Well, today is going to be another absolute banger. We've got a great group of people, great lineup.

Let me try and think of some of the panels we set up.

The next one coming up is going to be Coin Joins and Coin Swaps, Lightning Privacy, Lightning Payments.

We have a sidechains panel, a mempool panel, so an absolute fire lineup for today.

Keep the high signal content going over here on the open source stage.

Once again, I just want to thank everybody who helped make this happen.

I mean, there's a team of 10, 20 people back there that no one sees.

I make sure all this goes smoothly. We've got all these production guys in the back.

Really couldn't do without them.

We also have a panel today on open source funding and raising money for developers.

If you were here yesterday, I talked about my initiative at opensats.org.

My co-founder will be on that panel.

What I didn't mention and that I should have mentioned is that

we are accepting applications for projects and contributors to be listed on opensats.org.

So if you are a contributor, if you are a developer or you're a maintainer of a project,

make sure you submit it so we can get you listed. We have some people listed already.

So you can go to opensats.org. You can donate to our general fund where we contribute 100% of the proceeds

to board-selected projects, or you can actually choose the individual projects you want to do.

Now, when you go to that donation page, some people said, oh, it says email name is required.

That's only if you check the tax deductible. If you check non-tax deductible,

you don't have to provide us any information. You can just donate sats directly to the cause.

What else do I have on my homework that I'm supposed to talk about right now?

We have Raspi Blitz auction happening at 3 o'clock.

There's going to be three Raspi Blitz nodes available for that.

Proceeds of that auction will go 50% to opensats, 50% to Raspi Blitz development.

So if you want a really nice hardware node, consider coming for that

and supporting a good cause at the same time.

I just want to say that these last three days, it's been six months in the making,

eight months in the making. It's been extremely rewarding.

This is a global movement. A lot of times people get caught up in a lot of drama and a lot of bullshit.

But at the end of the day, we have passionate people around the world

that are moving this mission forward, that are contributing to open-source projects,

that are contributing to code, that will outlive all of us.

And we can't do it alone. So being able to meet all of you, talk to you in person,

is just really one of the most rewarding things.

And I know it can feel exhausting at times. It can feel overwhelming.

But one step at a time. We get through it together.

And I really do think we can make the world a better place in a very actionable way.

So, appreciate all of you.

Unfortunately, well, fortunately and unfortunately, I've been basically in this room all three days.

So I haven't been to the main stage.

But there was some really great talks that I heard about yesterday.

That I do, if, you know, these things, it's very hard to view all the content in person.

So do consider checking out all the video on demand after the fact.

Everything was recorded in high quality.

I know Foday had a really great keynote yesterday,

talking about his new Bitcoin Africa conference, which I'm really excited about.

I really like this blossoming communities that are happening in the developing world.

They're extremely powerful.

Gladstein had an absolutely insane freedom panel.

That really is what this movement is about.

So go check that out.

And of course, the guy who stole the show, Mollers, Jack Mollers,

had his announcement about nearly 50% of US merchants starting to accept Lightning with no KYC,

payable from any Lightning wallet.

And we have two panels today, Lightning privacy and Lightning payments,

that are going to be highly relevant to that conversation.

So the timing could not be better.

Anyway, with all that said, I love you all.

We're going to fucking do this thing. I hope you enjoyed today.

Huge thank you to the Bitcoin Magazine team for putting this all together

and getting this fantastic space.

Huge thanks to our sponsor Cash App, who also helped make this happen.

This was, this is not cheap.

This is not cheap and I really do appreciate it.

And thank you to all our open source contributors and all around the world,

especially those who couldn't make it.

Appreciate you all. Let's do this.

Hello, hello, hello. How's everyone doing today?

Glad to be back here in Miami.

I'm humbled and honored to be presenting this panel with this great cast of builders over here.

It's a very important panel on coin joins and coin swaps,

which are some essential tools that we can use to give Bitcoiners privacy on chain.

My name is Evan Kaloudis. I'm an application developer.

I'm the founder of Zeus, a Lightning wallet.

And I've got quite a cast here today.

Let's start from the left. I got Ben Carman from Bitcoin Company.

You've been working on some stuff with coin joins and lightning.

It's called Ellen Vortex, right?

Yeah, yeah. I made a proof of concept application to open up lightning channels inside of a coin join.

And hopefully we're actually launching it soon.

Super exciting. Excited to play around with that.

Next, we got Craig Roth from Sparrow Wallet, which is my favorite way to manage my on-chain funds.

He's recently added support for doing Samurai Whirlpool coin join transactions.

And you've also got like Paynm stuff in there.

Yeah.

So it's really cool to see another wallet implement those two tools.

And it's going to be fun to get into that in a bit.

Next up, we got Fontaine. How are you doing today, Fontaine?

Good. And you?

Great. So Fontaine, you've got a iOS application, fully noted.

And you've recently implemented a UI in there for managing coin join instances or join market instances,

which are a form of coin join that use like a maker-taker model, right?

Correct.

Excellent stuff. Really excited to have more tooling, more UI for join market.

So that's great.

And last up, we got Nick Gregory from Mercury Wallet.

He has a new product.

It's a state chain wallet that performs coin swaps.

It's quite a bit different from coin joins.

But I've been messing around with it this week, and I've been loving the experience so far.

So excited to get into that as well.

So yeah, I don't think we really got to get into why Bitcoin privacy is important in this volatile world

where we're seeing people getting de-platformed from different accounts

and all the turmoil in the world between people in Ukraine and Russia

dealing with their governments and the situation there,

people living just generally under authoritarian regimes.

And more closely, what's happened in Canada with the trucker protest

and the scrutiny that people have gotten after making these Bitcoin-driven donations.

So let's kick into the difference between a coin join and a coin swap.

There's a lot of similarities, but very distinct methods of getting on-chain privacy.

So anyone want to give us a good overview of what a coin join really is, what it consists of?

Sure, I'll have a go at that.

So I think the issue that we're trying to address with both coin joins and coin swaps

is the fundamental issue that Bitcoin is non-fungible, right?

So we wish we had non-fungibility at a protocol layer.

We don't have that, so we have to address that on an application layer.

And both coin joins and coin swaps are attempts to do that.

They differ in the sense that with a coin swap,

you are effectively swapping out one coin's history for a different coin's history.

So, for example, you may have two coins of the same size,

and then you're trying to say, well, I'm going to swap my history with yours.

For example, Evan.

With a coin join, what we have is a number of different participants come

and they join together to basically create what we call, for the most part,

an equal output coin join where we have a set of inputs and a set of outputs.

And the outputs are all the same size.

And if they're all the same size, then it's very difficult to tell

where the ownership of funds went after the fact.

So particularly if we have multiple rounds of coin joins,

we have this anonymity set which builds over time.

So the chief difference between the two is that instead of swapping one person's history

or one kind of individual's history for a different history,

what we have is swapping your history for the entire coin join

and anonymity set that you are taking part, or at least that part that applies to you.

And that's kind of the difference as I see it between the two.

Cool. Yeah, that's a great overview.

So now coin swaps, at least in the case of Mercury Wallet,

are being built off of a state chain.

Nick, would you want to get into what a state chain is for people?

So a state chain is another Bitcoin layer 2.

It's obviously not as well known as the others like a sidechain or a lightning network.

But it was an idea that was drafted in a paper written by Ruben Somsen in 2019.

And it's a way of basically transferring your private keys or UTXOs off-chain.

And yeah, so we built the first version of this.

And essentially we swap the coins and we swap the private keys.

It's non-custodial.

So the first use case was coin swap.

Now it is different than coin join in that you're essentially swapping history.

So there are some positives.

The positives are that there's no on-chain taint of a coin join.

The negatives is that you could end up with an undesirable coin, for example.

To deal with that issue, we built a sparse Merkle tree of all the coin swaps.

So if you were ever in a situation where you coin swapped with a coin

that you don't necessarily want to have,

you could prove that you participated in the coin swap

because we attested to the Bitcoin network.

Very interesting, very interesting.

So as a, what do you say, like an orchestrator of the state chain, right?

Yeah, I mean the way to view a state chain at a high level is,

I think someone termed it once, like virtual open dimes.

So essentially these open dimes now, we can swap them.

So long as they've got the same denomination,

we swap them using a similar protocol to the zero link.

And so we don't know who has swapped with who.

But as part of our state chain implementation,

we provide a kind of coordination service

which swaps these kind of virtual open dimes or UTXOs.

So let's say you got scrutiny, for example, from like a state actor.

Would you guys be able to blacklist UTXOs from participating?

Well, we do actually have a blacklist,

like many of the coin join coordinators,

because if people misbehave, that's a DDoS attack.

So if someone was to participate in a coin swap

and constantly not let the coin swap complete.

Yeah, like join the round and exit out,

just to throw off the process so that less coins get mixed.

So we have to implement that coin swap anyway.

But long term, we're looking at making the coin swap more blinded.

We're looking at integrating with Lightning.

And with Schnoor, we can do more blinding scenarios

where blacklisting wouldn't even be possible.

And that's our approach.

We could have made it blinded from day one,

but there are a lot of UI challenges.

But with certain events that have happened this year,

we're kind of accelerating that, as you can imagine.

Yeah, let's get there. That would be nice.

How about other risks with state chains?

Do users have to worry about the state chain orchestrator

perhaps running off with their funds?

With every layer 2, there are compromises.

So if the state chain entity was to cooperate with a previous owner,

in theory, they could steal the funds.

We've built a load of things to not let that happen.

We use an HSM on the back end to delete the private keys, the key shares.

But also, I think the biggest reason we wouldn't do that

is because every time a state coin is created,

you have essentially a backup transaction.

If the state chain entity was to cooperate with a previous owner,

you'd have evidence that that would have happened.

We call it proof of scam.

So you can always prove that the state chain had misbehaved.

And I think that's probably the biggest weapon we have to say

that we're going to cooperate.

Cryptographically proved, we stole the funds.

That's great.

And you know who I am. I'm here.

Wouldn't be good.

So yeah, we touched on blacklisting,

at least within the context of state chains.

Anyone want to make any comments about what we've seen

with some of the other CoinJoin coordinators as of late?

I know that's been a point of contention,

and I figured we'd get some spicy discussion in.

Ben, you look like you have something to say.

Yeah, I used to work at Wasabi,

so it's really sad to see that they did do that.

For one, I can understand being like,

we don't want the Bitfinex hack coins going through our CoinJoin

and someone coming and arresting me.

But for two, they're not even taking that stance.

They're talking about using Elliptic

to do chain analysis on every coin that comes in.

That's just awful.

That's sad to see.

Really, it kind of shows the benefits of things like JoinMarket,

where there is this no-coordinator, no-one-can-stop-it,

no censorship there.

Having the centralized coordinator is nice

because it creates this nice incentive

where they can make money and develop the wallet

and do all this stuff.

But obviously, centralization is not the best,

and censorship comes in.

It's sad to see.

But I think, luckily, in this space,

there are other alternatives.

We're doing fine, I think.

Not only do you have the options of

going to another coordinator system entirely,

like Samurai Whirlpool,

or getting rid of a coordinator entirely

and going to make-or-take-your-protocol,

sort of like JoinMarket.

But other people can run their own Wasabi instances,

and you can just choose not to mix with the main company.

It's not the end of the world, right?

We're having this diverse market

of these privacy providers of sorts

come in to provide these services.

But it is a little upsetting

when people preemptively decide to do these things.

It's a lie.

It's a lie?

It's a lie.

It's not the truth.

Don't look at it like you're preemptively

back to the point.

There's a legal side to the story.

We need to build out the information

that is legally protected towards us.

That protects us.

We're in a big war right now,

so we can't just go around

and say the truth.

That would be more trouble than what we're already in.

Unfortunately, we couldn't make that happen.

We can move forward,

unless anyone else has any other comments on that?

Well, look, I mean, you know,

the reality is, as far as we know,

there are no rules or regulations

that state that one needs to blacklist UTXOs

coming into a centralized CoinJoin service.

That's as far as we know,

and that's coming from ZK Snacks,

the makers of wasabi themselves, right?

That's what they've said to us.

So they're not aware of anything.

It's from what they've said.

We're not aware of anything.

Certainly I'm not.

And just, you know,

the difficulty of trying to actually create that regular...

If you think about what a coordinator does,

it takes a number of different inputs,

and it just organizes them, right?

So to try and legally block that kind of activity

is going to be difficult

because how do you avoid that

blocking a lot of other critical services in this world, right?

You know, I mean, what we're talking about

is not something dramatic.

There's no custody of funds.

You know, there's a lot of things

that are not going on there.

We're really just talking about

taking a few bits of data

and reorganizing them,

and that kind of happens on the Internet

for a number of different services,

often with financial amounts involved.

So, you know, I don't know.

I think that it's really not good for the Bitcoin world

when we start seeing services

trying to approach things

in a way that, you know,

really highlights the fact

that we have this non-fungible...

It is a fact that it exists,

but we shouldn't be trying,

particularly as a privacy service,

to push that forward, right?

The more that that happens,

the worse things get for everyone,

and it's really sad to see.

Okay.

Moving forward,

coin joins,

coin swaps,

do you guys see them

as being complementary, supplementary?

Can they be used in tandem?

And if so,

how would you guys propose they be used?

I think they should be used in tandem,

because, like,

if you were to do a coin swap,

for one, you're just going to give someone your coin,

and now they could see, like, your whole history.

So if you don't want to dox, like, your coin's history

to this person you're coin swapping with,

then you would want to coin join beforehand

to see, like, okay, you don't know

I bought this Bitcoin on Cash App or something.

So then they would, like, you know,

you would hide it there,

as well as, like,

have a larger anonymity set going in

to protect you,

because it's, like, a state act

would have high incentives to come in

and just do coin swaps all day

to try to see who's coin swapping.

If you come in with a coin joined output,

they would not be able to totally tell,

because if you just came from an address

to withdraw from, like, Coinbase,

they'd be like,

oh, this is Ben Carman's coin,

and then, you know,

the coin swap is useless now.

So if you came in with a coin joined,

they'd have a much harder time figuring out who it is.

So I really do think, like,

both of them together just complement each other

extremely well.

Yeah, I agree.

I think we're really just scratching the surface,

and I'm sure people are, you know,

doing their own mixes of stuff,

but moving forward,

it'd be really cool to see some services

sort of combine the two,

take the best properties of each,

and be able to pass it on to the user.

Nick, you had some ideas about other tools

that could be used in conjunction,

at least with your project and coin swaps.

Yeah, I mean,

we're looking to make things more blinded,

and that's like,

you know,

you essentially work a lot more with lightning.

So, you know,

rather than to take a fee

on our state chain,

which, you know,

certain companies could see the fee

and basically figure out that our coins

had participated in a coin swap,

we would take a lightning fee up front,

issue a kind of like a Chomein token,

and that would be redeemed for like a state coin,

and then that would make it slightly more blinded.

And we've looked at coin joins as well

as kind of on the withdrawal process.

But I think as always,

you know,

the UI...

So from the withdrawal process,

you mean like,

so going,

pegging out of the state coin?

Like...

Yes, yeah.

Okay, interesting.

But we put that on withdrawal

because we're more focused on lightning.

But people got to understand

there's a lot of things you can do,

but the UI challenges

are kind of harder than the technology behind it.

You know,

I think all technology here uses Tor.

It's an unreliable,

hard network to work with.

Oh, you're going to get me started on Tor.

And getting that working on a UI that,

you know,

everyone can use is a challenge.

And that's probably why...

But I think that's improving.

So you mentioned a very interesting thing there,

like a lot of application challenges,

putting together an app to make everything

work smoothly at the end of the day for the user.

Do you guys think that more progress

can be made at the protocol levels

with these sort of things,

like coin joins, coin swaps,

other similar tools?

Or do you think we need more focus

on the UI, UX,

the applications that we're giving the users?

Like, where is the bigger room for improvement,

would you say?

I would say we could really do

with cross-input signature aggregation.

It would be a major improvement,

and not just to the privacy layer of Bitcoin,

but to the scalability as well, right?

Indeed.

Because we'd have less data

going into every transaction.

So for me,

that is a very fundamental improvement,

and I worry that I don't see it

being talked about a lot.

I think it's been very briefly mentioned

here on the stage,

maybe once in the last two days.

And I'm really hoping to see more being done.

I know that it's not a simple thing.

I'm very aware of it.

It's very complicated.

It's a great challenge to implement.

People have been thinking about it

for many, many years.

If it was easy to do,

it would be done by now.

But Craig,

do you want to give us a little overview

of cross-input signature aggregation,

what it means as an overview?

Sure.

So basically right now,

every Bitcoin input that you spend,

you have to provide a signature

which shows that you own it.

And so we right now construct a transaction,

and for every input,

we have to provide this.

Now that not only bloats the size of the transaction,

but with Snore,

what we can do is actually

aggregate them down to one.

And that enables us to not only

decrease the size of the transaction,

which is good from a scalability point of view,

but in fact it can make

privacy-focused transactions

like coin-join transactions

actually cheaper to make.

Right?

So that's a very important fact.

Generally what we've seen

in the history of Bitcoin

is that advances happen

when the cost to the user becomes less.

Right?

Ultimately, everything is driven by money.

This is a monetary network we're on.

And if we're looking for things

to actually get adoption,

one of the reasons SegWit

has adoption in this world

is because it was cheaper to do.

So for me,

that's a really important thing.

It not only will enable Bitcoin to scale better,

but it will actually make people

turn to privacy-focused transactions

sooner than they might otherwise.

Yeah, absolutely.

Bitcoin, by all of its design,

it teaches us that

the incentives are imperative.

And CISA,

or cross-input signature aggregation,

not only makes it possible

for us to turn every...

makes it possible for us to turn every transaction into a CoinJoin,

but it incentivizes that economically, which is the amazing thing.

So you'd actually be paying more to not get in on a CoinJoin

and improve the privacy of yourself and others.

So yeah, that would be quite an advancement.

And I hope it just doesn't go to the wayside

and we could find a way to bring it to Bitcoin.

That would be incredible.

Fontaine, haven't heard from you too much.

Do you want to talk a little bit about Fully Noted,

why you picked JoinMarket to put in,

as opposed to perhaps one of these other centralized coordinators?

Yeah, the whole idea with Fully Noted is you run your own self-hosted server, Bitcoin Core.

And JoinMarket is exactly... it works the same way as Fully Noted.

It's just built right on top of Bitcoin Core.

So it was kind of a perfect match architecturally for the app

and just kind of the mental model of how the app works.

Yeah, I'm very excited about adding JoinMarket.

It's mind-blowing how it works

and kind of just the cryptography that goes into it to prevent Sybil attacks, I think.

I think the reason I like JoinMarket is because just my own intuition tells me

it's harder to Sybil attack JoinMarket than a centralized coordinator,

especially the ones where it's cheaper to keep remixing your coins, I think.

So, and obviously with what has happened recently,

has shown light that centralized servers where you're doing privacy-related stuff

probably is going to be a target, right?

Yeah, absolutely. We're definitely going to see more scrutiny in the coming years.

I'm just, yeah, I'm happy that it's approved on the App Store and that it's out there.

And I need to write some more tutorials and get some more people,

teach people how to use it basically and get it easier to install JoinMarket,

which a lot of the Node packages now, they are running it,

but they need to be running the wallet daemon

and setting up a service for that to easily connect.

Yeah, so we've had JoinMarket. It's been a project for some years now.

And, you know, most people have had to just interface with it via CLI

or very basic web interfaces.

So I am ecstatic to see all this progress being made in terms of the UI for it.

And it's funny because, you know, you don't have the centralized coordinator

making fees and facilitating the development of its software.

So you don't have a team that's been incentivized to put out a really nice UI

like Wasabi or Samurai has.

So it's really been sort of up to the community to get together

and put stuff together, hook into the API and make something presentable for users.

So it's been really awesome to see people like yourself putting out, you know, this UI.

We've seen some efforts from others like the Bitcoin design community.

And I know Gigi has been deeply involved in the web UI.

That's an alpha. I believe it's on Umbral now. It's called Flow. What is it called?

I'm not sure what it's called, but they did release it very recently.

And it's actually very pretty, so it's good to see.

Yeah, yeah. So it's a great start and I'm really excited to see that project iterate.

And yeah, let's see more. I know there's some people working on some other mobile apps.

So it would be great if we could get those Android users on.

So yeah, that has been an awesome, awesome development to see.

So yeah, more joint market stuff.

Ben, you want to get into some stuff with Coinjoins and Lightning?

Let's dive a little into some Ellen Vortex stuff.

Sure. Yeah, like Lightning kind of has this fundamental problem right now where

when you have a Lightning channel, you just, to tell people about the channel,

to prove you're not lying about it, you just say like, this is my UTXO, my channel is in.

So everyone can see like, you know, this node owns this channel.

And then you just look at the opening inputs in there and be like, OK, this is his wallet.

And he docks a lot of your on-chain privacy here.

So if you're privacy minded, what you should be doing is like Coinjoining through something like Wasabi

or Whirlpool or Joint Market or doing a coin swap with like Mercury Wallet or something.

And then so you have these new coins and then you open the channel.

So when people see that you have the UTXO, they don't know you're actually a hoister.

They don't see like, oh, you got these coins from Coinbase or something.

So, but that still is not the best because, you know, you're now having to do like two

or three transactions all on-chain and that takes a lot of space.

So I tried to solve this by building Vortex, which is basically a way to,

instead of doing a Coinjoin, then opening a channel,

you would just open a channel in a Coinjoin with like multiple other people.

So the idea is just, you know, you're, for one, saving on-chain space.

And then two, like, you know, your Lightning node is going to be online like 24-7, at least it should be.

So why not just have this thing Coinjoining all the time as well?

And then, you know, open channels when you need to.

So it helps you like, you know, always increase Coinjoin liquidity,

as well as, you know, just benefiting your Lightning node's privacy.

And you do get a little bit of very small on-chain savings by opening a channel with multiple people.

So it's not just taking like your XPub from another, you know, wallet that you have mixed

and using that to open up channels.

It's like you're doing the Coinjoin right into the channel open.

Yeah, precisely.

So it's really nice because then you just like have your channel in there.

And if you do it a private channel, then people just don't know like what this is,

which, you know, really benefits you.

So how have you designed it?

Like, you got your own coordinator in there that's putting everything together?

Yeah, yeah.

So it's the coordinator model because that's a lot easier to build, sadly.

But so there's a coordinator that just like, you know, makes sure everyone's queue's up.

And then you queue up and everyone opens a channel at the same time.

So what are your plans for that?

Are you going to run your own coordinator?

You just put the software out there?

It might be illegal.

I don't know.

So maybe someone non will run it.

But, yeah.

You know, perhaps a NIM could step up to the plate and help us out.

Yeah, I wouldn't want to see how the blacklist developed.

You know, Johnny, we'll all push the pressure on you.

So let's try to steer clear of that.

Yeah, yeah.

No, we have talked to some lawyers about it.

And apparently it's like, don't say CoinJoin.

We need to call it collaborative transactions now.

And it's just, this isn't for privacy.

It's for cheaper on-chain.

I'm a businessman.

I'm trying to save money.

So there's actually like, people seem OK with that now.

So, yeah.

Cool.

And where would you say the state of the project is right now?

It seems very early, right?

But it's functional, right?

Yeah.

On RegTest, I've opened the Lightning channel.

So it works.

I've been working, like, I'm too busy right now with my, like, real job.

But, uh.

Yeah, startup life is hard, huh?

Yeah, startup life sucks.

But it's also great.

But I actually talked to like a bunch of people here this week about it.

And I got a few people to commit to actually like,

paying money to try to build a UI for it.

So once I have that out, it'll be very easy to launch.

So I should be launching it in the next month or two.

Maybe we should talk about trying to get that into Zeus.

That'd be pretty cool.

Very down.

Yeah, I've been thinking a lot about coin joins and the relationship to LN

and what we can do to give users the interfaces and the tools

to be able to use them in tandem.

So, yeah, I've been working on some external account imports from XPUBs

to pull into Zeus with the LND PSBT API.

And I very much would like to get some coordination with some of the coin join

projects to provide the ability to do some external signing for, like,

unfunded, unsigned PSBT that Zeus passes it and going back.

So that would save you from having to, like, transfer, make a transaction

from your Samurai or Whirlpool to Zeus.

But, you know, your solution cuts out that extra step.

Like, just go from the coin join right into the Lightning Channel.

And I find that fascinating.

Yeah, I mean, it's weird because, like, a lot of people, like,

if they want to open a Lightning Channel, a lot of their processes

will either, like, send from, like, their exchange or their hardware wallet

to, like, Samurai, mix it, do, like, two or three on-chain transactions,

then send it to the LND wallet, then open the channel.

So it's like you're wasting all this block space

and spending all these fees, and it really sucks.

So you just do it.

At least you're propping up the fee market.

That's good.

Yeah, so you just do it all in one nice channel, yeah.

Great.

So let's take it back to protocol stuff versus application stuff.

Do you guys see any other things substantially

that application developers?

I mean, we got into CISA earlier, and we've

said that there are a lot of enhancements

that we can make on protocol layers.

But what more can application developers

do to make these tools more accessible?

I mean, there are some things, like, with the addition of Taproot,

now we can do some new fancier things that we couldn't before,

since, like, we do have the raw pubkey on-chain now.

So you can do things like a ring signature and other stuff

that you won't broadcast on-chain, but you

can do that for, like, proofs inside of your coin joins.

So there's probably now room for a lot more different models

in, like, Zerolink or something to actually create coin joins.

I know some people are working on research on that,

but it would be cool to see someone, like, you know,

now they have Taproot and all these other new properties.

Let's, like, try to build out things that, like, actually use it.

And because Taproot is, like, largely a privacy upgrade.

And with it, we should be able to, like,

create new kind of coin join protocols, or at least improve them currently.

And we haven't really seen that yet, because it's only been a couple months.

But I would love to see that happen.

Yeah, we're just starting to kick off, you know,

what Taproot is going to bring to the table.

You know, Lightning Labs and Taro was a pretty big announcement,

and it's going to have a lot of repercussions.

But yeah, I would love to see, you know, more tooling through, like,

Tapscripts and really getting creative with that

to bring people better privacy.

So that will be exciting.

Yeah, I think the one thing we should also consider

is that, you know, unless we do away with,

which, frankly, without a hard fork, I don't see it happening,

this kind of issue of Bitcoin being basically non-fungible

at the protocol layer, right?

If you can see the amounts, unfortunately, there is a coin history,

and you can trace it back over time.

So unless we can do away with that,

we're going to have to deal with the fact

that we have to build something on the application layer.

And then, really, you're talking about, you know,

the idea of anonymity sets, right?

So you're sort of one of a number of people,

and obviously, the greater that group of people,

the more anonymous you are.

So it's one thing to talk about, you know, how can we have new tools,

but we also have existing tools today.

And every time you launch a new tool,

you're going to have to possibly start from zero

on that anonymity set, right?

So that crowd is going to start off with one.

It's going to go to two and three and four, and it takes time.

You know, it takes time for that tool to get out there.

It takes time for people to trust the tool,

for clients to be written at how many wallets

are going to adopt the same tool,

or is everyone going to have to use one wallet?

So, you know, I think it's dangerous

to constantly be looking into the future and saying,

well, what could happen, right?

Because we might end up in a place where,

if we don't push the tools that we have today,

then by the time we get to the tools that we think might be better,

the world has changed to the point

that those tools are seen as not good, right?

But if we use the tools that we have today,

it changes the mindset of people,

and it changes how society views it.

So if CoinJoin becomes, you know, a widely used thing today,

then that will change the way that society views it.

And I think it's important not to wait too long

and to actually use the tools,

because, as I was saying, the crowd grows.

And as the crowd grows,

which not only helps the anonymity of your coins,

but it also changes the way that the rules

and regulations of the world will form.

So, you know, I think there's a different way to see it.

And it's like very true, too.

Like, we really aren't using all the tools we have available today.

Like, one, we're talking about Taproot,

but like, Liquid has existed for years

and has confidential transactions,

which is like perfect for CoinJoin,

where you could have unequal amounts and do all these spends.

You know, it is slightly different trade-offs

with it being the sidechain and kind of custodial.

But it would be perfect as a privacy tool.

And like, no one is using that, or has built something,

which is kind of like, that would be amazing.

I would use that all the time if someone built,

where you could CoinJoin on there

and do all these unequal amount things,

and then AtomicSwap back into real Bitcoin.

And no one's built that in like four or five years.

Like, we really aren't using our tools yet.

And like, yeah, that's something we need to press on.

I think we also need funding.

Like, there's a lot of,

there's not much money in developing wallets,

especially self-sovereign wallets, you know?

So, yeah.

Yeah, it's very few players, you know,

helping facilitate the building of these things.

But, you know, we got some good actors

that we're extremely grateful for, like HRF.

HRF both threw us a Bitcoin each at about the same time.

And yeah, it's really awesome

that we've been able to use those sats wisely

and continue to build out our products.

So, you know, shouts to HRF and Alex Gladstein,

all the good folks over there for supporting us.

So that's great.

But yeah, we hit on a lot of great points right there.

I think it's very important to hit on, you know,

perfect being the enemy of good.

And, you know, people holding out to, you know,

for privacy tools that may offer, you know,

better properties or whatnot.

But, you know, that's like speaking

from a position of privilege.

There are a lot of people that need Bitcoin privacy today.

And, you know, how do we support those people?

I think by and large, like,

the best way is to get in on these mixes with people,

use the tools and help increase those Anon sets.

And, you know, we saw it even with the construction

of this panel that, you know, CoinJoin, CoinSwaps,

privacy in general on Bitcoin has a bit of a stigma.

People or some companies in the space

don't wanna touch it with a 10 foot pole.

And that's really unfortunate.

But what can we do to try to de-stigmatize Bitcoin privacy,

which is a human right?

I think the most important thing is to use the tools, right?

That is the number one thing.

We have to not only use the tools,

but encourage others to use them, explain them.

And, you know, I have like a thing I like to say,

like normalize CoinJoin, you know, or CoinSwap, right?

Normalize these things because they're really like privacy.

If you believe it's a basic human rights,

then, you know, why should we feel ashamed

to just aim for that?

Because that's all that a CoinJoin is doing.

It's just giving you financial privacy over your coins.

So, you know, the sort of worries

and we sort of laugh at each other and smile and say,

well, maybe it's legal.

But actually we need to take the kind of, in my view,

the firm view that it's not, right?

I think that we shouldn't kind of have this kind of half view

we should actually be brave and say, you know what?

What we're asking for here is not something which is,

you know, in some way strange or, you know, not kosher.

It's really just a normal thing that we should all want.

So.

Yeah.

Yeah, and, you know, it's people have this misconception

based on, you know, I guess Bitcoin's history,

Darknet markets that, you know, why would you want privacy?

Are you trying to buy drugs?

Are you trying to support terrorism?

And it's, that couldn't be, you know,

further from the truth.

It's like when you make a purchase, right?

Like, do you want the person that you pay

to know how much money you have and to follow you

to every other store that you go to?

No, that sucks.

That's garbage.

Do you want your employer to know what you do

with your money after every paycheck?

Hell no.

So, indeed, whether it be, you know,

something as simple as getting, you know,

medicine for you or your family or, you know,

making other sensitive transactions that, you know,

other people shouldn't, you know, know.

Like these tools are imperative, you know,

especially in a world where, you know,

there's this increasing push by the state to,

by not just the state, I suppose,

but also corporations to know as much information

about your life and your finances, first and foremost.

It's important that, you know, we don't just try to,

we don't just recreate these tools in this, you know,

open blockchain system and that we give users the ability

to take back some of that privacy

and only selectively reveal the information

that they want to reveal.

So.

It's weird because like, I can understand if you're like,

I don't care if Twitter sends me targeted ads

because, you know, I'll buy Tide Pods or whatever.

But your Bitcoin privacy is extremely important

because like, for one, it's stored,

like the history is there forever.

So even if you fuck it up, it's gonna be fucked up.

Yeah, yeah, like that's,

there's no getting the toothpaste back in the tube

if you make an error with your on-chain interactions.

So.

You gotta make sure you're doing it right from the get-go.

But even then, there's still a lot of challenges

like you're, Anon said, deteriorating over time.

You know, perhaps some people that are in your mixes,

they begin to KYC themselves

as they're trying to sell Bitcoins perhaps

through, you know, some of these exchanges.

Don't do that, guys, don't do that.

Yeah, it's a can of worms, really.

So, you know, what else can people do?

Education, too.

I think OpenNOMS is really great.

He's just constantly helping people out

and writing excellent resources.

If you, I highly suggest looking at his GitHub

and going through all his information.

Indeed, indeed, he's been awesome.

And I think what goes along with that is,

you know, any service that blocks, you know,

coin-joined funds, you know, take them out.

You know, don't be afraid to call them out

because effectively we have two forces

pulling in the world, right?

We've got the sort of, call them governmental forces

that are pulling us towards the regulation,

the KYC side.

We need something on the other side

and that has to be us, right?

Who else is it going to be?

Who else is going to stand up?

If not us, then who?

Exactly.

Yeah, it's, you know, I said earlier that,

you know, privacy is a human right,

but rights are not granted, they're taken.

And it's going to take a lot of, you know,

push from us, or pulling if we're using the pulling analogy,

to pull things in the direction we want to see them.

So that's going to take individuals stepping up.

That's going to take developers and projects stepping up.

That's going to take companies stepping up

and saying, no, this is the right thing for us,

for our users, our customers, and for humanity as a whole.

Because the alternative that we could, you know,

very rapidly decline into is, you know,

a totalitarian hellscape of sorts,

where every transaction is recorded and known about

from, you know, your personal transactions at the pharmacy

or regarding to your health,

to the pocket change that you give to your son.

Do you really want to live in a world

where you have to get permission from the government

or, you know, tell them about spending money

you give to your kids?

I sure as hell don't.

So yeah, we're coming up on time soon.

We've got about two minutes to wrap up.

Do you guys have any closing thoughts?

Thank you for having me.

Thanks for being here

and thanks for building some awesome tools.

Yeah, I would just say, if you don't CoinJoin,

it's not, or CoinSwap, you should try them out.

It's like actually very easy to do

and it's monumentally benefits for you.

So like, I know a lot of people are daunted.

It's like, oh, that's the nerdy Bitcoin people

that it's like, that's what the hardcore people do.

It's like, no, it's like, I could get my mom

to use like any of them.

They're not that hard.

So you should try it out if you haven't done it before.

Yeah, absolutely.

Get on your umbrella, download JoinMarket,

check out Mercury Wallet.

I've been having a great time playing with it this week

and it's just super easy to use.

Just deposit, auto-swap.

I'm just running rounds and increasing my anon.

Yeah, it's great to have users that test it.

I mean, when we went into alpha,

some guy decided to create the state of the art

some guy decided to create the state chain torch

and we learned so much in those three months.

You know, it was passing around on Twitter.

People were finding bugs all over the place

and that really helped harden the product

and get it to where we could be production ready.

Yeah, it's important to test and try these tools

and figure out, you know, where the bugs are,

the rough spots and yeah, I encourage everyone

to go out and run your coin joins,

try some coin swaps out and to keep using these tools

to help proliferate them and, you know,

make privacy better for yourself but also for others.

And if we can get some more clients as well,

you know, the more wallets that implement these tools

would be great, you know, you might think

that I sort of enjoy being, you know,

one of only two willful clients

but really I wish there were five, I wish there were 10.

For me, that would be great.

It not only de-risks the entire space

but it just makes it much more accessible to everyone

because everyone comes in with different tools, right?

So if there are any devs in the audience here,

really think about building this stuff in

because it's not like we have forever to do it, right?

Time is critical.

This is very much an unsolved area of Bitcoin today

and the more people that are working on it,

the faster or the more chance we have

of getting to a place where I think we all want to be.

Indeed, so if you're an application developer out there,

please think critically about your users' privacy

and, you know, consider implementing

one of these tools into your wallet.

And yeah, on that note, let's call it.

Thank you all for joining me today.

It's been a great discussion.

Thank you.

Thank you.

Thank you.

Thank you.

Thank you.

Thank you.

Good morning, Miami. Welcome to the Bitcoin developer funding panel, open source funding.

My name is Mike Schmidt. We have a great panel here. My esteemed colleagues, we have Adi

Shankara from Summer of Bitcoin, Ben Price from OpenSats, and the Bitcoin company, and

Conor Ocus from Spiral. Before we get started, I don't know if Matt is out there, but I just

wanted to get a round of applause for Matt O'Dell and putting this together, this open

source stage. So, some quick introductions. Mike Schmidt. I head up Brink. We are a 501C3

not-for-profit organization who's focused on funding developers that are working on

Bitcoin protocol, Bitcoin core, and lightning technology. We are currently funding 12 developers

that are working on that technology right now, and they're in the form of grants as

well as our mentorship program for younger developers. And we have an office in London

where some of them are congregating, and we're trying to build that out as a bit of a hub.

And we also publish the Bitcoin Optech newsletter, and you should subscribe if you haven't already

already. So, Conor, do you want to do this? Yeah, sure. So, my name's Conor. I work at

Spiral. Spiral is an initiative within Block, formerly Square, and we're focused on improving

the open source Bitcoin ecosystem through a number of different initiatives. One of

those initiatives is our grant program where we fund over, at this point, two dozen or

so developers and designers and some project managers as well, all working on various types

of Bitcoin projects from Bitcoin core itself to lightning infrastructure projects to SDKs

that make building on top of Bitcoin a lot easier. And we have a global footprint as

well. So, our grantees are from all over the world, from India to Australia to Southeast

Asia, America, Europe, and more. And we want to kind of continue that trend and support

developers from other parts of the world as well. And just a quick shout out to some

other organizations who also fund open source Bitcoin development, the likes of Maika at

Brink and what Ben's doing at OpenSax and some other organizations like Gemini, Kraken,

Coinbase, BitMEX, all support an open source funding. And it really is a community effort,

and it's really good to see funding for development moving in a positive direction, really. So,

I'm really happy, personally, to continue to see that.

Ben?

Hey, everybody. My name's Ben Price. I actually have a for-profit, and we started a non-profit.

The for-profit's called The Bitcoin Company. It's kind of starting as rewards and loyalty

company, moving towards kind of a full-stack bank. That's the way we think that we can

kind of bring Bitcoin to the most people or consumers in the world. And then what we're

here to talk about or what I'm here to talk about today is OpenSats, which recently launched,

which is really exciting. That is a 501c3 not-for-profit with a mission of supporting

contributors to free and open source software, specifically around Bitcoin. The board is

full of a bunch of Bitcoiners. We're definitely staying focused there. But technically speaking,

it's all free and open source software. Anything that helps Bitcoin flourish needs a lot of,

I guess there's a lot of like technical dependencies that can help Bitcoin succeed. So, we're looking

forward to funding all of those. And, you know, shout out to, I think the developers

get a lot of love here, but there's a lot of ways to contribute back to open source,

including design, code review, research, just general education. So, we're really looking

forward to supporting kind of anyone contributing back, not just developers.

Adi?

I'm Adi. I'm the founder and lead at Summer of Bitcoin, where together with an incredible

group of open source developers, designers, and sponsor organizations, we are helping

university students learn about Bitcoin and contribute to open source Bitcoin projects.

One of our flagship programs is where a university student contributes to an open source Bitcoin

project under the guidance of a mentor and is paid a stipend in BTC. A number of our

graduates have gone on to contribute to Bitcoin Core or joint organizations like Chaincode

Labs, Galoy, and Blockstream.

So, I'd like to frame the discussion with a story that I think is interesting. I was

at a Bitcoin-related event, and I ended up talking to an engineer from an unnamed altcoin,

and we were discussing funding, and it so happens that he was involved with a project

that happened to raise some funds, and their token scheme, however it worked, ended up

netting them $300 million, of which that's not all developer funding, but a lot of that

would go towards developers and building the protocol and surrounding libraries, and

I hadn't even heard of this particular... they're not even in the top 40, if you believe

in the market cap metric. So, you have a non-top 40 network raising $300 million, and we don't

have that sort of scheme in Bitcoin. I would say Bitcoin is a little bit more bottom-up

as opposed to some of these organizations that are top-down, and the folks here on stage

are part of that bottom-up ground effort. So, Connor, how do you guys at Spiral think

about prioritizing open source? Why put your energy there? Why is Spiral putting their

energy there? Why is Jack getting behind it? Maybe you can talk about a little bit of the

motivation there. Yeah, so, I mean, open source software in general, open source development

in general, is very synonymous with public collaboration, self-organizing community.

All of the source code is open, available for anyone to download, use, modify, contribute to,

and create projects and third-party projects as they kind of see fit. And I think at Square,

Square is obviously a square block as an organization that has leveraged a lot of

open source tools, and Jack is no secret that Jack is a big advocate of Bitcoin, and Bitcoin

being very much in alignment with Blocks and Squares policy and agenda of economic empowerment,

it was very much a sense of what is the best way we can contribute back to the open source

ecosystem, because like Mike just described, there is no real model behind it. A lot of these large

organizations are using tools which we might consider public goods in the physical world,

and governments have very much taken on the responsibility of providing those services,

whether it be the streetlights, the roads, the bridges, military for example, and we fund that

for our taxes, but I'm pretty sure everyone in this room wouldn't exactly want open source

and software to be provided by their government. So, we're a team, we're an initiative that's

focused on providing funding for open source developers, designers who are ultimately trying

to push the Bitcoin ecosystem forward in a number of different ways, whether it be privacy,

scalability, decentralization, developer experience, whatever it is, and just providing the support

for them to kind of make those projects a reality and sustainable over the long term.

You talk about supporting these projects or individuals, at Brink we sort of think of this

sort of like a funnel, and there's this developer funnel specifically for let's say Bitcoin

contributing, and you have people who have a programming background who maybe start watching

some videos, maybe they attend summer Bitcoin program, maybe they attend chain code residency,

or Jimmy Song's course, and they kind of work their way through sort of leveling up their

expertise in order to get to a point where you could be funded by somebody like a spiral,

and I'm sure there's similar funnels for non-Bitcoin core contributing, but how do you get

people interested? Adi, you guys are focused on university students in terms of that funnel that

I sort of outlined, why focus on that demographic? Sure, you know that's really an important question

and is at the heart of what Summer of Bitcoin is all about. If you look at the common trajectory

of a university student today, you know, in first year of their college, especially someone who's

studying computer science and training to become a software developer, in their first year of

college they pick up a programming language, by second year they're solving obscure programming

puzzles online to get that internship at Google or Facebook by third year, and by the time they

graduate, the biggest aspiration is to have an assortment of big tech AI jobs in their kitty,

and so they end up joining one of these big tech companies where they're delegated to a team that,

you know, is maybe resizing buttons or changing fonts every few months, but of course, you know,

if you're lucky, you get to join a team that harnesses people's personal data while those

same people feel insecure about their lives as they compare themselves to others, and then maybe

make them feel a bit better by showing them ads to buy stuff that they never needed in the first

place. That's the norm. The exception is, of course, if you didn't do well in programming

puzzles, then, you know, you compensate by telling your friends that you're too adventurous for big

tech and that you're joining a fintech startup, where again, the most that you do is pry on

people's private transactions and, you know, in the hope of selling them dirty credit.

What is really not well understood is that joining big tech today is like joining Big Cola.

Both their business models revolve around triggering the same molecule in your brain,

and even if you keep the moral case aside, on the innovation front, you know, you can argue that

the sugar water we're drinking today is the same that it was 20 years ago,

and the search engine we use today is the same that it was 20 years ago.

At Summer of Bitcoin, our message is, if you are in university and you're a budding technologist,

you want to work on frontier technologies that flip the way the world runs. Working on Bitcoin

today is like working on the internet in the 90s. It might make sense to get some,

but not only get some, but also work on some in case it catches on.

There's also a case to be made for, you know, focusing on university students and introducing

them to Bitcoin. Bitcoin is a political movement as much as it is a technological movement.

You're forced to pick a side either as a global status or as a sovereign individual. And as free

citizens who believe in the promise of sound money, we need to ensure that those in universities

today are on the right side of the future, because in fact, they are the future. And this is a side

from the fact that the youth is and will be an important constituency that no politician can

afford to ignore. Ben, Adi's sort of talking about getting recruitment, getting people in early,

bought in, and sort of like recruiting in that developer pipeline. In addition to recruiting,

there's, we share some similarities in that we need to raise funds from the community. And so

there's recruiting, there's fundraising. And then there's just a general awareness that there is

this need and there is talent that is looking to be funded and there is talent that needs to be

cultivated. Of those challenges, what challenges do you see from your perspective at OpenSats?

Where can we do better? Where are the challenges? I think it's an interesting problem because you

have to like kind of address all of those issues. There's a study I think OKCoin released recently.

I think like not a lot of people actually know what like how Bitcoin is developed.

I believe a lot of people think developers are paid or maybe there is some natural funding

mechanism for mining. So I think like the first thing is general education and awareness to the

community that this thing doesn't really maintain itself like in a stable way. You need to let

corporations, you need to let users, you need to let anyone leveraging the technology. You need

to make sure they're aware that it's funded by a group of developers and designers and coders who

are really just like not rationally acting. They're providing maintenance and these things

for free. Nothing in the world is free. But we're lucky enough to have a few people out there who

really care about the mission and the vision of Satoshi to actually build on this thing.

These are some of the smartest people in the world dedicating their time for free in many senses. So

you know I think the first thing is making sure that users, businesses, anyone leveraging the

technology knows that it's important to give back to the people maintaining it. And then secondarily

you have these pipelines of maybe it's students or you know well-trained developers coming into

the system. But again it's not economically. We're all Bitcoiners here. We're logical thinkers.

The economically rational thing to do if you're a brilliant coder is to go work for Facebook.

If you really want Bitcoin go get a million dollar a year job and buy some Bitcoin. Screw

the code base. But that's not what we're relying on. We need a way to build from the ground up

like you said to create an actual self-sustaining ecosystem. And in order to do that I think

instead of relying on one or two large exchanges or corporations to do the majority of the funding.

Well that's important. That moves the needle. But it's really I think to create a self-sustaining

ecosystem you need like a grassroots movement where everyone gives back a little bit. If everyone

who's leveraging Bitcoin everyone who benefits from it gave back just a little bit. Well then

we have enough to we have enough funds enough funding enough training to actually continue

to sustain the ecosystem. So Adi, Ben touched on potentially some concerns that somebody might have

starting their open source development career if you will. Financial was the example Ben gave.

What do you hear in talking with these younger folks who may be considering a career in open

source? Are there concerns? What are they excited about? Sure. We've had about 20,000 university

students from over 50 countries around the world apply to a program this year. And the most common

question that every student starts with is will their governments ban Bitcoin? And as they go

through our resources talk to us and join our seminars and study Bitcoin just like they would

study TCP IP in a networking class. And remember these are computer science students who are

arguably grappling with concepts much harder than those that constitute Bitcoin. They quickly go

from you know hearing about Bitcoin in the media as being this illegitimate child of technology to

realizing that the Bitcoin network is in fact decentralized enough resilient enough secure

enough that even if you were to shut down all nodes but one the network could still run as is

and bootstrap itself again. That you know the Bitcoin protocol is in fact one of the most

important and beautiful innovations of the 21st century that can change the course of human

history. That understanding you know coupled with the energy and clairvoyance that the youth can

bring to the table is striking and remarkable to see. Having said that there's a ton of noise in

the space with other crypto ecosystems the lavish marketing budgets and catchy memes.

But you know so we get all kinds of questions around proof of stake and why can't we have our

own coin to decentralize dentistry. But those get quickly answered by themselves when they

figure out why is HTTP the most dominant way of exchanging information over the internet

and how Bitcoin is similar in terms of being the dominant way of exchanging value over the

internet. We have this internal aphorism in our cohorts where and it goes like blockchain

has only two applications one is money and the other is marketing. And you know you as

technologists you know we understand that it's never the memes it's never the marketing that

changes the world it's technology that works as intended that does. When it comes to helping

these students you know discover careers in Bitcoin there's a ton of thought and work yet to

be put in. And congratulations to organizations like Spiral, Chaincode Labs, Brink and OpenStats

for leading from the front line and showing us the way. We've talked a bit about individuals

and how they can kind of progress and contribute but there's also a lot of the work that Spiral's

doing is project-based and those projects also go through a sort of evolution from sort of ideation

one developer onwards. How do you guys think about that progression at Spiral? Yeah so we're going

to publish some content about this very soon and we're very much thinking about it in this kind of

four stage process which I'll try and go through very quickly. So phase one very much revolves

around like a proof of concept so an individual a team of developers have an idea that is going

to help move the ecosystem forward in areas of that we talk about security, privacy, decentralization

or whatever it might be. And at this stage they're very much trying to develop their project

architecture. They will be doing some pitching to organizations such as ourselves who would provide

no strings attached funding to help them get off the ground. And so like a successful exit from

that phase might look like some alpha piece of software that it has a code base that makes it

easy for new contributors to understand what is happening and also contribute to it as well as

perhaps wider buy-in from the wider Bitcoin ecosystem. Phase two is this kind of

community development process so everyone here is very much aware that this Bitcoin thing that

we're building this new money has a huge community behind it helping to drive it forward and we want

to see that developed for individual projects as well. So projects might do this by

creating a project website which clearly outlines the vision for the project, helps new people

understand how they can contribute, maybe outlines their roadmap as well and perhaps some start

developing some async communication channels whether it be on Discord or Slack or IRC

as well as raising awareness for their projects as well whether it be podcast articles or social

media. And again a successful exit from that phase might look like they have multiple contributors

who are fixing various types of bugs, adding documentation or adding new features. Phase three

is this kind of multi-entity funded phase where we hope to see a project fully sustainable by

having multiple donors and this might be facilitated and made a bit easier if a project

starts to develop a foundation around their project that makes it easier for larger organizations who

now see this piece of technology as like a critical part of their tech stack and want to

find an easy way to donate without having to do the kind of long process of due diligence on

individuals and contributors maybe outside of their jurisdiction. And so a successful exit

from that is again multiple entities funding a project and we start to see this project being

used in production environments close to like a beta type of software. And then lastly it's like

we want projects to be sustainable without Spiral. So if Spiral were not funding this

project it wouldn't collapse and it wouldn't cause significant damage to the project either.

And at this stage the project's really kind of developed its own culture, its own identity, and

can truly stand alone without a single entity. And so we very much look at these projects as

active projects within the Bitcoin ecosystem that will be around for the super long term

and ultimately be a part of Bitcoin's legacy. So that's like how we try to

try to think things through and hopefully keep funding as decentralized as possible.

Ben, Connor mentioned one way that a company can contribute to the space is if they're using

the software they can financially support it. You're in an interesting spot because

you're both a for-profit company with a Bitcoin company and OpenSats donating on the charitable

side. So being in that unique position, when you have your Bitcoin company hat on,

how do you think about contributing to the ecosystem? Yeah, that's a really interesting

one and hopefully it's a challenge that the open source ecosystem can kind of do better on. There

are a few, I think, really good actors in the space who are doing what they can to give back,

at least financially. But there's tons of ways to give back. We're a poor startup. I can't just

donate a million dollars to open source as much as I would love to. So earlier we talked about

developers themselves maybe not being economically incentivized or it's not economically rational

for them to pursue open source projects outside of just goodwill. But as a company, why would it

help? I think recruitment is a big one. I got Ben the car man and Connor in the audience. I think

without us going to these hackathons, without us giving back to some of these open source projects,

I'm not going to be able to recruit them. That's what drives a lot of people in this space

are working on these projects. I can't always just say add a widget, add a button and they're going

to be satisfied with their job. So for me, there is some recruiting benefits, some marketing benefits.

You know, I also think that like...

The beauty of open source is that you can build on it and I can build on it and we both benefit.

It is a public good that we both win from developing on top of.

It's more secure, it's faster, it's better maintained.

And so as you just continue layering on as a company, building on these core packages,

whether it's Bitcoin S or tons of open source things that we use, everyone wins.

And so when I give back or with the Bitcoin company, you get a benefit as well.

I also think like there are some ways, like especially us, we're a consumer facing application.

So a little bit of what we can do is education, highlighting projects that we really like,

giving bounties for things in our roadmap that we just don't have time to develop.

One thing that we've tried to hack together is we go to hackathons and we add prizes to the very end of the pool.

So a lot of the issues is hackathon projects are sometimes kind of half-baked.

They get 80% of the way done and then no one finishes them.

So, you know, as a bootstrapping startup, what I can do is go give someone another 500 bucks

or a little bit of Bitcoin to finish that off, write a blog post about it,

get their actual project out there and hopefully users on it.

So there's a lot of ways to give back, including like the one that I'm most excited about.

We just like, we rolled out referral codes in our application.

So this is an easy one.

If you sign up with the word OpenSats or donate, every time you make a purchase through us,

a portion of your proceeds go to fund Bitcoin core development.

And so that's like, you know, little things that just, you know,

we're going to be streaming sats towards Bitcoin core developers, you know, every day, all day.

And so I think it's just these little things.

You have to get creative.

Like I said, if you've got a billion dollars, just throw some money at some devs probably.

If you're poor like we are, you've got to get creative.

But there's a lot of really interesting ways to do it.

And I didn't name them all, but, you know, that's what we've come up with so far.

So we clearly have a lot to say since we're over time.

So I can speak on behalf of these guys.

I'm sure to say, if you want to learn more, feel free to grab any of us after this

and we can discuss more and I would give these guys a round of applause

for the work they've been doing.

You know, before we dive into all that, I'd love to just do a quick introduction of all our guests here.

Maybe, you know, say who you are and like what kind of experiences you have in Lightning,

but like more specifically in the commerce space itself.

So, Elise.

Great.

So I'm the outlier on this panel as the non-dev.

I'm a VC investor that's focused purely on Bitcoin.

And last year and this year, we've been focused a lot on Lightning

and how it can impact commerce in developed and emerging markets.

Elise, us developers love spending time with you, so I'm glad that you're with us.

I'm a rock star dev.

I contribute to BTC-based server.

Started the whole thing with Nicholas and then I'm VP of engineering at Strike.

Yay.

Are there Strike people here?

Okay.

Yeah, Strike started from a small team, that open source team that did Zap Wallet.

I'm sure a lot of you are familiar with that.

And then I was employee number one specifically for Strike and here I am today.

So I'm Bad Ark.

I'm a Bitcoin hobbyist, tinkerer.

And I tried to encourage a few years ago more of a maker scene.

So we make our own nodes, but we should also be making our own points of sale,

hardware, hardware wallets, ATMs, vending machines,

all these things which are going to run on Bitcoin and Lightning payments.

And there wasn't much of a scene there, so I wanted to try and build one

and then make some projects which people could build.

And then from that, I then developed, I started LMBits,

which is a really nice sort of wallet account system you can put on your node.

It's a bit like WordPress for your node.

You can extend it in any direction which is relevant to you.

So if your merchant has got extensions and so on.

So yeah, just a hobbyist tinkerer who's been lucky enough to kind of break new ground

with some of the cool Lightning stuff we're able to do.

Cool.

I'm Andre Neves, CTO and co-founder at Zebedee.

We are a gaming fintech company, so we build tools for game developers

and gamers to enable the powering of your game points,

your game rewards, your game assets in Bitcoin through Lightning.

So I'm just honored to be in this panel with all these great gentlemen and ladies.

So thanks, Tony, for setting this up.

Yeah, thank you, guys.

My name is Tony Giorgio.

I'm a Lightning developer myself working at Impervious right now.

So let's get started with some groundbreaking news here.

So Jack Mahler yesterday announced from Strike some huge integrations

that really changed the game for even the United States,

the e-commerce space, but also the physical commerce space as well.

Rockstar, would you like to kind of give us some perspective there?

And what was the announcement and what does it mean to you?

To me, when I said here I am, it's like culmination of all the work

that's happened over the past two years and what it is, like 10 months for me.

And I'm very unfortunate that this panel is like after Jack's speech.

Last year, it was easier.

It was like my panel, then Jack's speech.

Because it's so hard to follow after Jack, right?

You like the announcement?

Yeah?

Yeah.

So it's just, again, culmination of everything

that we've been doing for the last few years.

And as Jack was so excited, yeah, with that buying Coke over tour.

Yeah, we couldn't name it like that.

But it is all about that.

It's about having that freedom to use the money that you want to use

and spend it how you want to spend it.

So glad that that came out, and I'm looking forward

to some other announcements that are coming soon.

Awesome.

It feels like Lightning announcements are just left and right these days.

I wanted to talk a little bit about Lightning as commerce payments.

We really entered this era here where we haven't

been able to do commerce in the way that Lightning Network changes the game.

We have the near instant payments of Lightning.

We have micropayments, both the traditional credit card networks

and even Bitcoin on-chain layer itself aren't

able to fully service some of the amazing use cases we can get with Lightning.

I'm really curious about, from your guys' perspective,

all the unique innovations happening in the Lightning space

just across the board.

We could have a whole panel just on that.

But from your own experiences, what is really exciting

that we're now able to see in just the digital space itself

that Lightning now enables?

Anyone can start off with that.

So I mean, that's the thing which attracts me to working on Lightning,

is that feeling of breaking new ground.

And there's that kind of concept of skeuomorphic design.

We've got a new tool set now to do things with money

which we've never been able to do.

And then to try and imagine those things and build the tools and experiment.

And it's quite hard, and that's why you need real world use case

and real world feedback from people using the technology.

So much of the stuff I built was off the back of a bar in Berlin,

which accepted Bitcoin.

And now you think you've got whole countries accepting Bitcoin

and have Lightning payments.

So you get all this great data coming in,

which makes it a little bit easier to innovate.

But you're dead right.

And it's kind of like a snowball of ideas.

So something which I'm really excited about with Lightning

is just being able to split payments at point of sale.

So you pay for something, and then within that piece of production,

like a coffee shop, for example,

everybody could just be paid instantly into their wallets.

And that's something which is only possible by using these Lightning transactions.

But you could scale it up to larger production.

So you could buy a laptop,

and the payment could be split to different manufacturing distribution.

And it could be split down again into those different departments.

And then as well as that, it could impact tax.

So if there is a Bitcoin future, then tax collection will be hard.

And one easy way to collect tax is at point of sale,

is through value-added tax.

And when that happens, perhaps the user could say,

well, I want X amount to go here, I want X amount to go there.

And it's instant tax at point of sale.

So imagining those kind of use cases for money is very hard.

And this is why I like Ellen Bitz.

Like a lot of that concept of splitting payments for us

just came from an extension where Crypto Graffiti did a DJ set.

Then we had a QR code on the screen, people could tip.

And then if they tipped enough, they would get a download link for the song.

But then every time they tipped, 90% would go to the music producer,

and then 10% would go to the DJ himself.

And it was just that one time when we experimented with split payments,

we then experimented with it more.

Now we've got an extension specifically for split payments.

So yeah, you have all this kind of legacy baggage

of what you think you can do with money.

And then now we have this new type of money.

Theoretically, we've known that this thing would be possible.

But we've been able to have tiny, tiny, tiny little transactions.

But then thinking of new designs and new projects and new things

you can build on top of it, it's very exciting and a great place

to be in the space.

And that's why we saw this great innovation,

because obviously we're experimenting with a tool which

didn't previously exist for developers and builders.

Yeah, I think one of the beautiful things about Bitcoin

is that it turned this new form of money,

made it digital and fully programmable,

and Lightning makes it so much more approachable.

So this is a very good example of how we're just scratching

the surface of what it can do, what is able to be done with Lightning.

I think an example is looking at the dot-com in 2001 and looking at,

you know, right now we're streaming 8K video games across the internet.

It doesn't matter where you are in the world and you have low latency.

The people building the backbones of the internet back in the day

were not thinking of serving 8K video games, right?

They were thinking of maybe sending messages across.

So I think we're just scratching the surface now with money.

And money is such a societal, you know, an important piece to society.

And I think that's going to revolutionize much more than just money.

It's going to revolutionize industries.

It's going to revolutionize how society and, you know,

citizens interact with each other.

And I think Lightning is just that pivotal piece.

And you're seeing that with all the adoptions and announcements,

Strike, Kraken, BitPay, Robinhood, right?

So it's really that pivotal climax piece.

And I think next two years is going to be tremendous growth for Lightning.

And we're just, you know, just happy to be here building on this technology,

you know, with everyone.

On the startup side, we're also seeing very early-stage companies

take a broader range of experiments and projects forward.

And so, for example, we're seeing the integration of Lightning payments

for brick-and-mortar retail transactions,

like we saw with led by Ibex Mercado in El Salvador

with the adoption of Bitcoin as legal tender.

We're seeing the same sort of happen online.

We are seeing experimentation now with browser extensions

so that you can have your Lightning wallet sort of follow you around on the web.

I think that we underestimate how broadly payments exist in the world.

Everything where we're transacting, where there's some value,

of course, payments is important.

And through Lightning, we're able to now do that efficiently.

So, for instance, a portfolio company that we invested in

called L&D Work does Sphinx Chat,

which I bet a lot of people in this room are familiar with,

where Bitcoin can just be your native financial chat currency.

So, it's been interesting to see opportunities emerge

for entrepreneurs in the Lightning space recently.

And it really is snowballing as well, isn't it?

When you walk around and you meet some of the people who are building things

and all the projects now, which we now have in Lightning,

I was saying to someone, like, I think a year ago or something,

I was able to kind of keep abreast of most of the projects

which were in Lightning or being built,

the free and open-source stuff and some of the companies as well.

But now, I just can't keep up.

Like, there's so many great projects.

That's right.

So, we're probably talking to a few hundred founders a year.

And although sometimes I think Bitcoin gets maligned

for being less dynamic or creative,

we're seeing the exact opposite on the venture side.

So, the types of moonshots that people are taking

are just much more broad and ambitious.

Maybe I can also bring up that it's been nice to see the design space

open up through changes made at Bitcoin Core level.

So, earlier this week, we were just talking backstage

about an announcement that came out before the conference,

which was Lightning Lab's Tarot announcement,

which was a result of something that was enabled

because Taproot was activated last year on Bitcoin Core.

So, Tarot will ultimately allow you to exchange stablecoins,

for example, on Lightning Network,

which I anticipate will have a great impact on commerce on Lightning.

I think one of the really cool pieces about Lightning,

and just piggybacking off of that,

is that there are so many companies and so many teams

building so many different things.

And unlike Layer 1 Bitcoin, which is a consensus-based mechanism,

we all have to agree to the way the system works.

With Lightning, it is different. It is not like that.

So, Ben and I can have an agreement,

and we can exchange value on Lightning,

even though no one else in the network has the same agreement.

And I think that is beautiful

because it leads to a lot of innovations.

You have things like Build 12, you have LNURL,

you have Lightning Address, you have LNURLPOS.

And these are just things built on top of Lightning.

So, it's great for innovation,

but it also creates for potential segmentation.

We're now talking about certain companies pursuing this,

certain companies pursuing that.

And so, it's just a very exciting space.

It's very innovative and very fast-paced.

Strike ships all the time, Zebedee ships all the time.

It's fascinating to see the speed at which technology is evolving.

And I think, again, I'm just going to say it again,

I think we're just scratching the surface.

Just last, I believe it was two weeks ago,

Zebedee released a product called Zebedee Streamer,

which basically allows any person,

any content creator from anywhere in the world,

essentially, to put a QR code in their stream

and have interactions with their audience members.

So, you're now breaking that fourth wall

between your audience,

who used to be a passive participant of this engagement,

and is now using a tiny little bit of Lightning transaction

to interact with you, to send you a message.

And so, you break that fourth wall.

And this is something that is platform agnostic.

We're just using Lightning.

It doesn't matter if you're using on Twitch or YouTube

or wherever it is you're streaming.

This is just one of the products

that allows people to interact.

So, you can get, your audience in Japan

can help you in your guild, in your quest,

or in your stream if you're in the United States

or in your Brazil or in India.

So, the beauty of Bitcoin being global

enables for these types of innovations

which weren't possible before.

You can't easily send a dollar to your friend in Japan.

How does that actually work, right?

And with Bitcoin, and with Lightning, it's instant.

So, I think that's a very exciting part.

Well, what I like about people building more products

and projects, like with the video streamer.

So, with LNURL Pay, so that you're using LNURL.

And with LNURL Pay, there's part of the standard

where you can attach a memo, a note.

And for most use cases, that's not really very useful.

Or people weren't using it early on.

Whereas, because we got similar sort of extension in LNBits.

Having been able to pay in LNURL Pay,

and then write a little note,

and then for the viewer of a YouTube stream, for example,

being able to see that comment pop up in the video

with a little animated GIF or something is very cool.

And then that means, so it kind of guides the direction

of what sort of stuff is,

what sort, because LNURL is a wallet standard.

Obviously, the wallets need to implement these things.

So, it's almost like chicken and egg.

Like, without them implementing, you can't build

for those implementations.

But then, without you building something

to show that there's a need for it,

then they're not going to implement it.

So, it's a really interesting kind of,

watching those protocols kind of evolve.

Specifically, something like LNURL,

because it's so ground up and built by developers.

Because, for me, the biggest thing

is not just about technology, but about companies growing.

Because when you were saying,

there are new companies getting started,

it leads you.

Also, like existing companies.

When you look at Strike, as a company growing,

I don't know, where are my Strike employees?

There we go.

So, you see, oh, over there, over there.

We're everywhere.

But there is like Manuela, Frank, Casey, Joshua, Pablo.

All this exciting talent that's joining,

not from companies you never heard of,

but these are people that are joining

from either companies that are still not in the game,

but will be, like Google,

or companies that are getting into the game,

like Robinhood.

So, I'm really excited that Lightning, as a protocol,

is facilitating all of that,

and I'm looking forward to see how things will develop.

Yeah, absolutely.

So, we touched on it a little bit on this panel already,

but I want to talk about, for a second,

a little bit about how the Lightning Network,

this open monetary network,

is able to facilitate payments all across the globe.

You know, we talked about sending payments

to someone in Japan, you know,

micropayments at that level.

Yeah, Andre, do you want to kind of like,

you know, get into that a little bit more now?

You have gaming communities,

probably all around the world, right?

How has being able to stream, you know, micropayments,

being able to, you know,

have two users that don't know each other

on the complete side of the world,

how has this impacted their lives?

And, you know, down the panel,

we can get in, like, El Salvador

and other emerging markets that are using it.

Yeah, I think for us, specifically at Zebedee,

we actually have a very large Latin American community

of users, Brazil specifically.

We recently announced an integration with BIPA,

which is a Lightning-based exchange in Brazil.

And in that integration,

you actually can receive your SATs inside of Zebedee

by playing games, by winning tournaments,

and then you can, you know,

one-button click send to your BIPA account,

which automatically, you know,

FX converts into Brazilian Reais, right?

So we're talking about using Lightning

as the rail in between,

and at the edge nodes, you can use FX conversions.

So what we're seeing in Brazil is that, you know,

Brazil is one of the most connected, you know,

countries when it comes to people

that have access to the internet.

Everyone has smartphones, et cetera,

and it's a huge gaming, you know, community as well.

So folks are playing games powered by Zebedee,

and they're earning Satoshis,

and while these are primarily microtransactions,

and we're talking 100, 200, 1,000,

a couple thousand Satoshis,

it's not actually micro.

The impact is actually macro.

What we're seeing is that people

are accumulating the Satoshis,

and whenever they're ready,

whether they want to use the Satoshis themselves,

the Bitcoin itself,

or they want to transfer back to their Brazilian Reais,

they can do that, and the impact is very measurable.

We have seen people pay their rents.

We have people pay their grocery stores.

We have people, you know, buy medicine for family members,

and this is all enabled by, you know,

the ability of having money that is global.

We are an American company, American-based company.

We couldn't do that to someone in Brazil

because we can't easily send that value across to them,

right, and now in Bitcoin, with Lightning,

Lightning is digital money.

It's programmable money, and it lives on the internet,

right, so all of that is possible,

and the impact is very real.

Brazil is just the first, you know, country

that we're seeing that big change is happening

for us in the gaming industry,

but I think there's many, many more.

I think, you know, nations in the African continent

are, you know, emerging markets are exploding

through the roof, adoption and, you know,

financial inclusion and all of that,

so I think it's, I'm gonna repeat myself,

we're just scratching the surface.

Lightning is going to essentially take over.

It's going to be the story that we're going to be

talking about for the next five to 10 years,

and it's great to be here at the very beginning, right?

I think that's where we're headed.

Yeah, Rockstar, do you maybe wanna, like,

shine a little bit light on El Salvador

and some of the, you know, some of the life-changing impacts

that, you know, people, the citizens there

are able to utilize from, you know, remittance payments

to, you know, e-commerce, or sorry,

physical commerce themselves?

Yeah, I mean, that whole story is very personal for me

because on the inside, this whole thing was happening,

but for me, the fact that, you know,

one of us, a Bitcoiner like Jack, can go to El Salvador

and practically change the trajectory

of the history of a country

and get them to adopt that first

Bitcoin as a legal tender bill is just amazing.

And as Andre's saying, with scratching the surface,

we, yeah, that's just first domino.

And for us that, hey, yeah,

for us that have been in Bitcoin for so long,

it's just something that we have been expecting

because state and money will be separated.

Yeah.

Yeah.

I think.

State and money will be separated

and we are going to fix the money, fix the world.

Because when you see, for example, what happened in Canada,

I mean, it's just crazy that you have people honking,

people donating for people to honk.

And it's not even that people that are honking

are getting their bank accounts shut down,

it's people that send $20 to them.

And so I understand politicians

and they are trying to, you know, keep things running,

keep fulfilling promises that got them elected,

but I mean, come on.

You know, at a certain point,

you need to realize you are not going to make it

and look to solutions,

not just invent problems to stay in power.

And I would even expand that beyond countries.

Like it's even when you see what's happening with Bitcoin

and so many people trying to control Bitcoin

and narrative around Bitcoin,

what they need to hear and understand is that,

you know, Bitcoin doesn't need you, you need Bitcoin.

So yeah, like Mr. Wonderful ESG BS,

I mean, man, we don't need you, you know?

If we do, we have Peter Thiel, like, thank you very much.

So yeah, thank you.

And I look at Matt always and go with, you know,

stay humble, so I'll stay up, I'll stand there.

Awesome.

I'd like to kind of get into a little bit

of a different roles that we have here on this panel today.

You know, we have, you know, we have custodians

like servicing lightning payments on behalf of users.

We have open source tooling for self-sovereign individuals

to actually, you know, do lightning payments on their own,

both sending and receiving.

And we have a VC here, Elise, you know,

investing in some of the, you know,

most groundbreaking companies, you know,

moving at lightning speed and at like a technological level

that like we really don't see so much in the real world.

So I'd love to kind of just hear the importance

of like each of your roles that you have in lightning here

and, you know, even maybe the dichotomy between,

you know, custodians and open source development.

So like, Ben, do you want to like kind of talk about

like some of the open source tooling

that like you have created on with LNBits?

Yeah, so with LNBits, you can, you know,

run it just for yourself,

or you can run it for your friends or family,

or you can run it for a business,

or you can run it for the whole world if you want to

and be a custodian for other people's funds.

Then obviously you'll have to tackle

the regulatory stuff and whatever else.

So I'm not, I think within Bitcoin, you know,

not your node, not your rules,

like you should run your own node.

And we need to make that as easy as possible.

And we are making it as easy as possible

with all the great projects like Umbrella One

and RaspiBlitz and the MyNodes

and all these sorts of things.

But it's also okay to appreciate that some people will outsource that security to somebody who they quote-unquote trust.

And hopefully that, you know, the amount of money which they would leave on that service would be minimal.

And it could just be like a sort of a scrub service or a semi-custodial relay Bitcoin service where Bitcoin, you know,

so say if you've got someone offering a custodial service and then they're receiving Lightning payments,

then to have it just loop out on-chain when the amount gets too big, then as a custodial service,

maybe your security threat model is that you're just leaving, you know, a couple hundred quid on this service.

And then it's like, okay, well maybe for what I'm using it for, then maybe I don't need to run my own node.

It's easier not to. And some people will do that. So we need to be aware of them doing that.

And then we need to build for them, but do it in such a way that we can encourage them to then run it themselves.

So it's not hard to run themselves. So yeah, you have like, you know, custodial, then you have non-custodial.

And I think a lot of companies like, you know, like Galloy, like Allen Bits, like we're exploring like stuff in the middle.

You know, what's in the middle? Is it community banking? Is it sort of scrub services?

Could we get, you know, all that liquidity which is sloshing around in people's Lightning wallets?

Could we pool it together? And then could those pools be used as a funding source for custodial services?

So, you know, in a protocol-y way is, you know, the funds aren't being held by the service provider.

And then there could be some potential yield for the people who allow their Lightning funds to be put into that pool.

So I think there's some really interesting work on decentralizing custodianship and that murky area in the middle.

So I think that's really important because actually one of the most important pieces of Bitcoin and Lightning is the optionality, right?

It's a permissionless system. You can choose how deep in the stack you go.

So if you're, you know, a self-sovereign individual and you want to own the entire stack and you want to be your own bank, you have that capability.

You know, you can run a Bitcoin core node, you can run a Lightning node, you can have channel, you can do literally everything yourself.

I think it's a big ask to assume that each and every person in the world will eventually do that.

I think the optionality is really, really important. And you having hybrid models, having custodial models, having non-custodial models is one of the big value propositions of Bitcoin and Lightning.

You know, it's you serve your own needs. You get to serve your own needs.

So in a world where everything online and in real life can have a value attached to it,

I think everyone will be involved in Bitcoin in one way or another, even if you're not running the software yourself.

I think there are different use cases, you know, thinking from our side to the Zebedee side.

If you're a giant games publisher, you likely don't want to run, you know, your banking infrastructure yourself because of lots of regulatory burdens, because of infrastructure costs and etc.

So you're going to outsource that to a bigger custodian who's focusing on that.

But if you're a general user or you're a community bank with, you know, you and your family want to have a, you know, a node at home and you want to run that and manage that yourselves, you can do that, right?

So this is completely different to traditional finance. You can't just get a banking license as a person and sort of begin being a bank yourself.

Bitcoin allows for that optionality, gives you that permission, permissionless system, right?

And then you get to choose. You are a sovereign individual in Bitcoin. You get to choose how far you go, how deep you go, how technical you go.

Lots of people run their email servers, lots of people don't run their email servers and they choose to use Gmail, right?

Lots of people use accounts like Zebedee and Strike and lots of people run their own Lightning nodes at home.

So the optionality to me is a really important piece and it's how we're going to grow to millions and billions of Lightning users instead of every single person having their own node at home as an essential piece of it.

Lightning is the future and we need to make it approachable and reachable to all types of users, whether you're technical or not, right?

Yeah.

Yeah, to just add to that is someone that is working on both custodial solution with Strike and then non-custodial with BTC-based server.

I often get messages of my BTC-based server instance, there is this problem, that problem.

So yeah, it is about us creating the tools that facilitate the future.

And to me, one of the most natural use cases for Lightning is that big custodians specifically exchanges.

So big shout out to Jesse and Pierre for Kraken integrating Lightning Network.

Yeah.

A round of applause for them.

Because for me, when we have big exchanges like that, it's such a natural use case because you don't even need to deposit in exchange and get exchange hacked.

But rather you will have your funds in channel and yeah, you can pre-balance with your dirty fiat.

So yeah, it's all about providing a range of solutions and then people can pick and choose.

That's the original with Lightning, that was Satoshi's original vision, wasn't it?

It was anti-GOX and a unidirectional payment channel.

So it's really nice to see the exchanges actually implementing it.

Yeah, direct channel with non-GOX.

Yeah.

They can do high speed, high frequency updates to their funds.

At least on the VC side of things, how do you see your role in the Lightning space?

So our role is to be a collaborator and resource provider.

And I think of it as a service provider for the founders that we work with.

And then if we're doing our job well, it helps accelerate what the founder would have done without us.

That's the goal.

I also, though, think of us as a way to organize capital to provide resources for growth in the field,

which is more challenging in Bitcoin and Lightning than in altcoin spaces, for example.

And so it's important for us to be able to talk to Bitcoin OGs that have stacked a lot of Bitcoin

about why they should contribute back to the innovation ecosystem.

But then also to folks that might not get Bitcoin yet about why they should care.

And on that second group, one of the catalysts for people's curiosity has really been Lightning.

There's a hook there.

People get it, that it changes commerce in a variety of ways.

But I think what's interesting, and Andre kind of spoke around this earlier,

is that because it's more flexible, it can meet people in communities where they're at.

So, for instance, what Zebedee is doing for gamers is banking them, basically,

in a way that makes sense for the population and can't be done with traditional financial tools.

But it can also do that in emerging markets or for lower socioeconomic status populations

where traditional finance can't serve them either.

And so that's our job, is to recognize the opportunities that the protocols present

to create new utility and then find the founders that are going to be able to execute

and provide for these populations.

Awesome, amazing.

So, we've got about five minutes left.

I did want to kind of get into almost the flip side of things.

What if the Lightning Network is not the future of commerce here?

What if Lightning Network ends up being used in other use cases?

Is Lightning good enough the way it is?

What needs to progress to move to the next level from there?

Do we need additional payment protocols, things like Bolt 12,

to be able to service some of these use cases?

Are there going to be alternative sub-networks within the Lightning space

or even additional Layer 2 or Layer 3 solutions on top of Bitcoin?

So, as kind of final thoughts here, what do you guys see as Lightning as the future of commerce?

Is it the future of commerce?

Yeah, we had a really good talk in the backstage about this.

Maybe me and Andrew were talking about if you have additional hops,

it's not direct channel, success of payments is 77%.

Yeah, 77%.

And then it goes down from there.

But yeah, maybe you can expand on that.

Yeah, I think, to me, one of the important pieces of Lightning is interoperability and Bitcoin.

Layer 1, we all agree on everything, it's a consensus-based layer.

Layer 2, we have some agreements, but like we said before,

different participants can have separate agreements and still transact value.

As we stack the layers, as we continue building the Bitcoin stack,

I think it's really important to maintain that interoperability,

as with things with LNURL, Lightning address, and so forth.

And I think if we reach a scenario where certain companies are doing this,

other teams are doing that, some certain people are doing this,

and they can't speak to each other, you lose a very vital piece of Bitcoin,

which is the ability to send money to anyone, anywhere.

So we're working very hard for it to be the future,

but there's also lots of business interests for companies,

there's also incentives that are different for certain teams.

So it would be a shame if we were to split,

and Lightning becomes separate things to each team.

And that's when, in my opinion,

Lightning could come to not be the holy grail that we all want it to be.

So I think it's a matter of communication, but it's a very tough problem.

How do we engage as community members, as companies,

to agree on standards that are being built as we're building them?

Bitcoin and Lightning are sort of standardized now,

but what about the rest of the things that are being built on top of it?

So I think that's one of the big interesting points.

Yeah, when you look at the way that Lightning specification developed,

which was really good with Bolt 1, Bolt 2, all the way to Bolt 11,

and then from there we've expanded,

and now we are at this point where will we sit down and talk about specifications,

improve them, or what will be the path forward?

Because for me, maybe payments is not the future of Lightning,

maybe tokens are.

I offer that thought to you.

What I am really excited about, though, is alternative layers, too.

So Coinpool, as a proposal, has come out,

and I see that in the future there will be a lot of development there,

because there are such natural use cases for that.

As someone working on the BTC Pay server,

if you just overpay your merchant,

now you're masking the amount that you pay to merchant,

and only merchant knows it, can blank it out,

and whatever you overpay can now become a part of the pool,

sort of like what Samurai is doing.

But let's see, yeah, let's see.

And invitation, if there are any more NIMs like me,

shadowy super coders, come to BTC Pay server at Mattermost,

and let's talk about Coinpool.

So a lot of what I think can help advance Lightning for payments

and make Lightning payments more reliable,

including when there's multiple hops in the payment,

is being built now.

So Lightning is still early.

There's an opportunity that many companies have described,

for instance, voltage recently, I think, at this conference.

There's an opportunity to be more efficient

in how you manage your nodes and channels,

and businesses have the same opportunity.

And so I think one of the strengths about the Bitcoin community

is that we're really self-evaluative,

so we're hard on ourselves, we critique ourselves.

And I think that makes us much stronger,

but we also have to remember that it's just very early.

And so some of the picks and shovels that need to be built

for Lightning to be the future of commerce are being built today.

We're trying to fund them.

One of the things that makes me most bullish, though,

about Lightning for the future of commerce

is to see the sort of feedback loop that companies like Zebedee or Strike,

Ibex Mercado, Lightning Labs,

have been using in terms of the adoption and infrastructure cycle.

And so, for instance, we saw in El Salvador

a real love and appreciation for Lightning, the protocol.

And then we saw perhaps some difficulty or challenge for emerging markets

where households might have a one ratio of how much they make

and how much they need to spend each month.

It's harder to tolerate Bitcoin's volatility,

at least now, before everything's denominated in Bitcoin.

And so as part of that feedback loop,

we see companies thinking about how to offer the protocol

without forcing exposure to Bitcoin's volatility.

And so those sorts of quick iterative loops based on feedback from adoption

will, I think, position Lightning to be in a really good place

to dominate commerce in the future.

Yeah, I mean, I think that any money, medium of exchange money,

which we're going to be using in the future,

will be built using Lightning.

Currently, we're just at the stage where it's messy

and there's all this, you know,

it's the free and open source way, isn't it?

You're making the sausage in public

and everyone can see all the ingredients which go into it,

and it's messy, it's not like a closed source system.

So it seems very chaotic and it seems like things are breaking,

aren't working, and then you have payment failures.

But, you know, the reason people have payment failures

is because they haven't balanced their channels properly.

And now there's all these great services which are exploring

how to do that in a more automated way and, you know,

solutions for fixing that.

So, yeah, and this is what I was saying before about the, you know,

having real world use gives you all that great feedback.

Like in El Salvador, the thing which was obvious for anyone

who went there was the payment rail was fantastic.

Medium of exchange sucks because you've got the volatility of Bitcoin.

And then we know one day that Bitcoin will have enough liquidity

so it won't be volatile.

But then how will it get there unless people are using it

as a stable medium of exchange?

So the idea of these stable coins, which can bring in Bitcoin liquidity,

which we can use temporarily until we get to that, you know,

mass where the Bitcoin price just can't move

because it's so incredibly liquid.

I think that's the inevitable kind of next step for Bitcoin.

It's very exciting.

Yeah, yeah.

Well, I want to give everyone a round of applause

for these amazing panelists.

Thank you guys so much.

That's it.

Thank you.

What's up?

What's up?

Is my mic on?

Hello.

Hello.

Hello.

Can you hear me?

Testing one, two.

Testing one, two.

I'm going to borrow yours.

Oh, I can see us.

Hello.

Testing one, two.

Testing one.

Yeah, what's up?

Can you guys hear me okay?

Yeah.

Cool.

So this is the mempools panel.

My name is Wiz.

I'm the co-founder of the mempool open source project

and operator of the mempool.space block explorer website.

And this is the mempool panel where we're going to bore you guys to death

and blab on for hours about the mempool.

These are some really cool shadowy super coder cypherpunk people

we are very fortunate to have here today.

Why don't you introduce yourself?

Yeah, thanks.

My name is Sergey Kotler.

I'm the founder and CEO of BitRefill.

Many of you probably know what we do.

We let you buy anything you want.

Cool.

I think I'm okay.

My name is Gloria.

I work on Bitcoin Core, mostly in the mempool code base

and surrounding areas such as mempool validation,

transaction relay, and mining.

As a preface, when I say the mempool,

people often on Twitter say I don't know what I'm talking about.

I mean the mempool as in the code base area, just to say.

And I'm founded by Brink, which is a nonprofit

dedicated to Bitcoin research and development.

Hi, I'm Merch.

When I talk about the mempool, I mean the transactions

that are unconfirmed and are shared between all the different nodes

that run and have their own unique perspective on the mempool,

which just overlaps largely.

So the mempool is an abstract concept that just treats this overlap.

And I used to stare a lot more at the mempool

when I was at BitGo as a back-end coins team member

because we had so many customers that would get stuck transactions

or just needed advice on how they should send their transactions.

Now I'm at Chaincode Labs, and while I'm still interested in mempool,

I sometimes do the mempool weather report.

Yeah, we love those mempool weather reports from Merch.

They haven't done any while though.

Maybe if we ask real nice, they'll do one for us today.

But let's start with the basics.

Sergey, do you want to just break it down for everyone

who's not already familiar?

What is a mempool?

Why do Bitcoin nodes have them?

How do they work?

Why are we so interested in the mempools?

There's a lot there.

I mean, the basic thing is that when you send a Bitcoin transaction,

it doesn't go right into a block, right?

Where does it go? It goes into the mempool.

So the mempool is the pool of transactions

that are waiting to be confirmed into a block.

A Bitcoin node will receive a transaction.

It will check if it's valid, put it in the mempool,

put it in the stuff, and it will pass it around

to all the other Bitcoin nodes that it knows of.

So each has its own perspective,

but there's also some level of shared knowledge

of what are the transactions that are waiting to be confirmed.

And so, I mean, from my perspective as CEO,

technical CEO of a company that makes many Bitcoin transactions

and have customers making Bitcoin transactions to us,

especially back in 2017,

when the transaction fees were really high,

it became, I mean, really financially important,

because we were spending thousands and tens of thousands,

even in dollars, on transaction fees almost on a daily basis.

And so it created a strong incentive to keep an eye, right?

Because the most important thing is that the mempool is sorted by the fee rate, right?

So that transaction that has a higher transaction fee

will be sorted higher, and it's going to be prioritized first by the miners,

which are then working based on financial incentives, right?

But then it becomes important to set a fee that is just high enough,

but not too high, because then you're wasting money, right?

But not too low, because then the transaction is not going to go through,

maybe ever, or maybe in a long time, right?

And so fine-tuning that is super important,

and I mean, this is something that's gotten infinitely better in the past years.

But that's kind of how my interest got sparked into it,

and I still do, as a habit, even though the mempool isn't as crazy as it used to be,

I still watch it all, I was showing it to people,

I have it on my phone, you know, in my Safari.

Just to keep an eye on, like, because you can see, you know,

you can see a lot of stuff in the mempool,

of, like, what is going on, who's making the transactions,

what are they doing, where are you going, you know?

You learn a lot of stuff from watching it.

Yeah, that's a good way to put it.

It's kind of like the transaction queue of the Bitcoin network,

where whenever you use Bitcoin, it just goes into there first,

and it's this very interesting area to monitor and visualize, right?

But one thing you mentioned that was really interesting

is how high the transaction fees got last year.

Actually, this is a good question for Merch.

And maybe I think we have a slide for this, the history of the last year.

Could you guys show that first slide?

It's basically the mempool chart of the last three years.

Merch, do you want to give us your nice weather report?

What's going on in this chart?

Well, more of a historical weather overview.

So in the last year, we had the interesting situation that

from mid-December, 15th of December until 2nd of June,

the mempool never fully cleared.

So there was always at least one block worth of transactions

waiting to be confirmed.

And for some time of that, even the default mempool limit overflowed.

I think we are going to touch on that a little later, maybe.

So the colors that you see here, hopefully.

Yes.

So the lowest bar is...

You see color bands here, right?

And the color bands are fee rates.

And the size of the bands indicate how much data is waiting

to be included in blocks.

So at the bottom, you have this pinkish tone there.

That's just over default min-relay fee,

which is one satoshi per vbyte of transaction data.

And then I think yellow goes up to like 30, 40, or even...

100.

Yeah, 100.

So generally, the mempool is just a visualized...

Or this chart we're looking at here is a visualization

of the waiting queue of payment promises

to be turned into payments by being included in blocks.

Yeah, it was pretty crazy last year.

I think it was around December of, I guess, 2020

when we saw the fees start to rise

and the mempool was just congested all the time

until about the Miami conference last year, right?

It was right around when it...

And during that whole time, it was just totally congested.

And sometimes you pay as much as 300 sats per vbyte

just to get into the next block, like 20 US dollars

just to do an ordinary Bitcoin transaction.

It was really a unique time in Bitcoin's history, I think.

We hadn't really seen that kind of sustained fee market

really before.

And just to point out, sorry, there's a common expression,

there is no the mempool.

And likewise, this chart that you are seeing

is not a canonical view of the mempool

of the Bitcoin network, right?

This is just Wiz's node,

which happens to have a very large max mempool size.

But I don't know if you guys can still see...

Oh, if you could bring up the chart again, sorry.

I think it goes up to like 400,

it goes up to like 200 million virtual bytes.

But actually the default mempool size is 300 megabytes

and a lot of that is taken up by metadata, 75%, in fact.

So most mempools, like ordinary non-Wiz nodes

and not mining nodes on the network

are only keeping up to like 75 million virtual bytes

worth of transaction.

So they actually wouldn't even see

the peak of those mountains.

But of course, actually,

they're keeping the top section of the fee right,

not the bottom.

Yeah, and I think we have a slide

of what that looks like.

Can you go to the next one

to see what a normal node's mempool looked like last year?

Yeah, this is it.

Corey, you wanna walk us through

what we're looking at here?

Yeah, so in April or so, right,

they're purging all of the,

so okay, Sergey mentioned that we sort the mempool

in transactions based on their fee rate, right?

And I guess the first thing I probably wanna mention

is individual fee rate is not what matters.

Ancestor package fee rate is what matters.

So in Bitcoin, we have a unique transaction structure

where it's made of inputs and outputs, right?

We all know what the UTXO-based structure is.

So you can have transactions dependent upon each other

inside of the mempool.

So you can be spending a UTXO

that doesn't exist in the blockchain,

but it exists in a transaction that's still in the mempool.

That makes sense, right?

Hopefully everybody understands that.

But how did the Bitcoin network change during this time

of consistently high fee rate environment

and transactions getting purged?

Like, what was the experience like

for a normal Bitcoin user at this time?

Yeah, so I think if you had a 1SAP or VByte transaction

that you broadcast around April or so,

and as the mempool filled up,

your transaction was probably purged

by most of the mempools, most of the nodes' mempools.

Right, because there's this common belief

that you can just always send a transaction

at 1SAP per VByte fee rate,

and eventually it'll get confirmed.

But this is a common misconception, right?

I mean, if the mempool is constantly full,

your low-fee transactions will get purged out of the mempool.

There are other mempools that have lots of...

True.

And they do rebroadcast.

Like, when it goes down, you can see...

If we bring up the chart again...

I'll look at us, let's look at the chart.

When it goes down from the peak,

you can see over there,

some of the transactions are coming back, actually.

Like, on the right half,

you can see that the pink ones are coming back up.

Right, so the red color...

May or may not be.

The red color is like 1SAP per VByte,

and that light blue color is like maybe, what, 20-ish?

So after all the higher-fee rate transactions,

around 20 SATs per VByte got confirmed,

then you can see the low fees of 1SAP per VByte

started to get rebroadcasted and networked.

So how did BitRefill handle that during that time?

Like, don't you guys allow people to buy gift cards

with zero-conf transactions in the mempool?

Like, how did you guys handle this?

Well, this is exactly why we have to do that, right?

Because otherwise, the customer might be stuck

forever and ever, and have a horrible experience,

and support tickets, and confused refunds,

and exchange rates, it's like a whole mess.

So, I mean, again, like,

2017, when this was even worse,

even crazier than it was on the chart here,

it was a kind of formative time for us,

we were really struggling.

At the time, we were mainly doing low-value

phone refill transactions, you know,

so like, typical $5, $10 transactions.

And, I mean, we've done a lot of things,

you know, we developed, like,

we ourselves recommend a fee rate for the customer, right?

So we, like, our web server monitors this,

or our version of this,

and based on that, computes a recommendation

that we give to the customer,

and these days, most wallets do that automatically,

but we also sort of, like, make sure.

But isn't that a huge risk for your business?

I mean, if I go on your BitRefill site,

and buy an Amazon gift card for, like, $1,000,

and send you a low-fee transaction.

That's RBFable.

Well, if it's RBFable,

then we're not going to do the zero-conf,

I mean, you're gonna have a bad user experience.

But if you do that, then presumably,

you're savvy enough to be able to fix

the bad user experience yourself.

But, I mean, the risk factor,

I mean, people think that Bitcoin transactions are,

when they're unconfirmed, are trivially reversible,

and that's not true, at least not today, you know?

You need to collude with miners.

Is that, would you guys agree with that statement?

I think it has been shown

that if you're willing to put in the effort,

you can very successfully double-spend transactions,

even after they've been broadcast.

But you do have to really put in some effort right now.

We don't accept just any transaction, right?

There's a bit of magic going on

where we check and vet and make sure, right?

So, I mean, the low-hanging fruit stuff

that you have in mind, I mean, you know,

the goal isn't to double-spend,

the goal is just to trick us, right,

into believing that we got the money where we didn't.

That's the trick.

And, I mean, we've been doing this for seven years now.

I think it has happened in seven years one or two times,

and we do, like, you know,

more than 100,000 transactions every month, you know?

And compare that to credit cards,

where you, like, standard fraud rate is, like, 5%,

and, you know, it's, like, a cost of doing business.

So, and here it's, like, twice, ever,

and, like, it was because of bugs that we fixed.

I think it's still important to distinguish, though.

It's a little bit of a gentleman's agreement not to do it,

and there's no tools to do it easily.

There's very few people that would have the knowledge

and maybe connections to reliably double-spend.

And so, yeah, I agree that from a business perspective

and planning and, like, risk factors,

you can discard that risk for the most part.

But fundamentally, from how the mempool works,

there are some policies that help with this,

but it's not actually,

while a transaction is unconfirmed, it is unreliable.

And it just so happens that the policies

and the behavior of our society,

our Bitcoin society,

tends to confirm with our needs in regard to-

No, there's thieves and hackers and crooks

that use Bitcoin as well.

So, you know, it's not just the nice people

at the Bitcoin conference.

Yeah, fair, yeah.

Well, also, you have customer accounts, right?

It's not that people are completely-

No, no, no, no customer accounts.

Well, we do, but that's not related to this.

Yeah, I'd love to continue talking about mempool attacks,

because the first time we met, for me,

I mean, we all know that transaction relay

in a distributed system is, like, notoriously unreliable,

and there's, I think I know more than anyone

that there's tons of attacks, and it's a dangerous place.

And so when I first met you,

and you said you accept zero-conf transactions,

we had a very heated debate

about whether or not that's safe.

And I think you did manage to convince me

that, for you, at least,

it's difficult to convince the logic

on top of your Bitcoin operation

that you are going to be double-spending.

Yeah, it sounds like,

if you're going to be sending a million dollars to someone,

you might want to wait for six or 12 confirmations

on the Bitcoin blockchain.

But for your particular threat model,

where you're selling gift cards

of relatively small denominations,

and mitigating the double-spend risks,

like you said, no RBF,

they have to use a reasonably high fee rate,

et cetera, et cetera.

It sounds like you've figured out

how to manage this risk for your business.

And I mean, let's be very, very, very clear here.

I in no way say that you should rely

on unconfirmed transactions.

Yeah, don't do that.

It's advanced-level kung fu.

You need to have people that do it

and spend hours figuring it out,

monitoring it, evaluating, improving it, and so on.

It's something that you can do if you're a company

and have people working on this full-time.

It's not something for the common man, right?

It depends.

If your buddy's paying you back 10 bucks for lunch,

you don't have to sit there.

You can set it to the low-fee transaction.

And in fact, for, I think, quite a few,

I mean, maybe we can talk about the trustless aspect,

because I think it's very interesting

about how Bitcoin is all about the trustless.

But if you actually look

at most actual Bitcoin transactions,

there's always a very high degree of trust

between the parties in the sense of,

hey, we pay someone's salary in Bitcoin, right?

Okay, we're not gonna double-spend our employee,

because then he's not gonna go to work next week.

Also, it's unethical,

and it's not normal human behavior, right?

So for a lot of transactions, there is a mutual trust.

And in that situation, you can set the mempool fee

to one cent per byte,

and it's gonna confirm eventually.

In worst case, if it happens

that suddenly there's a big spike like that,

well, then you'll figure it out.

It's gonna be a little bit of a hassle.

Yeah, I think that's the big takeaway,

is that the fee rate you use,

or whether you accept the transaction

on zero-conf or six-confs,

it all really depends on your individual threat model

and use case and amount of the transaction.

It really depends.

And so for some people,

they can always send one cent per byte.

Even if it takes a year to get confirmed, they'll wait,

because they just might be sending it

between two of their same wallets,

and they know they're not going to

double-spend their own transaction.

But if I wanna say,

hey, let's buy a million dollars worth of gift cards,

I'm pretty sure you won't accept the zero-conf for that,

right?

But what about layer two networks?

Oh, yeah, exactly.

I wanted to point out that all of this

is assuming that transaction propagation

is based on this perfectly fair fee rate market,

where the higher the fee rate, the transaction,

the faster it's going to get mined.

And that's not quite true.

Right, so how does that apply to lightning, for example?

If I have a lightning node,

and I have to force close a channel,

how do the fees work with that?

Yeah, okay, so this is something

I spend a lot of my time thinking about,

because in all layer two contracts,

you have a particular set of conditions

that makes fees extremely important and dangerous.

So one thing is,

when you're doing a lightning transaction, right,

you and your counterparty are negotiating the fee rate

well before you're ever going to broadcast it.

Because the whole point

is you're going to exchange these transactions and payments

and only settle on-chain if you really need to,

or when both of you decide to close the channel, right?

So what really goes wrong

is when you have a unilateral close,

as in your counterparty's trying to cheat you,

your counterparty went offline,

whatever it is, something went wrong.

So now you need to broadcast your transaction.

And that might be hours, days, weeks,

after you decided what the fee rate

on that transaction is going to be.

And if your counterparty's trying to cheat you,

there's no way you're going to sign an RBF with them,

because they're like, I'm trying to steal your money,

why would I give you another signature?

And so that combination makes it quite dangerous.

So for example, if we go back to the second slide,

where the fee rate, the minimum fee rate of the mempool

went from one sat per vbyte to 20 sats per vbyte.

Let's say you open a Lightning channel,

and you have some HTLCs going,

and you negotiated a fee rate of 10,

or even 15 sats per vbyte on your commitment transaction.

But then something goes wrong and you need to broadcast.

Well, the commitment transaction will straight up

not even make it into anyone's mempool.

Maybe it will make it into Wiz's mempool,

because the floor is still one sat per vbyte.

But for the most part, it's just not going to work.

And then you say, oh Gloria, what about CPFB?

Commitment transactions have anchor outputs,

so either counterparty in the Lightning channel

should be able to attach a very high fee rate child

to their commitment transaction.

And newsflash, the first transaction will not make it in,

and we're actually only validating transactions

individually, so we'll reject the first one,

we'll look at the high fee child,

and we'll say, well, these inputs are not available

because they belong to a transaction we rejected.

And so, oops, sorry, neither of them are getting in.

So it sounds like Lightning has a pretty big

security hole right now based on what you just said.

Exactly, this is why I'm excited to be here today,

to tell you everything's broken and we need to fix it.

No, but I think this particular issue,

again, we have not seen a fee rate market like that

since April of last year, and I'm not saying

that there is a reliable attack

that attackers can always execute,

but if you think about it, as hundreds of billions

of dollars of capital is locked into Lightning contracts

and other L2 contracts, and the fee rate market,

or the usage of the mempool becomes less predictable,

we're not able to say, oh, in one week's time

or in one month's time, we know that there's gonna be room

in the mempool for a 10-SAP-4V by transaction.

These attacks become more and more critical,

and again, this is on a very long time horizon.

So as protocol developers, we're thinking about

something like this, where it's like, okay,

when you're building an L2, hopefully there is

a seamless interface between L2 and L1,

and I think mempool is where that security assumption

really breaks down, because to put it simply,

Lightning and all other L2 protocols

have a security assumption that you will always

be able to mitigate counterparty risk

by broadcasting something on-chain

to revoke their funds or to get your justice transaction in,

and that assumption is not always true.

It's not always false, okay, not to scare everyone,

but I think this is going to become more and more dangerous,

and we need to fix it.

But also on the scaring part, like, I mean,

normal Lightning wallet, when it opens the channel,

it sets that fee pretty high.

Yes.

So it sets it to a level such that it's relatively

unthinkable, even if 2017 were to happen again,

that it wouldn't even make it into people's mempools.

It's definitely, I mean, you can imagine it happening,

but it's like, it's unlikely, you know?

Yeah.

So essentially all the unilateral closes overpay heavily

because they cannot, so maybe to pick up

your point from earlier, the only thing that has

propagation guarantees in Bitcoin is blocks.

We guarantee that we will deliver blocks to other nodes

so that everybody can catch up to the best chain tip.

Transactions do not have propagation guarantees.

We forward them at best effort.

Generally, it means that all transactions

get to all other nodes in a minute or so.

And once they're in a block, of course,

as part of the block, they do get propagated.

But before that, the unconfirmed transactions

do not have guarantees, but essentially the L2s

rely on the assumption that there are guarantees

for transaction propagation.

So that's where the problem comes in.

Sergey, I think you run a pretty large Lightning node

for your business.

Can you tell us any stories?

Has BitRefill ever seen anyone trying to steal funds

out of a Lightning channel during that time?

I guess it was April of last year.

Did you see any shenanigans?

Probably not.

No, we've had shenanigans, but they're like

someone made a mistake and accidentally,

you know, their wallet started doing stuff,

and so we've, our thing is to slap them and so on.

And then the person reached out and said,

hey, I fucked up, you know, you gotta help me out,

and we help out.

But I think it's also important to keep in mind,

again, like we talked about, that a financial transaction

has a level of trust, right?

So for example, at BitRefill, our biggest channels

are going to be with other companies, right?

So we'll have a big channel, or multiple channels

with Strike, or BitFenix, BlueWallet, Asank, and so on.

And so it's not like, you know, I mean,

Bitcoin is built for the Wild West,

you know, everyone for themselves.

But in reality, most of it isn't, right?

I mean, just because imaginably we could

with a very sophisticated attack like this,

you know, rob our good friends of a strike of money

doesn't mean that we do.

You know, we have business really,

common human decency and so on.

So it depends, and Lightning channels

have a certain trust factor in them by default

in that you kind of rely on the person,

like keeping their node up and running

and not doing anything stupid and so on,

which is like a weak trust, right?

But there is a little bit of a type of trust.

You don't trust them with your money,

but you trust them to not mess things up.

I think we actually see this in many layer two networks

or maybe more broadly technologies built on top of Bitcoin

where there's not only the anarchist,

you know, trust of the base layer of blockchain.

For example, if I had a channel open with you,

and for some reason my node got messed up

and you had to like force close the channel

and you got those funds,

we have some kind of reputation or relationship together,

I would say, hey, can you, you know,

let's settle up properly.

I think this is quite common,

like you said, in the B2B space

where Bitcoin banks essentially have very large channels

between each other or Bitcoin payment processors

or merchants selling gift cards, et cetera.

And I think this is one part of the,

maybe to mitigate the risk in a different way

from what you mentioned earlier.

Okay, sure, Lightning has some security holes

or threat models maybe need to be adjusted

for when the mempool gets full all the time.

But one of these mitigations is actually

the social maybe capital part of it.

Yeah, sure.

But like, just maybe to play devil's advocate

or to provide a perspective of someone

who is trying to design our policy rules

and our mempool for the node runners

that are using a Raspberry Pi.

You know, the people in countries

where this is the most free option for them to transact

and their government is actively trying to censor,

or sorry, you know, someone is trying to censor

or freeze their ability to use money

for whatever it is that they need

that may or may not be politically accepted there, right?

Like we want the default option

to be as minimal as possible, as private as possible,

as censorship resistant as possible.

So of course there are many scenarios

where there is a social aspect

or there is a legal framework

with which people can use externally

to the Bitcoin and Lightning assumptions

to figure out how they're going to transact.

I think the most private, you know,

censorship resistant, blah, blah, blah,

option should be the default.

I strongly agree.

I mean, with everything that you say

and with everything that you do is super important.

I mean, we're building Bitcoin to survive in wartime, right?

I just sort of added in there

because maybe people get the impression

that shit, shit, if this goes up,

all of my money is going to be stolen from Lightning.

That's not necessarily the case, you know?

But we're talking about a sort of a risk

that is theoretical, highly unlikely,

requires a sophisticated attacker

and a special set of circumstances.

We need to fix that risk, right?

And that's what you're doing.

And the great people at Lightning and so on.

Yeah, but you know, it's important to know.

Yeah, I like that we have balanced voices on this panel.

I want to jump in here now too.

So, I mean, it's easy to build a trusted relationship

on a default of no trust necessary, right?

You can sort of upgrade your relationship

with somebody else by adding a trusted relationship

and then you can do more things than with the default.

But yeah, it is important that it works for,

well, Bitcoin is the money of enemies, right?

Taj said that very nicely.

So do you recommend someone to open a,

would you recommend someone to open a Lightning channel

with their enemy?

No.

I don't think that that,

you do open yourself up to a little bit of abuse

if you have a Lightning channel with someone.

They can make it hard for you to get your money back.

They can grief you for the fees for opening the channels

and things like that.

But generally, so we have the base layer

where you don't have to need a lot of trust.

And then of course you can build

business relationships on that

and you can do more with that.

It's sort of like we have a very simple,

stupid base layer in Bitcoin

and then we build the complex things at the edges

and on top because it's easier to go that direction

than vice versa.

Going from a trust necessary to an untrusted,

would you want to open a bank account

with somebody that you know

is going to try to steal money from you?

Nobody suggested that here.

No, no, no.

I'm just illustrating.

Yeah.

And obviously, hopefully nobody gets the impression

that I'm criticizing Lightning

or thinking that they're building too fast.

But I think in Bitcoin,

we have more of a philosophy of building bottom up.

So we have our base layer, no trust required,

as security model is as difficult as possible.

And then we're slowly building up

to a scalable payment system

that can handle the thousands of transactions per second

that honestly, we cannot fit into a block right now.

So we cannot afford to not build Lightning

or some scaling solution.

But the way that I think we do things,

what I like about Bitcoin development

is we build bottom up and we put security first.

I think that's the way we should think about things

and what I really like.

So-

Yeah, I think we covered a lot

of the very interesting past of the mempool,

historical data trends.

And now we just kind of touched

on the present state of the mempool

and how it affects various threat models

for various use cases.

But what about the future?

Mert, you usually give us like a weather report

of what's going on in the mempool.

Like, how about a prediction?

What's the future weather report for the mempool?

What do you think is gonna happen?

How is the mempool gonna change over time?

That's very interesting

and I've been thinking about that.

But I mean, I don't know.

But, so from the stats that I'm seeing,

I think that the number of payments

has been growing pretty steadily.

The amount of money that is being sent

has been growing pretty steadily.

And what led to this congestion in the last year

was that there were just more

and more transaction happening, transactions.

And eventually, the block space

was completely getting used.

And the block space supply is pretty inelastic.

While you're slightly below it,

it will clear every night or at least every weekend.

And the fees will calm down again.

As soon as you overshoot a little bit

and the number of transactions

that get submitted to the network

exceed the available block space,

it'll just continue growing, right?

Because there's not enough new block space to clear it out.

And so we had a bit of a demand shock after.

Well, first we had a supply shock

and then we had a demand shock.

First, China kicked out their miners

and the hash rate went down by 47%, I think, at the peak.

And then just around the same time,

blockchain.com, who is responsible

for about 30% of all transactions,

finally updated from pay-to-public-key hash

addresses to pay-to-witness-public-key hash.

So the inputs went from 148 bytes

to 68 vbytes on each input.

So they were less than half the size.

And suddenly, this being slightly

over the block space demand went to,

oh, we're like at 90-ish percent

of the block space being used

and fees dropped through the floor.

And then the hash rate regenerated maybe even faster than some people expected.

Some people were like, it'll take a year for all these companies to resettle.

They were heavily incentivized to get those miners as soon as possible.

So blocks were coming faster and transactions were smaller, at least, you know, blockchain.com.

So in a way, I think we'll see a couple more demand shocks, for example, with pay-to-tab root.

It took now almost five years, but we're at 83% SegWit transactions now.

And with tab root, I assume a similar pattern.

It will take a few years for use cases to come up.

But then especially for multi-sig, multi-sig will be a lot cheaper to do

with key path spends on pay-to-tab root.

And a key path spend in pay-to-tab root is only 58 vbytes,

whereas, for example, at 203 multi-sig, even with native SegWit right now,

it's 105.

Or older formats are 140 or 297 for legacy, even.

So the demand from multi-sig transactions will go down a bunch.

And then Lightning is actually maturing maybe a little quicker than...

So, for example, Rusty said, building Lightning will be a 20-year effort.

And now people are replying to Rusty,

and they're like, oh, that's great.

That's great.

That's great.

That's a 20-year effort.

And now people are reporting that they're routing thousands of transactions

only through their own node that they're administering from home.

So I think that the smaller payments will be pushed out

to the payment layer, to Lightning.

The multi-sig transactions will move

to these more efficient formats.

So for the middle term,

probably block space will remain relatively abundant.

But if payments continue to grow,

and conferences certainly seem to grow,

then we will always have some demand.

And what last year showed, I think,

is that transacting on Bitcoin

is valuable enough for a lot of people

that they were willing to pay significant fees.

And we have at least two more halvings or so

until the subsidy is going to start to be released.

It sounds like a typical free market economy

where you have limited supply,

or I guess maybe a variable supply and a variable demand.

And if the demand ever exceeds the supply,

then sure, the prices go up.

This is just basic economics.

But will we ever see a time where the demand

constantly exceeds the supply and the mempool is just constantly full

and transactions are getting priced out, essentially?

Well, one thing I want to add,

sorry to steal a bit,

is demand is not just comprised of how many people

are using Bitcoin to send money.

And this goes further than just,

oh, some of it's happening on Lightning, which we don't see on Chain.

A lot of it is happening on Lightning, actually.

And as you alluded to,

there's plenty of ways that wallet developers

can save users' money simply by making smaller transactions.

There are so many advancements,

at least that I know that exist in the Bitcoin Core wallet

and can be used to save users' money.

And in the enterprise world as well,

to batch payments or fee bump

in a more smart way.

Shout out to CardCoins for doing batched RBF payments

that save users' money.

So I don't think block space

or demand for block space necessarily

shows you how many people are transacting with Bitcoin.

That's my main point.

Because I think when people see empty blocks

or when they see an empty mempool, they're like,

oh, nobody's using Bitcoin. And that's just not true.

But also to elaborate on that is that, again,

when block space is cheap, people will use it.

When it's very, very expensive, people feel pain

and they try to solve it in different ways.

And we talked about that.

There's a ton of optimizations.

We've seen massive improvements in optimizations

in the mempool over the past four years.

It was originally interesting because it was so hilariously bad.

And now nobody's doing any hilariously bad stuff.

It was funny how batched transactions

were sort of starting mid-2017.

And then after that huge spike in 2017,

a lot of people very quickly started rolling that out.

And that's, of course, because users are heavily incentivized

to optimize their use of Bitcoin's blockchain space.

Once those fees spike up,

yeah, let's prioritize that SegWit implementation.

Or let's move our low-value transactions

to Layer 2s.

And that's when we saw a huge lightning adoption, too.

So there's an upwards pressure,

which is Bitcoin is growing and there is more of everything.

But there are downwards pressures. There are optimizations.

There's other solutions.

Someone might say, you know what, we can actually solve this particular thing

in a centralized way and it moves off of there.

There's a lot of different ways of achieving the same goal.

And so when the price is high, that creates an incentive

for someone to rethink of it.

I mean, I've always expected there to be

a Bitcoin payment service provider at some point

that just takes Bitcoin here, completely centralized.

It takes some Bitcoin here, sends the Bitcoin there, and just does it all on-chain.

But it still hasn't happened.

So, I mean, these things

will probably start happening

especially during this,

because the mempool moves, it doesn't grow nice and steady.

It moves in extreme spikes.

Yeah, when the market's pumping hard, everyone wants to move their money

to exchange and withdraw.

And there's a lot of stuff that's algorithmic here in terms of fee estimation

and a bunch of other things. Oftentimes it's not even a human.

There's bots that will send from one exchange to another exchange.

And I think the coffee transactions are getting pushed out,

priced out of Bitcoin, right?

The future of Bitcoin is that we migrate to this multilayer ecosystem

where sometimes you use Lightning or Liquid

or some custodial service, right?

Well, it might. I mean, you'd be surprised with how many really small transactions

there are still happening on-chain. I mean, I agree.

I'm a mega Lightning fan. I want to move it to Lightning.

But a lot of people use on-chain Bitcoin

for really small transactions.

Even at one saturbite, they pay a pretty high percent of the value

to make that transaction.

All right, guys. I guess we're out of time for our panel.

But thanks for sharing your very passionate opinions

on the state of the mempool and the future of the mempool.

I guess that's it. Thanks.

Thank you. And glory to Ukraine.

Uh-oh.

Well, hello.

We're here to talk about

why Lightning is not private.

It's, you know, as the B-cashers would say, doomed to failure.

It's never going to work. All that.

So, welcome.

Evan Kaloudis from Zeus Lightning.

Anthony Ronning from Impervious.

Nifty Nye from Blockstream.

And, yeah, in all seriousness,

Lightning is kind of pitched as a magic privacy solution.

You hop on Lightning.

You change your money over Lightning, and there's nothing to worry about.

No information leaking. It fixed

the privacy issue.

And the technical reality of that is

not quite.

So, I guess to start,

the whole issue between sending and receiving there.

I guess wildcard.

Anybody want to talk about the issues

in terms of when you receive money?

All the information that just leaks out into the world

that a lot of users might not be aware of?

Yeah, I think to start off,

senders have amazing privacy on Lightning

from a general level. There's some trade-offs there,

and you can get into the weeds on that, but when you're sending payments,

you have onion routing messages going across the network.

So, you don't really know where it actually came from.

You don't even know if the previous hop that a Lightning payment

is going through is actually who it is.

But like you said, receivers, on the other hand,

it's a little bit of a different story.

You have to give information out to another person

in order to get paid, to actually receive money.

So, some of that information that's leaked is alias names,

IP addresses, if you have any unannounced channels,

you may leak those as well

in order to get paid down those channels.

So, there's a lot of areas

where receivers need to be a little bit careful,

especially if someone is just posting invoices

onto Twitter or something,

and it's just completely doxing all that information to the open world.

So, I think there is

a lot of privacy gains that we can get on Lightning.

I think it comes down to the users not shooting themselves in the foot

and having a little bit more education on what to do and what not to do,

especially when it comes to receiving on Lightning.

We're sort of multifaceted, though.

Application developers, they need to give users the tools

to be able to not shoot themselves in the foot,

but we also need to see some changes at a protocol level, I believe,

to really get to where we want to be.

So, one thing maybe that's kind of interesting

to ask about Lightning privacy, too, is

it's more private than being on-chain, right?

When you sit down and look at it,

transacting on Lightning is a step-change function

in how private your actual transactions are.

So, just when you're making transactions,

if you're going to make a transaction with Bitcoin,

I think it's true that it's more private

if you're doing it on Lightning.

So, if you had to pick on-chain versus Lightning and you're concerned about privacy,

it's definitely the right choice, right?

Especially if you're sending.

It's definitely more private,

but it's not quite the perfect solution

that it kind of gets generalized about.

Speaking of solutions

to receiver-side privacy,

there's a number of protocol proposals,

rendezvous routing, route blinding,

trampoline routing that could potentially level that

to the point where receivers are

at least more private than they are now,

if not on par with senders.

You guys have any favorites there in terms of which one to go with?

Yeah.

From the protocol level,

I haven't read a lot of the specs,

but I think in general, just speaking at a high level,

receivers need to give out some information to get paid.

Ideally, that information doesn't reveal

anything about them.

It could have a lot of maybe fake hops.

Maybe it's with rendezvous or route blinding

and it's like, get your payment to this location

and then that location will get the payment to me.

Kind of the gist of that.

It kind of cuts that separation where,

everything previously, we don't know where it came from

and then everything after, we don't know where it's going either.

I think there's a lot of protocol advancements that could happen,

especially for receivers.

I'd be curious if you looked at

where we are at with being able to implement

some of that on the protocol level.

There's a couple different proposals.

When you send a payment right now,

if you want to receive a payment on Lightning,

you create something called an invoice, you give it to someone.

Invoice has a bunch of information in it.

It tells you who you're paying, how much you're paying.

Usually there's a description of what you're buying, etc.

Invoices themselves leak basically all of your transaction data.

That's the whole payment.

That's the whole transaction is in the invoice.

There's some questions about,

is there a way we can produce an invoice that doesn't tell you exactly

which node on the network you're paying,

but can pay to some intermediate node

and then that intermediate node will be able to figure out

how to get to the person who actually wants to receive the payment.

I guess we call those proxies

in normal networking stuff, right?

Yeah, and it's interesting because a lot of the proposals,

it's not really just making the data go away.

It's deferring to which parties are privy to who the receiver is.

Privacy is not just about

flicking a switch on or off.

It's about selectively deciding who you want to know that information.

When it comes to

the three proposals

where we're discussing rendezvous routing,

route blinding, trampoline routing,

they're all kind of, in a way,

doing the same thing,

just little subtle differences.

Evan or Lisa,

do you guys have any kind of thoughts

in terms of the privacy trade-offs

between the three of them?

The benefits you can get out of rendezvous versus route blinding

versus trampoline and potential negative sides to that,

depending on which one gets implemented.

I'm going to be honest.

I'm not as familiar with all the differences between all three of them.

All of these are ways

that you basically can find another node

to finish the payment for you to the actual destination.

In terms of what's being worked on currently,

I know that the route blinding thing is currently implemented

in Core Lightning, which is a project I work on.

There's a few other teams that are working on

route blinding currently.

In terms of out of these three things,

which is the most likely to get over the line first

in terms of being accessible to the most people

who are running Lightning, it'll definitely be route blinding.

I was just talking to one of the maintainers

of the Async project.

They're working on the route blinding stuff.

I think trampoline routing is the one that we're supposed to be doing

Maybe that'll be there soon.

These things are currently in progress.

I've been tasked with asking if you're a developer

and you want to get involved in improving

some of the payment routing privacy on Lightning,

we could definitely use some help reviewing the route blinding PR,

which I think is number 765 on the bolts repository.

Evan?

Any thoughts on which path we should take here?

Route blinding is exciting

because we have the most tangible stuff.

Really, I don't think we're going to

really get a full understanding

of what all the implications and limits are

until we're testing it out in the wild.

I'm very excited to see that tooling

out in various Node projects out in the wild

and people just trying it and figuring out

where they get caught up and whatnot.

Wherever I can, either 3 of these methods,

I would love to get them in Zeus

so people can try them on the go

and just give it a shot.

Since all these methods are really just about

changing up how the routing goes

instead of just having the sender

figuring out the path to it,

it's going to be interesting to see if people also have

any pains with being unable to find a path

to make their payment.

That's the tradeoff with a lot of these proposals.

You're going to be able to get selective privacy in a lot of ways,

but it may make for a worse UX

in terms of actually completing that payment.

Anthony, which one should we go with?

What's the perfect solution?

I don't even think it's mutually exclusive either.

I think the Electrum Lightning implementation

was the first to implement trampoline routing,

which was kind of cool.

I don't know anyone using that Python Node.

I don't know if you should.

It's awesome to be able to innovate

independently in all the different Node implementations,

experimenting with different things

and hopefully contributing back to the specification process

so we can all benefit from it.

Async has also implemented trampoline routing themselves.

I think there's combinations of things

that we could all use.

Maybe it's possible to use trampoline routing

with route blinding in a way or vice versa.

I would really just like to have the most amount of privacy options

for users on Lightning.

But again, I do agree with everyone here

that probably route blinding.

I haven't looked at it deeply enough to see any connotations with it,

so I think in general

it's pretty well supported

as far as we should probably do route blinding.

It's really just the nitty-gritty, getting into the details

and finishing the spec off.

More experimentation, yeah.

I've been trying to keep my mouth sipped a little more

than I've had on the first day.

Trampoline routing.

I kind of have an issue

at a high level

with the idea of outsourcing

the route construction to a third party

because in theory you can just kind of

mess different trampoline nodes together

and then have the first one just get the route from you

and then go on to the next one and the next one.

And like any onion routed system

you don't know if this is the final destination

I'm routing to or another trampoline node.

But in practice

a node doing trampoline routing and route selection

is probably going to be very publicly visible and known.

And you still have information

like the time step for the refund path

in an HTLC to look at

with the maximum length that can have.

And all the little metadata that kind of piles up

where it's like, well in theory

you can just link the different trampoline nodes together

and they don't know what the final destination is.

But in practice

there's probably going to be some things you can suss out.

Like the length of the route.

Let's say Blockstream had a trampoline node

and I go there first but then route to Asynx

well Blockstream's node is going to see

oh that's Asynx's node.

That's just another trampoline hub.

So is maybe

pitching that as a privacy solution kind of

a misnomer? Is that not more of just a scaling

solution for light wallets?

I haven't looked at it closely

I would probably need to go back but I think that intuition is probably

pretty good.

Basically the idea with a trampoline route is that

if you're using a trampoline route

you don't have to understand how to get to every node

on the network. So it saves you a lot of data as a node

because you can offload the pathfinding

responsibility to someone else in the network.

I think it's for a fee.

I think you get paid if you do. I think there's some little

earn some money by doing a trampoline route thing in there.

So you get an extra fee for constructing a route for someone, a personal route I should say.

So then the idea is that if you have

a mobile phone and a wallet and you wanted to send a payment from there

you only need to know how to construct a route to get to a trampoline node

and then you can get your payment sent from there

and then the trampoline node will figure out

how to send it to anyone else on the network.

I think all of these things

these are routing level stuff

so I think it's kind of interesting to talk about

what sort of data are you leaking when you're routing a payment.

We talked a little bit earlier about when you have an invoice

Invoice is basically the part of

figuring out who to pay

and how much to pay them and for what.

So it's like invoice level.

You use the invoice to figure out the route you're going to take for your payment

and then once you've figured out

this whole routefinding thing, maybe you're using trampoline

and someone else is finding out the route for you

what data is in this routefinding thing

it's going to be the amount of money that you're sending

it's going to be the amount of money that you're sending

so someone will know how much money you're sending

and depending on where they are in your route

maybe who you're sending it to

The level of information that you've got is different

depending on where in the payment process

that you find yourselves

One thing that's kind of interesting is talking to Matt Corallo

who works on Spiral, they do LDK stuff

One of the current issues with these payments

so when you send a payment across the network

usually they're wrapped up in things called onions

so you do onion routing which means that when you get a payment

you can see who sent it to you and you can see where it's headed

You as the person in the middle of this route

have no idea where it came from before it got to you

and where it's going after the next hop

We already have that level of privacy in Lightning that already exists

We're talking about

different levels of ways that you can make those routes

those onions and how do you make sure

that maybe you don't know exactly who the last person is

when you're constructing the onion

That's what trampoline does in some sense

One of the things with this routing data

is you want to be able to hide

how far you've gone from the start point

and how far you are from the finish

There's kind of a tension here between that

and this other parameter that we send in these packets

called the CTLV lock time

I think there are researchers

that have done analysis on the CTLV lock

It tells you how far you are in that path

If someone knows how many hops away you are

they can look back and figure out where you came from

and where it's going

Those kinds of questions

How do you de-anonymize

or figure out where a payment is going

given that you didn't see the invoice

We're trying to fix this with the Bolt 12 stuff

Bolt 12s use blinded paths

so you'll be able to, as a receiver

not tell people that you're the node being paid

You can instead provide a little bit of a route

of how to get to you

You send that with the request to be paid

The person who gets the request to be paid

will pay to the beginning of this path that you've constructed

That's the payment level stuff

Along the same lines, with analyzing the time lock you can even analyze the timing too If a payment normally takes a certain amount per hop and you can even analyze how long each hop has a certain network latency You can even try to figure out where in the network a node may have been sending from There's been some research on that level

There's been a lot of research or at least one paper into how we can actually construct routes at the sender level to take paths that are not the traditional path That way, if I'm always going through a couple of different nodes maybe they can analyze that Oh well, it's probably coming from this location over here They may not know exactly who's making the payment but they can make some educated guesses

Maybe that goes along the lines of maybe we shouldn't just hand it off to trampolines to construct the routes ourselves

But if individuals are able to do these non-traditional routing algorithms, pathing algorithms

Then we can actually try to attempt to get better privacy and better heuristics there

I think CoreLightning by default will choose a more random path than just the cheapest or most direct route

I think we use a fee budget, so we give you a budget to try and get to there

That way, trying to use not necessarily the most obvious way to make your payment happen

That's just a massive issue that I think is really, are we going to be able to solve that one?

Because what that really boils down to is timing analysis

If you zoom out and say the NSA gets really interested in what's happening on the Lightning Network

Well, they can just watch everybody's nodes

And oh, that string of packets, that's exactly the size that proposing an HTLC message is

Oh, and then something zipped back the other way?

Oh, okay, did that confirm or refund?

And just watch the packets and go, well, the whole protocol is specced out

You know exactly what the size of adding an HTLC is, removing it

Like a pre-image flowing back through the route

And okay, oopsies

Yeah, it's a major problem

A nation-state actor with that God-level view of the network

And ascertain some serious information

And there's been some ideas as to how to throw some extra noise into the network

To obfuscate what's actually happening

But that all comes with additional costs, right?

It's already tricky to run a node, it's processing a lot of packets

If you're moving a lot of stats around too, especially

And we need to acknowledge that with these ideas that are being proposed

It's going to increase the cost of node operation

Well, I guess, not to put you on the spot, Anthony

But I hear you have a little project going on

In regards to testing the privacy in effect of unannounced channels

Yeah, so about a year ago I wrote a paper on Lightning Privacy

And as I was really just documenting what I knew about it

I learned quite a lot doing that

And one of the things is we call private channels private

But they're really not

They're more along the lines of unannounced channels

So whenever I'm a node and let's say I have all private channels

If I want to receive down them, I create an invoice

And I give that invoice to other people to pay me

I basically have to dox my unannounced channel

So with that unannounced channel

They can see the UTXO, the unspent transaction output

That went into that channel

And then from there you kind of have the leakage

Of all the things that can be leaked on Bitcoin privacy

Like on-chain

Some of that flows into the Lightning Network

And that's an inherent problem for privacy as well

So one of the things you can actually do is

Probing on the Lightning Network

Because actually I consider it kind of a big problem in the space

I don't like that probing happens

I don't like that

It kind of allows that

But probing is basically sending a whole bunch of fake information

And finding information that is not traditionally public

In my case, what I'm trying to do right now

And I did a hackathon with Paul Miller in Austin a few weeks ago

Where we're kind of proving this out with the LDK Toolkit

You can actually probe four private channels

To see if they exist between two nodes

If me and Evan here have a private channel

You weren't supposed to tell them about that

If we have an unannounced channel together

And say it's for like 10 Bitcoin

Let's say it's for a huge amount

It's all on his side

You can actually

If I'm connected to the general Lightning Graph

You can actually try to probe through my channel

And try to attempt to guess the UTXO that is between us

And if you're able to guess the UTXO between us

There's a different error message that gets sent backwards

So you kind of get into a situation

Where once it proves it out

Once you actually probe all the way through

You create this fake payment in a way

Where Evan basically has to come back

His node will come back and say give it an error message

Like I can't redeem this fake payment that you made

But the fact that he is the one that gave that error message

Proves out that there is this unannounced channel between us

And from there you know the amount

Of UTXO, the addresses it's associated with

And all of that is possible today

And me and Paul finally took the time to actually

Create a proof of concept of doing that

And I'm hoping to run that over the next couple of months

And release my findings there

Because we love Lightning

I think a lot of us here

Really love some of this stuff

And if it's possible I want it to be revealed

If I can do this

Multi-billion dollar firms can do this

Triple letter agencies can do this

So I would rather us do this and find this information out

And try to make the Lightning Network better

There's no security in this security theater

But yeah, I mean

Yeah, if it breaks, let's break it now

While things can still be fixed

Instead of five years from now

When who knows how many countries

Are trying to plug into Lightning and use that as payment rails

But kind of a related

But little hard shift here

Who wants to talk about the gossip

Protocol and routing tables

And figure out why we still

Explicitly dox the UTXO

Associated with a public channel

So that the whole world can just follow where those coins go

After channels close

So I would call this a different level of privacy

So what we've been talking about beforehand

Is payment level privacy

I don't want to make a transaction on Lightning

And so we've been talking about some of the pros and cons

And sending invoices to people

And then sending payments, etc

So this level of privacy that we're talking about

Is the gossip network

And UTXO level is more like

So the information that you are leaking or finding out

The privacy here is which UTXOs

Belong to which nodes

So it's tying on-chain outputs and balances

To the account balance

Of any one Lightning node

How easy is that to figure out

What kind of implications does that have

So I think it's kind of interesting

That this information is completely separated

To a large extent from your transaction data

On-chain

When you make payments using on-chain Bitcoin

That becomes public record for everyone

Whereas when you're transacting on Lightning

It's ephemeral, people kind of have to be watching

For your stuff to go through

Or constantly monitoring balances, etc

Anyway, it's just like gossip stuff

The way that Lightning works

When you make a Lightning channel

You're creating an on-chain transaction

That creates a UTXO output

That UTXO output contains the balance of the channel

So there's two parties in a Lightning channel

Who owns what amount of that total balance

Is kind of an open question

That's what you might use the probing stuff

That we were talking about earlier to figure out

With an on-chain transaction

Typically, if you're using the version 1 of Channel Opens

Usually that balance is all on one side

To start with, generically speaking

So you have these UTXOs

It would be all great and good if you didn't have to tell

You could open a channel and you don't tell anyone

That you made a UTXO on the main chain

That's what an unannounced channel is

If you don't tell them about it

So if you were trying to start up a Lightning node

And earn money routing payment traffic from your node to someone else's

You would need to publicly announce them

The way that you publicly announce them is via something called the gossip network

Or is it gossip network?

Well, we don't want to conflate people

With Lightning network

But yeah, it's definitely a distinct part of the system

Where basically you make a message and you say

Hey, this is me, this is my channel buddy

Here's our pubkeys that we put into this on-chain transaction

Somewhere

Here's where you can find it on-chain

Go verify it before you use this as a route

So this is what we're talking about, routing table

The routing table is basically a list of all of these on-chain transactions

And the total balance of the channel

And who is party to that

So if you have all these balances and all these node connections

You can build a connected graph with balances

And then if you want to send a payment

You can look at this graph of data and figure out how to get

From Tony's node to that guy's node

And go through the graph that way

But the downside to that

Is that you're telling people where your on-chain transactions are

And you're associating them with your node ID

And this is public data

That everyone running a Lightning Node is hopefully getting

So if you're an organization

Like Chainalysis or some other such organization

That has a large body of output data

Like on-chain data

And they've been working really hard to tie identities

To those on-chain payments

Now if they already know what some of your transaction history had been

And then you put it on a Lightning Node

And then you use that to open a channel

All of a sudden someone who's managed to figure out your identity

In another arena

Now knows which Lightning Node is yours

And what your balances are in the network

So that's a little further out

So Gossip is really bad for on-chain privacy

Yeah and Rusty

Your coworker actually has a new proposal

To kind of fix that

Where instead of explicitly doxing the channel UTXO

And associating it to a specific channel

A node can just take one UTXO

And prove like I'm a node

I have real Bitcoin

And then not have to specifically connect it to their channels

So that opening and closing

That's not leaked

They just have their one little bit of Bitcoin to prove

Like I actually have money to route

But I'm not going to tell you the UTXOs to my actual channels

Yeah and so this is the kind of thing

I think Rusty's proposal is the sort of thing

That we would also need to adopt

Before you get any privacy improvements for Taproot

It basically makes it such that a Lightning Channel

Goes from having a very specific on-chain footprint

To being a single signature

And looking like any other output on-chain

But without changing the way that our Gossip

And our route table building stuff works

It's going to be very difficult to

Stop publishing that information

So Rusty's proposal

Because you use Gossip

The reason you do the Gossip stuff

Is so that you can build the route to send the payments

If we move away from publishing exactly how much money exists

Between two parties

How are you supposed to figure out where you can send payments

Or where there's capacity to send your payments

Route finding becomes very difficult

Well I think that Rusty's proposal has a pretty elegant solution

You have an amount for the UTXO you're tying to your node

And then some multiple of that

Is how much you're allowed to advertise in terms of channels

It's like you have one Bitcoin locked up

Maybe you can advertise 10 Bitcoin

As channels

That sounds like Fractional Reserve Lightning to me

I don't want that

Seriously, I think that is an elegant solution

Because the reality of

Why you dox these UTXOs in the first place

Is literally just to prove

You actually have control of Bitcoin

So that my wallet isn't spinning the wheel all day

Trying to route payments through people who don't actually have channels

That there's no way to route a payment through

And I think that this would work

And people concerned about denial of service

Or the multiple being way overblown

Well, just set it up as a curve

Maybe you toss 0.1 Bitcoin on there

Okay, maybe you can only advertise 0.2

But if you get up to throwing a whole Bitcoin on there

Maybe 5

Just adjust that curve

To prevent being able to just pretend you have

1000 Bitcoin when you just have 1

So what tier you are in the federal banking system

Depends on how much capital you have on chain

It sounds like it will trend towards centralization

Almost at that point where we have major hubs

And we're not really locking up at the other layers

So I don't know

It is a potential solution

So we're talking about

How to do this for public channels

I think there is one thing to maybe explain here

Is that there is some work right now

On actually untying the unannounced channels from the UTXO right now

So there's a short channel ID aliases

That is being worked on

By a few different teams I believe

Where you can actually

Between me and my channel partner

We come up with this scheme where we make a fake alias

That is not directly derived from the UTXO information

And then if we do that

We are the ones that are aware of this

So I share an invoice with my routing hints in there

It gets to Evan

And then from there Evan knows this fake channel ID

Between us

So he just goes ahead and sends it to me

And then from there it becomes exponentially harder

And even if you guessed the fact that me and Evan had a channel together

You wouldn't necessarily

Or you wouldn't even be able to get the UTXO amount

Or the other information associated with UTXO

So I think there's some great privacy improvements

For short channel alias IDs

That I'm excited about

But I mean

The public channel still needs to be addressed

One of the key points in that massive

Privacy article you wrote

Is if you have a private channel

You're receiving money through it

So whoever you open that channel with

Probably has a bunch of public channels

And eventually that's going to close

So if that private channel closes

And they still have a balance on their side

You can very easily deduce

That last transaction was a private channel closing

And now your UTXO with that balance can be followed on-chain

And it's okay, this is probably involved in Lightning

Yeah, exactly

And then on that node

It even works both ways

If that private channel gets closed

And there's some on one end and some on the other

You can tell between the two nodes

That there was probably a private channel between

So there's all kinds of on-chain analytics

And that's one of the things I want to eventually do

With this project I'm working on right now

Where I actually try to analyze all the possible UTXOs

That may be associated with a node

And start at that point instead of just brute forcing

Through every pay-to-public script hash on the network

So there's all kinds of weird on-chain analytics

That you can link back to a specific node

And that's one of them

Will Taproot help with that?

I think Taproot

I think there will still be that UTXO

That could end up in public channels

And if Taproot can't help with the public channel aspect of it

Then that's still a vulnerability

The other thing I'm slowly incrementing towards

Is the ability to

Right now I can look at all the pay-to-public script hash

Am I saying that correctly?

I always screw up the initials there

Pay-to-witness script hash

I can look at all the pay-to-witness script hashes

And try to use that as my baseline

For brute forcing all these unannounced channels

So if Taproot can't handle the normal spend

Even channel openings and cooperative channel closings

Then it makes it a lot harder

It's a bigger set that I have to brute force

Or anyone has to brute force

In general if the Bitcoin space starts adopting Taproot even more

Yeah, it's going to be a great step in the right direction

To get Taproot channels

I feel like we'll get them this year

Any wild card topics in the last two minutes?

I just want to make a public service announcement

That if you are paying an invoice with Lightning

And you're using a centralized service

That's not your node

You are leaking your payment data

So none of the stuff we talked about

About timing analysis

Or looking at payment traffic flow

Or probing is going to matter

Because you've just told someone

Who you're paying and how much and why

So this is why we're really excited

On Core Lightning about Bolt 12

Is that it makes it possible

To hide a lot of that information

And still have someone else make a payment on your behalf

That is actually a really good point

When you're using the Lightning network yourself

Like your own node, your own channels

There's that asymmetry where the sender is extremely private

Like that whole dynamic is very private

And receiving is not

And when you're dealing with a custodial wallet

It's almost the inverse

Like you're leaking everything about who you're paying to that custodian

But when you hand out an invoice

Yeah, and to even further expand on that

I could have my own node not using any custodial services

Or anything

And if I put in my invoice, like this is for drugs

And I give that to a Strike user

Strike can associate my public key with drugs

And that could put me on a blacklist to some extent

And I give an invoice, I don't know how they're going to pay me

So they may pay with their node or they pay with Strike

Now they link me to drugs and that's no bueno

Yeah, I guess last note

Don't use custodial wallets to take your personal identifying information

And buy drugs on the internet

We're out of time

Thanks everybody for doing this

This was a blast

Some friends in the audience

Okay, cool

So sidechains

Tremendous potential for this panel

It could be the best, most important talk in the whole conference

Will we live up to that potential? I don't know

But we're going to give it a try

First, before anything happens at all

I'm going to go on a little spiel here

The idea is no altcoin needed ever

It doesn't matter the excuse or the use case

Or how fringe or whatever it is

No altcoin, so you can have a different chain

You can go multi-chain

You can hard fork the rules, you can go proof of stake

You can do merge mining, whatever

But there's no altcoin, there's just 21 million coins

21 million BTC that travel among the chains

And all kinds of other concepts have hovered around it for years

But that is the sidechain concept

I do want to hasten to add one thing though

Which is that you can have other things on the blockchain

Like stocks, bonds, NFTs, whatever

And sometimes people use that for collateral

Or to do other complicated things

But the point is there's no altcoin as money

As a rival investment or rival network

It's all on Bitcoin

So that's the concept

You guys want to comment on what is a sidechain, sidechains, etc?

Oh yeah, let me first of all

Let me introduce myself first

My name is Borak, I'm a Bitcoiner, a Bitcoin dev

And a Bitmetrics founder, which is a covenant-based automated market maker on Liquid

So to give some color on sidechains and Liquid overall

A sidechain is by definition a separate blockchain

With no shitcoin

Bitcoin is the underlying asset

This is really cool because you can experiment with new things like confidential transactions

And some advanced scripting primitives

Without introducing any market, any asset class

For obvious reasons

I think it's interesting

Because the original paper for a sidechain

Was issued at the end of 2014 by Blockstrip

That was the original idea

And the concept is like the native asset of the secondary chain is Bitcoin

That is because there are other assets issued

Now Lightning is doing it, Liquid has been doing it, Rootstock is doing it

So you can have other assets, but the importance is what is the native asset

The asset that is used to pay for the fees of the network

So that creates a level of alignment between the secondary network

And the Bitcoin network that is very unique

Because in decentralized economies, economic alignment is key

It's what makes you an adversary or makes you a collaborator

And I think that's why the concept of a sidechain is so important

Because it's about extending Bitcoin but avoiding creating adversary networks to Bitcoin

Creating full alignment in the economic level with Bitcoin

Yes, everyone in the same group and everyone on the same team

But also freedom to develop your own software

It's kind of funny because the idea of sidechains and L2s and these terms we've come up with

Become kind of blurred over the years, like things have expanded in terms of what can and cannot happen

So to me it becomes more complicated to kind of put these things in boxes

But in my view, anything is a sidechain that contributes a significant value

To the underlying asset or the underlying chain, that's how I view it

Okay great, I have a proposal

This guy right here, Barack is the representative of sort of the liquid network

Roughly speaking, he's the liquid show I guess

And then we have RSK, and then we have a Thor chain over here

And then I have a proposal for Bitcoin, BIP300, to bring sidechains to Bitcoin on layer 1

So you can look that up, BIP300, or you can go to drivechain.info

Separately, I wrote long ago, I wrote a sidechain, what was supposed to be a sidechain for Bitcoin

But this was before sidechains even existed, called Truthcoin, which is a peer-to-peer Oracle thing

So that's kind of what I'm particularly interested in

So now we're going to have to talk about the difference between all of these different things

Because there's a big spectrum of what is called a sidechain now

This is what happened to the word blockchain, where a bunch of people started to change it around

So I really feel like I have the oldest and most pure original definition

But then we have some other, so now liquid is basically a multi-sig output on Bitcoin

With none of the sidechain logic necessarily

Well there's nothing, I guess maybe you would agree or disagree

I could generate an 11 or 15 multi-sig for liquid

From one that I could just make an 11 or 15 multi-sig tomorrow

I could generate 15 keys and make one, and then there's no real fundamental difference

Or maybe you would disagree, I don't know

I think from an on-chain standpoint, yeah, Bitcoin funds, yeah, living in on-chain, 11 out of 15

Every year it tries to get 32 bytes from the external world

So like from the sidechain or altcoin world

And those 32 bytes are, speaking very generally, the TXID of a withdrawal transaction

So getting the money over is very easy, getting the money moving up from layer 1 to layer 2

Into the sidechain is very easy, but having it come back is only 4 times a year

One transaction, where many people can ride along in that transaction

But this is like the one kind of connecting tissue

That's not supposed to be any inconvenience to the user

Because they can swap the assets using some kind of HTLC or using an exchange or something like that

So then we have, let's go to RSK, you guys have used a hybrid model in the past

You guys want to maybe use BIP300 someday

And then Sergio has this sort of alternate proposal that's very similar

Yes, I think the hybrid, because also in the implementation details of this multisig

That you are creating, there are a lot of important things

Because one thing is like if the pegnatories or the people signing the transactions

To get back from the sidechain into Bitcoin have access to the keys, to the private keys

It's very different if they don't have access and they are only providing like the machine

And the connectivity to the network, and I think both Liquid and Rootstock in that sense

Choose to have HSMs, to have hardware security modules

So the pegnatories cannot have access to the security keys directly

They can only unplug the keys, but they cannot really steal the funds

So that limits their action a lot, so that's one thing that is important

But again, I think this is just a temporary system that we have

Because we don't have something like Drivechain in place

Where if you really want to have a trustless or trust-minimized interaction between two blockchains

There has to be a way for one blockchain to understand the SPV, the simple payment verifications

Of the other blockchain, and in the case for example of Rootstock

Rootstock can understand the SPVs from Bitcoin, so it can create the Bitcoins on Rootstock

Based on the Bitcoin transaction coming into the pool of resources for the sidechain

But on the other way, Bitcoin cannot understand a transaction from Rootstock

And this is a little bit of what we are trying to sort out with Drivechain

It's how we make Bitcoin understand the sidechain to make actions based on something that happened on another blockchain

Once you have that, you don't need any pegnatories or signatories

You can really do blockchain to blockchain

Much like Sergio back in 2012 proposed with the B2Pool protocol

And I think we are in a process

Bitcoin is hard to change, and it's good that it's like that

But I think eventually we will get there

So it will take between 4 and 5 million years

Maybe I should have made this clear, for anyone who doesn't know, Rootstock is like Ethereum on Bitcoin

Anyone who wants to try out anything in the EVM, anything that Ethereum does

You just do it on Bitcoin, no need for ETH

And they are doing it already

They have been doing it for years

Everything is secured by the Bitcoin miners

Rootstock is secured by the Bitcoin miners

The network is run by the Bitcoin miners

So 50% of the Bitcoin miners of the world are protecting Rootstock now

So you have smart contracts with EVM, but secured by the Bitcoin miners

Paid with Bitcoin

We are not only using Bitcoin as an asset, as a time-stamping system

To settle the state of the network

But also contributing to the Bitcoin securities

It's like the most energetic sidechain you have

I was going to get to that later

By the way, compared to sidechains

From the sidechain definition, it's a blockchain with no shitcoin

And by that definition, we have only two sidechains to my knowledge, and that is Liquid and RSK

I don't know any third option to my knowledge

So things like Thorchain, Stacks, DeFi, all this crap, these are not sidechains

By that definition, these are just centrally heavily pre-mined Ponzi schemes

Coined by the insiders

If that's okay

So I think fundamentally, you might call Thorchain shit, as you just did

But fundamentally, what Thorchain is doing is actually changing the fundamentals of Bitcoin itself

You need a decentralized exchange to do that

And you cannot use a multisig to do it

Because you're going to require up to 15 or 20 people to be part of that process

You have to use threshold signatures, because you can have more or less money as you want

In Thorchain's case, up to 250 theoretically

If you have a mechanism to move in and out of Bitcoin in a decentralized way

Without using KYC or anybody giving you permission to do so, or being censored

To not just Bitcoin, to other really important networks, like Monero for example

That is a game-changing concept

So to call it a shitcoin, a bit weak

I don't think we really define it

Thorchain, as I understand it, is sort of a helpful way of swapping different assets

Thorchain is building a DeFi network that is agnostic to chain

And it treats every chain available to the really important DeFi protocols

With the AMMs, lending, interest accounts, all sorts of things we have planned as a project

Because every system today appeals to a particular ecosystem

Which kind of sucks fundamentally

The idea that the Ethereum network produces DeFi protocols and treats Bitcoin as a second-class citizen

Because you have to take on additional risk by using wrapped assets

That's fucking stupid. We should be able to have DeFi available to everybody in the industry

I don't care if it's Doge, I don't care what it is

Giving people the freedom of choice to choose what they want to earn yield on, or get in and out of

That's what freedom is all about, that's what Bitcoin is fighting for, freedom

As a sidechain proponent, I agree with you

Choice is not only the best way of doing things, it's also a moral issue

If someone is allowed to sell their Bitcoin for stuff, or sell it for US dollars

Or swap it, they should be able to spend it to a weird script or whatever

I have some Thorchain questions

Maybe you can clarify on that a bit, Thorchain

The idea of Thorchain is to have a separate network where you can swap cross-chain assets

In a cross-chain interoperable way, supposedly

When you look at Bitcoin, the Bitcoin that lives on Thorchain is on a multisig

And that lives on a multisig, right?

Where do Bitcoin funds live in that?

This is a threshold signature, that's very different than a multisig

Bitcoin funds are randomly picked by a subset of Thorchain validators

And I think you have around 100 or less validators right now

And in order to become a validator, you have to sort of log in

Or like 2x rune, 2x value, 2x more collateral than the actual asset

So you have a security assumption here, a serious security assumption

So it is a threshold scheme, right?

Bitcoin funds live on a threshold scheme

And the majority signatories can steal from that

If incentives are misaligned

And the security assumption of Thorchain heavily relies on the tokenomics of Thorchain

It relies on the economics in the sense of people are self-interested

And they don't want to burn a bunch of money

Because it relies on the tokenomics, the economics of Thorchain to run the shitcoin

But not only that, it doesn't also scale

Imagine Bitcoin being the global reserve currency at some point

Which will hopefully happen

But in that case, you cannot really collateralize Bitcoin with a superior asset

It's not collateralizing Bitcoin

It's ensuring that from a monetary perspective, anybody who is a part of the network

Is incentivized to do the right thing

Because if they don't, they will lose far more than they actually hold

But there's a previous question in my view

Because I don't think Thorchain is not posing itself as a Bitcoin sidechain

It's more of a DeFi platform, inter-blockchain

Because at the end, it's about the intellectual honesty

As long as you don't pose yourself as a Bitcoin sidechain

Because most of your concerns are about creating a proper Bitcoin sidechain

And I agree, if you only timestamp the state of your network on the Bitcoin blockchain

Then that's not necessarily a sidechain if the native currency of the sidechain is not Bitcoin

So I agree with that, but that's not actually how Thorchain has positioned themselves

So it's more about an interoperability system

To address your concern, in most cases and scenarios where people hold Bitcoin in one form or another

In almost all cases it requires trust

Of a few people running a multisig somewhere in the world

Of course, pretty much anything relies on trust

I mean, Liquid does not claim to be decentralized, it is federated

It is what it is, and it's honest

But wouldn't it be better if it was?

Don't we want to have decentralization?

So we need to stop thinking of decentralization as a Boolean thing

It's decentralized or not decentralized. Actually, decentralization is a process

And I think the important thing is that we keep decentralizing things and hardening things

So they can become a public good and they are for the service of humanity

So it's not about saying this is decentralized

I don't know if it was smart because they took a kind of like, what you may call

The purist approach

But it was very smart because they were able to actually do something where they have this multisig output that is supposedly controlled by a federation

And supposedly there are hardware security modules

But there's no real way of anyone knowing whether or not there are

So there's no way to...

When you run a Thor chain, you have to run a node of every subsidiary

Of every altcoin and bitcoin and probably have to do all these things

I think that the way sidechains really should work is sort of the opposite

Where your full node should be ignoring everything else as much as possible

And that is what makes it so nothing on those other networks can become your problem

So I don't know if you have a comment on that

But we have one distinction we can draw is that in BIP300

In Liquid and in Rootstock right now

We have this situation where there's an 11 of 15 kind of committee that controls where the bitcoin go

And in BIP300 it would be basically the miners or the mining process

And in Thor chain there's this sort of competitive struggle where you stake, ruin

And then you get locked into a...

So that's one difference along this spectrum that I guess we can...

But we were discussing something before getting involved

We are monitoring value on a certain period of time

So the backing collateral is mostly an insurance spot

So basically once the transaction is settled they can replenish the insurance spot

So that's good for managing flows but in the case of Liquid and Rootstock

You are managing in stock because you are actually locking large amounts of bitcoin for a long period of time

Oh, you do that on Thor chain too though

No, but imagine if you have 3,000 on a validator

I mean you have to spread among multiple validators but again from a working capital efficiency

Which was your point there, it's like it's very inefficient

But you would end up having double the working capital

Insurance for 3,000 bitcoins in your model

So it works very well when you are swapping assets and having flows

But not when you want to custody or lock value as you do on a sidechain

But people do

Let's move on to something else which is that sometimes I ask as a kind of joke

I think I know who they are but they don't

Do you think that's an unfair question or how is the key ceremony performed

As someone who has proposed something where there is a decentralized process involved

I sometimes think it's a little bit funny

I can certainly empathize with their desire to get something working in the real world

You give the bitcoin to these 15 people and you just hope that they give it back to you basically

And so the question is who are these 15 people and I ask that question sometimes on Twitter

Yeah, so I don't know, I think that could be

Also an internal objection to liquid maybe and maybe not, this is the way this is set up

But there is a saying, you know, liquid is a dynafed and ethereum is a static fed

With the proof of stake transition 2.0 we also don't know who these validators are

Or who are the initial 70% pre-mined holders are essentially

It's really important though if you want to stop collusion of any kind

Is that everybody who is holding part of the multi-asset in this case, that they don't know who each other are

Everybody has to be anon, I don't know who runs the validators of fortune

And they don't know who is running the validators either, so if they wanted to collude they have no mechanism to do so

But in a multi-asset commonly in a lot of designs and implementations

It's publicly known who they are or if it's not publicly known in your case they know each other in most cases

Well the thing is in order to be privileged to run a fortune validator node you need to post as bonds

The token and that is 100% pre-mined shitcoin, right?

It's 100% pre-mined shitcoin, right?

It's 100% shitcoin? It's pre-mined shitcoin

I think I should go there and slap his ass like Will Smith style, right?

You think so? Just kidding, I'm just kidding

You guys the foundation whatever the team can easily run a validator node because you guys have the stake

The nodes and the people who are running it are anonymous, if they're not they can collude and steal the funds

So you can go ahead and say it's a shitcoin if you want, but the network is fundamentally designed in a much more secure way than the way liquid is

But we don't know how the distribution, the run distribution is like

But I don't know who the 15 validators of the liquid network are

But it is centrally pre-mined, the foundation, the team can easily run all these 100 validator nodes

Because they have the stake

Because I don't know the names and addresses of everybody who holds the RUNE token, it's a security issue?

No, but I think the point is if you have enough resources, you can run all the nodes yourself

I'll tell you this right now, the team does not run any nodes

Verify it

It's the same concept that you raised before, which is the security budget merge mining fees concept

Which is that security budget is the total amount of money that we pay to miners

And we want that to go up because that is the cost of an endless 51% attack

And in sidechains if they are merge mined, all of that money goes to the layer 1 miners

So that seems like an easy slam dunk win

But in Liquid, all the money, the transaction fees go to a wall controlled by Blockstream

But that's a disadvantage I guess of that

Right now it's the way it's set up, but this might change of course

They could put it in some kind of optru or something where miners can just steal it and take it immediately

That would be kind of interesting

RSK started with 5% of the hashing power of Bitcoin

January 2018

So it's actually the first productive sidechain in the world

And was launched in January 2018 with 5% of the hashing power of Bitcoin

And since then now we have between 40 and 60% of the hashing power of Bitcoin

Securing rootstock

And how it works is like 80% of the funds go to the miners, to the Bitcoin miners

And 20% goes to the other key actors

Indeed the Federation is one of them, software development is the other

So we have this model where the fees of the network go to fund the key elements of the network

What we were calling not sidechains

They don't have Bitcoin as their native currency

But you have networks that timestamp on Bitcoin, that's one thing

So in a way timestamping the state of the network, like stacks or the other ones

So that's timestamping. The following stage is like having Bitcoin as a native asset

And on the following stage is Rootstock where it does the three things

It's like timestamping the state of the network using Bitcoin as a native currency

And also contributing to the security of the Bitcoin network

But I'm not saying anything is bad, it's just what it is

And I think all sidechains are good because for me extending Bitcoin is protecting an asset for humanity

It's very important that it's having a neutral reserve of value asset

That can remove most of the wars we have in the world

So it's like the level of peace that Bitcoin can bring to humanity deserves our devotion

In terms of creating value on top of Bitcoin, however we can

But then of course we have always our aspirations, but I agree with you, what you're contributing is very valuable as well

Then time will tell if your model can be a civil attack or not

Or your intentions, I think at the end that's the only thing that matters

At the beginning people were very suspicious of the Rootstock team as well

But now six years after, I think people have a clear understanding that we keep going in the direction of decentralizing everything

Like being true and honest to the Bitcoin ethos

Again, this is not only technology, this is a human thing as well

I think you're raising a good point there, because I think we should encourage the general market to experiment, try new things

Be creative, be innovative, and we shouldn't shit on people because they're doing it a different way than what you might do

I agree with that mentality

We should encourage creativity, yes, but it's not necessarily the case that there's no neutral idea, right?

You can't just be open-minded to an unlimited extent, that's exactly the same as being open-minded

to an unlimited extent, that's exactly the same as being closed-minded to an unlimited extent, in my opinion

But, let's move on to maybe ossifying Bitcoin and other things, maybe shrinking the layer one block size

or some of these crazy ideas that have been tossed around where sidechains enable all this kind of freewheeling

But let's put Drivechain in and then ossify it

Yeah, exactly, that's what I think, that's my opinion, because every change is a potential problem

And there have been controversial changes in the past, and there's been a lot of controversy

But one thing that I wanted to mention though, on this exact point that you two were just talking about

It's very unlikely, in Bitcoin, everyone has to agree on what the protocol rules are

And this is very unlikely that this is going to, the controversy has just gotten worse and worse

And as the community grows, I just think it will not possibly get any better

So, I think that the ossification, we have to do something other than what we're currently doing

Which is this kind of weird committee or something

Yeah, we have to definitely do something, yeah, I think we'll definitely get there, right?

I think we'll definitely have some, probably actually, trustless SPV sidechains at some point

I think simplicity could help in this, given the extensibility and expressivity

You know, maybe in 20 years from now, who knows, but I think we should definitely work on towards that

I think ossification or crystallization of decentralized protocols is part of the process

It's like, you know, you want it, the more decentralized the protocol it is, the tougher it is to change it

And that's part of the process, and you want that

Because the more decentralized it is, the less prone to attacks or concerted efforts to manipulate the protocol can happen

So, I think for me, ossification is a feature, not a bug

That's why I say, you know, let's bring, like, Drivechains or ways for Bitcoin to expand

And then let's freeze it in a vault forever

It's like, yeah, we want Bitcoin to be ossified, to be as immutable as possible

But we want also, because it's protecting, as I said, the more valuable asset for humanity today, that is Bitcoin, no?

So, we want that to happen

It's the only kind of sustainable way to actually achieve the goal of ossification, I think

For those of you who don't know, ossification means, like, we just stop changing the protocol

And we don't, you know, we don't make any changes, arguably including, like, improvements

We just say, like, it is what it is, it's like long division or something, we're not going to change it

Because every change is kind of a risk

Yeah

And so, I think the only real way to actually do that, to achieve the ossification, is to make sure that there is some kind of safety valve or something

For someone out there with a very good idea or a very fringe idea or some kind of experimental idea that might succeed but sort of probably won't

You need to have something where that can get into Bitcoin without it bothering everyone else who, other people who may hate the idea and not want it running on their computer at all

Yes, and also by creating these expansion channels or paths for Bitcoin

Also, we can think that Bitcoin will be the future, the core infrastructure of the whole financial system of the world

So, not only the reserve of value of the world, but also will enable, you know, the local currencies, everything to be issued and handled by the same security network

In different chains that will expand the core, like the bottom layer, the Bitcoin layer on top

And then, you know, nobody can question Bitcoin itself

It's like, you know, there's all this discussion about energy

Okay, but if with 5% we can serve any human being, the financial needs of any human being in the world

That's nothing. I mean, come in, I want to put 5% of the energy of the world to the service of humanity

So, the question shouldn't be how much energy Bitcoin gets, but how much value we get from that energy

And if we are really serving every human being in the world

And I think that's why we need to extend Bitcoin

Because otherwise, it's only a store of value, it's only for the 20% of the population who can store value for 2-3 years

At least for now, of course, if Bitcoin goes down in volatility

But hyper-Bitcoinization is not going to happen in the next decade or in two decades

So, we need to, like, if we want to get to that hyper-Bitcoinization

We need to create the path forward and serve the whole humanity in between

So, one thing, like, it's kind of universally endorsed that Bitcoin should scale in layers

And the traditional financial system also scales in layers

But there's, like, commercial banks and there's, like, the Fed, the US Fed, European Central Bank

And then there's, like, the Bank of International Settlements selling, like, a big tree

And so, I just kind of wanted to throw out the idea that

Sidechain is very fully consistent with this idea of scaling in layers

And I think it's actually the best realization of the idea

But I don't know if other people agree with that or not

I don't know, what do you think about that? Do you think that that makes any sense?

Yeah, maybe, yeah, it probably makes sense, yeah

One note I had here that I wanted to just throw out

It's kind of an interesting thing, it's very different

But the idea of fun, of people having fun

I remember Bitcoin, you know, when it was a smaller group

It was a little easier to have fun

Now everyone has to agree on all these things

I think that sidechains might restore a sense of fun

Because people are free to do their own weird idea

And people don't have to agree in, like, the Bitcoin development process

That it's a good idea

And maybe you can have an idea that's just good

And you don't have to justify it or explain it to other people

You can just do it, right?

And then you can just try and get customers

And I was just wondering if you have any thoughts on this

This is kind of a weird little note that I had to throw out there

Like, this idea of sidechains and fun

Does this make any sense to you at all, or is this just crazy?

Yeah, I think, yeah

You know, bringing some new stuff to Bitcoin is really hard

I think most people are taking the more conservative side on this

And I think we've seen some competing proposals so far

On covenants and sidechains

I haven't had a chance to read out BIP300

So it's really hard for me to, you know, add some comment on this

But I think I remember back on Twitter

In this space

The main objection was the majority hashrate can steal from the Drivechain

Maybe

Yes

Yeah, that was the common objection I remember

But hopefully we'll get there

Yeah, we'll hopefully get trusted sidechains

But in the meantime, let's experiment

You know, with federated sidechains

Think of that as the testnet of Bitcoin

And you can build, you know, smart contract primitives

And with some, you know, advanced scripting primitives

And whether it's Liquid and RSK

You can, you know, try to build things on Bitcoin

On layers of Bitcoin

Yes, I do

You know, to just defend BIP300 for a second

It is true that the majority hashrate can steal all the coins

But it takes them three months to do that

Or six months

Best case scenario, it takes three months

So it's deliberately designed with that reality in mind

And, in fact, there's very little

If 51% of the hashrate is against you

There's very little that they cannot steal from

So, for example

They could steal from the Lightning Network

By just censoring the justice transaction

So I'm not saying that to spread any fear of the Lightning Network

I really just think the whole criterion of the 51%

When I designed it

I literally had in mind

If 51% are against you

Then you're probably screwed no matter what

And so with that

That kind of open concept

Of them being able to pull any 32 bytes they like

Out of the world

It's deliberately

The slow three month withdrawal

Is deliberately designed to address that

But I think it is fundamental

There's nothing you can do

Like if you had a sidechain based on ZK-SNARK

51% of the hashrate could simply censor out

Messages

And then you would never know anything

So I think it's a fundamental limitation

That absolutely nothing can improve on

So I sort of took that as a kind of

Minimal assumption

And tried to push it all the way through

But I think people should read

Give BIP300 a read

And decide what you think for yourself

So, yes

Regarding your question

I think sidechains are fun

I mean

We have in Rootstock

NFT marketplaces

For art, for example

Curated art

Instead of just JPEGs

Like real artists

Publishing their ownership rights

And certifying those

On Rootstock with the hashing power of Bitcoin

Paying with Bitcoin for the art

So it's a lot of fun

Then you have DeFi

You have lending protocols being used in Latin America

Thanks to this

You have a P2P monetary system

Backed by Bitcoin running on Rootstock

So you have a dollar backed by Bitcoin

Thanks to a sidechain

Which I think is the best

Stable asset in the world

Because it's basically

You don't have to rely on a third party

It's called money on chain

It's the protocol

So, yeah

So you have all these things

That are happening thanks to

Sidechain

All the transactions and operations

Are paid with Bitcoin

So

I mean

If that's not fun

I don't know what it is

Speaking personally

I had a lot of fun

Thinking up and innovating

Doing something completely novel

That for most people

Wrote it off as if it's not possible

Including Eric Voorhees

He's one of the biggest advocates of the project

I love innovating

I've been doing it for a very long period of time

I like to challenge myself

I even spent 6 months working on a project

That was mathematically impossible to work on

Just because it was so fun

So I love this area of innovating

Sidechains or blockchains

Because there's so much to be done here

This industry is like a little infant baby

That needs to be matured

And I decided to devote myself to this idea

So I have so much fun every day

Other than the stress of course

It's really fun

With Taproot

We had a set of new additional opcodes

Bundled with Taproot

So you can build around

Covenants and smart contracts already on Liquid

It's really fun

I worry that

If we don't have sidechains

We'll have a lot of people show up

They'll be really excited

Then they'll try to get involved with Bitcoin core development

And they'll get really discouraged

We see a big proliferation

Everyone's doing altcoins

I think it's partly because

It's so easy to do an altcoin

It's so difficult to do something in Bitcoin

The idea is to sort of

Maybe address that

Problem

So now we're running low on time

Does everyone want to shill something

And make a final point

Tell people where to find you

We want to go back in reverse order maybe

I'll make myself available

On the other side of these doors

You can ask questions or whatever

Or go deeper into detail

I'm sure we don't have enough time here

Which is perfectly fine

I'll be on the other side of those doors

You're welcome to come up and ask me questions

But this world is just starting

And I'm so excited to be a part of it

I think you have to stay wild

Stay curious

I think this is a brand new world

I disagree with him

He's not a baby

He's a toddler

He's in his infancy

And everything is there to be built

And we are like

Really starting to

Meet the real people

So of course if you want to go

To the Rootstock stand here

The whole Rootstock community is there

People building on Rootstock

And I'll be there

And my Twitter is Dieguito

Like Diego in Spanish

So I'm happy to talk to you as well

If you're willing to

Only small countries use Liquid

That's it

Only small countries use Liquid

Because of El Salvador

I think we'll be seeing

A continuous trend towards that

I think Samsung has been doing a great job

Bitcoin pulling and Liquid pulling countries

We'll be seeing interesting stuff happening

On Liquid in terms of security tokens

And all other stuff

That's awesome

What's happening there is almost surreal

All of us in El Salvador

After so many years

Pushing for Bitcoin

And seeing it being used

In real life

It's almost magical

I'm very happy that

Liquid is helping on the bonds

And the tokenization of assets

For the government

That's great

Again I'm Paul Sztorc

I've been researching sidechains for a very long time

So you can read about my proposal, BIP300

You can read on my blog

Truthcoin.info

I have many other sidechain designs and commentary

So that's it I guess

Thank you very much

Right

Thank you very much for coming

I am going to

Talk to you about the very

Exciting subject of federated

Chowmian Mint

Or what I believe

Is effectively

The third pillar of the Bitcoin

Open source ecosystem

Now

When making this

Talk I wanted to think

About and reflect on

Why we are here

And I don't mean

In the existential sense

And I don't mean why we are here at Bitcoin 2022

I mean

Why are we here at the open source

Stage

I think the reason we are here

Is because

We understand how vital

Open source

Software is

To the Bitcoin ecosystem

And ensuring that

Bitcoin achieves its ultimate objective

Of separating money

From state

Now

We understand that

Bitcoin is a global scale

Decentralized

Decentralized spelled in the UK way by the way

Not the US way

Censorship resistant money

Now core to that

And no pun intended

Is Bitcoin core

Which is a global scale

Decentralized censorship resistant

Platform of money and store of value

Now over the last

Few years

We've seen the second pillar

Appear

Which is lightning

Which again is a censorship resistant

Decentralized

Global scale

Payment network

But I believe we are missing

A pillar

What we do not have and what we need

Is a censorship resistant

Decentralized global scale

Form of Bitcoin custody

Well at least

Until FediMint

Came along

Now before I go into

Details as to or give you an overview

Of what FediMint is

I think it's important to understand

Why

A decentralized

Bitcoin custody system is so

Vital

And to understand that

We need to understand what are the current options

If you want to custody your Bitcoin

Now the first option

Funnily enough

Is third party custody

Or with a non Cockney accent

Third party custody

Now this is where

You entrust your Bitcoin

Not to yourself, not to a friend

But to a third party

Someone who you don't know

I.e. a stranger

Now

Way back when

We would trust our Bitcoin

To unregulated

Exchanges

Such as MTGox

And as we all hopefully know

That didn't end well

What would happen is

If you trust your Bitcoin to someone

Who doesn't know you

They would either not look after it properly

And it would get stolen or lost

Or they themselves would run off with your Bitcoin

So

In response to this

A number of people tried to set up regulated

Exchanges

I was one of these

Eight years ago

I set up a Bitcoin exchange

Now

The intent was good

I wanted to and all the others

Wanted to set up exchanges

To resolve these problems

But

We resolved one and created a new

Problem

Basically

What we were asking people to do

And we educated them to do

Is to take their fiat

And use it to buy

A censorship resistant money

And then put it on an exchange

Which was regulated by a regulator

Regulators

Exist to regulate

Another word for regulation is censorship

So

You don't have to be a genius to realise

That's also in time

It's going to end well

Now this is not hyperbole

I over eight years

Saw increasing level of regulation

Coming down the line

And now today we are seeing

Whatever your view

We're seeing Ukraine, Russia

Where innocent Russians around the world

Are losing their access to their

Bitcoin

In the European Union

We're seeing

New regulations come into place

Which effectively

Prevent or make it very

Difficult for people to gain personal

Custody of their Bitcoin

So what was the solution to this

We advise and educate people

To use first party custody

This is where you are

Taking full personal responsibility

For your Bitcoin

Now

From a censorship resistant point of view

This is the gold standard

But the reality is

That

After eight years of running a Bitcoin

Only exchange

I had to come to the conclusion

That maybe we can get

5%, maybe 10, maybe even 20%

Of people

To self custody

But 80-90% are never going to get there

And the reasons

Are simple

For many people

It was just

Too technically complex

They

Did not feel comfortable

With the technical sophistication needed

To self custody

For others

They just

Couldn't afford it

Especially in the global self

I'm a board member for B-Trust

And I understand that many people around the world

Do not

Would not be able to afford

The cost for a hardware wallet

Or if they could

It was better given their total volume of Bitcoin

To buy more Bitcoin

Than to buy a hardware wallet

And third

For a lot of people

They were just too afraid

They just did not feel comfortable with

Custodying Bitcoin themselves

And they preferred to trust someone else

Other than themselves

So

In this arena

FediMint appears

And FediMint is a portmanteau

A mashup of the words

Federated Chaumian Mint

Now

FediMint

Contains

Three key innovations

One is philosophical

The second

Is structural

And the third

Are technical

First

The philosophical is

Instead of using third party

Stranger custody

Or first party

Do-it-all-yourself custody

You use third

Second party

Community custody

I.e. you take a community

Of close friends

Close family

Close work colleagues

And they form a community wallet together

In Bitcoin Beach

I was there last year

In El Salvador

This idea

Is strange

Potentially to people in the west

But in the global south

This is very common

For people to trust their friends and family

The second

Is structural

The FediMint protocol

Recognizes that not all people

In a community

So

Just like in days of yore

Where the strongest

In the tribe would look after the tribe

The technically strongest

In the FediMint community

Do the heavy lifting

Of running

The community wallet

The FediMint community wallet

On behalf of the tribe

Now

Clearly in that scenario

The guardians

Would I like to call guardians

Have a level of influence

On the Bitcoin

That normal members don't have

And in order to sort of

Effectively create guardrails around that

And limitations on that

Two technologies are put into place

The technologies that give FediMint its name

The first

Is the use of federations

And you can think about these

Simply as multi-signature wallets

So that

No one guardian

And in large federations

Several guardians can act together

To be able to create a transaction

To take money out of the wallet

So you avoid

Key man's single point of contact risk

The second

Is the use of

Xiaomi and Mintz

And this is quite key

Because Xiaomi and Mintz

Is a privacy protocol

Which means that

Guardians can work to manage

The communal or community wallet

But

They do not know the individual

Balances of community members

Furthermore

If a deposit comes into the wallet

Or a request for withdrawal

Goes out of the wallet

The guardians

Don't know who the money

Bitcoin coming in is for

Or who

The request to go out of the wallet

Now this provides

A level of privacy

Which is not only better than third party custody

Where the exchange

The stranger knows everything about

Your usage and all of their users

But it's actually better than

First party custody as well

Because blockchain analytics companies

Or blockchain monitoring companies

Are not able to determine

The difference between a federated

FediMint wallet

And a normal first party wallet

So from their point of view

It's all one user

They can know the total amount

Of balance but they don't know

Which person within that community

Including the guardians

Are doing what

So taken together

This means

That FediMint

Is global scale

Because

We are able to get

Not only the most technically sophisticated

Out from a regulated

Regime

But also their close friends

And family and work colleagues as well

Wherever they may be in the world

It's decentralized

Because you can

Envision a future where there are

10,000 to 100,000

FediMint communities

Around the world

Not the few dozen hyper large

Exchanges

Or regulated exchanges

That we are quickly heading towards

And it is censorship resistant

Because

If you are providing

This service as a guardian

And you are not

Then in most jurisdictions around the world

Most reasonable jurisdictions

That is exempt from regulation

Because you are not carrying out the task

By way of business

And therefore

You do not need to be regulated

Like hardware wallets

Taken together

I believe

And when I heard about this a year ago

I believe

That FediMint

Has the potential

To be the third key pillar

Of the Bitcoin

Open source ecosystem

A global scale

Decentralized

Censorship resistant

Form of Bitcoin custody

Now

What do you do next

You can't see the URL

Hopefully you can

The first thing

Is to

The first thing

Is please wait

And listen to the next talk

This is about

The future of Bitcoin privacy

I urge you all to listen to it

Because it is a really interesting talk

But also you have El Sirian

Who is the inventor of the

FediMint protocol

And also the main contributor

To the

Minimint reference implementation

Of the FediMint protocol

Two

And I'm sure he will go into more detail

As to some aspects of FediMint

Two

It doesn't appear clearly here

But you should go to

FediMint.org

Where you can find out more

About FediMint

And understanding of how it works

And the reasons behind it

And three and most important

If

You are a

Bitcoin open source engineer

Or developer

Or if you are someone who just wants to

Contribute to open source technology

I urge you to go to

GitHub and the FediMint project

On GitHub and consider

Investing your time and contributing

To the project

If you choose to do so

You will be helping

Ensure that Bitcoin

Achieves its ultimate objective

Which is the separation

Of money from state

Thank you very much

Applause

Music

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Hello, hello everyone

Welcome to this panel

Obi, thanks a lot, that was the best intro we could have hoped for

Obi

Gave the general idea

Of what we are going to be talking about on this panel

So that's Federated eCash

My name is Arno van Wittem

I work at Bitcoin Magazine

I'm joined by Casey Rodenmoor

To the right, to the left for you

Of course

Applause

And Eric Sirian

I'll let you guys introduce

Applause

I'll let you guys introduce yourself briefly

Just explain who you are

Sure, yeah, my name is Casey Rodenmoor

I'm a long time

Sort of minor Bitcoin developer

You know, hanging out in the shadows, doing random things

I have a bunch of preposterous ideas

That I work on

But I'm very interested in Bitcoin privacy

And I got interested

In Charmian eCash

On top of Lightning

Around the same time that Eric started to work on it

Yeah, and that's why I'm here

Eric?

Yeah, hey, I'm Eric, I'm a crypto-anarchist

And aspiring cypherpunk

I have a background in

Distributed systems, cryptography

I'm a Rust programmer

And yeah, around the time

Of last year, I think

We were talking

At the Miami conference, actually

About a new project of mine, Minimint

And that's how we got together

And that's how the project

When the project

Got started

Yeah, so let's talk about a little bit of the history

And we'll go back further than one year

Yep

So, Charmian eCash has a long history

Very long

Yeah, Casey, where does it come from?

Yeah, so the concept behind

Charmian eCash

Charmian eCash, okay, I did not get into what

Charmian eCash is yet

But it's based on something called blind signatures

Which were invented by Charm

In 1982

And then in 1989

He actually started a company

To try to commercialize that technology

And provide a

Sort of private digital bank

A fully centralized private digital bank

Using blind signatures

And never really successfully

Commercialized it, but it's kind of

An idea that's been there

In the background for a long time

And one thing I recommend for people

Is look into the

Pre-Bitcoin history

Of digital privacy

And digital cash technologies

And see things like eCash in the past

That are interesting ideas

Weird takes, so it's definitely

Like fertile ground to explore further

Yeah, well, Charm

So David Charm who invented it

He was basically the first person ever

To

Consider, you know, if money is going

Digital, that could actually be

Very bad news

If there's a central party that's tracking

Everyone's transactions

It's a nightmare, really

And he started to think about ways to make

That private, so he's the first person

That started to think about digital cash, really

So the first, yeah, predecessor

To Bitcoin or the first, you know

He's sort of the founding, how do you call it

Like the granddaddy

Of the whole movement, I would say

Yes, his first paper

Was called Transaction Systems

To Make Big Brother Obsolete, so that sort of says it all

Yeah

So let's get into then

The technical explanation, so how does this work

Do you want to take this, Erik?

Yeah, sure, sure

Like, Charmin eCash is based

On a super interesting technique

Called blind signatures

And what blind signatures allow you

Is as a user, you can acquire

A signature on a piece of data

Without showing this piece of data to the signer

Which might sound a little bit weird in the beginning

But we'll get to it in a minute

Why this is so important

Like if you

If you still remember carbon copy paper

You can imagine it as follows

You put your message

Your note into

An envelope made out of carbon copy paper

You close the envelope

Give it to the signer

They sign on the envelope, it pushes through

They give back the envelope

And you can open it, taking out the message

With the valid signature

But the signer never saw the message

And how we construct eCash from that

Is by simply taking

A random message, you just choose it randomly

Some big number

And also take a dollar, let's say

Or a bitcoin, we were at a bitcoin conference

I mean, so back in the day

Charmin was using actual bank accounts

Back then, so that's why that example

Also makes sense

You take any amount of money

You also take

This random number, put it in the envelope

Give both to the signer

To the bank

And they would keep the money

They would sign the envelope and give it back to you

And the signature would mean

This is worth, let's say, one dollar

Or one bitcoin, or one satoshi

And later on you could go back to the bank

Show to them that you have the signed piece of data

And they would give you back

The amount of money you deposited

And that's how you can also build

A transaction system from that

So the practical effect is

You have a bank where you deposit

And later you can withdraw

And the deposit is totally unlinked

The withdrawal is totally unlinked

From the deposit

Customers show up, they have this message

That proves that they deposited funds

But not who they are, when they deposited, whatever

The bank can verify its own signature

Give them the funds

And has no idea, any details of

The customers

Yeah, they know they really minted the cash

But they don't know

Which note they're getting back

Right

Exactly

And the way you pay

Is you literally send

The number to someone else, right?

And then that person will check immediately

Essentially with the bank in that case

That's right

They'll essentially send the number to the bank

And get it reissued

So then they get their own number

That the payer doesn't know

So now the funds are in their control

Yeah, that's how double spending back then was solved

You just check it immediately

With the bank that's issuing this

Now we're applying this

Same trick essentially to Bitcoin

So one way

You can do that is

You basically have a Bitcoin bank

You have someone that's

Customizing the Bitcoin

And you get the federated

Sorry, you get

We'll get to the federated part

Building up very, very simply

So the first thing you can do

Is you can just build a very simple Bitcoin bank

With this system

And somebody

You do this blind signature magic

You put the person who deposited it

You give them back some sort of token

A blinded token

And later they can withdraw it

So this is a nice one improvement

On a fully centralized

Fully non-private system

Now you have a centralized system

But now it's private

People can deposit and withdraw Bitcoin

Without the service knowing anything about the customers

Right

So we're not completely happy with this

No

A lot of trust

And it's not decentralized

You have a lot of trust in a single entity

That's running it

So we can do better with the magic of federation

Yeah, exactly

Especially, you have to imagine

If you're running such a Bitcoin bank

You'd probably want to do this

As a noob today

Because the regulations around banking

Are very unfavorable to privacy

So you probably couldn't run an eCash bank

In the open

So instead

You need to do it as a noob

And it's really easy to exit scam

So to solve this problem

Essentially, we can split the trust

Over multiple people

Like there is this technology called federations

Like you might have heard of it

There is the liquid federation

Which creates a sidechain

But you can also use federations

For other things

And the concept behind it

Is instead of holding all the Bitcoin

In one wallet

That is centrally controlled by one party

You can hold it in a multisig wallet

For example

There are 11 people

That you need 11 people out of 15

To actually move the funds

And that way it becomes much more secure

Because now 11 out of 15 people

Have to collude against you

To steal your money

And you can do the same thing

With the signing process

Like to the plain signature algorithm

There are special plain signature algorithms

For which you need 11

For example 11 out of 15 members

To collaborate to create these plain signatures

And to sign your eCash tokens

And that way

We successfully split the trust

Over multiple people

And as Obi said

You probably have some people in your life

That you cannot trust

Maybe not fully

But if you have

Sufficiently many of these

Then you could construct such a community bank

Yeah and

As Obi indeed mentioned

It is happening already

The Bitcoin beach wallet would be a good example of that

Where they have this distributed trust

Model

So there is a very good argument to be made

I think for a system like this

If people are already doing this

If they are already

Custodating Bitcoin in this sense

For convenience sake

Well it would be great

If we can add a privacy layer to that

With a system like this

Right and you could have all sorts of arrangements

You could imagine this being friends and family

You could imagine in jurisdictions

With favorable regulations

Where it is possible to do this

Public people doing this

You could imagine

Darknet markets or any wild people you want

Running this for profit

Or as like an adjunct to the existing services

And maybe you don't trust any one entity

But you trust them a little bit

And you add up a little bit of trust

And you get something that you feel comfortable

Putting some amount of funds into

Maybe even better

Like in the case of darknet markets

They might be fierce competitors

And you just trust that they hate each other enough

To not collaborate

Like with Bitcoin

We essentially trust that the miners

Are in a fierce competition

And don't collude against us

With some economic incentives

But essentially yeah

As long as they don't have incentives to collude

It works

We had a discussion about this earlier

So I want to

See Eric

Do you think that these banks

Need to be anons or not

If you're using a federated system

At least some form of identity

Kind of matters to

Make sure that they're not the same

Individual right

What are your thoughts there

Is there something that's compatible with complete anonymity

In that sense or

It's definitely not compatible

With complete anonymity

But let's say you have twitter nooms

That have a reputation

That they built over years

And it's hard

To have multiple nooms

That have high engagement let's say

And I pretty much trust that Shinobi

He is

That's probably his main noom

He probably can't run multiple

Accounts shitposting that much

So

I would totally trust him being a member

Of a federation and if there are multiple

Such people then I could totally imagine

A federation of nooms and

I really want to see this like a cypherpunk federation

Which is global

Where you don't have these second party trust relationships

But it's still good enough

It gives you a lot of privacy

And hopefully they won't exit scam

But on the other hand

There is this

Need for community banking

Which Obi described and I think

Their federated eCash can also play an important role

In local communities

Because currently

What you're seeing with

Bitcoin beach wallet

It's super cool

I love it

But ideally if we want to deploy this at a scale

You don't want your neighbor to know

What you're spending your money on

And that's also a problem federated eCash is solving

Okay so did you want to add something

Who would be the ideal federation members

Or how do you envision this

Who's going to adopt this in your view

Right

The ideal federation members

Are just people who have something to lose

If they collude against the federation

And that can be anybody

That can be twitter nooms, that can be people who run businesses

People you know personally

Yeah and I was just going to say

It isn't compatible with full anonymity

But it is compatible with pseudonymity

Do we agree by the way

This is probably the most important tradeoff

For systems like this

So we're getting great privacy

But regardless of your setup

There is some level of trust involved

One way or another

Is this the main tradeoff in your view

Definitely

You're trading trust for privacy in that sense

But you're not only trading it for privacy

You're also trading it for convenience

Yeah

That's the other thing

When you use somebody else's computer

You don't have to set it up yourself

So that's another tradeoff

You're trusting people

But you're also trading off

Technical difficulty versus trust

That's how I see it

We essentially trojan horse

Privacy into bitcoin that way

If we can make this so convenient

That everyone wants to use it

It will automatically give people

More privacy

And will also

Make it the natural thing to do

Not only criminals use the private bitcoin technology

Because currently

If you're using coinjoins

Then you have the big problem

All exchanges will flag you

And will freeze your funds

But if everyone is using this out of convenience

There's no reason to do this

They can't

You have strengths in numbers

Erik, is this system

At least auditable?

Can you know for sure

That there's not more

eCash issued than

The federation has

Bitcoin in reserve?

That's the one big problem

You can't audit such a system

Because it provides such great anonymity

That the federation

Never knows which tokens

Are always banned

You have all the tokens in your anonymity set

It also means you cannot generate

Proof that you have

A certain amount of funds for the issued

eCash tokens

Because you could not tell which ones to remove from the proof

If you were doing something

Like the exchanges do

Like proof of funds

You fully trust the federation

In that sense

I know we can't peer into the future

And we can't

Figure out what people

Will figure out later

I'm still going to ask

Is there any sort of plausible scenario

That in the future it might be audible

In one way or another

Or is this just completely off the table in your view?

I mean, I thought about this for a long time

And what I came up with

In the end was really close

To the Zerocoin design

And I think

In any design where you have auditability

You require the users that want to spend money

To sync some sort of blockchain

Or to sync some sort of global state

To hide in

And that makes it not as convenient

Like with the current

Federated eCash system

You only need to care about your own eCash tokens

Which is like small pieces of data

Which fits onto any phone

But as soon as you add the auditability

It becomes much more cumbersome to run a node

And then we probably can't

Roach and host privacy into Bitcoin

Because people won't run it

One topic we haven't

Mentioned yet is the vision

For integrating these kinds of systems

The federated Xiaomi systems

With Lightning

That's part of

Your project, right, Eric?

You seem eager to say something

Yeah, I just wanted to say

We touched on the privacy

Of the

Depositors

Have from the people

Running the federation

Don't know anything about the depositors

The nice thing is that when you pair the system

With Lightning

When users are depositing via Lightning

And making payments

And withdrawing via Lightning

You get very good privacy

From outside observers

So to the point of view of an outside observer

Somebody who's trying to surveil the Lightning network

And surveil the chain

One of these

Xiaomi and federated mints

Has a bunch of channels

And maybe you can observe

Through analysis

You can see how the balances are changing

Maybe get some ideas of payments that are being made

Or whatever

But because so many users

Are using this one Lightning node

And are essentially sharing all of these channels

An outside observer gets very little information

About the actual activities or identity

Of the customers

It's essentially like one big giant coin join

With this big shared Lightning node

That is very hard to surveil

And draw any conclusions about

So that's an important part

And that's its sort of external privacy

I'd definitely say that's part of it

But the original intent

For integrating Lightning

Was actually to not make this

Like one federation to rule them all

Because that would be enormously

A centralizing force

Because only people inside a federation

Can page other with eCash tokens

So if you don't have the Lightning integration

Everyone would want to be in the same

One big eCash federation

And that might become a systemic risk to Bitcoin

But if you can integrate Lightning

And I'm currently working on this

And I already have the outgoing Lightning integration

The incoming is currently being worked on

Then

You suddenly just have a Lightning wallet

Like a really private federated Lightning wallet

And can interact with any other Lightning service

May it be another federated eCash mint

Or like someone running their own Lightning node

Or even like centralized services

Like Wallet of Satoshi

Like you're fully interoperable

With the whole ecosystem

So you can think of these federated mints

As being sort of functionally equivalent to banks

And then Lightning being the settlement network

Which makes it very easy to move

Between them very quickly

And instantly

This does seem to bring

For me, this does seem to bring up

Like a bit of a tension maybe

So you're basically suggesting that you would prefer

These federated mints

To not be too large

And I guess the main risk of that

Is the custodial risk again?

Yeah, yeah, exactly

But then the trade-off there is

I think for optimal privacy

You actually want very large

You know

That's right, to increase the size of the anonymity set

So there seems to be some kind of tension there

Absolutely

And you just want, like, everybody has some price

At which they will defect

I don't know, maybe not everybody

And you just don't want to hit that price

With like a single federation

With like a giant, giant pot of gold

So yeah, there's tension

But yeah, the more people you have on the federation

The more transactions you have, the better privacy you get

But probably you don't need to have that many users

To have very good privacy

Like if it's reasonably popular

If it's making lots of transactions pretty much continuously

You're going to get pretty good privacy

And there can probably be

That might require a lot of users, right?

Do you have any ballpark?

Like at what point

Do you have

A big enough privacy pool?

Anonymity set

I have no idea

You kind of want there to be

Constant transactions

As long as there's a constant transaction

And you have a hard time doing any sort of

Timing attack, and I don't know

How many users that is

If Lightning is broadly adopted, maybe you don't need that many users at all

This ties into our next subject

And maybe we're sort of skipping ahead

What are the weaknesses

From a privacy perspective?

So you mentioned timing attack

Maybe there's someone in the room that doesn't know what it is

I doubt it in this room

Okay, very quickly explain what a timing attack is

A timing attack would be

Maybe you observe an on-chain deposit

And then you're also surveilling

The Lightning network

And so you, through watching changing channel balances

You see an outgoing payment from the federation

You see deposit on-chain to the federation

Then you see an outgoing deposit

Or an outgoing Lightning transaction from the federation

So then from that you might surmise

That the deposit

Was the same person who made the

Outgoing payment, right?

That's especially a problem if you want to use such a federation

For tumbling, because we didn't go into this yet

We mainly presented this as a way

To make payments

But you can also use it to tumble bitcoins

And for example to recycle

Toxic change you got from coin joins

There are so many possibilities to use this technology

And for that you'd have to wait

For a reasonable period of time

That other operations happen

And have some anonymity set

And a second weakness

I'd say is in the current implementation

It's not a theoretical weakness, more a practical one

To make the system efficient

We're using multiple amount

Denominations

Let's imagine we had only

One Satoshi tokens

And wanted to send the whole bitcoin

Then we'd have to assign

100 million random

Data strings

And that would take a long time

Even on modern computers

What we do instead is we introduce tokens

That are worth 1 Satoshi, 10 Satoshi, 100 Satoshi

And so on

That reduces our anonymity set

Per denomination

But in the end I believe

If all the users of the federation

Have roughly the same amount of money

Then it's still good enough

The problem is if you're the rich dude

In the federation and the only one owning

The one bitcoin tokens

That would be problematic

But you can see this

You can go to the federation and ask

How many tokens did you issue of this denomination

And if you see there's no one issuing

One bitcoin token

Then you just take the 0.01 bitcoin tokens

And issue 100 of them

And then you got your privacy back

So Erik, your specific project

Is called Minimint

What's the status of that?

How far are you with that?

It's currently a research project

I tested on rec tests

I definitely wouldn't put any mainchain funds on it yet

But I'm planning to have it ready

For like an early alpha release

In October for Hacker's Congress

I want to pay my coffee with it

And I did this last year

But it was kind of a hack

Because I used the rec test bitcoin

In the federation to

Trigger a payment from a lightning node

Which was operating on mainnet

So that's kind of cheating

But this year I want to have real bitcoin in there

And I have to put my skin into the game

Dogfood this and then it will become awesome

Has there been any interest

From other projects

To integrate this or not yet?

I mean

Not really yet

I mean it's in the early stages

I got a lot of support

Definitely I got a lot of support

From Wasabi people

We were discussing the crypto behind it

A lot of outreach

But from a more user-facing point of view

Not really yet

Because it doesn't make sense

I'm working on the deep tech behind it

And not on any user-facing apps

But this time will definitely come

One thing to mention is that it's written in Rust

So if you like Rust you're looking for a Rust bitcoin project

To contribute to

Selling point, you know

I was just going to say what do you need

At this point? Developers?

Yeah definitely

I need Rust developers to build the main thing

Like the server component

And also the client library

And what I'm currently planning on

Is building a WebAssembly based client

Where I compile the client library

For federated e-cache

Into WebAssembly

And then someone could build a React interface

To it

So it's easier to use

Just put it on your phone, scan QR codes

And it would be awesome

So if anyone has any knowledge about this stuff

I don't, I'm really a back-end guy

I'm a Rust developer

But I'd love to cooperate

We've hinted at it

A couple points throughout this panel

But

E-cache is of course not the only privacy

Tool for bitcoin

People are working on different solutions

To increase privacy

What's the vision for how does federated e-cache

Fit into a broader picture

Yeah I mean

So the ideal world would be one

Where lots of people use

Solutions like federated e-cache

To do these private L2 payments

And then all of the

On-chain payments, all of the L1

Or a lot of the L1 activity

Is just massive coin joins

It's just massive

Like the

Federation needs to get some coins

And send it to another federation

Or somebody needs to make an off-chain

Or an on-chain withdrawal

And they just all do it through giant coin joins

And sort of like non-settlement payments

All happen through these private L2 mechanisms

Maybe one thing to add there

Coin joins

Are currently

Not great because you have all these different

Denominations and if you want to pay a certain

Amount then it's a really weird

Amount and this will stick out

But if we were doing

All the commerce on layer 2 then we could have

Common denominations or like

On the base layer and that makes

Coin joins so much more efficient

And I can imagine a future where

Every spend is a coin join

That's the future I'm working for

I want to see this

Alright, well guys we're out of time

So thanks a lot for doing this with me

Thank you everyone for coming

This is the last talk

Here so this room

That was it, thanks