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Hello, and welcome to Drivechain Twitter Spaces.

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We're thrilled to have another conversation today,

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August 4th, about Drivechain,

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Bitcoin Improvement Proposal 300 and 301.

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Welcome to everyone who joins us live,

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as well as those who listen.

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This is a recorded space.

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I see some familiar faces in the audience.

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Thank you for all those who join and study Drivechain

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to understand its potential power to strengthen Bitcoin

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through hash rate escrow and merged mining,

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strengthening Bitcoin's fee revenue,

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strengthening the mining sector in Bitcoin,

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strengthening the network effects of Bitcoin,

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enabling experimentation and innovation

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on Bitcoin sidechains to accrue value to the mainchain,

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enabling the mainchain to be more ossified,

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and making sure any changes to the mainchain

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are tested thoroughly on sidechains first.

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This is such a powerful idea.

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It's essential Bitcoin adopt this design to succeed.

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Without Drivechain, Bitcoin is at grave risk

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for flippening, for a security budget problem,

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and for failure to optimize

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and failure to grow as rapidly as possible.

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We really need this change the sooner the better

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to strengthen this project.

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Bitcoin is in existential competition

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against the fiat money

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and against the other peer-to-peer protocols

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that have emerged and accrued hundreds of billions of value

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by being more attractive to development

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and more user-oriented.

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Bitcoin must be a place where users

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can get whatever they want,

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any trade-off, any feature,

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for scaling, for low fees, for privacy,

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oracles, and other innovations and experiments

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should be run on Bitcoin using the Bitcoin token.

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Sidechains would enable that.

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We had our biggest space ever last week

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with Adam back here.

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It was awesome.

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We had thousands of listeners.

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I saw in the audience almost every big name of Bitcoin.

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I'm so glad we had Dr. Back here to talk for three hours.

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The space is recorded.

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Everyone can go back and listen to it.

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It's on our Twitter timeline.

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And today we might have an open mic primarily.

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Everyone's welcome to come on up.

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Thank you to those who've been analyzing drivechain,

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whether from a favorable or critical lens.

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The truth is on our side, we believe.

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This is a powerful idea that would only strengthen Bitcoin.

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And is essential for the survival of Bitcoin.

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If you're in the audience

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and you have a question or comment,

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come on up, share your thought.

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Don't be shy.

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Hello, Moon Settler.

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Nice to see you in the audience.

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Hello, Professor Warner.

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Nice to see you in the audience.

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Everyone's welcome to come on up and share thoughts.

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Welcome to the stage, Paul and Austin,

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co-founders of LayerTwo Labs.

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Thanks.

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All right.

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So if you want to speak,

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what you have to do in this Twitter space

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is click to raise your hand,

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and then I will let you on up to the stage

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and you can share your question or comment.

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There's been a lot of great questions

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and comments on Twitter lately about blind merge mining

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and how it works.

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It's always been amazing to me

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how Satoshi explicitly wrote in 2010, so long ago,

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he explicitly wrote that merged mining

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can strengthen Bitcoin by bringing fees

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from every blockchain.

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And yet today, the mainstream view in Bitcoin

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is that it doesn't matter

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that Ethereum yesterday had $5.4 million of fee revenue

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while Bitcoin had 692,000.

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Ethereum has roughly, roughly speaking,

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10 times the fee revenue of Bitcoin.

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This is a major problem for Bitcoin.

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In the long run, if most fees are on other blockchains,

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those blockchains will accrue value

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and be stronger than Bitcoin and eventually flip Bitcoin.

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And then Bitcoin will have lost its primacy,

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its network effect leadership.

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So we have to be the biggest.

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That's very important in the market for money.

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Network effects are more important in money

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than any other market.

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I think Professor Warner published a giant saying

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on blind merge mining recently,

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which I didn't really read in detail.

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But I think the right way to think about blind merge mining

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is just that whether or not you bid on L1,

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if you pay the fees on L1 and you hash in the right spot,

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that is the same, that is supposed to be equivalent

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to the sidechain meeting the proof of work requirement.

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So in Bitcoin, whether or not the block is valid

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and whether or not the block header

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meets the proof of work requirement,

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the all the hashing, the SHA-256,

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all the actual work that all the miners are doing,

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it's all their machines, that's only on the header.

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They could do that work on an invalid block

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and then broadcast that header and that block to everyone.

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Or they could just do this work on a header

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and then there could be no,

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they could be missing the data of the block.

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In these cases, a full node will at first say,

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oh, this is probably the next block.

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But when it, then when it checks with actual block itself,

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it'll say, oh, wait a minute, this is not a valid block.

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There's no valid block here.

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And then they will invalidate it.

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And so there's sort of two hurdles you have to jump.

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And in blind merge mining, it just says the sidechain,

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the second hurdle is exactly the same as always,

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which is that the sidechain nodes will get the whole block.

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They'll check every message in the block

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to see that it always validates.

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All the rules of the sidechain are being followed.

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If there's, if it's an EVM sidechain,

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if it's a ZK-SNARK sidechain.

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So the second hurdle is exactly the same,

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but the first hurdle, instead of whether or not

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the 80 byte header hashes to something

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that has the right number of zeros, zero leading bits.

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Instead of that, it's just, do you have a transaction

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in L1 that has the hash of the block?

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So that is why it is supposed to be a pretty good analogy

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since almost everything is the same

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and only one thing is different.

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Paul, could you respond to this sentence

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in the piece that he published today, which was,

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I mean, we'll all get a chance to read it.

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It was published only 10 minutes ago, I think.

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But I'm reading through it

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and this sentence seems important near the end.

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Professor Warren wrote,

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for this reason, blind merged mind sidechains

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offer a fertile sandbox for layer one miners

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to test out all sorts of deviant strategies,

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fee sniping, undercutting, bullying, extortion, bribing,

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all without messing, all without messing with the main chain.

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This could provide a series of stepping stones

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toward this behavior on the main chain.

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How do you respond to that thought?

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Well, I mean, that seems like kind of a strange argument

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to me, like you could say anyone,

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the chains are very separate.

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So you could say like, I think if those type of behaviors

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are profitable at the end of the day,

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then eventually miners will figure out how to do them.

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And then it would just mean that either the design

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of Bitcoin just doesn't work or it does.

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So however they come to that knowledge

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doesn't really seem to make any difference.

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But it's like, they can try fee sniping on the,

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the sidechain will start with no block subsidy

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because that's a special feature of sidechains.

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They don't violate the 21 million coin limit.

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So, I don't know, it's kind of like,

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I disagree, I guess.

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Like, fee sniping is like, again, the fee sniping thing,

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that could always end up happening or not happening.

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I once tweeted something about how,

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if drivechain isn't embraced,

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then inflation will come to Bitcoin eventually

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to fund security.

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And Professor Warren replied,

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something about, saying something about how inflation is,

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that my concern about inflation is a moral panic.

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And do you think, Paul, that if drivechain isn't embraced

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on Bitcoin, if merged mining is specifically rejected

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by the Bitcoin technical community,

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in other words, if Peter Todd, you know,

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his view of merged mining is bad,

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but inflation would be an improvement for Bitcoin,

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do you think that that is ultimately an important issue here

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is that among the critics of merged mining,

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there seems to be, as far as I can tell,

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not a lot of strong opposition to inflation.

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And they seem, many of them, the critics of merged mining,

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seem to think that inflation wouldn't be so bad.

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And some of them explicitly endorse it.

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Like in my conversations with, you know, different people,

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I don't want to name names,

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but they're all on Twitter publicly.

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And they say things like inflation would be

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an obviously good move.

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If Bitcoin has low fees in the future,

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then we need inflation, that would be fine.

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Whereas it seems like among drive chainers,

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there's a recognition, I think a truth,

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that inflation would be very bad

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and that migrating to inflation

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would be a risky move for Bitcoin.

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These are separate topics, you know, but they're linked.

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If we don't do merged mining,

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inflation is the main other path.

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Is that right?

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Well, it seems to me that people are not going

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to be willing to pay high fee rates.

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In other words, the fee per layer one transaction

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will be low.

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And that means that, and the block size will stay small.

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So that means that the total fees collected

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will be very small.

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And so right now, Bitcoin is bolstered by the block subsidy,

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but the block subsidy goes down by 94% every 16 years.

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So it's basically eviscerated very quickly.

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And if there's no money, all the money going to miners,

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the miner revenues, the miner costs

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can never exceed the miner revenues.

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So whatever we pay them, at most,

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that's what they spend on hashing.

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There's a so-called security budget,

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and that is the cost of an endless 51% attack

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that destroys proof of work and destroys the network.

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So that value needs to go up somehow,

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and it's not gonna be, it's either the fee rates

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have to go up, like people have to be willing to pay

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like $500 per layer one transaction,

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which I think will never happen,

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or the block size needs to increase,

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which I also think will never happen,

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or something else has to happen.

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So it's either merge mining or the 21 million coin limit.

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I don't know when people say moral panic.

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I can interpret that two different ways.

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I can interpret that saying, yeah, well, I had inflation,

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but it won't be a big deal.

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Or I can interpret someone the exact opposite way saying,

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well, no one would ever consider

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doing such a horrible thing.

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I honestly don't know.

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I've heard both, so I honestly don't know which one

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is being referred to there.

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Well, the way I take it is the response that I got was,

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in my opinion, it was meant to say that

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my concern about inflation coming to Bitcoin

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is a moral outcry and that it's not a legitimate

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economic fundamental problem.

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In other words, that if Bitcoin were to do inflation,

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then that would be okay.

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That was the perspective I thought was being expressed.

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But psychologically, the pivot to inflation

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would involve a lot of risk

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because it would be Bitcoin's community

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giving up on one of the most powerful narratives of Bitcoin,

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which is that it has absolute scarcity.

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It's kind of a betrayal of trust

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00:13:44,234 --> 00:13:46,234
because people take it so seriously

263
00:13:46,234 --> 00:13:48,314
and it's been repeated so long

264
00:13:48,314 --> 00:13:51,734
that it would be a very serious betrayal, I think.

265
00:13:52,794 --> 00:13:57,074
It would be a lot like the block size war all over again.

266
00:13:57,074 --> 00:13:59,594
I personally know many miners who have said,

267
00:14:00,714 --> 00:14:03,234
eventually there will have to be a split.

268
00:14:03,234 --> 00:14:04,594
You know, if the fees don't go up,

269
00:14:04,594 --> 00:14:06,634
eventually there will have to be a fork of Bitcoin

270
00:14:06,634 --> 00:14:10,114
that has some inflation.

271
00:14:10,934 --> 00:14:12,294
So they plan on doing it.

272
00:14:18,774 --> 00:14:23,414
And of course, adopting inflation imposes taxes on holders.

273
00:14:24,334 --> 00:14:27,134
Oh, great, Professor Warren is here.

274
00:14:27,994 --> 00:14:28,854
Welcome to the stage.

275
00:14:28,854 --> 00:14:30,774
It's always nice to have you in our space.

276
00:14:30,774 --> 00:14:32,414
Please share your thoughts.

277
00:14:32,414 --> 00:14:33,254
Thanks, yeah, sorry.

278
00:14:33,254 --> 00:14:36,754
I was dealing with some weird headphones.

279
00:14:37,714 --> 00:14:41,174
But I mean, I think what you guys just said

280
00:14:41,174 --> 00:14:43,494
is precisely what I mean by moral panic,

281
00:14:43,494 --> 00:14:47,154
by saying that it's such a big deal.

282
00:14:48,134 --> 00:14:53,134
It's such a moral issue that it would be like monumentous

283
00:14:53,814 --> 00:14:55,534
to the whole project.

284
00:14:57,614 --> 00:14:59,454
I mean, either you agree with that or you don't,

285
00:14:59,454 --> 00:15:00,854
but if you look at it from the perspective

286
00:15:00,854 --> 00:15:01,954
of this is a moral panic,

287
00:15:01,954 --> 00:15:03,814
then that's exactly what you would be saying,

288
00:15:03,814 --> 00:15:05,374
how you would be describing it.

289
00:15:07,094 --> 00:15:08,334
Does that make sense?

290
00:15:08,334 --> 00:15:11,534
I mean, well, Peter Todd himself has written

291
00:15:11,534 --> 00:15:16,374
that it is perhaps more likely that Bitcoin will fail

292
00:15:16,374 --> 00:15:18,174
than adopt inflation.

293
00:15:18,174 --> 00:15:21,614
So even the leading advocate for the inflation

294
00:15:21,614 --> 00:15:25,734
and against merge mining thinks that aiming,

295
00:15:25,734 --> 00:15:29,414
if the technical community aims for inflation,

296
00:15:29,414 --> 00:15:32,814
then the users more broadly may resist that

297
00:15:32,814 --> 00:15:35,694
and prefer to have the project fail.

298
00:15:35,714 --> 00:15:38,834
So it's not a, I feel like your phrase moral panic

299
00:15:38,834 --> 00:15:43,834
is kind of like, it's not accurate.

300
00:15:44,674 --> 00:15:47,314
It belittles the concern that we have,

301
00:15:47,314 --> 00:15:48,794
that the drive chainers have.

302
00:15:48,794 --> 00:15:51,234
Because even the critics of drivechain

303
00:15:51,234 --> 00:15:54,114
are notably saying perhaps the project will fail

304
00:15:54,114 --> 00:15:56,354
if inflation is the only option.

305
00:15:57,394 --> 00:16:00,554
Okay, yeah, I guess that's precisely what I mean.

306
00:16:00,554 --> 00:16:02,474
Someone who is describing a moral panic

307
00:16:02,474 --> 00:16:04,834
is necessarily belittling the concerns

308
00:16:04,854 --> 00:16:07,214
that the people with that morality have.

309
00:16:07,214 --> 00:16:09,093
So I guess we're not really disagreeing

310
00:16:09,093 --> 00:16:11,573
except for the point on which we're disagreeing, right?

311
00:16:11,573 --> 00:16:12,974
Well, can I just ask you,

312
00:16:12,974 --> 00:16:15,414
are you saying that you don't think that it would be,

313
00:16:15,414 --> 00:16:18,214
which I still don't know which side

314
00:16:19,614 --> 00:16:21,974
of the argument you have, which is that either?

315
00:16:23,014 --> 00:16:28,014
I'm saying that in 2032, if the last halving ever happens,

316
00:16:29,914 --> 00:16:32,633
it would not be the end of the world.

317
00:16:33,494 --> 00:16:35,334
Like, I usually have this described to me,

318
00:16:35,334 --> 00:16:37,653
like if you stop having halvings,

319
00:16:37,653 --> 00:16:41,454
then what stops the miners from say, increasing the subsidy

320
00:16:41,454 --> 00:16:44,694
or doing all sorts of stuff that-

321
00:16:44,694 --> 00:16:47,414
Okay, so you think that Bitcoin community

322
00:16:47,414 --> 00:16:50,434
will add inflation and it will not be a big deal?

323
00:16:50,434 --> 00:16:54,893
Yeah, if they did in the future, it would not be like,

324
00:16:54,893 --> 00:16:58,133
it would not open the door for all the demons to rush in

325
00:16:58,133 --> 00:17:02,534
and take over the miners and ruin everything for everybody.

326
00:17:03,434 --> 00:17:06,074
Maybe it wouldn't, but the community,

327
00:17:06,074 --> 00:17:08,354
I mean, I don't know how long,

328
00:17:08,354 --> 00:17:10,754
do you mind if I ask you how long you have been

329
00:17:10,754 --> 00:17:14,274
like participating in the Bitcoin community?

330
00:17:14,274 --> 00:17:15,474
Is that a fair question?

331
00:17:16,994 --> 00:17:18,914
Well, the more important question is,

332
00:17:18,914 --> 00:17:22,254
what's the nature of the community in 10 years, 15 years?

333
00:17:23,394 --> 00:17:24,234
That's true.

334
00:17:25,114 --> 00:17:27,914
It might not be, it's not gonna be like in 2013.

335
00:17:27,914 --> 00:17:31,154
Yeah, of course, like the 8,000 people

336
00:17:31,174 --> 00:17:32,774
that were like actively in it

337
00:17:32,774 --> 00:17:35,534
would have just like vomited at the idea.

338
00:17:35,534 --> 00:17:39,774
But the goal is to have like billions of people

339
00:17:39,774 --> 00:17:41,974
in 2036 or something,

340
00:17:41,974 --> 00:17:45,814
and in which case people are like, yeah, okay, yeah.

341
00:17:45,814 --> 00:17:48,014
I mean, that's the way, that's what we need to do.

342
00:17:48,014 --> 00:17:49,314
That's what we need to do.

343
00:17:50,854 --> 00:17:53,934
Yeah, well, I think that that makes a lot of sense

344
00:17:53,934 --> 00:17:56,534
and it tracks the experience with gold

345
00:17:56,534 --> 00:18:00,454
and why gold was ultimately replaced by banknote money

346
00:18:00,474 --> 00:18:02,954
and why banknote money would be replaced with Bitcoin.

347
00:18:02,954 --> 00:18:05,174
But there is an intriguing aspect to that,

348
00:18:05,174 --> 00:18:06,014
which is, of course,

349
00:18:06,014 --> 00:18:08,454
since these are all open source pieces of software,

350
00:18:09,474 --> 00:18:12,014
to whichever one, if there's two that are viable

351
00:18:12,014 --> 00:18:14,474
and one has a lower inflation tax,

352
00:18:14,474 --> 00:18:17,574
that will make it, that will give it a pretty big advantage.

353
00:18:21,994 --> 00:18:24,194
Yeah, this is a very niche view that you have

354
00:18:24,194 --> 00:18:28,114
that the, like the people in the community today

355
00:18:29,114 --> 00:18:32,374
will be horrified at this prospect

356
00:18:32,374 --> 00:18:36,214
that the many people will join Bitcoin,

357
00:18:36,214 --> 00:18:37,774
the community's priorities will change,

358
00:18:37,774 --> 00:18:39,814
and then in 2038 or something,

359
00:18:41,094 --> 00:18:45,154
we will violate the 21 million coin limit regularly.

360
00:18:51,254 --> 00:18:53,534
Yeah, I just try to game out like what would happen.

361
00:18:53,534 --> 00:18:55,794
I mean, cause I think a lot of the goal for a lot of people

362
00:18:55,814 --> 00:18:59,854
is to try to increase this adoption,

363
00:18:59,854 --> 00:19:02,094
have people all over the world using this,

364
00:19:02,094 --> 00:19:03,934
in which case you have to ask the question,

365
00:19:03,934 --> 00:19:06,574
what if everybody's doing this every day?

366
00:19:06,574 --> 00:19:07,954
What are they gonna actually worry about?

367
00:19:07,954 --> 00:19:12,274
Whether you're, it's being devalued 0.5% per year

368
00:19:12,274 --> 00:19:14,294
or whether it's secure.

369
00:19:14,294 --> 00:19:15,334
And I think a lot of people will,

370
00:19:15,334 --> 00:19:17,334
I mean, that's a small trade-off.

371
00:19:17,334 --> 00:19:19,334
If you can tell me that it's more secure

372
00:19:19,334 --> 00:19:24,334
and I'm losing 0.5% versus 0.25% in the next four years,

373
00:19:26,774 --> 00:19:28,094
I'll probably take that.

374
00:19:28,094 --> 00:19:30,774
I mean, a lot of people, if you're running a business

375
00:19:30,774 --> 00:19:35,774
and you're just trying to decide if you wanna use this,

376
00:19:36,014 --> 00:19:39,774
hold it, transact in it, do all these things,

377
00:19:39,774 --> 00:19:42,214
then you're gonna want some guarantees and it's secure.

378
00:19:42,214 --> 00:19:44,814
And if people tell you that it's more secure this way,

379
00:19:44,814 --> 00:19:47,654
I think you're willing to take that 0.25%

380
00:19:47,654 --> 00:19:49,134
or whatever it is.

381
00:19:49,134 --> 00:19:51,334
Well, Moon Settler has his hand up, so.

382
00:19:52,194 --> 00:19:54,914
Yeah, I just wanted to ask that,

383
00:19:54,914 --> 00:19:58,914
so I don't think it's unreasonable to,

384
00:20:00,880 --> 00:20:05,880
to make the hodlers chime in to the security budget.

385
00:20:07,400 --> 00:20:11,920
So this is not a morally outrageous aspect to me.

386
00:20:11,920 --> 00:20:15,640
They are the main beneficiaries for the Bitcoin network effect

387
00:20:15,640 --> 00:20:19,438
that in theory relies on the security of the chain.

388
00:20:19,438 --> 00:20:24,438
So I also think that this could be justified.

389
00:20:24,598 --> 00:20:27,280
My problem is how anyone imagines this to work,

390
00:20:27,280 --> 00:20:31,960
because I just don't see that any amount of inflation

391
00:20:31,960 --> 00:20:33,998
that would actually fly with people

392
00:20:33,998 --> 00:20:36,040
would actually secure the network.

393
00:20:36,040 --> 00:20:39,158
Like it's technically a non-starter,

394
00:20:39,158 --> 00:20:44,158
because I think we would need a level of inflation

395
00:20:45,600 --> 00:20:46,960
going forward in the future

396
00:20:46,960 --> 00:20:51,960
if the adoption of Bitcoin continues

397
00:20:52,360 --> 00:20:57,360
and the Bitcoin block space gets more and more demanded

398
00:20:57,920 --> 00:20:59,838
and the fees start to rise

399
00:20:59,838 --> 00:21:02,960
and the economic density of transactions

400
00:21:02,960 --> 00:21:05,280
start to rise on main chain.

401
00:21:05,280 --> 00:21:08,280
You know, the transfer settled while you start to rise.

402
00:21:09,158 --> 00:21:10,838
So it's still worth it.

403
00:21:10,838 --> 00:21:15,518
Then the entire proof of work security model

404
00:21:15,518 --> 00:21:18,360
just doesn't work.

405
00:21:18,360 --> 00:21:22,040
It would require a level of inflation

406
00:21:22,040 --> 00:21:24,478
to provide decent security for these transactions

407
00:21:24,478 --> 00:21:25,640
through proof of work

408
00:21:25,640 --> 00:21:30,240
that nobody would find justifiable or acceptable.

409
00:21:30,240 --> 00:21:33,518
It would basically be worse than fiat on average.

410
00:21:33,518 --> 00:21:36,838
So I don't understand why people keep talking about it.

411
00:21:36,838 --> 00:21:38,040
It doesn't work.

412
00:21:43,158 --> 00:21:46,320
Okay, so you're saying that inflation is unlikely to come

413
00:21:46,320 --> 00:21:50,000
because the community would never support

414
00:21:50,000 --> 00:21:50,838
a sufficient amount of-

415
00:21:50,838 --> 00:21:55,838
No, no, I'm saying I can see how people would agree

416
00:21:56,438 --> 00:21:58,360
that this is a fine thing.

417
00:21:58,360 --> 00:21:59,920
It worked in the past, right?

418
00:21:59,920 --> 00:22:02,040
It worked great in the past

419
00:22:02,040 --> 00:22:07,040
and they could actually agree, I imagine.

420
00:22:07,398 --> 00:22:08,918
I'm not sure if they would,

421
00:22:08,918 --> 00:22:12,120
but I think people would find it reasonable.

422
00:22:12,120 --> 00:22:14,278
I'm just saying it would not technically work.

423
00:22:14,480 --> 00:22:16,438
It can't secure the network.

424
00:22:16,438 --> 00:22:18,438
We would need more in fees

425
00:22:18,438 --> 00:22:21,518
than half a percent of inflation.

426
00:22:21,518 --> 00:22:22,880
That's ridiculous.

427
00:22:22,880 --> 00:22:24,918
If the adoption keeps going, right?

428
00:22:24,918 --> 00:22:28,558
If Bitcoin remains some niche project

429
00:22:28,558 --> 00:22:30,558
that almost nobody uses

430
00:22:30,558 --> 00:22:32,600
and the blocks are almost always empty,

431
00:22:32,600 --> 00:22:34,918
then I can see that it would work,

432
00:22:34,918 --> 00:22:36,600
but then who cares, right?

433
00:22:36,600 --> 00:22:38,798
So a Bitcoin like that long-term

434
00:22:38,798 --> 00:22:40,880
would be displaced by something else.

435
00:22:40,880 --> 00:22:42,278
It's the number one project.

436
00:22:42,278 --> 00:22:44,040
It's almost guaranteed.

437
00:22:44,798 --> 00:22:47,078
And it would fade into oblivion slowly.

438
00:22:47,078 --> 00:22:51,400
So that's not a future in this regard

439
00:22:51,400 --> 00:22:54,760
that we should be worried about, I think.

440
00:22:54,760 --> 00:22:58,078
That's not what we are trying to do here, right?

441
00:22:58,078 --> 00:23:01,120
So in a future where Bitcoin actually gets adopted,

442
00:23:01,120 --> 00:23:05,240
then 0.5% inflation is just not gonna cut it.

443
00:23:05,240 --> 00:23:07,880
It's not going to secure the transactions

444
00:23:07,880 --> 00:23:09,600
that are economically viable

445
00:23:10,558 --> 00:23:15,558
in such a scarce block space, higher adoption future.

446
00:23:16,600 --> 00:23:19,158
It's not okay.

447
00:23:20,880 --> 00:23:22,918
I don't know what to say about this idea.

448
00:23:22,918 --> 00:23:24,480
I don't want to be very, very rude,

449
00:23:24,480 --> 00:23:29,480
but I think it's a complete misunderstanding

450
00:23:29,960 --> 00:23:34,960
of how transactions gain security from proof of work.

451
00:23:35,960 --> 00:23:37,880
I also think that in practice,

452
00:23:37,880 --> 00:23:41,638
it would be very difficult to coordinate the community

453
00:23:41,638 --> 00:23:44,760
on one alternative because it would open the door

454
00:23:44,760 --> 00:23:47,760
to all the bike shedding that we normally have

455
00:23:47,760 --> 00:23:50,760
and all the normal questions of who controls Bitcoin,

456
00:23:50,760 --> 00:23:52,158
who decides, and why.

457
00:23:52,158 --> 00:23:57,158
They'd have to pick a certain strategy for inflation.

458
00:23:57,400 --> 00:23:58,998
They'd have to say, at this block,

459
00:23:58,998 --> 00:24:02,798
we are not going to cut the substation.

460
00:24:02,798 --> 00:24:05,998
We're not going to cut the subsidy in half anymore

461
00:24:05,998 --> 00:24:07,798
or something like that.

462
00:24:07,798 --> 00:24:09,880
And I'm sure that that could be resolved,

463
00:24:09,880 --> 00:24:11,998
but actually, in practice,

464
00:24:11,998 --> 00:24:14,480
I think it would be a huge nightmare

465
00:24:14,480 --> 00:24:19,158
with the giant arguments and so.

466
00:24:20,238 --> 00:24:22,998
We've talked a little bit now about whether or not

467
00:24:22,998 --> 00:24:26,558
the Bitcoin community would ever support an inflation fork,

468
00:24:26,558 --> 00:24:29,040
which drive-chainers oppose.

469
00:24:29,040 --> 00:24:30,640
So we've talked about that a little bit.

470
00:24:30,640 --> 00:24:32,398
Maybe we should talk about the question

471
00:24:33,040 --> 00:24:35,158
of whether fees are going to rise.

472
00:24:35,158 --> 00:24:40,158
So the drivechain view is that fees for Bitcoin

473
00:24:40,238 --> 00:24:44,760
in its current form probably will not trend up substantially

474
00:24:44,760 --> 00:24:48,398
because transaction throughput is a production good,

475
00:24:49,238 --> 00:24:52,718
meaning that society, through capitalism,

476
00:24:52,718 --> 00:24:57,360
is constantly introducing valuable alternatives

477
00:24:57,360 --> 00:25:01,678
to Bitcoin's block space to enable users to opt in

478
00:25:01,678 --> 00:25:05,800
to lower fee transactions denominated in Bitcoin.

479
00:25:05,800 --> 00:25:09,278
So people can transact on Coinbase, on Lightning,

480
00:25:09,278 --> 00:25:13,958
on wrapped Bitcoin, et cetera, open dimes.

481
00:25:13,958 --> 00:25:17,080
There's many ways to move a unit of Bitcoin value around

482
00:25:17,080 --> 00:25:20,320
that avoids paying a fee to Bitcoin's miners.

483
00:25:20,320 --> 00:25:23,278
And because of this proliferation of alternatives,

484
00:25:23,278 --> 00:25:26,880
the Bitcoin block space will not accrue high value.

485
00:25:26,880 --> 00:25:28,040
Even in the future,

486
00:25:28,040 --> 00:25:31,558
if Bitcoin has a $5 trillion market cap,

487
00:25:32,398 --> 00:25:35,718
the block space might still be paying only half a million

488
00:25:35,718 --> 00:25:37,958
in value per day,

489
00:25:38,958 --> 00:25:41,278
and therefore Bitcoin will be less secure

490
00:25:41,278 --> 00:25:43,238
in terms of miner revenue

491
00:25:43,238 --> 00:25:46,718
as a ratio to total value protected.

492
00:25:46,718 --> 00:25:48,640
So a lot of Bitcoiners think,

493
00:25:48,640 --> 00:25:51,520
well, if Bitcoin's adopted, then the fees will rise.

494
00:25:51,520 --> 00:25:52,600
What's there to worry about?

495
00:25:52,600 --> 00:25:55,760
But they're ignoring the 14 years of data

496
00:25:55,760 --> 00:25:59,320
that show that fees aren't rising consistently.

497
00:25:59,320 --> 00:26:00,760
And they're ignoring the arguments

498
00:26:00,760 --> 00:26:03,718
that Paul has laid out crystal clear

499
00:26:03,718 --> 00:26:06,838
in the two security budget blog posts

500
00:26:06,838 --> 00:26:08,880
as to why the fees aren't rising.

501
00:26:21,838 --> 00:26:22,880
Any thoughts on that?

502
00:26:26,360 --> 00:26:28,600
I mean, I think we could get into the ideas

503
00:26:28,600 --> 00:26:29,880
of the blind merge mining.

504
00:26:31,398 --> 00:26:32,238
Article.

505
00:26:34,480 --> 00:26:38,718
Yeah, I just wanted to like really mention

506
00:26:38,718 --> 00:26:41,958
that one thing that people have assumptions

507
00:26:41,958 --> 00:26:44,238
on how things will be.

508
00:26:44,238 --> 00:26:47,718
And most of the Bitcoiners have assumptions

509
00:26:47,718 --> 00:26:52,438
of high adoption or extreme high adoption in the future.

510
00:26:52,438 --> 00:26:54,800
Like that's most of the thesis.

511
00:26:54,800 --> 00:26:58,838
Some of them actually want Bitcoin to remain more niche,

512
00:26:58,880 --> 00:27:00,920
remain at low adoption.

513
00:27:00,920 --> 00:27:02,278
I'm not sure they are thinking

514
00:27:02,278 --> 00:27:04,438
through the implications of that,

515
00:27:04,438 --> 00:27:09,438
like socially and legally and network effect wise.

516
00:27:10,558 --> 00:27:15,558
And ultimately that will affect Bitcoin's valuation.

517
00:27:17,558 --> 00:27:19,920
So I'm not sure they are thinking this all through.

518
00:27:19,920 --> 00:27:22,760
But I think most of the Bitcoiners are going to assume

519
00:27:22,760 --> 00:27:25,320
that everyone will want to hold their own keys

520
00:27:25,320 --> 00:27:27,640
because people will learn the lessons, right?

521
00:27:27,678 --> 00:27:30,800
And everyone will want to hold Bitcoin.

522
00:27:30,800 --> 00:27:33,640
And that's just impossible with low fees.

523
00:27:33,640 --> 00:27:38,118
So people are going to have to start giving up self custody

524
00:27:39,200 --> 00:27:41,838
or we are going to get into a territory

525
00:27:41,838 --> 00:27:46,640
where only extremely rich people are able to afford Bitcoin.

526
00:27:46,640 --> 00:27:50,118
And eventually, for me, all of these parts

527
00:27:50,118 --> 00:27:52,800
pretty much lead to a realization

528
00:27:52,800 --> 00:27:54,718
that what secures people's wealth

529
00:27:54,718 --> 00:27:56,080
is not actually proof of work.

530
00:27:56,080 --> 00:27:58,838
So all of these parts where proof of work

531
00:27:58,838 --> 00:28:01,640
does not actually secure these transactions

532
00:28:01,640 --> 00:28:03,558
for their economic value,

533
00:28:04,520 --> 00:28:06,640
all of these parts lead to a realization

534
00:28:06,640 --> 00:28:10,600
that it's actually needed and it's not justified

535
00:28:10,600 --> 00:28:14,600
and actually would be cheaper to be without it.

536
00:28:14,600 --> 00:28:16,880
And one way or another,

537
00:28:16,880 --> 00:28:21,040
it probably would be worked out of the system.

538
00:28:21,040 --> 00:28:22,360
That's how I see it.

539
00:28:22,360 --> 00:28:24,718
I just wanted to mention this.

540
00:28:24,718 --> 00:28:25,958
Thank you.

541
00:28:25,958 --> 00:28:28,678
Let's go to Professor Warren's article.

542
00:28:28,678 --> 00:28:32,200
I shared it in the Nest so everyone can find his tweet,

543
00:28:32,200 --> 00:28:35,200
which includes a link to his Medium post

544
00:28:35,200 --> 00:28:36,918
on blind merge mining.

545
00:28:36,918 --> 00:28:38,840
Since we have him here, which is great,

546
00:28:38,840 --> 00:28:40,200
let's talk about it.

547
00:28:42,400 --> 00:28:44,320
Yeah, I have been skimming through it.

548
00:28:45,358 --> 00:28:47,678
It seems kind of pretty negative on blind merge mining.

549
00:28:47,678 --> 00:28:50,918
But as I said, in my opening comments,

550
00:28:50,918 --> 00:28:53,160
blind merge mining is really, really similar

551
00:28:53,160 --> 00:28:58,160
to regular mining with just like one thing swapped

552
00:28:58,438 --> 00:28:59,438
for another thing,

553
00:29:00,520 --> 00:29:02,438
which is that whether or not the block header

554
00:29:02,438 --> 00:29:05,640
meets the proof of work requirement

555
00:29:05,640 --> 00:29:07,918
of having many leading zeros.

556
00:29:07,918 --> 00:29:11,678
That task is swapped with whether or not

557
00:29:11,678 --> 00:29:13,960
there's a transaction in L1.

558
00:29:13,960 --> 00:29:16,400
And similarly, just like miners have to do

559
00:29:16,400 --> 00:29:20,200
a lot of actual thermodynamic work in the real world

560
00:29:20,200 --> 00:29:23,798
to get that header to have many leading zeros,

561
00:29:25,038 --> 00:29:26,400
that is a cost.

562
00:29:26,400 --> 00:29:27,998
It's a proof of work.

563
00:29:27,998 --> 00:29:31,438
Similarly, in the blind merge mining world,

564
00:29:31,438 --> 00:29:33,880
there is a cost, which is the exact amount

565
00:29:33,880 --> 00:29:35,840
paid on the L1 fees.

566
00:29:37,280 --> 00:29:42,280
So that's the part that is an analogy

567
00:29:42,438 --> 00:29:46,478
or sort of transformed, but everything else is the same.

568
00:29:46,520 --> 00:29:50,558
So I don't know where all the differences are coming from

569
00:29:51,478 --> 00:29:55,400
in the article, like which things would apply

570
00:29:55,400 --> 00:29:57,760
to blind merge mining that would not just apply

571
00:29:57,760 --> 00:30:00,760
to proof of work mining.

572
00:30:00,760 --> 00:30:02,998
I don't know exactly where those come from.

573
00:30:04,598 --> 00:30:06,320
Yeah, well, you don't, I mean,

574
00:30:06,320 --> 00:30:07,520
the problem is you can just,

575
00:30:07,520 --> 00:30:11,038
someone can come in off the street, like today.

576
00:30:11,918 --> 00:30:14,840
If they see a BMN chain,

577
00:30:14,840 --> 00:30:18,080
all they need to do is buy the L1 token

578
00:30:18,080 --> 00:30:21,678
and they can say, buy the next 15 blocks, right?

579
00:30:21,678 --> 00:30:23,760
Like with proof of work, you have to,

580
00:30:23,760 --> 00:30:26,080
I mean, if you want to get 15 blocks in a row,

581
00:30:26,080 --> 00:30:28,200
you have to, I mean, you have to be incredibly lucky.

582
00:30:28,200 --> 00:30:29,400
I mean, it's impossible.

583
00:30:30,438 --> 00:30:33,160
But even if you want to get one out of the next 10 blocks,

584
00:30:33,160 --> 00:30:35,840
you have to spend probably billions of dollars.

585
00:30:35,840 --> 00:30:37,200
If you want to do that in proof of stake,

586
00:30:37,200 --> 00:30:38,640
you probably have to spend billions of dollars

587
00:30:38,640 --> 00:30:40,080
to get the stake.

588
00:30:40,080 --> 00:30:40,918
But-

589
00:30:40,918 --> 00:30:42,478
That equals in the security budget.

590
00:30:42,478 --> 00:30:44,280
If there was no Bitcoin block subsidy,

591
00:30:44,880 --> 00:30:47,558
it would also be a trivial amount of money.

592
00:30:47,558 --> 00:30:50,200
So this is the security budget concept coming back.

593
00:30:52,238 --> 00:30:54,200
There was no block subsidy and no inflation

594
00:30:54,200 --> 00:30:57,478
and Bitcoin fees were only $5 per block.

595
00:30:57,478 --> 00:30:59,280
Then it would only, you know, you could just show up

596
00:30:59,280 --> 00:31:04,038
and with $50, you could own the next 10 blocks.

597
00:31:04,038 --> 00:31:05,200
I don't think that's true.

598
00:31:05,200 --> 00:31:10,200
I mean, I think it's over economizing the security model.

599
00:31:11,840 --> 00:31:14,080
I mean, it's not true that I could just go right now

600
00:31:14,840 --> 00:31:15,678
and look at the next block,

601
00:31:15,678 --> 00:31:17,280
but pull $2,000 out of my pocket

602
00:31:17,280 --> 00:31:19,998
and pay a miner to mine that block for me.

603
00:31:19,998 --> 00:31:20,840
Looking at security-

604
00:31:20,840 --> 00:31:22,998
That's exactly what ordinals are, basically.

605
00:31:25,520 --> 00:31:28,038
Yeah, I mean, ordinals are-

606
00:31:28,038 --> 00:31:29,358
You just buy up the block.

607
00:31:29,358 --> 00:31:31,438
You pay two, three, $4,000.

608
00:31:31,438 --> 00:31:32,678
You own the whole block.

609
00:31:32,678 --> 00:31:34,520
You inscribe in there,

610
00:31:34,520 --> 00:31:36,840
Professor Warner is the coolest.

611
00:31:36,840 --> 00:31:37,880
That JPEG.

612
00:31:40,438 --> 00:31:41,358
Yeah, I mean, ordinals,

613
00:31:41,358 --> 00:31:44,520
I'm not suggesting ordinals are a great model.

614
00:31:45,640 --> 00:31:47,080
Well, the ordinal thing reveals

615
00:31:47,080 --> 00:31:49,438
that the true model is the security budget.

616
00:31:52,280 --> 00:31:53,918
The ordinals are just an example.

617
00:31:54,798 --> 00:31:56,238
You could also, instead of an ordinal,

618
00:31:56,238 --> 00:31:59,998
you could just construct dummy transactions,

619
00:31:59,998 --> 00:32:01,798
a big chain of dummy transactions

620
00:32:01,798 --> 00:32:04,880
that has no ordinal shape,

621
00:32:04,880 --> 00:32:08,760
but it is just a list of like 2,500 transactions

622
00:32:08,760 --> 00:32:10,238
that are all controlled by you.

623
00:32:10,678 --> 00:32:11,880
You have them as a set.

624
00:32:12,720 --> 00:32:14,598
You outbid the fees,

625
00:32:14,598 --> 00:32:16,238
and now you have the whole block.

626
00:32:17,478 --> 00:32:19,238
It's true that in proof of work,

627
00:32:20,918 --> 00:32:21,760
I mean, in proof of work,

628
00:32:21,760 --> 00:32:23,640
you don't know that you're going to find the next block,

629
00:32:23,640 --> 00:32:24,998
and in blind merge mining,

630
00:32:24,998 --> 00:32:26,798
you don't really know either

631
00:32:26,798 --> 00:32:28,798
because you can say,

632
00:32:28,798 --> 00:32:30,840
I'm going to pay a huge amount.

633
00:32:32,320 --> 00:32:33,438
I'm going to pay a huge amount,

634
00:32:33,438 --> 00:32:35,520
but someone could always outbid you,

635
00:32:35,520 --> 00:32:38,558
so maybe you get into a bidding war with them.

636
00:32:38,678 --> 00:32:41,200
Yeah, and with signaling,

637
00:32:41,200 --> 00:32:42,760
I can win that war,

638
00:32:42,760 --> 00:32:44,840
whereas I can't do that with proof of work.

639
00:32:44,840 --> 00:32:47,880
If you have 18% of the hash rate,

640
00:32:47,880 --> 00:32:49,918
there's no way you can just sort of bully your way

641
00:32:49,918 --> 00:32:52,678
and say, I'm going to win the next 12 blocks,

642
00:32:53,720 --> 00:32:56,200
whereas if you show up with a lot of money,

643
00:32:56,200 --> 00:32:57,438
you can throw it out on the table

644
00:32:57,438 --> 00:32:59,678
and say, I'm going to win the next 12 blocks.

645
00:33:01,160 --> 00:33:02,478
They can still bid.

646
00:33:02,478 --> 00:33:03,678
They could bid against you,

647
00:33:03,678 --> 00:33:06,080
and if they lose, then they get their money back.

648
00:33:06,438 --> 00:33:09,960
Their transaction never enters the block.

649
00:33:09,960 --> 00:33:10,998
You let them win once,

650
00:33:10,998 --> 00:33:12,438
and then you outbid them again,

651
00:33:12,438 --> 00:33:13,438
and then they lose their money,

652
00:33:13,438 --> 00:33:15,319
and then they don't do it.

653
00:33:15,319 --> 00:33:19,399
No, each operation is them earning

654
00:33:19,399 --> 00:33:22,759
what you might call $10 on L2,

655
00:33:22,759 --> 00:33:26,080
and then paying like $9.99 on L1,

656
00:33:26,080 --> 00:33:27,038
or whatever it is.

657
00:33:29,879 --> 00:33:30,959
So do you do the bid?

658
00:33:30,959 --> 00:33:33,678
So if the sidechain block is worth $10,

659
00:33:34,678 --> 00:33:36,998
you can bid up to $10,

660
00:33:36,998 --> 00:33:38,759
and either nothing will happen,

661
00:33:38,759 --> 00:33:40,319
because you'll lose the bid,

662
00:33:40,319 --> 00:33:44,118
or you'll win, in which case, you're up.

663
00:33:44,118 --> 00:33:45,520
So I bid $11.

664
00:33:47,998 --> 00:33:50,720
Right, then you win the block,

665
00:33:50,720 --> 00:33:52,438
and the other person...

666
00:33:52,438 --> 00:33:55,118
You understand that if I bid $9.99 and you bid $11,

667
00:33:55,118 --> 00:33:57,478
that I don't pay $9.99.

668
00:33:57,478 --> 00:33:58,319
It's just a bid.

669
00:34:00,640 --> 00:34:01,478
Oh, sure, sure.

670
00:34:02,358 --> 00:34:03,399
Well, I mean, okay,

671
00:34:03,399 --> 00:34:05,520
I don't know exactly how the transactions are structured,

672
00:34:05,520 --> 00:34:06,358
but...

673
00:34:07,438 --> 00:34:08,998
Yeah, they're all broadcast,

674
00:34:08,998 --> 00:34:11,118
but only one is allowed.

675
00:34:11,118 --> 00:34:13,038
This is the BIP301 rule.

676
00:34:13,038 --> 00:34:14,960
Only one per sidechain block

677
00:34:14,960 --> 00:34:17,200
is actually allowed into L1.

678
00:34:17,200 --> 00:34:18,038
Right, right.

679
00:34:18,038 --> 00:34:19,160
So miners pick the highest one.

680
00:34:19,160 --> 00:34:20,880
They pick the highest bid, you know?

681
00:34:20,880 --> 00:34:24,640
Bid $7, $8, $9, $10, $11.

682
00:34:24,640 --> 00:34:26,320
So your bid wins.

683
00:34:26,320 --> 00:34:29,438
The sidechain block is only worth $10, though.

684
00:34:30,400 --> 00:34:34,678
In terms of its objective public value of the fees.

685
00:34:34,678 --> 00:34:37,118
So you won, but that's not really any different

686
00:34:37,118 --> 00:34:38,358
than a miner, you know,

687
00:34:38,358 --> 00:34:42,280
investing, running their ASICs at a loss.

688
00:34:44,998 --> 00:34:46,238
But if I...

689
00:34:46,238 --> 00:34:47,960
Say you mine block,

690
00:34:47,960 --> 00:34:49,640
you bid for block D,

691
00:34:50,640 --> 00:34:52,558
and there's a lot of fees in that.

692
00:34:52,558 --> 00:34:54,960
I say, I'm going to go mine more.

693
00:34:55,060 --> 00:35:00,940
I'm to go bid higher than the Block D Plus One fees are to get Block D

694
00:35:00,940 --> 00:35:06,940
again. And then you are going to lose the money that you bid in

695
00:35:06,940 --> 00:35:08,500
good L1 Bitcoin, right?

696
00:35:09,650 --> 00:35:13,040
Yes. So this becomes just like a

697
00:35:13,060 --> 00:35:18,840
pissing contest where if I just signal that I really have strong motivation to say

698
00:35:18,840 --> 00:35:24,820
reorg the last six blocks, if everybody believes me, nobody's going to fight

699
00:35:24,820 --> 00:35:30,200
me and I can go back and reorg these six blocks and create a little chain split.

700
00:35:30,860 --> 00:35:31,160
I

701
00:35:31,238 --> 00:35:33,720
I don't know why you introduced this concept of belief.

702
00:35:33,720 --> 00:35:36,400
It's just a normal fee sniping situation.

703
00:35:36,400 --> 00:35:38,200
So like, let's say that every 10 minutes,

704
00:35:38,200 --> 00:35:42,558
the sidechain block is worth another $5.

705
00:35:42,558 --> 00:35:44,678
So it's $5 every 10 minutes.

706
00:35:44,678 --> 00:35:46,760
And then we have a main chain, sidechain blocks,

707
00:35:46,760 --> 00:35:48,238
A, B, C, D, E, F, G.

708
00:35:48,238 --> 00:35:49,598
I'm on G.

709
00:35:49,598 --> 00:35:52,280
I bid for block H.

710
00:35:52,280 --> 00:35:54,438
I pay $4 on L1.

711
00:35:54,438 --> 00:35:56,400
And I find the block.

712
00:35:56,400 --> 00:35:57,678
Now there's re-org risk.

713
00:35:57,678 --> 00:36:00,760
Just like in the analogy, there is re-org risk,

714
00:36:00,760 --> 00:36:02,640
but that's the same as with any,

715
00:36:02,640 --> 00:36:04,438
when a miner mines and they mine a block

716
00:36:04,438 --> 00:36:05,678
that meets a proof of work requirement,

717
00:36:05,678 --> 00:36:07,080
they also have re-org risk.

718
00:36:07,080 --> 00:36:08,998
And in fact, they don't have,

719
00:36:09,918 --> 00:36:12,160
there's the 100 block maturity rule.

720
00:36:12,160 --> 00:36:14,358
So they actually have pretty severe risk there.

721
00:36:14,358 --> 00:36:17,358
They have to hope that the chain moves forward.

722
00:36:18,320 --> 00:36:20,720
And I considered doing something,

723
00:36:20,720 --> 00:36:21,760
but I won't get into it right now.

724
00:36:21,760 --> 00:36:22,840
We can get into it later if you want.

725
00:36:22,840 --> 00:36:24,798
But I considered doing something,

726
00:36:24,798 --> 00:36:27,200
some kind of analogy of that,

727
00:36:27,200 --> 00:36:30,400
but I decided against it, but in 301.

728
00:36:30,400 --> 00:36:31,720
But anyways, the point is,

729
00:36:33,918 --> 00:36:35,998
the point is, so I find one for,

730
00:36:35,998 --> 00:36:38,520
I spend four and I win the $5 block.

731
00:36:39,798 --> 00:36:42,520
Now you say, okay, I'm going to go back.

732
00:36:42,520 --> 00:36:45,960
And instead, what I'm going to do is I'm going to bid.

733
00:36:45,960 --> 00:36:48,160
Now there's a whole new group of transactions

734
00:36:48,160 --> 00:36:50,598
that are coming in for the sidechain.

735
00:36:50,598 --> 00:36:54,080
So if you add the ones that were already mined

736
00:36:54,080 --> 00:36:55,200
to the new ones,

737
00:36:55,200 --> 00:37:00,200
then there's like roughly 10-ish dollars there of bids.

738
00:37:01,678 --> 00:37:04,200
So you could say, I won't,

739
00:37:04,200 --> 00:37:07,198
I'll go back and I'll find new H, H2,

740
00:37:08,318 --> 00:37:11,560
and I'll pay whatever amount that is

741
00:37:12,520 --> 00:37:17,520
to pay eight or $9 to find H2 that has $10.

742
00:37:20,800 --> 00:37:21,838
Yeah.

743
00:37:21,838 --> 00:37:25,640
But now the issue is what's my incentive to extend H2?

744
00:37:25,640 --> 00:37:30,640
I already burned $5 in the, for my H1.

745
00:37:31,958 --> 00:37:35,800
And so now I'm going to lose, as you say,

746
00:37:35,800 --> 00:37:38,880
I'm in a position where I'm going to lose the L1 coins.

747
00:37:38,880 --> 00:37:41,040
So now I have an incentive to bid extra

748
00:37:41,040 --> 00:37:43,078
to extend H1, the original.

749
00:37:44,400 --> 00:37:47,800
Right, so this becomes a dollar auction.

750
00:37:48,958 --> 00:37:50,800
No, well, I don't think so

751
00:37:50,800 --> 00:37:55,520
because I'm down five and I have the new,

752
00:37:55,520 --> 00:37:57,640
now that you've done that,

753
00:37:57,640 --> 00:38:00,318
now there's three blocks I can bid.

754
00:38:00,318 --> 00:38:03,760
I'm willing to bid up to 15 to extend my original.

755
00:38:06,640 --> 00:38:09,118
Yeah, and if you win that and then I come back,

756
00:38:10,118 --> 00:38:13,358
like so every, it is, it's almost literally a dollar auction

757
00:38:13,358 --> 00:38:15,560
because you're paying in every time.

758
00:38:15,560 --> 00:38:17,238
So if I let you win a couple

759
00:38:17,238 --> 00:38:20,040
and then I come back and take it over again,

760
00:38:20,078 --> 00:38:21,838
you're down worse.

761
00:38:21,838 --> 00:38:22,680
No, because-

762
00:38:22,680 --> 00:38:23,680
And then the next person that challenges me

763
00:38:23,680 --> 00:38:25,198
is not going to do this.

764
00:38:25,198 --> 00:38:27,760
The number of blocks is in the lead.

765
00:38:31,880 --> 00:38:35,160
There's a fork and we both mine six blocks on the fork.

766
00:38:35,160 --> 00:38:38,520
We've both paid fees for these six blocks, right?

767
00:38:38,520 --> 00:38:40,718
And these are gone to both of us.

768
00:38:40,718 --> 00:38:41,800
Right.

769
00:38:41,800 --> 00:38:43,238
And so we're going to continue this

770
00:38:43,238 --> 00:38:44,880
until we look at each other and-

771
00:38:44,880 --> 00:38:46,640
Well, no, basically this is why no one would do it

772
00:38:46,640 --> 00:38:48,400
in the first place though.

773
00:38:48,400 --> 00:38:50,078
Unless they believe they can win.

774
00:38:52,838 --> 00:38:54,238
But why would they?

775
00:38:54,238 --> 00:38:56,640
Because they're just a Chad like that.

776
00:38:57,640 --> 00:39:01,478
Because they know, I mean, they know that if they do this,

777
00:39:01,478 --> 00:39:04,078
if you destroy one person who challenges you,

778
00:39:04,078 --> 00:39:07,238
the next person is not going to challenge you.

779
00:39:07,238 --> 00:39:09,318
I don't really think there are any like reputations

780
00:39:09,318 --> 00:39:10,800
in this type of a thing.

781
00:39:12,400 --> 00:39:16,440
Okay, but if you saw this happen to a fellow miner.

782
00:39:16,440 --> 00:39:18,958
Yeah, there's a reward risk, I agree with that.

783
00:39:18,958 --> 00:39:21,560
And that is one of the reasons why the L1

784
00:39:21,560 --> 00:39:24,078
might not be exactly equal to the,

785
00:39:24,078 --> 00:39:25,838
it'll be the same dollar amount,

786
00:39:25,838 --> 00:39:28,440
but it won't be the same Bitcoin amount necessarily.

787
00:39:32,958 --> 00:39:37,118
What do we think about the expected behavior

788
00:39:37,118 --> 00:39:39,358
of the sidechain network participants?

789
00:39:39,358 --> 00:39:42,718
Because normally if someone tries to do a reward,

790
00:39:42,760 --> 00:39:45,520
then what this means is the chain tip

791
00:39:45,520 --> 00:39:47,478
is getting stalled on the sidechain.

792
00:39:47,478 --> 00:39:50,280
That's how that network perceives it primarily.

793
00:39:50,280 --> 00:39:54,640
So people are seeing that the mempool is getting more full.

794
00:39:54,640 --> 00:39:59,640
People that are in a hurry are going to pay higher fees.

795
00:40:02,240 --> 00:40:03,600
Offer higher and higher fees.

796
00:40:03,600 --> 00:40:05,200
They are going to beat that up.

797
00:40:05,200 --> 00:40:08,080
So they basically increase the,

798
00:40:08,080 --> 00:40:12,400
for anyone that wants to work beyond the chain tip.

799
00:40:12,400 --> 00:40:16,240
So this is the basis of the assumption

800
00:40:16,240 --> 00:40:19,600
how any reward attempt would play out,

801
00:40:19,600 --> 00:40:21,840
that people would basically naturally

802
00:40:21,840 --> 00:40:24,420
start bidding against it, right?

803
00:40:24,420 --> 00:40:29,420
I don't see anywhere where the analogy breaks down.

804
00:40:31,980 --> 00:40:32,980
Like in proof of work,

805
00:40:32,980 --> 00:40:36,940
you could also imagine a scenario where two miners

806
00:40:36,940 --> 00:40:39,940
are each stubbornly extending their chain tip,

807
00:40:41,060 --> 00:40:44,420
but it, and then you could call that a dollar auction.

808
00:40:45,860 --> 00:40:49,300
But no, the risk.

809
00:40:50,940 --> 00:40:53,300
The, with Nakamoto consensus,

810
00:40:53,300 --> 00:40:55,660
that gets resolved by somebody picking, right?

811
00:40:55,660 --> 00:40:57,180
You know, if we're both tied,

812
00:40:57,180 --> 00:40:59,700
there's 80% of the other hash rate out there.

813
00:40:59,700 --> 00:41:01,140
They have to pick.

814
00:41:01,140 --> 00:41:02,900
And they're not going to,

815
00:41:02,900 --> 00:41:04,060
they're not going to, if it's a bidding war,

816
00:41:04,060 --> 00:41:05,580
they're not going to dive in

817
00:41:05,580 --> 00:41:08,700
and try to like get in the middle of our fight.

818
00:41:08,700 --> 00:41:10,380
But that's exactly what they do.

819
00:41:10,380 --> 00:41:13,220
Whatever they pick is what they've invested there.

820
00:41:13,220 --> 00:41:14,820
They pay the opportunity cost of the fee

821
00:41:14,820 --> 00:41:16,420
is the exact same cost.

822
00:41:16,420 --> 00:41:18,420
Right, and then whoever's behind is now,

823
00:41:18,420 --> 00:41:19,460
I mean, this is a huge deal.

824
00:41:19,940 --> 00:41:23,700
If you're behind by two blocks in Bitcoin,

825
00:41:23,700 --> 00:41:26,300
you're toast, unless you have a lot of hash rate

826
00:41:26,300 --> 00:41:27,580
or you're bribing people.

827
00:41:27,580 --> 00:41:32,220
But if you're behind in two blocks in blind MIG mining,

828
00:41:32,220 --> 00:41:33,380
you're still in the game.

829
00:41:33,380 --> 00:41:37,820
Like you can just keep bidding and hope you can catch up.

830
00:41:39,820 --> 00:41:41,700
Well, I mean, that's true,

831
00:41:41,700 --> 00:41:43,340
but it's sort of also true in like,

832
00:41:43,340 --> 00:41:45,340
if you can convince people to go back,

833
00:41:45,340 --> 00:41:50,340
then, you know, they're not exactly the same,

834
00:41:50,380 --> 00:41:53,420
but they don't like, in some ways it's actually much better,

835
00:41:53,420 --> 00:41:54,540
the blind merge mining,

836
00:41:54,540 --> 00:41:57,220
because you can only find one block,

837
00:41:57,220 --> 00:41:59,180
no matter how low the fees are,

838
00:41:59,180 --> 00:42:01,340
you can only find one block every 10 minutes

839
00:42:01,340 --> 00:42:03,980
or whatever the main chain block rate is.

840
00:42:03,980 --> 00:42:05,380
So like in proof of work,

841
00:42:05,380 --> 00:42:07,100
you can like have a surprise attack

842
00:42:07,100 --> 00:42:08,820
where someone has secretly built a chain

843
00:42:08,820 --> 00:42:10,660
that is like 10 blocks ahead

844
00:42:10,660 --> 00:42:13,020
and then they broadcast it all at once.

845
00:42:13,060 --> 00:42:15,540
Whereas in blind merge mining, you can't do that.

846
00:42:15,540 --> 00:42:18,060
So it's true that it's not exactly the same.

847
00:42:18,060 --> 00:42:22,140
It's also like one other difference is that the ASICs,

848
00:42:22,140 --> 00:42:26,580
you have to actually buy ASICs and invest in them.

849
00:42:26,580 --> 00:42:28,740
And there's some kind of like time horizon.

850
00:42:29,860 --> 00:42:31,460
I mean, you can always rent ASICs, I suppose,

851
00:42:31,460 --> 00:42:33,260
which would make it kind of similar.

852
00:42:34,180 --> 00:42:38,420
Yeah, but ASICs are not as liquid as actual layer one BTC.

853
00:42:38,420 --> 00:42:39,820
So that is a difference.

854
00:42:40,820 --> 00:42:45,820
So they are different, but they're not really that different.

855
00:42:46,260 --> 00:42:48,100
Anything that can happen in blind merge mining

856
00:42:48,100 --> 00:42:51,500
can mostly happen on the main chain also.

857
00:42:51,500 --> 00:42:55,500
So it's true that someone could say, I'm committed to,

858
00:42:55,500 --> 00:42:59,820
I think part of it is what's really vexes people

859
00:42:59,820 --> 00:43:03,020
is that they don't imagine the future of Bitcoin

860
00:43:03,020 --> 00:43:04,700
without the block subsidies.

861
00:43:04,700 --> 00:43:06,580
This is really the difference between sidechains

862
00:43:06,580 --> 00:43:08,140
and other things is that the sidechains

863
00:43:08,140 --> 00:43:09,740
don't have the block subsidy.

864
00:43:10,540 --> 00:43:11,380
They only have the fees.

865
00:43:11,380 --> 00:43:13,660
They probably have a small amount of fees at first,

866
00:43:13,660 --> 00:43:16,660
but if you imagine the world where Bitcoin works like that,

867
00:43:16,660 --> 00:43:20,060
you have a small amount of fees coming in each block.

868
00:43:20,940 --> 00:43:23,300
Everything will be less stable in the same way.

869
00:43:23,300 --> 00:43:27,940
It will be like, so, but that's not necessarily,

870
00:43:27,940 --> 00:43:30,020
what the way to fix that is for the sidechain

871
00:43:30,020 --> 00:43:32,140
to become very popular and have lots of fees

872
00:43:32,140 --> 00:43:34,220
and be very useful to people.

873
00:43:34,220 --> 00:43:37,620
So I admit that that is, that is a,

874
00:43:38,620 --> 00:43:41,820
you know, that's like an arduous task,

875
00:43:42,660 --> 00:43:44,820
but that's the same type of Bitcoin basis.

876
00:43:45,900 --> 00:43:50,900
So yeah, the sidechains that don't generate much fee revenue

877
00:43:51,340 --> 00:43:55,380
would have pretty horrible finality expectations,

878
00:43:55,380 --> 00:43:59,820
but I'm also sure that people would kind of adopt to this.

879
00:43:59,820 --> 00:44:02,860
So I have used the analogy that people,

880
00:44:02,860 --> 00:44:06,300
when they pick a chain, it main chain or a sidechain,

881
00:44:06,300 --> 00:44:08,580
maybe a more popular sidechain with higher fees

882
00:44:08,580 --> 00:44:10,460
or a less popular sidechain with lower fees,

883
00:44:10,460 --> 00:44:12,460
they are basically trading that time

884
00:44:12,460 --> 00:44:14,740
against the fees that they pay.

885
00:44:14,740 --> 00:44:17,140
So they have to find, you know,

886
00:44:17,140 --> 00:44:21,540
some form of compromise that suits them.

887
00:44:21,540 --> 00:44:25,500
And they probably want to be on the highest fee,

888
00:44:25,500 --> 00:44:29,540
highest aggregate fee chain that they can afford

889
00:44:29,540 --> 00:44:30,700
because that will give them

890
00:44:30,700 --> 00:44:32,740
the best utility finality wise.

891
00:44:33,580 --> 00:44:38,580
And also, I don't know what to say about this.

892
00:44:40,300 --> 00:44:44,260
Yeah, so basically sidechains can technically choose

893
00:44:44,260 --> 00:44:47,140
to be somewhat parasitic with main chain.

894
00:44:47,140 --> 00:44:50,300
Aside from what Paul said that, you know,

895
00:44:51,420 --> 00:44:55,060
real risk can just, you know, sneak up on you.

896
00:44:55,060 --> 00:44:56,740
Deep reorgs, long range attacks

897
00:44:56,740 --> 00:45:00,380
can just sneak up on you with a sidechain.

898
00:45:00,380 --> 00:45:02,300
You would see them coming sort of,

899
00:45:02,860 --> 00:45:05,820
but also, like I said, the way people perceive this

900
00:45:05,820 --> 00:45:08,580
is that that chain tip is getting stalled.

901
00:45:08,580 --> 00:45:11,260
So the impatience to do economic activity

902
00:45:11,260 --> 00:45:13,340
and get your transaction through

903
00:45:13,340 --> 00:45:16,660
would actually probably create a natural pressure

904
00:45:16,660 --> 00:45:19,420
and incentives to continue on the chain

905
00:45:19,420 --> 00:45:22,340
for other miners and other sidechain,

906
00:45:22,340 --> 00:45:25,340
block assemblers that are other Bitcoin miners.

907
00:45:25,340 --> 00:45:28,940
And so that's there with a sidechain

908
00:45:28,940 --> 00:45:31,420
that has some decent economic activity.

909
00:45:31,420 --> 00:45:36,420
And this whole notion of, you know,

910
00:45:41,060 --> 00:45:43,580
infinite block space, big block sidechains

911
00:45:43,580 --> 00:45:48,580
where people don't really pay, you know, high fees

912
00:45:50,820 --> 00:45:55,820
is kind of less realistic to me for this purpose,

913
00:45:57,340 --> 00:45:58,500
for this reason.

914
00:45:58,500 --> 00:46:00,460
No, what I wanted to say is it was that

915
00:46:00,460 --> 00:46:02,900
the sidechain can choose to be parasitic.

916
00:46:02,900 --> 00:46:05,580
So they can actually say that they are not allowing

917
00:46:05,580 --> 00:46:10,580
by consensus rules, reorgs of N deep and that or higher.

918
00:46:11,700 --> 00:46:13,980
And this can actually make the bootstrapping

919
00:46:13,980 --> 00:46:17,020
of sidechains viable in some sense.

920
00:46:17,020 --> 00:46:19,940
So Bitcoin main chain can actually perceive this

921
00:46:19,940 --> 00:46:24,020
as parasitic because they are actually forcing

922
00:46:24,020 --> 00:46:26,780
finality derived from the main chain.

923
00:46:26,780 --> 00:46:29,580
So at a certain depth, the sidechain

924
00:46:29,580 --> 00:46:32,740
could only be reorged if main chain is reorged

925
00:46:32,740 --> 00:46:36,260
and it can only be installed really on main chain.

926
00:46:36,260 --> 00:46:39,220
But this can help bootstrap, you know,

927
00:46:39,220 --> 00:46:41,060
economic activity on a sidechain

928
00:46:41,980 --> 00:46:45,580
where it can actually start getting its own weight.

929
00:46:45,580 --> 00:46:48,740
So obviously people are not going to be okay

930
00:46:48,740 --> 00:46:51,620
with the lightning network where you have to wait

931
00:46:51,620 --> 00:46:56,620
like a week to, you know, open up the blockchain

932
00:46:56,780 --> 00:46:59,260
open a channel and can start transacting on it.

933
00:46:59,260 --> 00:47:00,940
Like that's complete nonsense.

934
00:47:00,940 --> 00:47:04,180
But maybe people for lower fees will actually

935
00:47:04,180 --> 00:47:07,300
use a lightning network where you have to wait

936
00:47:07,300 --> 00:47:09,580
several hours before you can start using

937
00:47:09,580 --> 00:47:11,140
the lightning channel.

938
00:47:11,140 --> 00:47:14,340
But eventually people would want finality.

939
00:47:14,340 --> 00:47:17,020
And the other point of proof of work

940
00:47:17,020 --> 00:47:20,420
and Bitcoin security is that it does provide

941
00:47:20,420 --> 00:47:23,380
some finality assumptions for us.

942
00:47:23,380 --> 00:47:25,940
Without that it would be pretty much

943
00:47:26,020 --> 00:47:28,500
pointless expenditure to use Bitcoin.

944
00:47:29,900 --> 00:47:34,900
And so that's how I see kind of this relationship

945
00:47:34,980 --> 00:47:39,060
that I think actually sidechains would need

946
00:47:39,060 --> 00:47:41,860
to constrain their block space to collect

947
00:47:41,860 --> 00:47:43,900
some serious fee revenue.

948
00:47:43,900 --> 00:47:46,620
And that they would be somewhat parasitic

949
00:47:46,620 --> 00:47:50,420
but in a livable way with main chain finality wise.

950
00:47:50,420 --> 00:47:55,420
I think we all agree that the sidechains

951
00:47:57,780 --> 00:47:59,540
will have constrained block space.

952
00:47:59,540 --> 00:48:01,140
There's no such thing as a sidechain

953
00:48:01,140 --> 00:48:04,060
that's been proposed that would have infinite block space.

954
00:48:04,940 --> 00:48:07,460
I think the right way to think about that question

955
00:48:07,460 --> 00:48:11,260
is that you can imagine a demand curve

956
00:48:11,260 --> 00:48:13,180
if you like econ.

957
00:48:13,180 --> 00:48:16,340
And if there is a minimum fee rate

958
00:48:16,340 --> 00:48:18,380
then there is a finite block.

959
00:48:18,380 --> 00:48:20,260
Because you're basically picking a point

960
00:48:20,260 --> 00:48:22,660
on the demand curve if you're the miner.

961
00:48:22,660 --> 00:48:26,220
You say either the minimum fee rate is really, really low

962
00:48:26,220 --> 00:48:27,820
and I pick up a lot of transactions.

963
00:48:27,820 --> 00:48:30,980
But as you increase your minimum fee rate required

964
00:48:30,980 --> 00:48:32,300
if you're a miner and you say I don't allow

965
00:48:32,300 --> 00:48:34,260
any transactions in the block that are,

966
00:48:35,500 --> 00:48:38,500
that they have to pay at least this much of a fee.

967
00:48:38,500 --> 00:48:40,540
The more you increase that number

968
00:48:41,820 --> 00:48:44,620
the fewer transactions will meet that bar.

969
00:48:45,620 --> 00:48:48,900
And so it's kind of like moving along the demand curve.

970
00:48:50,460 --> 00:48:54,100
You could say I only take transactions that pay $100

971
00:48:54,100 --> 00:48:56,180
and maybe there's only two of those.

972
00:48:56,180 --> 00:48:58,260
Or you could say I'll take anything that pays 10 cents

973
00:48:58,260 --> 00:49:00,060
and there could be millions of those.

974
00:49:00,060 --> 00:49:01,240
Or there could be whatever.

975
00:49:01,240 --> 00:49:04,780
But the block size is equal economically

976
00:49:04,780 --> 00:49:06,580
to the minimum fee rate.

977
00:49:06,580 --> 00:49:08,660
Because it's just, the demand curve

978
00:49:08,660 --> 00:49:10,500
just translates one to another.

979
00:49:10,500 --> 00:49:13,300
So when people really think there's an infinite block space

980
00:49:13,300 --> 00:49:17,420
they are literally saying the fee will basically be zero.

981
00:49:17,420 --> 00:49:19,140
Which of course is irrational.

982
00:49:19,140 --> 00:49:20,420
No miner would ever do that.

983
00:49:20,420 --> 00:49:23,740
They wanna maximize that money in fact.

984
00:49:23,740 --> 00:49:26,700
So they would be, the miners will actually be trying

985
00:49:26,700 --> 00:49:31,300
to maximize the area, the XY coordinate

986
00:49:32,940 --> 00:49:35,380
volume of that rectangle.

987
00:49:37,500 --> 00:49:41,260
Some large brokers wrote a paper a few years back

988
00:49:41,260 --> 00:49:44,420
saying that there is sort of a natural equilibrium.

989
00:49:44,420 --> 00:49:46,300
So if you include too many transactions

990
00:49:46,300 --> 00:49:48,100
you have a risk of your block

991
00:49:48,100 --> 00:49:50,420
not making it's way around the network.

992
00:49:50,420 --> 00:49:52,620
So there's sort of like a naturally occurring block.

993
00:49:52,620 --> 00:49:55,180
Yeah, but I don't think that was the case

994
00:49:55,180 --> 00:49:57,020
because it relied on orphan risk.

995
00:49:57,020 --> 00:49:59,740
But there was, luckily for them,

996
00:49:59,740 --> 00:50:01,900
that paper relied on,

997
00:50:01,900 --> 00:50:04,100
they said that the cost of mining the block

998
00:50:04,100 --> 00:50:07,760
is proportional to its size.

999
00:50:07,760 --> 00:50:08,740
But that was not true

1000
00:50:08,740 --> 00:50:11,460
because of spy mining and SPV mining.

1001
00:50:11,460 --> 00:50:15,340
But still there is a cost

1002
00:50:16,260 --> 00:50:19,780
in the form of, at a certain, is a non-linear effect.

1003
00:50:19,780 --> 00:50:22,020
Like if you drop the minimum fee rate

1004
00:50:22,020 --> 00:50:23,900
you may get more and more transactions.

1005
00:50:23,900 --> 00:50:26,260
But like I just mentioned, if you drop it to zero

1006
00:50:26,260 --> 00:50:27,100
then you get none.

1007
00:50:27,100 --> 00:50:30,340
So there's some kind of non-linear curve.

1008
00:50:30,340 --> 00:50:35,340
And they have, so they have some incentive

1009
00:50:36,340 --> 00:50:41,420
to not make it completely unconstrained.

1010
00:50:41,420 --> 00:50:43,580
But that paper, unfortunately,

1011
00:50:43,580 --> 00:50:46,420
did not address the actual concerns

1012
00:50:46,420 --> 00:50:48,820
that the small blockers had

1013
00:50:48,820 --> 00:50:52,780
which were about the cost of validating the network.

1014
00:50:52,780 --> 00:50:54,740
The cost of running a full node

1015
00:50:54,740 --> 00:50:56,780
which people wanted to be low.

1016
00:50:56,780 --> 00:50:59,040
And that cost goes up with every transaction added.

1017
00:50:59,040 --> 00:51:01,100
But fortunately sidechains do address this

1018
00:51:01,100 --> 00:51:03,300
because with sidechains you have,

1019
00:51:03,620 --> 00:51:07,260
they don't, each new sidechain does not affect

1020
00:51:07,260 --> 00:51:08,660
the cost of running a full node

1021
00:51:08,660 --> 00:51:10,820
for every existing network.

1022
00:51:10,820 --> 00:51:12,340
You make a new network.

1023
00:51:12,340 --> 00:51:15,440
And if you want people to run nodes over there

1024
00:51:15,440 --> 00:51:16,280
then they will.

1025
00:51:17,820 --> 00:51:21,860
And so, so that does solve that problem

1026
00:51:21,860 --> 00:51:23,660
because it sort of privatizes that.

1027
00:51:24,540 --> 00:51:28,340
You make a deal, you conjure up your own planet.

1028
00:51:28,340 --> 00:51:30,640
And it has its own pollution laws or whatever.

1029
00:51:34,300 --> 00:51:37,300
I just wanted to agree also with Moon Settler

1030
00:51:37,300 --> 00:51:39,060
that I had a similar thought.

1031
00:51:39,060 --> 00:51:41,140
I don't know about a consensus rule

1032
00:51:41,140 --> 00:51:44,200
preventing reorgs seven deep.

1033
00:51:44,200 --> 00:51:46,740
But that thought did occur to me.

1034
00:51:46,740 --> 00:51:48,740
But that kind of thing seems dicey.

1035
00:51:48,740 --> 00:51:51,740
But I had a lot of similar ideas on like

1036
00:51:51,740 --> 00:51:54,500
the people on the network will not want that.

1037
00:51:55,500 --> 00:52:00,420
So at that point, there'll be an uphill battle

1038
00:52:00,420 --> 00:52:02,340
to do a deep reorg.

1039
00:52:02,460 --> 00:52:03,500
What Professor Warner was saying

1040
00:52:03,500 --> 00:52:05,700
was that there'd be like a really shallow split

1041
00:52:05,700 --> 00:52:06,540
or something.

1042
00:52:06,540 --> 00:52:08,580
But see, the thing is the split is

1043
00:52:09,660 --> 00:52:11,900
no one actually wants to play a dollar auction.

1044
00:52:11,900 --> 00:52:16,900
So the, but yeah, I think it's an intriguing thing

1045
00:52:17,220 --> 00:52:18,460
that what would happen though,

1046
00:52:18,460 --> 00:52:21,020
if there was not, if there were a lot of sidechain reorgs

1047
00:52:21,020 --> 00:52:23,420
and a lot of fee sniping, which is totally possible

1048
00:52:23,420 --> 00:52:26,060
and which we should actually run the sidechain experiment

1049
00:52:26,060 --> 00:52:29,300
just to learn more about this type of thing

1050
00:52:29,300 --> 00:52:32,500
because it's Bitcoin's ultimate fate as well.

1051
00:52:32,500 --> 00:52:37,500
So I think I anticipate at least one or two surprises

1052
00:52:38,860 --> 00:52:43,700
of some kind, even though I think the analogy is very tight.

1053
00:52:43,700 --> 00:52:45,460
There's something interesting will happen.

1054
00:52:45,460 --> 00:52:47,940
But the thing is the worse it gets,

1055
00:52:47,940 --> 00:52:51,180
like the worst blind merge mining is like,

1056
00:52:51,180 --> 00:52:55,740
it'll just mean that the ratio of what is paid on L1

1057
00:52:55,740 --> 00:52:58,700
to what is mined on L2 will just change

1058
00:52:58,740 --> 00:53:00,620
in a corresponding way.

1059
00:53:00,620 --> 00:53:03,620
So let's say only half of the blocks

1060
00:53:03,620 --> 00:53:05,660
that are actually blind merge mined

1061
00:53:05,660 --> 00:53:08,220
end up in the longest sidechain,

1062
00:53:10,540 --> 00:53:14,100
whatever, longest active sidechain tip.

1063
00:53:15,700 --> 00:53:17,540
Like if you're mining sidechain blocks

1064
00:53:17,540 --> 00:53:18,780
with blind merge mining,

1065
00:53:18,780 --> 00:53:20,300
you're collecting fees on the sidechain,

1066
00:53:20,300 --> 00:53:23,420
but half of your blocks get orphaned and reorged out.

1067
00:53:23,420 --> 00:53:24,780
Well, then eventually you're gonna start to pay

1068
00:53:24,780 --> 00:53:29,060
only 50% or 45% of the value of this on L1.

1069
00:53:30,420 --> 00:53:32,460
And this means that again,

1070
00:53:32,460 --> 00:53:34,140
it'll all kind of work itself out

1071
00:53:34,140 --> 00:53:36,740
because if this happens,

1072
00:53:36,740 --> 00:53:39,340
then that means that people can make money now.

1073
00:53:39,340 --> 00:53:40,900
Someone out there can make a killing.

1074
00:53:40,900 --> 00:53:44,740
They can double their miner revenues from sidechains

1075
00:53:44,740 --> 00:53:49,740
if they can just figure out how to get the finality better.

1076
00:53:51,340 --> 00:53:54,100
And so then people just naturally set to work

1077
00:53:54,740 --> 00:53:57,580
whatever the problem was at fixing it.

1078
00:53:57,580 --> 00:54:02,140
And I definitely think there could be like sidechain rules

1079
00:54:02,140 --> 00:54:05,420
or even like, there could be even norms or something.

1080
00:54:05,420 --> 00:54:07,660
Like for the similar reason,

1081
00:54:07,660 --> 00:54:10,580
like what Professor Warner was saying

1082
00:54:10,580 --> 00:54:15,580
about someone setting like a kind of a reputation,

1083
00:54:15,980 --> 00:54:18,820
there could be like, people could each chip in,

1084
00:54:18,820 --> 00:54:21,140
like if a lot of people chip in like $5

1085
00:54:21,140 --> 00:54:22,660
if that chain starts to reorg,

1086
00:54:22,660 --> 00:54:24,540
then there's something like,

1087
00:54:24,540 --> 00:54:26,460
there's like many, many things that are possible.

1088
00:54:26,460 --> 00:54:28,140
But I think the most straightforward thing

1089
00:54:28,140 --> 00:54:30,100
would be that the miners themselves would say,

1090
00:54:30,100 --> 00:54:33,700
why are the L1, why are the bids so low?

1091
00:54:33,700 --> 00:54:36,020
Oh, it's because the finality is bad.

1092
00:54:36,020 --> 00:54:39,540
And the L1 miners can then temporarily take an interest

1093
00:54:39,540 --> 00:54:43,180
in getting rid of the orphans.

1094
00:54:43,180 --> 00:54:44,540
And then after they do that,

1095
00:54:44,540 --> 00:54:47,260
then people just kind of decide

1096
00:54:47,260 --> 00:54:50,620
that it will always not have orphans

1097
00:54:51,580 --> 00:54:56,580
and that the L1 fees, the BMM bids go back up.

1098
00:54:58,460 --> 00:55:01,900
So I definitely don't think it will be perfect.

1099
00:55:02,740 --> 00:55:04,140
I actually worry about this much more

1100
00:55:04,140 --> 00:55:08,620
than any of like miners can steal or any other stuff.

1101
00:55:08,620 --> 00:55:09,740
But what I'm worried about

1102
00:55:09,740 --> 00:55:11,980
is only the security budget being low.

1103
00:55:12,860 --> 00:55:15,620
If there actually is a huge amount of fees being paid,

1104
00:55:17,100 --> 00:55:19,700
that I'm very confident that everyone will be happy.

1105
00:55:20,780 --> 00:55:22,460
No one will really be like,

1106
00:55:24,980 --> 00:55:26,700
there won't be any shenanigans.

1107
00:55:26,700 --> 00:55:29,540
If there's lots of fees coming in 24 seven,

1108
00:55:30,620 --> 00:55:31,940
then people will like that.

1109
00:55:31,940 --> 00:55:34,540
Or at least if that's anticipated,

1110
00:55:34,540 --> 00:55:37,460
then there'll be happy customers,

1111
00:55:37,460 --> 00:55:39,260
happy miners, happy everyone.

1112
00:55:40,780 --> 00:55:44,100
If there's only like $5 worth of transactions,

1113
00:55:44,100 --> 00:55:45,940
if it's like liquid or something,

1114
00:55:45,940 --> 00:55:47,540
then I think it would be doomed.

1115
00:55:51,540 --> 00:55:54,860
Micah, could you share your thoughts on all of this?

1116
00:55:57,340 --> 00:55:59,820
Well, actually, Paul just basically argued claim two

1117
00:55:59,820 --> 00:56:01,020
and the thing I just wrote

1118
00:56:01,020 --> 00:56:05,900
is that if the sidechain miners were being anti-competitive,

1119
00:56:05,900 --> 00:56:08,700
the L1 miners would step in and try to fix that.

1120
00:56:11,260 --> 00:56:12,820
So I agree with that.

1121
00:56:12,820 --> 00:56:15,060
They would, exactly what he said.

1122
00:56:16,500 --> 00:56:18,220
If blocks start getting orphaned,

1123
00:56:18,220 --> 00:56:21,420
then the value of a bid on a block goes down.

1124
00:56:21,420 --> 00:56:24,020
So the fees would go down

1125
00:56:24,020 --> 00:56:29,020
and then the L1 miners would try to fix that.

1126
00:56:29,620 --> 00:56:32,900
The one thing issue is that the most,

1127
00:56:32,900 --> 00:56:35,460
one of the strongest ways to establish finality,

1128
00:56:35,460 --> 00:56:38,180
which may or may not be against the, I don't know,

1129
00:56:38,180 --> 00:56:40,940
norms and culture is to become a dictator.

1130
00:56:40,940 --> 00:56:45,940
And that's one concern is that like some group of L1 miners

1131
00:56:46,340 --> 00:56:47,340
could just come in and say,

1132
00:56:47,340 --> 00:56:49,700
hey, let's establish finality

1133
00:56:49,700 --> 00:56:53,980
by just sort of pushing forward our version of a chain

1134
00:56:55,100 --> 00:56:58,340
and anyone who fights it will get outbid

1135
00:56:58,340 --> 00:57:01,100
or just if you're part of our coalition,

1136
00:57:01,100 --> 00:57:04,420
you will just mine that block if you win the block.

1137
00:57:06,780 --> 00:57:08,420
Well, with consensus, it's actually better.

1138
00:57:08,420 --> 00:57:10,100
It's like driving on the left side of the road

1139
00:57:10,100 --> 00:57:12,860
versus driving on the right side of the road.

1140
00:57:12,860 --> 00:57:13,820
People don't really care,

1141
00:57:13,820 --> 00:57:17,500
but it needs to be like the same version for everyone.

1142
00:57:17,500 --> 00:57:19,540
So actually dictator is not so bad.

1143
00:57:19,540 --> 00:57:22,460
But in mining, it's very hard to have a coalition

1144
00:57:22,460 --> 00:57:25,540
because people can join or leave at any time

1145
00:57:25,540 --> 00:57:27,940
and they can, maybe you have 51%,

1146
00:57:27,940 --> 00:57:32,940
but then the 49% who are out, they can poach 5%.

1147
00:57:34,100 --> 00:57:36,020
They can offer them outrageously good terms

1148
00:57:36,020 --> 00:57:38,700
because the 49% are currently getting zero.

1149
00:57:39,580 --> 00:57:43,980
So they poach the 5% from the 51

1150
00:57:43,980 --> 00:57:47,160
and now they're the new 50 whatever, 54.

1151
00:57:48,300 --> 00:57:51,860
So there's just, it's just really not that stable.

1152
00:57:51,860 --> 00:57:53,940
But again, I think there's no guarantee

1153
00:57:53,940 --> 00:57:55,020
that any of this, there's no guarantee

1154
00:57:55,020 --> 00:57:57,740
even that Bitcoin will work or whatever.

1155
00:57:57,740 --> 00:58:02,740
I think all this stuff is like conjectural,

1156
00:58:04,080 --> 00:58:05,540
but it just doesn't seem like,

1157
00:58:06,540 --> 00:58:10,140
I certainly, like something, it's certainly worth,

1158
00:58:10,140 --> 00:58:12,700
to me, it's obvious that it's worth trying.

1159
00:58:12,700 --> 00:58:16,980
Many things seem to be working out just fine.

1160
00:58:16,980 --> 00:58:19,660
And you'd need to, like for someone to say,

1161
00:58:19,660 --> 00:58:22,940
this obviously is broken and will never work.

1162
00:58:22,940 --> 00:58:24,860
That doesn't seem to be like what people are saying.

1163
00:58:24,860 --> 00:58:27,300
I think it's just, it's all about the fees.

1164
00:58:27,300 --> 00:58:32,300
If the fees are high, then everyone has an incentive.

1165
00:58:32,500 --> 00:58:34,400
This is why it's a good system

1166
00:58:34,440 --> 00:58:39,440
because it's powered by the end user,

1167
00:58:41,080 --> 00:58:43,400
the end user getting something of value.

1168
00:58:43,400 --> 00:58:45,480
So it's all positive sum.

1169
00:58:45,480 --> 00:58:46,920
So the end user's transaction fees

1170
00:58:46,920 --> 00:58:49,200
is like pouring fuel into the mechanism.

1171
00:58:50,120 --> 00:58:52,140
So it's, none of it is a zero sum game

1172
00:58:52,140 --> 00:58:53,560
or a negative sum game.

1173
00:58:53,560 --> 00:58:57,700
None of it is really a dollar auction ever per se either

1174
00:58:57,700 --> 00:59:02,160
because as long as there's happy customers,

1175
00:59:02,160 --> 00:59:03,240
it's positive sum.

1176
00:59:03,240 --> 00:59:05,440
The transaction fee, the users are happy.

1177
00:59:05,440 --> 00:59:08,360
They get the utility of having banking

1178
00:59:08,360 --> 00:59:10,460
and smart contracts and whatever else.

1179
00:59:11,560 --> 00:59:14,960
And it's surplus to them.

1180
00:59:14,960 --> 00:59:17,280
And the fees are all coming in.

1181
00:59:17,280 --> 00:59:19,520
As long as someone has an incentive

1182
00:59:19,520 --> 00:59:22,760
to keep these fees coming in and to keep them growing

1183
00:59:22,760 --> 00:59:24,960
or keeping them from falling or whatever,

1184
00:59:26,360 --> 00:59:31,360
then you can imagine people cutting various deals

1185
00:59:32,320 --> 00:59:37,320
to protect that stream of profitability coming in.

1186
00:59:38,480 --> 00:59:41,560
So I think that's like the heart of the matter.

1187
00:59:41,560 --> 00:59:44,720
Yeah, well, I mean, so you could imagine there was,

1188
00:59:44,720 --> 00:59:46,960
I don't know, say some sidechain is generating,

1189
00:59:46,960 --> 00:59:48,880
I don't know, 10% of revenue or something.

1190
00:59:48,880 --> 00:59:52,000
So it's non-trivial and at some point

1191
00:59:52,000 --> 00:59:55,520
someone starts to mess with it and it starts to go down.

1192
00:59:55,520 --> 00:59:58,360
L1 miners would be motivated to say,

1193
00:59:58,360 --> 01:00:00,960
how can we sort of establish a...

1194
01:00:02,414 --> 01:00:06,414
a benevolent dictatorship over this chain to make sure the blocks keep moving forward,

1195
01:00:06,414 --> 01:00:11,694
to make sure people keep moving it. And it could be just a couple 15%

1196
01:00:12,894 --> 01:00:19,614
miners stepping in and saying, we're going to outbid anybody who messes with what looks like

1197
01:00:19,614 --> 01:00:24,734
a really good solid canonical chain. We're going to always mine the good solid canonical chain.

1198
01:00:25,614 --> 01:00:31,454
We're going to orphan anybody who attempts to write reorgs. And then you get into this kind

1199
01:00:31,454 --> 01:00:37,694
of like soft core governance. It's not governance over L1 really, but it's just kind of like

1200
01:00:39,052 --> 01:00:43,774
you're doing a little bit to nudge the sidechain in the right direction to make sure everybody

1201
01:00:43,774 --> 01:00:49,774
behaves. And this could be a little bit against... I mean, some people might have problems with this

1202
01:00:50,654 --> 01:00:53,372
where the miners are kind of exercising a little bit of...

1203
01:00:54,334 --> 01:01:02,094
I think we have seen something like this in the wild, by the way. Not exactly sure,

1204
01:01:02,094 --> 01:01:11,132
I remember correctly, but isn't Bcash had something similar where opportunistic or outright

1205
01:01:11,212 --> 01:01:24,014
or outright rubber capitalistic pool has tried to do some predatory mining practices.

1206
01:01:24,572 --> 01:01:30,492
And basically like 4 or 5% of the hash rate switched over and just squashed it.

1207
01:01:37,774 --> 01:01:39,852
Sorry, could you repeat what you said? I cut out.

1208
01:01:41,132 --> 01:01:48,252
I said we had something like this in the wild where I think on Bcash, and I'm not 100% sure,

1209
01:01:48,252 --> 01:01:57,774
but I think it was Sharpool that tried some predatory mining practices or trolling kind

1210
01:01:57,774 --> 01:02:04,172
of mining practices on not Bitcoin mainchain, but on the forks, one of the hard forks,

1211
01:02:04,654 --> 01:02:13,214
I think on Bcash. And there was some 4 or 5% of the Bitcoin hash rate just switched over and squashed

1212
01:02:13,214 --> 01:02:24,574
it. Yeah, I don't remember exactly, but there was some weird stuff certainly happened in late 2017.

1213
01:02:25,774 --> 01:02:31,292
I think so, yeah. Where there was like oscillating back and forth, the hash rate was...

1214
01:02:31,854 --> 01:02:38,494
And I don't remember people being upset about it. Like most people were like I think happy

1215
01:02:38,494 --> 01:02:44,892
that some of the miners choose to be benevolent and just squashed the predatory pool.

1216
01:02:47,532 --> 01:02:52,012
I remember someone saying like system works as advertised. I remember like a tweet or

1217
01:02:52,012 --> 01:02:56,652
something about that. But I don't remember the details, so maybe it was unrelated.

1218
01:03:02,252 --> 01:03:05,614
Should we take a step back and talk about drivechain in general,

1219
01:03:06,574 --> 01:03:11,774
or should we stay on blind merge mining specifically? Do you think, Paul? Which one?

1220
01:03:13,372 --> 01:03:16,732
I don't know. I think it should be up to the audience, whatever the audience

1221
01:03:17,694 --> 01:03:20,334
wants to talk about, I'll talk about. Great.

1222
01:03:20,334 --> 01:03:26,812
So we have more questions from the speakers or comments or other people want to speak.

1223
01:03:26,812 --> 01:03:34,652
And come on up and have a question or comment. All right. Welcome. Bitcode.

1224
01:03:37,134 --> 01:03:38,334
What's your question or comment?

1225
01:03:43,292 --> 01:03:48,334
In the meantime, Professor Warren, please continue with any questions or comments.

1226
01:03:49,292 --> 01:03:58,574
I would like to say maybe about the idea about coalition forming. So this is pretty well studied

1227
01:03:58,574 --> 01:04:03,372
in game theory. There's all sorts of coalitional game theory, and there is a lot of solution

1228
01:04:03,372 --> 01:04:11,372
concepts which take into consideration the fact that someone who switches to a different

1229
01:04:12,172 --> 01:04:19,534
which take into consideration the fact that someone who switches to a new coalition

1230
01:04:20,094 --> 01:04:25,214
then has the danger of then switching to a new coalition after that and this going around

1231
01:04:25,214 --> 01:04:33,934
in the circuit forever. So there's the stable set, there's the kernel, there's the bargaining

1232
01:04:33,934 --> 01:04:42,654
set, the nucleo, there's all sorts of solution concepts which are based on the idea that an

1233
01:04:42,654 --> 01:04:49,292
objection to a coalition will be met to a counter objection to that objection. So generally speaking,

1234
01:04:49,292 --> 01:04:55,132
you have this if someone forms a coalition, an objection is going to be a different coalition

1235
01:04:55,132 --> 01:05:03,534
that will favor some members of the coalition and kind of like prevent the original coalition

1236
01:05:03,534 --> 01:05:07,534
from being what would be like classically a Nash equilibrium. So you're always going to have

1237
01:05:07,534 --> 01:05:11,692
this situation where somebody can reform the coalition, it will be better for some people

1238
01:05:12,572 --> 01:05:20,494
by splitting at 60-40 instead of 50-50 with different members. But then these solution

1239
01:05:20,494 --> 01:05:26,814
concepts and then analyze, okay, if I make an objection, can someone else then come along

1240
01:05:27,534 --> 01:05:34,412
and make another objection and sort of ruin whatever coalition I just came up with? And

1241
01:05:34,412 --> 01:05:40,814
if that's the case, the original coalition is then considered somewhat stable because anyone who's

1242
01:05:40,814 --> 01:05:48,334
in that coalition will realize that by kind of throwing this game into this non-ending circuit,

1243
01:05:48,334 --> 01:05:53,374
it becomes like a Markov chain and you're dealing with like expected values. You're actually losing

1244
01:05:54,012 --> 01:05:57,292
a little bit of what you'd expect by just staying in the original coalition.

1245
01:05:58,254 --> 01:06:03,452
So I do think these coalitions tend to be somewhat stable. The classic game is going

1246
01:06:03,452 --> 01:06:08,892
to be odd man out where you have say three players and they split a pot,

1247
01:06:11,132 --> 01:06:14,972
$100, three people get to split it, they just have to decide any two vote,

1248
01:06:17,132 --> 01:06:22,012
the majority gets to split it. So if two people look at each other and say,

1249
01:06:22,012 --> 01:06:26,334
let's do it 50-50, obviously you say, well, the third person is going to offer one of them

1250
01:06:26,334 --> 01:06:32,172
60% and keep 40% and then once that happens, then this is going to go around and around.

1251
01:06:33,534 --> 01:06:38,654
But in reality, two people that look at each other and say, let's split this 50-50,

1252
01:06:38,654 --> 01:06:44,814
they're going to realize that once this game starts, their odds go from 50-50. They're not

1253
01:06:44,814 --> 01:06:50,814
looking at the 60% they're being offered, they're looking at the 33% that they're going to get if

1254
01:06:50,814 --> 01:06:56,334
this game just kind of goes around and the eventual winner is kind of undetermined. So

1255
01:06:56,334 --> 01:07:01,292
their odds aren't going from, or their expected value isn't going up to 60%, it's going down.

1256
01:07:01,292 --> 01:07:04,814
So they're probably just going, if they have an opportunity to take that 50%, they're probably

1257
01:07:04,814 --> 01:07:11,614
just going to take that 50%. This is in the, I think it's called the stable set or the bargaining

1258
01:07:11,614 --> 01:07:18,732
set. There's a more, I think more unique and canonical solution in that is they all look at

1259
01:07:18,732 --> 01:07:28,892
each other and split it three ways right away. Yes, divide a dollar game. Yeah, I think the

1260
01:07:28,892 --> 01:07:33,613
right, the best solution concept is the evolutionarily stable strategy for anything where

1261
01:07:33,613 --> 01:07:39,292
you have, it's continuous over time, but where humans don't live forever and there's an interest

1262
01:07:39,292 --> 01:07:46,572
rate. I think that one is the best for Bitcoin mining and there's even, we even have a phrase

1263
01:07:46,572 --> 01:07:52,813
for it, we call live by the fork, die by the fork, which is like, sure you could get a lot of great

1264
01:07:52,813 --> 01:07:58,494
stuff if you forked like for yourself or for other people, but then someone forks you. And of course

1265
01:07:58,494 --> 01:08:02,813
this happened many times where there was like Litecoin and it had a faster block time than

1266
01:08:02,813 --> 01:08:07,292
Bitcoin, but then there was like Feathercoin and then there was like Dustcoin. And then, you know,

1267
01:08:07,292 --> 01:08:12,732
there's Bitcoin Cash, but then there's Bitcoin SV, which has an even larger block size. So it does

1268
01:08:12,732 --> 01:08:22,732
speak to the, the world of pain that people open up when they try to deviate from the network

1269
01:08:22,732 --> 01:08:28,892
effects of Bitcoin Core. It doesn't seem to work out so far.

1270
01:08:36,172 --> 01:08:39,374
Bitcoin Code, please go ahead with your question or comment.

1271
01:08:40,332 --> 01:08:48,332
Hi everyone. I hope you're doing well. Thank you for having me here. I have a question for Paul.

1272
01:08:51,053 --> 01:09:00,652
Paul, could you touch please a little bit more in detail or kind of make clear what is the biggest

1273
01:09:00,652 --> 01:09:07,374
pushback or rejection regarding the drivechain in the Bitcoin community and

1274
01:09:08,013 --> 01:09:20,494
do you see something like something that is not related to the network from their side, but is

1275
01:09:20,494 --> 01:09:29,933
related towards the financial aspect? And this is the first question and another one.

1276
01:09:30,494 --> 01:09:40,332
Another one. I want to ask you with the blind merge mining, do you think that the mining

1277
01:09:41,133 --> 01:09:51,614
will be more decentralized and because there will be fees for the miners? And do you think that

1278
01:09:52,574 --> 01:09:57,532
with the time, I know that the cash rate go up and the difficulty and stuff like that, but

1279
01:09:58,013 --> 01:10:06,013
even the technology innovate, so, you know, more powerful miners could be on the market.

1280
01:10:06,013 --> 01:10:14,972
So do you think that even like will be incentivized more miners to come and mine blocks,

1281
01:10:14,972 --> 01:10:16,574
which are not big farms?

1282
01:10:16,972 --> 01:10:24,893
Well, I think the long run mining picture is just one of constant evolution where I'm talking about

1283
01:10:24,893 --> 01:10:30,732
the hashers. The pools, the pool is a percentage thing. So there's always going to be like

1284
01:10:31,772 --> 01:10:36,574
whatever, like 10, 15, 20, 25 pools that each only have a couple of percentage points.

1285
01:10:38,494 --> 01:10:44,574
That's just like a statistically optimal configuration. And it's because of pools

1286
01:10:45,532 --> 01:10:50,813
that we can have small miners anyway. So pools are kind of a good thing.

1287
01:10:52,574 --> 01:11:00,172
And so the long run, so that's the pools and then the hashers themselves, they will be chasing

1288
01:11:01,212 --> 01:11:05,772
cheaper and cheaper energy. They will be specialists and they will just be like,

1289
01:11:06,652 --> 01:11:10,332
it'll be like any other thing. Like if you're making the world's best toasters,

1290
01:11:10,332 --> 01:11:13,133
you're going to know everything about toasters. You're going to know how to make, stop them from

1291
01:11:13,133 --> 01:11:18,332
electrocuting people. You're going to know how to stop them from like tipping over or starting a

1292
01:11:18,332 --> 01:11:24,972
fire. And it won't be, it's not as easy to make a toaster these days than it was in like whatever,

1293
01:11:24,972 --> 01:11:32,172
the first toasters, because when something starts off, it's general, it's sort of hobbyist,

1294
01:11:32,172 --> 01:11:40,412
it's brand new, but then the better you get at anything, farming, fishing, eventually become

1295
01:11:40,412 --> 01:11:46,013
a master craftsman, you know, you start off as like a little apprentice. But then the same with

1296
01:11:46,013 --> 01:11:50,092
mining, you know, at the beginning, anyone could do it, anyone just like anyone could build a

1297
01:11:50,893 --> 01:12:00,254
build a house, build a little hut. But then over as time goes on, it becomes more and more

1298
01:12:00,254 --> 01:12:04,972
specialized. So I think that's the fate of mining and I don't think it has anything to do with.

1299
01:12:05,933 --> 01:12:10,652
As long as Bitcoin is still exists, that will still happen. If Bitcoin fails, then that will

1300
01:12:10,652 --> 01:12:18,494
all just get wiped away. It'll be like everything else in life where being an accountant today is

1301
01:12:18,494 --> 01:12:28,254
more specialized than being an accountant in the time of Medici. So that's the long run fate of

1302
01:12:28,332 --> 01:12:35,212
mining, of hashing and pools. And the first question, unfortunately, my phone glitched out

1303
01:12:35,212 --> 01:12:42,652
and I had to leave and rejoin and I did not. It was what are the major objections to drive

1304
01:12:42,652 --> 01:12:47,053
chain? That was the first question he had. Yeah, well, we get these two and they're both not very

1305
01:12:47,053 --> 01:12:53,454
good about miners can steal, which is true, but very misleading because miners can already steal

1306
01:12:53,454 --> 01:12:58,013
from all kinds of things, including main chain Bitcoin and the lightning network under all kinds

1307
01:12:58,092 --> 01:13:04,092
of various. So it's true that they can steal if a bunch of stuff happens. So it's that if it's kind

1308
01:13:04,092 --> 01:13:10,172
of a big deal. Miners can steal if a bunch of stuff, you know, miners could steal from everything

1309
01:13:10,172 --> 01:13:16,652
or miners can destroy the network or they could do whatever. Miners earn money from all the side

1310
01:13:16,652 --> 01:13:24,254
chains in the form of transaction fees and in the form of exchange rate appreciation. And just in

1311
01:13:24,254 --> 01:13:28,332
terms of just having a community that has creativity and progress and is releasing new

1312
01:13:28,332 --> 01:13:33,933
software and has competition for users, it won't be total nirvana, but it'll be better than what

1313
01:13:33,933 --> 01:13:40,972
we have now, where it's just horrible to release any new software or do anything new.

1314
01:13:43,292 --> 01:13:51,374
The second one is that it affects mining incentives and having debated people over

1315
01:13:51,374 --> 01:13:58,172
this topic for years, what they literally mean is that total miner revenues will go up.

1316
01:14:01,374 --> 01:14:05,694
That's their worst case scenario. But to me, it's obvious that that is a good thing.

1317
01:14:07,454 --> 01:14:15,292
Yeah, why they say that is a bad thing? I mean, we saw with the Ordinos, Ordinos was a very good

1318
01:14:15,292 --> 01:14:27,053
example where the mining reward was 6.25, but actually with the fees, that was a short period

1319
01:14:27,053 --> 01:14:36,254
of time. But with the fees accumulated, they got, I don't know, the rewards jumped to whatever was,

1320
01:14:36,254 --> 01:14:43,852
I'm guessing now 11, 12, 13 Bitcoin, you know, plus the block reward.

1321
01:14:46,013 --> 01:14:52,813
Yeah, I think it's a small slice of the type of thing that miners could be collecting

1322
01:14:54,013 --> 01:14:58,092
fee revenues from all kinds of other things that have been just sort of discouraged

1323
01:14:58,813 --> 01:15:05,933
in Bitcoin out of a desire to keep Bitcoin focused on being digital gold. But I think

1324
01:15:05,933 --> 01:15:12,893
this is a mistake. I think Bitcoin should be useful. It's like if someone had an idea where

1325
01:15:12,893 --> 01:15:20,254
gold could cure cancer or gold could be used to teleport across the universe, that would be good

1326
01:15:20,254 --> 01:15:26,172
for gold. It would still be digital gold, but if gold also cures cancer, and it can be used in

1327
01:15:26,172 --> 01:15:31,212
teeth, and it can be used in electronics, and it can be used to teleport across the universe,

1328
01:15:31,772 --> 01:15:37,133
and it turns out that gold is a super intelligent AI or something like that's good for gold.

1329
01:15:37,933 --> 01:15:46,013
So we don't want gold to become, you know, we don't want Bitcoin to lose its good properties,

1330
01:15:46,013 --> 01:15:52,332
but that is a completely different question from whether or not willing users should be

1331
01:15:53,292 --> 01:16:00,574
paying for things. The ordinals is a perfect example of like people finding an alternative

1332
01:16:00,574 --> 01:16:06,494
use for block space. All of that should be encouraged, not discouraged. All that's good

1333
01:16:06,494 --> 01:16:12,254
for gold. It's good for an investment in gold. If you own gold, this is good for your investment

1334
01:16:12,254 --> 01:16:18,574
to learn that gold cures cancer. I mean, that's, I would think that would be very clear, but it's

1335
01:16:18,574 --> 01:16:25,614
not because there's a widespread fear that if people start using the gold network a certain

1336
01:16:25,614 --> 01:16:31,292
way, it may not be used, you know, the original way and people fear change, I guess. I don't know.

1337
01:16:32,254 --> 01:16:37,053
But thanks to the, as long as you run a node, then the properties can't change. What you really want,

1338
01:16:37,053 --> 01:16:43,133
if you are worried about change, you want to be pro ossification and just don't change your L1 node.

1339
01:16:46,092 --> 01:16:53,933
I agree with you, and I think that you are doing the kind of the most right thing for Bitcoin,

1340
01:16:53,933 --> 01:17:02,574
because you are kind of following all this, you know, from the beginning, what Satoshi said,

1341
01:17:02,574 --> 01:17:10,572
and like in Bitcoin, Satoshi's vision and everything else. So for me, I'm doing so much

1342
01:17:10,572 --> 01:17:17,212
research and I'm, you know, from the beginning in Bitcoin, and that's why I support, you know,

1343
01:17:17,212 --> 01:17:23,212
and follow you and support drivechains. I read all your blogs and, you know, you have a very long

1344
01:17:23,212 --> 01:17:30,414
time in doing this, and I'm very surprised that, you know, like technology like this or innovation,

1345
01:17:30,414 --> 01:17:39,374
what you are trying to enable, it's getting so pushed back or, you know, a big kind of rejection

1346
01:17:40,013 --> 01:17:48,972
from the community. I mean, not all of them, but I don't know. I look and I'm looking through the,

1347
01:17:49,692 --> 01:17:56,654
through the, you know, like mostly Twitter, because, you know, the Bitcoiners and the communities

1348
01:17:56,654 --> 01:18:04,893
for Bitcoin, I think that some of the people, they don't really understand Bitcoin

1349
01:18:05,692 --> 01:18:14,654
in details and what Bitcoin can do for everything. And I think the drivechains are the

1350
01:18:14,812 --> 01:18:22,972
right way to move forward, because I don't like, even I think you agree with federated

1351
01:18:22,972 --> 01:18:32,332
ways of L2s or what's happening now, we have even companies trying to do a separate chain,

1352
01:18:32,332 --> 01:18:39,852
which is, they call is L2, with no relation, relationship to the, or connection to the

1353
01:18:40,812 --> 01:18:48,173
Bitcoin blockchain. And they rub the Bitcoin, they use kind of an alternative ways, like a

1354
01:18:48,173 --> 01:18:54,332
lightning channels and stuff like that, bridges to the EVM and stuff like that, which, you know,

1355
01:18:55,852 --> 01:19:06,893
it's kind of misrepresented. And this is one part that, you know, I think we all need to come

1356
01:19:07,374 --> 01:19:16,013
together and also, you know, share and educate people for the real values and what exactly is

1357
01:19:16,013 --> 01:19:23,133
Bitcoin blockchain. Because here, I'm for the blockchain, I'm not for the BTC or

1358
01:19:23,194 --> 01:19:25,413
the price or anything else.

1359
01:19:25,893 --> 01:19:28,053
I'm for the technology here.

1360
01:19:29,194 --> 01:19:33,533
Well, big quote, I'd like to point something out.

1361
01:19:33,694 --> 01:19:36,293
Sorry, I haven't been speaking much today.

1362
01:19:36,453 --> 01:19:37,873
I've been losing my voice.

1363
01:19:38,920 --> 01:19:44,620
but just the fact that you're hearing these critics recently on Twitter

1364
01:19:44,620 --> 01:19:50,280
in such a major way is I think a perfect example

1365
01:19:50,280 --> 01:19:53,227
of or perfectly highlights

1366
01:19:53,727 --> 01:19:58,967
that actually as being a post to by the community,

1367
01:19:59,647 --> 01:20:05,447
drivechain is actually kind of becoming aware, the community is becoming aware of

1368
01:20:05,447 --> 01:20:08,274
drivechain and the trajectory is actually looking extremely

1369
01:20:09,274 --> 01:20:22,274
There's many, many, many, many proposals and solutions and all sorts of stuff people want to add to Bitcoin and to the various blockchains that none of us here,

1370
01:20:22,274 --> 01:20:41,274
despite being, you know, 24, seven, many years I've even heard of. And we're not hearing anything about the criticism to those because they're not relevant and they're not on the trajectory of actually winning or actually, you know, being merged anytime soon.

1371
01:20:41,274 --> 01:21:04,274
But BIP300 is and that's why you've seen such a massive explosion in the rate of discussion of BIP300 because this is actually one stage of the consensus process. And I think now I'm seeing it's inevitable. It will be merged.

1372
01:21:04,274 --> 01:21:11,274
And, you know, at least in the modern timeline of Bitcoin in relative short order.

1373
01:21:14,966 --> 01:21:20,926
Well said we have a lot exciting developments in this space Currently layer 2

1374
01:21:20,926 --> 01:21:23,746
labs has retained Luke Das jr.

1375
01:21:23,746 --> 01:21:29,566
Legendary Bitcoin core developer to rebase the

1376
01:21:29,566 --> 01:21:30,686
drivechain code

1377
01:21:35,274 --> 01:21:54,274
Also, can I point out while, you know, I have a little bit of voice here for a minute. One thing you said is that you're not worried about or focused on the price. I actually think that, no offense to you, but I think that this is kind of not really the ideal way to think about it.

1378
01:21:55,274 --> 01:22:12,274
The price is by far the most important data point in Bitcoin. If you're looking to measure its relative success or failure at the current moment or at any moment in the past or the future, the price is the most important thing.

1379
01:22:13,274 --> 01:22:28,274
If we want it, no matter what you're looking for from Bitcoin, if you're a revolutionary or if you just want to get wealthy, if you want to disintermediate the central banks, the price is everything.

1380
01:22:28,274 --> 01:22:56,274
The price is a proxy for the security. The price is a proxy for the adoption. Now, there is a chance that we end up with Bitcoin having a massive valuation but completely failing to live up to any semblance of its revolutionary potential and the like.

1381
01:22:56,274 --> 01:23:23,274
I mean, maybe that is possible, but there's absolutely no possibility that Bitcoin has a meaningful impact in disintermediating the current financial system or whatever your ideology points you to believing is a success from that perspective and maintain a small price.

1382
01:23:23,274 --> 01:23:30,274
That is almost certainly not going to happen if Bitcoin remains at the price level today.

1383
01:23:31,274 --> 01:23:54,274
No, I wanted to say, for me, the price is not important. For me, Bitcoin is priceless. So for me, one Bitcoin is one Bitcoin. I don't calculate in dollars or fiat. So as soon as we stay in the fiat conversion, we'll always be on a confused path.

1384
01:23:54,274 --> 01:24:15,274
Well, that is very true. But before the mass mind shift to Bitcoin being the standard, the relative purchasing power equivalent is going to have to be much higher than whatever it is today. I think like $30,000 today.

1385
01:24:16,274 --> 01:24:30,274
And this is actually one of the reasons why I'm one of the most important reasons why I've been so supportive of drivechains for so many years, because I just see it as a as a complemental technology.

1386
01:24:30,274 --> 01:24:45,274
I think it's probably the best thing we can do if you're looking for Bitcoin to all time high. If you want to get into the next phase shift, the next epoch, jump Bitcoin up an order of magnitude or two.

1387
01:24:46,274 --> 01:25:04,274
Merge with 300, you know, and we can put a little straw in the pockets of all these shit coins and more so in the pocket, suck some of the value out from these fiat monstrosities and and pump Bitcoin's price.

1388
01:25:04,274 --> 01:25:14,274
And then all of us can be even wealthier. And none of those things are competing. Those things are all riding the same wave.

1389
01:25:14,274 --> 01:25:31,274
Well said. Yeah, drivechain has enormous potential to accrue value to Bitcoin because the native token on the sidechains is a synthetic Bitcoin.

1390
01:25:31,274 --> 01:25:51,274
And the only way to move units of value of Bitcoin onto the sidechain is by locking up Bitcoin in the hash rate escrow. So as Adam Back has described in tweets, drivechain is innovation without altcoin seniorage.

1391
01:25:51,274 --> 01:26:05,274
The people who think it's going to bring shit coins to Bitcoin have it exactly backwards. It promotes the use of Bitcoin's monetary policy on blockchains other than Bitcoin's main chain.

1392
01:26:06,274 --> 01:26:26,274
It promotes sidechains which use Bitcoin's monetary policy and miners, but the technology of an altcoin. So it drives value accrual into Bitcoin by increasing the number of users who are participating in Bitcoin's monetary policy.

1393
01:26:26,274 --> 01:26:45,274
Everyone should understand that it's it has enormous implications for Bitcoin's price potentially. If the drivechain sidechains are very popular, then that would bring a lot of value accrual to Bitcoin.

1394
01:26:45,274 --> 01:27:03,274
People who never opted into any drivechain sidechain would still experience the benefit of the higher purchasing power of Bitcoin on main chain as well as the higher miner revenue and this higher security from the higher miner revenue on the main chain.

1395
01:27:03,274 --> 01:27:22,274
So the main chain main chain would be more valuable and successful and stronger. Even if a person never chooses to use the sidechain, that person would benefit on the main chain from the existence of those sidechains. It's extremely important for the survival of Bitcoin.

1396
01:27:22,274 --> 01:27:50,274
Professor Warren, what do you think about that narrative that demand for the sidechains, if they're successful, drives value accrual to Bitcoin because the sidechains use Bitcoin's monetary policy? Do you follow exactly what I'm claiming there?

1397
01:27:50,274 --> 01:28:05,274
Sort of. Yeah. I mean, it's not clear how independent the fee rates and the value is. So, I mean, the goal here is just to drive up the fees.

1398
01:28:05,274 --> 01:28:25,274
Not exactly. What I'm saying is that the way that we, let's just take as for example, a large block Bitcoin sidechain we call Funder. This has been coded up and exists publicly on GitHub. This would be a peer to peer Bitcoin sidechain that uses drivechain.

1399
01:28:25,274 --> 01:28:46,274
And it would enable Bitcoin users to transact a unit of value of Bitcoin with much lower fees because of the larger blocks on the sidechain. What I'm claiming right now is that because the only way to put units of value on the sidechain is to move Bitcoin into the hash rate escrow of that sidechain.

1400
01:28:47,274 --> 01:29:10,274
We can say that if Funder is very successful, then that means that Bitcoin's value will be much higher than it otherwise would have been because of the two way peg. Economically, demand for tokens on the sidechain is demand for Bitcoin.

1401
01:29:11,274 --> 01:29:29,274
Because let's just say $100 billion worth of demand exists for the sidechain token. Well, that means Bitcoin's price must have gone up in order to move units from the main chain over onto the sidechain. Do you see what I mean there?

1402
01:29:29,274 --> 01:29:39,274
Oh, sure. Sure. I mean, you know, widen the tent for value storage or whatever you use it for. Sure. Yeah.

1403
01:29:40,274 --> 01:29:51,274
Yeah. So what I'm claiming here is that in the discussions on drivechain, we're not simply talking about the possibility of higher economic security on main chain because of merged mining revenues flowing to main chain miners.

1404
01:29:52,274 --> 01:30:04,274
We're talking about, in addition, main chain token holders, even if they never opted into any sidechain, receive the benefit of a higher value for their Bitcoin.

1405
01:30:05,274 --> 01:30:20,274
This is already true in the case of the federated sidechains that exist, like Rootstock and Liquid. They are small, but we can say categorically that all of the synthetic Bitcoin existing on those sidechains has increased Bitcoin's price.

1406
01:30:20,274 --> 01:30:32,274
And if those sidechains were a thousand times larger in terms of demand, then Bitcoin will have benefited in this way in terms of higher value per Bitcoin.

1407
01:30:33,274 --> 01:30:44,274
It's not just about fees. It's also about the value of Bitcoin going up as its network expands by bringing in more users who want the features only available on the sidechains.

1408
01:30:44,274 --> 01:31:00,274
So this whole discussion about drivechain isn't just about higher miner revenue. It's about a larger network of Bitcoin users using all of the different features only available on Bitcoin sidechains instead of going to altcoins for those features.

1409
01:31:01,274 --> 01:31:14,274
Yeah, and increasing miner fee revenue doesn't mean just raising the fees for people. You can have lower individual transaction fees on a Thunder sidechain.

1410
01:31:15,274 --> 01:31:23,274
And if there's a ton of transaction activity there, or maybe a lightning network built on top of that, eventually those fees make their way back to the main chain.

1411
01:31:23,274 --> 01:31:34,274
And it might be that a million people are paying way less fees than they even do right now. But in total, that's going to provide more security budget to the Bitcoin miners.

1412
01:31:35,274 --> 01:31:40,274
It's not that we want to make the fees higher for individual people's transactions.

1413
01:31:43,274 --> 01:31:49,274
For anyone new to our spaces, it's worth mentioning CryptAxe is one of the co-authors of the drivechain BIPs.

1414
01:31:49,274 --> 01:32:18,274
So, Professor Warren, what I was trying to express there is this view that drivechain is not just about fixing the security budget problem, which is the possibility of persistently low fees in the future making main chain insecure.

1415
01:32:19,274 --> 01:32:27,274
It's not just about boosting miner revenue through merged mining. It's about so much more than that.

1416
01:32:27,274 --> 01:32:47,274
It's about making Bitcoin's entire network of users much larger by enabling more innovation and experimentation on other blockchains that are connected to Bitcoin in a manner that is more peer to peer because there's no federated multisig involved.

1417
01:32:48,274 --> 01:32:56,274
So there's no socially selected parties who control Bitcoin in a sidechain that's using drivechain technology.

1418
01:32:56,274 --> 01:33:05,274
Instead, the miners, which are part of Bitcoin's peer to peer set of roles, are involved in the security.

1419
01:33:05,274 --> 01:33:11,274
So it's more peer to peer and it's multi-chain instead of monolithic Bitcoin.

1420
01:33:18,274 --> 01:33:20,274
Yeah, I agree that that is one of the goals. Yes.

1421
01:33:20,274 --> 01:33:34,274
Well, it's been really cool to read your tweets over the months recently.

1422
01:33:34,274 --> 01:33:43,274
You are very attuned to important questions that are not so commonly raised within Bitcoin discourse.

1423
01:33:44,274 --> 01:33:48,274
Questions around how a fee reliant future would look.

1424
01:33:48,274 --> 01:33:58,274
There are a lot of good academic papers on that topic, like if we only have fees and no subsidy, then the miner revenue will have a different texture.

1425
01:33:58,274 --> 01:34:10,274
It'll be more higher variance of total value per block coming to the miners, which increases the kinds of strategic mining that miners can do.

1426
01:34:11,274 --> 01:34:19,274
So a lot of the objections to drivechain are a kind of contemplation on strategic mining.

1427
01:34:23,274 --> 01:34:25,274
So it's kind of up your alley.

1428
01:34:26,274 --> 01:34:28,274
Right. Yeah.

1429
01:34:28,274 --> 01:34:29,274
So that's what I mean.

1430
01:34:29,274 --> 01:34:46,274
Yeah, that's what I've tried to, I guess, present a few things I've written up is that it seems like it offers a few more opportunities to play around with strategic mining or to play around with, I don't know, soft governance or play around with some of the things which are really hard at this moment to do on L1.

1431
01:34:46,274 --> 01:34:49,274
Like it's really hard to do anything weird.

1432
01:34:50,274 --> 01:34:56,274
Like we're pretty far away from selfish mining or undercutting, at least at this point in time on L1.

1433
01:34:56,274 --> 01:35:04,274
But if you introduce some of these drivechains, you might have a way in which miners can kind of like mess around with this stuff.

1434
01:35:06,274 --> 01:35:07,274
Just to get their hands dirty.

1435
01:35:08,274 --> 01:35:16,274
Yeah, but I think the best responses to these concerns is to point out that Bitcoin's future is necessarily one of transaction fee reliance.

1436
01:35:17,274 --> 01:35:26,274
And the future, if it's limited and narrow, if we pursue a kind of purity in Bitcoin, puritanism to use Jameson Lopp's word.

1437
01:35:27,274 --> 01:35:43,274
If we aim for this simple Bitcoin where the only thing people ever do is save units and then spend units and nothing more sophisticated and experimental is involved and there's no other blockchains that are linked to Bitcoin that the miners are making money from.

1438
01:35:44,274 --> 01:35:54,274
In other words, if all experimentation and innovation occurs on altcoins and one of those altcoins eventually achieves a drivechain like design, that threatens Bitcoin's primacy.

1439
01:35:54,274 --> 01:35:56,274
Its primacy wouldn't endure.

1440
01:35:56,274 --> 01:36:00,274
It would be irrelevant and small like gold is today.

1441
01:36:02,274 --> 01:36:08,274
And therefore the social aims of Bitcoinization would have not been achieved on Bitcoin.

1442
01:36:09,274 --> 01:36:19,274
So like either we have an expansive program where we try to have all of blockchain activity on Bitcoin and bring the entire crypto community onto Bitcoin.

1443
01:36:20,274 --> 01:36:22,274
Or we aim for something narrow and limited.

1444
01:36:24,274 --> 01:36:26,274
That's economically insignificant.

1445
01:36:32,274 --> 01:36:36,274
I mean, that's not the only two outcome that can happen.

1446
01:36:37,274 --> 01:36:59,274
The interesting thing about all this is that even if we don't do anything that altcoins currently do, if we could go for stuff like global commerce, global international commerce and settlement,

1447
01:37:00,274 --> 01:37:09,274
if Bitcoin would at least be suitable for that use case somehow, magically, because it's fucking not, I'm sorry.

1448
01:37:10,274 --> 01:37:19,274
So if Bitcoin could actually handle that use case, that would probably be hundreds of thousands of times more valuable than all of this altcoin nonsense.

1449
01:37:26,274 --> 01:37:27,274
Yeah, I agree with that.

1450
01:37:27,274 --> 01:37:43,274
That's important to keep in mind that it's not really like when I say creativity with sidechains, it's both creativity in terms of doing weird stuff like doing like SIA or ZK Snarks or prediction markets.

1451
01:37:44,274 --> 01:38:04,274
But it's also just different creative takes on how to actually do Bitcoin the best, of which the block size debate is a perfect example of just like reasonable people really disagreeing about what to do.

1452
01:38:05,274 --> 01:38:07,274
And they really both seemed very earnest.

1453
01:38:09,274 --> 01:38:14,274
This Roger Ver kind of group and the Greg Maxwell group.

1454
01:38:17,274 --> 01:38:25,274
And why not, we should always just have both, you know, we really shouldn't have had to like turn it into become political and toxic because it has become like a kind of little...

1455
01:38:26,274 --> 01:38:28,274
There is a horrible fallout from that, right?

1456
01:38:28,274 --> 01:38:47,274
So I'm pretty sure I see signs of, you know, I don't want to bogatize, you know, the experience of veterans, but I see some parallels to, you know, general PTSD behavior and how people, you know, approach the subject still to this day.

1457
01:38:47,274 --> 01:38:52,274
And it has been like five years or maybe we could say six.

1458
01:38:53,274 --> 01:39:09,274
And it seems like that somehow the means, the community and everything is still stuck in certain patterns that don't really make sense for peacetime Bitcoin whatsoever.

1459
01:39:10,274 --> 01:39:26,274
And now it's actually like where people still just think it's like naive large blockerism, even though it takes incredible pains to not be an L1 block size increase and to prevent all future L1 block size increases.

1460
01:39:26,274 --> 01:39:30,274
But people still just think, well, if it gives the large blockers what they want, it must be bad.

1461
01:39:30,684 --> 01:39:54,684
Yeah, but I mean, just the attitude towards changes, right, if you follow the discussion about any, you know, change to Bitcoin, you can expect to see people jump in and start, you know, just mindless opposition and virtual signaling, right?

1462
01:39:54,684 --> 01:40:12,684
That actually makes sense in a situation where Bitcoin is really under attack, like under attack from a group with a large amount of money that tries to push for like a POS approval first, like a fork or whatever, an ESG Bitcoin fork or whatever.

1463
01:40:12,684 --> 01:40:37,684
And so in a situation like that, this type of behavior might make sense, but I don't think it makes sense currently. And I don't think it makes sense when, you know, technically other people actually know that Bitcoin right now is in a weird position where it can't really scale to the level of adoption that most Bitcoiners are awaiting.

1464
01:40:37,684 --> 01:41:00,684
You know, it can't really handle people holding their own keys at that scale. Even Adam Beck has mentioned the same number that I arrived to, about 100 million people is how much we could probably stretch the current technology of Bitcoin to accommodate in some way.

1465
01:41:01,684 --> 01:41:18,684
And, you know, how do we actually give a utility for like a billion people or more is completely, you know, a territory where nobody has real ideas in the current set of rules.

1466
01:41:18,684 --> 01:41:45,684
And so a lot of people understand that something needs to be changed, but even discussing this need or even just voicing, you know, any sense of urgency that maybe we should not take like another decade with this, because, you know, if the world is really, you know, going to turn and there is going to be some adoption pressure, then it all will naturally drive people towards custody.

1467
01:41:45,684 --> 01:42:03,684
And that has its own set of risks. And so this behavior, however, is still, you know, still kind of neurotic and showing signs of PTSD that emerges in all this.

1468
01:42:03,684 --> 01:42:26,684
And like, I don't know how to heal the community from this, because it seems to be something that gets imprinted on the newer and newer generations. Like, so they come into this, they like it because it sounds good to them. They adopt these patterns and amplify it, you know. So it's really weird.

1469
01:42:33,684 --> 01:42:40,684
All right. Very wise words.

1470
01:42:40,684 --> 01:42:54,684
I think like it won't even be fixed until there is sidechains, because then people will be able to just do whatever they want. And this is assuming that sidechains work, which of course they may not.

1471
01:42:55,684 --> 01:43:03,684
We would probably want people to be able to disagree, right? So leave people beside each other in disagreement.

1472
01:43:04,684 --> 01:43:23,684
Exactly. Consensus is very bad. It's very good that when you're designing eCash software, but it's very bad in humans. Consensus is like you're living in North Korea or something, something has gone really wrong. In a real society, there's constant disagreement over how to make progress.

1473
01:43:24,684 --> 01:43:42,684
And that can include like, what types of evangelism to do, like a Roger Ver type, like, go on CNBC, go around to different stages. Or it could be something else like a Brian Armstrong, like a Coinbase type, or it could be every other, any other type, building a new thing, building open timestamps, like a Peter Todd type.

1474
01:43:42,684 --> 01:43:50,684
So, but there should really always be disagreement. And if there's no disagreement, then it means the community is stuck, I think.

1475
01:43:50,684 --> 01:44:16,684
Yeah. And we basically are assuming a lot of things, like we are assuming a lot of things about future user behavior, future human behavior, future miner behavior, future business behavior. We are assuming things about how this will play out, you know, on the political spectrum, globally, how politics will shift, how the financial system will do things.

1476
01:44:16,684 --> 01:44:33,684
We are making these huge, huge assumptions. And basically, we have very little certainty about any of this. And we are not trying enough different things, I believe.

1477
01:44:33,684 --> 01:44:52,684
So, I see that there is a very little focus on the Lightning Network, as is, basically, and the only like miner improvements on the way the Lightning Network works and making it more robust and efficient, which is a very good thing, if you can do that.

1478
01:44:52,684 --> 01:44:59,684
But of course, a lot of the major improvements to the Lightning Network would require soft forks as well.

1479
01:45:00,684 --> 01:45:19,684
Yeah, right. That's a different story. But the point is, it's a very narrow focus. And I'm pretty sure we should be trying like at least four or five or six major directions and a lot of smaller stuff, because we really don't know what will work and how the world will turn out.

1480
01:45:19,684 --> 01:45:34,684
And these things take time, like it could be a decade before something gains like real economic adoption, before people become really comfortable with it to use on a global scale.

1481
01:45:34,684 --> 01:45:50,684
So, let's see. Anyone else have any other questions or comments?

1482
01:45:50,684 --> 01:46:00,684
Paul, have you ever spoken about CoinNews or done any promotion of it?

1483
01:46:01,684 --> 01:46:19,684
Not really, but it's a great idea. It's very cool. It's just as there's a spot in the, it's not really a soft fork, it's just a cosmetic node upgrade. And there's a part of the node where people can publish news and it's sorted first by category and then by fee rate.

1484
01:46:20,684 --> 01:46:36,684
And so, if you want, you don't have to spend, if you want to spend $4,000 to inscribe an ordinal that just says, you know, Nick Carter is the coolest.jpg, you don't have to actually bid up the whole block for that, you can just take one of the CoinNews slots.

1485
01:46:36,684 --> 01:46:54,684
And the slots can all just be totally customizable. The categories that is, they can be like, I like US Weekly, you know, Japan Weekly, because people don't want each other's news, Japanese people can't read English, English people can't read Japanese.

1486
01:46:55,684 --> 01:47:10,684
But yeah, I think this is a perfectly good example of a way for miners to earn revenue using the blockchain. And it's also a great way of showing people that Bitcoin is actually for, can be used for something. It can actually do something.

1487
01:47:10,684 --> 01:47:33,684
Like if you're an Alex Jones type, or whatever your thing, you're worried about COVID, this is an uncensorable medium. And you will get the word out if you, if people adopt this scheme. So yeah, I think it's pretty harmless. And it's pretty cool. We put it in DriveNet. And it's very neat. We're gonna have a new release very soon. So that one will be easier to use.

1488
01:47:34,684 --> 01:47:42,684
Maybe it's worthwhile to make a explanation post or something that just focuses exclusively on CoinNews.

1489
01:47:43,684 --> 01:47:44,684
Yeah, probably should.

1490
01:47:45,684 --> 01:47:59,684
When you say that Bitcoin can be used for something, is what we really mean that currently Bitcoin is being used mainly for saving and payments? And the toxic Maxis?

1491
01:48:00,684 --> 01:48:25,684
Yeah, for money and non-banking use. So this is like, again, gold is good as gold, but gold is also good in electronics, it's in teeth. And it would be further, it would be even better if it could be used to cure cancer, or to do something else, teleport. I'm saying a use other than it's used as an accounting ledger. Because what's the actual use of the thing itself?

1492
01:48:26,684 --> 01:48:46,684
Yes. So at the heart of the toxic Maxi vision for Bitcoin, they think that the only thing that's really good about blockchain is payments, saving and payments, banking, right? So self custody banking, you know, cash, that's the only application of blockchain.

1493
01:48:47,684 --> 01:49:14,684
Well, I mean, I think maybe you could steelman that a bit and say that maybe not the only thing, but that that use case or the value of that use case so far exceeds any and maybe all others combined, that any discussion or focus on all others combined is, you know, not just a waste of time at best or an attack at worst.

1494
01:49:14,684 --> 01:49:16,684
Right.

1495
01:49:25,082 --> 01:49:28,722
picked up the talking points from that.

1496
01:49:29,322 --> 01:49:33,822
I was leading the charge in 2016 and earlier, I was saying the blockchain is mostly not

1497
01:49:33,822 --> 01:49:35,202
useful for these other things.

1498
01:49:36,362 --> 01:49:37,542
as

1499
01:49:44,684 --> 01:49:59,684
That's all it is, is a talking point about. And if you don't have the intelligence behind it, then it's, but it's, but this is good enough for most people to think that because then otherwise, they're going to be doing like healthcare on the blockchain and other stuff.

1500
01:49:59,684 --> 01:50:14,684
So that's, that's the history. That's the historical trajectory of this industry that it went through a long period of like, IBM blockchain. And it was all just, no offense to them. These were some of the most cringe, like, just humiliating.

1501
01:50:14,684 --> 01:50:34,684
And knowing that knowing how cringe and like, like just non reality based they were appreciate that. Looking back, we're talking hundreds and hundreds of millions of dollars squandered and in VC money and money with some of these legacy firms.

1502
01:50:34,684 --> 01:51:02,684
And I remember I was in San Francisco when they had the, I don't know if it was IBM, but one of these big companies, JP Morgan, somebody had a blockchain for healthcare conference, and the city was completely packed. All the hotel rooms were sold out. And I can only imagine how many of things like that repeated. R3 was funded to the tune of what half a billion dollars.

1503
01:51:03,684 --> 01:51:16,684
Huge amounts of money. And they hired Mike Kern, they even hired Peter Todd, sort of indirectly. It's very funny. Remember Corda? Where are they now? You know, that'd be fun. That'd be a fun game to play.

1504
01:51:16,684 --> 01:51:25,684
Paul, do you think in long run equilibrium, the value of Bitcoin sidechains could be more than the value on the main chain?

1505
01:51:26,684 --> 01:51:39,684
But that type of question is like, what are you actually driving at with that question? Because you could again, you have payments sidechain. And then the question is, if magic and compared to a counterfactual world where sidechains were not possible.

1506
01:51:40,684 --> 01:52:01,684
Isn't it also the case that all the assets that are on the sidechain are technically on the main chain also, or even primarily, as they are escrowed in the main chain and catalyzing the value for the assets and the sidechains comes from the main chain?

1507
01:52:02,684 --> 01:52:16,684
I guess what I mean is that the drivechain vision is a vision that there is valuable alternative blockchain design. And it would be good to have Bitcoin able to internalize that value.

1508
01:52:17,684 --> 01:52:37,684
So if there is a good technology in Monero or Zcash, then we should have a sidechain for that so that Bitcoin can absorb all of the potential demand for that technology, instead of having those users go to a different blockchain that doesn't participate in Bitcoin's monetary policy and miners the way that a sidechain does.

1509
01:52:37,684 --> 01:52:53,684
I think the way I would phrase it is that if you're going to bet against innovation and creativity, I think that is a big risk.

1510
01:52:54,684 --> 01:53:07,684
There was a time before Michael Saylor even heard about Bitcoin. And he didn't even know what was coming. It's like the beginning of a West Side Story or Romeo and Juliet or something.

1511
01:53:08,684 --> 01:53:25,684
They don't even know that their life is about to improve enormously. And so since that happened, it means that that can certainly happen again. There could always be something new where you're like, oh, I thought my life was great before, but now it just got 100 times better.

1512
01:53:26,684 --> 01:53:39,684
And so if you bet against creativity and innovation, especially human beings, we are pros at creativity and innovation. And now we have the internet. It's possible. It's very easy to write software now.

1513
01:53:40,684 --> 01:54:01,684
We have IDEs. There's lots of information available on YouTube for people to learn. Kids are not even going to school. They go to school from home. So a homeschooled child who's 12, who's tinkering with his computer and watching Bitcoin YouTube videos all day, Ethereum YouTube videos all day, will be a killer.

1514
01:54:02,684 --> 01:54:11,684
In the future, you'll only have to vaguely describe the parameters you're looking for and an AI will code it up for you.

1515
01:54:12,684 --> 01:54:23,684
So it's very easy to imagine, like, and especially if you think about how few people really understand Bitcoin. From where I'm standing, it seems like very few people do.

1516
01:54:24,684 --> 01:54:36,684
Those are the only people who can really improve it at all. And like, so the way I'm looking at it, we humans have done about 0% of all the things that can be invented.

1517
01:54:36,684 --> 01:54:52,684
We're looking at, it rounds down to the nearest, even if you go out 20 or 30 decimal places, we're rounding down to 0.0000% because even though we've invented fire and we've invented electricity, we just, to me, I think we're at 0%.

1518
01:54:53,684 --> 01:55:06,684
So I say that's something to think about when you say something like, is Bitcoin Core version 25 the absolute optimum thing ever built at all?

1519
01:55:06,684 --> 01:55:14,684
I think the answer to that question is no, and it's not a matter of if, it's a matter of when the better idea comes along.

1520
01:55:15,684 --> 01:55:25,684
And so I think it's only fair to say, here is the process by which you can try the new idea without screwing up Bitcoin.

1521
01:55:26,684 --> 01:55:38,684
And I think that basically, we know that new ideas are often misunderstood because by definition, a new idea is something that no one else has thought of yet.

1522
01:55:39,684 --> 01:55:46,684
So there must be a reason why they didn't think of it yet. And so it's just the fate of a new idea that people rejected at first.

1523
01:55:47,684 --> 01:55:54,684
So what we should do is lower the cost as much as we can for an unpopular idea to be tried with Bitcoin.

1524
01:55:55,684 --> 01:56:00,684
But we currently do the exact opposite of that. We say it must be, the idea must have consensus.

1525
01:56:01,684 --> 01:56:18,684
Even the dumbest person on Twitter with the worst ideas and is the laziest and has the worst, in bad faith, maybe bought off, maybe have sinister motives, maybe a sadist, may just be really, really confused, may just be not very bright.

1526
01:56:19,684 --> 01:56:22,684
We say every single person has to agree before a CTV can be done or something.

1527
01:56:23,684 --> 01:56:33,684
So that would be my first – I have a lot to say about that, but that's my first instinct is the bet against innovation is basically shooting yourself in the head.

1528
01:56:34,684 --> 01:56:38,684
Because by definition, you don't know what innovation is coming up.

1529
01:56:39,684 --> 01:56:49,684
So it's a bet that you're just certain to lose because all you're saying is I haven't thought of every innovation that we'll come up with yet, but that's always the case.

1530
01:56:50,684 --> 01:56:52,684
So it's always a losing bet.

1531
01:56:53,684 --> 01:57:15,684
So it's kind of like a mentality which excessively venerates the invention of Bitcoin to a degree where there's an assumption incorrectly that no improvement will be needed or would be possible to make Bitcoin even much better.

1532
01:57:16,684 --> 01:57:18,684
Plenty of people say that about Bitcoin.

1533
01:57:19,684 --> 01:57:20,684
They're like, why do we have Bitcoin?

1534
01:57:21,684 --> 01:57:22,684
The existing dollar is already digital.

1535
01:57:23,684 --> 01:57:24,684
That's like a Paul Krugman thing.

1536
01:57:25,684 --> 01:57:34,684
So that's – plenty of people – I personally have said that about Twitter and Snapchat when they came out.

1537
01:57:35,684 --> 01:57:36,684
I was like, what's the point of this?

1538
01:57:37,684 --> 01:57:38,684
This is pointless, but it shouldn't be up to me.

1539
01:57:39,684 --> 01:57:44,684
As an end user, I just delay adoption until I get it, I get the point, and then I become an adopter.

1540
01:57:45,684 --> 01:57:46,684
But it's very wrong.

1541
01:57:47,684 --> 01:57:51,684
It's immoral to stop other people from trying those out, other people who see the potential.

1542
01:57:52,684 --> 01:57:53,684
It's a very bad thing to do.

1543
01:57:54,684 --> 01:58:01,684
It's barbaric, and it's against the spirit of not only liberalism and the way…

1544
01:58:02,684 --> 01:58:05,684
All of us have that same story.

1545
01:58:06,684 --> 01:58:20,684
I mean, not all of us, but many, many people have the story about, oh, I heard of Bitcoin at this time or somebody introduced me to it or somebody gave me or tried to give me Bitcoin and I lost it or I didn't get it or what have you.

1546
01:58:21,684 --> 01:58:30,684
So the example Paul is speaking to, I think many, many people can empathize with it in their own life.

1547
01:58:32,684 --> 01:58:35,684
Go ahead with your question or comment, Bitcode.

1548
01:58:36,684 --> 01:58:37,684
Thanks for being here.

1549
01:58:38,684 --> 01:58:39,684
Thank you.

1550
01:58:40,684 --> 01:58:43,684
I love, Paul, what you're saying and totally agree with you.

1551
01:58:44,684 --> 01:58:50,684
Yeah, this is the one thing why I'm here and I'm with other people.

1552
01:58:51,684 --> 01:58:57,684
As a team, we are trying to do something on Bitcoin from a data perspective.

1553
01:58:58,684 --> 01:59:09,684
But, yeah, I see also a kind of a paradox where we say, oh, others are kind of suppressing the innovation.

1554
01:59:10,684 --> 01:59:12,684
They don't like Bitcoin and stuff like that.

1555
01:59:13,684 --> 01:59:19,684
But when you see even within the Bitcoin, you have suppression of innovation, which, you know…

1556
01:59:20,684 --> 01:59:28,684
And by the way, what we are trying to do, I think that if the drivechain comes, we will be enabled on the Bitcoin blockchain.

1557
01:59:29,684 --> 01:59:31,684
It will be much easier for us to innovate.

1558
01:59:32,684 --> 01:59:33,684
And, you know, many, many…

1559
01:59:35,262 --> 01:59:44,062
Like, other things that can be done on top of Bitcoin with platform like drivechains, it's incredible.

1560
01:59:44,062 --> 01:59:52,862
For me, I always say and I always will say, the mass adoption will not come through the token or coin or stuff like that.

1561
01:59:52,942 --> 02:00:07,822
The mass adoption will come when the most of the world will use the Bitcoin blockchain or platform that enables close relationship to the Bitcoin blockchain,

1562
02:00:07,822 --> 02:00:13,901
because it's the most decentralized and has the highest security through that.

1563
02:00:14,701 --> 02:00:25,102
And in many, many things like healthcare records or, you know, companies can use through different means.

1564
02:00:25,102 --> 02:00:38,701
And, you know, it's when widely is used, then you have that network, the hyper Bitcoinization or, you know, the big, big network effect.

1565
02:00:43,901 --> 02:00:49,502
All right. We've been going for two hours here.

1566
02:00:49,502 --> 02:01:02,382
This is Drivechain Spaces. We meet once a week, every Friday at 1 p.m. Eastern to talk about Bitcoin Improvement Proposal 300 and 301.

1567
02:01:02,382 --> 02:01:05,982
Thank you, everyone who is joined today to talk.

1568
02:01:05,982 --> 02:01:10,942
Let's keep on going with open mic, questions and comments.

1569
02:01:11,901 --> 02:01:17,102
Moonsettler, what's on your mind these days regarding Drivechain in general?

1570
02:01:17,102 --> 02:01:26,942
What technical, substantive concerns would you like to share if you're interested?

1571
02:01:26,942 --> 02:01:38,942
No, I'm actually just happy with, you know, that the conversation seems to have progressed from the old trenches a little bit.

1572
02:01:38,942 --> 02:01:52,941
I kind of predicted that the whole thing will eventually, you know, culminate in this MEV debate.

1573
02:01:52,941 --> 02:01:58,941
So things seem to be moving forward.

1574
02:01:58,941 --> 02:02:10,941
More people are beginning to, you know, make long form critiques and discussions and are starting to formalize their statements.

1575
02:02:10,941 --> 02:02:18,941
I think that's great. Like, that's something I really wanted to see happen.

1576
02:02:18,941 --> 02:02:22,941
I guess I just want to see how it goes.

1577
02:02:28,941 --> 02:02:30,941
Well said.

1578
02:02:30,941 --> 02:02:36,941
Like, really, I want to say it here. A lot of people are here.

1579
02:02:36,941 --> 02:02:50,941
Drivechain needs long form critiques, I believe. More long form critiques, more well thought out, more substantialized arguments against it, I believe.

1580
02:02:50,941 --> 02:02:54,941
So everyone feel free to contribute if you can.

1581
02:02:54,941 --> 02:03:08,941
Yeah, absolutely. So today, Professor Warren of the Department of Mathematics at the University of Oregon was here earlier speaking with us very well.

1582
02:03:08,941 --> 02:03:12,941
He published today a Medium article that we put in The Nest. It's still up there in The Nest.

1583
02:03:12,941 --> 02:03:20,941
If you just scroll through the tweets there, you can find it easily, his tweet, and read his article. It's not his first.

1584
02:03:20,941 --> 02:03:42,941
And LayerTwo Labs, in order to generate more critical study of Drivechain, has paid Peter Todd, legendary OG Bitcoiner, to write a long form blog post on his blog about Drivechain, setting forth his critiques and concerns.

1585
02:03:42,941 --> 02:03:52,941
Yep, he hasn't done it yet. So, it's all crickets so far. But we will see.

1586
02:03:52,941 --> 02:03:58,941
Yeah, I'm sure when he's ready, he'll publish in the coming days or weeks, probably.

1587
02:03:59,941 --> 02:04:08,941
And after he's published it, he will do a two hour discussion with Paul on the Stefan Levera podcast.

1588
02:04:08,941 --> 02:04:20,941
So we're excited to have this long form article by Peter Todd, followed by a long form discussion so we can thoroughly understand his views.

1589
02:04:20,941 --> 02:04:24,941
And that'll be great.

1590
02:04:24,941 --> 02:04:31,941
It's interesting that Peter Todd is an advocate for inflation on Bitcoin.

1591
02:04:31,941 --> 02:04:40,941
Not all of the Drivechain critics are publicly in favor of inflation the way Peter Todd is.

1592
02:04:40,941 --> 02:04:49,941
Or maybe some of them don't realize that they're for inflation. They haven't yet worked through the issues.

1593
02:04:49,941 --> 02:04:59,941
But it's great that Peter is clear about that. He takes the controversial view, being pro-inflation, but he's, you know, even though it's a controversial view, he has it.

1594
02:04:59,941 --> 02:05:09,941
So that's good that he's clear on that.

1595
02:05:09,941 --> 02:05:23,941
Well, we could keep on going with open mic questions and comments, if anyone has any.

1596
02:05:23,941 --> 02:05:28,941
If you have a question or comment, come on up.

1597
02:05:28,941 --> 02:05:36,941
I can throw in a slightly unrelated question for Paul if he wants to entertain it.

1598
02:05:37,941 --> 02:05:44,941
So I just wanted to ask if you have read this Bitcredit proposal and what do you think about it?

1599
02:05:44,941 --> 02:05:50,941
I can summarize in a few sentences what I understand about it, if you like.

1600
02:05:50,941 --> 02:05:52,941
What is it called?

1601
02:05:52,941 --> 02:05:54,941
Bitcredit.

1602
02:05:54,941 --> 02:05:59,941
Oh, Bitcredit. Yeah, I don't think I know what it is.

1603
02:05:59,941 --> 02:06:10,941
All right, so basically the idea is that Bitcoin is M0 money and we need an M1 currency.

1604
02:06:11,941 --> 02:06:35,941
And basically they are trying to resurrect the 500-year-old fields of exchange mechanism that was used to, you know, enable global trade, even in times where currency scarcity, availability and cost to settle was high.

1605
02:06:35,941 --> 02:06:42,941
And basically they are trying to cryptographically implement the fields of exchange protocol.

1606
02:06:42,941 --> 02:06:55,941
And this would be basically, you could say, a fixed lifespan Bitcoin IOUs, Bitcoin denominated IOUs that can be traded.

1607
02:06:55,941 --> 02:07:01,941
But they would have a specific lifespan where they have to be settled.

1608
02:07:01,941 --> 02:07:08,941
And this means that, in theory, currency would be created as the economic activity.

1609
02:07:08,941 --> 02:07:11,941
Is this Daniel's idea from Miami?

1610
02:07:11,941 --> 02:07:15,941
I don't know whose idea it is really.

1611
02:07:18,941 --> 02:07:20,941
Oh, I think I do. Well, I know that version.

1612
02:07:20,941 --> 02:07:22,941
And I think that's a good idea that we should try.

1613
02:07:23,941 --> 02:07:35,941
I think my understanding of that idea is like you prove you own a UTXO and then you join like a list, like a credit agency or something.

1614
02:07:35,941 --> 02:07:38,941
And you say, I'm...

1615
02:07:38,941 --> 02:07:54,941
Yeah, no, the Bitcoin idea is actually, it's not one UTXO that, you know, just changes hands of chain because that would still limit the amount of money available to actual on-chain Bitcoin.

1616
02:07:54,941 --> 02:08:02,941
This idea is more like you have real economic goods and services that you negotiate the price of in Bitcoin.

1617
02:08:02,941 --> 02:08:11,941
And you basically create this currency without having Bitcoin because you are actually doing some production or anything like that.

1618
02:08:11,941 --> 02:08:15,941
And you are going to have the Bitcoin when you sell your audit value product.

1619
02:08:15,941 --> 02:08:20,941
But you are actually buying something real, something tangible, something that exists.

1620
02:08:20,941 --> 02:08:27,941
So the whole thing is supposedly tied into, you know, the real economic activity and the real demand for currency.

1621
02:08:27,941 --> 02:08:34,941
So it wants to be able to inflate them while money supply as demand for the currency gets presented.

1622
02:08:34,941 --> 02:08:39,941
But it supposedly will naturally contract back.

1623
02:08:39,941 --> 02:08:43,941
So unlike the current fiat system where money just keeps getting printed and printed.

1624
02:08:43,941 --> 02:08:50,941
And even if you have contraction, it never really contracts back, you know, to what it was before somehow magically.

1625
02:08:51,941 --> 02:08:55,941
In this case, it would be tied to real goods and services in theory again.

1626
02:08:55,941 --> 02:09:05,941
And money would be created as needed as people have a need to have money, but they don't actually yet have it because they are not getting paid yet.

1627
02:09:05,941 --> 02:09:10,941
And so in like two or three months, these things would be settled and you have a chain.

1628
02:09:10,941 --> 02:09:15,941
And everyone in the chain of these bills of exchange is liable for paying it.

1629
02:09:15,941 --> 02:09:21,941
So the more signatures you have, basically, the more people you can sue if push comes to shove.

1630
02:09:21,941 --> 02:09:31,941
And they would have special nodes called Wildcats that countersign so people can feel more safe.

1631
02:09:31,941 --> 02:09:44,941
These people would deal with the legal hassle of non-performing, non-paying that these are, I don't know how you say it.

1632
02:09:44,941 --> 02:09:49,941
The point is they would, in theory, handle this thing in court if needs to be.

1633
02:09:49,941 --> 02:09:57,941
They have the money, they have the holdings, kind of like protobanks.

1634
02:09:57,941 --> 02:10:05,941
They can fork out these bills so that the end user does not have to deal with this hassle.

1635
02:10:06,941 --> 02:10:13,941
They have some ideas about for the end users, they would not actually use these non-fungible bills of exchange.

1636
02:10:13,941 --> 02:10:22,941
They would get something like eCash or a payment channel or something like that issued on it and the end user could use that.

1637
02:10:22,941 --> 02:10:31,941
People could get paid, so a company could hand the bills of exchange conditionally, endorsed.

1638
02:10:31,941 --> 02:10:38,941
I think when you sign on the back of the bill, it was called endorsement, and you could add conditional endorsements.

1639
02:10:38,941 --> 02:10:46,941
So you could say to a Wildcat bank that, listen, here is the 0.1 BTC bills of exchange.

1640
02:10:46,941 --> 02:10:53,941
It was issued by this, they signed it, and I would like you to give me eCash.

1641
02:10:54,941 --> 02:11:06,941
And if I can't return this eCash to you in two months or whatever, then you have this conditional endorsement that in that case,

1642
02:11:06,941 --> 02:11:18,941
this bill of exchange can be used by you to demand the BTC from the other parties and settle that way.

1643
02:11:18,941 --> 02:11:28,941
So you can basically create currency that is not really custodial because it's credit and people can use this credit money,

1644
02:11:28,941 --> 02:11:34,941
very high velocity credit money in their everyday life without ever touching Bitcoin main chain.

1645
02:11:34,941 --> 02:11:46,941
And basically, the whole thing is, sadly, the whole thing is dependent on the legal system to at least tolerate this,

1646
02:11:46,941 --> 02:11:50,941
to tolerate private peer-to-peer contracts between individuals.

1647
02:11:50,941 --> 02:11:57,941
Of course, the enforcement is never peer-to-peer with the state, but the legal system recognizes contracts between peers,

1648
02:11:57,941 --> 02:11:59,941
and in this sense, it is peer-to-peer.

1649
02:11:59,941 --> 02:12:09,941
So the legal system has to tolerate this or assist in the enforcement, but in theory, the parties would badly resort to that.

1650
02:12:09,941 --> 02:12:16,941
And supposedly, these bills of exchange system worked perfectly great back in the gold era.

1651
02:12:16,941 --> 02:12:21,941
So I'm not sure if you recognize what I'm saying from that.

1652
02:12:21,941 --> 02:12:25,941
Yeah, it's pretty difficult to follow actually, but it reminds me a lot.

1653
02:12:25,941 --> 02:12:28,941
I mean, one thing is I don't understand.

1654
02:12:28,941 --> 02:12:33,941
Just because it's linked to goods and services, the money supply could still expand all the time.

1655
02:12:33,941 --> 02:12:37,941
I think it sort of reminds me of old Ripple.

1656
02:12:37,941 --> 02:12:43,941
I think in general, we should try – I'm very pluralist, so I think we should try everything.

1657
02:12:43,941 --> 02:12:51,941
We should try lots of different things, and I think everything has probably some niche where it would survive and thrive.

1658
02:12:52,941 --> 02:13:01,941
Yes, I think the main idea behind this proposal is that you want money supply that is more elastic to real economic activity,

1659
02:13:01,941 --> 02:13:10,941
or you get all the deflationary horror stories and the periods where gold was money and gold was scarce,

1660
02:13:10,941 --> 02:13:16,941
and people had to somehow deal with that, that simply money was scarce.

1661
02:13:16,941 --> 02:13:20,941
I mean, there is only 21 million bitcoins supposedly that will ever exist,

1662
02:13:20,941 --> 02:13:25,941
and we know that 21 million will never be available, practically speaking.

1663
02:13:25,941 --> 02:13:35,941
So the entire world would have to run on, I don't know, 10 million bitcoins that is constantly getting tied up and stuff.

1664
02:13:35,941 --> 02:13:44,941
It's just hard to imagine how it would – for me, it was very hard to imagine how would bitcoin function in a hyper-bitcoinized world

1665
02:13:44,941 --> 02:13:52,941
with on-chain settlement like this, when we see how currency and credit hungry the world is.

1666
02:13:52,941 --> 02:13:59,941
So if we are looking at the fiat system, we are seeing that even though dollars are almost freely printed,

1667
02:13:59,941 --> 02:14:03,941
like instant amounts of dollars are printed, everyone is bitching about this,

1668
02:14:03,941 --> 02:14:08,941
the world is so hungry for dollars that it's never enough.

1669
02:14:08,941 --> 02:14:10,941
And that's a bit scary.

1670
02:14:10,941 --> 02:14:19,941
So if people take this perspective and think about how scarce bitcoin is and how immovable, immutable this supply is,

1671
02:14:19,941 --> 02:14:24,941
without something like this that adds some elasticity to it.

1672
02:14:25,941 --> 02:14:30,941
But the big question I guess that everyone would have is what makes this system return,

1673
02:14:30,941 --> 02:14:37,941
what makes this system contract when the economic activity declines, like it should naturally contract.

1674
02:14:37,941 --> 02:14:43,941
And the idea with this is that every bill of exchange would have a limited lifespan,

1675
02:14:43,941 --> 02:14:45,941
and people would need to issue new ones.

1676
02:14:45,941 --> 02:14:49,941
So far the economic activity keeps going, growing, people can issue new ones,

1677
02:14:49,941 --> 02:14:52,941
but eventually it has to contract, that's the idea.

1678
02:14:52,941 --> 02:15:01,941
I'm not sure how this is actually enforced and how sure one can be of the reality of the goods and services.

1679
02:15:01,941 --> 02:15:06,941
These are different topics because these are not rules that you can enforce on a blockchain.

1680
02:15:06,941 --> 02:15:08,941
I think that's clear.

1681
02:15:08,941 --> 02:15:14,941
So as you said, I think we should look at a lot of things and try a lot of things,

1682
02:15:14,941 --> 02:15:17,941
and this is something currently very interesting to me.

1683
02:15:17,941 --> 02:15:30,941
And I was just wondering how could sidechains be used to make this also less hanging in the air,

1684
02:15:30,941 --> 02:15:39,942
or less, I don't know how to say it, but basically this proposal naturally would not necessarily have a centralized ledger,

1685
02:15:39,942 --> 02:15:42,942
which is very good for scaling purposes,

1686
02:15:42,942 --> 02:15:51,942
but also it makes the fungibility, the interchangeability, the transactability of these bills more questionable.

1687
02:15:51,942 --> 02:15:53,942
So, I don't know.

1688
02:16:00,942 --> 02:16:03,942
That was very interesting. Thank you for sharing.

1689
02:16:03,942 --> 02:16:16,942
Yeah, I don't know. It seems pretty weird. I don't think I understand it enough.

1690
02:16:16,942 --> 02:16:19,942
I can maybe help out a little bit.

1691
02:16:19,942 --> 02:16:27,942
At the heart of objections to Bitcoin from some people in the Austrian school,

1692
02:16:27,942 --> 02:16:39,942
there is a concern that because of Bitcoin's fixed supply, there is no price-responsive supply changes,

1693
02:16:39,942 --> 02:16:47,942
and therefore Bitcoin is less likely, in the view of these people, to monetize than gold.

1694
02:16:47,942 --> 02:16:53,942
Because gold has price-responsive supply, meaning demand-responsive supply.

1695
02:16:53,942 --> 02:16:57,942
When there's a higher price for gold, then the issuance rate increases,

1696
02:16:57,942 --> 02:17:03,942
and this lowers the long-term volatility of the purchasing power of a unit of gold.

1697
02:17:03,942 --> 02:17:11,942
With Bitcoin, because of difficulty adjustment and supply cap, there is no demand-responsive supply.

1698
02:17:11,942 --> 02:17:19,942
Supply is fixed, and therefore the volatility of Bitcoin is higher than it would have been

1699
02:17:19,942 --> 02:17:25,942
if Satoshi had implemented some kind of demand-responsive supply mechanism.

1700
02:17:25,942 --> 02:17:31,942
However, demand for Bitcoin is also based on the fact that because of its fixed supply,

1701
02:17:31,942 --> 02:17:38,942
the return to holding is higher than it would be if supply were demand-responsive.

1702
02:17:38,942 --> 02:17:43,942
So, there's a question in the view of the Austrian thinkers like Lawrence White at George Mason University.

1703
02:17:43,942 --> 02:17:46,942
They wonder, which is a better money, gold or Bitcoin?

1704
02:17:46,942 --> 02:17:53,942
On the one hand, gold has this smooth return because of the demand-responsive supply.

1705
02:17:53,942 --> 02:17:59,942
On the other hand, there's always more of gold, and therefore the return from holding it a long time is lower

1706
02:17:59,942 --> 02:18:04,942
than the return that would be achieved if there was a fixed supply.

1707
02:18:04,942 --> 02:18:08,942
So, maybe that's what Bitcredit is aimed at doing,

1708
02:18:08,942 --> 02:18:18,942
is trying to smooth the volatility of Bitcoin's purchasing power to make it more likely to be monetized.

1709
02:18:18,942 --> 02:18:23,942
That's one of the aims that it tries to do.

1710
02:18:23,942 --> 02:18:32,942
The other, as I understand it, is to bridge the gap between what real-world economic actors today in the world,

1711
02:18:32,942 --> 02:18:36,942
what makes the world go around and what makes production happen,

1712
02:18:36,942 --> 02:18:42,942
is that people have access to currency before they actually would get it.

1713
02:18:42,942 --> 02:18:53,942
So, this seems to be a crucial piece that is required for the world to function and for volume to be added in production.

1714
02:18:53,942 --> 02:18:58,942
This can form an entire chain of these value-adds.

1715
02:18:58,942 --> 02:19:03,942
That's the other thing that this proposal, I believe, tries to address.

1716
02:19:03,942 --> 02:19:10,942
But I wanted to... I forgot the other thing I wanted to add.

1717
02:19:13,200 --> 02:19:22,200
Moon, what you described in this protocol is exactly how the current financial system works. Credit and debt.

1718
02:19:22,200 --> 02:19:33,200
The big difference is that you have now central banks that basically can issue currency at will, and it never ever contracts back.

1719
02:19:34,200 --> 02:19:42,200
I mean, we can see it. And people that do this money printing, everybody knows the meme about the Cantillon effect,

1720
02:19:42,200 --> 02:19:47,200
the closer you are to the money printer, the more you benefit from it.

1721
02:19:47,200 --> 02:19:51,200
So, this is a much more peer-to-peer system. You don't have a central bank.

1722
02:19:52,200 --> 02:20:05,200
Basically, companies, corporations, reputable corporations that do business, issue their currency that they are under-signing, that they will make good on these notes.

1723
02:20:05,200 --> 02:20:18,200
And as they trade it around, the others who are also signing, that they will make good on these notes, are also staking their reputation and putting themselves out to legal exposure.

1724
02:20:19,200 --> 02:20:30,200
So, at its core, it's basically trying to undo how central banks basically attacked money and the world, so to speak.

1725
02:20:30,200 --> 02:20:36,200
So, how they captured the entire thing. This proposal, as I understand, tries to undo the very first step.

1726
02:20:37,200 --> 02:20:44,200
And that is why it's very interesting and a bit different. But I also have a lot of questions about it, mind you.

1727
02:20:44,200 --> 02:20:47,200
I'm not saying this is starting to work.

1728
02:20:49,200 --> 02:21:04,200
Yeah, there are so many questions because the credit and debt is mostly around the world, not every single financial system in every country.

1729
02:21:04,200 --> 02:21:08,200
But that's how the current financial system works.

1730
02:21:09,200 --> 02:21:14,200
I would be very skeptical on something like that.

1731
02:21:14,200 --> 02:21:20,200
Someone said that actually credit and IOUs predate commodity money.

1732
02:21:20,200 --> 02:21:29,200
So, everyone seems to think that commodity money was first used and credit is somewhat of a creation.

1733
02:21:29,200 --> 02:21:31,200
But others argue it's actually no.

1734
02:21:31,200 --> 02:21:40,200
Actually, IOUs, favors, mental ledgers of favors, owed, predate commodity money, actually.

1735
02:21:40,200 --> 02:21:46,200
And commodity money was a technological invention that allowed civilization to scale beyond the Dunbar number.

1736
02:21:46,200 --> 02:21:49,200
I don't know if I pronounced it the Dunbar number.

1737
02:21:49,200 --> 02:21:55,200
So, it was a scaling technology, actually, so that we can make our civilization larger.

1738
02:21:56,200 --> 02:21:59,200
And the other thing I wanted to say.

1739
02:21:59,200 --> 02:22:05,200
So, I, too, was pretty clueless about this whole thing, I'm going to admit.

1740
02:22:05,200 --> 02:22:10,200
And I, too, had used credit as a nasty word.

1741
02:22:10,200 --> 02:22:13,200
So, we have a tendency for this in Bitcoin.

1742
02:22:13,200 --> 02:22:17,200
I believe that we say everything is shit because of credit.

1743
02:22:18,200 --> 02:22:26,200
And the thing is, the thing that made me realize that this may not actually be so,

1744
02:22:26,200 --> 02:22:34,200
was when I basically accidentally realized that you can make eCash non-custodial if you turn it around.

1745
02:22:34,200 --> 02:22:41,200
So, you basically can emulate the credit card use case very privately.

1746
02:22:41,200 --> 02:22:49,200
So, we all know credit cards are horrible because they create a perverse game theory

1747
02:22:49,200 --> 02:22:55,200
for the places that accept it will raise the prices and work it inside them.

1748
02:22:55,200 --> 02:23:00,200
Basically, people that try to use cash are going to pay most, but eventually everyone will pay.

1749
02:23:00,200 --> 02:23:03,200
The credit card company, or Amazon, right?

1750
02:23:03,200 --> 02:23:08,200
Just a function, and they created this whole thing that basically captured the world.

1751
02:23:08,200 --> 02:23:17,200
And you have no privacy, like zero privacy, and all sorts of Orwellian bullshit can come out of this with further regulation.

1752
02:23:17,200 --> 02:23:26,200
It's not true that we need CBDC as a technological invention to restrict your spending and travels and whatever.

1753
02:23:26,200 --> 02:23:30,200
So, I think the current technological stack is more than capable of it.

1754
02:23:30,200 --> 02:23:32,200
All it needs is regulation.

1755
02:23:32,200 --> 02:23:34,200
But that's a tangent.

1756
02:23:34,200 --> 02:23:40,200
So, what I wanted to say that when I realized that actually if you issue eCash as credit,

1757
02:23:40,200 --> 02:23:42,200
and it does not actually represent anything.

1758
02:23:42,200 --> 02:23:43,200
It's not an IOU.

1759
02:23:43,200 --> 02:23:45,200
That's the funny thing about credit.

1760
02:23:45,200 --> 02:23:46,200
It's not an IOU.

1761
02:23:46,200 --> 02:23:48,200
It's a line of credit, literally.

1762
02:23:48,200 --> 02:23:52,200
When you spend it, you start to owe the issuer.

1763
02:23:52,200 --> 02:23:58,200
But if you can present it in whole, the balance that you agreed on,

1764
02:23:58,200 --> 02:24:03,200
your line of credit can be presented at the end of whatever settlement period, like every month, 15.

1765
02:24:03,200 --> 02:24:09,200
If you can present it without any amount missing, then you don't owe him anything.

1766
02:24:09,200 --> 02:24:16,200
Basically, it gives unprecedented privacy to Bitcoiners in their daily spending,

1767
02:24:16,200 --> 02:24:21,200
and it is not a raggable relationship, like with Fedimints.

1768
02:24:21,200 --> 02:24:27,200
If anyone really thinks that Fedimints are somehow not raggable, I mean...

1769
02:24:27,200 --> 02:24:32,200
So, anyhow, I stopped using credit as a dirty word.

1770
02:24:32,200 --> 02:24:33,200
That's what I wanted to say.

1771
02:24:33,200 --> 02:24:39,200
I dug into it a little bit deeper, and I pretty quickly landed on this bitcredit idea,

1772
02:24:39,200 --> 02:24:43,200
which is, by the way, like 100 steps further than I got on my own.

1773
02:24:43,200 --> 02:24:49,200
But I was more open-minded at that point because I already figured it out on my own

1774
02:24:49,200 --> 02:24:53,200
that credit can actually be a very powerful tool for privacy and freedom.

1775
02:24:54,200 --> 02:25:00,200
But, of course, we know this is not perfect and not 100% compatible with the blockchain world,

1776
02:25:00,200 --> 02:25:07,200
where we want kind of everything verifiable and enforced without the legal system.

1777
02:25:07,200 --> 02:25:13,200
So that's a big difference here, I believe, that somehow, if you involve credit,

1778
02:25:13,200 --> 02:25:20,200
you start working the fabric of society and the legal system to a degree.

1779
02:25:20,200 --> 02:25:23,200
Because, of course, you can do secure credit on Bitcoin.

1780
02:25:23,200 --> 02:25:26,200
You can basically create...

1781
02:25:26,200 --> 02:25:30,200
If you think about it, it's an extremely flexible and private lightning channel.

1782
02:25:30,200 --> 02:25:31,200
You create an escrow.

1783
02:25:31,200 --> 02:25:35,200
It's still not as trustless as lightning, basically,

1784
02:25:35,200 --> 02:25:39,200
but you can make it very trust-minimized and reputation-based.

1785
02:25:39,200 --> 02:25:44,200
All the stuff that you want to do with services and whatnot in an uncapped world,

1786
02:25:44,200 --> 02:25:48,200
it would involve reputation and some level of trust, by the way.

1787
02:25:48,200 --> 02:25:50,200
So blockchain is really special.

1788
02:25:50,200 --> 02:25:53,200
And so what I wanted to say, you can do secure credit

1789
02:25:53,200 --> 02:26:00,200
and you can emulate this uncapped paradise on Bitcoin with very, very private credit.

1790
02:26:00,200 --> 02:26:02,200
But the thing is that this does not scale.

1791
02:26:02,200 --> 02:26:10,200
So we are coming back to the point where we are facing the limitations of on-chain Bitcoin

1792
02:26:10,200 --> 02:26:17,200
is just keep us from extorting these things properly

1793
02:26:17,200 --> 02:26:22,200
because they keep forcing us back into trusted relationships

1794
02:26:22,200 --> 02:26:28,200
and also relationships where you are basically beholden to the legal system.

1795
02:26:28,200 --> 02:26:31,200
And that always comes with a price, always seems to come with a price,

1796
02:26:31,200 --> 02:26:33,200
like exchanges, custodians.

1797
02:26:33,200 --> 02:26:37,200
And I don't think I have to iterate this very long.

1798
02:26:37,200 --> 02:26:39,200
Everyone knows what I'm talking about.

1799
02:26:39,200 --> 02:26:45,200
So when politicians feel like they got the upper hand to set the terms and conditions

1800
02:26:45,200 --> 02:26:49,200
of how you can interact with people who want to provide you liquidity

1801
02:26:49,200 --> 02:26:55,200
or whatever UTXO guardianship service, they tend to abuse this.

1802
02:26:55,200 --> 02:27:01,200
So this is where this world is going.

1803
02:27:01,200 --> 02:27:03,200
Right.

1804
02:27:03,200 --> 02:27:11,200
We agree that it would be very bad for Bitcoin to scale primarily in a custodial manner.

1805
02:27:11,200 --> 02:27:16,200
And we also agree that credit is not a bad thing.

1806
02:27:16,200 --> 02:27:27,200
Credit, when it arises between voluntary parties, is mutually beneficial.

1807
02:27:27,200 --> 02:27:29,200
All right.

1808
02:27:29,200 --> 02:27:31,200
Welcome to the stage, Alex.

1809
02:27:31,200 --> 02:27:32,200
It's always great to have you here.

1810
02:27:32,200 --> 02:27:34,200
I'm on Settler.

1811
02:27:34,200 --> 02:27:39,200
Go ahead with your questions and comments.

1812
02:27:40,200 --> 02:27:43,200
Thank you, guys.

1813
02:27:43,200 --> 02:27:50,200
A few weeks ago, it's kind of an inverted, not rug pullable system.

1814
02:27:50,200 --> 02:27:58,200
So can you speak to whether or not changes to the Bitcoin would be required to enable bitcredit?

1815
02:27:58,200 --> 02:28:01,200
And how does it compare to your dark pool protocol?

1816
02:28:01,200 --> 02:28:05,200
Is it related at all?

1817
02:28:05,200 --> 02:28:07,200
I'm sorry, what pool?

1818
02:28:07,200 --> 02:28:08,200
Dark pool, right?

1819
02:28:08,200 --> 02:28:09,200
Like, is it related to a dark pool?

1820
02:28:09,200 --> 02:28:10,200
Dark pool.

1821
02:28:10,200 --> 02:28:11,200
Yeah.

1822
02:28:11,200 --> 02:28:13,200
So not really.

1823
02:28:13,200 --> 02:28:23,200
Basically, what I was talking about is just the idea that instead of you using debit eCash,

1824
02:28:23,200 --> 02:28:30,200
like when you actually deposit with a mint some amount of SOTS, your own chain on Lightning,

1825
02:28:30,200 --> 02:28:35,200
instead, the mint can issue you a line of credit in the form of eCash.

1826
02:28:35,200 --> 02:28:38,200
And it basically is not actually an IOU.

1827
02:28:38,200 --> 02:28:40,200
So this is just a line of credit.

1828
02:28:40,200 --> 02:28:43,200
When you spend it, then you start to owe the mint.

1829
02:28:43,200 --> 02:28:45,200
You have to settle after a certain period.

1830
02:28:45,200 --> 02:28:52,200
And this creates the possibility for very private, very, very, very high-velocity money.

1831
02:28:52,200 --> 02:28:58,200
So really something that is suitable for daily payments, like buying ice cream and coffee.

1832
02:28:59,200 --> 02:29:04,200
And what I said is not ruggable, because basically, what will the mint rug?

1833
02:29:04,200 --> 02:29:05,200
Your line of credit?

1834
02:29:05,200 --> 02:29:06,200
Seriously?

1835
02:29:06,200 --> 02:29:08,200
Like, that's his business.

1836
02:29:08,200 --> 02:29:12,200
He's collecting fees on providing you this kind of credit.

1837
02:29:12,200 --> 02:29:15,200
And yeah, the Secure's version is different.

1838
02:29:15,200 --> 02:29:16,200
Yes.

1839
02:29:16,200 --> 02:29:17,200
No, I understand.

1840
02:29:17,200 --> 02:29:22,200
But is it basically a version of the Fedimint protocol, where instead of moving SOTS around,

1841
02:29:23,200 --> 02:29:29,200
Fedimint acts like a credit card issuer, where the Fedimint will settle Lightning payments,

1842
02:29:29,200 --> 02:29:33,200
while you will incur more and more debt with the Fedimint?

1843
02:29:33,200 --> 02:29:34,200
Is that the idea?

1844
02:29:34,200 --> 02:29:36,200
Or is it different from the Fedimint protocol?

1845
02:29:36,200 --> 02:29:39,200
Yes, but it doesn't actually have to be a federation at that point.

1846
02:29:39,200 --> 02:29:46,200
Because like I said, the things that you are trusting them with are very, very limited.

1847
02:29:47,200 --> 02:29:53,200
But what's the model for them to interoperate with the rest of the Lightning and each other?

1848
02:29:53,200 --> 02:29:55,200
And what is the business model for issuers?

1849
02:29:55,200 --> 02:29:56,200
It's the same.

1850
02:29:56,200 --> 02:30:02,200
So, you could basically just, right now, you could start Cashu, let's say.

1851
02:30:02,200 --> 02:30:04,200
Cashu is simpler than Fedimint.

1852
02:30:04,200 --> 02:30:06,200
You could just start a Cashu mint.

1853
02:30:06,200 --> 02:30:12,200
And you could just print eCash out of nothing, the TIN-R, and give it to me.

1854
02:30:12,200 --> 02:30:20,200
And we agree on that, that I will present you, like 45 days from now, we could give it in writing,

1855
02:30:20,200 --> 02:30:24,200
that I will present to you the exact amount that you gave me,

1856
02:30:24,200 --> 02:30:29,200
or I will pay 5% fine on the difference, whether it's plus or minus.

1857
02:30:29,200 --> 02:30:36,200
So, I may have more eCash or less eCash, somewhat, but I pay 5% on the difference to you.

1858
02:30:36,200 --> 02:30:39,200
And that's how we will keep this rolling.

1859
02:30:39,200 --> 02:30:47,200
And if I don't, then either I have some collateral, because we don't have a case relationship,

1860
02:30:47,200 --> 02:30:49,200
or you are actually a financial provider.

1861
02:30:49,200 --> 02:30:55,200
It's fine with me, you know, showing my ID, or whatever, and getting it to a legal contract,

1862
02:30:55,200 --> 02:30:57,200
and then forcing it into a legal system.

1863
02:30:57,200 --> 02:30:58,200
That is an alternative.

1864
02:30:58,200 --> 02:31:00,200
That's the unsecured version.

1865
02:31:00,200 --> 02:31:02,200
But you still won't know anything about my spending.

1866
02:31:02,200 --> 02:31:07,200
So, you know, my actual spending, even though, if you have a case relationship,

1867
02:31:07,200 --> 02:31:11,200
it's almost like I have an account with you, but it's really just a line of credit.

1868
02:31:11,200 --> 02:31:14,200
There is no account in eCash, thank God.

1869
02:31:14,200 --> 02:31:22,200
So, basically, everything I do with this eCash system is exactly the same as it works right now.

1870
02:31:22,200 --> 02:31:27,200
The only difference is that you actually have to have that liquidity, right?

1871
02:31:27,200 --> 02:31:31,200
So, I'm not giving you the money that I will spend from your mint.

1872
02:31:31,200 --> 02:31:36,200
You are actually providing the liquidity, and you are going to, of course, charge fees on that,

1873
02:31:36,200 --> 02:31:39,200
especially if I roll a deficit.

1874
02:31:39,200 --> 02:31:45,200
So, if I roll a deficit over to next month, then you are really going to make your money on that,

1875
02:31:45,200 --> 02:31:47,200
just like with, you know, credit cards.

1876
02:31:47,200 --> 02:31:50,200
It's exactly the same thing as with credit cards.

1877
02:31:50,200 --> 02:31:56,200
But the financial privacy, the permissionless nature, so we know the story about the Canadian truckers.

1878
02:31:56,200 --> 02:31:58,200
You can't Canadian trucker someone.

1879
02:31:58,200 --> 02:31:59,200
You can remove their line of credit.

1880
02:31:59,200 --> 02:32:01,200
They will go to somewhere else.

1881
02:32:01,200 --> 02:32:05,200
You can't actually hold their money hostage in this system.

1882
02:32:08,200 --> 02:32:10,200
Of course, it not solves every problem.

1883
02:32:10,200 --> 02:32:12,200
So, it does not solve the saving use case.

1884
02:32:12,200 --> 02:32:14,200
I'm talking about extreme high-velocity money.

1885
02:32:14,200 --> 02:32:20,200
And you can actually do take this entire thing and place it on top of Bitcredit.

1886
02:32:20,200 --> 02:32:31,200
So, instead of, you know, Layer 1 Bitcoin, you could actually make this entire thing like M1 Bitcredit based eCash.

1887
02:32:31,200 --> 02:32:42,200
And so, the scalability just really, really blows up with this idea that we, to a certain extent,

1888
02:32:42,200 --> 02:32:48,200
embrace credit with, you know, caveats to the whole thing.

1889
02:32:48,200 --> 02:32:53,200
And what I wanted to say about all this.

1890
02:32:53,200 --> 02:33:01,200
So, the point is someone has to run a lightning node and someone has to have funds in a lightning channel, you know.

1891
02:33:01,200 --> 02:33:05,200
And when you spend this credit, it actually becomes real.

1892
02:33:05,200 --> 02:33:07,200
It becomes real Bitcoin.

1893
02:33:07,200 --> 02:33:15,200
People have asked me what stops the mint to issue more credit than it has, you know, nothing.

1894
02:33:15,200 --> 02:33:16,200
And it's not interesting.

1895
02:33:16,200 --> 02:33:18,200
The line of credit is not an IOU.

1896
02:33:18,200 --> 02:33:21,200
It's completely different when you are using the BitBase eCash.

1897
02:33:21,200 --> 02:33:23,200
I don't know if that answers your question.

1898
02:33:23,200 --> 02:33:25,200
Yes, I think it does.

1899
02:33:25,200 --> 02:33:28,200
But I just am thinking more on the practical side.

1900
02:33:28,200 --> 02:33:36,200
So, let's say, for example, you have an investor who wants to participate in the Bitcoin payment space, right?

1901
02:33:36,200 --> 02:33:38,200
Today, they can create a lightning service provider.

1902
02:33:38,200 --> 02:33:42,200
Maybe they can become an ASP for ARK.

1903
02:33:42,200 --> 02:33:51,200
But what you're talking about sounds like any existing lightning service provider or any future ASP for ARK can just add this service to their wallet and say,

1904
02:33:51,200 --> 02:33:57,200
you can just get this credit SATS, you know, and use us as a credit card, too.

1905
02:33:57,200 --> 02:34:01,200
In other words, pay now, like spend now, pay later.

1906
02:34:01,200 --> 02:34:03,200
Probably the same premise as credit cards have, right?

1907
02:34:03,200 --> 02:34:05,200
Which is pay now and spend later.

1908
02:34:05,200 --> 02:34:10,200
Yes, and you could actually, I believe, do it in a way if you have ARK.

1909
02:34:10,200 --> 02:34:25,200
I could actually take like a 1 million SAT VTXO, and I could probably sign it over conditionally, sign a transaction that will transfer it to an escrow contract where it can be arbitrated.

1910
02:34:25,200 --> 02:34:31,200
You know, like we have trusted, reputable, Oracle's services, true Oracle services.

1911
02:34:32,200 --> 02:34:40,200
I don't want to get into a lot of technical details, but basically, we can prove out publicly who is cheated if someone tries to cheat.

1912
02:34:40,200 --> 02:34:46,200
So it's a funny thing about eCash systems that they are very private, but you can actually prove a lot of things.

1913
02:34:46,200 --> 02:34:52,200
If someone is bullshitting, you can prove that in challenge response group sessions.

1914
02:34:52,200 --> 02:34:55,200
If someone stops responding, then he's the bad guy.

1915
02:34:55,200 --> 02:34:56,200
So that's good.

1916
02:34:56,200 --> 02:35:03,200
Could you see something like reputations being established on top of Nostr keys?

1917
02:35:03,200 --> 02:35:10,200
So, for example, rather than these mints asking for your ID or…

1918
02:35:10,200 --> 02:35:12,200
Yeah, for the arbitrators.

1919
02:35:12,200 --> 02:35:20,200
In other words, to make onboarding easier, you just show up with your Nostr key and you say, look, this is my identity.

1920
02:35:20,200 --> 02:35:23,200
This is my Nostr public NPUB, right?

1921
02:35:23,200 --> 02:35:25,200
No, that's not important.

1922
02:35:25,200 --> 02:35:36,200
Listen, so if you have, again, if you have this conditional signed transaction to a certain arbitration contract,

1923
02:35:36,200 --> 02:35:41,200
and you both bring your own trusted, reputable Oracle that you agree on.

1924
02:35:41,200 --> 02:35:44,200
So you both bring a trusted, reputable Oracle you agree on.

1925
02:35:44,200 --> 02:35:47,200
You enter into a 304 contract.

1926
02:35:47,200 --> 02:35:54,200
This is a transaction that puts it into that output.

1927
02:35:54,200 --> 02:35:56,200
Basically, this does not need to happen.

1928
02:35:56,200 --> 02:36:05,200
What I'm trying to say is, if you have ARK, then you can keep this the same way off-chain as you keep anything else off-chain.

1929
02:36:05,200 --> 02:36:19,200
So what you do is that you basically sign a transaction with the mint that could be used to transfer this 1 million Satoshi UTXO to an arbitration contract.

1930
02:36:19,200 --> 02:36:27,200
And the mint will give you the 1 million Satoshi eCash, basically.

1931
02:36:28,200 --> 02:36:39,200
And if you get this 1 million Satoshi eCash and you spend it, then you actually have to return it to the mint at the end of the period.

1932
02:36:39,200 --> 02:36:46,200
Or he will use your transaction to send it to the arbitration contract, and then you will be tried and judged.

1933
02:36:46,200 --> 02:36:57,200
And unless you can prove that you actually do have the eCash and you are presenting it to the mint and it's there, and he can prove that you already spent that with him.

1934
02:36:57,200 --> 02:36:59,200
So, like I said, fraud proofs are very complicated.

1935
02:36:59,200 --> 02:37:03,200
I don't want to go into the technical details, but it's figured out.

1936
02:37:03,200 --> 02:37:06,200
So you can do fraud proof sessions, you can do this arbitration.

1937
02:37:06,200 --> 02:37:09,200
But the main point is you can keep the whole thing off-chain.

1938
02:37:09,200 --> 02:37:17,200
So you can actually have a relationship with the mint or the ASP where you don't trust each other, you don't even know each other.

1939
02:37:17,200 --> 02:37:23,200
But you both have to bring a trusted, reputable arbitrator, and you both have to agree on that.

1940
02:37:23,200 --> 02:37:25,200
That is how this credit line is created.

1941
02:37:25,200 --> 02:37:34,200
So, like, the amount of scaling and privacy and velocity that you can get out of this is absolutely mind-boggling.

1942
02:37:35,200 --> 02:37:45,200
And these things can be, you know, really supercharging each other.

1943
02:37:45,200 --> 02:37:57,200
But we know that with these covenant-based UTXO sharing schemes, you still kind of have a problem with block space available to people to some extent.

1944
02:37:57,200 --> 02:38:03,200
So you still are largely optimistic about all of this.

1945
02:38:03,200 --> 02:38:07,200
And this is my main motivation why I'm interested in sidechains.

1946
02:38:07,200 --> 02:38:16,200
Because especially for low-value virtual UTXOs, I believe sidechains could be a viable alternative instead of mainchain.

1947
02:38:16,200 --> 02:38:23,200
Because it's much more plausible that you can actually, you know, unilaterally settle if someone is trying to cheat on you.

1948
02:38:23,200 --> 02:38:30,200
And you can actually enforce your property right in an economically viable way on a sidechain.

1949
02:38:30,200 --> 02:38:32,200
And again, these are the low-value UTXOs.

1950
02:38:32,200 --> 02:38:37,200
So you don't have to do it with your savings or your main savings account or whatever.

1951
02:38:37,200 --> 02:38:47,200
So this entire thing, I believe, people are just starting to scratch the surface of what you can do with these things if you combine them.

1952
02:38:47,200 --> 02:38:51,200
Like combining sidechains and ORC and eCash, credit eCash.

1953
02:38:51,200 --> 02:38:58,200
And how self-sovereign, and how permissionless, and how private, and how high-velocity this whole thing can get.

1954
02:38:58,200 --> 02:39:06,200
Moonsettler, if I understand you correctly, when these credit sets are issued by the mint to the user, the user cannot…

1955
02:39:07,764 --> 02:39:14,764
Like, why are we even talking about the user having their own presence on-chain or off-chain? In other words, aren't these things…

1956
02:39:14,764 --> 02:39:23,764
You don't have to. I'm talking about the situation where the mint and the user does not have a KEC-trusted relationship.

1957
02:39:23,764 --> 02:39:29,764
So the mint has to trust you. If you KEC and have a legal contract with them, then he has to trust you.

1958
02:39:29,764 --> 02:39:37,764
If you, however, just want anonymously a line of credit, then there has to be some mechanism that replaces the legal system.

1959
02:39:37,764 --> 02:39:47,764
And I believe Bitcoin, at its core, is a mechanism that replaces or supersedes the legal system, truly, for these settlements that we do on-chain and are enforceable on-chain.

1960
02:39:47,764 --> 02:39:49,764
I think that's the entire point of Bitcoin, really.

1961
02:39:50,764 --> 02:40:00,764
So, yes, you can revert back to the legal system, but if you want a little bit more out of it, or you, for some reason, don't want to have a KEC relationship,

1962
02:40:00,764 --> 02:40:04,764
then it is still theoretically possible to get a secured line of credit.

1963
02:40:04,764 --> 02:40:13,764
But then the other party has to enforce its property rights on-chain. That's unavoidable in that case.

1964
02:40:13,764 --> 02:40:16,764
And we have a serious problem with scaling that.

1965
02:40:16,764 --> 02:40:24,764
So if you put these escrow contracts, if you put them in, like, again, we are talking about credit card use case, right?

1966
02:40:24,764 --> 02:40:34,764
So most people have a little bit more life savings than what they have on the roughly monthly spending budget would be in credit card amount, right?

1967
02:40:34,764 --> 02:40:37,764
So what you spend in a month, roughly.

1968
02:40:37,764 --> 02:40:45,764
And basically, you are getting your paycheck, you are replenishing, you are paying, and maybe you are rolling over a surplus or deficit here or there.

1969
02:40:45,764 --> 02:40:52,764
But basically, you are having a stable balance, and you have a savings account and checking account.

1970
02:40:52,764 --> 02:40:59,764
And so basically, right now, currently, we can't really scale the secured credit use case to billions of people.

1971
02:40:59,764 --> 02:41:03,764
Like, that's not realistic. It's much more robust than Lightning.

1972
02:41:03,764 --> 02:41:14,764
Like, Lightning channels are much more fragile, much more likely to get closed on you if you go a bit inactive or not respond or respond wrongly or whatever.

1973
02:41:14,764 --> 02:41:18,764
Lightning channels have basically no privacy to your channel peers.

1974
02:41:18,764 --> 02:41:21,764
They are very fragile and finicky.

1975
02:41:21,764 --> 02:41:24,764
And this is basically…

1976
02:41:34,764 --> 02:41:36,764
I can't hear him anymore.

1977
02:41:36,764 --> 02:41:37,764
I can't hear him either.

1978
02:41:37,764 --> 02:41:41,764
That's weird. His dots are still moving, but I can't hear him.

1979
02:41:42,764 --> 02:41:46,764
Probably Twitter's fault. I mean, X's fault.

1980
02:41:46,764 --> 02:41:48,764
He seems to have crashed.

1981
02:41:48,764 --> 02:41:54,764
Actually, what I really like Amun's idea, but the problem is that most people will not want to…

1982
02:41:54,764 --> 02:41:57,764
Oh, there you go. He's back.

1983
02:41:57,764 --> 02:42:03,764
I'm saying most people will probably be afraid to borrow in Satoshi's just because Bitcoin tends to spike up a lot.

1984
02:42:03,764 --> 02:42:08,764
And you don't want that in a monetizing commodity.

1985
02:42:08,764 --> 02:42:13,764
But I can totally see how this could onboard 100 million people.

1986
02:42:13,764 --> 02:42:15,764
Imagine the following scenario.

1987
02:42:15,764 --> 02:42:21,764
There's like 50 million people who've downloaded Strike app around the world in all these like 60 different countries.

1988
02:42:21,764 --> 02:42:24,764
And what you have in Strike is you have two services provided.

1989
02:42:24,764 --> 02:42:31,764
One is you have ability to buy and sell Bitcoin for like a good with a small spread.

1990
02:42:31,764 --> 02:42:35,764
And the second one, there's a built-in stable coin, which Strike doesn't talk about.

1991
02:42:35,764 --> 02:42:42,764
But basically they're competing with Tether because those U.S. dollar balances inside Strike is their own stable coin.

1992
02:42:42,764 --> 02:42:46,764
But that stable coin is not traded in DeFi against other stable coins.

1993
02:42:46,764 --> 02:42:54,764
But nevertheless, when people withdraw money from their American bank account and send it around the world, there's no interest being paid on that currency.

1994
02:42:54,764 --> 02:42:59,764
While Strike is earning 5% on short-term treasury bonds.

1995
02:43:00,764 --> 02:43:02,764
So these are the two services they provide.

1996
02:43:02,764 --> 02:43:10,764
And I can see how they can easily provide a credit service where you can borrow in maybe Sats or USD.

1997
02:43:10,764 --> 02:43:14,764
And they will issue credit because you already have a relationship with them.

1998
02:43:14,764 --> 02:43:20,764
So those 100 million African villagers can just spend now and pay off their microcredit at the end of the month.

1999
02:43:20,764 --> 02:43:22,764
They don't need to have high caps.

2000
02:43:22,764 --> 02:43:25,764
They could have like $20 or $50 caps.

2001
02:43:26,764 --> 02:43:39,764
Actually, this would be replacing the last vestiges of banking that they would need outside Bitcoin if there was a credit-like service provided by the same Strike app, which already has onboarded them.

2002
02:43:39,764 --> 02:43:41,764
They can just stay off-chain forever.

2003
02:43:41,764 --> 02:43:43,764
They don't even need to know what's going on.

2004
02:43:43,764 --> 02:43:45,764
There is a Sats balance in their account.

2005
02:43:45,764 --> 02:43:46,764
There is a USD balance.

2006
02:43:46,764 --> 02:43:51,764
And there is a credit balance, which could be denominated in either dollars or Sats.

2007
02:43:52,764 --> 02:43:56,764
Yeah, I'm not sure how long you heard me because I crashed.

2008
02:43:56,764 --> 02:44:01,764
I'm not sure what you heard last from me or if there was a question in the meantime.

2009
02:44:01,764 --> 02:44:03,764
I'll just go on silent.

2010
02:44:03,764 --> 02:44:06,764
I have been talking, but then I just crashed.

2011
02:44:08,764 --> 02:44:12,764
Moon, could you share this if it's any link or website?

2012
02:44:12,764 --> 02:44:16,764
I don't know if you are trying to do this or somebody else.

2013
02:44:16,764 --> 02:44:24,764
Could you share the link for the website or if they have some kind of where we can find information?

2014
02:44:25,764 --> 02:44:29,764
All right, I will try to share something.

2015
02:44:29,764 --> 02:44:42,764
So this is just really a proposal on how you issue eCash differently to achieve a different relationship, a fundamentally different relationship with the Mint.

2016
02:44:43,764 --> 02:44:46,764
Because we really like eCash for the privacy.

2017
02:44:46,764 --> 02:44:52,764
We really like eCash for its velocity, for its flexibility, that it's Lightning interconnected.

2018
02:44:52,764 --> 02:44:54,764
And you can basically pay anyone.

2019
02:44:54,764 --> 02:45:02,764
And they don't even able to glean anything about your holdings in theory or ideally whatsoever.

2020
02:45:02,764 --> 02:45:05,764
Not even as much as with Lightning if you pay over Lightning.

2021
02:45:05,764 --> 02:45:08,764
So there are many, many, many advantages of this.

2022
02:45:09,764 --> 02:45:16,764
And what I was mainly focusing on really is this cypherpunk idea that maybe you don't have to rely on a legal system.

2023
02:45:16,764 --> 02:45:28,764
That we can move into a more algorist, cypherpunk, anarcho-capitalist direction.

2024
02:45:28,764 --> 02:45:30,764
Where you rather use secure credit.

2025
02:45:30,764 --> 02:45:32,764
But like I said, that has scalability issues.

2026
02:45:32,764 --> 02:45:34,764
But my paper is mainly focused on that.

2027
02:45:35,764 --> 02:45:40,764
So I'm going to try to put that in the nest while you guys talk.

2028
02:45:40,764 --> 02:45:43,764
But I want to say that if you are interested in eCash in general.

2029
02:45:43,764 --> 02:45:49,764
And like I said, almost all of the code base would be unchanged.

2030
02:45:49,764 --> 02:45:51,764
So you can just use Cashu or anything.

2031
02:45:51,764 --> 02:45:57,764
Basically the way the eCash gets issued is the only difference.

2032
02:45:57,764 --> 02:46:00,764
The way you spend it, you receive it or whatever is not different.

2033
02:46:00,764 --> 02:46:02,764
It works exactly the same.

2034
02:46:02,764 --> 02:46:06,764
What it means, what the eCash token means is what's different.

2035
02:46:06,764 --> 02:46:13,764
And Cashu is also towards with the custodial eCash, with the debit eCash if you want.

2036
02:46:13,764 --> 02:46:18,764
It also moves towards a system where you would have a new key set.

2037
02:46:18,764 --> 02:46:21,764
So you would issue new money each month.

2038
02:46:21,764 --> 02:46:24,764
And people would swap in their money.

2039
02:46:24,764 --> 02:46:31,764
Basically this is related to the proof of reserves and liabilities scheme that we came up for eCash.

2040
02:46:32,764 --> 02:46:38,764
Because everyone thought about eCash as custodians mainly in the past.

2041
02:46:38,764 --> 02:46:47,764
And it really was just an idea that hit me that you could actually remove this custody aspect and turn it around.

2042
02:46:47,764 --> 02:46:51,764
And of course a lot of things have went into this.

2043
02:46:51,764 --> 02:46:57,764
So the whole concept that the Ark service provider would front your liquidity for you.

2044
02:46:57,764 --> 02:47:01,764
It would be a liquidity provider for you if you want to transact or want to do anything.

2045
02:47:01,764 --> 02:47:02,764
Stuff like that.

2046
02:47:02,764 --> 02:47:09,764
And we know that Ark has, some people imagine that we have horrible liquidity requirements.

2047
02:47:09,764 --> 02:47:15,764
Like 2, 3, 4 times what the people hold in Ark service provider.

2048
02:47:15,764 --> 02:47:18,764
It's really dependent on the velocity of the money.

2049
02:47:18,764 --> 02:47:23,764
Now with eCash, credit eCash, it's actually not dependent on the velocity of money.

2050
02:47:23,764 --> 02:47:28,764
In the sense that eCash can change hands a thousand times within the mint.

2051
02:47:28,764 --> 02:47:30,764
And that's not a problem for the mint whatsoever.

2052
02:47:30,764 --> 02:47:34,764
It doesn't need more liquidity for that.

2053
02:47:34,764 --> 02:47:39,764
The mint needs liquidity when you are paying a merchant over the Lightning network.

2054
02:47:39,764 --> 02:47:44,764
Like Lightning is very good for this point of sale terminal use case.

2055
02:47:44,764 --> 02:47:46,764
It's really perfect for that.

2056
02:47:46,764 --> 02:47:50,764
And it has been probably the prime direction in development.

2057
02:47:51,764 --> 02:48:01,764
So when you are paying a merchant, it becomes a real liability from you towards the mint.

2058
02:48:01,764 --> 02:48:08,764
And basically, so to speak, the Bitcoin becomes as you spend it.

2059
02:48:08,764 --> 02:48:14,764
The whole thing becomes real and that is created as you spend this eCash token.

2060
02:48:14,764 --> 02:48:19,764
And like I said, it's really the meaning of the eCash token that I changed.

2061
02:48:19,764 --> 02:48:22,764
It's not a huge technological innovation.

2062
02:48:22,764 --> 02:48:24,764
The eCash mint works exactly the same.

2063
02:48:24,764 --> 02:48:30,764
How you issue the eCash and how you are rolling over these eCash notes to new eCash notes,

2064
02:48:30,764 --> 02:48:35,764
new months eCash notes is what's different with credit eCash really.

2065
02:48:35,764 --> 02:48:44,764
I will share the link to the credit eCash gist I brought up.

2066
02:48:45,764 --> 02:48:48,764
Very interesting.

2067
02:48:54,764 --> 02:49:00,764
I have to go, but feel free to hang out without me, of course.

2068
02:49:01,764 --> 02:49:03,764
Thank you, Paul.

2069
02:49:04,764 --> 02:49:06,764
See everyone later.

2070
02:49:06,764 --> 02:49:07,764
Thank you.

2071
02:49:07,764 --> 02:49:09,764
Thanks for stopping by.

2072
02:49:09,764 --> 02:49:11,764
Thank you, Paul.

2073
02:49:12,764 --> 02:49:21,764
Moon Settler, the topic of credit is important in history because gold needed to scale

2074
02:49:21,764 --> 02:49:29,764
and scaling gold with credit, meaning paper gold, was one of the major ways that gold monetized.

2075
02:49:29,764 --> 02:49:38,764
As Alex mentioned earlier, there is an important question related to credit and Bitcoin,

2076
02:49:38,764 --> 02:49:45,764
which is that if Bitcoin remains volatile, if the purchasing power of Bitcoin remains volatile,

2077
02:49:45,764 --> 02:49:52,764
then that would reduce the use of credit that is denominated in Bitcoin

2078
02:49:52,764 --> 02:49:58,764
because unlike gold, which has demand responsive supply,

2079
02:49:58,764 --> 02:50:03,764
Bitcoin's supply is fixed and is not demand responsive.

2080
02:50:04,764 --> 02:50:10,764
Therefore, to the extent that monetization requires the proliferation of credit,

2081
02:50:10,764 --> 02:50:24,764
Bitcoin will not monetize because the use of Bitcoin in credit would be dangerous for those parties who are short Bitcoin.

2082
02:50:25,764 --> 02:50:26,764
Yes.

2083
02:50:26,764 --> 02:50:29,764
You have to have income.

2084
02:50:29,764 --> 02:50:35,764
One more thing is to me personally, the simple solution for Bitcoinization is Thunder,

2085
02:50:35,764 --> 02:50:40,764
a large block sidechain with extremely low fees because it has large blocks.

2086
02:50:40,764 --> 02:50:44,764
And why do we have to talk about credit and credit protocols?

2087
02:50:44,764 --> 02:50:50,764
Why not just aim for more people using Thunder to scale Bitcoin?

2088
02:50:50,764 --> 02:50:56,764
Henry, there is a problem with this Thunder because I think a lot of confusion comes from the fact,

2089
02:50:56,764 --> 02:50:59,764
hopefully you guys can hear me, I apologize for the wind.

2090
02:50:59,764 --> 02:51:00,764
We can.

2091
02:51:00,764 --> 02:51:07,764
There is confusion that comes from the fact that people commingle the notion of collateral and the notion of currency

2092
02:51:07,764 --> 02:51:10,764
and they just use this notion of money and monetization.

2093
02:51:10,764 --> 02:51:15,764
But I think it's very useful to separate the idea of collateral from the idea of the currency.

2094
02:51:15,764 --> 02:51:23,764
And the idea of credit as a third thing where currency is just the credit from the central bank that everybody accepts.

2095
02:51:24,764 --> 02:51:32,764
My point is that people would rather not borrow Bitcoin simply because their debt can spike in value.

2096
02:51:32,764 --> 02:51:42,764
But it doesn't mean that people will collateralize Bitcoin and then use it as collateral to gain liquidity in the currency that is devalued.

2097
02:51:42,764 --> 02:51:44,764
Everybody wants to do this.

2098
02:51:44,764 --> 02:51:46,764
Sorry about the noise.

2099
02:51:46,764 --> 02:51:56,764
Everybody wants to do this case where you lock up Bitcoin in a protocol and you issue a stable coin that you later convert into a U.S. dollar.

2100
02:51:56,764 --> 02:52:01,764
And you spend it because in that use case, this is like the best of all worlds.

2101
02:52:01,764 --> 02:52:04,764
Basically, there is no taxable event in that case, number one.

2102
02:52:04,764 --> 02:52:15,764
Number two, your liability is an inflated currency like the U.S. dollar while your assets are in a rising asset like Bitcoin.

2103
02:52:15,764 --> 02:52:18,764
Basically, it's like you have three advantages.

2104
02:52:18,764 --> 02:52:23,764
You do not get rid of your Bitcoin if you continue to benefit from its rise.

2105
02:52:23,764 --> 02:52:26,764
Everybody wants this use case.

2106
02:52:26,764 --> 02:52:32,764
I would like to give a different approach, by the way, if you allow me.

2107
02:52:32,764 --> 02:52:34,764
Please.

2108
02:52:35,764 --> 02:52:46,764
The main concern is cost, cost of settlement, the velocity of money, and basically privacy.

2109
02:52:46,764 --> 02:52:55,764
These are in my mind the main challenges that keep Bitcoin from being used as money, as a medium of exchange.

2110
02:52:55,764 --> 02:53:01,764
This whole thing about Bitcoin's volatility, it either is going to improve or not going to improve.

2111
02:53:01,764 --> 02:53:02,764
We can try various things.

2112
02:53:02,764 --> 02:53:05,764
We can wait for it to improve on its own.

2113
02:53:05,764 --> 02:53:06,764
We don't know.

2114
02:53:06,764 --> 02:53:08,764
You can have incoming Bitcoin.

2115
02:53:08,764 --> 02:53:13,764
If you have incoming Bitcoin, you are very calm about taking out credit.

2116
02:53:13,764 --> 02:53:16,764
If you have Bitcoin savings, you might also.

2117
02:53:16,764 --> 02:53:23,764
It's no different from spending your Bitcoin if you have the Bitcoin when you take out credit.

2118
02:53:23,764 --> 02:53:27,764
And again, in case of secure credit, you literally have the Bitcoin.

2119
02:53:28,764 --> 02:53:32,764
Either you have Bitcoin savings that are not as private.

2120
02:53:32,764 --> 02:53:34,764
You cannot move them as private.

2121
02:53:34,764 --> 02:53:37,764
On-chain Bitcoin is extremely traceable.

2122
02:53:37,764 --> 02:53:38,764
We kind of know this.

2123
02:53:38,764 --> 02:53:40,764
And it is expensive.

2124
02:53:40,764 --> 02:53:46,764
So what we are trying to do is limit the on-chain movement, limit the on-chain settlement as much as possible.

2125
02:53:46,764 --> 02:53:53,764
Maybe I'm only going to do like one on-chain transaction a decade or something like that when I really have to.

2126
02:53:53,764 --> 02:54:00,764
And your question why I wouldn't just use a blockchain is kind of related to that.

2127
02:54:00,764 --> 02:54:05,764
So you are not getting the same things out of a blockchain as you get.

2128
02:54:05,764 --> 02:54:09,764
You are getting different things that are very important out of blockchains.

2129
02:54:09,764 --> 02:54:19,764
And that is why I kind of think for the highest velocity of money for everyday spending where you want the most privacy, I think eCash is excellent.

2130
02:54:19,764 --> 02:54:22,764
And if you can make it unruggable, then it's even more excellent.

2131
02:54:23,764 --> 02:54:24,764
Obviously.

2132
02:54:24,764 --> 02:54:33,764
And Lightning gives us this interconnection, this glue that can tie together an entire global ecosystem, not based on trust.

2133
02:54:33,764 --> 02:54:40,764
And maybe, therefore, more permissionless and more free than the current financial system.

2134
02:54:41,764 --> 02:54:44,764
And that is how all this ties together in my head.

2135
02:54:44,764 --> 02:54:55,764
And like I said, a sidechain like Thunder can actually give a billion people the chance to hold their own keys to an escrow.

2136
02:54:56,764 --> 02:55:13,764
So we know that we could actually onboard a billion people to a relationship that is less card than holding Satoshi-denominated brownie points on a custodial Lightning wallet.

2137
02:55:13,764 --> 02:55:18,764
Like a lot of Satoshi or whatever.

2138
02:55:18,764 --> 02:55:22,764
So we don't know what those things are worth.

2139
02:55:22,764 --> 02:55:25,764
People can be shown anything like that.

2140
02:55:25,764 --> 02:55:26,764
That is like the absolute worst.

2141
02:55:26,764 --> 02:55:28,764
And you also don't have privacy.

2142
02:55:28,764 --> 02:55:31,764
So that is what we are trying to improve on.

2143
02:55:32,764 --> 02:55:38,764
And we are trying to give people the maximum amount of privacy and self sovereignty.

2144
02:55:38,764 --> 02:55:44,764
And we actually want to make Bitcoin as capable as a payment settlement system as possible.

2145
02:55:44,764 --> 02:55:50,764
Of course, it's absolutely plausible that people will issue these in other denominations.

2146
02:55:50,764 --> 02:55:53,764
So you can actually do eCash in USD.

2147
02:55:53,764 --> 02:55:56,764
As someone mentioned, you can do it in any altcoin.

2148
02:55:56,764 --> 02:55:59,764
That's not actually a technical problem.

2149
02:55:59,764 --> 02:56:03,764
What we kind of want to do with Bitcoin, of course, is make Bitcoin the money.

2150
02:56:03,764 --> 02:56:06,764
The money of the internet and maybe the money of the world.

2151
02:56:06,764 --> 02:56:10,764
And it all ties together.

2152
02:56:10,764 --> 02:56:17,764
But like I said, you either have a legal settlement and a KEC relationship, at least on your line of credit.

2153
02:56:17,764 --> 02:56:22,764
Or you are going to need a way to settle, a medium to settle, a way to hold your own keys.

2154
02:56:22,764 --> 02:56:27,764
And that's either mainchain, which we expect to be in very high demand and very expensive.

2155
02:56:27,764 --> 02:56:29,764
Or it has to be a sidechain.

2156
02:56:29,764 --> 02:56:30,764
Yes?

2157
02:56:32,764 --> 02:56:38,764
Monsettler, I just have an objection to this idea that Bitcoin can be the money of the internet.

2158
02:56:38,764 --> 02:56:40,764
I don't have an objection in principle.

2159
02:56:40,764 --> 02:56:45,764
All I'm saying is that it has to become a reserve asset first.

2160
02:56:45,764 --> 02:56:50,764
Because it could become actually the money of the internet 10, 20, 30 years down the road.

2161
02:56:50,764 --> 02:57:00,764
But it can never become that unless it moves from this volatile, sterile store of value that it is today to actually a reserve asset.

2162
02:57:00,764 --> 02:57:06,764
And what makes a reserve asset different than simply a store of value is the fact that it's widely accepted collateral.

2163
02:57:06,764 --> 02:57:09,764
Like gold is not widely accepted collateral.

2164
02:57:09,764 --> 02:57:12,764
But gold is a store of value, right?

2165
02:57:12,764 --> 02:57:17,764
So Bitcoin has to move from gold-like store of value to being a reserve asset.

2166
02:57:17,764 --> 02:57:23,764
And this is the first step that's necessary to make in order to get to that future that you're talking about.

2167
02:57:23,764 --> 02:57:31,764
But in order to make this first step, actually eCash and velocity of money, it's not relevant yet, right?

2168
02:57:31,764 --> 02:57:34,764
What is relevant is whether or not Bitcoin can be collateral.

2169
02:57:34,764 --> 02:57:39,764
Widely accepted collateral similar to how the US Treasury bonds are collateral.

2170
02:57:39,764 --> 02:57:48,764
Because you can never have that money of the world situation until you first become a widely accepted collateral.

2171
02:57:48,764 --> 02:58:00,764
It's interesting because if you look at the current landscape of development for the wallets and the user experience,

2172
02:58:00,764 --> 02:58:08,764
everybody seems to be focusing really on that, that you can actually buy a banana or a coffee.

2173
02:58:08,764 --> 02:58:10,764
Well, yes, but they use table coins for that, right?

2174
02:58:10,764 --> 02:58:16,764
Like people in the global south don't want to have – they want to have – you know, Tether is basically –

2175
02:58:16,764 --> 02:58:21,764
Tether displays Bitcoin as a unit of account on exchanges for a reason, right?

2176
02:58:21,764 --> 02:58:23,764
Bitcoin used to be the unit of accounts.

2177
02:58:23,764 --> 02:58:25,764
Everything was denominated in Satoshi's.

2178
02:58:25,764 --> 02:58:29,764
Now basically everything on the global crypto exchanges is denominated in Tether.

2179
02:58:29,764 --> 02:58:33,764
And there's a reason for that because it's a more convenient unit of account.

2180
02:58:33,764 --> 02:58:44,764
Yeah, but you are also going to see some of the same fiction introduced on these table coins that we have on the fiat.

2181
02:58:44,764 --> 02:58:47,764
No, no, I mean, I know they are fiat, right?

2182
02:58:47,764 --> 02:58:51,764
There could be decentralized table coins, that's a separate issue.

2183
02:58:51,764 --> 02:58:54,764
All I'm saying is that Bitcoin has to evolve one step at a time.

2184
02:58:54,764 --> 02:58:59,764
And you cannot get to the global money or internet money until Bitcoin becomes…

2185
02:59:01,700 --> 02:59:03,700
Competitive to use treasury bonds as collateral.

2186
02:59:03,700 --> 02:59:11,700
Yeah, but there is a paradox here, right? There is a paradox here because on the other hand, it does not become a medium of exchange.

2187
02:59:11,700 --> 02:59:21,700
It does not get its valuation decoupled from the traditional financial system and the authors like J.P. Morgan and BlackRock.

2188
02:59:21,700 --> 02:59:28,700
If it does not escape that range, then it's very likely it's going to share the fate of gold.

2189
02:59:29,700 --> 02:59:37,700
The outcome of gold is the default right now. This is what a lot of people don't understand and this is my nightmare scenario.

2190
02:59:37,700 --> 02:59:40,700
It's a captured system currently.

2191
02:59:40,700 --> 02:59:47,700
Well, yeah, it becomes like an exotic store of value asset like art or gold, but it's not used as collateral anywhere.

2192
02:59:47,700 --> 02:59:55,700
And that would be a terrible outcome because all the early whales will still enjoy $1 million Bitcoin, but Bitcoin will fix nothing.

2193
02:59:56,700 --> 03:00:05,700
Now, what I'm saying is that in order to escape that fate, you have to have Bitcoin as something that's competitive with the U.S. treasury bonds as collateral.

2194
03:00:05,700 --> 03:00:16,700
And there's a peculiar mystery about the treasury bonds that everybody observed, but very few people can explain, which is why is it 15 years since 2008 you had negative interest rates?

2195
03:00:16,700 --> 03:00:21,700
Like who in their right mind is holding U.S. treasury bonds that are yielding below inflation?

2196
03:00:21,700 --> 03:00:28,700
Why is this happening for 15 years? Why is the market still liquid? Why are people still holding these things that are losing money in nominal terms?

2197
03:00:28,700 --> 03:00:34,700
And there is actually one reasonable explanation to that, which explains everything that's relevant for Bitcoin.

2198
03:00:34,700 --> 03:00:39,700
And the explanation is this. Nobody holds treasury bonds for long term yield.

2199
03:00:39,700 --> 03:00:43,700
Banks have to have treasury bonds because they leverage them 10x.

2200
03:00:43,700 --> 03:00:51,700
So even though if the treasury bond is yielding 2% and inflation is 8%, when you put on the leverage of 10x or 20x on top of it, it no longer matters.

2201
03:00:51,700 --> 03:00:59,700
But it's the only asset that can be used for collateral to create a lot of leverage derivative positions and so on and so forth.

2202
03:00:59,700 --> 03:01:11,700
Therefore, the asset is overpriced relative to, you know, it's losing money in inflation terms, but only for those people who simply hold it, but not for 95% of inventory that's used to create a lot of leverage.

2203
03:01:11,700 --> 03:01:18,700
So Bitcoin has to be competitive in that market in order to escape the sterile store of value dead end where it fixes nothing.

2204
03:01:18,700 --> 03:01:21,700
It has to basically out-compete treasury bonds.

2205
03:01:21,700 --> 03:01:45,700
But of course, the collateral use case requires the volatility also to go down because if 75% and 90% drops are in the game, or I don't know how to say it, so they are possible, then you would have to greatly over-collateralize on a very scarce asset.

2206
03:01:45,700 --> 03:01:47,700
And that will never work, right?

2207
03:01:48,700 --> 03:01:56,700
But even though there may be low volatility, right, because Bitcoin lacks, you know, it has a hard cap on supply, right?

2208
03:01:56,700 --> 03:01:59,700
So it doesn't have this quality of gold.

2209
03:01:59,700 --> 03:02:02,700
It still hasn't found that low of its volatility.

2210
03:02:02,700 --> 03:02:08,700
So in other words, Bitcoin with $2 or $5 trillion market cap will have lower volatility than it has now.

2211
03:02:08,700 --> 03:02:18,700
It will probably approach gold's volatility, but it will never be, you know, as volatility will buy somewhere, but there's still a long way to go to that point.

2212
03:02:18,700 --> 03:02:22,700
So Bitcoin hasn't manifested its lowest possible volatility yet.

2213
03:02:22,700 --> 03:02:28,700
So there is still, you know, it's still usable as collateral in the future when volatility will decline, right?

2214
03:02:28,700 --> 03:02:44,700
The volatility of Bitcoin can be reduced, according to some theorists, by fractional reserve banking or credit that is not 100% reserved on some peer-to-peer protocol.

2215
03:02:44,700 --> 03:02:49,700
So an example of this is there's a little bit of noise.

2216
03:02:49,700 --> 03:02:53,700
I'll just mute everyone for the moment.

2217
03:02:53,700 --> 03:02:55,700
Now I've unmuted.

2218
03:02:55,700 --> 03:03:08,700
So the way this works is that the entrepreneurs and capitalists who want to engage in lending, they predict that the economy will grow and the demand.

2219
03:03:08,700 --> 03:03:13,700
They predict that the demand for cash will grow and they engage in lending.

2220
03:03:13,700 --> 03:03:21,700
And this increases the total supply of money, the broad money supply, which is the base money plus the credit money.

2221
03:03:21,700 --> 03:03:34,700
And thereby they reduce the purchasing power of Bitcoin through their lending activity, through their monetary issuance that results from their fractional reserve lending.

2222
03:03:35,700 --> 03:03:52,700
And then if they're profitable, they would correctly anticipate contractions in the business cycle and they would restrict the supply of money by making less loans when they predict that the borrowers won't be able to repay due to the contraction.

2223
03:03:52,700 --> 03:04:00,700
So this is the theory that the so-called liquidity preference Austrians hold, and they disagree with the Rothbardians.

2224
03:04:00,700 --> 03:04:08,700
The Rothbardians say fractional reserve banking is bad and is a threat to the stability of the monetary system and society.

2225
03:04:08,700 --> 03:04:23,700
The liquidity preference Austrian school thinkers, they say that fractional reserve banking creates endogenous stability in the financial sector by regulating the supply of money in a way that creates value.

2226
03:04:23,700 --> 03:04:28,700
It produces elasticity in otherwise inelastic commodity money, right?

2227
03:04:28,700 --> 03:04:44,700
If you get beyond the conspiracy theories of the Federal Reserve, the actual reason why it was created and it's not all evil conspiracy is simply because that before it was created, you had these runs on banks where basically there was not enough elasticity of gold as money.

2228
03:04:45,700 --> 03:04:51,700
And gold tends to pool with the largest, most credit, credit worthy holders during times of panics.

2229
03:04:51,700 --> 03:04:59,700
And that would exacerbate the panics because there would be no credit available anywhere in the system, which would just create runs on banks.

2230
03:04:59,700 --> 03:05:11,700
So when the Federal Reserve was created, it was partly to increase elasticity of money through issuance of credit on top of gold, so-called fractional reserve, which laser eyed people hate as the root of all evil or whatever.

2231
03:05:11,700 --> 03:05:20,700
But the point is that imagine the situation where in order for Bitcoin to become collateral competitive with the treasuries, right?

2232
03:05:20,700 --> 03:05:23,700
It actually needs to be collateral for something, right?

2233
03:05:23,700 --> 03:05:26,700
Like, what is it that you do with this collateral?

2234
03:05:27,700 --> 03:05:41,700
And in my mind, the premier use case is to replace tether and strike and $200 billion worth of stable coins with stable coins collateralized by Bitcoin in a decentralized way because that's what the world actually wants, right?

2235
03:05:41,700 --> 03:05:48,700
The world wants stable coins, but they don't want stable coins issued by this Mickey Mouse tether outfit.

2236
03:05:48,700 --> 03:05:51,700
They want stable coins with the same characteristics as Bitcoin has.

2237
03:05:51,700 --> 03:05:54,700
Uncensorability, et cetera, et cetera, et cetera.

2238
03:05:54,700 --> 03:05:55,700
And that's possible, right?

2239
03:05:55,700 --> 03:05:58,700
So that would be the actual use of the collateral.

2240
03:05:58,700 --> 03:06:05,700
It's so sad that you did not come earlier because we were talking about another alternative to all this.

2241
03:06:06,700 --> 03:06:29,700
The Bitcoin proposal would basically be an alternative to fractional reserve central banking, a more decentralized system where basically it's just the bills of exchange system modernized and digitized on a cryptographic basis is what it tries to be.

2242
03:06:29,700 --> 03:06:36,700
And it would give us elasticity and reduce the volatility and help us price Bitcoin with real goods and services.

2243
03:06:36,700 --> 03:06:39,700
Yes, go ahead.

2244
03:06:40,700 --> 03:07:03,700
So deals made for the real economic activity, real goods and services would naturally help us price Bitcoin better, more accurately, but also not create this absolute scarcity scenario that an M0 Bitcoin without any credit or any currency on top of it would create.

2245
03:07:03,700 --> 03:07:06,700
We could expect huge volatility.

2246
03:07:06,700 --> 03:07:11,700
People would need Bitcoin before they have the Bitcoin.

2247
03:07:11,700 --> 03:07:20,700
And the whole thing with rehypothecation and all the jazz that it would require to function would be a very unstable system probably.

2248
03:07:20,700 --> 03:07:28,700
I'm in that camp that thinks fractional reserve banking and rehypothecation creates a bad system overall.

2249
03:07:28,700 --> 03:07:30,700
And this is an alternative.

2250
03:07:30,700 --> 03:07:32,700
It's not bad.

2251
03:07:33,700 --> 03:07:34,700
Let me just make one quick point.

2252
03:07:34,700 --> 03:07:41,700
There is a very big difference between central banking and competitive free banking.

2253
03:07:41,700 --> 03:07:52,700
So central banking is what's bad and competitive free banking is consumer oriented and good and ethical and productive.

2254
03:07:52,700 --> 03:08:04,700
So the problem when Satoshi said Satoshi made two sentences on this topic, and unfortunately, the first sentence was that central banks are bad.

2255
03:08:04,700 --> 03:08:07,700
They inflate the money and debase it.

2256
03:08:07,700 --> 03:08:12,700
But then the next sentence was the Rothbardian one.

2257
03:08:12,700 --> 03:08:19,700
After the sentence against central banking, Satoshi gave a sentence which was against banks in general.

2258
03:08:19,700 --> 03:08:31,700
And that was unfortunate because that set in motion in the Bitcoin community what we have today, which is what you just said, which is that fractional reserve rehypothecation is an evil scourge.

2259
03:08:31,700 --> 03:08:36,700
It's part of the free market that people will lend things to other people.

2260
03:08:36,700 --> 03:08:40,700
There's nothing inherently wrong with competitive free banking.

2261
03:08:40,700 --> 03:08:42,700
Or with maturity transformation.

2262
03:08:42,700 --> 03:08:46,700
Banks do have a function of maturity transformation and credit allocation.

2263
03:08:47,700 --> 03:08:52,700
Because if there is no banks, where will you borrow to lend money?

2264
03:08:52,700 --> 03:08:54,700
Somebody needs to do it.

2265
03:08:54,700 --> 03:08:59,700
Also, I have a radical idea that you guys may not agree with, but I still want to float it again.

2266
03:08:59,700 --> 03:09:05,700
My idea is that the fiat system based on central banks actually ended in 1970.

2267
03:09:05,700 --> 03:09:07,700
It wasn't the end of the gold standard.

2268
03:09:07,700 --> 03:09:09,700
It was actually the end of the fiat system.

2269
03:09:09,700 --> 03:09:14,700
And what we've been living in since then is actually very similar to the free banking.

2270
03:09:14,700 --> 03:09:16,700
It's just called Eurodollar system.

2271
03:09:16,700 --> 03:09:26,700
So even though the central banks do exist at the margins, they no longer perform the functions that they were designed to perform, namely controlling money supply and interest rates.

2272
03:09:26,700 --> 03:09:31,700
The only function left for the Fed and other central banks is to mop up the crisis.

2273
03:09:31,700 --> 03:09:37,700
They're basically janitors that show up whenever there is a financial panic or a credit crisis.

2274
03:09:37,700 --> 03:09:43,700
And they just create confidence in the system by making announcements and issuing credit.

2275
03:09:43,700 --> 03:09:48,700
But they actually no longer see or control the money supply or interest rates.

2276
03:09:48,700 --> 03:09:52,700
So we are much closer to the free banking system that most people realize.

2277
03:09:52,700 --> 03:09:55,700
Well, they can't control the money supply.

2278
03:09:55,700 --> 03:09:59,700
Right. But it's also a system not based on sound collateral.

2279
03:09:59,700 --> 03:10:07,700
The classical free banking system had sound collateral gold, which is the system that we have today has unsound collateral, which is treasury bonds.

2280
03:10:07,700 --> 03:10:09,700
Or you have corporate bonds.

2281
03:10:09,700 --> 03:10:14,700
Basically, regardless, you have counterparty risk in the collateral that didn't exist when the gold was collateral.

2282
03:10:14,700 --> 03:10:23,700
And before I'm telling you, before Bitcoiners understand that they no longer have the boogeyman of the central bank and the money printing actually does not matter.

2283
03:10:23,700 --> 03:10:27,700
Just to give you an approximate scenario.

2284
03:10:27,700 --> 03:10:31,700
Like, you know, there was big news that the Fed printed three trillion dollars during COVID.

2285
03:10:31,700 --> 03:10:40,700
There's an estimate that during the same year, the euro dollar system actually has a credit supply that exceeds a hundred trillion dollars.

2286
03:10:40,700 --> 03:10:47,700
So the fact that the Fed created three trillion dollars, people forget that the Fed does not print money and inject it into the economy.

2287
03:10:47,700 --> 03:10:53,700
What happens is that the Fed creates reserves and removes collateral from the economy.

2288
03:10:53,700 --> 03:11:07,700
So just just because the Fed created three trillion dollars in reserves does not mean that actually amount of unsequestered money in the system has increased because the Fed just bought, you know, treasury bonds and removed them from the system.

2289
03:11:07,700 --> 03:11:15,700
So it's not even necessarily an injection of new money into the system, because if you think about it, treasury bonds are more money like than the reserves.

2290
03:11:15,700 --> 03:11:17,700
Right. Because they're more usable as collateral.

2291
03:11:18,700 --> 03:11:21,700
So to make a long story short, I think we don't live in a fiat system.

2292
03:11:21,700 --> 03:11:23,700
I think the central banks are irrelevant.

2293
03:11:23,700 --> 03:11:25,700
They're basically all just LARPing.

2294
03:11:25,700 --> 03:11:34,700
And with Bitcoin, the Bitcoin's actual competition is a euro dollars issued by offshore banks or European banks.

2295
03:11:34,700 --> 03:11:35,700
This is the actual competition.

2296
03:11:35,700 --> 03:11:39,700
And in that system, they use multiple flavors of collateral.

2297
03:11:39,700 --> 03:11:41,700
Of course, the top one being U.S. treasury bonds.

2298
03:11:41,700 --> 03:11:45,700
But they also use, you know, German bonds and French bonds, et cetera, et cetera.

2299
03:11:45,700 --> 03:11:48,700
This is the place where Bitcoin needs to compete against.

2300
03:11:48,700 --> 03:11:50,700
It does not compete against central banks.

2301
03:12:00,700 --> 03:12:01,700
That was very interesting.

2302
03:12:03,700 --> 03:12:09,700
I think we we've all like heard, you know, a lot of conversation about euro dollars before.

2303
03:12:09,700 --> 03:12:11,700
It's interesting. It's it's all correct.

2304
03:12:11,700 --> 03:12:13,700
Everything you said is correct.

2305
03:12:13,700 --> 03:12:17,700
But I would still emphasize just to bring the conversation down to earth.

2306
03:12:17,700 --> 03:12:33,700
There is a world of difference between a central bank, which enjoys a government enforced monopoly on, you know, legal tender creation versus competitive free banking, which is a free market phenomenon.

2307
03:12:33,700 --> 03:12:38,700
And that gold and Bitcoin are competitive free market phenomena.

2308
03:12:38,700 --> 03:12:42,700
The central bank with its paper money is not.

2309
03:12:43,700 --> 03:12:46,700
I mean, I agree with you.

2310
03:12:46,700 --> 03:12:49,700
But what I'm saying is that the euro dollar system is decentralized.

2311
03:12:49,700 --> 03:12:52,700
However, it's not free of counterparty risk, right?

2312
03:12:52,700 --> 03:13:08,700
Because any bank in London, you know, Chase, Chase Manhattan Bank, whatever Chase Morgan Chase, JP Morgan Chase Bank has hundreds of subsidiaries, many of which are simply offshore in the city of London or Cayman Islands.

2313
03:13:08,700 --> 03:13:13,700
These banks issue their own dollars that are outside of the jurisdiction of the US.

2314
03:13:13,700 --> 03:13:15,700
Yes, we all agree. We all agree.

2315
03:13:15,700 --> 03:13:18,700
I think. But my point is that it's marginal, right?

2316
03:13:18,700 --> 03:13:25,700
The impact of the of the of the Fed is very marginal compared to the hundred trillion plus in the total credit issuance in the euro dollar system.

2317
03:13:25,700 --> 03:13:27,700
Right. Yeah. Very, very marginal.

2318
03:13:28,700 --> 03:13:40,700
Another interesting way of thinking about it is from the perspective of foreigners, like if you're in France and I'm in Germany, neither one of us has direct access to the money printer at the Fed in America.

2319
03:13:40,700 --> 03:13:48,700
And so worse than that, neither one of us wants that access because you don't want US authorities to be able to seize your funds.

2320
03:13:48,700 --> 03:13:57,700
Right. What I'm saying is that the dollar for non-Americans is kind of like gold in that it's something which they cannot directly issue.

2321
03:13:57,700 --> 03:14:01,700
So the point here is.

2322
03:14:01,700 --> 03:14:05,700
This is the magic of the euro dollar system is that they can.

2323
03:14:05,700 --> 03:14:15,700
Well, yes, I agree. The broad money supply is increased when any bank anywhere in the world lends on a fractional reserve basis, US dollar denominated lending.

2324
03:14:15,700 --> 03:14:25,700
So that's how exactly and all they need and all they need to do that is to have collateral in a treasury bond or in euro or in real estate, whatever it is.

2325
03:14:25,700 --> 03:14:31,700
Any bank offshore that's completely outside of US jurisdictions has the capability to issue US dollars.

2326
03:14:31,700 --> 03:14:35,700
And by the way, those US dollars are no worse than the US dollars issued by Bank of America in New York.

2327
03:14:35,700 --> 03:14:41,700
I have a question for Moon Settler since he's here and talking about the credit, which is so interesting.

2328
03:14:42,700 --> 03:14:48,700
Is the bit credit protocol fractional reserve or is it inherently full reserve?

2329
03:14:48,700 --> 03:14:52,700
Like my understanding of lightning is that lightning is inherently full reserve.

2330
03:14:52,700 --> 03:14:57,700
If you're if you're like, so lightning is M0, M0 technology.

2331
03:14:57,700 --> 03:15:00,700
Absolutely. And Ark is M0 technology as well.

2332
03:15:00,700 --> 03:15:06,700
Is bit credit also, you know, 100 percent reserve like lightning and Ark or not?

2333
03:15:06,700 --> 03:15:09,700
No, bit credit is M1 technology.

2334
03:15:09,700 --> 03:15:20,700
So it's not it's not actually closely related in its operation to to main chain Bitcoin, except in settlement.

2335
03:15:20,700 --> 03:15:27,700
So as I understand, when these bills of exchanges come to maturity, you have to.

2336
03:15:27,700 --> 03:15:32,700
So the entire system is defined in such a way that you have to actually settle in real Bitcoin.

2337
03:15:33,700 --> 03:15:44,700
Someone has to settle because obviously you can sell your near maturity bills of exchange that maybe you bought at a discount when it was far away from maturity.

2338
03:15:44,700 --> 03:15:52,700
And you actually are fine with that because you don't want to own chain Bitcoin because own chain Bitcoin is costly to hold and handle and transact.

2339
03:15:52,700 --> 03:15:57,700
You don't actually want it. So you can actually trade your your bills with someone.

2340
03:15:57,700 --> 03:16:01,700
Someone has long maturity. You have short maturity.

2341
03:16:01,700 --> 03:16:05,700
You actually want to stay in the bit credit system. He wants real Bitcoin.

2342
03:16:05,700 --> 03:16:12,700
So you just have it and maybe you make a little bit on it or whatever or you get what you want.

2343
03:16:12,700 --> 03:16:19,700
The point is, it is M1 money technology. It is currency. It's not actually reserved by Bitcoin.

2344
03:16:19,700 --> 03:16:26,700
I think they are very prickly about any insinuation that Bitcoin can be used as reserve.

2345
03:16:26,700 --> 03:16:35,700
There are many people that think it cannot be used because of its scarcity properties and because of its hard money properties.

2346
03:16:35,700 --> 03:16:39,700
A lot of people seem to think and I wanted to ask you guys what you think about this,

2347
03:16:39,700 --> 03:16:48,700
because a lot of people think that rehypothecation and any play pretend that reserves in Bitcoin can only end in disaster.

2348
03:16:48,700 --> 03:16:50,700
A lot of people hold this.

2349
03:16:50,700 --> 03:16:56,700
Yeah, this is this is just false because Bitcoin is converging with gold and volatility.

2350
03:16:56,700 --> 03:17:02,700
And, you know, two weeks from now or one week from now, the BRICS will announce gold back reserve currency,

2351
03:17:03,700 --> 03:17:10,700
which will basically combine hard M0 reserves, which is gold, with modern on-chain technology for the currency,

2352
03:17:10,700 --> 03:17:13,700
for the M1 tokens to circulate worldwide.

2353
03:17:13,700 --> 03:17:21,700
Like this is sort of the best of both worlds where you'll have velocity of money from on-chain issued trading currency,

2354
03:17:21,700 --> 03:17:23,700
which is redeemable for gold on demand.

2355
03:17:23,700 --> 03:17:28,700
And that will be actually much better product as a trading currency than the U.S. dollar is today.

2356
03:17:28,700 --> 03:17:33,700
Because, you know, as we've seen, U.S. dollar can be trivially, you know, seized, frozen, whatever.

2357
03:17:33,700 --> 03:17:39,700
Whereas that currency, if it's implemented right, it would be redeemable for gold on demand,

2358
03:17:39,700 --> 03:17:43,700
while at the same time, uncensorable on blockchain.

2359
03:17:43,700 --> 03:17:48,700
I mean, that's completely centralized. That redemption is completely centralized.

2360
03:17:48,700 --> 03:17:52,700
It is centralized, but it's no more centralized than the U.S. dollar, right?

2361
03:17:52,700 --> 03:17:55,700
It's like it doesn't need to compete with Bitcoin.

2362
03:17:55,700 --> 03:17:58,700
Of course, it's centralized. Redemption will be centralized.

2363
03:17:58,700 --> 03:18:00,700
But the point is that it will be enforced.

2364
03:18:00,700 --> 03:18:04,700
It's a better trade-off for these countries that are sanctioned by the U.S.

2365
03:18:04,700 --> 03:18:06,700
Russia, China, India, whatever, right?

2366
03:18:06,700 --> 03:18:09,700
It's another trading channel for them.

2367
03:18:09,700 --> 03:18:15,700
They're not abandoning the existing system, but they're creating an option to survive swift sanctions, right?

2368
03:18:16,700 --> 03:18:19,700
Yes, and you are saying?

2369
03:18:19,700 --> 03:18:24,700
I was just going to say, like, one question you asked Moonseller just now is,

2370
03:18:24,700 --> 03:18:29,700
will the rehypothecation always end in disaster?

2371
03:18:29,700 --> 03:18:38,700
So are Toxic Maxis right to say that credit and rehypothecation are inherently unstable and unproductive?

2372
03:18:38,700 --> 03:18:43,700
So one thing we can say about Bitcoin is that because of its fixed supply, the volatility.

2373
03:18:45,120 --> 03:18:55,040
Of its purchasing power will converge on the volatility of the stock indices. So Bitcoin,

2374
03:18:55,040 --> 03:19:01,598
this is kind of what Alex was just saying, Bitcoin will never be less volatile in its purchasing power

2375
03:19:01,598 --> 03:19:09,838
than gold. Because gold has price responsive, sorry, demand responsive supply. It has elastic

2376
03:19:09,838 --> 03:19:16,960
supply like gold does. But if the growth rate of the economy, like let's imagine Bitcoin is money.

2377
03:19:16,960 --> 03:19:22,080
Let's just imagine today, hypothetically, everyone is holding Bitcoin and spending Bitcoin and

2378
03:19:22,080 --> 03:19:27,760
earning Bitcoin only. So Bitcoin has become, hypothetically, the world's money. What would

2379
03:19:27,760 --> 03:19:35,040
the volatility of Bitcoin's purchasing power be? It would be the volatility of the growth rate

2380
03:19:35,040 --> 03:19:37,760
of the economy, which is uncertain.

2381
03:19:37,760 --> 03:19:39,440
The S&P 500, basically.

2382
03:19:39,440 --> 03:19:39,998
Exactly.

2383
03:19:39,998 --> 03:19:41,920
It's the same as the S&P 500.

2384
03:19:41,920 --> 03:19:49,200
Right. Exactly. So Bitcoin would be as volatile as the stock market. It would not be as volatile

2385
03:19:49,200 --> 03:19:54,960
as gold was, which was a lower volatility because gold has that elastic supply.

2386
03:19:56,880 --> 03:20:04,798
And the question is, will people want to ever lend something as volatile as the stocks?

2387
03:20:05,518 --> 03:20:06,158
Maybe not.

2388
03:20:06,158 --> 03:20:11,040
People may want to lend it, but the borrowers will not want to borrow it because that would

2389
03:20:11,040 --> 03:20:17,040
be madness to borrow in an asset that keeps going up, right? You want to borrow in an asset

2390
03:20:17,040 --> 03:20:21,360
whose value is declining like the U.S. dollars, but you don't want to borrow in Bitcoin, right?

2391
03:20:21,360 --> 03:20:26,718
No, it's not. I would say that's an error, that people never want to borrow in something

2392
03:20:26,718 --> 03:20:32,478
which is going up in value because this has been written in human action by Von Mises very clearly.

2393
03:20:33,200 --> 03:20:36,880
Well, I mean, I agree with you on short term, right? Like when you're doing a flash loan,

2394
03:20:36,880 --> 03:20:42,319
you can borrow, you know, $100 million worth of Ether on Aave and one transaction later,

2395
03:20:42,319 --> 03:20:46,640
you can repay the debt because you've already done your arbitrage trade through five protocols,

2396
03:20:46,640 --> 03:20:48,798
right? So technically, that's borrowing too.

2397
03:20:50,640 --> 03:21:00,798
So if a money is always strengthening and purchasing power, people can borrow it or lend

2398
03:21:00,880 --> 03:21:09,600
it and the expected change in the purchasing power will be imputed into the interest rate.

2399
03:21:09,600 --> 03:21:15,200
So every interest rate has exactly three components, time preference, credit risk,

2400
03:21:16,158 --> 03:21:21,600
and the third one, which is what I'm talking about, which is what we call the price premium or

2401
03:21:21,600 --> 03:21:28,638
the expected change in the purchasing power of the money. Today, people lend dollars and borrow

2402
03:21:28,638 --> 03:21:34,880
in dollars even though they're constantly losing purchasing power. So what people do is they

2403
03:21:34,880 --> 03:21:40,718
predict how much loss of purchasing power will occur and they charge a higher interest rate.

2404
03:21:40,718 --> 03:21:46,960
So this secures, it protects the lender from the fall in the purchasing power of the dollar

2405
03:21:46,960 --> 03:21:51,840
because they're charging a higher interest rate. Similarly, if Bitcoin becomes money,

2406
03:21:51,840 --> 03:21:57,518
people will charge a lower interest rate because they expect the purchasing power

2407
03:21:57,518 --> 03:22:03,840
of Bitcoin to increase. So there can be lending and borrowing when money is always

2408
03:22:03,840 --> 03:22:08,479
strengthening in purchasing power. Yeah, there can be and there will be.

2409
03:22:08,479 --> 03:22:13,200
And I can give you like today's example is not like what you said is not entirely correct simply

2410
03:22:13,200 --> 03:22:17,840
because the way lending works for mortgages, let's say, is that the banks can borrow in the

2411
03:22:17,840 --> 03:22:22,718
wholesale market at 3 percent, then give you the mortgage at 5 percent. And when you sign that

2412
03:22:22,718 --> 03:22:27,518
mortgage, they can unload it into a secondary market into mortgage-backed securities three days

2413
03:22:27,518 --> 03:22:33,760
later. So that way, they basically have zero risk on the whole operation. Even if inflation is 10

2414
03:22:33,760 --> 03:22:38,960
percent, it's a still profitable operation for them to lend you at 5. And the reason why these

2415
03:22:38,960 --> 03:22:43,600
mortgage-backed securities could be trading at low yields is precisely what I said before, which is

2416
03:22:43,600 --> 03:22:51,278
that you can use them for 10x, 20x, 50x or 100x leverage to do complicated financial operations.

2417
03:22:51,278 --> 03:22:58,638
Their function as collateral obviates any need for them to recoup yields higher than inflation.

2418
03:22:58,638 --> 03:23:02,398
Like if you can get treasury bonds at 3 percent, but you can do a 10x

2419
03:23:03,118 --> 03:23:07,920
leverage operation on them, then essentially you're earning a risk-free 30 percent.

2420
03:23:07,920 --> 03:23:12,558
The fact that inflation is 10 percent doesn't matter to you because you're still making 20 percent

2421
03:23:12,558 --> 03:23:17,760
if you hold them to maturity. This is how the financial system works. Nobody cares that for

2422
03:23:17,760 --> 03:23:22,640
15 years you had negative yields on treasury bonds or mortgage-backed securities. People

2423
03:23:22,640 --> 03:23:28,319
underestimate the fact that it's simple to think of somebody actually holding these securities for

2424
03:23:28,319 --> 03:23:34,238
the yield for the long term, but 95 percent of them are not held for the long term. They're

2425
03:23:34,238 --> 03:23:39,920
traded in and out. They're used as collateral to do sophisticated futures contracts with 100x

2426
03:23:39,920 --> 03:23:45,118
collateral, et cetera, et cetera, et cetera. So their yield is irrelevant relative to inflation.

2427
03:23:48,718 --> 03:23:55,200
So what does this tell us about the technological parts Bitcoin should take?

2428
03:23:55,838 --> 03:24:06,718
Like if you actually want to reinforce Bitcoin's usage in the world as collateral

2429
03:24:07,920 --> 03:24:12,319
and like this large scale settlement?

2430
03:24:12,718 --> 03:24:19,040
So in other words, your scenario of people using Bitcoin as high velocity money is possible 30,

2431
03:24:19,040 --> 03:24:23,438
50 years down the road. And I agree with Saylor on this because I agree that

2432
03:24:23,438 --> 03:24:29,600
major fiats will remain. But it can never get there until it gets to be competitive collateral.

2433
03:24:29,600 --> 03:24:34,398
And the one thing that currently is missing in Bitcoin in order to make it competitive collateral

2434
03:24:34,958 --> 03:24:40,319
is what's not missing, unfortunately, in Ethereum, which is ability to lock up and

2435
03:24:40,398 --> 03:24:46,880
liquidate that collateral without using trust minimized protocols. Bitcoin does not have that,

2436
03:24:46,880 --> 03:24:51,838
unfortunately. So the demand for Bitcoin as collateral is already large enough where like

2437
03:24:51,838 --> 03:24:58,640
300,000 Bitcoin were wrapped up into this custodial WBTC. But what's missing is the ability

2438
03:24:58,640 --> 03:25:04,880
to say, you know, liquidate my Bitcoin if I don't pay out, pay back the debt to a smart contract.

2439
03:25:04,880 --> 03:25:09,760
This is the missing part. If you had that, essentially, you can think of it as because

2440
03:25:09,760 --> 03:25:14,479
if you have that, you have like Ethereum, like smart contracts. So you can get there

2441
03:25:14,479 --> 03:25:19,520
many different ways. You can get it through drivechains, roll ups, witness encryption or whatever.

2442
03:25:19,520 --> 03:25:24,080
But the point is that until you have the same ability for BTC that Ethereum has,

2443
03:25:24,880 --> 03:25:29,520
you will Ethereum is actually superior collateral, even though it's more volatile.

2444
03:25:33,760 --> 03:25:37,998
If you guys are willing, before we wrap up, once we're done with this topic,

2445
03:25:37,998 --> 03:25:41,200
and please continue with this topic, could we have a brief discussion on

2446
03:25:42,880 --> 03:25:47,520
restaking and whether it could be a threat to Bitcoin?

2447
03:25:49,040 --> 03:25:53,920
It is absolutely a threat to Bitcoin because it's the most advanced development in Ethereum that

2448
03:25:53,920 --> 03:25:58,958
many people don't understand yet. But restaking is essentially a rehypothecation of your staked

2449
03:25:58,958 --> 03:26:04,958
Ether, right? So this is the ability for you to take on more risk while staking your Ether,

2450
03:26:04,958 --> 03:26:09,920
because currently like you can stake Ether and have risk free 4% yield from staking it.

2451
03:26:09,920 --> 03:26:15,040
What restaking allows you to do is to take the same Ether and sign up to five more protocols,

2452
03:26:15,040 --> 03:26:22,558
each one of which pays another 4, 5, 8%. But this additional yield comes with additional risk of you

2453
03:26:22,558 --> 03:26:28,558
getting your Ethereum slashed should the node that you run for those protocols misbehave and

2454
03:26:28,558 --> 03:26:37,040
not comply with the protocol. It seems to me like when I read descriptions of restaking and

2455
03:26:37,040 --> 03:26:42,800
Eigen layer, it seems to me a lot like drivechain. In your view, how is it similar and how

2456
03:26:42,800 --> 03:26:47,678
is it different? Because on the one hand, let's say I want to stake, I can earn more if I'm

2457
03:26:47,678 --> 03:26:53,838
staking on many blockchains. Similarly, in Bitcoin mining, if I'm a miner, it's better if I get fees

2458
03:26:53,838 --> 03:27:01,360
from many blockchains. So why is my simplistic understanding of restaking as merged mining in

2459
03:27:01,360 --> 03:27:06,640
a proof of stake context? Why is that not so simple? Because what's missing in merged mining

2460
03:27:06,640 --> 03:27:13,520
or blind mining is the ability for you to be punished for not complying with the protocol.

2461
03:27:13,520 --> 03:27:18,478
Like there's nothing but upside in merged mining for Bitcoin miners. While with restaking,

2462
03:27:19,200 --> 03:27:27,598
if you stake your Ether on Ethereum, then you're just running their consensus chain,

2463
03:27:27,598 --> 03:27:31,760
not the execution chain, but their consensus layer. And all you're doing is you're signing

2464
03:27:31,760 --> 03:27:35,918
blocks for the consensus. This is the default case, which is considered risk-free. In other words,

2465
03:27:35,918 --> 03:27:40,720
that's the yield that you get. Well, there is some risk of you being slashed, for example,

2466
03:27:40,720 --> 03:27:46,399
if your validator is not online and not signing blocks. So it's the ability of the system to

2467
03:27:46,399 --> 03:27:54,478
punish you by slashing your value, which creates this perfect tradeoff where you can enable reuse

2468
03:27:54,478 --> 03:28:00,478
of collateral to secure multiple networks. And you have this network effect where you can have

2469
03:28:00,478 --> 03:28:06,640
an Oracle network, you can have a data availability layer, you can have completely

2470
03:28:06,640 --> 03:28:11,520
different blockchains secured by the same Ethereum. Exactly. That's why it sounds to

2471
03:28:11,520 --> 03:28:16,558
me like drivechains. But what's missing from drivechains is the punishment mechanism,

2472
03:28:16,558 --> 03:28:21,678
because miners only see the upside in blind merged mining, but they don't get punished

2473
03:28:22,399 --> 03:28:28,880
if the drivechain has behaved. I wish they would see it. Almost none of them see it yet.

2474
03:28:30,880 --> 03:28:38,080
Yes, go ahead, sir. Alex, sorry, this topic. So I'm not sure if you read the proposal. I'm not

2475
03:28:38,080 --> 03:28:45,840
sure who made it, but basically, I can sum it up. It's a staking mechanism for Bitcoin,

2476
03:28:45,840 --> 03:28:51,840
a very, very primitive staking mechanism, because Bitcoin is very limited, right?

2477
03:28:52,399 --> 03:28:54,399
Stake chains, right? You're talking about stake chains?

2478
03:28:54,399 --> 03:28:57,438
I think, yeah, yeah, stake chains. What do you think about that?

2479
03:28:57,998 --> 03:29:03,438
So I'm very familiar with stake chains. Stake chains is a good idea for creating chains that

2480
03:29:03,678 --> 03:29:11,840
it's kind of an incomplete sidechain proposal. In other words, you can secure a sidechain with

2481
03:29:11,840 --> 03:29:18,319
staked Bitcoin. And because Bitcoin is absolute digital scarcity, it doesn't suffer from problems

2482
03:29:18,319 --> 03:29:22,880
of proof of stake, because ultimately, security is guaranteed by immutability of the Bitcoin

2483
03:29:22,880 --> 03:29:28,720
chain itself. So it kind of has advantages of proof of stake, but at the same time,

2484
03:29:28,720 --> 03:29:32,640
it doesn't suffer from the disadvantages of long-term attacks and so forth.

2485
03:29:33,280 --> 03:29:38,640
But it's not an end product that's desirable, because there is no coin on the stake chain,

2486
03:29:38,640 --> 03:29:43,200
right? So for example, what is it that you would be actually doing on the sidechain?

2487
03:29:44,319 --> 03:29:49,918
As long as you don't have a two-way bridge that you can allow, that sats can move to and from it,

2488
03:29:49,918 --> 03:29:54,720
that sidechain has very limited uses, right? Because what you want is you want that sidechain

2489
03:29:54,720 --> 03:29:59,438
to have smart contracts or do something that Bitcoin doesn't do. And as long as you cannot

2490
03:29:59,438 --> 03:30:04,319
move the sats to and from it trustlessly, you cannot use that sidechain, for example,

2491
03:30:04,319 --> 03:30:09,760
for trust-minimized collateral, right? Yeah. And what if you bind this with a

2492
03:30:09,760 --> 03:30:14,640
hash rate test code? Because you said the problem with bind-mesh mining is you do not have this

2493
03:30:14,640 --> 03:30:19,678
mechanism. Stake chains seem to have the two-way peg mechanism, actually.

2494
03:30:20,238 --> 03:30:26,080
Well, they have punishment for non-compliance with the stake chain protocol. But if we brought

2495
03:30:26,080 --> 03:30:32,960
this up in the context of restaking, I think restaking is like rehypothecation in a traditional

2496
03:30:32,960 --> 03:30:38,880
financial system. It's a very powerful and very attractive thing because it enables people to

2497
03:30:38,880 --> 03:30:44,478
choose the level of risk they want for their reward. Because right now, if you hold ETH,

2498
03:30:44,478 --> 03:30:48,880
you basically can stake it or not. If you don't stake it, you're just holding a monetizing,

2499
03:30:48,880 --> 03:30:54,080
like increasing in value, decentralized coin, more or less. If you stake it, you assume some

2500
03:30:54,080 --> 03:30:58,640
risk because like your validator can get slashed. So there is a bit of a slashing risk. But in

2501
03:30:58,640 --> 03:31:03,520
exchange, you get higher yield. What restaking enables people to do is they can say, well,

2502
03:31:03,520 --> 03:31:08,640
wait a second. So we have a hundred billion dollars worth of ETH already staked on Ethereum.

2503
03:31:08,640 --> 03:31:15,200
Why can't we all tap into this pool of a hundred billion dollars worth of trust and give an opt-in

2504
03:31:15,200 --> 03:31:21,280
option for people who are already staking their ETH to secure additional protocols by running

2505
03:31:21,280 --> 03:31:37,840
additional nodes? And there is a huge network effect there. Imagine what it would take to

2506
03:31:37,840 --> 03:31:43,200
launch a blockchain or an Oracle protocol or any kind of system today. You basically have to

2507
03:31:43,200 --> 03:31:48,478
bootstrap your whole economy from scratch where you have to have a coin, its own validators,

2508
03:31:48,558 --> 03:31:56,399
etc. It's very difficult to do. Whereas instead now, you can launch a system that does terabits

2509
03:31:56,399 --> 03:32:02,720
per second worth of data availability, let's say, or an Oracle network. But instead of having its

2510
03:32:02,720 --> 03:32:07,840
own coin, you just give an option to Ethereum stakers to say, listen, download my node from

2511
03:32:07,840 --> 03:32:13,598
my network and run it. And if you believe my code to do what it says it will do, and if your node

2512
03:32:13,598 --> 03:32:18,478
actually operates 24-7 as it should, you're going to get an extra 10% of yield on your ETH.

2513
03:32:19,358 --> 03:32:27,358
So that becomes very attractive, right? This works exactly the same with stake chains. So one stake

2514
03:32:27,358 --> 03:32:34,960
can be used as many chains as you want because you actually just basically have a mechanism

2515
03:32:34,960 --> 03:32:42,080
where you are enforcing the uniqueness for a certain blockhead, the uniqueness of signatures,

2516
03:32:42,080 --> 03:32:48,558
single use signatures for a blockhead. Yeah, but you cannot run two stake chains using this,

2517
03:32:48,558 --> 03:32:55,998
right? Why not? Because a single Bitcoin locked up to secure a single stake chain cannot be used

2518
03:32:55,998 --> 03:33:02,960
again because it uses a mechanism of non-leakable nonsense, right? Yes, but those can be different

2519
03:33:02,960 --> 03:33:09,998
for every chain, so that's not a problem. You can sign for the same blockhead for the same chain

2520
03:33:09,998 --> 03:33:16,558
twice, but you can have different nonsense for different chains, and I don't see the problem.

2521
03:33:17,358 --> 03:33:21,438
I think you're right. I was wrong about this a minute ago, but I think the real problem is that

2522
03:33:21,438 --> 03:33:27,438
the script is so limited that you actually cannot structure a contract to be flexible enough in

2523
03:33:27,438 --> 03:33:32,478
order for somebody to say, look, I want to stake, you know, I want to enter the system and exit the

2524
03:33:32,478 --> 03:33:39,038
system, you know, and the stake chains has particular limitations, whereas this restaked

2525
03:33:39,038 --> 03:33:43,678
system in Ethereum, there's absolutely zero technical limitations on what this other system

2526
03:33:43,678 --> 03:33:48,720
looks like, right? It could be a blockchain, it could be a centralized, whatever the hell it is,

2527
03:33:49,438 --> 03:33:54,319
it has no connection to Ethereum itself, like it doesn't depend on the Ethereum blocks or

2528
03:33:54,319 --> 03:33:59,118
Ethereum keys, there's like zero dependency there, right? There's only a smart contract on

2529
03:33:59,118 --> 03:34:03,840
Ethereum that basically says if you join the smart contract, you will get additional yield

2530
03:34:03,840 --> 03:34:09,998
or your subscribed Ether will get slashed if your node misbehaves, that's it. Is it correct

2531
03:34:10,640 --> 03:34:18,399
that this restaking could drive movement among blockchains to

2532
03:34:19,358 --> 03:34:24,880
converge on Ethereum? There's already been announcements in Ethereum that some

2533
03:34:24,880 --> 03:34:29,918
layer one blockchains like Celo, for example, recently announced that it's abandoning its

2534
03:34:29,918 --> 03:34:35,118
blockchain and it's going to migrate to become a layer two on Ethereum. Yeah, that's what I'm

2535
03:34:35,118 --> 03:34:41,998
worried about. There's something different, there's something even more significant going on,

2536
03:34:42,080 --> 03:34:49,118
because you now have this thing called shared sequencing going on, right? So every roll-up

2537
03:34:49,118 --> 03:34:53,280
until recently would try to run its own centralized sequencer, but now they have

2538
03:34:53,280 --> 03:34:57,438
a shared sequencer, the system is called Espresso, I think, where instead of every

2539
03:34:57,438 --> 03:35:02,640
roll-up running its own sequencer, there's a single sequencing network which is using restaking

2540
03:35:02,640 --> 03:35:09,200
on Ethereum that allows any pair of roll-ups to atomically execute transactions in such a way

2541
03:35:09,200 --> 03:35:15,200
that the transaction executes on both roll-ups or not at all using a single Ethereum transaction

2542
03:35:15,200 --> 03:35:20,640
for settlement. So you now can have arbitrage between roll-ups and the whole thing is enabled

2543
03:35:21,280 --> 03:35:30,159
by a blockchain called Espresso, which itself is just a restaking node on Ethereum,

2544
03:35:30,159 --> 03:35:35,438
so it no longer bothers to launch its own blockchain. Eigenlayer itself is launching

2545
03:35:35,520 --> 03:35:43,118
a data availability layer that, just for comparison, Ethereum has 30 kilobits per second

2546
03:35:43,118 --> 03:35:48,399
bandwidth to its own data availability layer, up and down. They're launching a 10 megabit per second

2547
03:35:48,399 --> 03:35:53,920
bandwidth to the data availability layer that will have billions of dollars worth of Ether securing

2548
03:35:53,920 --> 03:36:01,118
it, and therefore as long as Ethereum exists, you will have data storage guaranteed to be available

2549
03:36:01,118 --> 03:36:06,640
at, you know, one hundredth the price of Ethereum block space on the data availability layer.

2550
03:36:06,640 --> 03:36:14,238
Is there going to be an Eigenlayer token or not? There is going to be an Eigenlayer token, but

2551
03:36:14,238 --> 03:36:21,040
it's a protocol equity token similar to how CRV or Aave has a protocol equity token.

2552
03:36:21,040 --> 03:36:25,440
Are those strictly necessary? Are those necessary or why can't they just design it like

2553
03:36:25,440 --> 03:36:31,358
a drivechain where there's no token? This token is not a shitcoin in the sense of it's not trying

2554
03:36:31,358 --> 03:36:35,520
to be currency, you know, and this is back to Laser Eye call, you know, declaring everything a shitcoin,

2555
03:36:35,520 --> 03:36:41,598
which is a mistake. If you look at what CRV token is or Aave token is, those are crypto equity tokens.

2556
03:36:41,598 --> 03:36:47,198
They're not trying to be currencies. They're basically tokens which accrue value through

2557
03:36:47,198 --> 03:36:52,880
fees charged by the protocol, right? So Eigenlayer is not in the business of charity. They will

2558
03:36:52,880 --> 03:36:57,920
provide this Eigenlayer stuff, but in exchange, they will collect some kind of, you know, small

2559
03:36:57,920 --> 03:37:02,880
commission on the yield, on the additional yield that you're collecting. This small commission will

2560
03:37:02,880 --> 03:37:07,760
accrue to the protocol token as crypto equity, right? So think of it as an income stream to

2561
03:37:07,760 --> 03:37:12,078
Apple shares. You know, Apple has income. Apple shares, therefore, have value. So you'll have the

2562
03:37:12,078 --> 03:37:18,399
same kind of protocol equity token in Eigenlayer, but it's not trying to be store value. It's not

2563
03:37:18,399 --> 03:37:23,040
trying to be collateral. It's not trying to be anything. It's simply crypto equity. It's a stock

2564
03:37:23,680 --> 03:37:27,998
in a company that happens to be a smart contract and has no employees. That's all it is.

2565
03:37:28,800 --> 03:37:35,680
Alex, may I ask you a question? Because you mentioned CRV. And can you tell me what are,

2566
03:37:35,680 --> 03:37:42,399
because I want to bring like a comparison between all this, what you're talking and the drive

2567
03:37:42,399 --> 03:37:52,078
chains. What are the risks or risk management? Do you go on that path and you check all this?

2568
03:37:52,078 --> 03:37:59,760
Because the recent events, what's happened is that even particularly specifically for

2569
03:38:00,640 --> 03:38:05,440
CRV, the most of the supplies is held by one person.

2570
03:38:05,440 --> 03:38:11,040
The most of the supply of this crypto equity, like imagine if somebody held, you know, 50%

2571
03:38:11,040 --> 03:38:17,118
of Apple stock, right? And imagine if this somebody put all of their holdings as collateral

2572
03:38:17,118 --> 03:38:21,760
and borrowed stable coins against them. So now you have a problem where these protocols that lend them

2573
03:38:21,760 --> 03:38:27,118
stable coins are looking at mass liquidation because his CRV token is going down because

2574
03:38:27,118 --> 03:38:31,760
there were hacks and the hacker wants to unload the CRV tokens, right? So the CRV tokens were

2575
03:38:31,760 --> 03:38:37,838
hacked. The hacker will dump the CRV tokens that will cause forced liquidation of CRV as collateral,

2576
03:38:37,838 --> 03:38:43,998
which might cause bad debt and protocol crashes and other protocols that allow CRV to be the

2577
03:38:43,998 --> 03:38:51,358
collateral. It was a mistake for these protocols to allow this kind of crypto equity token as

2578
03:38:51,358 --> 03:38:56,478
collateral in the first place, right? Why would you allow a Mickey Mouse company, which consists

2579
03:38:57,040 --> 03:39:02,078
of a smart contract and issues its token that accrues value from the fees? Why would you allow

2580
03:39:02,078 --> 03:39:07,598
that as collateral that you can borrow Bitcoin, Ethereum or stable coins against to begin with?

2581
03:39:07,598 --> 03:39:12,478
The reason why they allowed it is because they are all whales holding CRV. The people running

2582
03:39:12,478 --> 03:39:17,680
these protocols basically did a sweetheart deal with themselves where they allowed the CRV token

2583
03:39:17,680 --> 03:39:22,559
as collateral, even though it's too volatile to be collateral. And now they're basically looking

2584
03:39:22,559 --> 03:39:27,440
at like obvious, looking at, you know, hundreds of millions of dollars of bad debt in the protocol

2585
03:39:27,440 --> 03:39:29,118
where CRV might.

2586
03:39:29,784 --> 03:39:37,584
Go down low enough where it needs to be liquidated, but there will be no buyers to repay the debt, so they might end up with negative protocol value.

2587
03:39:39,704 --> 03:39:42,344
Yeah, it's a huge problem in DeFi at the moment.

2588
03:39:42,344 --> 03:39:54,384
I mean, it's not at the moment, but the problem with this is not really DeFi, this is Dino, decentralized in name only because any DeFi protocol that has governance is not decentralized.

2589
03:39:54,424 --> 03:39:59,424
I don't give a fuck what they call it, but pardon my French, but I'm saying any protocol where you have

2590
03:39:59,424 --> 03:40:01,584
voting on parameters is not decentralized.

2591
03:40:01,584 --> 03:40:06,224
Any protocol where you can have an upgrade to the protocol code is not decentralized.

2592
03:40:06,544 --> 03:40:12,784
Now, these are not the only kinds of DeFi protocols, there are truly decentralized DeFi protocols out there, right?

2593
03:40:12,784 --> 03:40:15,904
There are protocols which have zero governance and zero upgradability.

2594
03:40:15,944 --> 03:40:18,664
Those are the only legitimate DeFi protocols from my perspective.

2595
03:40:19,104 --> 03:40:21,184
And, you know, there's good examples of those as well.

2596
03:40:21,744 --> 03:40:27,344
So what does this all mean for Bitcoin and how we could, you know, move forward, what do you think?

2597
03:40:27,864 --> 03:40:35,864
I think what Bitcoin is missing is like there is this complete myopic misunderstanding of it having to become collateral first.

2598
03:40:36,304 --> 03:40:55,904
And if people really understood that the one thing that will keep Bitcoin from becoming captured by BlackRock and becoming another fine art or another gold is to actually enable what people want to use it for, which is the same thing that people use Ethereum for, which is a volatile but decentralized and trust minimized collateral.

2599
03:40:56,304 --> 03:40:58,984
On top of which you can do a million different operations.

2600
03:40:58,984 --> 03:41:03,624
You can issue stable coins, you can issue futures, you can issue insurance contracts.

2601
03:41:03,944 --> 03:41:14,264
There's a million uses for collateral and Bitcoin, unfortunately, treats collateral as a dirty word back to the same, you know, hybrid hypothecation, fractional reserve banking, whatever.

2602
03:41:14,264 --> 03:41:17,544
But this is what the Eurodollar, this is what modern finance is.

2603
03:41:17,544 --> 03:41:21,384
It's basically collateral with 100x leverage on top, right?

2604
03:41:21,864 --> 03:41:27,744
Unfortunately, basically, we are trying to take over the world by pissing on the world or something.

2605
03:41:28,064 --> 03:41:36,264
Well, you're trying. Yeah, you're trying to take over the world by doing something that's not that's not what the modern finance cares about, which is payments are a solved problem.

2606
03:41:36,264 --> 03:41:42,264
Right. Like from my perspective, you know, Visa or PayPal or whatever, they can do incredible velocity of money.

2607
03:41:42,464 --> 03:41:46,984
And the fact that it's custodial doesn't even matter because it's your petty cash.

2608
03:41:46,984 --> 03:41:47,904
It's not your savings.

2609
03:41:47,904 --> 03:41:57,064
Right. Like what matters is that those people, you know, you know, institutions want collateral, whereas plebs in third world want stable coins that cannot be robbed from them.

2610
03:41:57,704 --> 03:41:59,624
And Bitcoin doesn't care about either one.

2611
03:42:00,224 --> 03:42:01,264
And this is the problem, right?

2612
03:42:01,264 --> 03:42:05,144
Bitcoin is trying to produce high velocity private payments.

2613
03:42:05,144 --> 03:42:11,304
But who cares that your bank knows about your $1,000, you know, petty cash balance that you buy stuff on the Internet?

2614
03:42:11,304 --> 03:42:17,064
I mean, unless you buy drugs online, in that case, go ahead and use use your Wasabi wallet or something or use Monero.

2615
03:42:17,344 --> 03:42:22,304
But it's not a use case that the world actually cares about the financial system.

2616
03:42:22,304 --> 03:42:26,464
The institutions care about collateral and the plebs care about stable coins that cannot be robbed.

2617
03:42:27,504 --> 03:42:38,424
Alex, I think what you said, I disagree because the is not is not the case that who cares the bank, even I don't care what what they say.

2618
03:42:38,744 --> 03:42:43,424
But the thing is that nobody can censor you from transacting.

2619
03:42:43,863 --> 03:42:50,943
Yes, but there is a huge amount of friction in the traditional finance and banking world.

2620
03:42:50,943 --> 03:42:53,704
And it's a huge pain in the ass.

2621
03:42:53,704 --> 03:42:56,744
And the financial is seemingly increasing.

2622
03:42:57,344 --> 03:43:01,544
But what's actually solving that issue of friction?

2623
03:43:02,184 --> 03:43:03,264
It's not Bitcoin.

2624
03:43:03,344 --> 03:43:04,943
It's you. It's Tether, right?

2625
03:43:05,144 --> 03:43:07,984
Tether is a real competition, not not dollars.

2626
03:43:08,504 --> 03:43:16,504
But Tether is a company that they can just sit on if they want, like create a version of Tether that cannot be robbed, right?

2627
03:43:16,504 --> 03:43:20,863
Create a decentralized dollar backed by Bitcoin as collateral like LUSD, right?

2628
03:43:21,224 --> 03:43:25,064
If LUSD became as big as Tether, the Tether would go away.

2629
03:43:25,704 --> 03:43:29,224
Didn't it just end in disaster every time someone tried it?

2630
03:43:30,504 --> 03:43:36,464
Well, yeah, because no, no, it only ended in disaster if you try algorithmic coins, right?

2631
03:43:36,464 --> 03:43:38,024
I'm not talking about algorithmic coins.

2632
03:43:38,024 --> 03:43:43,624
I'm talking about collateralized coins where the collateral itself is decentralized.

2633
03:43:43,664 --> 03:43:46,703
That those models are known to work perfectly.

2634
03:43:46,703 --> 03:43:50,784
There is no de-pegging of LUSD and there can never be de-pegging of LUSD.

2635
03:43:51,144 --> 03:43:54,863
If you want an example of what the world actually wants, look at LUSD liquidity.

2636
03:43:55,464 --> 03:44:01,863
The only reason why it's not become huge yet is because there's liquidity network effects for Tether and USDC and others.

2637
03:44:01,863 --> 03:44:02,824
Right. And Dai.

2638
03:44:02,824 --> 03:44:06,064
Right. But they actually the world doesn't know it yet.

2639
03:44:06,464 --> 03:44:11,504
But if the world had LUSD as a mass adopted coin, this is what the plebs want.

2640
03:44:11,863 --> 03:44:16,624
Now, it wouldn't be helpful for Bitcoin, but Bitcoin wouldn't compete with this until 30 years from now.

2641
03:44:16,904 --> 03:44:24,104
What Bitcoin needs to do is to give institutions what they want, which is they crave collateral that has no counterparty risk.

2642
03:44:24,344 --> 03:44:27,784
Right now, right now in the world, there's only one asset that does it.

2643
03:44:27,784 --> 03:44:29,744
You know what it is? Unfortunately, Ethereum.

2644
03:44:30,543 --> 03:44:36,824
Ethereum is the only asset in the world where you can use it as collateral with no counterparty risk and you can do fancy operations on top of it.

2645
03:44:37,184 --> 03:44:39,144
Bitcoin does not solve that case.

2646
03:44:39,543 --> 03:44:41,624
And that's why it's not interesting to institutions.

2647
03:44:43,384 --> 03:44:47,904
Right. The EURUSD system wants Bitcoin to be like Ethereum.

2648
03:44:52,424 --> 03:44:59,064
Alex, there is another perspective of what you're saying.

2649
03:44:59,104 --> 03:45:10,504
Because the and I want to ask you, what do you think about what the drivechains try to do and how the mechanism with depositing and escrow

2650
03:45:12,264 --> 03:45:17,424
holdings, how you view this mechanism?

2651
03:45:17,424 --> 03:45:28,863
And because I want to say that you are saying Ethereum, but Ethereum is way behind the other blockchains, which they already are in the future.

2652
03:45:29,144 --> 03:45:31,624
With what you are saying already, tokenization.

2653
03:45:32,784 --> 03:45:37,224
I disagree. I mean, Ethereum has killed off all of its Ethereum killers.

2654
03:45:37,624 --> 03:45:39,624
No, no, no.

2655
03:45:40,424 --> 03:45:41,904
Let's not let's not argue about it here.

2656
03:45:41,944 --> 03:45:43,064
But who cares?

2657
03:45:43,703 --> 03:45:56,464
I mean, my point is that drivechains are I will take drivechains because at least even though it's not a perfectly secure, trust minimized setup, it's better than having nothing right now.

2658
03:45:56,703 --> 03:46:00,184
Like at least some drivechains appear and somebody does a successful drivechain.

2659
03:46:00,504 --> 03:46:13,344
You will have the ability to collateralize Bitcoin on this drivechain and do advanced operations, even though it sounds like the network effect is already so hugely tilted from what you described to us so far.

2660
03:46:13,744 --> 03:46:15,584
It sounds like kind of like too late.

2661
03:46:16,664 --> 03:46:17,904
It may be too late.

2662
03:46:18,104 --> 03:46:23,504
I agree with you. I'm still hopeful that it's not simply because Bitcoin still has more liquidity than Ethereum.

2663
03:46:23,824 --> 03:46:29,664
So even though Ethereum has huge network effects, but the total market cap of Bitcoin is still above Ethereum.

2664
03:46:29,664 --> 03:46:38,344
So there's still a chance when it will become too late is if Ethereum flippens or lappens Bitcoin, in other words, not just one X, but two, three, four X Bitcoin.

2665
03:46:38,703 --> 03:46:49,904
At that point, the game will be over because at that point, even if you enable perfectly secure sidechains or roll ups on Bitcoin, it will be too late to catch.

2666
03:46:50,384 --> 03:46:54,744
Like the only advantage remaining to Ethereum will be the fact that it's higher volatility than Bitcoin.

2667
03:46:55,264 --> 03:47:01,824
But once its market cap is above Bitcoin and stays above Bitcoin, I think its volatility will equal or go lower than Bitcoin as well.

2668
03:47:02,904 --> 03:47:03,424
Exactly.

2669
03:47:03,424 --> 03:47:07,584
So that will be game over. So you basically have between now and the flippening to do something.

2670
03:47:08,584 --> 03:47:10,424
Exactly. Drivechain now.

2671
03:47:10,664 --> 03:47:16,304
If we wait to the flippening to wise up and understand what's going on, it's going to be over probably.

2672
03:47:16,344 --> 03:47:21,024
And the biggest problem with opponents of drivechain is that they decide for other people.

2673
03:47:21,024 --> 03:47:27,824
Like if you don't like drivechain, do not deposit your coins there, but do not prevent people who want to use drivechain from doing it.

2674
03:47:27,984 --> 03:47:32,464
Right. And truth be told, like drivechains do not really need a soft fork, right?

2675
03:47:32,464 --> 03:47:36,984
They could have a miner activated soft fork that is either announced or unannounced.

2676
03:47:37,464 --> 03:47:38,703
Oh, that's a huge conundrum.

2677
03:47:39,224 --> 03:47:47,904
Yeah. Well, but, you know, at the end of the day, it's that or Bitcoin becomes an exotic store of value and becomes like art or gold and fixes nothing.

2678
03:47:47,904 --> 03:47:51,104
Right. So do you think miners care about that?

2679
03:47:51,224 --> 03:47:59,264
Like, do they have business plans that span through the next cycle or something like that?

2680
03:47:59,264 --> 03:48:01,664
They actually do care what happens.

2681
03:48:01,664 --> 03:48:06,144
I think miners are not endangered enough to care about it.

2682
03:48:06,984 --> 03:48:17,144
Yeah. At the conference in Miami, I asked them, I went to the different mining companies and asked their employees if they're interested in the possibility of higher fee revenue from sidechains.

2683
03:48:17,744 --> 03:48:24,464
At this moment, I don't think most of the miners understand this and they they're just hoping for a number go up.

2684
03:48:24,464 --> 03:48:26,984
That way, the subsidy pays them for the next few years.

2685
03:48:28,304 --> 03:48:30,943
That's all they're thinking about, as far as I can tell.

2686
03:48:31,184 --> 03:48:35,104
The one miner that has written favorably about merged mining is brains.

2687
03:48:35,464 --> 03:48:44,623
Brains put out a blog post in the past about merged mining Rootstock and how they like doing that to promote Rootstock and to collect the fees from that chain.

2688
03:48:45,544 --> 03:48:48,904
Yeah, Rootstock I think even now has 50% of the hashrate, right?

2689
03:48:49,064 --> 03:48:52,064
I think that's the least favorite way to do this, by the way.

2690
03:48:52,344 --> 03:48:55,464
Yeah, because it's no real peg and it's yeah.

2691
03:48:55,464 --> 03:48:58,224
But Rootstock had like 80% of the hashrate at some point.

2692
03:48:58,224 --> 03:48:59,664
Maybe it's got 50% right now.

2693
03:48:59,664 --> 03:49:04,703
Currently, it's currently about half of Bitcoin's hashrate is merged mining Rootstock.

2694
03:49:05,384 --> 03:49:12,104
And it just shows you that because they have zero downside from doing it, just some technical, you know, they just have to run another piece of software.

2695
03:49:12,623 --> 03:49:13,623
They will do it.

2696
03:49:14,024 --> 03:49:22,424
Yeah. And with blind merge mining, they got to do absolutely nothing except they have to orphan the blocks that try to withdraw early.

2697
03:49:22,424 --> 03:49:25,784
Right. Which is the way that would enforce this miner activated soft fork.

2698
03:49:25,984 --> 03:49:28,664
And I don't even think they have to.

2699
03:49:28,703 --> 03:49:30,504
They don't have to orphan blocks.

2700
03:49:30,623 --> 03:49:35,184
No, if you are talking about BIP300, they just download them.

2701
03:49:36,784 --> 03:49:37,784
They just what?

2702
03:49:38,703 --> 03:49:43,064
They just download them, basically, or up with another competing proposal.

2703
03:49:43,104 --> 03:49:44,344
They don't have to be organic.

2704
03:49:44,384 --> 03:49:57,544
Down, down, down voting doesn't doesn't doesn't is not sufficient because if somebody tries to create an early withdrawal from that address, that withdrawal is invalid to the block containing.

2705
03:49:57,584 --> 03:49:59,584
Yeah, that's yeah, that's that's.

2706
03:49:59,824 --> 03:50:01,504
Yeah, I understand now what you're saying.

2707
03:50:01,544 --> 03:50:04,703
So breaking the consensus rules, so yeah, yeah.

2708
03:50:04,703 --> 03:50:17,904
So the only thing that miners need to do to enable drop chain is basically to get together into a cartel and say, look, we will not build on top any block that does an early withdrawal or does a withdrawal without the majority vote after three to six months.

2709
03:50:17,904 --> 03:50:32,584
Man, I guarantee you there would be a second civil war if they tried it like that is the one path that that I understand that what you're saying, that it would technically be now, but it's almost guaranteed that there would be a civil war.

2710
03:50:32,584 --> 03:50:36,664
Imagine imagine if they're imagine if they're doing this without announcing this, though.

2711
03:50:37,304 --> 03:50:40,504
Imagine that occasionally you see an orphan block and you don't know why.

2712
03:50:41,024 --> 03:50:48,984
But who would use the drivechain then if they don't announce it and they don't commit like who would be stupid enough to put money in that?

2713
03:50:49,104 --> 03:50:51,744
Well, you would still see that coin based transaction, right?

2714
03:50:51,744 --> 03:50:54,984
You would still see these like deposits and withdrawals going on.

2715
03:50:55,384 --> 03:51:02,984
It's just that I'm saying that they wouldn't aggravate the laser right faction by by saying, hey, we're getting into this conspiracy of miners, right?

2716
03:51:03,424 --> 03:51:10,664
They could just quietly now announce a year later that we've been doing billions of dollars worth of deposits and withdrawals to the sidechains.

2717
03:51:12,264 --> 03:51:25,304
Can you give me some idea of why Stacks is doing merge mining in such a despicable way and why they are burning coins in the worst way possible?

2718
03:51:25,664 --> 03:51:32,623
Basically, from my point of view, Stacks is doing the merge mining and burning coins the worst possible way.

2719
03:51:32,623 --> 03:51:35,064
If you really want to harm Bitcoin, this is how you do it.

2720
03:51:36,024 --> 03:51:41,544
Well, I mean, they because their marketing wants to tell you that you can earn Bitcoin by staking Stacks, right?

2721
03:51:41,544 --> 03:51:44,664
But they're creating a marketing story for why you should hold STX.

2722
03:51:45,024 --> 03:51:45,943
That's all there is to it.

2723
03:51:46,784 --> 03:51:48,664
They are not merge mining per se.

2724
03:51:48,664 --> 03:51:50,264
It's not technically merge mining.

2725
03:51:51,224 --> 03:51:52,464
No, it's not merge mining.

2726
03:51:52,464 --> 03:51:54,424
It's basically staking of STX.

2727
03:51:54,943 --> 03:52:02,104
The miners have to run their software, right, integrated into their mining operation, which is basically like classical merge mining.

2728
03:52:02,424 --> 03:52:06,584
And the way they burn Bitcoin miners, they don't care about the Stacks miners yet.

2729
03:52:07,623 --> 03:52:20,904
But I heard miners actually run the software and they can they can they can rug pull Stacks by by doing certain like mine for miners.

2730
03:52:20,904 --> 03:52:23,904
It's an additional risk free source of revenue for Bitcoin miners.

2731
03:52:24,304 --> 03:52:32,464
Because they can either rug pull or run Stacks software because they have privileged position of building blocks and they don't really need to pay for transaction fees and stuff.

2732
03:52:33,024 --> 03:52:38,744
So for them, it's like it's a little trickle of additional revenue with zero risk, which is like why leave it on the table.

2733
03:52:39,264 --> 03:52:42,504
Right. It's kind of like the same story as RSK basically.

2734
03:52:42,504 --> 03:52:48,144
Alex, what is your long term expectation on Stacks if we assume drivechain never comes to Bitcoin?

2735
03:52:48,623 --> 03:52:50,904
It's irrelevant. I think it's not going anywhere.

2736
03:52:50,943 --> 03:52:56,664
It's just it's just another shit coin that that's not even worthy of discussion, basically, from my perspective.

2737
03:52:56,664 --> 03:52:59,344
Like the whole ecosystem, the whole Stacks project.

2738
03:52:59,464 --> 03:53:01,064
Yeah, it's a ghost town.

2739
03:53:01,464 --> 03:53:03,984
I mean, it's all just a LARP, basically.

2740
03:53:03,984 --> 03:53:05,104
There is no ecosystem there.

2741
03:53:08,703 --> 03:53:13,784
That seems to be the story of Bitcoin sidechains, support sidechains.

2742
03:53:14,024 --> 03:53:16,703
Well, because Bitcoin sidechains do not exist, right?

2743
03:53:16,703 --> 03:53:20,784
Like Liquid is not technically a sidechain relative to the original sidechain paper.

2744
03:53:20,784 --> 03:53:22,544
It's like a multi-stake custodial thing.

2745
03:53:24,904 --> 03:53:30,864
Alex, would you agree that in order to be a true sidechain, the sidechain must be peer to peer?

2746
03:53:31,184 --> 03:53:35,504
Would you would you agree that that is the right sort of categorical description?

2747
03:53:35,504 --> 03:53:36,544
I would agree with that.

2748
03:53:36,544 --> 03:53:43,584
But I'm saying I'm telling you that in the long run, that's necessary, but insufficient because they tried all these variants in the Ethereum world.

2749
03:53:44,144 --> 03:53:57,664
And what they settled on to scale Ethereum is rollups for a good reason, because rollups allow you to pull security, whereas in drivechains, every every drivechain has to be big and secure enough on its own.

2750
03:53:57,664 --> 03:54:06,703
And it cannot benefit from from double spend resistance of Bitcoin and it cannot double benefit from immutability of Bitcoin.

2751
03:54:06,943 --> 03:54:13,864
So basically, in the long run, yes, it's necessary for the sidechain to be peer to peer, but it's just not sufficient.

2752
03:54:14,304 --> 03:54:24,304
Unless you have this one super popular drivechain that actually has billions of dollars worth of security because it's running collateral and smart contracts and everything else.

2753
03:54:24,664 --> 03:54:27,984
Yes, it would be viable, that kind of drivechain.

2754
03:54:27,984 --> 03:54:34,984
But it still would not pull its security with Bitcoin, which is a bummer, I guess, because of the rollup.

2755
03:54:35,943 --> 03:54:46,584
Do you think it's actually a viable combination to combine BIP300 and with multi-chain, stake chain type of stuff for security?

2756
03:54:47,344 --> 03:54:50,984
Because it seems to solve the real problem on the sidechain side.

2757
03:54:50,984 --> 03:54:57,464
No, it doesn't, because the sidechain that uses stake chain has its own security, you know, walled garden.

2758
03:54:57,584 --> 03:55:03,744
It doesn't really benefit from Bitcoin security in the sense that, yes, it does fix long range attacks.

2759
03:55:04,064 --> 03:55:10,584
But in order to mutate the tip of that stake chain, you only need to outspend whoever's staking to secure that chain.

2760
03:55:10,584 --> 03:55:14,943
Whereas rollups simply get the entire security of Ethereum for free.

2761
03:55:15,064 --> 03:55:17,224
Right. You cannot you cannot beat that.

2762
03:55:17,224 --> 03:55:18,784
This is like safety in numbers.

2763
03:55:18,984 --> 03:55:24,824
The more that exists on Ethereum, the more secure Ethereum is and the more secure every rollup is.

2764
03:55:24,824 --> 03:55:28,464
Now, rollups have one downside, which is that they consume block space on Ethereum.

2765
03:55:28,464 --> 03:55:31,424
Right. Which is what drivechains would not do.

2766
03:55:31,544 --> 03:55:32,943
They would have their own block space.

2767
03:55:33,344 --> 03:55:39,623
But this consumption of block space actually creates the fee pressure that's necessary anyways.

2768
03:55:39,623 --> 03:55:48,784
Right. And by escalating the price of the M0 block space, it actually indirectly creates demand for M1, M2 and M3 block space.

2769
03:55:49,104 --> 03:55:57,984
But this kind of waterfall where once the M0 becomes expensive enough, everybody's forced to M1 or L2, L3 and so forth.

2770
03:55:57,984 --> 03:56:11,784
So this is kind of a reinforcing thing, too, that the fact that they're not perfectly scalable because they consume the block space is actually an advantage because it forces uneconomical uses to join the L2s and L3s.

2771
03:56:11,864 --> 03:56:14,464
Right. Which reinforces their use and security.

2772
03:56:14,464 --> 03:56:21,464
Right. So like rollups are on one hand, they're not scalable a billion times like drivechains would be.

2773
03:56:21,943 --> 03:56:31,984
But the tradeoff of would you rather have a secure rollup that is like maximum 100x scalable relative to Bitcoin itself if you're just doing payments is still worth it, I think.

2774
03:56:32,984 --> 03:56:47,504
So if I understand correctly, you would think drivechains would be more suitable for certain utility type things where the block space is actually the whole point, sort of?

2775
03:56:47,824 --> 03:56:55,024
Yeah. If you need something like trillions, like terabytes worth of block space, then drivechain is better than a rollup.

2776
03:56:56,024 --> 03:56:57,024
Right.

2777
03:56:58,024 --> 03:57:02,024
Because rollups have to share block space with L1, right?

2778
03:57:05,024 --> 03:57:12,024
So if you have a use case where you want to put all the images of the world on a blockchain, then a rollup is not appropriate, but a drivechain is.

2779
03:57:13,024 --> 03:57:28,024
And the fact that the security might be sufficient for you to store your data, even though it doesn't benefit from L1 security, is probably OK for that kind of rollup, right?

2780
03:57:28,024 --> 03:57:30,024
Where you're just backing up data, for example.

2781
03:57:30,024 --> 03:57:41,024
Alex, what are your expectations in terms of the possibility of Bitcoin doing rollups or drivechains in the future? What do you practically expect?

2782
03:57:41,024 --> 03:57:52,024
Practically, I expect a failure. In other words, I expect Bitcoin not to do this unless there is a real apocalypse and a pleb uprising.

2783
03:57:52,024 --> 03:57:59,024
Like I said in the past, you need a real crisis in order to get the laser eye cult to wake up and smell what's going on.

2784
03:57:59,024 --> 03:58:09,024
Because a real crisis is that you need basically sticky high fees on Bitcoin in order to destroy the laser eye cult gatekeeping on any changes to Bitcoin.

2785
03:58:09,024 --> 03:58:12,024
This is the only way. This is exactly what works in Ethereum.

2786
03:58:12,024 --> 03:58:19,024
But it's interesting that you – and we've talked about this before. It's always so interesting to hear your thoughts.

2787
03:58:19,024 --> 03:58:26,024
You expect that there could be a feepocalypse, and you're referring to the possibility of persistently high fees.

2788
03:58:26,024 --> 03:58:31,024
But as you know, the drive chainers expect persistently low fees.

2789
03:58:31,024 --> 03:58:33,024
Yeah, I disagree with that.

2790
03:58:34,024 --> 03:58:35,024
I disagree with that.

2791
03:58:35,024 --> 03:58:46,024
Isn't there a cart before the – there's a cart before the horse problem where we're talking about development on Bitcoin and demand accruing, demand building up on the block space.

2792
03:58:46,024 --> 03:58:50,024
But how will there be that demand when the development must come first?

2793
03:58:50,796 --> 03:59:00,796
No, I know, but there's enough development right now because, you know, for example, there's one feature missing in ordinals right now that would like increase the demand for block space by 100x.

2794
03:59:00,796 --> 03:59:08,796
And the feature is the hierarchical nested ordinals, right? Because ordinals are not hierarchically nestable right now.

2795
03:59:08,796 --> 03:59:16,796
You cannot create an ordinal that represents you as an identity and then have a file system below you where you have folders and other ordinals below you.

2796
03:59:16,796 --> 03:59:26,796
But once they add this feature to ordinals, expect all these websites to appear to say, you know, upload all your baby photos and different folders to Bitcoin forever and ever and your family will keep it.

2797
03:59:26,796 --> 03:59:35,796
Pay only like $59 today or pay $200 to upload, you know, 10 megabytes of various encrypted data into Bitcoin.

2798
03:59:35,796 --> 03:59:40,796
But until they have this ability to structure information, that's not a viable use case.

2799
03:59:40,796 --> 03:59:50,796
But you don't need to change Bitcoin to get that. What you need is you need to basically to hurry up and merge a couple of pull requests for ordinals to enable nested ordinals.

2800
03:59:50,796 --> 03:59:53,796
And I believe that will create sufficient block space demand.

2801
03:59:54,796 --> 04:00:19,796
What do you think about people, Bitcoiners basically just moving towards U3XO and zero sync model for most of them basically killing this free rider replication, free replication narrative and just killing the whole ordinals inscription thing?

2802
04:00:19,796 --> 04:00:30,796
I don't think it's going to happen simply because miners will always run nodes where you can download fast blocks, even if there was a mass movement to U3XO, etc.

2803
04:00:30,796 --> 04:00:34,796
This is not a data availability problem. This is a data archiving problem.

2804
04:00:34,796 --> 04:00:39,796
And, you know, the question is, what is the incentive for somebody to archive the blockchain?

2805
04:00:39,796 --> 04:00:43,796
There is no answer for that in Bitcoin or Ethereum for that matter.

2806
04:00:43,796 --> 04:00:50,796
But if the miners start to charge fees for serving this data, then it basically becomes worse than cloud.

2807
04:00:52,796 --> 04:01:01,796
Yes, but if that archival data is not available, you just broke Bitcoin security model because the security model says that you have to download the blocks for the whole history.

2808
04:01:01,796 --> 04:01:06,796
Well, not with zero sync, right? Not with zero sync. You don't have to.

2809
04:01:07,796 --> 04:01:14,796
Yeah, but what I'm saying is that if zero sync exists as an option, it's not part of Bitcoin consensus, right?

2810
04:01:14,796 --> 04:01:21,796
You can use it as an option, but Bitcoin consensus requires that you sync to the tip of the chain with at least one honest peer, right?

2811
04:01:21,796 --> 04:01:28,796
So somebody needs to give you all the blocks historically and this somebody must not be Chinese Communist Party.

2812
04:01:28,796 --> 04:01:34,796
That must be somebody who's actually giving you the real version of history going back all the way to block zero.

2813
04:01:34,796 --> 04:01:41,796
I don't think there's any danger of archival becoming charged for or unavailable.

2814
04:01:41,796 --> 04:01:46,796
Because, you know, even in Ethereum, there's still hundreds of nodes that provided for free as a community service.

2815
04:01:46,796 --> 04:01:50,796
And I think that will always remain the case in Bitcoin. I'm not worried about that.

2816
04:01:50,796 --> 04:01:55,796
What I'm worried about is literally, I'm not even worried, I'm resigned myself to this.

2817
04:01:55,796 --> 04:02:01,796
I know that there will be no drive-to-gain soft fork, which is why I'm advocating for miner activation there.

2818
04:02:01,796 --> 04:02:04,796
I know that there will be no action taken until there is a real crisis.

2819
04:02:04,796 --> 04:02:11,796
But in order for the real crisis to occur, you need either flippening or Fipocalypse or both.

2820
04:02:11,796 --> 04:02:18,796
And there's no other outcome that will actually, you know, begging for soft fork.

2821
04:02:18,796 --> 04:02:26,796
The flippening scenario basically means we are too late because we will just start to build out an ecosystem

2822
04:02:26,796 --> 04:02:31,796
that tries to compete with something that is already big enough to overtake Bitcoin.

2823
04:02:31,796 --> 04:02:34,796
Exactly. So we're not too late right now.

2824
04:02:34,796 --> 04:02:37,796
We're not too late right now because the market cap is still 2X of Ethereum.

2825
04:02:37,796 --> 04:02:42,796
But if the flippening sticks, not just one time and then unflippens, right?

2826
04:02:42,796 --> 04:02:48,796
But if the flippening sticks, in other words, if the market cap of Ethereum goes above and stays above, that's very important.

2827
04:02:48,796 --> 04:02:52,796
Then you've already lost the network effect game.

2828
04:02:52,796 --> 04:03:00,796
With one exception, with one exception, there may be some uses for like central banks that don't want to hold Ether because it's a cult.

2829
04:03:00,796 --> 04:03:08,796
And, you know, Vitalik and others can do a hard fork, but they would hold a collateralized form of Bitcoin on a smart contract chain.

2830
04:03:08,796 --> 04:03:16,796
So there is still a use case where if Bitcoin actually enabled rollups or enabled witness encryption or whatever,

2831
04:03:16,796 --> 04:03:24,796
you could have very conservative institutional demand for that form of collateral simply because it's completely ossified, right?

2832
04:03:24,796 --> 04:03:27,796
While Ethereum will not be ossified for another 10 years.

2833
04:03:27,796 --> 04:03:32,796
So actually, it's not too late to fight Ethereum until Ethereum itself ossifies.

2834
04:03:32,796 --> 04:03:38,796
So it's not maybe flippening is not sufficient, but flippening followed by ossification, that would be the...

2835
04:03:38,796 --> 04:03:48,796
And this whole thing that you said is basically predicated on the proof-of-work meme, basically, in some sense wins.

2836
04:03:48,796 --> 04:03:58,796
Like, I think it kind of assumes that the ESG narrative somehow flips.

2837
04:03:58,796 --> 04:03:59,796
It's already flipped, right?

2838
04:03:59,796 --> 04:04:00,796
Some of the verses...

2839
04:04:00,796 --> 04:04:01,796
It's already flipped, right?

2840
04:04:01,796 --> 04:04:03,796
Some of the verses, and it sticks.

2841
04:04:03,796 --> 04:04:05,796
Like, we don't know if this is sticky.

2842
04:04:05,796 --> 04:04:06,796
We don't know if...

2843
04:04:06,796 --> 04:04:12,796
No, but we do know this, that Ethereum is not a credible reserve asset until it ossifies.

2844
04:04:12,796 --> 04:04:17,796
So maybe I was too premature to say that flippening is not enough.

2845
04:04:17,796 --> 04:04:19,796
Even lappening is not enough.

2846
04:04:19,796 --> 04:04:29,796
But lappening or flippening followed by ossification of Ethereum, which by the way, Ethereum is organically ossifying right now because its velocity of change is decreasing every year.

2847
04:04:29,796 --> 04:04:34,796
Simply because there's so many stakeholders that they can't agree on changes anymore easily, right?

2848
04:04:34,796 --> 04:04:36,796
So even small tweaks now take a year.

2849
04:04:36,796 --> 04:04:39,796
So, like, by 2030, Ethereum can naturally ossify.

2850
04:04:39,796 --> 04:04:47,796
If by that time it has flippened and it has ossified credibly, then there is basically zero use case left for Bitcoin.

2851
04:04:47,796 --> 04:04:51,796
Like, there's no use case where Bitcoin is superior to Ethereum.

2852
04:04:51,796 --> 04:04:55,796
There is still a possibility that proof-of-stake somehow...

2853
04:04:55,796 --> 04:04:59,796
The specific way they did proof-of-stake somehow backfires on them, right?

2854
04:04:59,796 --> 04:05:06,796
So, proof-of-work can come out by sheer stubbornness and resistance to change in a sentence.

2855
04:05:06,796 --> 04:05:13,796
I agree with you that proof-of-stake may be captured by central banks printing fiat to buy Ether, whereas proof-of-work cannot be captured that way.

2856
04:05:13,796 --> 04:05:23,796
That part is true, but there's also the other flip side to that is that proof-of-stake enables restaking and rehypothecation, while proof-of-work in theory does not.

2857
04:05:23,796 --> 04:05:28,796
So, in a sense, it's like it's a more attractive financial system that you can build on top of proof-of-stake,

2858
04:05:28,796 --> 04:05:35,796
simply because you can pick the level of yield commensurate with the level of risk that you want to take.

2859
04:05:35,796 --> 04:05:37,796
Whereas in proof-of-work, you just burn electricity.

2860
04:05:37,796 --> 04:05:40,796
If it costs you less than the Bitcoin you get, that's all you can do.

2861
04:05:40,796 --> 04:05:42,796
It's like a primitive financial system.

2862
04:05:42,796 --> 04:05:44,796
Proof-of-stake, you can have restaking, right?

2863
04:05:44,796 --> 04:05:50,796
So, you can say, I want the 50% yield with a lot more risk or I want 3% yield with zero risk.

2864
04:05:50,796 --> 04:06:04,796
What do you think about this meme that people are pushing real hard right now that Bitcoin would be basically an integral part of scaling power for the world, for human civilization?

2865
04:06:04,796 --> 04:06:12,796
I mean, right now it's a fucking joke, like 0.1% or something like that of the global energy consumption.

2866
04:06:12,796 --> 04:06:18,796
But if it becomes like a significant part of energy needs in the future…

2867
04:06:18,796 --> 04:06:28,796
Well, there is that effect where Bitcoin makes stranded energy sources viable, which is true, but it's negligible at this point.

2868
04:06:28,796 --> 04:06:34,796
But if Bitcoin becomes 10% or 20% of electricity production in the world, then it becomes relevant.

2869
04:06:34,796 --> 04:06:39,796
Can Bitcoin become 10% or 20%? Yes, possibly. It's possible.

2870
04:06:40,796 --> 04:06:47,796
But this has to happen in time, right? So, there is a time window where this can happen at all.

2871
04:06:47,796 --> 04:06:56,796
If we assume that this competition with Ethereum is going to play out, I don't know, in the next 10-20 years?

2872
04:06:56,796 --> 04:07:01,796
I think it's going to play out in the next 3 years, 3-5 years is when it's decided.

2873
04:07:01,796 --> 04:07:06,796
Because, I mean, Ethereum either flippens Bitcoin in the next 5 years or probably will never flippen it.

2874
04:07:06,796 --> 04:07:13,796
But you also have a scenario where Bitcoin becomes 10% or 20% of energy use in the world, but fixes nothing else.

2875
04:07:13,796 --> 04:07:20,796
Because it's still a 20 trillion market cap by gold, but plebs don't use it, only institutions in the world use it.

2876
04:07:20,796 --> 04:07:26,796
And it doesn't have any effect on inflation, money printing or awards.

2877
04:07:26,796 --> 04:07:34,796
So, Bitcoin can still fix nothing by just becoming digital gold, and at the same time it can have 10% or 20% of electricity usage in the world.

2878
04:07:34,796 --> 04:07:38,796
Alex, it's so interesting to have you here.

2879
04:07:38,796 --> 04:07:44,796
When I hear you speak, I sense that a lot of your ideas are harmonious with Paul's.

2880
04:07:44,796 --> 04:07:56,796
The one thing that you and he disagree on the most, in my view, is that you don't share his thoughts on the need to shrink the main chain block size of Bitcoin.

2881
04:07:56,796 --> 04:08:05,796
So, while you completely agree with him, it seems, on the value of ossification as a crypto-economic benefit.

2882
04:08:05,796 --> 04:08:10,796
In terms of, like, if a protocol is ossified, that's a valuable feature of that protocol.

2883
04:08:10,796 --> 04:08:18,796
Because there's conservatism and stability and network effect that isn't disrupted through change and internal disagreement.

2884
04:08:19,796 --> 04:08:26,796
But you don't seem to think that – see, he has this philosophy that the small blocks enable an error correction.

2885
04:08:26,796 --> 04:08:32,796
Like, it's an error correcting mechanism whenever one can validate and observe what's going on.

2886
04:08:32,796 --> 04:08:36,796
And he thinks that eventually Ethereum will try to ossify it.

2887
04:08:36,796 --> 04:08:39,796
Small blocks are a relative notion, right?

2888
04:08:39,796 --> 04:08:44,796
In the world of ordinals, where you have 200 gigabytes of total blockchain space per year.

2889
04:08:44,796 --> 04:08:51,796
And there is, like, luxury ordinals that want to stuff one terabyte worth of data into Bitcoin blockchain.

2890
04:08:51,796 --> 04:08:53,796
Bitcoin already has tiny blocks.

2891
04:08:53,796 --> 04:08:56,796
It's a relative notion. What does it mean to have a small block?

2892
04:08:56,796 --> 04:08:59,796
It's only relative to the demand, right?

2893
04:09:00,796 --> 04:09:08,796
I guess you would say, like, you want to have people with a smartphone conveniently validating layer.

2894
04:09:08,796 --> 04:09:14,796
Yeah, but that's already going to be possible simply because the existing four megabyte block limit.

2895
04:09:14,796 --> 04:09:22,796
If your smartphone today doesn't do it, then your smartphone three or five years from now will do it trivially without having to shrink the Bitcoin blockchain, right?

2896
04:09:22,796 --> 04:09:23,796
Like, who cares?

2897
04:09:23,796 --> 04:09:25,796
People thought that. People thought that.

2898
04:09:25,796 --> 04:09:29,796
But then it turns out that the block space is a little bit too high.

2899
04:09:29,796 --> 04:09:32,796
But you don't need to do that, right? You can do ZK proof.

2900
04:09:32,796 --> 04:09:37,796
Like, why do you need to download and verify the whole chain when you can do the Qtrix or ZK proof of history, right?

2901
04:09:37,796 --> 04:09:43,796
Your phone can literally do ZK proof, like ZK coin, you know, like Linux.

2902
04:09:43,796 --> 04:09:48,796
ZeroSync is basically that. Sorry, I did not explain. I thought you were familiar with it.

2903
04:09:48,796 --> 04:09:54,796
So, ZeroSync is basically a ZK proof of the whole Bitcoin blockchain validation to a point.

2904
04:09:54,796 --> 04:10:05,796
And it will prove a UTXO forest root to a certain block height that it has been calculated validly.

2905
04:10:05,796 --> 04:10:06,796
That's what it proves.

2906
04:10:07,796 --> 04:10:13,796
So, basically, it gives you a sync point that is as trustless as the ZK proof itself, basically.

2907
04:10:13,796 --> 04:10:15,796
It's fairly costly to provide.

2908
04:10:15,796 --> 04:10:23,796
But as I understand, ZK proofs can form a Merkle tree and can be aggregated.

2909
04:10:23,796 --> 04:10:31,796
So, people can actually distribute this burden of building these proofs to a lot of nodes and then can aggregate.

2910
04:10:31,796 --> 04:10:33,796
And this aggregation work can distribute as well.

2911
04:10:33,796 --> 04:10:40,796
So, we could get these periodic checkpoints that four nodes could sync up to with minimal effort and minimal cost.

2912
04:10:40,796 --> 04:10:43,796
And then can run a full UTXO node mode.

2913
04:10:43,796 --> 04:10:49,796
And if you take it offline for a month, then it can maybe find a new sync point.

2914
04:10:49,796 --> 04:10:52,796
So, that's exactly what it is about, what I told about.

2915
04:10:54,796 --> 04:10:56,796
So, that could be done on the phone right now.

2916
04:10:56,796 --> 04:10:59,796
That could be done on the phone today, basically, right?

2917
04:10:59,796 --> 04:11:02,796
Any phone can do ZK proof of the Bitcoin today.

2918
04:11:03,796 --> 04:11:05,796
Manu, you've been waiting so patiently for so long.

2919
04:11:05,796 --> 04:11:09,796
Why don't you chime in with your question or comment, please?

2920
04:11:10,796 --> 04:11:11,796
Yes.

2921
04:11:11,796 --> 04:11:13,796
I've been listening for long.

2922
04:11:13,796 --> 04:11:15,796
Pleasure to be here.

2923
04:11:15,796 --> 04:11:21,796
I just wanted to, because I was not listening all the time.

2924
04:11:21,796 --> 04:11:27,796
But, Alex, I wanted to understand, because you are talking about a change.

2925
04:11:27,796 --> 04:11:31,796
But your position about Rustock, RSK.

2926
04:11:31,796 --> 04:11:36,796
Because you've been talking about stablecoins and many things that already exist in Rustock.

2927
04:11:36,796 --> 04:11:45,796
But I didn't listen to you to talk about Rustock and what your position.

2928
04:11:45,796 --> 04:11:50,796
I mean, Rustock is a good idea, but it doesn't work in practice because it has no liquidity.

2929
04:11:50,796 --> 04:11:56,796
And the stablecoins, like the sovereign dollar or whatever, whatever exists on Rustock, are basically dinos.

2930
04:11:56,796 --> 04:12:01,796
They are decentralized in name only because they have governance and they have upgradability.

2931
04:12:01,796 --> 04:12:04,796
So they're not credible DeFi stablecoins in my world.

2932
04:12:04,796 --> 04:12:10,796
It's basically just another form of kind of tether, because you can be pulled by the dev team.

2933
04:12:10,796 --> 04:12:12,796
You can be upgraded by the dev team.

2934
04:12:12,796 --> 04:12:13,796
Everything can happen.

2935
04:12:13,796 --> 04:12:18,796
So even if they had, unfortunately, even if they had really decentralized stablecoins on Rustock,

2936
04:12:18,796 --> 04:12:22,796
they would not be usable because Rustock has no liquidity to trade them.

2937
04:12:22,796 --> 04:12:29,796
Because the primary use case of a stablecoin is for you to mint the stablecoin, but then sell it immediately for dollars.

2938
04:12:29,796 --> 04:12:32,796
Because you don't want to actually hold that stablecoin unless it's tether,

2939
04:12:32,796 --> 04:12:38,796
which has actually payment use case around the world where people hold a little bit of it sometimes.

2940
04:12:38,796 --> 04:12:41,796
Every other stablecoin is only a conduit to the fiat system.

2941
04:12:41,796 --> 04:12:47,796
And Rustock simply has no liquidity for you to exit your stablecoin without huge slippage.

2942
04:12:47,796 --> 04:12:51,796
So if you want to borrow $100 worth of stablecoin, you can still exit.

2943
04:12:51,796 --> 04:12:56,796
But the moment you borrow $10,000 or more, you have this huge slippage to exit it.

2944
04:12:56,796 --> 04:12:58,796
Because there's no liquidity in the pools.

2945
04:12:58,796 --> 04:13:00,796
It's a ghost system, unfortunately.

2946
04:13:00,796 --> 04:13:05,796
Because Rustock is just another L1 that fell victim to Ethereum's network at the end of the day.

2947
04:13:05,796 --> 04:13:09,796
There is no use case to use Rustock instead of Ethereum from my perspective.

2948
04:13:09,796 --> 04:13:11,796
I think they try to boycott it.

2949
04:13:11,796 --> 04:13:12,796
That's the word.

2950
04:13:13,796 --> 04:13:19,796
Unfortunately, they pretend like they have a decentralized stablecoin.

2951
04:13:19,796 --> 04:13:21,796
They call it sovereign dollar.

2952
04:13:21,796 --> 04:13:25,796
But in reality, the moment you ask them a question, can you upgrade your public sector?

2953
04:13:25,796 --> 04:13:27,796
Can you do governance?

2954
04:13:27,796 --> 04:13:29,796
They will talk about it.

2955
04:13:29,796 --> 04:13:33,796
But in reality, there's just a multisig where they can rug the whole thing from you.

2956
04:13:33,796 --> 04:13:39,796
I'm not interested in dev teams pretending like they create a DeFi protocol,

2957
04:13:39,796 --> 04:13:42,796
where in reality, they just hold all your money in a multisig.

2958
04:13:42,796 --> 04:13:45,796
While I hold a totally positive view on Liquid and Rootstock,

2959
04:13:45,796 --> 04:13:52,796
I think that drivechainers are very eager to see peer-to-peer blockchains attached to Bitcoin,

2960
04:13:52,796 --> 04:13:57,796
not ones that involve a socially selected set of people controlling the value.

2961
04:13:57,796 --> 04:13:59,796
Liquid is basically like Coinbase.

2962
04:13:59,796 --> 04:14:01,796
It's not even a sidechain.

2963
04:14:01,796 --> 04:14:03,796
It's a centralized custodian.

2964
04:14:03,796 --> 04:14:05,796
That's all it is.

2965
04:14:05,796 --> 04:14:07,796
Brayton, thank you for joining the stage.

2966
04:14:07,796 --> 04:14:09,796
Why don't we – oh, sorry.

2967
04:14:09,796 --> 04:14:13,796
I just want to give maybe our last speaker a chance to ask a question.

2968
04:14:13,796 --> 04:14:16,796
Brayton, before we wrap up, maybe in the next ten minutes,

2969
04:14:16,796 --> 04:14:19,796
because we've been going for like five hours now.

2970
04:14:19,796 --> 04:14:21,796
Brayton, what's your question?

2971
04:14:21,796 --> 04:14:25,796
Yeah, I just wanted to note that Celo, before it pivoted to L2, implemented Plumo,

2972
04:14:25,796 --> 04:14:28,796
which was a zk-sync protocol, essentially,

2973
04:14:28,796 --> 04:14:33,796
to be able to verify that your state had never violated consensus rules.

2974
04:14:33,796 --> 04:14:35,796
So it's something that is in implementation today,

2975
04:14:35,796 --> 04:14:40,796
and being able to sync from Genesys is an incredibly powerful property.

2976
04:14:40,796 --> 04:14:43,796
In the future, I don't think all rollouts will necessarily have it.

2977
04:14:43,796 --> 04:14:49,796
You know, big block scenarios will almost certainly have this form of syncing

2978
04:14:49,796 --> 04:14:53,796
through yet more optimistic methods or syncing through zero-knowledge proofs.

2979
04:14:53,796 --> 04:14:57,796
Once we see zero-knowledge proofs become far more reliable and far more widely adopted,

2980
04:14:57,796 --> 04:15:00,796
it could definitely change how we treat consensus in general, I think.

2981
04:15:01,796 --> 04:15:03,796
Well said.

2982
04:15:03,796 --> 04:15:10,796
I agree. I mean, you have L1s that are voluntarily disbanding

2983
04:15:10,796 --> 04:15:12,796
and becoming rollups on Ethereum right now.

2984
04:15:12,796 --> 04:15:15,796
This is something that Bitcoiners are unaware of,

2985
04:15:15,796 --> 04:15:19,796
but this just shows you the power of Ethereum's security network effect, right?

2986
04:15:19,796 --> 04:15:24,796
Why in the world would you build your own chain with trivial security

2987
04:15:24,796 --> 04:15:27,796
when you can just benefit from Ethereum's security, period?

2988
04:15:28,796 --> 04:15:32,796
Alex, I guess as we're aiming to wrap up now, it's been four and a half hours.

2989
04:15:32,796 --> 04:15:35,796
I just want to say it was really great to have you and Moon Settler

2990
04:15:35,796 --> 04:15:38,796
and others discuss all of these ideas today.

2991
04:15:38,796 --> 04:15:41,796
Just to kind of aim towards wrapping up,

2992
04:15:41,796 --> 04:15:44,796
I would mention that this is a weekly Twitter space.

2993
04:15:44,796 --> 04:15:48,796
You and Moon Settler and everyone is welcome to come back next week on Friday,

2994
04:15:48,796 --> 04:15:53,796
where we'll have our next weekly Drivechain-focused discussion.

2995
04:15:53,796 --> 04:15:56,796
But in closing, Alex, why don't you please, if you'd like to,

2996
04:15:56,796 --> 04:16:01,796
describe the relationship between an ossified Layer 1

2997
04:16:01,796 --> 04:16:06,796
and a highly extensible multitude of blockchains built on top of it,

2998
04:16:06,796 --> 04:16:15,796
and how Bitcoin and Ethereum might be sort of aiming towards that end state,

2999
04:16:15,796 --> 04:16:20,796
that end state of an ossified Layer 1 with a multitude of blockchains

3000
04:16:20,796 --> 04:16:25,796
built on top for extensibility and innovation and experimentation.

3001
04:16:25,796 --> 04:16:27,796
How do you see that playing out?

3002
04:16:27,796 --> 04:16:30,796
Well, we have to define ossification first.

3003
04:16:30,796 --> 04:16:35,796
So I don't think ossification is something that can be decided by the community or decreed.

3004
04:16:35,796 --> 04:16:38,796
And this is the biggest mistake when discussing ossification.

3005
04:16:38,796 --> 04:16:45,796
Ossification only happens to widely successful protocols like TCPIP or SMTP.

3006
04:16:45,796 --> 04:16:50,796
And only after they've been adopted and used for many, many years, maybe decades.

3007
04:16:50,796 --> 04:16:54,796
And it's not an explicit decision of the community, developers, or anybody else.

3008
04:16:54,796 --> 04:16:58,796
It's just an outcome of the inertia of the protocol

3009
04:16:58,796 --> 04:17:03,796
where the changes to the protocol become impossible even if everybody wants them.

3010
04:17:03,796 --> 04:17:06,796
Essentially, examples of that is SMTP.

3011
04:17:06,796 --> 04:17:09,796
You could theoretically add digital signatures

3012
04:17:09,796 --> 04:17:12,796
or some other anti-spamming measures to the mail protocol,

3013
04:17:12,796 --> 04:17:16,796
but the protocol is ossified, so nobody can ever touch it

3014
04:17:16,796 --> 04:17:19,796
even though 100% of people in the protocol would want to do it.

3015
04:17:19,796 --> 04:17:21,796
So there's two outcomes.

3016
04:17:21,796 --> 04:17:24,796
Either your protocol becomes big and successful enough

3017
04:17:24,796 --> 04:17:26,796
where ossification becomes a possibility,

3018
04:17:26,796 --> 04:17:28,796
or else it's not even worth discussing.

3019
04:17:28,796 --> 04:17:32,796
But if Ethereum and Bitcoin do become big and successful enough,

3020
04:17:32,796 --> 04:17:34,796
they will naturally ossify.

3021
04:17:34,796 --> 04:17:37,796
But it will never be a bunch of gatekeepers at the core saying,

3022
04:17:38,796 --> 04:17:41,796
or the podcasting priests in Bitcoin saying,

3023
04:17:41,796 --> 04:17:43,796
let's ossify Bitcoin.

3024
04:17:43,796 --> 04:17:46,796
All the chanting about ossification are completely beside the point.

3025
04:17:46,796 --> 04:17:50,796
Nobody had to chant about ossifying SMTP or TCPIP.

3026
04:17:50,796 --> 04:17:53,796
And I just want to say, guys, that this group is nice,

3027
04:17:53,796 --> 04:17:56,796
but ultimately we're all in this peer support group

3028
04:17:56,796 --> 04:18:00,796
because we all see that Bitcoin is in trouble

3029
04:18:00,796 --> 04:18:03,796
because it's unable to do what its users want it to do.

3030
04:18:03,796 --> 04:18:07,796
And there's this whole kind of laser-eyed cult resistance

3031
04:18:07,796 --> 04:18:09,796
to any possible change of Bitcoin

3032
04:18:09,796 --> 04:18:12,796
because they assume that Bitcoin is already perfect

3033
04:18:12,796 --> 04:18:15,796
and it needs to do nothing in order to survive and thrive.

3034
04:18:15,796 --> 04:18:19,796
And I disagree with that because we've seen the rise of Ethereum.

3035
04:18:19,796 --> 04:18:21,796
It cannot be dismissed as a scam anymore,

3036
04:18:21,796 --> 04:18:24,796
as a mother of all scams if you listen to Saifedean.

3037
04:18:24,796 --> 04:18:26,796
We've seen the rise of stablecoins.

3038
04:18:26,796 --> 04:18:29,796
These things appear because Bitcoin fails to provide

3039
04:18:29,796 --> 04:18:31,796
things that people actually want.

3040
04:18:32,796 --> 04:18:35,796
And if, God forbid, we get into a territory

3041
04:18:35,796 --> 04:18:38,796
where there's a flippening followed by ossification,

3042
04:18:38,796 --> 04:18:42,796
that essentially removes the last distinguishing characteristic of Bitcoin

3043
04:18:42,796 --> 04:18:46,796
because Bitcoin is a very stable protocol,

3044
04:18:46,796 --> 04:18:48,796
although not ossified yet,

3045
04:18:48,796 --> 04:18:51,796
and it still has the largest amount of liquidity in the world.

3046
04:18:51,796 --> 04:18:54,796
If those two things go to Ethereum, then it's game over.

3047
04:18:54,796 --> 04:18:57,796
And then you're in the world where proof of stake is won

3048
04:18:57,796 --> 04:18:59,796
and proof of work is irrelevant,

3049
04:18:59,796 --> 04:19:01,796
and you will have whales.

3050
04:19:01,796 --> 04:19:04,796
The rich will become richer in a proof of stake world, unfortunately.

3051
04:19:04,796 --> 04:19:06,796
That's not true in proof of work world,

3052
04:19:06,796 --> 04:19:08,796
but in the world where Ethereum wins...

3053
04:19:08,682 --> 04:19:11,722
The rich will become richer and the poor will become poorer.

3054
04:19:11,722 --> 04:19:20,682
That's unfortunately, but you know, so this is like a peer support group for people victimized by a laser eye tunnel, basically.

3055
04:19:20,682 --> 04:19:33,322
How do you reconcile that view about rich becoming richer with the fact that proof of stake imposes a cost on stakers in the form of liquidity that is spent?

3056
04:19:33,322 --> 04:19:43,322
Well, it's basically the poor cannot afford to stake because they have a much higher liquidity preference and therefore they cannot afford to keep up with inflation.

3057
04:19:43,322 --> 04:19:49,322
So only the rich have savings and therefore the rich get richer simply because it takes money to make money.

3058
04:19:49,322 --> 04:20:03,322
It's not accurate. It's not correct, strictly speaking, to say that money begets money because those who are staking, just like those who are mining, are burning value.

3059
04:20:03,322 --> 04:20:13,322
In the mining, they're consuming value in the form of energy consumption primarily. In staking, they're consuming value in the form of liquidity consumption primarily.

3060
04:20:13,322 --> 04:20:25,322
I agree with you that there's a value exchange there, but all I'm saying is that imagine that no new non-negligible issuance occurs in Bitcoin.

3061
04:20:25,322 --> 04:20:29,322
Like we're in 10 years from now and there's basically issuances become negligible.

3062
04:20:29,322 --> 04:20:35,322
And because there's no new issuance, there is a transfer of money through fees to the miners for doing the mining.

3063
04:20:35,322 --> 04:20:40,322
But your stake in Bitcoin is safe as long as you hold it in cold storage.

3064
04:20:40,322 --> 04:20:56,322
That's not the case in Ethereum, right? Because even though Ethereum's issuance will be falling because of the burn, there will be people getting richer by staking versus people who are not staking.

3065
04:20:56,322 --> 04:21:01,322
I'm not the best exponent of this idea for why staking has…

3066
04:21:01,322 --> 04:21:02,322
I would agree.

3067
04:21:02,322 --> 04:21:07,322
But there's a good couple of blog posts that you can find where it does show…

3068
04:21:08,322 --> 04:21:13,322
But I suspect all of those posts harbor the same error that I just described, which is a…

3069
04:21:13,322 --> 04:21:21,322
No, no, no. They do acknowledge that there is a liquidity cost, right? Like locking up stake is something that you pay a price for.

3070
04:21:22,322 --> 04:21:30,322
Alex, the key insight I'm pushing right now is that as Paul laid out in the blog post, nothing is cheaper than proof of work.

3071
04:21:30,322 --> 04:21:45,322
In 2015, he argued that proof of stake and proof of work are economically symmetrical because the value consumed, whether it's in the form of energy or in the form of liquidity, is symmetrical if we assume otherwise equivalent systems.

3072
04:21:45,322 --> 04:21:48,322
I agree with that blog post. It was a brilliant blog post.

3073
04:21:48,322 --> 04:21:56,322
The one thing he didn't consider at the time, which has now become apparent, is that nothing is as rehypothecatable as stake using restaking.

3074
04:21:56,322 --> 04:22:04,322
So in proof of work, you pay once, nothing is cheaper, but you cannot reuse what you pay.

3075
04:22:04,322 --> 04:22:07,322
Whereas in proof of stake, you reuse your stake.

3076
04:22:07,322 --> 04:22:15,322
Emerged mining reuses the work and achieves a higher return for the miner.

3077
04:22:15,322 --> 04:22:30,322
Right. But think of it this way. Why would you do emerged mining if you can do security and just get security without needing to get to settle for 5% of security available on a drivechain?

3078
04:22:30,322 --> 04:22:35,322
Why would any real drivechain with real usage settle for a small fraction of Bitcoin security?

3079
04:22:36,322 --> 04:22:47,322
The only use case for that is if you can organize a drivechain that becomes so popular because it has terabytes of block space that it doesn't need security because people just upload their cat videos there or something like that.

3080
04:22:47,322 --> 04:22:54,322
If people don't care about security much, otherwise they should be using Rails or they should be using, you know what I'm saying?

3081
04:22:54,322 --> 04:23:03,322
In theory, drivechain mining, it's hard to see a serious drivechain becoming usable and to be secure.

3082
04:23:03,322 --> 04:23:08,322
There is a question about whether the bootstrapping would be feasible.

3083
04:23:08,322 --> 04:23:14,322
And that's why drivechain is a hypothesis about the potential value of peer to peer sidechains on Bitcoin.

3084
04:23:14,322 --> 04:23:16,322
No one knows with certainty the future.

3085
04:23:16,322 --> 04:23:31,322
The only thing I was nitpicking with you about today, since I agree with almost everything you've said today, is just that it seemed to be that you were saying something that was in conflict with the notion that proof of stake is economically symmetrical to proof of work, which it is.

3086
04:23:31,322 --> 04:23:34,322
But it's not. Because of restaking, it's not.

3087
04:23:34,322 --> 04:23:42,322
It is indeed not cheaper than proof of work, and I agree with that part, but it is more usable because of restaking.

3088
04:23:42,322 --> 04:23:50,322
And also it's not symmetrical in the scenario where, let's say, misbehaving happens.

3089
04:23:50,322 --> 04:23:55,322
So the punishment for misbehaving is not at all symmetrical.

3090
04:23:55,322 --> 04:24:04,322
Right, because it's exactly quantifiable slashing going on versus unquantifiable sunk cost punishment for a miner.

3091
04:24:04,322 --> 04:24:07,322
Yes, some opportunity cost, but it's unquantifiable.

3092
04:24:07,322 --> 04:24:11,322
Exactly, and the fact that it is quantifiable allows you to build advanced protocols.

3093
04:24:12,322 --> 04:24:22,322
By the way, I suggest that everybody go out and read the Eigen layer white paper, because this is a big conceptual breakthrough that's sort of the hottest thing on Ethereum.

3094
04:24:22,322 --> 04:24:28,322
And it is relevant to the other crypto economic systems, the whole idea of restaking and why it's so powerful.

3095
04:24:28,322 --> 04:24:36,322
Because just like we're seeing aggregation of L1s to become L2s to share the security, there's even a bigger case for sharing the stake.

3096
04:24:36,322 --> 04:24:41,322
Because the network effects of reusing the stake are going to be much more powerful.

3097
04:24:41,322 --> 04:24:45,322
And they're just like complete no-brainer for anybody who wants to create their own system.

3098
04:24:45,322 --> 04:24:51,322
They no longer need to get their whole economic system with a blockchain off the ground.

3099
04:24:51,322 --> 04:24:58,322
All they can do is simply say, hey, Ethereum stakers, download these 10,000 nodes and they'll give you extra yield.

3100
04:24:58,322 --> 04:25:05,322
The stupidest thing in the world was probably when people tried to launch like 10,000 proof-of-work chains.

3101
04:25:05,322 --> 04:25:06,322
Yes, exactly.

3102
04:25:06,322 --> 04:25:09,322
That was a horrible idea.

3103
04:25:09,322 --> 04:25:13,322
The second stupidest thing is to launch 10,000 proof-of-stake chains.

3104
04:25:13,322 --> 04:25:19,322
Because there's not enough validation stake, it's hard to get that network effect off the ground.

3105
04:25:19,322 --> 04:25:20,322
But you no longer need to.

3106
04:25:20,322 --> 04:25:26,322
Because the best case for this is going to be, by the way, these things are launching like next month or something.

3107
04:25:26,322 --> 04:25:31,322
One will be the eigenlayer zone data availability layer launching like in a few weeks.

3108
04:25:31,322 --> 04:25:35,322
And the other one is this Espresso shared sequencer for all the roll-ups.

3109
04:25:35,322 --> 04:25:40,322
Which not only makes roll-ups decentralized because their sequencer is no longer centralized.

3110
04:25:41,322 --> 04:25:48,322
But it allows atomic settlement between roll-ups that either happens on both ends or doesn't happen at all.

3111
04:25:48,322 --> 04:25:53,322
Which enables arbitrage and reuse of Ether and all the assets join the same pool.

3112
04:25:53,322 --> 04:25:55,322
This is incredibly powerful.

3113
04:25:55,322 --> 04:26:01,322
It just creates additional network effect that is completely unthinkable in any other system.

3114
04:26:01,322 --> 04:26:03,322
Cardano or Stellana or Bitcoin.

3115
04:26:04,322 --> 04:26:06,322
Let me ask another question.

3116
04:26:06,322 --> 04:26:16,322
Alex, do you expect that the privacy blockchain users will eventually migrate to Bitcoin or Ethereum and why?

3117
04:26:17,322 --> 04:26:20,322
I think they will just stay on Monero for a while.

3118
04:26:20,322 --> 04:26:24,322
Because I use Monero when I need to use Monero, if you know what I mean.

3119
04:26:24,322 --> 04:26:28,322
And that's basically a narrow use case that Monero does well.

3120
04:26:28,322 --> 04:26:30,322
And it already has network effect.

3121
04:26:30,322 --> 04:26:32,322
So it's hard to dislodge.

3122
04:26:33,322 --> 04:26:38,322
But the purchasing power of Monero fluctuates and the security of that changes.

3123
04:26:38,322 --> 04:26:41,322
But that's irrelevant because nobody ever holds a single dollar worth of Monero.

3124
04:26:41,322 --> 04:26:45,322
Whenever I use Monero, I send some Bitcoin which converts to Monero.

3125
04:26:45,322 --> 04:26:49,322
And then it gets paid to the address that I'm sending on the fly.

3126
04:26:49,322 --> 04:26:51,322
I never spend one second holding Monero.

3127
04:26:51,322 --> 04:26:53,322
So it's irrelevant to me.

3128
04:26:54,322 --> 04:26:56,322
Nobody ever holds Monero, right?

3129
04:26:56,322 --> 04:26:58,322
Its volatility doesn't matter.

3130
04:26:58,322 --> 04:27:00,322
It's just pure medium of exchange.

3131
04:27:00,322 --> 04:27:04,322
I know, but medium of exchange does involve holding.

3132
04:27:04,322 --> 04:27:06,322
No, because it's not priced.

3133
04:27:06,322 --> 04:27:10,322
The goods that are sold for Monero in dark markets are never priced in Monero.

3134
04:27:10,322 --> 04:27:12,322
They're always priced in euros and dollars.

3135
04:27:12,322 --> 04:27:16,322
So the value of Monero relative to these fiats is irrelevant.

3136
04:27:16,322 --> 04:27:23,322
It's just like today you're sending this many tiny Moneros and tomorrow you're sending two or three hundred times more Moneros.

3137
04:27:23,322 --> 04:27:25,322
It makes no freaking difference.

3138
04:27:25,322 --> 04:27:27,322
Nobody holds it.

3139
04:27:28,322 --> 04:27:30,322
Okay, I was just interested.

3140
04:27:30,322 --> 04:27:32,322
It's hard to dislodge that network effect.

3141
04:27:32,322 --> 04:27:35,322
So even like your Zcash scenario, right?

3142
04:27:35,322 --> 04:27:38,322
It seems like it's a perfect drivechain made in heaven.

3143
04:27:38,322 --> 04:27:42,322
You will have a hard time convincing dark markets to actually adopt it.

3144
04:27:42,322 --> 04:27:44,322
Right, that's true.

3145
04:27:44,322 --> 04:27:45,322
You will have a hard time, right?

3146
04:27:45,322 --> 04:27:47,322
Because there's that network effect of Monero.

3147
04:27:47,322 --> 04:27:53,322
And go ahead and change a hundred dark markets and all their software to support another coin.

3148
04:27:53,322 --> 04:27:54,322
It's not an easy task.

3149
04:27:55,322 --> 04:27:58,322
Maybe you could say that Monero is ossified already.

3150
04:27:58,322 --> 04:28:02,322
Like the dark market system has frozen on using Monero.

3151
04:28:02,322 --> 04:28:03,322
That's the end of it.

3152
04:28:03,322 --> 04:28:04,322
Maybe.

3153
04:28:04,322 --> 04:28:05,322
Yeah.

3154
04:28:05,322 --> 04:28:06,322
I was just wondering about.

3155
04:28:06,322 --> 04:28:08,322
There is another use case there.

3156
04:28:08,322 --> 04:28:13,322
There is another use case where institutions don't want to leak their activities in the financial system.

3157
04:28:13,322 --> 04:28:18,322
And unfortunately today on Ethereum with all this DeFi, they essentially operate with open books.

3158
04:28:18,322 --> 04:28:19,322
And they hate that idea.

3159
04:28:19,322 --> 04:28:22,322
So there is a use case for encrypted Ethereum.

3160
04:28:22,322 --> 04:28:31,322
So you can have a use case where some kind of chain, be it a drivechain of Bitcoin or a roll-up of Bitcoin, does everything that Ethereum does.

3161
04:28:31,322 --> 04:28:36,322
But in a completely encrypted way where nobody can see your activities on all these protocols.

3162
04:28:36,322 --> 04:28:38,322
And institutional privacy is important, right?

3163
04:28:38,322 --> 04:28:40,322
Nobody does that yet.

3164
04:28:40,322 --> 04:28:41,322
So that would be.

3165
04:28:41,322 --> 04:28:42,322
No, that exists.

3166
04:28:42,322 --> 04:28:44,322
Alex, that exists already.

3167
04:28:45,322 --> 04:28:46,322
Well, there is like a roll-up.

3168
04:28:46,322 --> 04:28:49,322
I think it's called Aztec on Ethereum that tries to do that.

3169
04:28:49,322 --> 04:28:50,322
No, no, no.

3170
04:28:50,322 --> 04:28:55,322
It's a different blockchain that has that functionality.

3171
04:28:55,322 --> 04:29:00,322
But again, it's not enough to have that functionality.

3172
04:29:00,322 --> 04:29:03,322
That chain must have liquidity in order to be usable.

3173
04:29:03,322 --> 04:29:04,322
It's like RSK.

3174
04:29:04,322 --> 04:29:16,322
The fact that you can use some kind of sidechain of Bitcoin doesn't make it usable because you will have 5 or 10 percent slippage when you try to exit a $100,000 stablecoin position into fiat.

3175
04:29:17,322 --> 04:29:26,322
No, but what you're saying about the privacy and their customizable blockchains that they can do whatever they like.

3176
04:29:26,322 --> 04:29:28,322
They can set how they want.

3177
04:29:28,322 --> 04:29:31,322
I guess what I'm saying is that the market doesn't want other chains.

3178
04:29:31,322 --> 04:29:41,322
It wants to have privacy added to Ethereum because it's the only liquid and cost-effective chain for liquidity of institutional stablecoin issuance and trading and everything else.

3179
04:29:41,322 --> 04:29:43,322
Like liquidity is where it's at.

3180
04:29:44,322 --> 04:29:48,322
And you cannot take away composability and liquidity modes that Ethereum has.

3181
04:29:48,322 --> 04:29:59,322
Composability is just the ability to use multiple protocols as jigsaw puzzles into a single picture, which is absent on other chains, even the ones that are copying EVM.

3182
04:29:59,322 --> 04:30:05,322
They cannot claim credibly to have all the same protocols available for cross-calling that Ethereum does.

3183
04:30:05,322 --> 04:30:06,322
That's the composability mode.

3184
04:30:06,322 --> 04:30:22,322
And then there is the liquidity mode that even though it costs you one penny to transact on Avalanche, you will have 5 percent slippage trading stablecoins on Avalanche and you will have 1 tenth percent slippage on Ethereum.

3185
04:30:22,322 --> 04:30:29,322
So the fact that Ethereum trade costs $20 allows you to save hundreds of thousands of dollars on less slippage.

3186
04:30:29,322 --> 04:30:33,322
That's why those other L1 chains are not viable, basically.

3187
04:30:33,322 --> 04:30:45,322
So what do you think about the whole client-side validation, RGB prime?

3188
04:30:45,322 --> 04:30:47,322
I think RGB prime is not viable.

3189
04:30:47,322 --> 04:30:55,322
It's not viable for the same reason that RSK is not viable, namely it has no trust-minimized peg and it also lacks liquidity.

3190
04:30:55,322 --> 04:31:02,322
So unfortunately, until there is a peg and there is some liquidity, it's not really a viable system.

3191
04:31:02,322 --> 04:31:07,322
I mean, it would primarily be like tokens.

3192
04:31:07,322 --> 04:31:15,322
So I'm not even sure if Bitcoin would necessarily be a big part of it.

3193
04:31:15,322 --> 04:31:23,322
But would you want to have NFTs or stablecoins on RGB when nobody else has NFTs or stablecoins on RGB?

3194
04:31:23,322 --> 04:31:26,322
I see the network effect stuff.

3195
04:31:27,322 --> 04:31:31,322
This is not something that technologists really appreciate or care about.

3196
04:31:31,322 --> 04:31:36,322
But this network effect of liquidity and just being where everybody...

3197
04:31:36,322 --> 04:31:39,322
You only want to go to a bazaar where there are other people trading.

3198
04:31:39,322 --> 04:31:41,322
You don't want to go to some bazaar in the desert.

3199
04:31:41,322 --> 04:31:53,322
I think all of this just assumes that Ethereum somehow food guns itself with proof of stake and proof of work somehow comes out as the savior.

3200
04:31:53,322 --> 04:31:56,322
It's like a weak rationalization that LaserEyes have.

3201
04:31:56,322 --> 04:32:02,322
They would always tell you, oh, proof of stake is like fundamentally flawed because it can be captured by the government.

3202
04:32:02,322 --> 04:32:05,322
And therefore Ethereum will just become a big tech.

3203
04:32:05,322 --> 04:32:08,322
Like I can tell you right now, I'm making the following prediction.

3204
04:32:08,322 --> 04:32:19,322
If in this bull market Ethereum flips Bitcoin, all the LaserEye podcasters that are basically the priests of the LaserEye cult, they will sell the following narrative to explain it.

3205
04:32:19,322 --> 04:32:23,322
They will say, well, Ethereum is just a big tech like Google.

3206
04:32:23,322 --> 04:32:26,322
So who cares if Apple or Google has $3 trillion market cap?

3207
04:32:26,322 --> 04:32:29,322
It's not even money. It's nothing. It's just like a big tech platform.

3208
04:32:29,322 --> 04:32:34,322
That will be their narrative to justify why Ethereum is flipping.

3209
04:32:34,322 --> 04:32:41,322
I have no doubt in my mind that justifications would be plentiful.

3210
04:32:41,322 --> 04:32:44,322
These are all copes, basically.

3211
04:32:44,322 --> 04:32:46,322
Basically, yeah.

3212
04:32:46,322 --> 04:32:53,322
Yeah, but let's assume that Ethereum really does food gun itself somehow.

3213
04:32:53,322 --> 04:33:08,323
In that world, you can't imagine that client-side validation can take care of more private, less exposed tradings of securities and other tokens.

3214
04:33:08,323 --> 04:33:14,323
Yeah, you could see RGB becoming kind of a backbone of a hidden EURUSD system 2.0.

3215
04:33:14,323 --> 04:33:19,323
But in order for it to happen, it needs to have sort of a minimum critical mass.

3216
04:33:19,323 --> 04:33:27,323
I can see banks doing RGB transactions with each other because that's the only way they can guarantee that there is no historical record.

3217
04:33:27,323 --> 04:33:30,323
But again, it's a chicken and egg problem.

3218
04:33:30,323 --> 04:33:33,323
In order for RGB to get there, it has to become big enough.

3219
04:33:33,323 --> 04:33:35,323
Maybe it can become big enough.

3220
04:33:35,323 --> 04:33:45,323
For example, if it had a two-way peg based on witness encryption or something like that, then it could, in theory, have trust-minimized double-pegging of Bitcoin in and out.

3221
04:33:45,323 --> 04:33:48,323
Then probably it could develop into a stablecoin.

3222
04:33:48,323 --> 04:33:50,323
Tether would issue a stablecoin there.

3223
04:33:50,323 --> 04:33:54,323
Then all of a sudden, Societe Generale would issue a stablecoin there.

3224
04:33:54,323 --> 04:33:56,323
All of a sudden, you could get to that critical mass.

3225
04:33:56,323 --> 04:34:01,323
But you could have some region of the EURUSD 2.0 system sitting on top of RGB.

3226
04:34:01,323 --> 04:34:02,323
You could.

3227
04:34:02,323 --> 04:34:13,323
So basically, we either have some really trustless two-way peg mechanism or basically the whole Ethereum ecosystem somehow has to magically fail.

3228
04:34:13,323 --> 04:34:15,323
That's like two scenarios.

3229
04:34:15,323 --> 04:34:19,323
We know at least one trustless two-way peg mechanism, right?

3230
04:34:19,323 --> 04:34:20,323
Roll-ups.

3231
04:34:20,323 --> 04:34:21,323
Everybody knows that by now.

3232
04:34:22,323 --> 04:34:25,323
There are some people who object to roll-ups for this reason or that reason.

3233
04:34:25,323 --> 04:34:32,323
Because you can do bike-shedding forever of the verifier for the proof.

3234
04:34:32,323 --> 04:34:34,323
So you can say, oh, whatever.

3235
04:34:34,323 --> 04:34:35,323
But then there's another one.

3236
04:34:35,323 --> 04:34:37,323
Maybe witness encryption is another possibility.

3237
04:34:37,323 --> 04:34:42,323
But the point is that it's not like quantum gravity.

3238
04:34:42,323 --> 04:34:45,323
Quantum gravity is not a solved problem in science.

3239
04:34:45,323 --> 04:34:48,323
Trustless two-way peg has been solved.

3240
04:34:48,323 --> 04:34:58,323
It's just that laser eyes refuse to adopt what used to be considered the holy grail for Bitcoin because they keep chanting ossify, ossify, ossify, right?

3241
04:34:58,323 --> 04:35:00,323
May I ask a quick question, Alex?

3242
04:35:00,323 --> 04:35:02,323
The roll-up topic is very complex.

3243
04:35:02,323 --> 04:35:07,323
And it's hard for people like me, a lawyer, and not a technologist like you, to understand it.

3244
04:35:07,323 --> 04:35:16,323
It seems to me that drivechain is a much more lower tech and conservative technology than roll-ups.

3245
04:35:16,323 --> 04:35:18,323
Is that a fair statement?

3246
04:35:18,323 --> 04:35:20,323
Yeah, it is a fair statement.

3247
04:35:20,323 --> 04:35:21,323
Sorry.

3248
04:35:21,323 --> 04:35:25,323
It's like drivechain is like a locomotive train.

3249
04:35:25,323 --> 04:35:28,323
And a roll-up is like a spaceship.

3250
04:35:28,323 --> 04:35:30,323
It's more high tech.

3251
04:35:30,323 --> 04:35:31,323
Okay.

3252
04:35:31,323 --> 04:35:34,323
So if we were to do roll-ups on Bitcoin, it's like 10 years from now.

3253
04:35:34,323 --> 04:35:35,323
Is that right?

3254
04:35:35,323 --> 04:35:36,323
No, I would disagree with that.

3255
04:35:36,323 --> 04:35:39,323
I would say that 10 years ago, you could have said 10 years from now.

3256
04:35:39,323 --> 04:35:40,323
But guess what?

3257
04:35:40,323 --> 04:35:48,323
10 years ago at the San Jose First Bitcoin Conference, the people who developed ZK Proofs showed up and they said,

3258
04:35:48,323 --> 04:35:50,323
let's scale Bitcoin with ZK Proofs.

3259
04:35:50,323 --> 04:35:53,323
And everybody was just like, dude, you're talking some moon math.

3260
04:35:53,323 --> 04:35:54,323
Go away.

3261
04:35:54,323 --> 04:35:56,323
We don't want to mess with this thing right now.

3262
04:35:56,323 --> 04:35:57,323
So they went away.

3263
04:35:57,323 --> 04:36:00,323
And now Ethereum is scaling on top of roll-ups, right?

3264
04:36:00,323 --> 04:36:02,323
So it's not a risky technology anymore.

3265
04:36:02,323 --> 04:36:04,323
It is more complex than drivechains.

3266
04:36:04,323 --> 04:36:08,323
I agree with you that drivechains are a no-brainer as far as risk reward.

3267
04:36:08,323 --> 04:36:11,323
They should have been activated five years ago.

3268
04:36:11,323 --> 04:36:15,323
And if they're not activated soon, then maybe the window will close altogether.

3269
04:36:15,323 --> 04:36:18,323
And it's absolutely no-brainer to activate drivechains, right?

3270
04:36:18,323 --> 04:36:19,323
Right.

3271
04:36:19,323 --> 04:36:20,323
Yes.

3272
04:36:20,323 --> 04:36:21,323
Agreed.

3273
04:36:21,323 --> 04:36:22,323
Let's do it.

3274
04:36:22,323 --> 04:36:23,323
Do it, people.

3275
04:36:23,323 --> 04:36:24,323
Well, yeah.

3276
04:36:24,323 --> 04:36:25,323
Yeah.

3277
04:36:25,323 --> 04:36:26,323
Okay.

3278
04:36:26,323 --> 04:36:28,323
We're waiting for Moon Settler to come around.

3279
04:36:28,323 --> 04:36:31,323
He's still making up his mind, which I respect completely.

3280
04:36:31,323 --> 04:36:36,323
Well, I mean if you're uncertain about drivechains, my answer is don't deposit your funds there.

3281
04:36:37,323 --> 04:36:38,323
Live and let live.

3282
04:36:38,323 --> 04:36:39,323
Let other people use it.

3283
04:36:39,323 --> 04:36:42,323
Don't claim that it's a bad thing or a good thing for Bitcoin.

3284
04:36:42,323 --> 04:36:44,323
There's never any bad thing or good thing.

3285
04:36:44,323 --> 04:36:50,323
Nobody forces you to deposit your own funds into a drivechain deposit address, right?

3286
04:36:52,323 --> 04:36:53,323
Yeah.

3287
04:36:54,323 --> 04:36:56,323
With roll-ups, right?

3288
04:36:56,323 --> 04:37:09,323
So you basically, in a way, you would have to do something with the block space limitations, no?

3289
04:37:09,323 --> 04:37:11,323
Not necessarily.

3290
04:37:11,323 --> 04:37:15,323
I mean, not necessarily because they're not infinitely scalable.

3291
04:37:15,323 --> 04:37:17,323
That part is true.

3292
04:37:17,323 --> 04:37:27,323
But they would create permanently high fees that would actually, ironically, proliferate other roll-ups and proliferate level three.

3293
04:37:27,323 --> 04:37:29,323
There would be roll-ups of roll-ups.

3294
04:37:29,323 --> 04:37:38,323
So essentially, it would essentially create enough of a crisis for Bitcoin to do what Ethereum has been forced to do despite not wanting to do, right?

3295
04:37:38,323 --> 04:37:44,323
Because Ethereum had a crisis of $500, $300 fees and the plebs being unable to move their ETH.

3296
04:37:44,323 --> 04:37:47,323
And because of that crisis, they have figured out roll-ups.

3297
04:37:47,323 --> 04:37:53,323
It's just that Bitcoin hasn't been in a crisis mode like that for a long time since the Civil War.

3298
04:37:53,323 --> 04:37:57,323
But the data availability problem does not really work that way.

3299
04:37:57,323 --> 04:38:04,323
So you can't just pack roll-ups into roll-ups and hand-wave away that particular problem, right?

3300
04:38:04,323 --> 04:38:10,323
It's true, but you could have a roll-up whose only task is to provide terabytes of data availability, right?

3301
04:38:11,323 --> 04:38:25,323
So rather than doing roll-ups of roll-ups, you could have a roll-up which basically provides terabytes and terabytes of data availability while confirming a few kilobytes worth of data on Bitcoin.

3302
04:38:27,323 --> 04:38:29,323
It would not be as secure.

3303
04:38:29,323 --> 04:38:32,323
Someone would have to run the nodes for that.

3304
04:38:32,323 --> 04:38:35,323
They would need to be somehow compensated.

3305
04:38:35,323 --> 04:38:39,323
Those people, yeah, those people would be the roll-up miners, right?

3306
04:38:39,323 --> 04:38:41,323
Yeah, that's true.

3307
04:38:41,323 --> 04:38:43,323
But roll-ups have miners, right?

3308
04:38:43,323 --> 04:38:46,323
These sequencers or whatever.

3309
04:38:46,323 --> 04:38:48,323
They have nodes, basically.

3310
04:38:48,323 --> 04:38:51,323
There would have to be economic incentives there.

3311
04:38:51,323 --> 04:39:01,323
But you could even, if you want to be crazy, if you want to be adventurous, you could imagine a Bitcoin data availability layer that uses restaking on Ethereum.

3312
04:39:01,323 --> 04:39:04,323
There is no reason not to do that, right?

3313
04:39:05,323 --> 04:39:09,323
But again, it's not going to be as data available as Bitcoin itself.

3314
04:39:09,323 --> 04:39:23,323
And the 100x, like in the Bitcoinrollups.org report, there is a 100x best case scenario if the roll-ups adopt account-based scaling and 3x scenario if it's a UTXO scaling.

3315
04:39:23,323 --> 04:39:30,323
But at the end of the day, right, 100x or 3x is not going to be enough to onboard billions of plebs, right?

3316
04:39:30,323 --> 04:39:36,323
But onboarding billions of plebs is something we can leave to Visa and PayPal and Strike for 20 years from now.

3317
04:39:36,323 --> 04:39:47,323
I just want to survive the chasm of transitioning from sterile store of value, which right now the default outcome is that Bitcoin becomes our best case scenario or gold.

3318
04:39:47,323 --> 04:39:55,323
And not jumping across that chasm to become a real reserve asset as a usable collateral in the Eurodollar system.

3319
04:39:55,323 --> 04:39:58,323
That's the main danger in my mind.

3320
04:39:58,323 --> 04:40:01,323
Because without it, you will never become money of the Internet.

3321
04:40:01,323 --> 04:40:06,323
You will never become pleb, high-velocity Bitcoin credits.

3322
04:40:06,323 --> 04:40:17,323
Bitcoin was actually money of the Internet before, sort of money of the darknet, before the privacy became…

3323
04:40:17,323 --> 04:40:21,323
So now you have Monero and now you have stablecoins.

3324
04:40:22,323 --> 04:40:30,323
Yeah, but Bitcoin technically, especially with these technologies, right, lightning network will have a bigger network effect than Monero,

3325
04:40:30,323 --> 04:40:40,323
especially in real-life payments and have better finality and better final settlement speeds and it is generally more scalable.

3326
04:40:40,323 --> 04:40:46,323
Yes, but it's only cross-institutional. Do you really care that a thousand institutions will interconnect using lightning instead of Swift?

3327
04:40:47,323 --> 04:40:54,323
Do you really care about that? I mean, will it be used by tens of millions of merchants around the world or will it only be…

3328
04:40:54,323 --> 04:41:00,323
I mean, even if a hundred million merchants use lightning, that doesn't mean that they actually run their lightning belt, right?

3329
04:41:00,323 --> 04:41:02,323
They will just sign up with Spike.

3330
04:41:02,323 --> 04:41:09,323
Yes, no, the main point with lightning is that you have a network effect and interconnectability, interoperability.

3331
04:41:10,323 --> 04:41:16,323
And basically, the end-user wallets, if they support lightning, they support the entire world, basically.

3332
04:41:16,323 --> 04:41:23,323
That's the idea, that you can go to El Salvador from Germany and just use your lightning wallet and buy stuff there.

3333
04:41:23,323 --> 04:41:35,323
That is the whole Bitcoin-er, cypherpunky, Bitcoin-moxy idea for the next few years, right?

3334
04:41:35,323 --> 04:41:44,323
Is there competition to that? For example, can you use lightning inside Minecraft a hundred times per minute every time you grab an object and you get paid for stuff?

3335
04:41:44,323 --> 04:41:47,323
Can you use lightning for that? Maybe.

3336
04:41:47,323 --> 04:41:53,323
No, I don't think so. I don't think so and I don't think it should be forced.

3337
04:41:53,323 --> 04:42:00,323
Like lightning as an end-user wallet, I think it's not going to work out. This is my feeling.

3338
04:42:00,323 --> 04:42:02,323
Exactly, it's cross-institutional.

3339
04:42:02,323 --> 04:42:17,323
But it has the potential to actually collect wallets that solve the privacy and end-user scaling issue, connect to the merchants and institutions, as you said.

3340
04:42:17,323 --> 04:42:25,323
So there is a potential there that this whole thing can actually take off and have a network effect.

3341
04:42:26,323 --> 04:42:37,323
But I think people take it as inevitable, like a lot of Bitcoiners take it as inevitable and I think that's a huge stretch.

3342
04:42:37,323 --> 04:42:43,323
Exactly, because first of all, lightning has been around for six years now, right? Since 2017.

3343
04:42:43,323 --> 04:42:50,323
Its total value locked in the public lightning is $170 million. It's not exactly taking off, right?

3344
04:42:50,323 --> 04:42:58,323
It no longer doesn't take off, the worse it looks like. But I got even worse news, like Strike is no longer a lightning company, it's a stablecoin company.

3345
04:42:58,323 --> 04:43:04,323
They thought that their business model would be sitting and collecting 10 basis points from all the merchants.

3346
04:43:04,323 --> 04:43:10,323
They realized it's not working, so they became a tether competitor by issuing fiat inside their Strike app.

3347
04:43:10,323 --> 04:43:15,323
This is their tether company. They no longer care about lightning that much.

3348
04:43:15,323 --> 04:43:24,323
It's going to be interesting, I believe, when even central banks decide to be a tether competitor, because why not?

3349
04:43:24,323 --> 04:43:30,323
There are a lot of advantages for a country to actually do the exact same thing as tether does.

3350
04:43:30,323 --> 04:43:36,323
The simplest thing for the US government to do to disable tether and every other possible competitor is not to do anything,

3351
04:43:36,323 --> 04:43:42,323
but simply to permit JPMorgan Chase and other too-big-to-fail banks to issue stablecoins.

3352
04:43:42,323 --> 04:43:49,323
Because those banks are already branches of the Fed, de facto, but the Fed is incapable of managing the technical infrastructure.

3353
04:43:49,323 --> 04:43:56,323
If they just allow JPMorgan to issue a stablecoin on multiple blockchains, it's basically game over for tether.

3354
04:43:56,323 --> 04:44:00,323
I mean, there's still some network effect there, it will survive for a while.

3355
04:44:00,323 --> 04:44:08,323
But why would you hold tether when you can hold a stablecoin issued by essentially the Fed, but indirectly through a too-big-to-fail bank?

3356
04:44:08,323 --> 04:44:12,323
I would hold that any time before I would hold tether.

3357
04:44:12,323 --> 04:44:19,323
My theory is also that actually reducing friction is in the interest of central banks,

3358
04:44:19,323 --> 04:44:25,323
if it allows them to export their inflation by creating international demand for their currency,

3359
04:44:25,323 --> 04:44:32,323
which they couldn't do practically before this whole technology stack becoming widespread.

3360
04:44:32,323 --> 04:44:40,323
They couldn't practically export their inflation, even if a foreign country's population actually preferred their currency.

3361
04:44:40,323 --> 04:44:45,323
The local government could very easily control this situation.

3362
04:44:45,323 --> 04:44:54,323
The Indian government can do a lot to control the population, what currency they can use in their daily lives and whatnot.

3363
04:44:55,323 --> 04:45:01,323
But I think with CBDCs, internet-notice CBDCs, this can change hugely.

3364
04:45:01,323 --> 04:45:07,323
And suddenly it can become like a competition between central banks to decrease friction.

3365
04:45:07,323 --> 04:45:13,323
It's like all the central banks enter the same octagon and fight to the death using mixed martial arts.

3366
04:45:13,323 --> 04:45:22,323
And the stakes are quite high, especially for a smaller state, if they can sort of win this or get ahead of this,

3367
04:45:22,323 --> 04:45:27,323
because they provide like a hundred times less friction than the United States government,

3368
04:45:27,323 --> 04:45:33,323
and they are still like a state and a central bank, and they have their dollar reserves and whatnot.

3369
04:45:33,323 --> 04:45:41,323
So if they can provide this, they can get comparatively a lot more advantage than the US,

3370
04:45:41,323 --> 04:45:43,323
that actually did this with the USD, right?

3371
04:45:43,323 --> 04:45:48,323
So they actually exported a lot of their inflation, and they like to do that.

3372
04:45:48,323 --> 04:45:53,323
But they also introduce a lot of friction and a lot of restrictions that the world doesn't seem to like.

3373
04:45:53,323 --> 04:45:57,323
But you know, there's something that's even better than Fedcoin.

3374
04:45:57,323 --> 04:46:02,323
Assuming the same level of liquidity, the one thing that would be better than Fedcoin to hold,

3375
04:46:02,323 --> 04:46:07,323
and I would actually feel better hiding at the top of the food market in that kind of stablecoin,

3376
04:46:07,323 --> 04:46:08,323
is something like LUSD, right?

3377
04:46:08,323 --> 04:46:14,323
Because it's not a coin that can be rock-pulled or frozen or censored, right?

3378
04:46:14,323 --> 04:46:18,323
Whereas Fedcoin would still be, you know, censorable, etc.

3379
04:46:18,323 --> 04:46:23,323
So assuming the same level of liquidity, of course, that may not be possible,

3380
04:46:23,323 --> 04:46:26,323
because once the Fed, you know, like once JP Morgan Chase starts issuing,

3381
04:46:26,323 --> 04:46:29,323
they will have liquidity, but there's no decentralized stablecoins,

3382
04:46:29,323 --> 04:46:31,323
and they will not necessarily have liquidity.

3383
04:46:31,323 --> 04:46:33,323
That would be even better.

3384
04:46:37,323 --> 04:46:39,323
We are hearing very badly.

3385
04:46:39,323 --> 04:46:42,323
I think you are outside the…

3386
04:46:42,323 --> 04:46:44,323
I get some wind noise going on.

3387
04:46:44,323 --> 04:46:50,323
Gentlemen, we're almost at five hours now in this space.

3388
04:46:50,323 --> 04:46:51,323
It's been a great conversation.

3389
04:46:51,323 --> 04:46:55,323
Do you think we should continue or maybe wrap up for next week?

3390
04:46:56,323 --> 04:46:59,323
Yeah, maybe we should wrap up.

3391
04:46:59,323 --> 04:47:04,323
I mean, there is so much to talk about, but it's really just too much, I believe.

3392
04:47:04,323 --> 04:47:06,323
We lost almost everyone.

3393
04:47:06,323 --> 04:47:13,323
I encourage everyone to follow the speakers on stage, Alex Kravitz and Moon Settler,

3394
04:47:13,323 --> 04:47:19,323
both of whom have spoken here in the past at the weekly Drivechain Twitter spaces of LayerTwo Labs.

3395
04:47:19,323 --> 04:47:23,323
This has been yet another one of our weekly spaces.

3396
04:47:23,323 --> 04:47:28,323
We discussed Drivechain, which is Bitcoin Improvement Proposal 300 and 301.

3397
04:47:28,323 --> 04:47:32,323
These are recorded spaces for the public benefit to understand

3398
04:47:32,323 --> 04:47:39,323
this incredibly powerful potential soft fork upgrade for Bitcoin eight years in the making.

3399
04:47:39,323 --> 04:47:46,323
Thank you, everyone who listens live and speaks, as well as those who listen on demand later.

3400
04:47:46,323 --> 04:47:50,323
You can learn more about Drivechain at layer2labs.com.

3401
04:47:50,323 --> 04:47:53,323
You can also go to drivechain.info.

3402
04:47:53,323 --> 04:47:58,323
You can download the Drivechain testnet software and run it.

3403
04:47:59,323 --> 04:48:06,323
And you can read the many articles and essays, such as the essay by Nostr creator Fiatjaf,

3404
04:48:06,323 --> 04:48:13,323
in favor of Drivechain, as well as Bitcoin and Nostr focused developer SuperTestnet,

3405
04:48:13,323 --> 04:48:16,323
who has written in favor of Drivechain.

3406
04:48:16,323 --> 04:48:19,323
And we'll see you all next week.

3407
04:48:19,323 --> 04:48:22,323
Thank you so much for those who've spoken and listened.

3408
04:48:22,323 --> 04:48:28,323
Have a great weekend and continue to study these ideas.

3409
04:48:28,323 --> 04:48:31,323
Thanks again, Alex, for being here and Moon Settler and others.

3410
04:48:31,323 --> 04:48:33,323
I really appreciate it. Bye bye.