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Hello, and welcome to Drivechain Twitter Spaces.

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We are thrilled to have another conversation

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on this very important Bitcoin improvement proposal today.

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Welcome to those in the audience.

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All are welcome to raise your hand and come on up

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and chat about this monumentally important

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Bitcoin improvement proposal.

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I'm Henry of LayerTwo Labs, and today is March 30th, 2023.

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Every day brings us closer to Bitcoinization

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facilitated by powerfully valuable sidechains,

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which are peer-to-peer in nature

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and consistent with the vision of Satoshi

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of a multi-chain blockchain ecosystem

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merged mind with Bitcoin,

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enabling a wide variety of applications

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to use blockchain in a manner that accrues value

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to Bitcoin's block space.

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In the Drivechain view,

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these blockchains, other than Bitcoin, are sidechains,

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and they accrue value not only to Bitcoin's block space,

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but also Bitcoin's native token, BTC,

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thus facilitating number-go-up technology

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and a harmonious arrangement of development

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on multiple blockchains in a way

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that accrues value to Bitcoin and its block space.

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That's so important.

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Either Bitcoin will or won't adopt this proposal,

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which would enable it to internalize the value

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of innovations outside of Bitcoin.

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Eventually, there'll be one Layer 1,

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and on top of that Layer 1, everything else will exist.

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This is the result of network effects.

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There'll be one protocol, which is the Layer 1,

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and everything else will be built on top of it.

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So it's important, in order for Bitcoin to be that Layer 1,

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that it have great extensibility,

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meaning a lot of potential

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for value creation, innovation,

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and customization on top of Bitcoin.

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Well, as always, people in the audience

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are welcome to come on up.

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Don't be shy.

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Ask a question, share a comment, do a little rant,

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sing a song about Drivechain, whatever you'd like to do.

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All are welcome.

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Maybe we should put something in the nest for conversation.

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A recent tweet of importance.

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Ah, we have a speaker.

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Dr. Bailey, welcome to the stage.

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Hey, Henry.

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How's it going?

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It's going well, as always.

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How you doing?

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Life is good.

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It's been a while since I dropped in on one of these.

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I do have a question for you.

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This is part business, part personal.

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You've thrown your lot in with Drivechain

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for a couple of months now.

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I wonder how you measure success there,

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and whether you believe you've seen success

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on the metrics that matter to you

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since you've been so active in promoting Drivechain

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for, what, about three or four months now, something like that?

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Yeah, that's a great question.

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So I've actually been promoting Drivechain

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long before I even took this job.

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I was running Twitter spaces,

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and the titles of those Twitter spaces were,

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I would either title it Drivechain,

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or I would title it Paul Sztorc Fan Club.

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And I was doing that for almost a year

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before I joined LayerTwo Labs.

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And if my position at LayerTwo Labs were to come to an end,

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I would continue to advocate for Drivechain as a volunteer.

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So for me, this is a topic of fascination and enthusiasm,

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separate from my professional life, to some extent.

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Now, I do monitor the metrics of how many people

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are in our Drivechain Telegram group,

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and how many people are following LayerTwo Labs,

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how many people are following the Drivechain Reddit community

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and a few other metrics.

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So I do think it's good to keep track of those things

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and try to grow them.

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I also view Drivechain as a project of persuasion

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in terms of persuading key people.

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So if we have, let's say,

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10,000 people join the Telegram group,

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but then we have some very influential Bitcoiner

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announce that he's in favor of Drivechain,

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it'd be hard to say which one was more valuable.

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It's possible that if we get masses of people,

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if we get thousands of people interested in Drivechain

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and discussing it for Bitcoin,

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for Bitcoin's survival and success,

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then the key thinkers, the leading influencers in Bitcoin,

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like researchers at Blockstream and others like that,

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developers, they'll be more comfortable

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in talking about the benefits of Drivechain.

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So as it stands right now,

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a lot of Bitcoiners aren't familiar with Drivechain,

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and they might've heard some people criticize it,

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like Shinobi,

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or they might've heard some people advocate for it,

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like Adam Back, Fiatjaf, Mike Tidwell, and others.

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So there are some supporters and some detractors,

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but I would like to see more of the influencers

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become supporters.

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And at the same time,

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I think that broad support among the plebs is valuable

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and makes it, it just advances the discussion,

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because ultimately you have to have both.

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You have to have kind of the grassroots

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as well as the influencers.

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They have to all be convinced it's a good idea.

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So those are some of the ways that I see it.

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Obviously, total success would mean

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like Bitcoin activating the Drivechain BIPs.

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So there's a lot of stuff going on behind the scenes

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that is good.

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I think we're gonna see this year as a huge year

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for Drivechain success and understanding.

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LayerTwo Labs is endeavoring to make Bitcoiners

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more informed and educated and interested

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in this very valuable and important view,

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where a multitude of applications can be built on Bitcoin.

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Bitcoin would become more technologically interesting.

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It would be very exciting for the Bitcoin community

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if there's a peer-to-peer sidechain

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that does Zcash privacy technology,

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if there's a peer-to-peer sidechain

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that does Hivemind oracles,

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where you can make a bet on anything about the future.

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It would also be interesting to have a big block,

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one gigabyte block scaling sidechain and others.

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It would be really great.

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Bitcoin would be a lot more interesting and exciting.

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And if just 1% or 2% or 5% of Bitcoiners

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send their assets to those sidechains,

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those sidechains will have billions of dollars of value

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and their fee revenue probably will be significant

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and adequate.

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Because if there's, let's say there's a Thunder sidechain

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with $10 billion of market cap,

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that'd be a pretty serious blockchain.

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And we would find out, we would find out over the years

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whether it's something which is a great design or not.

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But I think it's definitely worth doing at this point.

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We have to have Bitcoin be on track to be the blockchain

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on which everything else is built.

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Like either that will be achieved or not.

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So I subscribe to the Fiatjaf view,

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which is either Bitcoin is the complete winner

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or it'll be a complete loser.

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There isn't some happy middle ground where it's,

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you know, where like hypothetically,

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let's say in 10 years from now,

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Ethereum is the largest by market cap

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and Bitcoin is one fifth the market cap of that.

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And it's still somehow viable.

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That probably wouldn't work out

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because of the nature of price.

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Nature of protocol network effects.

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It's important that Bitcoin be that digital gold layer one

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on which everything else is built.

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So we've already, we've got that ossified layer one,

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but we've got to just make a tweak

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to enable the extensibility

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so that there can be this thriving variable layer

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of innovation and experimentation

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on top of that digital gold substrate.

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Henry, I have another question for you.

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This is about strategy.

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I believe you've correctly identified the campaign here

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as a political and social one.

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Your goal is to persuade.

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The technology is settled.

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We know what this does and does not do technically.

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So it's a matter of persuading people.

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And I also like that you've identified influencers,

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people with extraordinary reach on social media

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as key points to persuade.

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And I'm wondering if you could talk a little bit

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about that.

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So you've identified influencers, people with extraordinary reach

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on social media as key points to persuade.

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But it seems to me there's a trade-off here

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that makes that difficult

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because one job of a Bitcoin influencer

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is to persuade people that all is well,

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that number will go up,

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and that you should keep on buying Bitcoin.

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This is just a fact.

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This is what influencers do.

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And yet one of the important steps

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to understanding drivechain is to see that,

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wait a minute, there's this issue with fees

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because of the exponentially declining block subsidy.

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And this, once you put these two against each other,

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it looks to me like they kind of cut against each other.

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So there's an inherent challenge

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to actually capturing the minds of the people

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who matter the most

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when it comes to affecting Bitcoin's social layer.

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Well said.

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I think that low fees forever on layer one

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is not the best justification for drivechain.

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You didn't say otherwise.

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But just to elaborate on your point,

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low fees for layer one is a threat to Bitcoin

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in the long run if it persists.

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And to the extent that anyone thinks

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that it is going to be a long run threat,

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then it threatens Bitcoin right now.

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So that's one thing that's very important

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is people say within Bitcoin's community,

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there's no problem.

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Bitcoin is working fine.

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TikTok next block.

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But every time someone comes to the opinion

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that Bitcoin likely will have a problem in the future,

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that person doesn't buy Bitcoin today

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because economic actors are future oriented.

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So they manifest their expectations in the present

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with respect to the future.

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So there are people on Twitter every day

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with over 100,000 followers who are tweeting

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in favor of Ethereum like Evan Van Ness

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writes every day that Bitcoin's gonna have inflation

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and that people aren't admitting it.

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And Justin Bonds is writing this every day.

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I think they're convincing probably thousands of people

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that Bitcoin's going to do inflation.

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And whether they're right or wrong, in my opinion,

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may depend on whether drivechain is adopted.

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It might be in the future that people will look back

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and the narrative that drive chainers have will be correct.

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However, it's just important to note

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in order to not overstate our claims,

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it's important to note that the security budget problem

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isn't one that drive chainers should characterize

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as an inevitability.

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That is, we shouldn't say that without merged mining,

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there'll be no solution.

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There's always a possibility that the optimists

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will be proven right.

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That there's a logical possibility

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that the whole world will demand Bitcoin layer one

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block space for their ordinals

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and for their digital gold movements

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and their luxury ordinals.

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And then there'll be high fees forever.

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We might see next year, $20 Bitcoin transactions

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all year, it's possible.

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So we shouldn't say that we must do drivechain

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specifically because we will have low fees without it.

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The justification for drivechain, as you know,

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originally had nothing to do with the low fee problem.

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Nobody knew about low fees as a problem in the future

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in the way that we do now until 2018, when Jordan McKinney,

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and this is my understanding personally,

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that he was the first person to ever talk

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about the security budget.

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No one had ever used the words security budget

265
00:14:19,854 --> 00:14:23,093
before 2018 in Bitcoin's context.

266
00:14:23,093 --> 00:14:27,614
So Jordan McKinney invented that, he coined it.

267
00:14:27,614 --> 00:14:31,893
He also coined security factor, which is more important.

268
00:14:31,893 --> 00:14:34,974
People really should talk about security factor more

269
00:14:34,974 --> 00:14:37,374
because he explained in that blog post

270
00:14:37,414 --> 00:14:39,573
on his website, on his blog,

271
00:14:39,573 --> 00:14:42,133
security budget is the Coinbase plus the fees.

272
00:14:43,054 --> 00:14:47,213
And as the Coinbase declines, the fees don't go up.

273
00:14:47,213 --> 00:14:49,614
And then we have security budget failure,

274
00:14:49,614 --> 00:14:52,534
but security factor is most important

275
00:14:52,534 --> 00:14:54,854
because that's the ratio between the security budget

276
00:14:54,854 --> 00:14:56,573
and the market cap.

277
00:14:56,573 --> 00:14:59,013
So if you have a declining security budget,

278
00:14:59,013 --> 00:15:02,653
you're gonna have a worsening security factor ratio.

279
00:15:02,653 --> 00:15:07,653
And then eventually people will just devalue the token

280
00:15:08,213 --> 00:15:11,174
because of the declining security budget

281
00:15:11,174 --> 00:15:14,414
to bring the security factor back into alignment.

282
00:15:14,414 --> 00:15:17,414
So it's not good.

283
00:15:19,974 --> 00:15:22,934
Lynn Alden talks about these concepts in her blog post,

284
00:15:22,934 --> 00:15:27,534
in her essay on her website in 2021 in March,

285
00:15:27,534 --> 00:15:29,054
the Bitcoin fee modeling one.

286
00:15:29,054 --> 00:15:30,974
She doesn't say security budget and security factor,

287
00:15:30,974 --> 00:15:33,253
she just says that there's a percent.

288
00:15:33,253 --> 00:15:35,213
She'd like to see what,

289
00:15:35,213 --> 00:15:36,534
she doesn't call it security factor,

290
00:15:36,534 --> 00:15:37,773
but she says some phrase.

291
00:15:37,773 --> 00:15:39,734
And then she says she'd like to see that percentage

292
00:15:39,734 --> 00:15:44,734
be about 1.5% to 0.5%.

293
00:15:46,414 --> 00:15:50,174
So like roughly 1% of Bitcoin every year

294
00:15:50,174 --> 00:15:51,534
being spent on security.

295
00:15:51,534 --> 00:15:55,013
So if we have a $100 trillion Bitcoin market cap,

296
00:15:55,013 --> 00:15:58,534
she would like to see annual miner revenue

297
00:15:59,534 --> 00:16:02,093
of one trillion.

298
00:16:02,093 --> 00:16:04,013
If it's $100 trillion market cap,

299
00:16:04,013 --> 00:16:06,414
then one trillion per year in miner revenue.

300
00:16:07,614 --> 00:16:09,653
So that's what she would like to see.

301
00:16:09,653 --> 00:16:11,174
It's not something to laugh about really,

302
00:16:11,174 --> 00:16:14,934
because if you have $100 trillion of value secured,

303
00:16:14,934 --> 00:16:18,814
then annual spending of one trillion on transaction fees

304
00:16:18,814 --> 00:16:21,333
is where she feels there would be a healthy equilibrium

305
00:16:21,333 --> 00:16:25,013
of not overspending on security, which is inefficient

306
00:16:25,013 --> 00:16:27,773
because then society is supporting

307
00:16:27,773 --> 00:16:30,253
a oversecured payment system.

308
00:16:30,253 --> 00:16:33,213
But if it's undersecured, then that's not good.

309
00:16:33,213 --> 00:16:37,333
So it's very tricky because there's no oracle system

310
00:16:37,333 --> 00:16:40,534
that regulates the amount of security spending.

311
00:16:41,854 --> 00:16:44,814
But my view, which is I think Paul's view,

312
00:16:44,814 --> 00:16:49,814
is that fees are not the only reason to do drivechain.

313
00:16:49,974 --> 00:16:51,494
And in fact, fees weren't even part

314
00:16:51,494 --> 00:16:52,693
of the original discussion.

315
00:16:52,693 --> 00:16:55,054
Back in 2015, when drivechain was conceived,

316
00:16:55,054 --> 00:16:59,934
it was all about this question of isn't it terrible

317
00:16:59,934 --> 00:17:03,213
for Bitcoin economically as a movement

318
00:17:03,213 --> 00:17:08,214
to lose the resources of the value, the fees,

319
00:17:08,214 --> 00:17:09,694
and not the fees, but the value

320
00:17:09,694 --> 00:17:12,773
and the intellectual resources

321
00:17:12,773 --> 00:17:16,133
of having people split off and do their own thing.

322
00:17:16,133 --> 00:17:18,133
Like whenever someone splits off from Bitcoin

323
00:17:18,133 --> 00:17:20,814
doing a fork or doing an altcoin,

324
00:17:20,814 --> 00:17:25,814
then it diminishes the resources that the community has.

325
00:17:28,574 --> 00:17:31,613
So it's ideal for the community to always be very cohesive

326
00:17:32,613 --> 00:17:33,534
and to be together.

327
00:17:33,534 --> 00:17:38,534
But of course, if there's too much ossification prematurely

328
00:17:39,253 --> 00:17:42,694
and if Bitcoin isn't enabling extensibility,

329
00:17:42,694 --> 00:17:47,694
and if we're on track in a way that's not healthy,

330
00:17:48,174 --> 00:17:51,294
then the pressure from people leaving the community

331
00:17:51,294 --> 00:17:52,174
could be good.

332
00:17:54,253 --> 00:17:57,414
So what are your thoughts?

333
00:17:57,414 --> 00:18:01,814
Do you completely agree that the reason to do drivechain

334
00:18:01,814 --> 00:18:06,814
shouldn't be seen as primarily about the security budget?

335
00:18:10,054 --> 00:18:12,773
The best justification is, as Mike Tidwell would say,

336
00:18:12,773 --> 00:18:14,454
the love of innovation.

337
00:18:14,454 --> 00:18:16,934
Simply enabling more innovation and creativity

338
00:18:16,934 --> 00:18:18,893
for Bitcoiners on Bitcoin,

339
00:18:18,893 --> 00:18:21,013
that is the reason to do drivechain.

340
00:18:21,013 --> 00:18:22,653
I think that's the out of back reason.

341
00:18:22,653 --> 00:18:24,534
He talks about innovation,

342
00:18:24,534 --> 00:18:28,653
that he would like to do Zcash stuff on Bitcoin

343
00:18:28,653 --> 00:18:30,133
as a sidechain.

344
00:18:30,133 --> 00:18:34,214
And that way it's, you're a Bitcoiner when you're doing it,

345
00:18:34,214 --> 00:18:35,214
but it's innovative.

346
00:18:38,534 --> 00:18:39,534
I would agree with that,

347
00:18:39,534 --> 00:18:41,694
but I would actually use slightly different language.

348
00:18:41,694 --> 00:18:44,174
I think the language of innovation and cool technology

349
00:18:44,174 --> 00:18:45,534
is a bit abstract.

350
00:18:45,534 --> 00:18:47,613
For most Bitcoiners, the way to reach them

351
00:18:47,613 --> 00:18:50,454
is to say that Bitcoin will become more useful,

352
00:18:50,454 --> 00:18:53,174
and when something's more useful, it's more valuable.

353
00:18:53,174 --> 00:18:56,013
And drivechain makes Bitcoin more useful.

354
00:18:56,013 --> 00:18:58,373
Now, maybe that's the same thing as saying innovation

355
00:18:58,373 --> 00:19:00,013
and better technology,

356
00:19:00,013 --> 00:19:02,574
but at least it feels more concrete to me

357
00:19:02,574 --> 00:19:03,694
to talk about usefulness,

358
00:19:03,694 --> 00:19:05,373
that you can do more stuff with it,

359
00:19:05,373 --> 00:19:07,013
and that makes it more precious.

360
00:19:07,893 --> 00:19:08,773
Right.

361
00:19:08,773 --> 00:19:11,613
I always worry though, when people talk about use,

362
00:19:11,613 --> 00:19:15,493
because they often say that holding isn't using,

363
00:19:15,493 --> 00:19:17,373
but if you're transacting, you're using,

364
00:19:17,373 --> 00:19:20,414
when really the truth is slightly different.

365
00:19:20,414 --> 00:19:21,973
But holding is a form of using,

366
00:19:21,973 --> 00:19:23,334
because saving is using.

367
00:19:24,454 --> 00:19:26,214
Saving is an activity.

368
00:19:26,214 --> 00:19:28,534
But if there's a peer-to-peer Oracle network

369
00:19:28,534 --> 00:19:30,414
where you can make bets on the future,

370
00:19:31,814 --> 00:19:33,694
or if there's a large block sidechain

371
00:19:33,694 --> 00:19:36,094
where you can transact very cheaply,

372
00:19:38,054 --> 00:19:39,773
that's another kind of use.

373
00:19:39,773 --> 00:19:41,414
So it does make it more useful.

374
00:19:42,214 --> 00:19:43,694
I agree with you.

375
00:19:43,694 --> 00:19:46,733
I think that the builders like Adam Back and Mike Tidwell

376
00:19:46,733 --> 00:19:48,253
like those words about innovation

377
00:19:48,253 --> 00:19:49,934
because they're innovators, right?

378
00:19:49,934 --> 00:19:51,373
They're building tech.

379
00:19:51,373 --> 00:19:53,733
They're not just consumers like me.

380
00:19:53,733 --> 00:19:58,733
So I guess different people enjoy different advertisements.

381
00:19:59,600 --> 00:20:01,600
Hi, Alex. Welcome.

382
00:20:01,600 --> 00:20:12,600
Hi, Henry. I have a question. How does Lyn Alden justify the idea that roughly 1% of market cap should be spent on security?

383
00:20:12,600 --> 00:20:15,600
I'll look it up now.

384
00:20:15,600 --> 00:20:25,600
I remember reading that blog post, and I think it's just like a heuristic. There's no real...

385
00:20:25,600 --> 00:20:36,480
As Bitcoin's market capitalization has grown, the absolute amount spent on security has

386
00:20:36,480 --> 00:20:42,000
grown as well, but the percentage of the market capitalization spent on security has diminished.

387
00:20:42,000 --> 00:20:45,960
Indeed, that's what we should expect to occur over time.

388
00:20:45,960 --> 00:20:51,120
Paying a huge percentage of the market cap in security each year made sense in the beginning

389
00:20:51,120 --> 00:20:53,600
when the protocol was small, vulnerable, and highly inefficient.

390
00:20:53,600 --> 00:21:03,720
inflationary, but in the long run from a large market size and small issuance rate, something

391
00:21:03,720 --> 00:21:11,240
more like 0.5% to 1.5% of market capitalization spent on security would probably be appropriate.

392
00:21:11,600 --> 00:21:16,600
I like how she uses probably be appropriate.

393
00:21:16,600 --> 00:21:25,600
Yeah, it's like, what about one tenth of 1% or one hundredth of 1%? Why is that less appropriate? I mean, it depends on the market cap, right?

394
00:21:25,600 --> 00:21:35,600
If the market cap is $10 trillion, the size of gold, then one tenth of 1% is still a very large number. Why is it the whole percent?

395
00:21:35,600 --> 00:21:55,600
I like the reasoning Paul Sztorc provides in his blog posts at truthcoin.info, where he argues that we want to see Bitcoin's security spending on track to rival the spending of the US government in terms of its growth rate.

396
00:21:55,600 --> 00:22:05,600
So he points out that the US government spends like 600 or 700 million or billion dollars on defense, and it grows at 6% a year.

397
00:22:05,600 --> 00:22:22,600
So I think he would say that if Bitcoin were to get to 100 trillion, which is a number he often gives as the target, then the annual security spending should be around a trillion a year, if I'm not mistaken.

398
00:22:22,600 --> 00:22:28,600
So that's 1%, same as Lyn Alden.

399
00:22:28,600 --> 00:22:32,600
Is that to outspend the US military? That's the idea?

400
00:22:32,600 --> 00:22:41,600
I don't know. I guess it's to say that if it were a trillion dollars a year, the US government couldn't easily do it.

401
00:22:41,600 --> 00:22:55,600
There was another idea, which is that the moment Bitcoin consumes more than 50% of all electricity on earth, then it's safe, because it will be hard to bring more electricity online in order to provide it.

402
00:22:55,600 --> 00:23:04,600
Yeah, that's the Shinobi sophistry. That it's all about the energy, and it's not about the money.

403
00:23:04,600 --> 00:23:19,600
Recently, Michael Saylor confused everyone by saying that only the good guys will have the ASICs. And then everyone disagreed with that, but for different reasons.

404
00:23:20,600 --> 00:23:34,600
Yeah, but it's like Michael Saylor might be saying that as part of a political manipulation to introduce the idea into the political class that we should be the good guys with the ASICs and we should promote Bitcoin mining, etc.

405
00:23:34,600 --> 00:23:45,600
You might realize that from a game theoretic perspective, it's the budget that matters, not the energy efficiency of the latest ASIC box.

406
00:23:46,600 --> 00:23:50,600
That's a very charitable reading that you have. Very charitable.

407
00:23:50,600 --> 00:24:06,600
Well, it's either that or he doesn't understand this issue, and now the question is will he repent publicly once he realizes he's wrong or not.

408
00:24:07,600 --> 00:24:18,600
I agree. I mean, Eric Wall has been making fun of it a lot. Rightly so. I mean, I don't like making fun of people. I think it could have been more gentle, the correction.

409
00:24:18,600 --> 00:24:23,600
But the truth is that Saylor said a bunch of incorrect stuff there.

410
00:24:24,600 --> 00:24:43,600
I just want to say it's all about the fees and the Coinbase. It's all about money. Imagine two different militaries. If one has a higher budget than the other, presumably it's going to be the superior military.

411
00:24:44,600 --> 00:24:56,600
The idea that the good guys will win with a lower budget is no good, especially when we're talking about how Satoshi from the very beginning made it very clear it's all about a majority.

412
00:24:56,600 --> 00:25:06,600
Who has the majority of hash rate? And we can just presume that the more hash rate you have, the more you're consuming to produce that hash rate.

413
00:25:06,600 --> 00:25:21,600
So it's a financial thing. Bitcoin security is financial. Now obviously security, life isn't all financial. People are doing things. There could be ideological mining. There are sources of mining.

414
00:25:21,600 --> 00:25:39,600
Yeah, those are negligible. I mean, you're right. I agree with you there. But earlier you were talking about doing education and explaining to people that innovation would be enabled using Bitcoin, the asset, etc.

415
00:25:39,600 --> 00:25:56,600
So even though all these things are true, that message is not connecting because it's drowned out by all these fear-mongering influencers who, in order to get the clicks and the impressions, they always need to scare you about yet another attack on Bitcoin.

416
00:25:56,600 --> 00:26:07,600
So basically the whole podcasting elite, all these Twitter personalities, they just farm engagement by fear-mongering.

417
00:26:07,600 --> 00:26:21,600
Right. I agree with a lot of that. I agree. I mean, what can we say? It's unfortunate many people are interested in...

418
00:26:22,600 --> 00:26:36,600
What we can learn is because the same situation, well, not the same, but similar situation existed in the Ethereum world for a few years when Ethereum barely functioned.

419
00:26:36,600 --> 00:26:48,600
It was like a minimally viable sort of pre-alpha stage network that was launched and it was clearly unscalable with the single-threaded execution of complex contracts and stuff.

420
00:26:48,600 --> 00:26:59,600
And the fees skyrocketed and stayed high. And it has to be some kind of a crisis for the network in order to concentrate the minds.

421
00:26:59,600 --> 00:27:11,600
So basically, in the case of Bitcoin, it will either be an apocalypse, is what I call it, when the fees go high and stay high, or it will be a flippening by Ethereum or maybe even lappening by Ethereum.

422
00:27:11,600 --> 00:27:12,600
Fascinating.

423
00:27:12,600 --> 00:27:29,600
2x or 3x flippening. It has to be a crisis to concentrate the minds, basically. So it's very similar to the situation during World War II when Churchill said that Americans can be counted upon to do the right thing after they've exhausted all the other possibilities.

424
00:27:29,600 --> 00:27:46,600
So it's going to take a crisis with fees rising and staying high for months. And by high, I mean like $20 fees or higher, which basically eliminates ability by the global self-plebs to move their savings.

425
00:27:46,600 --> 00:27:52,600
And then you'll have this great outcry in the force that we need to scale Bitcoin.

426
00:27:52,600 --> 00:28:04,600
So your view is that the security budget problem will be eliminated and, in fact, the opposite thing will occur, which is that you, as we've discussed, I know you have this view and you may well be right.

427
00:28:05,600 --> 00:28:33,600
I'm hoping for the easiest way to catalyze a crisis, basically. Because I know that all this talk about let's unleash innovation, they always have rationalizations like, oh, go ahead and innovate on Lightning Network, even though people who created Lightning Network and who truly understand it will tell you that Lightning Network is inappropriate for plebs because no protocol that requires you to run an online server has ever succeeded in mass adoption on the internet.

428
00:28:33,600 --> 00:28:44,600
And that will not be the case for Lightning Network either, although Lightning Network is very useful for institutions to do instant final settlement over private channels that you will never see.

429
00:28:44,600 --> 00:28:55,600
But the point is that I'm looking for the – like the ordinals was like a God-given – I'm still hoping the ordinals will – luxury ordinals specifically – will create a fee crisis.

430
00:28:55,600 --> 00:29:01,600
And the fee crisis will force a scaling, and the scaling will mean that you need either sidechains or rolloffs.

431
00:29:01,600 --> 00:29:04,600
So I have a couple of questions for you.

432
00:29:05,600 --> 00:29:22,600
So to be clear, you would say that every time any drivechainer has ever said fees might stay too low unless we get drivechain, unless we get merged mining, you would say to them, that's completely wrong.

433
00:29:22,600 --> 00:29:32,600
If we ever get merged – you know, merged mines, sidechains, you know, drivechains, if we ever get more of that, it's going to be because fees are too high on Layer 1.

434
00:29:34,600 --> 00:29:41,600
What I'm saying is that trying to argue has failed, right?

435
00:29:41,600 --> 00:29:44,600
Like arguing for sidechains has failed.

436
00:29:44,600 --> 00:29:53,600
You know, people in the core, they're not saying anything that the engagement farmers would disapprove of.

437
00:29:53,600 --> 00:29:57,600
Otherwise, other developers in the core stop reviewing their pull requests.

438
00:29:57,600 --> 00:30:01,600
So there is like a wall of silence in there, right?

439
00:30:01,600 --> 00:30:04,600
So everybody tries to avoid any controversy.

440
00:30:04,600 --> 00:30:08,600
And all of these talks and all this education has failed.

441
00:30:08,600 --> 00:30:21,600
And what will not fail is the real need to scale the network, which can come about either because the fees go high and stay high, which we all know that they must, right?

442
00:30:21,600 --> 00:30:23,600
Because Bitcoin is a settlement network.

443
00:30:23,600 --> 00:30:29,600
You know, I will not be surprised if the average transfer fee is $100 forever, right?

444
00:30:29,600 --> 00:30:39,600
But $100 fees basically means that tens of millions of plebs in Nigeria and Vietnam and the global south cannot move their savings, period, right?

445
00:30:39,600 --> 00:30:42,600
Because the savings are small in dollar terms, right?

446
00:30:42,600 --> 00:30:45,600
And the Lightning Network goes disabled too.

447
00:30:46,600 --> 00:30:56,600
So like what I'm saying is that there has to be a scaling crisis or there has to be a crisis where Ethereum temporarily hopefully flippens or lappens Bitcoin.

448
00:30:56,600 --> 00:31:07,600
And then that will concentrate the minds that you cannot just sit back and expect Bitcoin to take all the monetary value from all the other assets and become $100 trillion large.

449
00:31:07,600 --> 00:31:19,600
Can you talk about which of those do you think is more – can you just elaborate on those two interesting possibilities?

450
00:31:19,600 --> 00:31:27,600
The first is, if I understand you correctly, you're saying that low fees forever on Bitcoin is not likely in your view.

451
00:31:27,600 --> 00:31:46,600
So you in fact think that Bitcoin will – with the ordinals and inscriptions, there is actually going to be more fee pressure and that once the fee pressure is high enough for long enough, then people will talk about things like drivechains.

452
00:31:46,600 --> 00:31:48,600
Like scaling Bitcoin, right?

453
00:31:48,600 --> 00:31:49,600
Scaling.

454
00:31:49,600 --> 00:31:53,600
So you think that people will see the high fees and then they'll say Lightning isn't enough.

455
00:31:53,600 --> 00:31:57,600
Let's have sidechains, like big block sidechains, for example.

456
00:31:57,600 --> 00:31:59,600
You think that's going to happen?

457
00:31:59,600 --> 00:32:05,600
Well, I mean, imagine the fees go to $20 or $30 and stay there for months.

458
00:32:05,600 --> 00:32:28,600
Then engagement farming by fudding all changes to Bitcoin and claiming that everything is an attack on Bitcoin becomes less profitable than fudding the idea that, hey, those guys in Nigeria that have been saving in Bitcoin now need to spend 10% of their savings to move their coins one time.

459
00:32:28,600 --> 00:32:38,600
So you will now have this kind of pleb uprising, basically, where the plebs are no longer interested and don't change Bitcoin no matter what.

460
00:32:38,600 --> 00:32:44,600
So you think that the people who advocate for Lightning as the scaling layer will say, we've changed our minds.

461
00:32:44,600 --> 00:32:48,600
You think some of them will say that and actually embrace the idea of a big block sidechain?

462
00:32:48,600 --> 00:32:51,600
It's not the big block, right?

463
00:32:52,600 --> 00:33:01,600
From my perspective, Lightning has failed to become adopted by retail or plebs, right?

464
00:33:01,600 --> 00:33:04,600
Because, I mean, there will be custodial Lightning.

465
00:33:04,600 --> 00:33:09,600
Sure, there will be 20 companies like Strike that have tens of millions of people.

466
00:33:09,600 --> 00:33:17,600
And honestly, those people in the global south don't know and don't care if they're using custodial or non-custodial Lightning, right?

467
00:33:17,600 --> 00:33:25,600
If they create a payment standard that allows you to do payments using SATs that fly around the world and there's no credit involved,

468
00:33:25,600 --> 00:33:35,600
these payments will be 100 times cheaper than existing payments that have this credit risk and counterparty risk and all these middlemen along the way.

469
00:33:35,600 --> 00:33:39,600
So Lightning can succeed without onboarding millions of users, right?

470
00:33:39,600 --> 00:33:46,600
Because it basically just needs a thousand well-funded private channels between giant custodial Lightning providers.

471
00:33:46,600 --> 00:33:52,600
But you cannot say to plebs, to millions of plebs that have unchained Bitcoin,

472
00:33:52,600 --> 00:33:58,600
you cannot say just use Lightning when their Bitcoin is now trapped and immovable because of high fees, right?

473
00:33:59,600 --> 00:34:13,600
I have a question. If the fees go up a lot, everyone will have to pay a fee at least one time to get into some other spending paradigm of Lightning or sidechains, right?

474
00:34:13,600 --> 00:34:14,600
They'll have to be...

475
00:34:14,600 --> 00:34:19,600
Yeah, yeah. And people don't want to pay 10% of their savings as a one-time fee, right?

476
00:34:19,600 --> 00:34:21,600
There's no solution to that, right?

477
00:34:21,600 --> 00:34:35,600
Well, the solution is for them to sit and wait for a week while the fees dip low because the fees will be volatile and then maybe transfer part of their savings to a roll-up or to a drivechain.

478
00:34:35,600 --> 00:34:49,600
What is your thought on the idea that drivechain is low-tech, roll-ups are high-tech, and roll-ups are many years away from getting a soft fork because they're so complicated, right?

479
00:34:49,600 --> 00:34:55,600
I think it's the wrong approach. I think once there's a real crisis, I mean, all bets are off.

480
00:34:55,600 --> 00:35:04,600
I think this whole idea that we cannot get any soft fork in and, you know, the truth is that roll-ups are not a dangerous soft fork, right?

481
00:35:04,600 --> 00:35:11,600
Because roll-ups only require like a Boolean function that returns true or false to check a proof on another...

482
00:35:11,600 --> 00:35:26,600
So you don't accept what I hear from, I think, Paul Sztorc and maybe some others, which is that, in fact, John Light said something to this effect, you know, like a few months ago in this space where it's a recorded space, I can find a tweet.

483
00:35:26,600 --> 00:35:35,600
But he says that, you know, he likes roll-ups and drivechains and that drivechains can probably be ready earlier and therefore could be...

484
00:35:35,600 --> 00:35:41,600
Yeah, I mean, drivechains are less controversial and they're completely sort of...

485
00:35:41,600 --> 00:35:50,600
Are you sure? It sounds like drivechain is more controversial, but it's more low-tech and therefore it's more available readily.

486
00:35:50,600 --> 00:35:56,600
Like if the Bitcoin community wanted to do drivechain, we could do it in a year from now. It would take just 12 months.

487
00:35:56,600 --> 00:36:05,600
We can do it in a week from now. Listen, when there is a real crisis and the fees go high and stay high, like, for example, I'm, you know, forget ordinals.

488
00:36:05,600 --> 00:36:14,600
What if, like, the government of China decides to create a trillion UTXOs while the fees are low, right, as a way to flood Bitcoin forever?

489
00:36:14,600 --> 00:36:25,600
Like, what if they create a trillion dusty UTXOs, right, which is, like, the most dangerous attack on Bitcoin would be just to create dusty UTXOs and, you know, spend a few million dollars doing that.

490
00:36:25,600 --> 00:36:28,600
And you will essentially blow out memory usage on every node, right?

491
00:36:28,600 --> 00:36:41,600
There's, like, it basically has to be a crisis because if there is no crisis, there will be no... there is no desire to make any changes.

492
00:36:42,600 --> 00:36:52,600
Can I ask a follow-up question about that? So, I was under the impression that the primary driver of data accrual to the blockchain is the block size.

493
00:36:52,600 --> 00:37:00,600
But the metric you just pointed to, which is the number of UTXOs, that would be totally separate, right? Totally...

494
00:37:00,600 --> 00:37:05,600
It's a separate thing, but it's an easier attack vector.

495
00:37:05,600 --> 00:37:10,600
Why hasn't it already been done? Why hasn't someone done this where they increase the...

496
00:37:10,600 --> 00:37:25,600
There was an attack by Roger Ver when it was the 2017, you know, block size war where he created, like, 10 million dusty UTXOs and he tried to, you know, flood the network with transactions and create the millions of UTXOs.

497
00:37:25,600 --> 00:37:30,600
But, again, this is just some lunatic guy with his own agenda, right?

498
00:37:30,600 --> 00:37:42,600
Like, I mean, if you have the government of China or, you know, the government of some other dictatorship or whatever, Nigeria, you know, the government of Nigeria could be attacking Bitcoin for pennies, right?

499
00:37:42,600 --> 00:37:50,600
Once again, regarding this thing about roll-ups versus drivechains, it sounds like you're saying that you kind of prefer the roll-ups in general, but...

500
00:37:51,600 --> 00:37:55,600
I think it's... We don't need to choose. We should have them both, right?

501
00:37:55,600 --> 00:38:09,600
And drivechains are easier to deploy simply because there's no need to obsess over minute details of what proof system, you know, is going to be supported by roll-ups, right?

502
00:38:09,600 --> 00:38:12,600
Because drivechains just do the counting of the number of...

503
00:38:12,600 --> 00:38:18,600
You think that we would get roll-ups on a drivechain and that would facilitate roll-ups coming faster to layer one?

504
00:38:19,600 --> 00:38:24,600
I don't know. I can tell you that roll-ups are more secure than drivechains.

505
00:38:24,600 --> 00:38:27,600
And that's why, like, in the Ethereum world, they've considered everything.

506
00:38:27,600 --> 00:38:34,600
They considered sidechains, drivechains, plasma, you know, state channels and 50 other scaling things.

507
00:38:34,600 --> 00:38:42,600
In the end, they settled on ZK, AVM roll-ups and, you know, everything else will be thrown away for a good reason, right?

508
00:38:42,600 --> 00:38:45,600
Because they do have sort of unconstrained innovation going on there.

509
00:38:45,600 --> 00:38:52,600
They have a lot of funding from VCs and all other scaling techniques and technologies are falling by the wayside.

510
00:38:52,600 --> 00:39:00,600
And they're just going full steam towards the ZK, AVM roll-ups, which, you know, is the right thing for them to do.

511
00:39:01,600 --> 00:39:13,600
And the thing is that because they can do hard forks and they have Pope Vitalik that can basically have final say on what goes in or not into Ethereum, right?

512
00:39:13,600 --> 00:39:20,600
So, he basically, the Ethereum foundation and Pope Vitalik, you have a final say and they can just say, well, these EIPs go into the next release.

513
00:39:20,600 --> 00:39:24,600
And, you know, it's like five hard forks every six months, right?

514
00:39:25,600 --> 00:39:27,600
That's why Ethereum can never be money, right?

515
00:39:27,600 --> 00:39:31,600
But Ethereum is like a big tech stock, which has a lot of income and fees.

516
00:39:31,600 --> 00:39:38,600
So, the fees that Ethereum is accruing, they're like a stream of income accruing to like a Google stock, right?

517
00:39:38,600 --> 00:39:40,600
But like a big tech stock.

518
00:39:40,600 --> 00:39:47,600
So, you know, Ethereum has value because it's a utility token with incoming fees, right?

519
00:39:47,600 --> 00:39:49,600
It doesn't need to be money.

520
00:39:49,600 --> 00:40:03,600
But like again, for example, if one Bitcoin startup used, you know, $10 million of its budget to create a fee crisis, you know, that might actually be an easier way to do a soft fork.

521
00:40:04,272 --> 00:40:11,952
Then, you know, advocating endlessly on Twitter and going against the flow of this ossification mob,

522
00:40:12,592 --> 00:40:20,352
you know, that's like fear mongering and engagement farming on Twitter, you know,

523
00:40:21,472 --> 00:40:26,032
by claiming that everything is an attack on Bitcoin, you know, it's all a CIA conspiracy.

524
00:40:26,751 --> 00:40:31,392
You know, and the Ordinals thing is actually kind of a double-edged sword, right? Like on one hand,

525
00:40:32,032 --> 00:40:37,792
it broke the taboo against using Bitcoin for non-monetary uses. But on the other hand,

526
00:40:38,672 --> 00:40:44,512
it was like an outcome of the Staproot soft fork. So, now there's this kind of like this

527
00:40:44,512 --> 00:40:50,032
consensus, quote-unquote, that, you know, any changes can create unforeseen consequences like

528
00:40:50,032 --> 00:40:57,152
Ordinals. So, we should just do no changes whatsoever to Bitcoin, right? But that position

529
00:40:57,152 --> 00:41:02,751
becomes unsustainable once there's a real crisis, like once there's a pleb uprising or once

530
00:41:02,751 --> 00:41:09,952
Ethereum passes Bitcoin, hopefully temporarily, market cap, then there's like a real crisis,

531
00:41:09,952 --> 00:41:13,471
right? Then you have to do something. You know, doing nothing is no longer an option.

532
00:41:15,791 --> 00:41:21,072
I see. Well, I think you're right that the way we think about culture is that things are

533
00:41:21,072 --> 00:41:26,272
deliberative in the long run, but in fact, things happen quickly and then all of a sudden there's

534
00:41:26,272 --> 00:41:33,871
like a sort of tumultuous moment and then a new direction is chosen by the high priests.

535
00:41:35,312 --> 00:41:41,871
Well, it's not that Bitcoin culture is like that. It's just that everybody's short attention span,

536
00:41:42,432 --> 00:41:49,312
it's basically a mob looking for entertainment, right? So, it's not like, you know, five people

537
00:41:49,312 --> 00:41:55,471
in the world understood what actually Taproot soft fork was doing, right? And none of them

538
00:41:55,471 --> 00:42:02,511
understood that they just enabled ordinals, for example, right? And Taproot soft fork was more

539
00:42:02,511 --> 00:42:10,432
complicated than the roll-ups and the drivechains put together times 10, right? But by the amount of

540
00:42:10,432 --> 00:42:16,832
new code that you had to add to Bitcoin, right? Taproot was like incredibly Baroque and complicated

541
00:42:16,832 --> 00:42:24,991
and SegWit was even more complicated and Baroque. Drivechains are like 10 lines of code or whatever.

542
00:42:25,071 --> 00:42:33,952
I've heard something different said. Gabriel Keltman, I think his last name is Keltman

543
00:42:34,591 --> 00:42:39,871
or Kerman. He was the co-founder of Rootstock. He spoke in here a few weeks ago and he said that

544
00:42:39,871 --> 00:42:44,991
drivechains code is substantial in size and that he thinks that could be an impediment to

545
00:42:44,991 --> 00:42:49,151
its adoption in the future. He said he's an advocate for it, but he thinks that's one

546
00:42:49,952 --> 00:42:54,591
detraction that it would be ideal if drivechain could have less code.

547
00:42:56,351 --> 00:43:01,791
Well, you know, like I suspect that somebody will figure out a way to enable drivechains using

548
00:43:02,431 --> 00:43:09,871
possibly upcoming OP_VAULT, you know, opcodes or some other covenant opcode, right? Like,

549
00:43:10,752 --> 00:43:15,711
you don't need to do the drivechains the way Paul does them in his BIP300. You can get them

550
00:43:15,711 --> 00:43:20,032
permissionlessly, you know, like if there is covenants, then you can get drivechains out of

551
00:43:20,032 --> 00:43:25,071
that, for example. They're going to be slightly less efficient. There'll be another 10 bytes

552
00:43:25,071 --> 00:43:30,672
or whatever used in each block or something like that or one extra transaction, but it doesn't

553
00:43:31,312 --> 00:43:38,112
matter much. I mean, conceptually, a drivechain is just a counting device, right? Like when the

554
00:43:38,112 --> 00:43:43,952
count goes to 13,600 or whatever, then certain transaction becomes valid, right? Otherwise,

555
00:43:43,952 --> 00:43:50,832
it's not valid. So it's not much. It's not much code, and it could be very well isolated from

556
00:43:50,832 --> 00:43:56,431
the other code. That's not the case for Taproot or SegWit. That was like all in the middle of

557
00:43:56,431 --> 00:44:02,272
the existing code with, you know, script interpreter, and, you know, there was just like huge

558
00:44:02,272 --> 00:44:06,991
amounts of code for both of those, and it wasn't code that's isolated from the rest of the code,

559
00:44:07,791 --> 00:44:11,392
right? I think drivechains could be, even if drivechains are 100 lines of code,

560
00:44:12,112 --> 00:44:18,032
you could isolate them into like separate functions that do not depend or

561
00:44:18,032 --> 00:44:23,712
neither are depended upon by the rest of the code. You know, it would be a fairly safe change.

562
00:44:25,712 --> 00:44:30,432
Understood. Well, you've mentioned a whole bunch of different interesting topics.

563
00:44:30,432 --> 00:44:38,911
So they include drivechains and rollups and how we can, like both of them, and which one

564
00:44:38,911 --> 00:44:45,392
could be available sooner, and also how a crisis in Bitcoin, such as high fees, not low fees,

565
00:44:46,031 --> 00:44:56,351
or either, would perhaps lead to interest in them. So I guess one major difference is that you see

566
00:44:56,351 --> 00:45:05,311
high fees as possible, whereas... I see them as possible and even likely soon,

567
00:45:05,311 --> 00:45:11,071
fairly soon, like within a year maybe. For example, in this boom whole market that has started,

568
00:45:11,071 --> 00:45:15,311
right, like you can have high fees for months. People have said there'll be high fees on Bitcoin

569
00:45:15,311 --> 00:45:20,511
for a long time. I suspect that Paul Sztorc will be vindicated, which may be a bias of mine, which

570
00:45:20,511 --> 00:45:26,672
is why I went to work for him, but I suspect he'll be vindicated that people think that Bitcoin

571
00:45:26,672 --> 00:45:35,712
adoption and demand is like unidimensional, like people just demand Bitcoin, but actually

572
00:45:35,712 --> 00:45:43,552
the token and the block space, their demand curves are unmoored. They're separate.

573
00:45:43,552 --> 00:45:48,911
So we could have... Yes, I mean, I agree with you there. It's just that, you know, there is like a

574
00:45:48,911 --> 00:45:53,471
limited resource, which is number of payments per day. I like to think about block space as how many

575
00:45:53,471 --> 00:45:59,552
payments per day you can make. And as adoption, you know, doubles the number of users every three

576
00:45:59,552 --> 00:46:04,432
to four years, there will be this intersection point where there's enough adoption to fill up

577
00:46:04,432 --> 00:46:11,872
all payments every day and keep the mempool, you know, thousands of blocks to clear, right?

578
00:46:11,872 --> 00:46:17,631
Like, for example, recently we saw 300 blocks to clear mempool with Ordinals, and Ordinals are

579
00:46:18,112 --> 00:46:25,311
just terribly not user-friendly to create and manage and look at, and no wallets support them yet.

580
00:46:25,311 --> 00:46:31,552
But you can imagine that like one year from now when your, you know, iPhone wallets can display

581
00:46:31,552 --> 00:46:36,031
your Ordinals and you can move them around without worrying about, you know, whether you're going to

582
00:46:36,031 --> 00:46:43,231
send an Ordinal to a wrong address. And, you know, when this whole Ordinal ecosystem matures

583
00:46:44,191 --> 00:46:50,112
in Bitcoin, you might have these, you know, like there's evidence for luxury Ordinals, these apes,

584
00:46:50,112 --> 00:46:56,592
right, where creators are paying $300 in fees to create an ape on Bitcoin.

585
00:46:57,631 --> 00:47:02,112
There's, you know, in the recent week when there was this huge backlog of Ordinals,

586
00:47:02,672 --> 00:47:09,311
there was lots of transactions where these Bored8YachtClub creators were paying $300 in fees

587
00:47:09,952 --> 00:47:16,112
to put an image of a Bored ape on Bitcoin, right? So, that tells you that there is

588
00:47:16,832 --> 00:47:23,552
a market for luxury Ordinals, and it's just like, it just needs to have support in wallets.

589
00:47:24,351 --> 00:47:28,191
And there will be, and Ordinals are just, I mean, like, you think about the images,

590
00:47:28,191 --> 00:47:32,992
but the images are just the beginning. Like, I think Bitcoin Ordinals and inscriptions are a

591
00:47:32,992 --> 00:47:38,112
great place to store encrypted data, like, in a reliable way, right? Not just images,

592
00:47:38,112 --> 00:47:43,471
like, you can encrypt your will, your medical history, and store the encrypted copies in there

593
00:47:43,471 --> 00:47:51,952
with keys being offline, for example. You know, that's like, so there's only 200 billion gigabytes

594
00:47:51,952 --> 00:47:58,351
per year of block space, right? And I think there's going to be high fees, and fairly soon,

595
00:47:58,351 --> 00:48:04,592
like, I anticipate them in this ongoing bull market that we're in, right? So, maybe a year

596
00:48:04,592 --> 00:48:10,191
from now, maybe 18 months from now, there will be a period of months when the fees are high and

597
00:48:10,191 --> 00:48:19,631
staying high. Interesting. Well, we haven't had that yet, but maybe we will. In the past,

598
00:48:21,231 --> 00:48:26,672
that same thing happened on Ethereum, and they were desperate to scale, and they created side

599
00:48:26,672 --> 00:48:32,432
chains, like Original Polygon, for example, was a sidechain, and they created all kinds of,

600
00:48:32,992 --> 00:48:39,071
you know, 50 different startups got funded to scale Ethereum, and now it's scaling, right? Now

601
00:48:39,071 --> 00:48:46,111
you have this l2b.com site that shows that, you know, they have 4x scaling of layer 2s, processing

602
00:48:46,111 --> 00:48:52,352
4x the transactions of Ethereum itself, and that ratio is just going up and up and up, right? That

603
00:48:52,352 --> 00:48:58,191
will be eventually, like, a thousand x scaling, or a million x scaling, where Ethereum L2s will

604
00:48:58,191 --> 00:49:04,032
process a million more transactions than Ethereum itself, you know? But they only did it when they

605
00:49:04,032 --> 00:49:09,952
had to, right? That's my point, is that when they had a fee crisis, which priced out everybody except,

606
00:49:10,751 --> 00:49:16,671
you know, hedge funds and DoQuans, you know, in Wales, those would be the only people who

607
00:49:16,671 --> 00:49:22,111
could pay $100 fees on Ethereum. I see. So, your main view is that, I understand correctly,

608
00:49:22,111 --> 00:49:26,111
that there'll be high fees perhaps, and when those high fees come, people will say,

609
00:49:26,111 --> 00:49:31,311
how do we scale Bitcoin and give the masses something to use that has lower fees? And you

610
00:49:31,311 --> 00:49:38,592
think that the use of Lightning will, at that time in the future, not be chosen in popular discourse

611
00:49:38,592 --> 00:49:47,152
as the path forward, primarily? Well, Lightning will not lower the fees, right? Because Lightning,

612
00:49:47,152 --> 00:49:52,912
you know, Lightning will not help with Ordinal-induced fees. Why not?

613
00:49:52,912 --> 00:49:57,792
Like, if someone is using Lightning, aren't they getting lower fees than if they're using Layer 1?

614
00:49:59,712 --> 00:50:04,912
No, because you cannot put Ordinals in, you know, those board 8 pictures will not go on Lightning,

615
00:50:04,912 --> 00:50:08,592
they will stay on Chain, for example, right? And encrypted data will go on Chain, too.

616
00:50:08,592 --> 00:50:10,431
But nothing, but the...

617
00:50:12,991 --> 00:50:15,311
That stuff cannot go on Lightning.

618
00:50:15,311 --> 00:50:20,111
I thought you were saying that the crisis will be, how will the people, you know, who,

619
00:50:20,111 --> 00:50:26,272
at the Global South, as you said, would use Bitcoin, couldn't the discourse be that

620
00:50:26,272 --> 00:50:28,832
they'll use Lightning when fees are high on Layer 1?

621
00:50:28,832 --> 00:50:33,871
Well, I mean, they will rationalize it at first by saying, just use Lightning, right? But that's

622
00:50:33,871 --> 00:50:39,551
just like saying, it's just like, you know, Luke Jr. saying, just use, you know, hand-assembled

623
00:50:39,551 --> 00:50:45,392
hardware with, like, crazy security protocols to stash your Bitcoin offline. You know, he was doing

624
00:50:45,392 --> 00:50:53,712
that and he lost all of his Bitcoin, right? So, basically, the point is that the mantra of just

625
00:50:53,712 --> 00:50:58,991
use Lightning when the fees are high and staying high will not work simply because, like, Lightning

626
00:50:58,991 --> 00:51:03,232
gets disabled if fees are high. Because most Lightning channels, you know, the penalty

627
00:51:03,232 --> 00:51:08,592
transaction needs to be cheap. And, you know, opening new channels and closing channels,

628
00:51:08,592 --> 00:51:13,792
all these transactions need to be cheap, right? And if the fees are $10, $20 and staying there,

629
00:51:13,792 --> 00:51:15,631
then Lightning becomes disabled, too.

630
00:51:16,352 --> 00:51:16,592
Okay.

631
00:51:17,551 --> 00:51:20,751
I mean, at least retail Lightning, right? Not institutional Lightning.

632
00:51:24,191 --> 00:51:28,592
All right. Well, it's very interesting that this fee topic, I think, gets a lot of attention,

633
00:51:28,592 --> 00:51:34,032
and it should. Will fees be too high or will they be too low? It's very interesting to reflect on

634
00:51:34,032 --> 00:51:40,751
how either of those creates motivation for scaling Bitcoin with drivechain and roll-ups.

635
00:51:41,392 --> 00:51:47,232
Actually, you know, my real motivation for scaling Bitcoin is not the fees because I'm

636
00:51:47,232 --> 00:51:52,751
a fee optimist. I think fees will go high anyway. But my motivation is, you know,

637
00:51:52,751 --> 00:51:59,472
permissionless innovation, like you said. And specifically, having trust minimized or trust

638
00:51:59,472 --> 00:52:07,232
less Bitcoin as collateral and having US dollar stable coins based on that Bitcoin as collateral.

639
00:52:07,952 --> 00:52:13,472
Because, you know, however much Global South wants Lightning and Bitcoin, what they actually want

640
00:52:14,191 --> 00:52:20,832
is a decentralized US dollar. They want it a thousand times more, right? So there's clear

641
00:52:20,832 --> 00:52:26,032
demand for a truly decentralized US dollar. But in order for that to exist, it needs to use Bitcoin,

642
00:52:26,032 --> 00:52:30,111
which is the only decentralized asset as collateral. And that cannot happen until you

643
00:52:30,111 --> 00:52:35,712
either have drivechains or roll-ups. And drivechains are not as secure as roll-ups for this

644
00:52:35,712 --> 00:52:40,511
kind of, let's create 10 trillion dollars in decentralized US dollar stable coins, right?

645
00:52:40,511 --> 00:52:45,631
Because drivechains are not, you know, they're not cryptographically secure,

646
00:52:45,631 --> 00:52:54,671
they're just crypto-economically secure. Right. Crypto-economically secure.

647
00:52:57,551 --> 00:53:04,511
In other words, it's in the miner's interest not to mess with a sidechain that produces a lot of

648
00:53:04,511 --> 00:53:10,511
fees. Right. Just like it's in the miner's interest not to attack Bitcoin itself with double

649
00:53:10,511 --> 00:53:16,592
spending, for example. But it's not the same level of security as the miners being unable to steal

650
00:53:16,592 --> 00:53:21,392
your Bitcoin because they don't know the private key, right? Which is the roll-ups, they have this

651
00:53:21,392 --> 00:53:27,071
that level of security, right? They have the security of the bridge that's as secure as layer

652
00:53:27,071 --> 00:53:30,991
one Bitcoin. Have you read Paul's rewritten version of the FAQ?

653
00:53:34,111 --> 00:53:38,191
No, I glanced at it, but I didn't really read it. Well, there's a section on roll-ups,

654
00:53:38,191 --> 00:53:45,792
so that might interest you. Okay. What does he say? I had an argument with him about roll-ups,

655
00:53:45,792 --> 00:53:51,311
and he gives me these game-theoretic reasons why drivechains are better. Like, for example,

656
00:53:51,472 --> 00:53:58,912
drive miners should be able to kill a drivechain. And, you know, maybe theoretically that's true,

657
00:53:58,912 --> 00:54:07,392
but in practice, I don't know if it's a good thing that miners can kill a drivechain or,

658
00:54:07,392 --> 00:54:12,592
I mean, like, miners cannot kill a roll-up. So there will be a lot of stale roll-ups that

659
00:54:12,592 --> 00:54:18,111
don't pay much fees, but they can't die. You know, just like there's a lot of shitcoins that can't

660
00:54:18,272 --> 00:54:32,272
either. So for anyone listening who's interested, we're talking about drivechain.info. If you go

661
00:54:32,272 --> 00:54:43,712
to drivechain.info and click on FAQ, you'll see Paul Sztorc's article, his FAQ on drivechain,

662
00:54:43,712 --> 00:54:49,792
including a discussion of roll-ups, and he compares and contrasts roll-ups to drivechains.

663
00:54:59,232 --> 00:55:05,631
Alex, one of Paul's views on this security budget topic is that, as I was trying to say earlier,

664
00:55:07,232 --> 00:55:10,751
it's not a total certainty, but he thinks it's very likely that we won't see

665
00:55:10,751 --> 00:55:17,871
sustained high fees because he thinks that the way blockchains tend to work is that

666
00:55:19,631 --> 00:55:28,032
the token of a blockchain, which can be scarce, like Bitcoin, that is a certain

667
00:55:28,032 --> 00:55:34,751
kind of economic good called a proportional good, where the creation of more of it

668
00:55:35,712 --> 00:55:42,511
and increase in its supply doesn't produce value for anyone. The whole point of Bitcoin is that

669
00:55:42,511 --> 00:55:50,352
it's limited in supply. If we were to double the supply and airdrop everyone 100% of what they

670
00:55:50,352 --> 00:55:56,511
already have, nobody would have gotten richer. But the nature of Bitcoin's block space is that

671
00:55:56,511 --> 00:56:03,952
people do want more of it to bring down its cost, but there's a trade-off there with decentralization.

672
00:56:04,832 --> 00:56:11,631
The drivechain solution is to make lower levels of decentralization available on an opt-in basis,

673
00:56:11,631 --> 00:56:18,511
so people can go into a sidechain, which has larger blocks, get lower fees, but it's opt-in.

674
00:56:19,631 --> 00:56:26,272
His view is kind of harmonious a little bit with the big blocker view, which is that the big

675
00:56:26,272 --> 00:56:32,352
blockers think nobody wants to pay high fees, you shouldn't rely on high fees,

676
00:56:33,311 --> 00:56:39,311
you should try to get a ton of transactions all at a low fee, and the total will be high.

677
00:56:40,111 --> 00:56:46,352
So what drivechain aims to do is have a bunch of sidechains, which are large block, and the

678
00:56:46,352 --> 00:56:51,232
whole world will be using those. And every time someone sends a transaction, it'll cost them like

679
00:56:51,232 --> 00:56:58,352
a penny or less. But if you do tons of transactions, it'll add up to a large number. So that's the way

680
00:56:58,431 --> 00:57:03,392
you get high fees on Layer 1, is when Layer 1 is like the settlement layer for all of the

681
00:57:04,511 --> 00:57:11,791
compacted fees from the sidechains. Whereas your view is that because Layer 1 is special,

682
00:57:11,791 --> 00:57:15,952
people will want to inscribe on it, and there'll be enough luxury ordinals

683
00:57:17,391 --> 00:57:22,911
that people will want to pay a lot for each one on Layer 1.

684
00:57:22,992 --> 00:57:31,551
Well, I mean, I agree with Paul. Okay, so like, if you guys, Bitcoiners stopped reading the echo

685
00:57:31,551 --> 00:57:36,512
chamber of the religious Bitcoin Twitter, and they looked at what's going on in the Ethereum

686
00:57:36,512 --> 00:57:41,632
world occasionally, they would see that what's happening there is that they're about to create

687
00:57:41,632 --> 00:57:47,071
like unlimited amount of block space altogether, just like, they're gonna create like terabytes

688
00:57:47,472 --> 00:57:54,512
per second of block space, you know. So basically, you know, there's these proposals on Ethereum,

689
00:57:54,512 --> 00:58:01,712
like this eigenlayer data availability thing, which basically simply uses Ethereum as a way

690
00:58:01,712 --> 00:58:09,151
to stake Ether, and have that stake Ether protect other networks that you would run other nodes for.

691
00:58:09,151 --> 00:58:15,232
But some of these networks would just provide like a highly secure crypto network,

692
00:58:15,472 --> 00:58:19,791
like a highly secure, crypto economically secure, because people are staking Ether,

693
00:58:20,431 --> 00:58:25,712
a layer where you could store not just megabytes, you know, megabytes as blocks,

694
00:58:25,712 --> 00:58:29,952
terabytes as blocks. I mean, they're not even blocks, they're just basically just unlimited

695
00:58:30,911 --> 00:58:37,311
block space suppliers, right? So and then people would put movies in there, and people put,

696
00:58:37,311 --> 00:58:44,271
you know, their whole file systems in there and everything, right? So that, so they are

697
00:58:44,271 --> 00:58:49,551
kind of manifesting the big blocker vision. But it's not just about payments, it's about,

698
00:58:49,551 --> 00:58:54,671
you know, this, you know, they're building this world computer, right? They were actually

699
00:58:54,671 --> 00:58:58,752
serious about it when they, I mean, it was all bullshit when they talked about it five years ago.

700
00:58:59,952 --> 00:59:04,832
But because there's, you know, hundreds of these Ethereum well funded startups, and they're all,

701
00:59:05,712 --> 00:59:12,512
you know, coordinating on using Ether as an asset, they are actually building all this crazy stuff.

702
00:59:12,512 --> 00:59:17,791
And it's working, right? Like, you know, Ethereum switched the proof of stake in a few weeks,

703
00:59:17,791 --> 00:59:23,472
they will enable withdrawal, there will be a lot more staking of Ether, because withdrawals are

704
00:59:23,472 --> 00:59:29,071
now credible. And you can now stake and unstake and, you know, the price of Ether will skyrocket

705
00:59:29,071 --> 00:59:33,712
in a few months, probably, and there will be a flippening. So I don't know what will happen first,

706
00:59:33,712 --> 00:59:39,232
the flippening, or the pleb uprising in Bitcoin because of permanently high fees. But one of those

707
00:59:39,232 --> 00:59:45,551
two crises is guaranteed to happen if nothing is done. That's for sure. Like, I'm pretty convinced

708
00:59:45,551 --> 00:59:50,271
of that. How could there be a high fees and flippening? If I mean, you weren't saying there

709
00:59:50,271 --> 00:59:56,271
would be both, but suppose there were, I think it'd be unlikely because wouldn't wouldn't Ethereum's

710
00:59:56,271 --> 01:00:03,151
high fees be kind of a sign of its utilization, same for Bitcoin? No, no, no. Ethereum fees have

711
01:00:03,151 --> 01:00:08,671
been moderated now, right? Like Ethereum is overflowing into these L2s.

712
01:00:09,160 --> 01:00:15,880
And it will eventually overflow into like, a million times larger decentralized systems. So

713
01:00:15,880 --> 01:00:20,760
the whole sort of L1 Ethereum will just remain as a staking mechanism for Ether,

714
01:00:21,640 --> 01:00:25,960
right? It will not even like provide data availability, it will not even provide block

715
01:00:25,960 --> 01:00:30,520
space in the future, there will be all these other networks that just use Ether and they stake on

716
01:00:30,520 --> 01:00:36,680
Ethereum. And people who want to secure those networks will stake on Ethereum. And they will

717
01:00:36,680 --> 01:00:41,320
be slashed if the nodes that they're running don't perform. So there will be this kind of sort

718
01:00:41,320 --> 01:00:47,160
of unbounded sort of reuse of trust, right? So basically, you have this trust on Ethereum

719
01:00:47,160 --> 01:00:53,400
that's like currently $20 billion large, but it will be like, you know, if 50% of Ether gets

720
01:00:53,400 --> 01:00:58,839
staked, it might get to like $100 billion large. And then if Ether market cap goes up 10x,

721
01:00:58,839 --> 01:01:03,800
there'll be this huge amount of crypto economic trust that all these other networks will reuse.

722
01:01:03,800 --> 01:01:08,760
But it doesn't mean that the fees on Ethereum itself will go high, right? It basically what

723
01:01:08,760 --> 01:01:14,280
we've seen there is that once the fees go high enough, there's a crisis. And then the fee pressure

724
01:01:14,280 --> 01:01:21,240
overflows into these L2s. And then you know, it will overflow into L3s or will overflow into other

725
01:01:21,240 --> 01:01:27,559
L2s that provide data availability and other services. So there's this sort of like a cascading

726
01:01:27,559 --> 01:01:33,559
fountain effect, right? Where there's like enough fee pressure just overflows, overflows, overflows,

727
01:01:33,559 --> 01:01:40,439
but in the end, you know, if you have Ethereum and Metamask, you'll be able to store your movie

728
01:01:40,439 --> 01:01:44,280
libraries in there somewhere in the cloud. And, you know, like people will be uploading their

729
01:01:44,280 --> 01:01:50,680
file systems and, you know, it'll be like a competitor to Amazon eventually.

730
01:01:50,680 --> 01:01:55,559
I have a quick question. Since you were such an expert on both Bitcoin and Ethereum, Alex,

731
01:01:56,360 --> 01:02:01,720
to what extent would you say that the strategy of Ethereum is similar to drivechain in that

732
01:02:02,519 --> 01:02:07,720
there is an attempt to have the base layer token and the base layer block space

733
01:02:11,080 --> 01:02:15,400
increase in proportion to the demand on the higher layers?

734
01:02:19,559 --> 01:02:24,759
For example, just as an elaboration, suppose you had a merged mind altcoin,

735
01:02:25,399 --> 01:02:33,000
that is merged mind with Bitcoin. So demand for the altcoin token would not increase the value

736
01:02:33,000 --> 01:02:41,880
of Bitcoin, but the transaction fees on the merged mind altcoin would pay money to Bitcoin miners.

737
01:02:42,679 --> 01:02:48,599
Now, okay. And see, this is also, this is just one more difference between Bitcoin and Ethereum.

738
01:02:48,599 --> 01:02:55,559
One more elaboration. So the reason why I like drivechain is that unlike merged mind altcoins,

739
01:02:55,559 --> 01:03:00,360
which is what Satoshi had in mind with BitDNS, unlike merged mind altcoins, where in merged mind

740
01:03:00,360 --> 01:03:05,880
altcoins, the transaction fees are paid to Bitcoin miners, but the value of the altcoin doesn't cause

741
01:03:05,880 --> 01:03:13,160
value accrual to Bitcoin. With a drivechain, the native token is a synthetic Bitcoin. All demand

742
01:03:13,160 --> 01:03:19,959
for that native synthetic Bitcoin on the drivechain causes value accrual to Bitcoin layer one.

743
01:03:19,959 --> 01:03:26,119
So it's more harmonious with Bitcoin because in a drivechain, Bitcoin's token and block space

744
01:03:26,119 --> 01:03:32,759
appreciate when... Henry, I totally get what you're saying, but I got bad news for you because

745
01:03:32,759 --> 01:03:38,440
Ethereum is even more harmonious. And the way it's more harmonious is as follows. Like you said,

746
01:03:38,440 --> 01:03:44,759
let's say you have 50 merged mind drivechains and they all pay fees and these fees go to Bitcoin

747
01:03:44,759 --> 01:03:50,759
miners, right? The Bitcoin mining complex will become big and rich and Bitcoin will become

748
01:03:50,759 --> 01:03:57,080
secure. But in the world of Ethereum, a fraction of these fees, a large fraction of these fees

749
01:03:57,080 --> 01:04:03,559
is going to be burned. So it gets paid to the existing Ethereum holders. You can think of this

750
01:04:03,880 --> 01:04:10,440
as essentially like a corporation buying back its stock, right? So the Ethereum network

751
01:04:10,440 --> 01:04:16,199
is buying back fractions of its own shares every time the fees go above a certain level. They call

752
01:04:16,199 --> 01:04:23,720
this the burn barrier, like 16 Guay per level of fees. Is that more harmonious? I think that the

753
01:04:23,720 --> 01:04:29,640
burning of the fees and the issuance, the whole point of that is to have a lower variance of

754
01:04:29,640 --> 01:04:37,960
block rewards for the miners or stakers. Because when you have their security budget paid by

755
01:04:39,080 --> 01:04:44,039
perpetual issuance, tail issuance... But they don't have perpetual issuance, right?

756
01:04:44,039 --> 01:04:45,080
They do. They no longer have.

757
01:04:45,080 --> 01:04:47,319
They do. They're issuing.

758
01:04:49,159 --> 01:04:53,960
In theory, they are issuing some ETH, but more ETH is burned than they issue.

759
01:04:53,960 --> 01:04:58,199
There's a guarantee of that. Aren't they issuing forever? And the question is whether net issuance

760
01:04:58,199 --> 01:05:00,520
is positive or negative, but they're still issuing forever.

761
01:05:01,960 --> 01:05:06,759
Yes, but they are issuing a little bit. But like I said, they have this burn barrier thing,

762
01:05:06,759 --> 01:05:12,599
which is that if the Ethereum fee pressure moves the price of block space above 16 Guay,

763
01:05:12,599 --> 01:05:18,360
and by the way, it hasn't been below that for months. So if the fee pressure moves the price

764
01:05:18,360 --> 01:05:24,840
of block space above the 16 Guay, then there's more burn than issuance.

765
01:05:25,560 --> 01:05:25,800
Right.

766
01:05:26,680 --> 01:05:32,120
So basically, even in this bear market, you see Ethereum is so useful and powerful that

767
01:05:32,120 --> 01:05:36,920
even in the bear market, all the NFTs, all of those DeFi stuff that's happening

768
01:05:37,479 --> 01:05:42,759
is actually buying back Ethereum in the bear market. Now in the bull market, they will burn

769
01:05:42,759 --> 01:05:44,840
10 or 20% of Ethereum in the next bull market.

770
01:05:44,840 --> 01:05:48,680
I understand the basics, but I think that what they're doing there is simply

771
01:05:49,479 --> 01:05:57,080
having the security budget paid by transactors to a greater extent than holders.

772
01:05:58,279 --> 01:06:03,479
Yes, but the difference is that the payments go to holders of Ethereum as opposed to miners

773
01:06:03,479 --> 01:06:09,800
and Bitcoin. If you're a holder of Bitcoin, the fact that miners have paid huge fees

774
01:06:09,800 --> 01:06:14,439
doesn't really benefit you except that you can say that security budget is high

775
01:06:14,439 --> 01:06:17,640
and maybe Nigeria can no longer afford to attack Bitcoin.

776
01:06:19,080 --> 01:06:23,319
Whereas in the case of Ethereum, the security budget is essentially

777
01:06:25,159 --> 01:06:29,560
bought back as a stock by the company, reducing the supply of Ether.

778
01:06:30,199 --> 01:06:34,680
Now, what they don't anticipate is that this reduction in supply of Ether is going to have

779
01:06:34,680 --> 01:06:39,319
some unanticipated effects. For example, Ethereum might end up with a lot more volatility

780
01:06:39,960 --> 01:06:46,279
in the future because as its supply decreases, there will be these crazy booms and busts

781
01:06:46,279 --> 01:06:52,279
in price of Ether, and Ethereum volatility might end up staying much higher forever than

782
01:06:52,279 --> 01:06:56,439
the volatility of Bitcoin, and that makes Ethereum maybe bad collateral.

783
01:06:56,439 --> 01:06:58,520
So there's all these unanticipated effects.

784
01:07:01,719 --> 01:07:03,719
There is an interesting point I can make there.

785
01:07:05,479 --> 01:07:12,840
One interesting comparison of gold to Bitcoin is that gold was monetized in the past possibly

786
01:07:12,840 --> 01:07:20,759
because it had a stable purchasing power, because it has a price responsive issuance.

787
01:07:21,960 --> 01:07:26,680
In other words, when the value of gold goes up, there's more mining and that brings down

788
01:07:26,680 --> 01:07:34,120
the value. So gold has a elastic supply. In other words, it has, you could say,

789
01:07:34,120 --> 01:07:40,199
demand responsive supply, whereas Bitcoin, because of difficulty adjustment and hard cap,

790
01:07:40,199 --> 01:07:46,599
there is no elasticity, almost none, and therefore Bitcoin will be, in the view of

791
01:07:46,599 --> 01:07:51,960
the Austrian economist like Lawrence White at George Mason, there's going to be higher volatility

792
01:07:52,599 --> 01:07:56,920
for Bitcoin if it becomes money than gold if gold were to become money again.

793
01:07:57,479 --> 01:08:05,960
And your point is that because of the issuance of Ether being at times highly contractionary,

794
01:08:05,960 --> 01:08:11,080
like you could have high growing demand with falling supply, it could be very volatile.

795
01:08:11,800 --> 01:08:18,520
And I agree with it. What they really need is an oracle that can somehow

796
01:08:19,159 --> 01:08:22,360
stabilize and regulate the issuance in accordance with the...

797
01:08:22,999 --> 01:08:29,400
Well, no, but they don't need that because as soon as you have... I'm not saying Ethereum

798
01:08:29,400 --> 01:08:34,039
is decentralized. It's not. It's essentially like a religion run by Pope Vitalik and the

799
01:08:34,039 --> 01:08:39,960
Ethereum Foundation is like the Vatican. But basically, it's not money and it's not trying

800
01:08:39,960 --> 01:08:45,399
to be money. It's essentially a big tech stock, right? But as long as they have revenues accruing

801
01:08:45,399 --> 01:08:50,920
to the shares, the share price will rise and the company, quote unquote, is the Ethereum network,

802
01:08:51,800 --> 01:08:56,360
is buying back shares all the time. So, you know, you might have the situation where

803
01:08:56,360 --> 01:09:01,479
price of Ether goes really high, but the market cap doesn't go that high because the 10 or 20

804
01:09:01,479 --> 01:09:07,000
million ETH were burnt in the next bull market, for example. That's also possible. But my point

805
01:09:07,000 --> 01:09:13,719
is that even though you have this potentially very volatile asset on the network like Ethereum

806
01:09:14,440 --> 01:09:19,240
or Bitcoin, both of them will have terminal volatility that's probably too high to be

807
01:09:19,240 --> 01:09:24,440
like a unit of account. But that's OK, right? As long as Bitcoin can be used as a reserve asset.

808
01:09:24,440 --> 01:09:28,839
And now we're back to what I really want, which is ability to use Bitcoin as collateral,

809
01:09:28,839 --> 01:09:35,159
because that's what a reserve asset is for. So all these dumb asses on Twitter that say

810
01:09:35,159 --> 01:09:39,079
it never changed Bitcoin again, they don't understand that the primary use of Bitcoin

811
01:09:39,079 --> 01:09:43,880
is a store of value. It's not a dead store of value like gold. It has to be used as collateral,

812
01:09:43,880 --> 01:09:49,959
right? So once you can use it as collateral in a trust minimized way where you don't trust anybody

813
01:09:49,959 --> 01:09:55,000
and it's secured by cryptography, which would require roll ups, or I will even settle for a

814
01:09:55,000 --> 01:10:02,599
drivechain early on. But once you have it as collateral, then you can build any kind of

815
01:10:02,599 --> 01:10:09,479
stable coin on it you want, where the volatility is transferred to the people who mint the stable

816
01:10:09,479 --> 01:10:15,399
coin and get yield, while the stable coin itself is very stable. It doesn't have to be stable

817
01:10:15,399 --> 01:10:19,959
relative to the dollar, although that's what the world wants. It could be stable relative to any

818
01:10:19,959 --> 01:10:24,519
metric, right? It could be stable relative to a commodity index or to CPI or whatever the hell

819
01:10:24,519 --> 01:10:30,599
you want. But the point is that you can then build other assets on top of it, you know,

820
01:10:30,599 --> 01:10:39,639
using programmatic smart contracts. Do you agree that when Ethereum is burning fees

821
01:10:42,120 --> 01:10:54,039
in order to make holders not bear the burden of inflation as the source of economic security,

822
01:10:55,159 --> 01:11:03,240
Ethereum is basically putting more burden on transactors than on holders? Whereas in Bitcoin,

823
01:11:04,279 --> 01:11:12,599
right now, with low fees and high inflation, there's a burden on holders from the inflation.

824
01:11:13,800 --> 01:11:18,440
So it's not more harmonious, like you said. It's simply a decision that burdens

825
01:11:19,159 --> 01:11:27,079
transactors more and encourages holding. Well, yes, but in other words,

826
01:11:28,120 --> 01:11:35,000
despite what some rabid ETH maxes will say, they're not trying to be a store of value money,

827
01:11:35,000 --> 01:11:41,079
right? They're trying to have a lot of fees and these fees go directly, they benefit the existing

828
01:11:41,079 --> 01:11:48,440
Ethereum holders. And there is no miners in the loop, right? They cut out, they fired the miners,

829
01:11:48,440 --> 01:11:52,760
right? So basically, I mean, Ethereum has other problems, like the rich will get richer in

830
01:11:52,760 --> 01:11:57,399
Ethereum, right? In Bitcoin, there was going to be distribution of Bitcoin into ever smaller,

831
01:11:57,399 --> 01:12:02,760
like, units and, you know, another hundred million plebs will come online in a year or two.

832
01:12:02,760 --> 01:12:07,560
But in Ethereum, it's a fiat system where the existing whales will become bigger.

833
01:12:07,560 --> 01:12:13,159
Wait, I have to ask you about that. I mean, surely you're familiar with Paul's argument

834
01:12:13,719 --> 01:12:19,959
that there is work being done in proof of stake. It's just obfuscated. So when you're

835
01:12:19,959 --> 01:12:26,279
staking capital, you're burning your liquidity. And therefore, yes, it's not like, yes,

836
01:12:27,240 --> 01:12:31,959
they solve that problem. They solve that problem with liquid staking derivatives. You see,

837
01:12:31,959 --> 01:12:39,800
there is like, liquid staking derivatives for a small fee will let you stake and be liquid for

838
01:12:39,800 --> 01:12:46,599
like 1% kickback to the liquid staking derivative. It's not true. In my opinion, in my understanding,

839
01:12:46,599 --> 01:12:53,079
the invention of liquid staking derivatives does not diminish at all Paul's argument that

840
01:12:54,039 --> 01:13:02,039
the value, here it is, this is how I say it, the value of the liquidity consumed in proof of stake

841
01:13:02,680 --> 01:13:07,399
is equal to the value of the energy and other inputs consumed in proof of work.

842
01:13:09,079 --> 01:13:12,039
I don't disagree with that. I just, I don't see how it's relevant.

843
01:13:12,039 --> 01:13:14,039
Because to the extent... I don't disagree with that.

844
01:13:14,039 --> 01:13:20,360
Okay. So then, therefore, to the extent that people who stake receive a token or a sandwich

845
01:13:20,360 --> 01:13:29,000
or anything, to the extent that that occurs, more people will pursue staking. And therefore,

846
01:13:29,000 --> 01:13:35,079
it'll bring down the real return of staking. And therefore, more capital will be locked up

847
01:13:35,639 --> 01:13:42,200
and get people get a smaller yield. So it's not the case that it's like, this is how I feel like

848
01:13:42,200 --> 01:13:48,680
some early Ethereum writers, like in 2018, 2019, were saying, like, proof of stake is free,

849
01:13:48,680 --> 01:13:55,159
because we fired the miners. And now we're just gonna like, we don't have any more costs.

850
01:13:55,159 --> 01:13:59,240
It's like, no, there is a cost. Tons of people are locking up tons of capital.

851
01:13:59,240 --> 01:14:01,560
There's a loss of liquidity. Every...

852
01:14:02,680 --> 01:14:04,599
Right. I agree. I mean, it's...

853
01:14:04,599 --> 01:14:09,159
When you say we fired the miners, we actually hired a whole group of equally large people, right?

854
01:14:11,240 --> 01:14:16,440
Well, right now, it's like only like 15% of ETH is staked, because precisely because you've been

855
01:14:16,440 --> 01:14:23,079
unable to unstake it. But once this unstaking goes live on April 12, there will be like another 30-40%

856
01:14:23,079 --> 01:14:28,920
of ETH will go in and get staked. And that will lower the yield. You're right. Like the yield

857
01:14:28,920 --> 01:14:34,839
might fall from like 7% down to 3% or 2%. But what I told you earlier, this eigenlayer stuff,

858
01:14:34,839 --> 01:14:39,639
which is that they want to rehypothecate Ethereum that's being staked. Essentially,

859
01:14:39,639 --> 01:14:45,079
you can now take your 32 ETH, and rather than just staking it to secure Ethereum,

860
01:14:45,079 --> 01:14:51,479
the same 32 ETH can be staked to secure 10 other networks. And there could be an NFT network with

861
01:14:51,479 --> 01:14:56,200
terabytes, you know, for video. There could be YouTube running there, right? Which you're securing

862
01:14:56,200 --> 01:15:02,200
by the same 32 ETH. Now, there is a downside to that, of course, which is you can now be slashed

863
01:15:02,200 --> 01:15:10,279
for two different kinds of violations, right? So if your validator doesn't obey the Ethereum

864
01:15:10,279 --> 01:15:16,760
protocol, you will be slashed by Ethereum. And if your other node running this YouTube network

865
01:15:16,760 --> 01:15:22,920
doesn't obey its rules, the same 32 ETH will be slashed by the other network's smart contracts

866
01:15:22,920 --> 01:15:27,639
on Ethereum. But my point is that they're basically reinventing traditional finance,

867
01:15:27,639 --> 01:15:33,800
right, where capital is rehypothecated. So you will have a situation where, you know,

868
01:15:33,800 --> 01:15:38,200
like in traditional finance, if somebody has, you know, $100 million worth of treasuries,

869
01:15:38,920 --> 01:15:44,680
they use that collateral 20 different times. You know, this is what Genesis was doing, for example,

870
01:15:44,680 --> 01:15:49,240
where you would give them Bitcoin as collateral, they would give you a USD loan, and then they

871
01:15:49,240 --> 01:15:54,200
would take that Bitcoin that you gave them, and then they would use it somewhere else as collateral.

872
01:15:54,920 --> 01:15:59,479
They would rehypothecate collateral. And so Ethereum is essentially reinventing modern finance.

873
01:16:00,279 --> 01:16:04,920
So there will be additional yield for those who want to take on more risk.

874
01:16:05,479 --> 01:16:11,240
This is what the eigenlayer stuff is doing in Ethereum. And of course, like, only five people

875
01:16:11,240 --> 01:16:16,360
in Bitcoin universe are aware of this stuff. Like Eric Wall is one of them, maybe I'm the second one,

876
01:16:16,360 --> 01:16:21,560
whatever, because it's like an echo chamber, and nobody's paying any attention to what's going on

877
01:16:21,560 --> 01:16:27,479
in the world, right? Yeah, I agree with you that there's an echo chamber phenomenon in Bitcoin,

878
01:16:27,479 --> 01:16:33,880
where it's not so malicious. It's like, if you start out with 1000 people, and then

879
01:16:34,920 --> 01:16:42,120
half of them want to do new cool stuff, the other half don't. And then almost everyone in the first

880
01:16:42,120 --> 01:16:48,360
half leaves and does Ethereum. And then you're left with like, that other half who doesn't like

881
01:16:48,360 --> 01:16:54,920
doing new stuff. Well, right. So it's an ongoing process where Vitalik left because he couldn't

882
01:16:54,920 --> 01:17:01,079
do what he wanted to do on Bitcoin, right? Vitalik left in 2014, precisely because of that.

883
01:17:01,560 --> 01:17:07,079
I remember Vitalik, I saw Vitalik when he was still writing articles for Bitcoin magazine in 2013.

884
01:17:07,079 --> 01:17:10,839
He didn't want to leave Bitcoin, he left it because he actually tried to implement this

885
01:17:10,839 --> 01:17:15,800
stuff on MasterCoin first. But then he realized that Bitcoin will not allow any changes. So he

886
01:17:15,800 --> 01:17:20,920
just went off and created his own altcoin, right, which is Turing complete, blah, blah, blah. And

887
01:17:20,920 --> 01:17:26,119
this stuff, this process has been continuing, right? There's like lots of college professors

888
01:17:26,119 --> 01:17:32,279
and smart college kids writing papers about cryptography. And they just bypass Bitcoin,

889
01:17:32,279 --> 01:17:38,840
because it's essentially become like boomer coin, right? It's like, it's like this conservative

890
01:17:38,840 --> 01:17:47,480
moralizing cult that, you know, that basically, you know, all these engagement farmers are

891
01:17:47,480 --> 01:17:53,159
agitating, you know, the mob to always scream that they're morally right about everything,

892
01:17:53,159 --> 01:17:54,600
and Bitcoin never needs to change.

893
01:17:58,680 --> 01:17:59,180
Understood.

894
01:18:02,840 --> 01:18:06,200
But listen, what you said about Ethereum, you know, having, you know,

895
01:18:06,200 --> 01:18:12,440
the proof of stake having a cost, that is true, but that's not, that doesn't change the big

896
01:18:12,440 --> 01:18:22,279
picture. Like, basically, there is simpler security model with proof of stake slashing,

897
01:18:22,279 --> 01:18:27,639
for example, that enables something like eigenlayer, you know, and I asked Paul,

898
01:18:27,639 --> 01:18:32,359
you know, a few months ago, I said, if you really want to use your, you know, your big brain to

899
01:18:32,359 --> 01:18:37,080
solve something, figure out how to do eigenlayer on Bitcoin with proof of work. I haven't heard

900
01:18:37,080 --> 01:18:44,119
from him since. But the point is that the fact that they can do slashing and impose a known

901
01:18:44,840 --> 01:18:50,440
calculable cost on you for misbehaving, you know, that that thing doesn't exist in proof of work,

902
01:18:50,440 --> 01:18:55,320
and proof of work, the closest you come to it is, you know, the miners have spent 100 million

903
01:18:55,320 --> 01:19:03,560
dollars building data centers, so there'll be some cost, but there is no sort of calculable

904
01:19:03,560 --> 01:19:11,159
penalty for the miner to misbehave in the same way, right, in proof of work systems like Bitcoin.

905
01:19:11,159 --> 01:19:24,680
Very cool. Alex, it's always great to have you here. And I always enjoy hearing your takes on

906
01:19:24,680 --> 01:19:32,759
Ethereum and Bitcoin. I think we completely agree, you and I, on almost everything. At least,

907
01:19:32,759 --> 01:19:36,200
you know, my ability to understand what you're saying is as far as I can agree.

908
01:19:37,080 --> 01:19:41,879
Well, we disagree on the fees, because you think the fees will stay low, and I think the fees will

909
01:19:41,879 --> 01:19:49,560
explode and stay high within a year or two, you know. Actually, didn't you say to me that it

910
01:19:49,560 --> 01:19:54,999
would be by mid-year this year? Well, I mean, there was a period, right, like first of all...

911
01:19:54,999 --> 01:19:58,039
Wait a minute, are you moving the goalposts a little bit?

912
01:19:59,800 --> 01:20:03,720
No, I mean, I still don't... Okay, so what's holding back the ordinals

913
01:20:04,279 --> 01:20:08,440
is that basically like 10 guys in the world can figure out how to do them right now. It's

914
01:20:08,440 --> 01:20:12,920
a lot of command line fussing with them, and no wallets support them yet.

915
01:20:13,177 --> 01:20:19,477
So maybe, you know, like what has happened already is I've been proven right about luxury ordinals, right?

916
01:20:19,477 --> 01:20:28,677
So we've seen hundreds of ape pictures paying $300 in Bitcoin fees to get into the next block, and they don't care,

917
01:20:28,677 --> 01:20:34,677
because these apes will be selling for, you know, $50,000 or $100,000 worth of Bitcoin later.

918
01:20:34,677 --> 01:20:40,677
So their creators don't mind paying $300 in fees, and that's real fee pressure, right?

919
01:20:40,677 --> 01:20:48,976
Because, you know, these are big 30-kilobyte, 50-kilobyte transactions, and they're paying 25 sats per V-byte, right,

920
01:20:48,976 --> 01:20:53,776
or 30 sats per V-byte to get in. They don't even bother waiting, right?

921
01:20:53,776 --> 01:21:02,377
And we have seen, you know, 300-block backlog in the mempool that, you know, hasn't existed like ever in Bitcoin history,

922
01:21:02,377 --> 01:21:07,577
maybe once during 2017 or something for a few hours or a few days.

923
01:21:07,577 --> 01:21:12,077
And now we see this ongoing backlog over 100 blocks to clear the mempool.

924
01:21:12,077 --> 01:21:15,377
So my thesis about luxury ordinals has already come true.

925
01:21:15,377 --> 01:21:22,577
It's just that their number is not high enough to permanently move the fees high enough.

926
01:21:22,577 --> 01:21:27,276
But when, you know, it's like how fast is the ordinal ecosystem developing?

927
01:21:27,276 --> 01:21:32,776
When will you see or will you be able to observe your ordinal collection in common Bitcoin wallets?

928
01:21:32,776 --> 01:21:40,977
That's the question. That's when the plebs will start, you know, spending $50 to buy pictures on Bitcoin.

929
01:21:40,977 --> 01:21:44,977
And, you know, then you'll see a real fee pressure.

930
01:21:44,977 --> 01:21:53,876
Understood. Well, where we agree is that a flippeting would be bullish for drivechain and rollups.

931
01:21:53,876 --> 01:21:59,776
And you also think that high fees might come. So we'll have to wait and see.

932
01:21:59,977 --> 01:22:02,477
One of those two crises will come.

933
01:22:02,477 --> 01:22:06,376
What about one thing we haven't discussed today is low fees.

934
01:22:06,376 --> 01:22:09,977
Is there a scenario of Bitcoin having fees that are too low?

935
01:22:09,977 --> 01:22:15,376
And how do you think about that? Do you think? Here's my question in a more detailed way.

936
01:22:15,376 --> 01:22:26,777
Do you think there would be a increase in non-catastrophic problems in mining, like double spending, fork withholding, selfish mining?

937
01:22:26,777 --> 01:22:33,376
Those kinds of, you know, things, malfeasance mining of different sorts, incentive non-compatible mining.

938
01:22:33,376 --> 01:22:39,277
Do you think that would increase in a non-catastrophic fashion if there are low fees in the future?

939
01:22:39,277 --> 01:22:56,076
Or do you think the only way that low fees manifest is in a catastrophic hostile attack by, you know, a terrorist or sovereign that wants to just make Bitcoin unusable permanently by reorging and mining in a way that centers everyone?

940
01:22:56,177 --> 01:23:01,177
Do you think that kind of catastrophe is the way that low fees would play out?

941
01:23:03,876 --> 01:23:09,376
Well, I mean, if the fees stay low, then it enables such a scenario, right?

942
01:23:09,376 --> 01:23:16,777
And I'm telling you that another scenario that nobody talks about is ballooning of UTXO set, which is not that expensive.

943
01:23:16,777 --> 01:23:22,977
It would be cheaper than a double spending attack or continuous ongoing attack on the tip of the chain, right?

944
01:23:22,977 --> 01:23:29,277
Like right now, it would be cheaper to, the cheapest way to attack Bitcoin is to balloon its UTXO set right now, right?

945
01:23:29,277 --> 01:23:35,677
So basically create millions of transactions that create dust UTXOs and just burn the money, right?

946
01:23:35,677 --> 01:23:46,677
And then you'll have the situation where you'll have, you know, a hundred times more memory requirement to run a Bitcoin node forever, right?

947
01:23:46,677 --> 01:23:56,376
So that kind of attack could be done by, you know, government of Nigeria, some other desperate third world country that's losing control of their currency to Bitcoin or whatever.

948
01:23:56,376 --> 01:24:01,777
They're just not competent enough to realize they can do this, right?

949
01:24:01,777 --> 01:24:05,277
Now, I don't see the fees staying low even without ordinals.

950
01:24:05,277 --> 01:24:11,277
I don't see the fees staying low for the long run precisely because there's a limited number of payments per day.

951
01:24:11,376 --> 01:24:15,576
It's roughly a million payments per day that are possible and there's ongoing adoption.

952
01:24:15,576 --> 01:24:22,477
So, you know, there's just that cascading waterfall fountain thing.

953
01:24:22,477 --> 01:24:30,177
You know, once the top part fills up to the brim, right, you know, it has to go somewhere, right?

954
01:24:30,177 --> 01:24:35,177
So in another four years of adoption, the fees will be high without ordinals.

955
01:24:35,177 --> 01:24:39,076
And, you know, there's now talk of deploying roll-ups on Bitcoin, right?

956
01:24:39,177 --> 01:24:45,177
Like, I don't know if you saw this roll kit business where sovereign roll-ups that can use the same block space as ordinals.

957
01:24:45,177 --> 01:24:51,377
They're basically altcoins that steal Bitcoin security, right?

958
01:24:51,377 --> 01:24:56,777
So, you know, those could do 10 times more fee pressure than ordinals.

959
01:24:56,777 --> 01:25:02,777
So I don't see low fees in the future as a foregone conclusion.

960
01:25:02,777 --> 01:25:06,076
I cannot rule them out either, right?

961
01:25:06,277 --> 01:25:11,777
I mean, but I would give it a low probability, like 10% or less, you know.

962
01:25:14,976 --> 01:25:15,576
Interesting.

963
01:25:17,177 --> 01:25:26,677
Well, well, if anybody wanted to, for example, if anybody wanted to launch an altcoin today, which maybe not many people do,

964
01:25:27,177 --> 01:25:33,777
the best way to do it would be to launch a roll-up on Bitcoin that doesn't have the secure bridge from Bitcoin to the roll-up.

965
01:25:33,777 --> 01:25:36,377
It's called, you know, they call it sovereign roll-ups in Ethereum world.

966
01:25:36,976 --> 01:25:42,576
But you could, in theory, launch a network and that network will have all the security of Bitcoin.

967
01:25:43,576 --> 01:25:51,576
It just will not have Bitcoin in it, but it will be just as resistant to double spending, just as resistant to, you know,

968
01:25:51,576 --> 01:25:56,976
it will have cryptographic security for its assets, which is like the highest level of security possible.

969
01:25:57,377 --> 01:25:59,177
It will be just as secure as Bitcoin.

970
01:25:59,177 --> 01:26:03,377
It'll just use the same data that the ordinals are using, right?

971
01:26:04,277 --> 01:26:13,576
So if that network becomes, you know, useful or used by, you know, like you could see the additional fee pressure coming from that.

972
01:26:23,877 --> 01:26:24,677
Very interesting.

973
01:26:25,476 --> 01:26:27,377
Well, we're reaching the top of the hour.

974
01:26:27,377 --> 01:26:29,377
We've been going for about 90 minutes.

975
01:26:30,476 --> 01:26:32,476
Everyone is welcome to join the stage.

976
01:26:34,277 --> 01:26:36,677
And contribute to this discussion.

977
01:26:38,677 --> 01:26:43,576
We've been talking about whether fees will go up or stay low.

978
01:26:46,777 --> 01:26:48,877
Let's take a look at how the fees are looking.

979
01:26:49,177 --> 01:26:59,976
One reason why so few Bitcoiners understand the fee market is that unfortunately the website mempool.space doesn't provide the fees.

980
01:27:00,976 --> 01:27:04,576
You have to go to another one like blockchain.com.

981
01:27:04,576 --> 01:27:05,777
That's where I always go.

982
01:27:06,277 --> 01:27:11,277
Glassnode has it, but Glassnode doesn't give you the most recent fee information unless you pay.

983
01:27:11,976 --> 01:27:22,777
If you go to blockchain.com and then click on charts, Explorer charts, and then total transaction fees USD, you can see the fee market.

984
01:27:23,277 --> 01:27:24,777
Let's check out where they are now.

985
01:27:25,377 --> 01:27:31,976
So as of March 28th, we had $774,000 in fees.

986
01:27:33,476 --> 01:27:38,677
And the high point was a few days ago on March 23rd, over a million dollars in fees per day.

987
01:27:40,377 --> 01:27:41,976
Which was the high of the year.

988
01:27:42,177 --> 01:27:46,677
So the high of the last 12 months was just a few days ago.

989
01:27:47,177 --> 01:27:58,076
So Alex, your theory of higher fees coming soon might be right because on March 23rd, we had $1.2 million of fees in a day.

990
01:28:00,076 --> 01:28:00,377
Right.

991
01:28:00,576 --> 01:28:09,677
So what's holding back the fees from Ordinals is essentially this release for the Ordinal software that is supposed to come real soon now, as they say in Silicon Valley,

992
01:28:09,677 --> 01:28:24,377
which allows you to have your own identity as an Ordinal and then have your creations as multiple collections, all cryptographically linked to that Ordinal in a kind of a file system thing, which is what the artists really want.

993
01:28:25,076 --> 01:28:39,377
And then there will be like this, you know, 10x demand for block space from Ordinals once that releases because that will essentially enable you to upload your whole file system, hopefully encrypted into Bitcoin, right?

994
01:28:39,677 --> 01:28:51,577
And, you know, hundreds of images, whole collections of stuff, you know, once that releases out, maybe in a month or so, I don't know what their release schedule is like on this Ord server.

995
01:28:52,776 --> 01:29:03,177
It essentially extends the Ordinal protocol to enable, you know, mass uploads of thousands of images automatically, you know, and then wallets need to show them as your Ordinal collection, right?

996
01:29:03,476 --> 01:29:10,276
Because that creates a demand from people other than the people who can use command line to look at their Ordinal.

997
01:29:11,177 --> 01:29:21,276
You know, people can go to this ordiscan.com and look at Ordinals, but then, you know, it's very sort of like ancient, bare bones user experience, you know.

998
01:29:22,276 --> 01:29:35,177
So my idea about Ordinals has been proven right in that we now know that there are luxury Ordinals that will pay $300 or even $500 in fees, you know, to be included one time.

999
01:29:35,577 --> 01:29:38,776
So we've established the existence of luxury Ordinal market.

1000
01:29:39,476 --> 01:29:42,077
Now, how big this market will become, we don't know yet.

1001
01:29:52,276 --> 01:29:53,276
Cool.

1002
01:29:57,276 --> 01:29:58,276
Well.

1003
01:29:59,276 --> 01:30:07,276
The metric I like to observe is the percentage of total subsidy comprised of fees.

1004
01:30:08,276 --> 01:30:16,276
Like before Ordinals, it was like 1.5%, and I think it's been like 4 to 5% lately.

1005
01:30:17,276 --> 01:30:21,276
But, you know, some of it is because price of Bitcoin is going up, right?

1006
01:30:22,276 --> 01:30:24,276
So there's more willingness to move coins between exchanges.

1007
01:30:24,276 --> 01:30:31,276
I don't think it's good to look at the percentage of the total miner income that is of fees.

1008
01:30:32,276 --> 01:30:38,276
I think it's more important to look at the total amount of fees per unit of time.

1009
01:30:39,276 --> 01:30:40,276
All right.

1010
01:30:40,276 --> 01:30:41,276
Yeah, no, I agree with you.

1011
01:30:41,276 --> 01:30:42,276
Like in the US dollars, yes.

1012
01:30:43,276 --> 01:30:53,276
If the fees, if Ethereum, like if you go to the fee website that shows all the networks with fees, and Bitcoin used to be number five or seven or something.

1013
01:30:54,276 --> 01:30:59,276
And now it went up to like number three on that list, where Ethereum is like 5 million per day in fees.

1014
01:31:00,276 --> 01:31:05,276
And Uniswap is like a million and a half or something like in fees.

1015
01:31:06,276 --> 01:31:08,276
And then Bitcoin is like number three or number four now.

1016
01:31:09,276 --> 01:31:10,276
So Bitcoin moved up a few places in that list.

1017
01:31:10,276 --> 01:31:13,276
I think you're looking at cryptofees.info. Is that right?

1018
01:31:14,276 --> 01:31:15,276
Yes, yes.

1019
01:31:15,276 --> 01:31:17,276
Okay, cryptofees.info. I'm there now.

1020
01:31:18,276 --> 01:31:22,276
Ethereum has six and a half million dollars of fees.

1021
01:31:23,276 --> 01:31:26,276
And Bitcoin has 772.

1022
01:31:27,276 --> 01:31:30,276
But look at the seven day averages there.

1023
01:31:32,276 --> 01:31:34,276
That's better.

1024
01:31:35,276 --> 01:31:36,276
It's almost the same.

1025
01:31:37,276 --> 01:31:38,276
Okay.

1026
01:31:39,276 --> 01:31:45,276
But you see, Bitcoin used to be like number eight or nine on that list, like six months ago.

1027
01:31:46,276 --> 01:31:47,276
And now it's like number three or four.

1028
01:31:48,276 --> 01:31:52,276
Yeah, because six months ago, we had fees that were around $200,000 a day.

1029
01:31:53,276 --> 01:31:55,276
And now we're like four times that.

1030
01:31:56,276 --> 01:31:59,276
I would say 80% of that is due to ordinals.

1031
01:32:00,276 --> 01:32:01,276
And this is just the beginning, right?

1032
01:32:01,276 --> 01:32:07,276
Because the ordinals will go up exponentially once you can see your apes on your phone.

1033
01:32:08,276 --> 01:32:09,276
But nobody can see that right now.

1034
01:32:10,276 --> 01:32:15,276
Why would people pay for apes if they can't see them on their phone and they can't put them into their Twitter?

1035
01:32:16,276 --> 01:32:20,276
I mean, it's basically just like a tiny priesthood that can deal with ordinals right now.

1036
01:32:21,276 --> 01:32:22,276
But it's exploding, right?

1037
01:32:23,276 --> 01:32:24,276
It's going to be a mass phenomenon.

1038
01:32:25,276 --> 01:32:26,276
I think the metric that people...

1039
01:32:27,276 --> 01:32:33,276
Let's discuss which metric do you think is most important with respect to economic security?

1040
01:32:34,276 --> 01:32:41,276
So which chain has the digital gold characteristic of being very hard to attack through brute force?

1041
01:32:42,276 --> 01:32:47,276
I think that the following metric is most important.

1042
01:32:48,276 --> 01:32:53,276
It would be the ratio of the security spending to the value secured.

1043
01:32:54,276 --> 01:32:55,276
The security factor.

1044
01:32:59,276 --> 01:33:04,276
Well, I mean, you could have that ratio be very high on Ethereum and it would still be very easy to attack.

1045
01:33:05,276 --> 01:33:06,276
Right?

1046
01:33:07,276 --> 01:33:08,276
Because Ethereum is...

1047
01:33:09,276 --> 01:33:10,276
When they had their hard fork...

1048
01:33:10,276 --> 01:33:11,276
Yeah.

1049
01:33:21,276 --> 01:33:28,276
So when Ethereum had their hard fork and there was talk of proof-of-work Ethereum continuing, right?

1050
01:33:29,276 --> 01:33:31,276
Like miners didn't want to switch to proof-of-stake.

1051
01:33:32,276 --> 01:33:41,276
Everybody shut up very quickly once stablecoin issuers, namely Circle, USDC and Tether said that they're only going to redeem on a proof-of-stake fork.

1052
01:33:42,276 --> 01:33:44,276
That immediately nuked the other fork.

1053
01:33:45,276 --> 01:33:50,276
So you could, in theory, have two companies that decide what the rules of Ethereum are.

1054
01:33:51,276 --> 01:33:54,276
And both of those companies are controlled by US authorities now.

1055
01:33:54,276 --> 01:34:00,276
So you could have essentially stablecoin people say, hey, new release of Ethereum must have this code in it.

1056
01:34:01,276 --> 01:34:05,276
And if it doesn't, then we will not redeem the stablecoins on the fork that doesn't do that.

1057
01:34:06,276 --> 01:34:07,276
Right?

1058
01:34:08,276 --> 01:34:13,276
So, I mean, unless you want the total wipeout of the Ethereum ecosystem, you'd have to do with Circle and Tethered Sake.

1059
01:34:14,276 --> 01:34:16,276
So it doesn't apply.

1060
01:34:17,276 --> 01:34:28,276
Is there a point that an economic majority of Ethereum is commanded by these trusted parties involved in the stablecoins?

1061
01:34:29,276 --> 01:34:31,276
That's today. That's already today.

1062
01:34:32,276 --> 01:34:36,276
It's basically a de facto agency of the US government.

1063
01:34:37,276 --> 01:34:42,276
Aren't the stablecoins, don't they have like a market cap that's lower than Ethereum?

1064
01:34:42,276 --> 01:34:44,276
Yeah, but they do.

1065
01:34:45,276 --> 01:34:49,276
But the thing is, Ethereum derives all of its value from NFTs and DeFi.

1066
01:34:50,276 --> 01:34:53,276
And the stablecoins are key in the DeFi world, right?

1067
01:34:54,276 --> 01:35:02,276
So, you know, once they say that we want Ethereum rules to change like this, and we're not going to redeem on the other fork,

1068
01:35:03,276 --> 01:35:05,276
they essentially decide the rule change in Ethereum.

1069
01:35:06,276 --> 01:35:12,276
Otherwise, if you stay on the other fork, it's a total wipeout of the whole DeFi ecosystem.

1070
01:35:13,276 --> 01:35:16,276
Like all the protocols go bankrupt in a second.

1071
01:35:17,276 --> 01:35:18,276
Right?

1072
01:35:19,276 --> 01:35:22,276
So you can think of Ethereum as kind of like Facebook, right?

1073
01:35:23,276 --> 01:35:26,276
Like Facebook would take orders from FBI about what to censor.

1074
01:35:27,276 --> 01:35:33,276
And Ethereum is just basically a de facto agency of the US government now.

1075
01:35:33,276 --> 01:35:35,276
So it's never going to be neutral money.

1076
01:35:36,276 --> 01:35:42,276
But if you think of it as a big stock that takes orders from the US government, it could be a very profitable stock to hold, right?

1077
01:35:43,276 --> 01:35:49,276
Like, you know, Google and Facebook were very profitable, and they essentially completely controlled by the US government.

1078
01:35:50,276 --> 01:35:52,276
Snowden told you that in 2013.

1079
01:35:59,276 --> 01:36:00,276
Good point.

1080
01:36:01,276 --> 01:36:03,276
So it doesn't apply, right?

1081
01:36:04,276 --> 01:36:07,276
Like in the case of Ethereum, there is no decentralization.

1082
01:36:08,276 --> 01:36:15,276
There is only, you know, kind of a religion of people who are trying to, quote unquote, make the world a better place.

1083
01:36:16,276 --> 01:36:18,276
And that includes taking orders from the US government.

1084
01:36:21,276 --> 01:36:23,276
It's basically like a corporation, right?

1085
01:36:31,276 --> 01:36:37,276
But like, Ethereum doesn't need to exist as long as Bitcoin can be used as trust-minimized collateral, right?

1086
01:36:38,276 --> 01:36:52,276
It's just so obvious to me and to like David Ciro, I think the guy's name is, who wrote this big article in Bitcoin magazine about the vision of the future where it's Bitcoin backed stablecoins and DeFi on top of them.

1087
01:36:53,276 --> 01:36:55,276
That would be what the world actually wants.

1088
01:36:56,276 --> 01:36:58,276
The world does not want Tether or USDC.

1089
01:36:58,276 --> 01:37:02,276
The world wants a fully decentralized dollar that nobody can control.

1090
01:37:03,276 --> 01:37:09,276
And that dollar requires Bitcoin, the only decentralized collateral, as collateral, right?

1091
01:37:10,276 --> 01:37:11,276
That's what the world really wants.

1092
01:37:12,276 --> 01:37:13,276
Ethereum is like a testnet.

1093
01:37:14,276 --> 01:37:15,276
But, you know, they'll stumble upon it.

1094
01:37:16,276 --> 01:37:21,276
If Bitcoin doesn't change, Ethereum will eventually, you know, develop this capability.

1095
01:37:22,276 --> 01:37:27,276
Arguably, it already has that, like LUSD, for example, is the example of that.

1096
01:37:44,276 --> 01:37:45,276
Interesting.

1097
01:37:46,276 --> 01:37:51,276
Once again, this is Drivechain Twitter Spaces hosted by LayerTwo Labs.

1098
01:37:52,276 --> 01:37:54,276
We meet every Monday and Thursday.

1099
01:37:57,276 --> 01:38:00,276
And all are welcome to come up to the stage and ask questions about Drivechain.

1100
01:38:01,276 --> 01:38:02,276
We have some familiar faces in the audience.

1101
01:38:03,276 --> 01:38:08,276
Drivechain is probably the most important thing ever in the history of the world.

1102
01:38:09,276 --> 01:38:10,276
That's my personal opinion.

1103
01:38:11,276 --> 01:38:12,276
I'm sure reasonable people can disagree on that.

1104
01:38:13,276 --> 01:38:22,276
And I'm very optimistic that it'll strengthen and secure Bitcoin in a transformative way.

1105
01:38:23,276 --> 01:38:28,276
Hopefully, in the not-too-distant future, we'll get merged-mind, peer-to-peer sidechains

1106
01:38:29,276 --> 01:38:39,276
that fulfill the cypherpunk vision of Bitcoin as an ecosystem of tremendous privacy, scalability,

1107
01:38:39,276 --> 01:38:45,276
and decentralization and technological innovation.

1108
01:38:46,276 --> 01:38:54,276
Rather than merely a digital gold Austrian economics project that is anti-inflation,

1109
01:38:55,276 --> 01:39:02,276
Drivechain envisions Bitcoin as a technology platform for permissionless innovation,

1110
01:39:03,276 --> 01:39:06,276
both monetary and otherwise.

1111
01:39:06,276 --> 01:39:11,276
So, I wouldn't say that it's like making Bitcoin more like Ethereum,

1112
01:39:12,276 --> 01:39:22,276
because it is unique to Bitcoin to have a very simple and time-tested conservative Layer 1

1113
01:39:23,276 --> 01:39:26,276
with a lot of growth and development on top.

1114
01:39:27,276 --> 01:39:34,276
So, I think Drivechain is a unique project that'll make Bitcoin even better

1115
01:39:34,276 --> 01:39:36,276
and secure it in the future.

1116
01:39:45,276 --> 01:39:50,276
Alex, it seems like you agree with half of that.

1117
01:39:51,276 --> 01:39:54,276
You like that Bitcoin is doing what it's doing,

1118
01:39:55,276 --> 01:39:58,276
but you also appreciate the kind of innovation going on in Ethereum.

1119
01:39:59,276 --> 01:40:07,276
Well, it originally used to go on in Bitcoin before 2015 or so.

1120
01:40:08,276 --> 01:40:13,276
There was all this crazy fun happening in Bitcoin as well.

1121
01:40:14,276 --> 01:40:17,276
Ethereum is just a bunch of frustrated kids who left.

1122
01:40:18,974 --> 01:40:23,974
When they were told, you know, shut up, you know, no, you know, it's digital gold and that's it.

1123
01:40:24,974 --> 01:40:35,974
But, I mean, original Bitcoin maximalism was about using Bitcoin as digital scarcity in unknown, unknown applications, right? Unlimited contexts.

1124
01:40:37,974 --> 01:40:42,974
What do you think of this Jason Lowery guy? Is he at all a candidate for Drivechain?

1125
01:40:42,974 --> 01:41:04,974
I don't know. I think, I mean, he's talking about some kind of philosophical stuff for, you know, some kind of U.S. government insider lobbying other U.S. government people to start, you know, supporting Bitcoin as an antidote to authoritarian regimes.

1126
01:41:05,974 --> 01:41:14,974
You know, eventually they'll start. I mean, the U.S. government consists of hundreds of agencies with conflicting agendas and interests, and some of them will start doing it.

1127
01:41:16,974 --> 01:41:19,974
You know, maybe the deep state is already doing it, you know.

1128
01:41:19,974 --> 01:41:39,974
Do you think there's any chance that the higher hash rate we're witnessing now could be part of some nefarious operation?

1129
01:41:40,974 --> 01:41:53,974
I think it's unlikely. I think it's older ASICs being put back online and, you know, more electricity being available because the price made them profitable.

1130
01:41:53,974 --> 01:42:11,974
If there were, right now, a party mining in secret building a 51% reorg, do you think that that activity would necessarily cause higher hash rate to be observed?

1131
01:42:14,974 --> 01:42:19,974
Not if they're mining in secret, right? They wouldn't observe it until they dump a new chain on the network.

1132
01:42:19,974 --> 01:42:20,974
Of course.

1133
01:42:20,974 --> 01:42:40,974
If they're mining in secret, then it's not visible. But, you know, given how well-spoken all the ASICs and all the power sources, like, people in the mining industry would know if somebody was building a lot of capacity in secret, even if that somebody was some kind of government actor.

1134
01:42:41,974 --> 01:42:49,974
Like, all this stuff would leak, basically. I don't expect any of this. Governments are incapable of doing this kind of Manhattan Project type thing.

1135
01:42:50,974 --> 01:42:53,974
Well, they certainly are capable of Manhattan Projects, right?

1136
01:42:54,974 --> 01:43:12,974
Well, they used to be, right? Like, the US government is not capable of that since the 60s. And, you know, you could have, like, who else would be? I mean, the others are too preoccupied with their internal chaos and survival to think about this. I don't know.

1137
01:43:13,974 --> 01:43:30,974
And, you know, at the end of the day, you would have, you know, core devs saying things like, oh, we can invalidate any fork once it gets dumped on the network by declaring its block, its original block invalid, for example. Think of it as a user-activated soft fork.

1138
01:43:31,974 --> 01:43:58,974
So you could kill off a fork if you, you know, if the Bitcoin Core priesthood all unanimously proclaim that, you know, what happened yesterday with this big reorg is an attack on Bitcoin, please download a new version in order to, or better yet, just restart your Bitcoin Core with this additional option that declares a particular block as invalid, which kills off that other branch, you know.

1139
01:43:59,974 --> 01:44:22,974
Like, there could be these social layer counterattacks. Think of it as a—and it would not even require, I think it would not even require a distribution of the new Bitcoin Core. You can now tell Bitcoin Core, I mean, it's been the case for years, that a certain block hash is just invalid and whatever fork originates with that block can just be killed off.

1140
01:44:23,974 --> 01:44:34,974
So the recent tweets where people were saying there's higher hash rate without higher miner income, is someone—

1141
01:44:34,974 --> 01:44:37,974
It's all scaremongering clickbait farming.

1142
01:44:37,974 --> 01:44:47,974
Because if someone were mining in secret, which would be the largest possible attack, right, it would not produce visibly higher hash rate.

1143
01:44:48,974 --> 01:44:59,974
Yeah, right. You would see no difference in the hash rate. You would just see this, like, hundred blocks reorg being dumped on the network or a thousand block reorg that just says, hey, there's a new version of history here.

1144
01:45:00,974 --> 01:45:11,974
Do you agree with Paul's reasoning in the FAQ that when people say, oh, the miners can steal from a drivechain, what they're missing is that it takes half a year.

1145
01:45:11,974 --> 01:45:32,974
And if the same miners were to do a half a year attack on non-drivechain Bitcoin, but just regular Bitcoin, they could double spend, like, all of the circulating supply for half a year and therefore basically steal almost all of the Bitcoin in existence.

1146
01:45:33,974 --> 01:45:51,974
And therefore drivechains with hash rate escrow are actually more secure, arguably, under one analysis, under one scenario, which is that if you compare those two circumstances that I just described, the one where you steal from the drivechain is immediately visible because of the nature of drivechain.

1147
01:45:51,974 --> 01:45:59,974
You can see immediately when the attack begins, whereas the double spending attack on non-hash rate escrow Bitcoin can be done in secret.

1148
01:45:59,974 --> 01:46:09,974
So actually, drivechains are more secure under one analysis. Do you agree with that at all? I'm sure Moonsettler wouldn't, but what do you think of that?

1149
01:46:10,974 --> 01:46:15,974
What's the scenario where drivechain escrow coins are more secure than ZK Rollups?

1150
01:46:15,974 --> 01:46:28,974
Well, they're more secure just in the sense, not ZK Rollups, I'm talking about ordinary Bitcoin, not in a hash rate escrow, just Bitcoin that's in your treasure, coming to my treasure.

1151
01:46:28,974 --> 01:46:43,974
The drivechain is more secure because the theft from the hash rate escrow is by nature public. It begins in a manner that is observable immediately.

1152
01:46:43,974 --> 01:47:02,974
Whereas the double spending 51% attack occurs in secret while it's going on. The development of that attack is in secret, whereas the progress on a hash rate escrow theft is visible publicly.

1153
01:47:03,974 --> 01:47:17,974
All right. But the only viable, profitable double spend attack, and I'm not talking about a government just wanting to kill Bitcoin and therefore just burning some money for it.

1154
01:47:17,974 --> 01:47:29,974
The only viable double spend attack that's profitable is for miners to send Bitcoins to an exchange and then sell them for Ether, withdraw Ether and then reorg the chain.

1155
01:47:29,974 --> 01:47:54,974
And that's basically, it's up to the exchange today, what the security policy is. Binance allows you to withdraw your deposits after two confirmations, basically, because they figure that the miners are incapable of coordinating and unwilling to attack them or something.

1156
01:47:55,974 --> 01:48:19,974
So you would need a reorg of two blocks only in order to steal a large deposit from Binance today, for example. But on the other hand, nation state attackers, if they wanted to burn $100 million trying to kill Bitcoin, they would be much better off ballooning the UTXO set than doing a double spend attack. It's a lot cheaper.

1157
01:48:19,974 --> 01:48:27,974
You could essentially knock out 99% of all Bitcoin nodes today by simply ballooning the UTXO set over a few weeks.

1158
01:48:28,974 --> 01:48:44,974
So, can you hear me? Because I knew I'd never used it before. Hi guys. So, I wanted to inject just one thing. You have the same data availability problem that you have with ZK proofs.

1159
01:48:44,974 --> 01:49:00,974
If you think you know that a hash represents something, you can't actually prove it. If miners just include a hash, you don't know if that's a legit or not a legit withdrawal, basically.

1160
01:49:00,974 --> 01:49:19,974
Yeah, I think you're referring to Paul Sztorc's comparison to validity rollups in his FAQ, where he analyzes drivechains versus validity rollups.

1161
01:49:20,974 --> 01:49:33,974
No, I just meant in general. So, a single hash does not tell you anything about the intent or the content. So, we don't necessarily know that something is wrong.

1162
01:49:37,974 --> 01:49:41,974
But in the case of validity rollups, we know when something is right.

1163
01:49:41,974 --> 01:49:42,974
Yes.

1164
01:49:42,974 --> 01:49:44,974
When the proof is checked, yeah.

1165
01:49:45,974 --> 01:49:56,974
So, I mean, I think, Henry, I was just reading, as I was listening, I was just reading Paul's updated section on drivechains versus validity rollups.

1166
01:49:57,974 --> 01:50:05,974
And I think Paul is doing a lot of cherry picking and rationalizations there to show that drivechains have advantages.

1167
01:50:06,974 --> 01:50:18,974
They do have advantages, right? But they're not, I mean, they are not the final say, the final word in L2 extension protocols, right?

1168
01:50:19,974 --> 01:50:30,974
They are technologically inferior to validity rollups, but for social reasons, I would rather have them both, drivechains and rollups. Let the market decide, right?

1169
01:50:31,974 --> 01:50:41,974
Like, for example, drivechains have a problem that if the drivechain is not popular enough, it will still be easy to attack on the drivechain, right?

1170
01:50:42,974 --> 01:50:44,974
It doesn't inherit the security of the main chain.

1171
01:50:45,974 --> 01:50:46,974
Yeah.

1172
01:50:46,974 --> 01:50:47,974
Yeah.

1173
01:50:49,974 --> 01:50:55,974
So, like, do you really want to do, like, a decentralized dollar with billions of dollars of issuance on a drivechain?

1174
01:50:56,974 --> 01:51:01,974
Well, I mean, Paul would say that if it's really useful for the market, the fees will be there and therefore it will be secure.

1175
01:51:02,974 --> 01:51:06,974
But you can inherit security for free if you use a validity rollup.

1176
01:51:07,974 --> 01:51:20,974
So, I think, basically, drivechains are superior to space chains. So, I would absolutely prefer drivechains instead of space chains. I don't know how you are with this.

1177
01:51:21,974 --> 01:51:29,974
No, no, it's clear to everyone. I mean, that one is easy, yeah. But drivechains versus validity rollups, that's a different story.

1178
01:51:30,974 --> 01:51:37,974
Yeah. So, I mean, we pretty much suspect that space chains would be used for utility mainly.

1179
01:51:38,974 --> 01:51:46,974
All this prototyping and utility. So, it's not a store of value sidechain, most likely.

1180
01:51:47,974 --> 01:51:59,974
And even there, I think, or especially there, I think drivechains don't have any major downsides, basically, in that scene.

1181
01:51:59,974 --> 01:52:20,974
My problem, like, I agree with you that drivechains are very easy to add and they should not be controversial and whatever the engagement farmers try to scare people with about drivechains, it's all basically nonsense.

1182
01:52:21,974 --> 01:52:36,974
And, you know, they should be enabled as well as, you know, validity rollups, as well as simplicity, as well as, you know, recursive covenants, too, because, you know, like OP_VAULT, for example, and stuff like that.

1183
01:52:37,974 --> 01:52:43,974
But my point, like, on the meta level, I don't see any of this happening until there is, like, a real crisis.

1184
01:52:44,974 --> 01:52:50,974
Like, Bitcoin doesn't scale, right? You know, they had this real crisis in Ethereum and it was this pleb uprising, right?

1185
01:52:51,974 --> 01:53:05,974
The outcry of millions of people saying, you guys created this system, you promised, you know, decentralized finance for the world and now you can only have these whales using Ethereum because the fees are $100 or $200 to call a contract.

1186
01:53:05,974 --> 01:53:16,974
And, you know, that concentrated their minds and they did a lot of thinking by a lot of smart people, by hundreds of funded startups, and what they came to is essentially validity rollups.

1187
01:53:17,974 --> 01:53:27,974
Not only validity rollups, but validity rollups with EVM as a system so that all the protocols can be copy-pasted over there, too.

1188
01:53:28,974 --> 01:53:30,974
Yeah.

1189
01:53:31,974 --> 01:53:37,974
So, validity rollups have this hostage situation problem, right?

1190
01:53:38,974 --> 01:53:56,974
So, if I understand correctly, miners can create a situation where it's a valid state, everyone can check that it's a valid state, but no one can actually withdraw unilaterally because they don't have the rollup state.

1191
01:53:57,974 --> 01:54:04,974
So, that creates this weird situation where, you know, maybe the users can be taken for ransom, I don't know.

1192
01:54:05,974 --> 01:54:11,974
No, I think that's not true. Like, if you're talking about miners of the rollup or miners of L1?

1193
01:54:12,974 --> 01:54:13,974
L1.

1194
01:54:13,974 --> 01:54:25,974
Yeah. So, the miners of L1 just, you know, they wouldn't even know, for example, that a withdrawal is attempted on a rollup because it could be hidden inside taproot.

1195
01:54:25,974 --> 01:54:44,974
But as far as the state, because all the state is embedded into L1, into Bitcoin, you can just run your own node, replay all the transactions, get the state, and then issue another transaction to withdraw that will also be embedded into L1 Bitcoin.

1196
01:54:44,974 --> 01:54:55,974
That's not a problem. If you read Bitcoinrollups.org report, you know, it's all in there. It's just a lot of reading and it's, you know, but there is no hostage problem.

1197
01:54:56,974 --> 01:55:08,974
Like, there's no inherent hostage problem. All the existing rollups, like if you'll go to l2b.com, they're not fully decentralized, but they're decentralizable in theory completely.

1198
01:55:09,974 --> 01:55:18,974
But none of them is fully decentralized because, you know, they're run by these VC funded teams that want to retain control until they dump their tokens on the plebs and all this other stuff.

1199
01:55:22,974 --> 01:55:32,974
So, you are saying that if volatility rollups are implemented correctly, then the users basically have the same sovereignty that they have on L1?

1200
01:55:33,974 --> 01:55:40,974
Correct. They have the same security of their assets. They're just as secure sitting on the rollup as sitting on L1.

1201
01:55:41,974 --> 01:55:51,974
Like, so for example, if there was a Bitcoin bridge that moved Bitcoin to the rollup, there would be no difference in security between holding your Bitcoin on a bridge, I mean, on a rollup or on L1.

1202
01:55:52,974 --> 01:55:57,974
And they would have the same double spend resistance and they would have the same censorship resistance.

1203
01:55:58,974 --> 01:56:08,974
There was essentially, the only thing you could do, I mean, but the thing is these rollups, they require like provers, they call them sequencers, right?

1204
01:56:09,974 --> 01:56:14,974
And these sequencers could be a point of centralization, but you could also implement them in a decentralized way.

1205
01:56:15,974 --> 01:56:28,974
So, it's just that, you know, it basically, the rollup solved the ancient problem in Bitcoin, which they called, you know, trust minimized two-way peg, right?

1206
01:56:29,974 --> 01:56:30,974
They solved that problem.

1207
01:56:31,974 --> 01:56:51,974
In fact, like Greg Maxwell posted on Bitcoin Talk in 2013, the proposed solution that Ethereum will eventually rediscover, which is just do ZK proof checks of the other chain and, you know, supply true or false to Bitcoin to allow withdrawals or not, right?

1208
01:56:51,974 --> 01:57:05,974
Like you can go back to this Greg Maxwell post in 2013 on Bitcoin Talk Forum, where he essentially proposed a solution to two-way peg, but, you know, it's one thing to propose a solution, the other thing is to be incentivized enough to implement it.

1209
01:57:06,974 --> 01:57:12,974
But, you know, nothing can be done in Bitcoin because it's like a moralizing cult, you know, nowadays.

1210
01:57:12,974 --> 01:57:30,974
So, I understand that you can embed the rollup state into whatever form, into witness data, whatever. You can have it available on L1.

1211
01:57:31,974 --> 01:57:34,974
Not the state, the transactions, right? Not the state, right?

1212
01:57:35,974 --> 01:57:41,974
It's the sequence of transactions, but then if you play them on your own rollup node, you will get the current state if you replay them.

1213
01:57:42,974 --> 01:58:05,974
Yeah, yeah, I mean, and so, but what is the mechanism to guarantee that the rollup UTXO state update is related to this published, I don't know, basically I think of them as inscriptions of sort and how does it work?

1214
01:58:06,974 --> 01:58:11,974
It works by rollup nodes looking at Bitcoin as a source of truth.

1215
01:58:12,974 --> 01:58:17,974
Right, because rollup embeds this transaction history inside another chain.

1216
01:58:18,974 --> 01:58:27,974
So, if you launch your own UTXO node, sorry, rollup node, right, the rollups don't have to use UTXOs, but they could.

1217
01:58:28,974 --> 01:58:39,974
And you just replay the transaction history that's embedded in Bitcoin, you will essentially, you know, perform the protocol like every protocol compliant rollup node should be doing.

1218
01:58:40,974 --> 01:58:55,974
Yes, but you can, in theory, so you have a UTXO that represents the rollup state in a way, you know, the balance of it, I don't know how to call it.

1219
01:58:56,974 --> 01:59:03,974
And so, when that updates to a new state, there has to be a zero knowledge proof, right?

1220
01:59:04,974 --> 01:59:06,974
That every node validates after the fork.

1221
01:59:07,974 --> 01:59:10,974
Right, and Bitcoin validates too, right?

1222
01:59:11,974 --> 01:59:24,974
Yeah, but the one thing I don't actually get is what makes the relation between the two, whatever is published, that nodes don't validate, it's just there for data availability.

1223
01:59:25,974 --> 01:59:39,974
And these state updates, because as I understand, we try to make it so that normal nodes, normal Bitcoin nodes don't have to actually build the rollup state and validate those transactions, they just validate the ZK proof.

1224
01:59:40,974 --> 01:59:42,974
But what's the relation between them?

1225
01:59:44,974 --> 01:59:46,974
There doesn't need to be a relation between them.

1226
01:59:46,974 --> 01:59:50,974
You can think of rollup blocks as being just inscriptions, right?

1227
01:59:51,974 --> 02:00:09,974
And I wouldn't use the word validate, I would use the word check, because there's no validation, there's just one-time top-to-bottom proof scanning to check the proof, which is infinitely cheaper than, you know, executing the program, right?

1228
02:00:10,974 --> 02:00:14,974
So they just, it's like a predicate that returns true or false, that's it.

1229
02:00:16,243 --> 02:00:32,802
Yeah, and it controls withdrawals from a UTXO that stores the bridge funds, right? So you have a UTXO that people deposit into, and then with every block or every attempted withdrawal, it has to be rolled over with a covenant, right?

1230
02:00:32,802 --> 02:00:48,963
That was the design in BitcoinRollups.org, where you basically have to roll over the funds in the covenant, and you only allow withdrawals if the proof checks to be true, right?

1231
02:00:49,283 --> 02:01:15,522
Yes, this is my understanding. The one thing I'm missing really is, you have the data availability is there, in theory, if everyone does their job correctly, but the validity of the data that is available is, as I understand, not checked by all nodes, they only check the ZK proof and the covenant, and they don't actually play those other transactions that only rollup nodes.

1232
02:01:15,682 --> 02:01:41,202
And what makes it impossible to basically embed bullshit that is not true for the rollup state, which, by the way, is a perfectly valid state update, the miner or whoever just withheld the real transaction data, you know, and now nobody can build the correct state, and they are, as I said, hostage. I don't understand this part of the whole thing.

1233
02:01:41,283 --> 02:01:45,683
What miner is attacking the system? Is it the rollup miner or the...

1234
02:01:46,082 --> 02:02:04,403
Elbow miners that also know the rollup state and can update. The rollup state, these are centralized because that's what guarantees basically that only trusted people can update the state, or it's just a coincidence?

1235
02:02:04,723 --> 02:02:25,123
It's a coincidence because it's like, today these sequencers or provers are very expensive computationally, so they use graphics cards, so they basically like these very big nodes that build, you know, one proof every 30 minutes or every hour, and then they submit it to Ethereum, for example, right?

1236
02:02:26,082 --> 02:02:40,323
But as they optimize the way this functions, like, you will be able to have multiple nodes building proofs in competition with each other, you know, it's kind of like mining and Bitcoin, you know, you could do it that way.

1237
02:02:40,323 --> 02:02:51,603
Now, as far as, like, rollup data being invalid, Bitcoin miners don't care. For them, it will be just like images, right? They will just ignore it. It will sit in the same space as inscriptions.

1238
02:02:51,922 --> 02:02:54,963
Yes, but basically you can...

1239
02:02:54,963 --> 02:03:09,522
But the nodes of the rollup network will reject invalid blocks, so even if it gets merged into, even if it gets saved in Bitcoin, it doesn't mean that it will be accepted by the nodes of the rollup network.

1240
02:03:09,683 --> 02:03:22,243
But what makes the... Yes, I understand this. This is basically like any other blind merge mine chain. They behave the same. You can include bullshit into mainchain and they don't progress their state if it's bullshit. That's clear.

1241
02:03:22,243 --> 02:03:24,243
Right. They can just ignore it, right?

1242
02:03:24,483 --> 02:03:42,082
You can actually, with the ZK proof, make all nodes out there that are not aware of the rollup chain, you can make them accept the state update that is perfectly valid by the rollup chain, right? And I don't see the connection, the break that stops these two from diverging.

1243
02:03:43,043 --> 02:03:54,722
Well, it's like when you say two, you mean the transactions embedded inside Bitcoin and the blocks accepted by rollup?

1244
02:03:54,722 --> 02:04:05,282
The transactions embedded in Bitcoin and the blocks accepted by rollup and the state of the UTXO, the rollup UTXO, ESCO, whatever you want to call it on-chain.

1245
02:04:06,243 --> 02:04:19,043
That state is just the number of SATs held inside the bridge, right? It doesn't have any other meaning. It's just number of SATs held inside that bridge UTXO.

1246
02:04:19,043 --> 02:04:26,243
Yeah, but you can actually take money out from there in a way that no one else knows, right?

1247
02:04:27,203 --> 02:04:39,202
No, you cannot, because in order to take the money out, you need to present a proof that proves the whole computation of playing all the blocks on the rollup.

1248
02:04:39,202 --> 02:04:45,202
Yes, you just don't tell anyone else. Let's say it's a valid transaction, but you don't tell anyone else.

1249
02:04:45,202 --> 02:04:48,163
Like you don't publish it?

1250
02:04:48,163 --> 02:04:52,163
Yes, you don't publish it, you just update the UTXO.

1251
02:04:52,163 --> 02:04:57,123
Oh, you're saying it will not be published into L1 Bitcoin or something like that?

1252
02:04:57,123 --> 02:05:03,123
Yeah, I mean, L1 nodes that are not rollup-aware would just accept it, right?

1253
02:05:03,123 --> 02:05:09,123
Yeah, for them it's just like image data. They don't even look at it at all.

1254
02:05:10,082 --> 02:05:16,082
Like from the point of view of Bitcoin nodes, they only see like some junky data coming in ordinals,

1255
02:05:16,082 --> 02:05:26,082
and then they see this one kilobyte of data being fed into OPStackVerify that returns true or false. That's all they see.

1256
02:05:27,042 --> 02:05:39,042
So, I was just wondering if I'm missing something crucial here, because it kind of seems to me that if someone with sufficient hash power on Bitcoin

1257
02:05:39,042 --> 02:05:49,042
and aware of these rollups could actually, and have money in there, could actually get this stock for everyone else,

1258
02:05:49,042 --> 02:05:53,042
as I said, he could basically hold the remaining coins in the...

1259
02:05:54,003 --> 02:05:58,003
But that would be invalid execution of the rollup, wouldn't it?

1260
02:05:58,003 --> 02:06:06,003
I don't know. That's what I meant. So, basically, he can uphold the rules or the rules of the rollup.

1261
02:06:06,003 --> 02:06:12,003
He takes out his own coins, but he doesn't tell everyone else how he did it.

1262
02:06:14,003 --> 02:06:20,003
Yeah, I think you're not seeing how powerful the ZKStarks are.

1263
02:06:20,963 --> 02:06:28,963
To tell you the truth, I'm not 100% intuitively on top of this myself, but if you go and read into BitcoinRollups.org,

1264
02:06:28,963 --> 02:06:30,963
they talk about it there.

1265
02:06:30,963 --> 02:06:32,963
All right.

1266
02:06:32,963 --> 02:06:34,963
Yeah.

1267
02:06:34,963 --> 02:06:44,963
But I'm willing to trust that the whole Ethereum ecosystem with all these funded startups and Mr. Light with his report and everybody,

1268
02:06:45,922 --> 02:06:47,922
and the people behind StarkNet, right?

1269
02:06:47,922 --> 02:06:53,922
So, it's just like either rollup execution is correct, which means that all the correct blocks have been played,

1270
02:06:53,922 --> 02:06:57,922
and all the computation has been proven to be correct, or not.

1271
02:06:57,922 --> 02:06:59,922
There is no alternative there.

1272
02:06:59,922 --> 02:07:03,922
So, if it is correct, then the withdrawal is released.

1273
02:07:03,922 --> 02:07:11,922
I don't know what shape the bridge takes on the rollup side.

1274
02:07:12,883 --> 02:07:14,883
Sorry, I didn't want to take up so much time.

1275
02:07:14,883 --> 02:07:16,883
No, it's okay.

1276
02:07:16,883 --> 02:07:18,883
This is just something that has been bothering me.

1277
02:07:18,883 --> 02:07:20,883
There's nobody in this...

1278
02:07:20,883 --> 02:07:22,883
There's very few people in this...

1279
02:07:22,883 --> 02:07:24,883
What is it called?

1280
02:07:24,883 --> 02:07:26,883
This room here.

1281
02:07:26,883 --> 02:07:28,883
Space, right?

1282
02:07:28,883 --> 02:07:30,883
There's very few people, and mostly they're lurking.

1283
02:07:30,883 --> 02:07:36,883
So, it's not like we're preventing other people from speaking if they want to.

1284
02:07:36,883 --> 02:07:38,883
Yeah, I love it when you guys are here chatting.

1285
02:07:39,843 --> 02:07:41,843
Very high-level conversation.

1286
02:07:41,843 --> 02:07:43,843
Please continue.

1287
02:07:43,843 --> 02:07:45,843
It's actually low-level, right?

1288
02:07:45,843 --> 02:07:47,843
It's low-level nitty-gritty stuff.

1289
02:07:47,843 --> 02:07:55,843
It's the stuff that techies should keep down in their minds,

1290
02:07:55,843 --> 02:07:59,843
where they mine low-level stuff.

1291
02:07:59,843 --> 02:08:07,843
It's not high-level economic security of rollups, or Bitcoin, or drivechains.

1292
02:08:08,802 --> 02:08:10,802
I feel like Moon Settler, his attitude,

1293
02:08:10,802 --> 02:08:16,802
it expresses what Shakespeare wrote about things falling apart.

1294
02:08:16,802 --> 02:08:18,802
He wrote,

1295
02:08:18,802 --> 02:08:20,802
The best lack all conviction,

1296
02:08:20,802 --> 02:08:24,802
While the worst are full of passionate intensity.

1297
02:08:24,802 --> 02:08:26,802
I feel like Moon Settler is the best,

1298
02:08:26,802 --> 02:08:28,802
and he lacks conviction.

1299
02:08:28,802 --> 02:08:30,802
And I am the worst.

1300
02:08:30,802 --> 02:08:36,802
Well, he has the right defensive mindset of a cypherpunk.

1301
02:08:37,762 --> 02:08:39,762
Anything that can go wrong will inevitably go wrong,

1302
02:08:39,762 --> 02:08:43,762
and anything that can't be attacked will inevitably be attacked.

1303
02:08:43,762 --> 02:08:47,762
So, it's the right mindset to have for Bitcoin.

1304
02:08:47,762 --> 02:08:49,763
I agree.

1305
02:08:49,763 --> 02:08:51,763
But at some point,

1306
02:08:51,763 --> 02:08:53,763
it's like Arthur C. Clarke said that

1307
02:08:53,763 --> 02:08:57,763
any sufficiently advanced technology is indistinguishable from magic.

1308
02:08:57,763 --> 02:09:01,763
Well, those ZK proofs, ZK Stark proofs, or Snark proofs,

1309
02:09:01,763 --> 02:09:05,763
they are sufficiently advanced to appear magical.

1310
02:09:06,722 --> 02:09:08,722
Unless you really grok them all the way down,

1311
02:09:08,722 --> 02:09:10,722
which is complicated math, etc.

1312
02:09:10,722 --> 02:09:14,722
Right now, all of them are run with a backdoor, right?

1313
02:09:14,722 --> 02:09:16,722
There's no decentralized...

1314
02:09:16,722 --> 02:09:18,722
It's not so much backdoor,

1315
02:09:18,722 --> 02:09:20,722
it's kind of like,

1316
02:09:20,722 --> 02:09:22,722
if you go to that L2B.com

1317
02:09:22,722 --> 02:09:24,722
and you see there's like 16 networks

1318
02:09:24,722 --> 02:09:26,722
that are L2s of Ethereum,

1319
02:09:26,722 --> 02:09:28,722
and half of them are ZK,

1320
02:09:28,722 --> 02:09:30,722
and some of them are optimistic.

1321
02:09:30,722 --> 02:09:34,722
There's like a little wheel column in there

1322
02:09:34,722 --> 02:09:36,722
that shows the decentralization.

1323
02:09:36,722 --> 02:09:40,722
And you want all the categories,

1324
02:09:40,722 --> 02:09:42,722
all the risks to be black.

1325
02:09:42,722 --> 02:09:44,722
Yes.

1326
02:09:44,722 --> 02:09:46,722
And the best ones have one or two yellow and orange there.

1327
02:09:46,722 --> 02:09:48,722
You know.

1328
02:09:48,722 --> 02:09:50,722
But in theory, right,

1329
02:09:50,722 --> 02:09:52,722
the big thing that happened in Ethereum

1330
02:09:52,722 --> 02:09:54,722
is that you had three teams

1331
02:09:54,722 --> 02:09:56,722
releasing ZK EVM as open source.

1332
02:09:56,722 --> 02:09:58,722
You had like Scroll,

1333
02:09:58,722 --> 02:10:00,722
you had Consensus,

1334
02:10:00,722 --> 02:10:02,722
and you had Polygon.

1335
02:10:02,722 --> 02:10:04,722
And now you have like three code bases

1336
02:10:04,722 --> 02:10:06,722
of ZK EVM using...

1337
02:10:06,722 --> 02:10:08,722
So basically,

1338
02:10:08,722 --> 02:10:10,722
they're commoditizing this technology

1339
02:10:10,722 --> 02:10:12,722
so anybody can go grab it

1340
02:10:12,722 --> 02:10:14,722
and launch a roll-up that's fully decentralized.

1341
02:10:14,722 --> 02:10:16,722
You don't even need to code much.

1342
02:10:16,722 --> 02:10:18,722
So...

1343
02:10:20,722 --> 02:10:22,722
This stuff is no longer magical

1344
02:10:22,722 --> 02:10:24,722
inside Ethereum.

1345
02:10:24,722 --> 02:10:26,722
It's just magical to Bitcoiners

1346
02:10:26,722 --> 02:10:28,722
because Bitcoiners are still sitting

1347
02:10:28,722 --> 02:10:30,722
in the Plato's cave

1348
02:10:30,722 --> 02:10:32,722
to see reality.

1349
02:10:38,722 --> 02:10:40,722
All right.

1350
02:10:44,722 --> 02:10:46,722
By the way, I did read through

1351
02:10:46,722 --> 02:10:48,722
the polls

1352
02:10:48,722 --> 02:10:50,722
comparing roll-ups

1353
02:10:50,722 --> 02:10:52,722
to drivechain.

1354
02:10:52,722 --> 02:10:54,722
There's an allegedly updated FAQ on that.

1355
02:10:54,722 --> 02:10:56,722
Just like 10 minutes ago

1356
02:10:56,722 --> 02:10:58,722
I was reading that stuff.

1357
02:10:58,722 --> 02:11:00,722
There's lots of places

1358
02:11:00,722 --> 02:11:02,722
where Paul is cherry-picking

1359
02:11:02,722 --> 02:11:04,722
the evidence and

1360
02:11:04,722 --> 02:11:06,722
rationalizing. Just presenting

1361
02:11:06,722 --> 02:11:08,722
the benefits but not the downsides

1362
02:11:08,722 --> 02:11:10,722
of

1363
02:11:10,722 --> 02:11:12,722
drivechains versus roll-ups.

1364
02:11:14,722 --> 02:11:16,722
Like, for example, he says

1365
02:11:16,722 --> 02:11:18,722
roll-ups do nothing to solve

1366
02:11:18,722 --> 02:11:20,722
the data availability problem. That's just false.

1367
02:11:20,722 --> 02:11:22,722
The whole point of

1368
02:11:22,722 --> 02:11:24,722
roll-ups is data availability using L1.

1369
02:11:28,722 --> 02:11:30,722
I mean, it's...

1370
02:11:30,722 --> 02:11:32,722
He needs to steel-man

1371
02:11:32,722 --> 02:11:34,722
the argument against roll-ups.

1372
02:11:34,722 --> 02:11:36,722
He should collaborate with Mr. Light

1373
02:11:36,722 --> 02:11:38,722
on steel-manning that section

1374
02:11:38,722 --> 02:11:40,722
of the FAQ.

1375
02:11:40,722 --> 02:11:42,722
I mean, for 99%

1376
02:11:42,722 --> 02:11:44,722
of Bitcoiners and for the whole

1377
02:11:44,722 --> 02:11:46,722
you know,

1378
02:11:46,722 --> 02:11:48,722
ossification mob, they never

1379
02:11:48,722 --> 02:11:50,722
read these blog posts anyways.

1380
02:11:50,722 --> 02:11:52,722
So all of that pulls on deaf ears

1381
02:11:52,722 --> 02:11:54,722
anyways.

1382
02:11:54,722 --> 02:11:56,722
To what extent is the

1383
02:11:56,722 --> 02:11:58,722
roll-up-on-Bitcoin idea

1384
02:12:00,722 --> 02:12:02,722
chasing Ethereum's narratives?

1385
02:12:02,722 --> 02:12:04,722
And that drivechains

1386
02:12:04,722 --> 02:12:06,722
is different

1387
02:12:06,722 --> 02:12:08,722
because of its technology?

1388
02:12:10,722 --> 02:12:12,722
Well, you know,

1389
02:12:12,722 --> 02:12:14,722
if you live in the universe of Ethereum

1390
02:12:14,722 --> 02:12:16,722
then drivechains and actually all kinds

1391
02:12:16,722 --> 02:12:18,722
of sign-chains are just technologically

1392
02:12:18,722 --> 02:12:20,722
obsolete.

1393
02:12:20,722 --> 02:12:22,722
Including drivechains, right?

1394
02:12:22,722 --> 02:12:24,722
Because they tried them all.

1395
02:12:24,722 --> 02:12:26,722
They tried state channels.

1396
02:12:26,722 --> 02:12:28,722
They tried drivechains.

1397
02:12:28,722 --> 02:12:30,722
All of those things are obsolete.

1398
02:12:30,722 --> 02:12:32,722
Technologically obsolete.

1399
02:12:32,722 --> 02:12:34,722
What is Paul's response to the idea that

1400
02:12:34,722 --> 02:12:36,722
something like

1401
02:12:36,722 --> 02:12:38,722
drivechains was tried and found

1402
02:12:38,722 --> 02:12:40,722
to be suboptimal

1403
02:12:40,722 --> 02:12:42,722
in Ethereum?

1404
02:12:42,722 --> 02:12:44,722
Paul keeps silent

1405
02:12:44,722 --> 02:12:46,722
when he can't win an argument.

1406
02:12:46,722 --> 02:12:48,722
You know?

1407
02:12:48,722 --> 02:12:50,722
So...

1408
02:12:50,722 --> 02:12:52,722
His silence speaks volumes, right?

1409
02:12:52,722 --> 02:12:54,722
For example,

1410
02:12:54,722 --> 02:12:56,722
when I alerted him to this eigen-layer

1411
02:12:56,722 --> 02:12:58,722
stuff where, you know,

1412
02:12:58,722 --> 02:13:00,722
here comes restaking of

1413
02:13:00,722 --> 02:13:02,722
Ethereum, right?

1414
02:13:02,722 --> 02:13:04,722
His whole argument against proof-of-stake, for example,

1415
02:13:04,722 --> 02:13:06,722
was based on this collateral being

1416
02:13:06,722 --> 02:13:08,722
locked up, and that's more work

1417
02:13:08,722 --> 02:13:10,722
than burning electricity.

1418
02:13:10,722 --> 02:13:12,722
Well, that's only true until that collateral

1419
02:13:12,722 --> 02:13:14,722
becomes reusable in a hundred

1420
02:13:14,722 --> 02:13:16,722
different places at the same time.

1421
02:13:16,722 --> 02:13:18,722
That's what I was trying to explain to you earlier.

1422
02:13:18,722 --> 02:13:20,722
I don't believe that the existence

1423
02:13:20,722 --> 02:13:22,722
of

1424
02:13:22,722 --> 02:13:24,722
the staking derivatives

1425
02:13:24,722 --> 02:13:26,722
confounds...

1426
02:13:26,722 --> 02:13:28,722
No, no, it's not the staking derivatives.

1427
02:13:28,722 --> 02:13:30,722
That part is...

1428
02:13:30,722 --> 02:13:32,722
Staking derivatives is the market response

1429
02:13:32,722 --> 02:13:34,722
to Ethereum being

1430
02:13:34,722 --> 02:13:36,722
a liquid.

1431
02:13:36,722 --> 02:13:38,722
People who want to have a liquid version of Ethereum

1432
02:13:38,722 --> 02:13:40,722
will use staking derivatives

1433
02:13:40,722 --> 02:13:42,722
in exchange for paying some fees.

1434
02:13:42,722 --> 02:13:44,722
Some people are willing to wait,

1435
02:13:44,722 --> 02:13:46,722
and other people are not willing to wait.

1436
02:13:46,722 --> 02:13:48,722
So the specialists who are willing to wait

1437
02:13:48,722 --> 02:13:50,722
will collect fees by giving

1438
02:13:50,722 --> 02:13:52,722
liquidity in exchange for fees.

1439
02:13:52,722 --> 02:13:54,722
So, you know, like, from your point

1440
02:13:54,722 --> 02:13:56,722
of view, you can collect lower yield

1441
02:13:56,722 --> 02:13:58,722
but have liquidity, or you can have

1442
02:13:58,722 --> 02:14:00,722
higher yield and

1443
02:14:00,722 --> 02:14:02,722
it will take you a week or two to unstake.

1444
02:14:02,722 --> 02:14:04,722
That's just liquid staking

1445
02:14:04,722 --> 02:14:06,722
derivatives. I mean, there's a bigger issue

1446
02:14:06,722 --> 02:14:08,722
there, which is this eigenlayer stuff

1447
02:14:08,722 --> 02:14:10,722
where they do a rehypothecation

1448
02:14:10,722 --> 02:14:12,722
of Ethereum collateral, right?

1449
02:14:12,722 --> 02:14:14,722
This is when you stake

1450
02:14:14,722 --> 02:14:16,722
the same 10 ETH or 32 ETH

1451
02:14:16,722 --> 02:14:18,722
or whatever, but instead of

1452
02:14:18,722 --> 02:14:20,722
getting yield from one source, you now get

1453
02:14:20,722 --> 02:14:22,722
yield from 20 different networks

1454
02:14:22,722 --> 02:14:24,722
for the same staked Ethereum.

1455
02:14:24,722 --> 02:14:26,722
So your

1456
02:14:26,722 --> 02:14:28,722
combined yield might be 20%,

1457
02:14:28,722 --> 02:14:30,722
even if Ethereum's own yield is

1458
02:14:30,722 --> 02:14:32,722
3%. My point is that every

1459
02:14:32,722 --> 02:14:34,722
time someone who stakes their Ether

1460
02:14:34,722 --> 02:14:36,722
gets a yield on it,

1461
02:14:36,722 --> 02:14:38,722
it's just like someone who's mining

1462
02:14:38,722 --> 02:14:40,722
gets, you know, the sound

1463
02:14:40,722 --> 02:14:42,722
and heat monetized somehow,

1464
02:14:42,722 --> 02:14:44,722
like mining at a cold place.

1465
02:14:44,722 --> 02:14:46,722
No, no, I agree with you that

1466
02:14:46,722 --> 02:14:48,722
there is no free lunch there.

1467
02:14:48,722 --> 02:14:50,722
That part is true, but what's not true

1468
02:14:50,722 --> 02:14:52,722
is that in Bitcoin, fees

1469
02:14:52,722 --> 02:14:54,722
go to miners, whereas in

1470
02:14:54,722 --> 02:14:56,722
Ethereum, fees go to stakers.

1471
02:14:56,722 --> 02:14:58,722
Stakers

1472
02:14:58,722 --> 02:15:00,722
happen to overlap with holders to a large

1473
02:15:00,722 --> 02:15:02,722
extent, right? When you say the

1474
02:15:02,722 --> 02:15:04,722
fees, you mean the value of

1475
02:15:04,722 --> 02:15:06,722
the burnt fees accrues to

1476
02:15:06,722 --> 02:15:08,722
the holders of Ethereum

1477
02:15:08,722 --> 02:15:10,722
because of the purchasing power

1478
02:15:10,722 --> 02:15:12,722
gain that results

1479
02:15:12,722 --> 02:15:14,722
relative to what

1480
02:15:14,722 --> 02:15:16,722
the purchase...

1481
02:15:16,722 --> 02:15:18,722
Okay, so the value of the

1482
02:15:18,722 --> 02:15:20,722
burnt fees accrues to all holders,

1483
02:15:20,722 --> 02:15:22,722
but the new issuance goes to

1484
02:15:22,722 --> 02:15:24,722
stakers too. It goes only to stakers.

1485
02:15:24,722 --> 02:15:26,722
Correct.

1486
02:15:26,722 --> 02:15:28,722
But stakers

1487
02:15:28,722 --> 02:15:30,722
being holders benefit from both,

1488
02:15:30,722 --> 02:15:32,722
right? They get the new

1489
02:15:32,722 --> 02:15:34,722
issuance and the

1490
02:15:34,722 --> 02:15:36,722
company's buying back its stock.

1491
02:15:36,722 --> 02:15:38,722
They get the new issuance

1492
02:15:38,722 --> 02:15:40,722
and they get the new

1493
02:15:40,722 --> 02:15:42,722
issuance, so they dilute those

1494
02:15:42,722 --> 02:15:44,722
who aren't staking, and then they

1495
02:15:44,722 --> 02:15:46,722
get the burnt

1496
02:15:46,722 --> 02:15:48,722
fees

1497
02:15:48,722 --> 02:15:50,722
along with everyone else.

1498
02:15:50,722 --> 02:15:52,722
Everybody gets the

1499
02:15:52,722 --> 02:15:54,722
burnt fees, but it's like an equilibrium.

1500
02:15:54,722 --> 02:15:56,722
Will there be more burning or

1501
02:15:56,722 --> 02:15:58,722
more issuance?

1502
02:15:58,722 --> 02:16:00,722
I don't know how this equilibrium

1503
02:16:00,722 --> 02:16:02,722
plays out. I saw the charts that

1504
02:16:02,722 --> 02:16:04,722
they say in the long run, Ethereum will

1505
02:16:04,722 --> 02:16:06,722
settle down at 50 million ETH

1506
02:16:06,722 --> 02:16:08,722
outstanding, down from 120

1507
02:16:08,722 --> 02:16:10,722
million today.

1508
02:16:10,722 --> 02:16:12,722
They expect that kind of equilibrium to

1509
02:16:12,722 --> 02:16:14,722
emerge, but basically

1510
02:16:14,722 --> 02:16:16,722
the more popular Ethereum is, the more

1511
02:16:16,722 --> 02:16:18,722
fees are. The burning

1512
02:16:18,722 --> 02:16:20,722
will outpace issuing

1513
02:16:20,722 --> 02:16:22,722
almost all the time. It's happening right now

1514
02:16:22,722 --> 02:16:24,722
in the bear market.

1515
02:16:24,722 --> 02:16:26,722
It's no longer a bear market. It's like early

1516
02:16:26,722 --> 02:16:28,722
stages of the bull market.

1517
02:16:28,722 --> 02:16:30,722
It can't go on forever, because eventually

1518
02:16:30,722 --> 02:16:32,722
people are going to want to...

1519
02:16:34,722 --> 02:16:36,722
You can't just burn forever. You can't burn to

1520
02:16:36,722 --> 02:16:38,722
50 million ETH.

1521
02:16:38,722 --> 02:16:40,722
Yeah, you can. You just burn

1522
02:16:40,722 --> 02:16:42,722
ever smaller fractions.

1523
02:16:42,722 --> 02:16:44,722
You can have

1524
02:16:44,722 --> 02:16:46,722
50 million ETH left, and

1525
02:16:46,722 --> 02:16:48,722
the price of each ETH will be a million dollars.

1526
02:16:48,722 --> 02:16:50,722
They will burn just one

1527
02:16:50,722 --> 02:16:52,722
ETH per day on the network for the

1528
02:16:52,722 --> 02:16:54,722
next thousand years or whatever.

1529
02:16:58,722 --> 02:17:00,722
The thing is, Ethereum is more divisible than

1530
02:17:00,722 --> 02:17:02,722
Bitcoin. Ethereum has 18 decimal

1531
02:17:02,722 --> 02:17:04,722
points versus Bitcoin's 8.

1532
02:17:06,722 --> 02:17:08,722
If

1533
02:17:08,722 --> 02:17:10,722
you

1534
02:17:10,722 --> 02:17:12,722
go to

1535
02:17:12,722 --> 02:17:14,722
ultrasound.money, which is

1536
02:17:14,722 --> 02:17:16,722
nonsense, because Ethereum

1537
02:17:16,722 --> 02:17:18,722
is not money, it's just a giant

1538
02:17:18,722 --> 02:17:20,722
big tech controlled by the US government,

1539
02:17:20,722 --> 02:17:22,722
they

1540
02:17:22,722 --> 02:17:24,722
have these curves that

1541
02:17:24,722 --> 02:17:26,722
predict

1542
02:17:26,722 --> 02:17:28,722
terminal supply of Ether

1543
02:17:28,722 --> 02:17:30,722
based on burning versus

1544
02:17:30,722 --> 02:17:32,722
issuance.

1545
02:17:32,722 --> 02:17:34,722
You can see that they have

1546
02:17:34,722 --> 02:17:36,722
reasonable arguments for what

1547
02:17:36,722 --> 02:17:38,722
will happen with burning and issuance and all

1548
02:17:38,722 --> 02:17:40,722
that stuff. They expect

1549
02:17:40,722 --> 02:17:42,722
50 million ETH by 2030, for example.

1550
02:17:42,722 --> 02:17:44,722
Plus, you know,

1551
02:17:44,722 --> 02:17:46,722
they still have that ace up their sleeve, right?

1552
02:17:46,722 --> 02:17:48,722
What if Ethereum decides to ossify?

1553
02:17:48,722 --> 02:17:50,722
They don't even need to decide

1554
02:17:50,722 --> 02:17:52,722
to ossify. They can just become so popular

1555
02:17:52,722 --> 02:17:54,722
and so widely used that they become impossible

1556
02:17:54,722 --> 02:17:56,722
to change.

1557
02:17:56,722 --> 02:17:58,722
It could be like

1558
02:17:58,722 --> 02:18:00,722
the internet, right? TCPIP is impossible

1559
02:18:00,722 --> 02:18:02,722
to change just because of how widely used

1560
02:18:02,722 --> 02:18:04,722
it is.

1561
02:18:06,722 --> 02:18:08,722
So the power

1562
02:18:08,722 --> 02:18:10,722
of Vitalik's cult

1563
02:18:10,722 --> 02:18:12,722
is declining gradually, right?

1564
02:18:12,722 --> 02:18:14,722
They may not be able to

1565
02:18:14,722 --> 02:18:16,722
do these hard forks

1566
02:18:16,722 --> 02:18:18,722
once it's a 10 trillion dollar network.

1567
02:18:18,722 --> 02:18:20,722
Yeah.

1568
02:18:20,722 --> 02:18:22,722
Well, that's one of the drivechain ideology

1569
02:18:22,722 --> 02:18:24,722
ideas,

1570
02:18:24,722 --> 02:18:26,722
which is that we need to ossify,

1571
02:18:26,722 --> 02:18:28,722
but we don't want to ossify before

1572
02:18:28,722 --> 02:18:30,722
we establish extensibility.

1573
02:18:32,722 --> 02:18:34,722
Correct, yes.

1574
02:18:34,722 --> 02:18:36,722
I would say drivechains

1575
02:18:36,722 --> 02:18:38,722
is

1576
02:18:38,722 --> 02:18:40,722
necessary but insufficient

1577
02:18:40,722 --> 02:18:42,722
to ossify.

1578
02:18:42,722 --> 02:18:44,722
I'm all for

1579
02:18:44,722 --> 02:18:46,722
drivechains, but I also want

1580
02:18:46,722 --> 02:18:48,722
covenants and I want

1581
02:18:48,722 --> 02:18:50,722
to let simplicity

1582
02:18:50,722 --> 02:18:52,722
be introduced there as well.

1583
02:18:52,722 --> 02:18:54,722
Do you agree with the idea that drivechain

1584
02:18:54,722 --> 02:18:56,722
is the ultimate way to

1585
02:18:56,722 --> 02:18:58,722
speed up the establishment of

1586
02:18:58,722 --> 02:19:00,722
the

1587
02:19:00,722 --> 02:19:02,722
upgrades to L1

1588
02:19:02,722 --> 02:19:04,722
that are not drivechain?

1589
02:19:04,722 --> 02:19:06,722
If we have drivechain, then

1590
02:19:06,722 --> 02:19:08,722
you can have a drivechain doing roll-ups,

1591
02:19:08,722 --> 02:19:10,722
a drivechain doing other things.

1592
02:19:10,722 --> 02:19:12,722
No.

1593
02:19:12,722 --> 02:19:14,722
The roll-ups that are sitting on top of

1594
02:19:14,722 --> 02:19:16,722
the drivechain would not be more secure than

1595
02:19:16,722 --> 02:19:18,722
the drivechain itself.

1596
02:19:18,722 --> 02:19:20,722
But as a testing ground with live money.

1597
02:19:24,722 --> 02:19:26,722
The thing is, what you guys are doing

1598
02:19:26,722 --> 02:19:28,722
at LayerTwo Labs, you kind of have

1599
02:19:28,722 --> 02:19:30,722
a failure of imagination going on.

1600
02:19:30,722 --> 02:19:32,722
You're not, like I told this to Paul,

1601
02:19:32,722 --> 02:19:34,722
you're not ambitious enough

1602
02:19:34,722 --> 02:19:36,722
with your visions of drivechains.

1603
02:19:36,722 --> 02:19:38,722
Rather than having

1604
02:19:38,722 --> 02:19:40,722
technological

1605
02:19:40,722 --> 02:19:42,722
geeky proposals about

1606
02:19:42,722 --> 02:19:44,722
let's do Zcash or whatever,

1607
02:19:44,722 --> 02:19:46,722
if you figure out how to give

1608
02:19:46,722 --> 02:19:48,722
5 billion plebs out there

1609
02:19:48,722 --> 02:19:50,722
in the world decentralized dollar

1610
02:19:50,722 --> 02:19:52,722
using a drivechain, that's valuable.

1611
02:19:52,722 --> 02:19:54,722
I think that

1612
02:19:54,722 --> 02:19:56,722
the only way to do that

1613
02:19:56,722 --> 02:19:58,722
would be to have the Hivemind

1614
02:19:58,722 --> 02:20:00,722
oracles

1615
02:20:00,722 --> 02:20:02,722
regulate the value

1616
02:20:02,722 --> 02:20:04,722
of the decentralized dollar.

1617
02:20:04,722 --> 02:20:06,722
So there would be no collateral,

1618
02:20:06,722 --> 02:20:08,722
it would just be

1619
02:20:08,722 --> 02:20:10,722
the oracles

1620
02:20:10,722 --> 02:20:12,722
and a futures market.

1621
02:20:12,722 --> 02:20:14,722
But he has said that

1622
02:20:14,722 --> 02:20:16,722
the liquidity of Hivemind

1623
02:20:16,722 --> 02:20:18,722
might not be enough to...

1624
02:20:18,722 --> 02:20:20,722
Well, that's why

1625
02:20:20,722 --> 02:20:22,722
I wouldn't say it's the only way to do it.

1626
02:20:22,722 --> 02:20:24,722
It's probably a way to do it.

1627
02:20:24,722 --> 02:20:26,722
I haven't read about Hivemind

1628
02:20:26,722 --> 02:20:28,722
in the last god knows how many years.

1629
02:20:28,722 --> 02:20:30,722
Maybe there's been some new stuff.

1630
02:20:30,722 --> 02:20:32,722
I don't really remember reading

1631
02:20:32,722 --> 02:20:34,722
what I read the first time.

1632
02:20:34,722 --> 02:20:36,722
Don't say it's the only way to do it.

1633
02:20:36,722 --> 02:20:38,722
There's proven ways to do it

1634
02:20:38,722 --> 02:20:40,722
and they're doing it on Ethereum without

1635
02:20:40,722 --> 02:20:42,722
any crazy oracle markets.

1636
02:20:42,722 --> 02:20:44,722
It's just,

1637
02:20:44,722 --> 02:20:46,722
you do need an oracle price feed

1638
02:20:46,722 --> 02:20:48,722
for a price of Bitcoin.

1639
02:20:48,722 --> 02:20:50,722
That price feed should be decentralized.

1640
02:20:50,722 --> 02:20:52,722
But anytime you launch

1641
02:20:52,722 --> 02:20:54,722
a blockchain system,

1642
02:20:54,722 --> 02:20:56,722
be it a drivechain or a rollup,

1643
02:20:56,722 --> 02:20:58,722
you could add a decentralized

1644
02:20:58,722 --> 02:21:00,722
Bitcoin price oracle to it.

1645
02:21:00,722 --> 02:21:02,722
I mean truly decentralized.

1646
02:21:02,722 --> 02:21:04,722
Not chainlink decentralized.

1647
02:21:08,722 --> 02:21:10,722
Not Hivemind decentralized.

1648
02:21:10,722 --> 02:21:12,722
I'm assuming Hivemind decentralized

1649
02:21:12,722 --> 02:21:14,722
is game theoretically

1650
02:21:14,722 --> 02:21:16,722
decentralized somehow

1651
02:21:16,722 --> 02:21:18,722
where it's like

1652
02:21:18,722 --> 02:21:20,722
the price of an oracle

1653
02:21:20,722 --> 02:21:22,722
could be trusted because

1654
02:21:22,722 --> 02:21:24,722
if it's wrong, people will lose money somehow.

1655
02:21:26,722 --> 02:21:28,722
The idea of Hivemind,

1656
02:21:28,722 --> 02:21:30,722
in my very simple understanding,

1657
02:21:30,722 --> 02:21:32,722
is that you have a group of people

1658
02:21:32,722 --> 02:21:34,722
like the Bitcoin miners

1659
02:21:34,722 --> 02:21:36,722
where anyone can participate,

1660
02:21:36,722 --> 02:21:38,722
anyone can get involved. It's peer-to-peer.

1661
02:21:38,722 --> 02:21:40,722
You don't have to have permission

1662
02:21:40,722 --> 02:21:42,722
to become part of the oracle network.

1663
02:21:42,722 --> 02:21:44,722
And then when you're part of the oracle network,

1664
02:21:44,722 --> 02:21:46,722
you have some of this thing called votecoin.

1665
02:21:46,722 --> 02:21:48,722
So there is a token

1666
02:21:48,722 --> 02:21:50,722
that only the people who want to be an oracle

1667
02:21:50,722 --> 02:21:52,722
would have. And I think probably

1668
02:21:52,722 --> 02:21:54,722
there's some mechanism for

1669
02:21:54,722 --> 02:21:56,722
the better job. When they do a better job,

1670
02:21:56,722 --> 02:21:58,722
they make more money

1671
02:21:58,722 --> 02:22:00,722
and therefore it's

1672
02:22:00,722 --> 02:22:02,722
incentive-compatible like

1673
02:22:02,722 --> 02:22:04,722
mining where no one has to be

1674
02:22:04,722 --> 02:22:06,722
trusted but it still works. There's emergent order.

1675
02:22:06,722 --> 02:22:08,722
Similarly, the people

1676
02:22:08,722 --> 02:22:10,722
who want to be oracles, it'll be like hedge funds

1677
02:22:10,722 --> 02:22:12,722
predicting things. So they would predict

1678
02:22:12,722 --> 02:22:14,722
the value, the purchasing power of

1679
02:22:14,722 --> 02:22:16,722
a US dollar, like how many Bitcoin

1680
02:22:16,722 --> 02:22:18,722
is one US dollar

1681
02:22:18,722 --> 02:22:20,722
tomorrow. And they would predict that

1682
02:22:20,722 --> 02:22:22,722
as accurately as they could.

1683
02:22:22,722 --> 02:22:24,722
Look, Henry, I

1684
02:22:24,722 --> 02:22:26,722
get it. I get all that.

1685
02:22:26,722 --> 02:22:28,722
It might even work.

1686
02:22:28,722 --> 02:22:30,722
There is another way.

1687
02:22:30,722 --> 02:22:32,722
Simpler ways.

1688
02:22:32,722 --> 02:22:34,722
There is another way I heard.

1689
02:22:34,722 --> 02:22:36,722
Maybe

1690
02:22:36,722 --> 02:22:38,722
you should talk to Jbin.

1691
02:22:38,722 --> 02:22:40,722
I will send you

1692
02:22:40,722 --> 02:22:42,722
the handling DMs.

1693
02:22:42,722 --> 02:22:44,722
His idea is all

1694
02:22:44,722 --> 02:22:46,722
about getting the real price

1695
02:22:46,722 --> 02:22:48,722
of Bitcoin. So it's a decentralized

1696
02:22:48,722 --> 02:22:50,722
exchange kind

1697
02:22:50,722 --> 02:22:52,722
of idea but it's not for

1698
02:22:52,722 --> 02:22:54,722
end users necessarily.

1699
02:22:54,722 --> 02:22:56,722
It's for the market makers.

1700
02:22:56,722 --> 02:22:58,722
The idea is that

1701
02:22:58,722 --> 02:23:00,722
it should give you the real

1702
02:23:00,722 --> 02:23:02,722
price of Bitcoin against

1703
02:23:02,722 --> 02:23:04,722
other assets.

1704
02:23:04,722 --> 02:23:06,722
And it's

1705
02:23:06,722 --> 02:23:08,722
it's

1706
02:23:08,722 --> 02:23:10,722
the way

1707
02:23:10,722 --> 02:23:12,722
it works is

1708
02:23:12,722 --> 02:23:14,722
people play with their actual money.

1709
02:23:14,722 --> 02:23:16,722
So you don't

1710
02:23:16,722 --> 02:23:18,722
just

1711
02:23:18,722 --> 02:23:20,722
stake something or

1712
02:23:20,722 --> 02:23:22,722
stake some tokens or

1713
02:23:22,722 --> 02:23:24,722
vote or whatever. You actually

1714
02:23:24,722 --> 02:23:26,722
are putting the money on

1715
02:23:26,722 --> 02:23:28,722
the table.

1716
02:23:28,722 --> 02:23:30,722
That's another

1717
02:23:30,722 --> 02:23:32,722
crypto economically secure

1718
02:23:32,722 --> 02:23:34,722
setup where you build a game

1719
02:23:34,722 --> 02:23:36,722
and then the

1720
02:23:36,722 --> 02:23:38,722
equilibrium of that game presumably

1721
02:23:38,722 --> 02:23:40,722
is that the price is right and

1722
02:23:40,722 --> 02:23:42,722
people who don't want to play by the rules

1723
02:23:42,722 --> 02:23:44,722
lose money. But it's

1724
02:23:44,722 --> 02:23:46,722
complicated and has issues of liquidity

1725
02:23:46,722 --> 02:23:48,722
whether there will be enough trading in there

1726
02:23:48,722 --> 02:23:50,722
whether those markets are easy to

1727
02:23:50,722 --> 02:23:52,722
manipulate or not. I'm telling you there's

1728
02:23:52,722 --> 02:23:54,722
radically simpler way to do Bitcoin

1729
02:23:54,722 --> 02:23:56,722
price oracle.

1730
02:23:56,722 --> 02:23:58,722
Radically simpler.

1731
02:23:58,722 --> 02:24:00,722
That is perfectly decentralized.

1732
02:24:00,722 --> 02:24:02,722
You know

1733
02:24:02,722 --> 02:24:04,722
just imagine.

1734
02:24:04,722 --> 02:24:06,722
So Jay's idea is

1735
02:24:06,722 --> 02:24:08,722
that you don't see, you don't know

1736
02:24:08,722 --> 02:24:10,722
the real price of Bitcoin.

1737
02:24:10,722 --> 02:24:12,722
Because the whole thing is just

1738
02:24:12,722 --> 02:24:14,722
basically manipulation

1739
02:24:14,722 --> 02:24:16,722
and

1740
02:24:16,722 --> 02:24:18,722
pump and dumps

1741
02:24:18,722 --> 02:24:20,722
and whatever games.

1742
02:24:20,722 --> 02:24:22,722
That sounds like a rationalization to

1743
02:24:22,722 --> 02:24:24,722
justify his system existing.

1744
02:24:24,722 --> 02:24:26,722
You know

1745
02:24:26,722 --> 02:24:28,722
if

1746
02:24:28,722 --> 02:24:30,722
you can know the real price of Bitcoin

1747
02:24:30,722 --> 02:24:32,722
you can just have a list of 100

1748
02:24:32,722 --> 02:24:34,722
biggest exchanges that

1749
02:24:34,722 --> 02:24:36,722
you do your volume weighted or

1750
02:24:36,722 --> 02:24:38,722
time weighted

1751
02:24:38,722 --> 02:24:40,722
VWAP

1752
02:24:40,722 --> 02:24:42,722
WAP whatever they call this stuff

1753
02:24:42,722 --> 02:24:44,722
exponential moving average

1754
02:24:44,722 --> 02:24:46,722
by querying 100 largest

1755
02:24:46,722 --> 02:24:48,722
exchanges.

1756
02:24:48,722 --> 02:24:50,722
And that number doesn't need to be

1757
02:24:50,722 --> 02:24:52,722
exact. It could just be within 5%

1758
02:24:52,722 --> 02:24:54,722
of the real price of Bitcoin.

1759
02:24:54,722 --> 02:24:56,722
And if every block

1760
02:24:56,722 --> 02:24:58,722
on this site

1761
02:24:58,722 --> 02:25:00,722
drivechain or roll up

1762
02:25:00,722 --> 02:25:02,722
in its header has to include

1763
02:25:02,722 --> 02:25:04,722
let's say Moscow time

1764
02:25:04,722 --> 02:25:06,722
how many satoshis per dollar

1765
02:25:06,722 --> 02:25:08,722
in the block header

1766
02:25:08,722 --> 02:25:10,722
and every node

1767
02:25:10,722 --> 02:25:12,722
locally checks that

1768
02:25:12,722 --> 02:25:14,722
disclosed value in the block header

1769
02:25:14,722 --> 02:25:16,722
against its own view of the exchanges

1770
02:25:16,722 --> 02:25:18,722
then you essentially

1771
02:25:18,722 --> 02:25:20,722
have the same oracle as the time

1772
02:25:20,722 --> 02:25:22,722
oracle that exists in Bitcoin.

1773
02:25:22,722 --> 02:25:24,722
Right.

1774
02:25:24,722 --> 02:25:26,722
Bitcoin

1775
02:25:26,722 --> 02:25:28,722
time oracle works this way

1776
02:25:28,722 --> 02:25:30,722
Bitcoin blocks have a timestamp

1777
02:25:30,722 --> 02:25:32,722
in them and the timestamp

1778
02:25:32,722 --> 02:25:34,722
must be greater than

1779
02:25:34,722 --> 02:25:36,722
median of the 11 blocks in the past

1780
02:25:36,722 --> 02:25:38,722
and less than 2

1781
02:25:38,722 --> 02:25:40,722
hours ahead in the future

1782
02:25:40,722 --> 02:25:42,722
given network time

1783
02:25:42,722 --> 02:25:44,722
where network time is the median

1784
02:25:44,722 --> 02:25:46,722
time of all your connected nodes

1785
02:25:46,722 --> 02:25:48,722
that communicate time to you or something like that.

1786
02:25:48,722 --> 02:25:50,722
But basically Bitcoin price

1787
02:25:50,722 --> 02:25:52,722
is another ambient variable

1788
02:25:52,722 --> 02:25:54,722
just like widely available in the world right now

1789
02:25:54,722 --> 02:25:56,722
24-7

1790
02:25:56,722 --> 02:25:58,722
So if a node checks the price disclosed

1791
02:25:58,722 --> 02:26:00,722
in the block header

1792
02:26:00,722 --> 02:26:02,722
and makes sure that it's within 2 or 3%

1793
02:26:02,722 --> 02:26:04,722
of what the exchanges

1794
02:26:04,722 --> 02:26:06,722
currently show

1795
02:26:06,722 --> 02:26:08,722
then the block

1796
02:26:08,722 --> 02:26:10,722
is valid or invalid

1797
02:26:10,722 --> 02:26:12,722
so if the block is invalid it's thrown away

1798
02:26:12,722 --> 02:26:14,722
if the block is valid

1799
02:26:14,722 --> 02:26:16,722
then the chain

1800
02:26:16,722 --> 02:26:18,722
can consider the price of Bitcoin to be

1801
02:26:18,722 --> 02:26:20,722
like an exponential moving average

1802
02:26:20,722 --> 02:26:22,722
of the last 256 blocks

1803
02:26:22,722 --> 02:26:24,722
or something like that

1804
02:26:24,722 --> 02:26:26,722
and this would be

1805
02:26:26,722 --> 02:26:28,722
trust minimized price

1806
02:26:28,722 --> 02:26:30,722
oracle because

1807
02:26:30,722 --> 02:26:32,722
every price disclosed into the system

1808
02:26:32,722 --> 02:26:34,722
would be validated by all

1809
02:26:34,722 --> 02:26:36,722
right

1810
02:26:36,722 --> 02:26:38,722
you don't need a market

1811
02:26:38,722 --> 02:26:40,722
that's what I'm saying

1812
02:26:42,722 --> 02:26:44,722
I see

1813
02:26:44,722 --> 02:26:46,722
it's exactly like timestamps in Bitcoin

1814
02:26:46,722 --> 02:26:48,722
block headers right

1815
02:26:48,722 --> 02:26:50,722
now there's one downside

1816
02:26:50,722 --> 02:26:52,722
to this setup which is also true about

1817
02:26:52,722 --> 02:26:54,722
timestamps in Bitcoin block headers

1818
02:26:54,722 --> 02:26:56,722
which is when you're doing initial block

1819
02:26:56,722 --> 02:26:58,722
download right

1820
02:26:58,722 --> 02:27:00,722
one of the consensus rules is that the timestamp

1821
02:27:00,722 --> 02:27:02,722
in the block header has to be

1822
02:27:02,722 --> 02:27:04,722
greater than 11 blocks in the past

1823
02:27:04,722 --> 02:27:06,722
median of those and less than 2 hours

1824
02:27:06,722 --> 02:27:08,722
in the future but you cannot check

1825
02:27:08,722 --> 02:27:10,722
the second condition when you're doing initial

1826
02:27:10,722 --> 02:27:12,722
block download right

1827
02:27:12,722 --> 02:27:14,722
you can only check that it's

1828
02:27:14,722 --> 02:27:16,722
greater than 11 blocks in the past right

1829
02:27:16,722 --> 02:27:18,722
so

1830
02:27:18,722 --> 02:27:20,722
in this kind of system that

1831
02:27:20,722 --> 02:27:22,722
I'm talking about when somebody in the future

1832
02:27:22,722 --> 02:27:24,722
does the download of the historical data

1833
02:27:24,722 --> 02:27:26,722
they cannot necessarily check that

1834
02:27:26,722 --> 02:27:28,722
the price of Bitcoin was

1835
02:27:28,722 --> 02:27:30,722
what the block header

1836
02:27:30,722 --> 02:27:32,722
disclosed at the time they just have to trust

1837
02:27:32,722 --> 02:27:34,722
that the network as a whole

1838
02:27:34,722 --> 02:27:36,722
validated that block

1839
02:27:36,722 --> 02:27:38,722
make sense

1840
02:27:46,722 --> 02:27:48,722
well said

1841
02:27:52,722 --> 02:27:54,722
well said

1842
02:28:00,722 --> 02:28:02,722
but like this kind of Oracle

1843
02:28:02,722 --> 02:28:04,722
which you can find it you know

1844
02:28:04,722 --> 02:28:06,722
Ruben Somsen documented

1845
02:28:06,722 --> 02:28:08,722
on this page after talking

1846
02:28:08,722 --> 02:28:10,722
to me and Fernando

1847
02:28:10,722 --> 02:28:12,722
we were talking about how to do decentralized

1848
02:28:12,722 --> 02:28:14,722
price Oracle but

1849
02:28:14,722 --> 02:28:16,722
basically this is decentralization

1850
02:28:16,722 --> 02:28:18,722
by unanimous validation

1851
02:28:18,722 --> 02:28:20,722
it's the same thing as timestamps

1852
02:28:20,722 --> 02:28:22,722
in Bitcoin block

1853
02:28:22,722 --> 02:28:24,722
this only works for

1854
02:28:24,722 --> 02:28:26,722
values that are widely available

1855
02:28:26,722 --> 02:28:28,722
24x7 around the world

1856
02:28:28,722 --> 02:28:30,722
right like it wouldn't work

1857
02:28:30,722 --> 02:28:32,722
for a price of some obscure

1858
02:28:32,722 --> 02:28:34,722
company in Taiwan

1859
02:28:34,722 --> 02:28:36,722
or something like that

1860
02:28:36,722 --> 02:28:38,722
price of their stock it only works like price of Bitcoin

1861
02:28:38,722 --> 02:28:40,722
or current time

1862
02:28:41,722 --> 02:28:43,722
this kind of

1863
02:28:43,722 --> 02:28:45,722
trustless

1864
02:28:45,722 --> 02:28:47,722
validation of every

1865
02:28:47,722 --> 02:28:49,722
like Vitalik Buterin could be disclosing

1866
02:28:49,722 --> 02:28:51,722
the price of Bitcoin into every block header

1867
02:28:51,722 --> 02:28:53,722
and it would be okay

1868
02:28:53,722 --> 02:28:55,722
like if Vitalik himself put the price of

1869
02:28:55,722 --> 02:28:57,722
Moscow time into every block

1870
02:28:57,722 --> 02:28:59,722
of this roll up or the drivechain

1871
02:28:59,722 --> 02:29:01,722
that would be fine because if Vitalik

1872
02:29:01,722 --> 02:29:03,722
misbehaves his blocks will be tossed away

1873
02:29:03,722 --> 02:29:05,722
right

1874
02:29:17,722 --> 02:29:19,722
all right

1875
02:29:19,722 --> 02:29:21,722
shall we continue or

1876
02:29:21,722 --> 02:29:23,722
should we call it a day

1877
02:29:33,722 --> 02:29:35,722
Henry

1878
02:29:43,722 --> 02:29:45,722
Henry why does this

1879
02:29:45,722 --> 02:29:47,722
space have like

1880
02:29:47,722 --> 02:29:49,722
8 people in it while

1881
02:29:49,722 --> 02:29:51,722
another space about toxic

1882
02:29:51,722 --> 02:29:53,722
change and coin joints has

1883
02:29:53,722 --> 02:29:55,722
150 people in it 165

1884
02:29:55,722 --> 02:29:57,722
well obviously the reason

1885
02:29:57,722 --> 02:29:59,722
is that I'm not

1886
02:29:59,722 --> 02:30:01,722
as talented

1887
02:30:01,722 --> 02:30:03,722
as a

1888
02:30:03,722 --> 02:30:05,722
Twitter spaces host is some

1889
02:30:07,722 --> 02:30:09,722
no no it's not that I think it's

1890
02:30:09,722 --> 02:30:11,722
part of the cult it's part of the Bitcoin

1891
02:30:11,722 --> 02:30:13,722
echo chamber because

1892
02:30:13,722 --> 02:30:15,722
people think that coin joints is how

1893
02:30:15,722 --> 02:30:17,722
you get anonymity on Bitcoin

1894
02:30:17,722 --> 02:30:19,722
but you know like it's ironic

1895
02:30:19,722 --> 02:30:21,722
that Paul found a better way to do it

1896
02:30:21,722 --> 02:30:23,722
using deniability and stuff

1897
02:30:23,722 --> 02:30:25,722
but you know the

1898
02:30:25,722 --> 02:30:27,722
the Borg doesn't

1899
02:30:27,722 --> 02:30:29,722
know about it the Maxi Borg I call

1900
02:30:29,722 --> 02:30:31,722
it the Maxi Borg

1901
02:30:49,722 --> 02:30:51,722
well maybe now's a good time to

1902
02:30:53,722 --> 02:30:55,722
to break until next time

1903
02:30:55,722 --> 02:30:57,722
so this has been drivechain Twitter spaces

1904
02:30:57,722 --> 02:30:59,722
we meet every Monday and Thursday

1905
02:30:59,722 --> 02:31:01,722
next week we might meet

1906
02:31:01,722 --> 02:31:03,722
at unusual times

1907
02:31:03,722 --> 02:31:05,722
or not at all so there may be a break

1908
02:31:05,722 --> 02:31:07,722
next week where we don't meet on

1909
02:31:07,722 --> 02:31:09,722
Monday and Thursday but the

1910
02:31:09,722 --> 02:31:11,722
following week we will resume

1911
02:31:11,722 --> 02:31:13,722
as usual next week is special

1912
02:31:13,722 --> 02:31:15,722
so

1913
02:31:15,722 --> 02:31:17,722
it might be

1914
02:31:17,722 --> 02:31:19,722
missed or there might be an opportunity to

1915
02:31:19,722 --> 02:31:21,722
have

1916
02:31:21,722 --> 02:31:23,722
it at an unusual time

1917
02:31:23,722 --> 02:31:25,722
but there might be one week so for those of you who

1918
02:31:25,722 --> 02:31:27,722
enjoy talking about drivechain every

1919
02:31:27,722 --> 02:31:29,722
Monday and Thursday my

1920
02:31:29,722 --> 02:31:31,722
apologies thanks for your patience

1921
02:31:31,722 --> 02:31:33,722
we'll have to pick up

1922
02:31:33,722 --> 02:31:35,722
one week from now probably

1923
02:31:35,722 --> 02:31:37,722
a little bit more than that

1924
02:31:39,722 --> 02:31:41,722
alright

1925
02:31:41,722 --> 02:31:43,722
thanks for setting it up Henry

1926
02:31:43,722 --> 02:31:45,722
thank you Alex see you next time

1927
02:31:45,722 --> 02:31:47,722
thank you Moon Settler and others

1928
02:31:47,722 --> 02:31:49,404
ciao