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Welcome to the Bitcoin Infinity Show, brought to you by  BitBox Stampseed,

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the Bitcoin Advisor and ShopInBit.

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Go to  BitcoinInfinity.com for books, merch and more.

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Enjoy the conversation.

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Adam, welcome back to the Bitcoin Infinity Show, newly rebranded.

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It's a good name.

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Good to be here again.

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Yeah, yeah, the correct greeting would be, good morning, Adam, uh, no, welcome, Adam,

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back to the Bitcoin Infinity Show, right?

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So, how are you

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today?

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Yeah, pretty good.

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Good to be back in Riga at this conference.

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One of the few kind of Bitcoin only conferences that's still running.

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I mean, they did a panel yesterday talking about the history of

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Bitcoin, of the conference.

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And they observed that there were some people that came to all of them.

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Apparently I was one of them.

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I didn't realize, that's, that's true though, in the sense that

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I like Bitcoin only conferences.

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So, you know, there's too many conferences really for people who

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have a day job to go to, or maybe even for anybody's case at this point,

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there's so many conferences, right?

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But.

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If you've got to make a choice, you want to come to the Bitcoin Only ones.

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And this is one of the good ones.

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Yeah, I missed the first one, but I've been to all the other

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ones.

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So like, this is where everything started for me.

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And I, I really like it because it's so high signal, low noise.

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Uh, yeah,

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And I don't think there's a single shit coiner in here this year.

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Like it's

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I've met a couple of, met a couple of, um, people who are, aren't fully orange

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pilled, but, but yeah, there, there aren't any crypto, crypto vendors or

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anything.

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Like, yeah,

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one's shilling this stuff.

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Yeah, yeah, yeah.

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I've got a good thing going.

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So, so how has your year been?

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Well, I mean, last time we interviewed you was here in Riga last year.

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it was.

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What has happened?

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You made a price prediction then, I think.

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Uh, yeah, I was seeing the, well, let me see what time of year.

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Yeah, it's probably this time of year.

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So I think the price was like a bit depressed, 30k range or something.

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And I was saying, we might see 100k before the halving and everybody thought

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I was insane because they thought we were going to see 10k or something dismal.

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What's the next, uh, outcome?

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And so, you know, of course, if you make a price prediction and you miss,

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you always get ragged, but like, it's not a precise science, right?

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And so, so my argument is, well, I was directionally right, that we had

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a new all time high before the half inc, which had never happened before,

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and it wasn't 100, but it was like, over 70, which nobody saw coming.

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So, and there's a lot of stuff going on in the world, so I, I take that as a

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kind of philosophical win, personally.

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yeah.

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The all time high was when we were on Madeira, I believe.

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That's when it happened.

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So that was a big moment.

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So, so we'll, so yeah, direct stupid price.

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We never talk about price, but when, when does Bitcoin hit a hundred thousand?

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well probably, maybe even this year or next year, like, uh, I think there are

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a lot of, um, kind of, there were a lot of temporary headwinds which are wearing

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off, you know, the um, the bankruptcy selling, like FTX bankruptcy selling.

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Because Some of these bankruptcies take a dollar denominated definition.

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So they declare a bankruptcy date and they sell everything to dollars.

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And then they run their process, try and claw back what they

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can, and then pay it out.

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And so people get back, you know, the people who had the bitcoins on there

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would sooner have the bitcoin and experience the bitcoin price movement

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between the bankruptcy date and today.

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Even if it's like a fraction of the bitcoin.

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I don't know, what they did is they sold to dollars and they declared

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that everybody made a profit.

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But now they have to buy the bitcoin back, uh, you know, four

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times the price or something.

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So, uh, I mean, there's a lot of things like that, you know.

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Um, different bankruptcies, selling, government seizures, uh, Mt.

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Gox paying out.

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Mt.

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Gox doesn't seem to be having that much effect.

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Uh, but people are presumably just holding it.

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Um, But, you know, there's a new, new game in town, which is the ETF buyers.

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And they are, I think, predominantly in the U.

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S., I mean, these U.

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S.

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ETFs, of course you can buy them internationally, but presumably mostly U.

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S.

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buyers.

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And if you look at a segment of the U.

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S.

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kind of individual investors.

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So if you take the top 10 percent of wealth, you subtract the top 1%, you

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know, the billionaires kind of thing.

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The top 1%, sorry, top 10 percent might be, you know,

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professionals, doctors, lawyers.

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Business owners, people with a portfolio ranging from a few hundred thousand

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to a few million kind of thing.

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And between them, they have, um, 30 trillion worth of stocks

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and bonds and different things in their portfolio, basically.

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And so we think it's those guys that are buying.

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And if you look at the ETF inflows, Um, so, you know, 30 trillion, 1 percent

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of, if they did a 1 percent allocation, it'd be 300 billion, which would move

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the Bitcoin price, because even though Bitcoin's market cap's like maybe 1.

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3 trillion, price is set at the margin, and there's a multiplier

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of money in, as we know, right?

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Um, and so if you look at their allocations so far, if you assume it's

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all US, they're like at six basis points or something, so they've got a way to go.

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And, you know, not all of the wealth management firms have internal

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approvals or training materials or, you know, rules about what they can,

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how they can sell it in place yet.

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So, I think that's got some room to go.

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Another thing that was going on is post harving, miners are having a bad time.

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You know, hash price is down, miner profitability is not so good.

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There's still a surplus of miners.

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And so, you've got people with sunk cost miners.

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So, they're going to turn them online, even if they are

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just to reduce their loss.

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Right?

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And so that, that kind of suppresses the hash price.

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Um, and so some of them have been selling Bitcoin.

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I mean, they try to accumulate and keep Bitcoin on a balance sheet,

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but some of them have been selling their Bitcoin, uh, you know, to, Get

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through this tough period, right?

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Um, so once, I think once that runs out and you've seen some consolidation,

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like acquisitions and mergers and bankruptcies in the mining sector.

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So once they're selling stops, that helps as well, right?

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So it's all about like the balance of sellers and buyers.

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So yeah, I think, um, and the other kind of positive surprise is the ETF

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buyers Uh, seems to be good hotlists.

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Like, they buy and they don't sell.

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Like, you know, there's a decent pullback and there's very

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little outflow from the ETFs.

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And, you know, they're even inflowing.

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You know, buying the dip a bit at times.

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So, and of course that affects the, the money multiplier because, you know, if, if

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somebody buys and they're new to Bitcoin and the price drops 10 percent and they

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sell, they're not really helping because, you know, they push the price up and

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they push it down and they offset, or maybe they make it worse, right, because

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Bitcoin tends to, uh, I don't know.

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Have, you know, with, with stocks, there are analysts who are looking

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at prices that work for pension funds and things like that.

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And they will have a price target.

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And if the price gets low, they'll say it's cheap and they'll put

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money in and they'll buy it because they've got a thesis.

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With Bitcoin, most of the people who have the thesis have no fear left.

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And so absorbing downside is difficult.

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Structurally, right?

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So, so people who buy and panic actually might be a net negative.

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So, um, but the ETF buyers apparently are not like that, so that's, you know, that's

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positive news, uh, for the price, you know, for the structure, market structure.

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So, yeah, I mean, I think there's a lot of, uh, goods set up here, and, you know,

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people are talking about institutional.

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Interest, but I don't think there's that, that hasn't landed yet, really.

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You know, there's a few very early funds.

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So institutional, we would mean right, um, pension funds, mutual funds, like

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managed by professionals on behalf of individuals rather than individuals making

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allocations within their own portfolio.

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And so there are a few places where, you know, BlackRock has added it to

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some managed fund or Fidelity, but there's very few of them right now.

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And they've made small allocations.

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So I think, you know, there's lots of, all of that is ahead of us.

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And that's even more money than this, you know, the top, you know, 10 percent minus

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1 percent band of investors in the US.

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That's a much bigger part of mine.

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Yeah, uh, you mentioned minor profitability there, and one thing

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we've explored on this show a lot is the spam issue, so I'd love to

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pick your brain on what your stance on that is, and how big of a problem

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it is, how we solve the problem,

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Yeah.

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what the fee spikes are doing to it.

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You know, custodial lightning providers and stuff like, what are your thoughts?

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Yeah.

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I mean, um, of course, because Bitcoin is permissionless, there's

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nothing we can do about it.

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And we need that to be the case because, you know, censorship is, um, I mean, if

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censorship is possible, it can be directed at anything at spam and, uh, things that,

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you know, some group of people don't like and say, there's not much we can do

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about it in terms of selective filtering, just inherently rank because Bitcoin is

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permissionless and censorship resistant.

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But in terms, and some people would say just a kind of market

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statement that spam doesn't exist.

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If people pay, it's not spam because they, they paid for it.

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But I disagree.

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I think it's, you know, it's clear that Bitcoin is, You know, focused on

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use cases and an outcome for savings and ability to transact the savings,

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ability to do transactions, to use it, to support second layers for more kind

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of permissionless payments and activities that degrade the ability to transact.

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Um, that, that hurts, you know, hurts layer two.

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Maybe, you know, they're also consuming UTXO space and it's a

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scarce resource, so they're gonna price some newcomers out of it.

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Like the wealth levels in the, in the world are quite dpar disparate.

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And so, you know, they may price some newcomers out of being able to even own

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A-U-T-X-O, which is not a positive thing.

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And you know, the, uh, the spam transactions are not.

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know, as a value judgment, I think they're useless and stupid, right?

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They're just putting JPEGs on the chain that, you know, obliterate the

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space of a hundred UTXOs at a pop.

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And so, you know, maybe they think they derive value from it

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in their kind of NFT Ponzi game, but it's a negative for Bitcoin.

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Yeah.

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Yeah.

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So, so, um, what about an initiative like Ocean, for instance, that, that

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just chooses to, or let's, let's the individual miners select the block and.

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Well, I mean, I think it's good.

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It's good for individual miners to be able to select blocks

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because, or select block policies.

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Because you, you want like, um, it's kind of decentralization theory that you

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get a more robust system, especially, I mean, that's basically how censorship

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resistance works in, in Bitcoin, which is you, know, if one miner won't process your

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transactions because he doesn't like you, another one will because there's, there's

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a fee involved or because philosophically he doesn't want to see any policy there.

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Right.

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And, um, So from that point of view, it's good.

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Now they do get some ribbing because their blocks may be less profitable.

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And so, you know, some people will philosophically, well, they'll, they'll

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mine the block with the highest fees, even if it's full of JPEGs or something.

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Yeah,

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but I think the rationale there, as far as I understand it, is that the bigger mining

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pools, mining these blocks with all the spam in them, that they might be getting

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payments under the table, so to speak.

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So it's not transparent, so the individual hash salesman that sells their hashing

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power to that particular pool, Might not get, uh, as big a cut of the reward as

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they think they do, uh, and that in the long run you might be even more profitable

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mining with something like Ocean.

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That's been, there was, uh, I think Bob Burnett looked at this and did

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this over quite some, quite some time and his ocean pointed, uh, ASICs did

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better than, uh, Various FPPS pools.

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He didn't name the pools, but yeah.

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So apparently, yeah.

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I mean, it's clear that when they're doing this, the fees go up.

235
00:13:00,754 --> 00:13:03,914
I mean, they saw a fee spike just a few days ago, right?

236
00:13:04,004 --> 00:13:10,614
And, well, I mean, it's very positive if, if the rational thing to do, you

237
00:13:10,614 --> 00:13:14,614
know, that's, that's positive for Bitcoin, actual native use cases also

238
00:13:14,614 --> 00:13:18,614
is more profitable because it shows the free market potentially has a solution.

239
00:13:18,644 --> 00:13:25,194
And, and also, you know, just because we are, Economic actors doesn't mean

240
00:13:25,194 --> 00:13:27,714
we have to be, uh, hyper rational.

241
00:13:28,184 --> 00:13:33,924
Like, you know, there is some ethical, like some people won't accept stolen

242
00:13:33,924 --> 00:13:36,334
goods on a principle, a lot of people.

243
00:13:36,764 --> 00:13:37,804
And like you say, but it's cheap.

244
00:13:38,414 --> 00:13:41,234
You save money, you make money by doing it, but they don't want to do it

245
00:13:41,234 --> 00:13:43,214
because they disagree philosophically.

246
00:13:43,944 --> 00:13:50,579
And so there is potentially some scope within Bitcoin mining for, um, Kind of

247
00:13:50,579 --> 00:13:54,409
soft, uh, policy type of things, right?

248
00:13:54,439 --> 00:14:00,219
Which is, you know, they choose to deprioritize JPEGs or something, right?

249
00:14:00,509 --> 00:14:02,209
Um, it's interesting.

250
00:14:02,209 --> 00:14:06,599
I mean, it's possible that what that's saying as well is that the

251
00:14:07,329 --> 00:14:13,299
pools taking under the table payments are being unethical actually, right?

252
00:14:13,309 --> 00:14:18,534
So they are, um, Under reporting or keeping the profit or excluding

253
00:14:18,534 --> 00:14:21,944
the profit from their payout calculations or something.

254
00:14:22,744 --> 00:14:23,444
So, yeah.

255
00:14:24,224 --> 00:14:27,664
Maybe it's not that they're being unethical, but that the hash

256
00:14:27,684 --> 00:14:32,164
salesmen aren't vigilant enough in checking what is actually going on.

257
00:14:33,474 --> 00:14:38,404
So they just accept, oh, I'm making a profit, so therefore I'm good.

258
00:14:38,464 --> 00:14:42,444
When they could have been making a bigger profit with a more ethical behavior.

259
00:14:43,124 --> 00:14:50,154
I mean, the spam, like the long term risk of the spam is that the cost of firing up

260
00:14:50,154 --> 00:14:58,364
a new node gets so high, so it's somewhat of an attack surface that in the long

261
00:14:58,364 --> 00:15:00,204
run will reduce the number of attacks.

262
00:15:00,884 --> 00:15:04,034
Uh, individual nodes because they're too expensive to run,

263
00:15:04,194 --> 00:15:06,494
uh, and hard decentralization.

264
00:15:06,494 --> 00:15:07,354
So what's your take there?

265
00:15:07,974 --> 00:15:12,584
Well, I mean, I think, you know, the miners are typically, I mean, not

266
00:15:12,584 --> 00:15:17,194
the pools, but the miners themselves are typically Bitcoin holders.

267
00:15:17,644 --> 00:15:21,604
They want to mine a Bitcoin at discount and keep as many of it as they can.

268
00:15:22,379 --> 00:15:26,159
Because they're trying to build a bitcoin stash or treasury for

269
00:15:26,159 --> 00:15:30,039
the company or, you know, stacking sats for the owner or operator.

270
00:15:30,289 --> 00:15:32,879
And some of these pools have been around a long time, so they're like privately

271
00:15:32,879 --> 00:15:33,979
owned and stuff like that, right?

272
00:15:34,539 --> 00:15:35,639
And some of the miners too.

273
00:15:35,669 --> 00:15:41,390
So, If that's the case, they're not just kind of short term profiteers.

274
00:15:41,880 --> 00:15:46,730
They have a long term alignment in Bitcoin's adoption curve, usefulness.

275
00:15:47,510 --> 00:15:51,610
And, you know, if you take it to the extreme case, which sometimes

276
00:15:51,610 --> 00:15:52,830
helps to reason about things.

277
00:15:54,010 --> 00:15:58,580
If everybody went crazy and like, you know, shrunk the blocks effectively,

278
00:15:58,640 --> 00:15:59,690
or made it very disruptive.

279
00:15:59,700 --> 00:16:02,510
So it hurt use cases, made Lightning harder to use.

280
00:16:03,200 --> 00:16:08,770
Then, you know, that could impact people's confidence in transact with Bitcoin.

281
00:16:09,670 --> 00:16:14,090
Um, or it could push everybody to like, you know, custodial wallets or something.

282
00:16:14,350 --> 00:16:19,220
So it could have a long term negative effect on the Bitcoin economic,

283
00:16:19,240 --> 00:16:21,360
you know, price and adoption curve.

284
00:16:22,030 --> 00:16:27,040
And so from that point of view, as a long term investor in Bitcoin, as a, as

285
00:16:27,040 --> 00:16:32,485
a miner, let's say, Maybe you're willing to forego some, you know, fee spikes

286
00:16:32,575 --> 00:16:37,705
because you think that, uh, that will help Bitcoin and you help everybody eventually.

287
00:16:37,715 --> 00:16:39,775
Now the problem is the freeloader, right?

288
00:16:39,775 --> 00:16:42,515
So, you know, if, if everybody takes that view or enough people

289
00:16:42,515 --> 00:16:43,805
take that view, it works out.

290
00:16:43,805 --> 00:16:49,925
But if, if it's, you know, only 10 percent of people do it, then the people who take

291
00:16:49,925 --> 00:16:53,105
the more freeloader kind of mentality, they actually profit short term.

292
00:16:53,205 --> 00:16:53,385
So.

293
00:16:54,165 --> 00:16:59,635
Yeah, yeah, so, so the question boils down to, is that, that incentive strong enough?

294
00:16:59,685 --> 00:17:02,665
The, the incentive to keep Bitcoin alive for a long time?

295
00:17:03,135 --> 00:17:08,275
Or, or, or is that a weak, a weak chain in the link of Bitcoin security?

296
00:17:09,775 --> 00:17:17,185
Well, I mean, I think, uh, I mean, because one, one other sort of risk

297
00:17:17,185 --> 00:17:20,555
that people talk about or like to talk about, which I think is premature,

298
00:17:20,555 --> 00:17:25,715
is, is the prospect that the reward eventually stops because the halvings

299
00:17:26,385 --> 00:17:28,285
or becomes less significant, right?

300
00:17:28,385 --> 00:17:30,675
And, um,

301
00:17:32,785 --> 00:17:34,915
and then they wonder, does the, does the network have enough

302
00:17:34,915 --> 00:17:36,375
incentive to secure itself?

303
00:17:36,945 --> 00:17:46,130
And My argument is, um, you know, like the, there are lots, most

304
00:17:46,130 --> 00:17:47,140
other forms of money are weaker.

305
00:17:48,490 --> 00:17:53,850
You know, so like fiat depends on, you know, 10, 000 banks, none of them

306
00:17:53,850 --> 00:17:57,610
being hacked, kind of weakest link in the chain and like audit discovery

307
00:17:57,680 --> 00:18:02,870
of insider theft or unauthorized printing and stuff like that.

308
00:18:02,880 --> 00:18:07,762
So I think people, need money to work.

309
00:18:08,362 --> 00:18:14,362
And so, you know, with Bitcoin, there's a trillion dollar incentive for it

310
00:18:14,362 --> 00:18:16,582
to work from all the savers, right?

311
00:18:16,682 --> 00:18:22,852
And so I think they would actually find ways to make it work regardless, right?

312
00:18:23,422 --> 00:18:30,192
Um, even if it meant, you know, spending 1 percent to do a bit of

313
00:18:30,192 --> 00:18:31,612
mining that doesn't make a profit.

314
00:18:32,287 --> 00:18:35,127
Because they value bitcoin, or you know, they have a business that makes money

315
00:18:35,127 --> 00:18:39,077
because of bitcoin, and if it becomes less functional, that has their business.

316
00:18:39,087 --> 00:18:40,377
So, there are other,

317
00:18:42,437 --> 00:18:44,907
you know, kind of mutual cooperation situations.

318
00:18:45,407 --> 00:18:50,047
I mean, a close one is internet peering arrangements, right?

319
00:18:50,167 --> 00:18:53,757
So, you know, the internet, everybody, retailers using an internet connection

320
00:18:53,757 --> 00:18:55,297
is paying a service provider.

321
00:18:56,137 --> 00:19:01,377
But at a certain level of service provider or telecom provider, they have peering

322
00:19:01,377 --> 00:19:04,587
arrangements where they agree to transit each other's traffic in like a tit for

323
00:19:04,587 --> 00:19:09,857
tat or, you know, without payment or with some calculated rebalancing or something.

324
00:19:09,857 --> 00:19:15,587
So it shows that, those companies need the internet to work.

325
00:19:15,747 --> 00:19:18,567
And so they'll find a way to cooperate, even if it's not, you

326
00:19:18,567 --> 00:19:21,637
know, hyper, hyper rational behavior.

327
00:19:21,847 --> 00:19:24,577
Um, Because ultimately they make all their money from selling,

328
00:19:24,857 --> 00:19:25,977
from the internet working well.

329
00:19:26,337 --> 00:19:28,107
And so you could see that working with Bitcoin.

330
00:19:28,107 --> 00:19:30,117
If Bitcoin is the internet of money, why couldn't that go up with Bitcoin?

331
00:19:30,117 --> 00:19:31,247
So I think it could ultimately.

332
00:19:31,647 --> 00:19:35,327
So I'm not really worried about, you know, I think long term things will work out.

333
00:19:36,267 --> 00:19:40,377
And, and I think the other point is, you know, these use cases

334
00:19:40,377 --> 00:19:41,727
might just price themselves out.

335
00:19:41,967 --> 00:19:45,837
Like, you know, the fee spikes haven't lasted that long so far.

336
00:19:45,837 --> 00:19:55,992
And also they tend to be You know, rug pull the investors and I think

337
00:19:56,002 --> 00:20:00,432
the investors are getting fatigue, like, you know, get sick of losing

338
00:20:00,432 --> 00:20:02,322
money and then they eventually learn.

339
00:20:03,042 --> 00:20:11,042
So, you know, I saw a post last month by some altcoin guy, but it was basically

340
00:20:11,132 --> 00:20:19,752
a plea to altcoin creators and memecoin creators to reduce the pre mine.

341
00:20:20,692 --> 00:20:24,402
Because it was making hard to sell new coins because there was no possible,

342
00:20:24,412 --> 00:20:29,712
almost no possibility even for a lucky retail investor to make any money because

343
00:20:29,722 --> 00:20:33,972
the insiders were just, you know, dumping on it before it had a chance to succeed.

344
00:20:33,972 --> 00:20:37,412
And the users just gave up, lost, lost interest in playing the roulette game.

345
00:20:37,462 --> 00:20:37,792
Right.

346
00:20:37,802 --> 00:20:42,992
So near from that point, if you, this kind of profiteering is sort

347
00:20:42,992 --> 00:20:44,292
of killing itself slowly as well.

348
00:20:45,007 --> 00:20:50,197
I guess the devil's advocate argument to that is that what if a spammer

349
00:20:50,207 --> 00:20:57,297
has an actual money printer and like And this is a, the, you know, it's

350
00:20:57,307 --> 00:21:02,607
conspiracy theory waters, but like, if this is actually a state funded

351
00:21:02,607 --> 00:21:08,977
attack to like reduce the usability of Bitcoin and thereby saving the legacy

352
00:21:08,977 --> 00:21:11,237
system, it's far fetched, I know, but

353
00:21:11,472 --> 00:21:11,942
Hmm.

354
00:21:12,012 --> 00:21:12,422
Yeah.

355
00:21:12,817 --> 00:21:13,607
even possible?

356
00:21:14,441 --> 00:21:16,531
I mean, I guess they would be.

357
00:21:18,766 --> 00:21:19,256
Paying.

358
00:21:20,226 --> 00:21:26,366
So, I mean, you know, potentially the Bitcoin ecosystem would have

359
00:21:26,366 --> 00:21:29,686
more money to fight back because the attacker is paying it.

360
00:21:29,776 --> 00:21:32,196
So, you know, maybe something creative could be done.

361
00:21:32,196 --> 00:21:36,721
I mean, I think there are like, if it became a problem, there

362
00:21:36,721 --> 00:21:37,971
would be workarounds, right?

363
00:22:38,962 --> 00:22:39,362
All right.

364
00:22:39,452 --> 00:22:41,062
Um, next topic.

365
00:22:41,267 --> 00:22:45,197
Well, a follow on on this one is the effect on the layer twos.

366
00:22:45,407 --> 00:22:48,897
And I mean, Liquid, I think, saw quite a bit of adoption, right?

367
00:22:48,937 --> 00:22:51,637
As a result of these fee things.

368
00:22:51,637 --> 00:22:54,047
Like the incentives, the other incentives that people move

369
00:22:54,047 --> 00:22:55,967
to other layers, basically.

370
00:22:55,967 --> 00:22:58,967
And people with lightning channels were very happy, but other people without

371
00:22:58,967 --> 00:23:00,307
lightning channels were less happy.

372
00:23:00,917 --> 00:23:05,017
Um, things like, uh, Boltz's interoperability with, uh, with liquid

373
00:23:05,037 --> 00:23:08,747
and things like that seems to have solved that, so I mean, what has been

374
00:23:08,937 --> 00:23:12,107
the effect on liquid, uh, in all this?

375
00:23:12,802 --> 00:23:16,352
Yeah, I mean it, I think we were talking about this last time, so it was like,

376
00:23:16,412 --> 00:23:21,742
it had just started to happen then, and it's actually continued and grown.

377
00:23:22,652 --> 00:23:30,322
Um, and, so there are more wallets using liquid and bolts combo, so it's a way

378
00:23:30,322 --> 00:23:36,047
to, You have a lightning wallet without having a lightning wallet, kind of, right?

379
00:23:36,047 --> 00:23:39,057
So you have a liquid wallet and use the bolts exchange to swap liquid for

380
00:23:39,057 --> 00:23:41,327
lightning or swap lightning for liquid.

381
00:23:41,557 --> 00:23:46,757
And so to the user, it feels like they are able to interoperate with lightning.

382
00:23:46,777 --> 00:23:49,197
It feels like they have a lightning wallet, but actually they're using

383
00:23:49,907 --> 00:23:54,757
the managed channels, using bolts, his own capital on the main chain.

384
00:23:56,197 --> 00:23:58,337
And they're atomically swapping liquid.

385
00:23:58,337 --> 00:24:02,897
So I mean, the original mechanism they built was to rebalance lightning channels.

386
00:24:03,267 --> 00:24:06,747
And it started on the main chain, it got disrupted by the first

387
00:24:06,747 --> 00:24:08,197
wave of ordinals and inscriptors.

388
00:24:10,332 --> 00:24:15,292
And so they rapidly implemented a liquid Bitcoin atomic, submarine atomic

389
00:24:15,292 --> 00:24:16,642
swap to rebalance the main chain.

390
00:24:16,672 --> 00:24:22,702
But over a period of months, that became used by wallets as an API.

391
00:24:23,542 --> 00:24:26,262
You know, originally it was just for people managing channels to rebalance

392
00:24:26,262 --> 00:24:30,002
channels, but it became actually second use, which is a wallet API.

393
00:24:30,907 --> 00:24:34,157
And so that, that has continued to grow in popularity.

394
00:24:34,157 --> 00:24:37,197
So it's sort of competing with other Lightning stacks.

395
00:24:37,827 --> 00:24:42,257
You know, say Blockstream, for example, has Core Lightning, which

396
00:24:42,267 --> 00:24:46,297
is, you know, uh, there are a few, like three or four Lightning kind

397
00:24:46,297 --> 00:24:47,907
of node and library implementations.

398
00:24:47,907 --> 00:24:51,787
And Core Lightning is one of them that focuses on interoperability,

399
00:24:52,037 --> 00:24:55,677
um, and standards, you know, evolving the standards, doing things

400
00:24:55,677 --> 00:24:57,157
in a standard interoperable way.

401
00:24:57,617 --> 00:24:59,867
And then we have Greenlight, which is a kind of.

402
00:25:00,977 --> 00:25:06,907
Lightweight, uh, way to integrate Lightning into wallets.

403
00:25:07,027 --> 00:25:11,637
Um, it, it puts more of the kind of support intelligence on a

404
00:25:11,637 --> 00:25:16,637
server and, but the key signing and verification is done on the device.

405
00:25:16,737 --> 00:25:19,967
So it, it makes it more lightweight cause you don't have to download as much stuff.

406
00:25:20,037 --> 00:25:24,647
And so effectively BoxStream has two products indirectly.

407
00:25:24,687 --> 00:25:26,897
Now, of course, like, because these are infrastructure products,

408
00:25:26,907 --> 00:25:28,977
other people are building things around them and innovating, right?

409
00:25:28,987 --> 00:25:29,147
So.

410
00:25:29,767 --> 00:25:33,127
But effectively Blockstream has part in two things, which ended up competing

411
00:25:33,127 --> 00:25:36,637
with each other, which is Greenlight as a, as a way to make a Lightning Wallet

412
00:25:37,537 --> 00:25:42,467
and Liquid plus Bolt's Atomic Swaps, which is, uh, now, I mean, both of

413
00:25:42,467 --> 00:25:44,647
those things are growing, but they're like competing with each other, right?

414
00:25:44,647 --> 00:25:47,187
Because there are alternatives, you know, you either, you either run a Greenlight

415
00:25:47,807 --> 00:25:50,737
integrated Lightning Wallet, or you, you do a full node Lightning Wallet

416
00:25:50,737 --> 00:25:52,297
or, you know, some other system, right?

417
00:25:52,397 --> 00:25:55,367
Or, You don't do a lightning wallet and you get one anyway

418
00:25:55,367 --> 00:25:57,227
by using bolts API and swaps.

419
00:25:57,237 --> 00:25:57,947
So that's pretty cool.

420
00:25:57,947 --> 00:26:00,347
And like, since we talked last year, there have been.

421
00:26:01,367 --> 00:26:04,357
Ball Bitcoin stepped up and really gone for this model.

422
00:26:05,257 --> 00:26:06,817
Peach Bitcoin is doing it.

423
00:26:06,987 --> 00:26:10,407
I just hope somebody at this conference is also doing it.

424
00:26:10,487 --> 00:26:16,777
And Breeze is, um, Breeze is actually using, um, Greenlight.

425
00:26:18,247 --> 00:26:22,367
But, yeah, so it seems to be growing as a convenient way.

426
00:26:22,367 --> 00:26:27,957
And I think the other thing that is, you know, the next bottleneck you

427
00:26:27,957 --> 00:26:32,267
could foresee coming is that, okay, you can use other layer twos and you

428
00:26:32,267 --> 00:26:33,927
could also use like e cash, right?

429
00:26:33,937 --> 00:26:39,797
Like the, the cashew and a fetty, the glue that holds those together and they,

430
00:26:39,867 --> 00:26:41,667
they can have multiple mints, right?

431
00:26:42,447 --> 00:26:43,947
Um, is lightning.

432
00:26:43,997 --> 00:26:47,487
So you can also implicitly rebalance a lightning channel using, you know,

433
00:26:47,537 --> 00:26:49,587
fetty cash or cashew cash, right?

434
00:26:50,247 --> 00:26:54,627
So the ability to rebalance existing main chain lightning channels with

435
00:26:54,627 --> 00:26:58,864
other layer twos, like you said, that helps if you already have a channel,

436
00:26:58,904 --> 00:27:00,214
but what if you don't have a channel?

437
00:27:01,049 --> 00:27:05,329
Now you've got to establish a channel, and if the fees are really high,

438
00:27:06,119 --> 00:27:07,439
maybe that becomes impractical.

439
00:27:07,539 --> 00:27:15,089
So, now you can clearly see that Boltz maybe helps because it's,

440
00:27:15,899 --> 00:27:18,549
you don't actually have to lay any channel, they do, right?

441
00:27:18,619 --> 00:27:21,438
And so they can survive in higher fee environments because they've

442
00:27:21,439 --> 00:27:24,309
got fat channels, because they're shared amongst lots of users, right?

443
00:27:24,849 --> 00:27:32,074
But for users that actually want a soft custodial channel, um, They, uh,

444
00:27:32,154 --> 00:27:35,924
I mean, like just, just to be clear that you are self custodial with,

445
00:27:36,544 --> 00:27:39,994
with bolts, it's just that your, your custody is on liquid, right?

446
00:27:40,874 --> 00:27:45,734
So it's, it's kind of neat cause you get the sort of reliability and performance

447
00:27:45,734 --> 00:27:51,874
advantages of a custodial channel like arrangement, except that not yours.

448
00:27:52,064 --> 00:27:54,374
There are bolts and it doesn't affect your self custody, right?

449
00:27:54,444 --> 00:27:59,524
Whereas, um, A wallet, I think Blue Wallet was an Satoshi is the biggest one,

450
00:27:59,524 --> 00:28:00,984
right, where it's actually custodial.

451
00:28:01,744 --> 00:28:05,104
You just own a share of the, of a big channel, and that's

452
00:28:05,104 --> 00:28:06,384
it, it's an IOU, right.

453
00:28:06,404 --> 00:28:08,104
So, so Boltz doesn't have that problem.

454
00:28:08,534 --> 00:28:12,744
So, the obvious problem is, nevertheless, like, what's gonna happen next?

455
00:28:13,004 --> 00:28:21,899
Um, and, so, what, what we What we're doing with Greenlight is, there is

456
00:28:21,899 --> 00:28:27,629
lightning on Liquid, so, you know, because Liquid is, is organized in the same way as

457
00:28:27,629 --> 00:28:31,029
Bitcoin as a blockchain, lightning works on it, and a core lightning implementation

458
00:28:31,029 --> 00:28:34,239
has worked on Liquid for, I don't know, five years or something, right?

459
00:28:34,239 --> 00:28:40,239
But there has never been enough demand or reason to, you know, grow a network and

460
00:28:40,239 --> 00:28:43,329
liquidity and interconnectivity there.

461
00:28:43,419 --> 00:28:47,439
Um But the time may be rising for that.

462
00:28:47,489 --> 00:28:51,749
And so the idea there is that using green light, we can, um,

463
00:28:52,639 --> 00:28:53,959
kind of merge the networks.

464
00:28:54,079 --> 00:28:58,479
So there are like a kind of merger of the two networks.

465
00:28:58,489 --> 00:29:01,349
So you can route through, through both types of channels.

466
00:29:02,059 --> 00:29:05,499
And that's good because it means that you get interoperability.

467
00:29:05,499 --> 00:29:07,029
So somebody has a main chain channel.

468
00:29:07,539 --> 00:29:11,169
They don't really need to know or care that the sender has

469
00:29:11,189 --> 00:29:13,769
a liquid lightning channel.

470
00:29:14,014 --> 00:29:20,914
Or, um, or if they also have a Bitcoin Lightning Channel, but some of the

471
00:29:20,914 --> 00:29:24,694
intermediate hops are liquid Lightning Channels, because, you know, it all

472
00:29:24,694 --> 00:29:26,274
interoperates and it's anyway atomic.

473
00:29:26,584 --> 00:29:29,284
So, right, you don't really care if the characteristics of the channels

474
00:29:29,284 --> 00:29:30,314
are slightly different in the middle.

475
00:29:31,074 --> 00:29:35,714
Um, and so, you know, that opens a new prospect, which is some,

476
00:29:35,784 --> 00:29:40,354
once that's in play, that's in development now, some wallets might.

477
00:29:41,609 --> 00:29:44,469
You know, the different types of users in the network, right?

478
00:29:44,469 --> 00:29:48,189
We've seen that the The service providers, the API providers, and the

479
00:29:48,189 --> 00:29:49,839
stores, they can afford fat channels.

480
00:29:50,139 --> 00:29:51,579
So actually they can, they're okay.

481
00:29:51,639 --> 00:29:52,649
They can survive, right?

482
00:29:52,829 --> 00:29:55,849
But, but the retail endpoints, that gets expensive.

483
00:29:55,949 --> 00:29:58,629
You know, if you want to like set up a lightning wallet and receive five,

484
00:29:58,899 --> 00:30:01,969
five dollars of liquidity, which, which by the way, somebody is probably,

485
00:30:02,729 --> 00:30:06,159
you know, lending you and trying to recoup by charging you fees later.

486
00:30:06,209 --> 00:30:07,999
So that, that liquidity is expensive.

487
00:30:08,894 --> 00:30:13,394
Um, if it costs 5 of fees to put 5 on there, that starts

488
00:30:13,394 --> 00:30:14,374
to get problematic, right?

489
00:30:14,464 --> 00:30:20,134
And so, you know, there is a, there is a, the world where retail users end up

490
00:30:20,164 --> 00:30:26,284
using Liquid on Lightning and for the, for the endpoints that are, you know,

491
00:30:26,284 --> 00:30:28,134
direct soft custody, not using bolts.

492
00:30:29,509 --> 00:30:33,609
And they, you know, and they're cheaper and, you know, the obvious thing to say

493
00:30:33,609 --> 00:30:37,979
about Liquid is, you know, blockchains blockchain and, you know, if you pushed it

494
00:30:37,979 --> 00:30:44,959
too far, you know, giga blocks, like some forks we won't mention, then it will also

495
00:30:45,029 --> 00:30:46,969
stop being a blockchain for many purposes.

496
00:30:47,119 --> 00:30:52,859
But I think the middle ground is that because it's anyway not as

497
00:30:52,859 --> 00:30:55,469
decentralized, you can assume a.

498
00:30:56,474 --> 00:31:02,284
Kind of more power user profile, like you need a reasonable, you know, home

499
00:31:02,284 --> 00:31:07,254
internet connection with, you know, 10, 20 megabits or something higher, right?

500
00:31:07,764 --> 00:31:12,954
And you need a faster computer, you know, like maybe a reasonable laptop

501
00:31:12,954 --> 00:31:16,394
class computer and not a Raspberry Pi or something, and then it can keep up.

502
00:31:16,824 --> 00:31:20,434
But if you, if you try it with a Raspberry Pi and we have to scale it in this

503
00:31:20,434 --> 00:31:22,964
kind of middle range, I mean, at the moment it runs on a Raspberry Pi, but

504
00:31:22,964 --> 00:31:25,054
if it gets, if it needs to get scaled.

505
00:31:26,184 --> 00:31:27,274
Then that won't be the case.

506
00:31:27,284 --> 00:31:30,494
So, so I think there's a sort of incremental scale you can

507
00:31:30,494 --> 00:31:32,844
get to, but beyond a certain point, it stops making sense.

508
00:31:32,854 --> 00:31:37,464
So I think that means that there is scope for, uh, lightning

509
00:31:37,464 --> 00:31:39,774
on liquid to fill in a bit.

510
00:31:39,834 --> 00:31:44,274
But like the, the other observation is that, you know, the market is still

511
00:31:44,274 --> 00:31:51,164
evolving things like the bolts API is like a pure market innovation and, you

512
00:31:51,164 --> 00:31:52,404
know, almost a happenstance, right?

513
00:31:52,414 --> 00:31:54,364
The people who built it weren't anticipating it.

514
00:31:54,779 --> 00:31:56,239
So there's like three parties involved.

515
00:31:56,239 --> 00:32:01,319
Like we built liquid, built an atomic swap, and then wallet users started

516
00:32:01,499 --> 00:32:04,899
using their channel rebalancing to build a new architecture standard, right?

517
00:32:05,509 --> 00:32:08,419
So, you know, who knows what the future holds, right?

518
00:32:08,499 --> 00:32:10,459
There may be new things that evolve.

519
00:32:11,079 --> 00:32:17,049
Um, of course the, the e cash protocols are very scalable, but

520
00:32:17,049 --> 00:32:18,229
they have a different trade off.

521
00:32:18,489 --> 00:32:22,039
Um, so the limitation there is.

522
00:32:22,864 --> 00:32:27,374
Firstly, the model is quite similar to Liquid, like it's a federation, it's

523
00:32:27,374 --> 00:32:32,304
just that the federation is, you know, a community situation, where Liquid is

524
00:32:32,304 --> 00:32:37,114
a federation of Bitcoin exchanges and wallets and different companies, right?

525
00:32:37,214 --> 00:32:42,764
So, um, so you've got that factor, but then laid on top of that, you also have

526
00:32:42,784 --> 00:32:48,504
the trade offs of the e cash protocols, and so they have extremely good privacy.

527
00:32:49,589 --> 00:32:53,269
They're unauditable because it's a side effect of the privacy.

528
00:32:53,949 --> 00:32:54,819
You can't

529
00:32:57,169 --> 00:32:58,629
how many coins have been issued.

530
00:32:59,369 --> 00:33:03,019
And so you don't know, you can audit the coins that are pegged into it,

531
00:33:03,019 --> 00:33:05,969
but you can't audit if they, if they issued a matching number of coins.

532
00:33:06,599 --> 00:33:11,409
And so you have to prospect that, you know, with, with any kind of peg, there's

533
00:33:11,649 --> 00:33:15,749
a, there's a risk that the peg gets bypassed somehow and the peg coins get

534
00:33:15,969 --> 00:33:18,529
taken out and then you're fractional and then that's game over, right?

535
00:33:19,164 --> 00:33:22,604
But with the e cash protocols, you've got the possibility of it

536
00:33:22,604 --> 00:33:25,484
going fractional in an undetectable way and staying that way for years.

537
00:33:25,984 --> 00:33:27,854
Uh, like a kind of slow theft, right?

538
00:33:27,894 --> 00:33:31,994
If, if there's people generally paying in and not paying, you know, if, if you

539
00:33:31,994 --> 00:33:39,324
can see that there are a hundred Bitcoin in and, um, you know, a hundred Bitcoin

540
00:33:39,334 --> 00:33:42,204
out, but people are still using it and think they have Bitcoin, then clearly

541
00:33:42,204 --> 00:33:44,214
it's been, it's fractional, right?

542
00:33:44,264 --> 00:33:45,874
But you won't find out until that's the case.

543
00:33:45,884 --> 00:33:48,094
But now, so in between.

544
00:33:49,024 --> 00:33:51,874
You know, you could think there's a hundred Bitcoin in there, but

545
00:33:51,874 --> 00:33:54,724
actually they issue 200 and you, you wouldn't, you don't have to

546
00:33:54,724 --> 00:33:55,774
have a way to detect that, right?

547
00:33:55,774 --> 00:33:56,914
So that, that's the trade off.

548
00:33:56,914 --> 00:34:01,234
Now, there's a positive side effect of that, which is because you can't audit

549
00:34:01,234 --> 00:34:04,924
it, there's no audit stream, there's no like, big amounts of data, of past

550
00:34:04,924 --> 00:34:06,634
transactions to download and blocks.

551
00:34:07,174 --> 00:34:10,084
And so it becomes very scalable, right?

552
00:34:10,084 --> 00:34:11,554
So you, you don't have to sync a node.

553
00:34:11,734 --> 00:34:14,194
You just like connect to a new cash server.

554
00:34:14,194 --> 00:34:15,094
There's very little data.

555
00:34:16,069 --> 00:34:16,969
So that's a trade off there.

556
00:34:16,969 --> 00:34:20,769
So, I mean, I think the other variable is other than custody,

557
00:34:20,799 --> 00:34:27,369
we don't know how much people will favor the Feddy and Cashy approach.

558
00:34:27,369 --> 00:34:31,159
You know, if that gets a lot of adoption, that's form of scalability

559
00:34:31,159 --> 00:34:31,839
with a different trade off.

560
00:34:31,859 --> 00:34:35,169
So we'd have to wait and see what the market likes, you know?

561
00:34:35,744 --> 00:34:41,754
Yeah, I think it was Lynn Alden that made the point that Yes, because even with

562
00:34:41,784 --> 00:34:46,989
custodial lightning and stuff like this you can you can do a fractional Fractional

563
00:34:46,989 --> 00:34:52,649
reserve banking on Bitcoin effectively, but, but to a much smaller degree than in

564
00:34:52,649 --> 00:34:58,169
the legacy system, because, um, because you have something to measure against.

565
00:34:58,169 --> 00:35:02,409
You can see, uh, it's not, it's not like there are cameras in Fort Knox

566
00:35:02,409 --> 00:35:05,688
that we can see all the gold there and how much is actually there and stuff.

567
00:35:05,689 --> 00:35:11,269
But you can still see on chain transactions, so that it's

568
00:35:11,289 --> 00:35:13,239
possible, but not to the massive,

569
00:35:13,859 --> 00:35:17,779
not on the scale that the legacy system has.

570
00:35:18,039 --> 00:35:19,009
Well.

571
00:35:20,929 --> 00:35:24,749
Yeah, I mean, I hope that, you know, I think Lynn is talking about

572
00:35:24,819 --> 00:35:26,489
kind of competitive free banking.

573
00:35:26,569 --> 00:35:32,449
So the concept that you could have a fractional reserve Bitcoin bank.

574
00:35:32,489 --> 00:35:34,889
Now, I hope that never happens and that people refuse to use

575
00:35:34,889 --> 00:35:36,239
any such proposals, right?

576
00:35:36,369 --> 00:35:43,094
But, I mean, And maybe some free banking people would think that's okay.

577
00:35:43,204 --> 00:35:46,284
You know, that you can have fractional Bitcoin banks and people

578
00:35:46,284 --> 00:35:49,904
can choose them based on how well managed they are or how long they

579
00:35:49,904 --> 00:35:51,204
lasted or whether people trust them.

580
00:35:51,234 --> 00:35:54,454
But I, I would say never accept fractional Bitcoin.

581
00:35:55,464 --> 00:36:02,654
Like, and so I hope that the market like takes that outlook,

582
00:36:02,764 --> 00:36:04,154
does not use fractional Bitcoin.

583
00:36:04,414 --> 00:36:05,714
But I think the challenge is that.

584
00:36:06,464 --> 00:36:09,744
You know, particularly with some of these community run things, you

585
00:36:09,744 --> 00:36:13,874
don't necessarily know who's running them, or even that, you know, if

586
00:36:13,874 --> 00:36:16,474
it's like a three or five, that that's not all the same person.

587
00:36:17,014 --> 00:36:17,964
Can't necessarily tell, right?

588
00:36:17,974 --> 00:36:22,654
So sooner or later, somebody is going to try and rug pull them

589
00:36:23,464 --> 00:36:28,534
and you don't actually know, you know, how many coins they printed.

590
00:36:29,504 --> 00:36:29,824
Right.

591
00:36:29,834 --> 00:36:32,844
Cause you, you literally, cause I mean, basically what happens is you,

592
00:36:33,294 --> 00:36:38,404
what's supposed to happen is you peg in coins into the mints and it issues

593
00:36:38,404 --> 00:36:41,494
you with coins, but because of the privacy, they can issue, the owners

594
00:36:41,494 --> 00:36:44,744
of it can issue, if they collude as a federation, can issue themselves

595
00:36:44,744 --> 00:36:46,224
more coins and you can't audit it.

596
00:36:46,594 --> 00:36:47,454
You can't detect that.

597
00:36:47,534 --> 00:36:48,344
And then they can spend them.

598
00:36:49,264 --> 00:36:51,284
Um, they overdo it.

599
00:36:51,594 --> 00:36:56,109
Eventually it might become apparent because, you know, People might

600
00:36:56,109 --> 00:36:57,889
withdraw and then it hits zero.

601
00:36:58,169 --> 00:37:00,979
And yet there are lots of people who think they still have a balance, right?

602
00:37:01,529 --> 00:37:02,389
Then you'd notice.

603
00:37:02,949 --> 00:37:04,719
So that, that kind of trade off.

604
00:37:05,659 --> 00:37:08,319
And of course it's like, it has IOU risk as well, right?

605
00:37:08,319 --> 00:37:18,555
Cause it's, it's um, if the operators are regulatory attacks, they might be forced

606
00:37:18,565 --> 00:37:20,255
to like freeze it or something, right?

607
00:37:23,285 --> 00:37:26,475
So, and it's a very interesting trade off as well between, you

608
00:37:26,475 --> 00:37:31,285
know, identified company operated federations and community federations.

609
00:37:31,295 --> 00:37:38,635
So, I think, you know, people tend to trust themselves, so like, they

610
00:37:38,635 --> 00:37:40,925
feel good about community because they can participate, they can run

611
00:37:40,925 --> 00:37:42,835
their own and they trust themselves and their friends trust them.

612
00:37:43,515 --> 00:37:49,405
And But on the other hand, it might be more of a grey area about

613
00:37:49,405 --> 00:37:50,995
whether that's regulatorily okay.

614
00:37:51,435 --> 00:37:55,205
Now I assume that, you know, because families de facto do, you know, like,

615
00:37:55,315 --> 00:37:58,225
some shared financing and things, that in a small scale there's probably

616
00:37:58,225 --> 00:38:00,985
nothing that could be said about it.

617
00:38:02,085 --> 00:38:03,295
And it differs in countries, right?

618
00:38:03,305 --> 00:38:05,515
Some countries have very little banking and so everything is

619
00:38:05,515 --> 00:38:06,615
organized like this, right?

620
00:38:07,845 --> 00:38:12,535
So maybe that's, you know, the target use case, but at least with the

621
00:38:13,045 --> 00:38:18,895
exchange companies, you, you know, the pool of companies that may be

622
00:38:18,895 --> 00:38:26,285
running the, uh, the hardware, the nodes, and they are anyway operating

623
00:38:26,995 --> 00:38:28,775
regulated businesses typically, right?

624
00:38:28,775 --> 00:38:31,895
I mean, they're, they're operating an exchange where they do KYC and they have

625
00:38:31,925 --> 00:38:33,455
banking, you know, their bank accounts.

626
00:38:33,495 --> 00:38:34,915
And saying.

627
00:38:36,070 --> 00:38:40,960
It's maybe not introducing them to, you know, they're already regulated, right?

628
00:38:41,040 --> 00:38:44,340
So, you know, maybe it doesn't change their profile that much.

629
00:38:44,400 --> 00:38:48,960
Um, yeah, so that's, that's the kind of interesting trade off.

630
00:38:49,810 --> 00:38:55,110
So, I mean, my, my viewpoint is generally, you know, uh, just, just build things

631
00:38:55,240 --> 00:38:57,290
and react to what works in the market.

632
00:38:57,420 --> 00:39:01,240
And cause it's like very, you can't like centrally plan or plan ahead because it's

633
00:39:01,240 --> 00:39:06,410
too complicated to like map out You know, like, like some of these altcoins do, you

634
00:39:06,410 --> 00:39:10,630
know, there's a, there's a dictator, like, who thinks he's benevolent, who's like

635
00:39:10,740 --> 00:39:14,720
drawing roadmaps and waving his arms and saying this is how it's going to work.

636
00:39:14,740 --> 00:39:17,410
And I think in the real world that doesn't, that never works.

637
00:39:17,630 --> 00:39:19,300
So people are just going to build things.

638
00:39:19,940 --> 00:39:24,080
And if you want to succeed in that environment, you have to adapt to what

639
00:39:24,080 --> 00:39:27,860
gets innovated, what gets traction and what, what the market wants to use.

640
00:39:27,860 --> 00:39:31,760
You know, users are maybe, could be more pragmatic.

641
00:39:33,195 --> 00:39:35,815
than the operator of an individual company who thinks, you know,

642
00:39:35,855 --> 00:39:38,555
things really should work this way and they like this and not that.

643
00:39:39,115 --> 00:39:43,085
If users make a pragmatic choice, they won't use that product, right?

644
00:39:43,565 --> 00:39:46,525
So I think that's, you know, that's one of the reasons you have to adapt.

645
00:39:47,260 --> 00:39:51,100
I mean, some people already make the choice not to use specifically Wallet

646
00:39:51,100 --> 00:39:55,470
of Satoshi and choose just a different custodial provider because it seems

647
00:39:55,470 --> 00:39:59,020
like the risk is lower in others.

648
00:39:59,020 --> 00:40:02,410
The Wallet of Satoshi seems to be like the big one that if that one were to collapse,

649
00:40:02,410 --> 00:40:04,980
it would be a big deal, basically.

650
00:40:05,115 --> 00:40:05,465
Yeah.

651
00:40:05,465 --> 00:40:12,705
I mean, it's interesting in, uh, in some areas you see people gravitate towards

652
00:40:12,705 --> 00:40:16,425
the biggest because I think it's the best, but in this case, the biggest is

653
00:40:16,425 --> 00:40:18,965
the highest risk because it's relevant.

654
00:40:20,895 --> 00:40:23,985
And, you know, they have more users, so one of the users will do something

655
00:40:24,025 --> 00:40:28,235
incredibly stupid or illegal and create the external investigation.

656
00:40:29,145 --> 00:40:30,785
So it's probably the most at risk.

657
00:40:31,035 --> 00:40:33,285
Um, probably a balance though, right?

658
00:40:33,295 --> 00:40:37,375
If it's super unknown, maybe it's just set there to like rug

659
00:40:37,375 --> 00:40:38,805
pull some unsuspecting users.

660
00:40:38,975 --> 00:40:45,125
So I guess, you know, there is some kind of owner reputation, like if the

661
00:40:45,195 --> 00:40:50,400
owner is publicly known and, Also, if they've been involved in the space

662
00:40:50,400 --> 00:40:53,940
for a long time, probably helps, like, they've, a Lindy effect, right,

663
00:40:53,940 --> 00:40:54,920
that's been operating for a while.

664
00:40:54,940 --> 00:40:57,640
There's no guarantee, like, you can get late rug pulls.

665
00:40:58,545 --> 00:41:03,565
Yeah, if I got the point right from Lynn's book about free banking, it's

666
00:41:03,565 --> 00:41:07,855
like that there's nothing inherently wrong with fractional reserve banking,

667
00:41:07,865 --> 00:41:13,365
as long as it's transparent and the users or the customers of the bank

668
00:41:13,715 --> 00:41:15,465
know that that is what they're doing.

669
00:41:15,465 --> 00:41:16,605
So the banker can tell.

670
00:41:17,175 --> 00:41:21,235
Uh, the clients that, uh, okay, we're, uh, are you okay with

671
00:41:21,295 --> 00:41:26,365
us using a portion of your, uh, wealth to invest in other things?

672
00:41:26,365 --> 00:41:30,675
And if you are, we will be able to give you an interest in the long,

673
00:41:31,205 --> 00:41:33,845
uh, to give an interest over time.

674
00:41:34,685 --> 00:41:38,715
And she always said, like, the problems come in when you have a central bank

675
00:41:38,715 --> 00:41:42,525
and banks get bailed out and you have all these government guarantees and

676
00:41:42,525 --> 00:41:47,415
stuff because then that whole system becomes way, way, way much more complex

677
00:41:47,635 --> 00:41:52,805
and it's very hard, at least if you have a bank that, a fractional reserve

678
00:41:52,815 --> 00:41:59,625
bank, and it goes bankrupt, it's the users of that bank that pay the

679
00:41:59,625 --> 00:42:00,225
bill in the end.

680
00:42:00,490 --> 00:42:06,530
it's true that it avoids the moral hazard and kind of perverse side

681
00:42:06,530 --> 00:42:09,710
effects of central banking, Buh.

682
00:42:12,560 --> 00:42:15,480
And it's also true that the right people suffer the consequences,

683
00:42:15,530 --> 00:42:18,520
which is if you thought this was a good idea, and there's a bank run,

684
00:42:18,650 --> 00:42:19,040
Yeah.

685
00:42:19,140 --> 00:42:20,830
it's, it's you that loses, right?

686
00:42:21,220 --> 00:42:23,700
But at the same time, like, there were a lot of bank runs.

687
00:42:23,740 --> 00:42:26,500
So historically, right before they introduced central banking,

688
00:42:26,500 --> 00:42:27,600
now I don't like central banking.

689
00:42:28,545 --> 00:42:33,755
And, but I also don't want to experience a bank run when Bitcoin repeats the

690
00:42:34,045 --> 00:42:38,505
pre central banking fractional reserve situation, so I want full reserve banking.

691
00:42:38,545 --> 00:42:42,845
In fact, I want like multi, like either single custody or a multi sig

692
00:42:42,855 --> 00:42:45,035
so they can't spend it without, so they can't make fractional without

693
00:42:45,035 --> 00:42:46,065
my approval or something, right?

694
00:42:46,725 --> 00:42:51,135
And I mean, there's a gray area of fractionality, which is kind of

695
00:42:51,205 --> 00:42:55,925
rehypothecation, which is to say, you know, you put your Bitcoin into

696
00:42:55,925 --> 00:43:00,485
a bank, they make a business loan of the Bitcoin to somebody, and they

697
00:43:00,485 --> 00:43:01,895
have collateral for the business loan.

698
00:43:01,925 --> 00:43:06,035
So if the business fails, they can sell the business assets and

699
00:43:06,035 --> 00:43:08,495
rebuy the Bitcoin and pay you back.

700
00:43:09,135 --> 00:43:14,995
So, you know, A small amount of rehypothecation sort of sounds okay.

701
00:43:14,995 --> 00:43:17,895
And like, I think a lot of that happened in the DeFi though.

702
00:43:18,265 --> 00:43:23,615
And the problem is that people get greedy and the competing

703
00:43:23,615 --> 00:43:24,905
people offering interest.

704
00:43:25,925 --> 00:43:26,335
Um.

705
00:43:27,045 --> 00:43:28,175
They have a race to the bottom, right?

706
00:43:28,175 --> 00:43:30,675
They, they offer a high and higher interest and they take more and more

707
00:43:30,675 --> 00:43:35,425
crazy risks till they're ultimately lending to people who are running

708
00:43:35,455 --> 00:43:39,865
Ponzi's or hedge funds making directional bets that backfire.

709
00:43:40,235 --> 00:43:43,125
Because like, you know, to their point of view, they take the upside

710
00:43:43,125 --> 00:43:44,845
and if it fails, they shrug, right?

711
00:43:45,335 --> 00:43:48,725
Now, it's not, you know, if a, if a wealthy investor chooses

712
00:43:48,725 --> 00:43:52,755
to take that risk profile as a hedge fund investor, Fair game.

713
00:43:52,905 --> 00:43:58,475
But if somebody who is a, I don't know, let, let's say Gemini Urn user who just

714
00:43:58,485 --> 00:44:02,425
thinks, you know, oh, they're offering interest and assumes that it's in

715
00:44:02,425 --> 00:44:05,185
some, you know, they don't, they don't think about how does that work, right?

716
00:44:05,185 --> 00:44:11,735
That it's, um, yeah, it, it creates problems and you get,

717
00:44:11,825 --> 00:44:13,385
you get contagion and so on.

718
00:44:13,425 --> 00:44:20,695
So I think the, uh, non fractional reserve is the, is the way to go or.

719
00:44:21,780 --> 00:44:24,940
At least fully collateralized, like over collateralized lending.

720
00:44:25,000 --> 00:44:32,870
And the problem is, people know, but the prevailing interest rates on Bitcoin

721
00:44:32,870 --> 00:44:36,800
and dollars in the Bitcoin trading and exchange ecosystem are very different.

722
00:44:36,940 --> 00:44:41,060
So the dollar interest rates are double digit, 10, 15, 20%,

723
00:44:41,790 --> 00:44:43,350
depending on the market conditions.

724
00:44:43,720 --> 00:44:45,310
It's mostly used for leverage, right?

725
00:44:45,670 --> 00:44:49,470
But also for business work in capital, like miners will borrow.

726
00:44:50,550 --> 00:44:53,100
Dollars to, I don't know, buy more miners or something against

727
00:44:53,130 --> 00:44:54,110
Bitcoin or against miners.

728
00:44:54,120 --> 00:44:58,240
So the prevailing interest rate is, is high because there's a shortage

729
00:44:58,240 --> 00:45:02,220
of dollars because too many people are, I mean, I think it's a good

730
00:45:02,220 --> 00:45:05,280
thing, but like everybody's very all in, so they don't have any dollars.

731
00:45:05,340 --> 00:45:10,640
So there's a shortage of dollars and the big pools of institutional

732
00:45:10,640 --> 00:45:16,400
capital and bank capital outside of Bitcoin doesn't understand the risk.

733
00:45:16,995 --> 00:45:17,915
And so they're scared, right?

734
00:45:17,935 --> 00:45:23,135
So, so they, you know, they'll be earning, you know, 5%, they could earn 15, but

735
00:45:23,135 --> 00:45:24,025
they're scared of the risk profile.

736
00:45:24,025 --> 00:45:25,375
They think it's not worth it, right?

737
00:45:25,925 --> 00:45:31,405
So, and then on the Bitcoin side, know, there are very, very few people who are

738
00:45:31,405 --> 00:45:33,065
short Bitcoin for long periods of time.

739
00:45:33,825 --> 00:45:39,155
And so it's very cheap to borrow Bitcoin to short it on exchanges.

740
00:45:39,185 --> 00:45:41,315
There's, there's lots of, I mean, people leave their custody of

741
00:45:41,465 --> 00:45:42,775
Bitcoin on exchanges, many traders.

742
00:45:43,275 --> 00:45:46,685
There's lots of bitcoins sitting there, so they've got like a free market rate,

743
00:45:47,175 --> 00:45:49,525
there's a huge amount of bitcoin and very few people that want to borrow it.

744
00:45:50,065 --> 00:45:53,535
Because the borrowing rate is like, you know, a fraction of a percent.

745
00:45:54,170 --> 00:45:55,220
It's not, I mean, it's not worth lending.

746
00:45:55,230 --> 00:45:58,030
It's not worth intentionally exposing yourself to the custody

747
00:45:58,030 --> 00:45:59,690
risk to get the interest rate.

748
00:45:59,920 --> 00:46:01,070
That's a bad deal, right?

749
00:46:01,080 --> 00:46:07,310
So, so consequently when people offer you, you know, mid single digit

750
00:46:07,500 --> 00:46:12,970
interest rates on Bitcoin, like five percent, it's, that implies necessarily,

751
00:46:13,410 --> 00:46:18,200
for the most part, that they're making unsecured, uncollateralized

752
00:46:18,250 --> 00:46:20,090
loans of Bitcoin to other people.

753
00:46:21,280 --> 00:46:23,680
And then if they, if that person is, you know, how are

754
00:46:23,680 --> 00:46:24,670
they creating an interest rate?

755
00:46:24,850 --> 00:46:26,260
Or they're gambling on something, right?

756
00:46:26,320 --> 00:46:30,780
And if they get it wrong, then the person rehypothecating

757
00:46:30,790 --> 00:46:32,150
it, it's going to lose money.

758
00:46:32,160 --> 00:46:33,790
And then you're going to lose, you're going to lose the coins.

759
00:46:33,830 --> 00:46:38,520
And that, that's basically what happened in the DeFi implosion.

760
00:46:38,940 --> 00:46:44,040
And especially if you have a a UA huge bull run in the midst of it, then they'll

761
00:46:44,040 --> 00:46:45,930
never be able to buy back the coins.

762
00:46:45,980 --> 00:46:46,510
Yeah.

763
00:46:46,680 --> 00:46:47,030
Yeah.

764
00:46:47,290 --> 00:46:51,490
I mean, uh, it's also, I mean, it's all about directional bets.

765
00:46:51,500 --> 00:46:54,290
So lots of examples, you know, I mean, so, you know.

766
00:46:56,030 --> 00:47:00,270
Some users, because the problem is the RISC profile is getting laundered through

767
00:47:01,170 --> 00:47:04,175
intermediary Borrowers and lenders, right?

768
00:47:04,215 --> 00:47:07,945
So you'll put it in something that is trying to be conservative and they'll

769
00:47:07,945 --> 00:47:12,455
give it to, to some other party that's providing an interest rate and on

770
00:47:12,455 --> 00:47:15,915
what, you know, hand waving about, oh, how they, you know, they do due

771
00:47:15,915 --> 00:47:20,705
diligence, they only lend to reputable borrowers, blah, blah, blah, right?

772
00:47:21,215 --> 00:47:25,265
And all that they stand in the, in the way, like they will repair a loss.

773
00:47:26,060 --> 00:47:29,430
But then what really happens is it lends to somebody else who lends to somebody

774
00:47:29,430 --> 00:47:31,050
else who's doing something crazy, right?

775
00:47:31,170 --> 00:47:35,000
And then, you know, even if these guys say that they'll stand in the way,

776
00:47:35,740 --> 00:47:37,270
they're just doing that to make a sale.

777
00:47:37,340 --> 00:47:39,350
And when too many things go wrong, they go bankrupt, right?

778
00:47:39,350 --> 00:47:41,030
So the guarantee is also not worth anything.

779
00:47:41,150 --> 00:47:42,770
It's the big short, that's

780
00:47:42,800 --> 00:47:45,020
basically the plot synopsis of the big short.

781
00:47:45,150 --> 00:47:46,410
Yeah, I love that film.

782
00:47:46,410 --> 00:47:51,450
And it's very ironic that, you know, the Bitcoin ecosystem is like

783
00:47:51,480 --> 00:47:53,710
repeating the exact same problems.

784
00:47:53,800 --> 00:47:54,200
Yeah.

785
00:47:54,580 --> 00:47:57,130
Did you see the um, the GameStop one?

786
00:47:57,400 --> 00:48:00,700
I don't remember the name of the film, but it was very similar to the big short.

787
00:48:01,490 --> 00:48:02,030
I haven't seen that.

788
00:48:02,740 --> 00:48:03,220
you haven't seen

789
00:48:03,270 --> 00:48:04,120
I'll go look.

790
00:48:04,140 --> 00:48:04,360
Yeah,

791
00:48:04,480 --> 00:48:04,660
Yeah.

792
00:48:04,660 --> 00:48:06,670
Yeah, you should because it's very like.

793
00:48:07,650 --> 00:48:13,360
There's, uh, so it's about the game shop's, uh, uh, stock and, um, there's

794
00:48:13,360 --> 00:48:18,360
a ton of Bitcoin, uh, uh, memes in it that originates from Bitcoin,

795
00:48:18,390 --> 00:48:22,000
like HODL, for instance, and we're not selling and all of this stuff.

796
00:48:22,320 --> 00:48:28,280
And, uh, the, the thing is when you, when you see that movie, it's like all of these

797
00:48:28,280 --> 00:48:32,910
people that were involved in this did this when, uh, When Bitcoin was already

798
00:48:32,910 --> 00:48:38,000
a thing so like it's it's not that far back So if they had done the exact same

799
00:48:38,030 --> 00:48:44,110
thing with Bitcoin Then the the big hedge funds and stuff and Robin Hood couldn't

800
00:48:44,110 --> 00:48:51,380
have like suppressed it at any point So so that it gives you like holy shit when

801
00:48:51,460 --> 00:48:56,480
when Some guy like that gets gets the same idea and gets the same momentum on

802
00:48:56,480 --> 00:49:01,370
social media and stuff on Bitcoin It's like game over when it's every Every

803
00:49:01,370 --> 00:49:04,690
single saver starts just, I'm not selling,

804
00:49:06,010 --> 00:49:11,300
Yeah, I mean, um, yeah, I mean, like the GameStop is interesting

805
00:49:11,310 --> 00:49:13,620
because of, exposes a few things.

806
00:49:13,620 --> 00:49:20,402
I mean, one is the, the, people, like people with different power

807
00:49:20,452 --> 00:49:22,482
have different access to the market.

808
00:49:23,002 --> 00:49:26,382
So the retail traders are trading through Robinhood in this case.

809
00:49:27,137 --> 00:49:31,357
And Robin Hood, for technical reasons, might have to suspend trading.

810
00:49:32,437 --> 00:49:33,387
Just when you need to trade.

811
00:49:34,152 --> 00:49:34,562
yeah,

812
00:49:34,657 --> 00:49:35,467
And that's a problem.

813
00:49:35,692 --> 00:49:36,202
reasons.

814
00:49:36,417 --> 00:49:42,057
I mean, the technical reason is that they, they, um, the delayed

815
00:49:42,057 --> 00:49:44,097
settlement, like the T plus one stuff.

816
00:49:44,247 --> 00:49:47,507
And so, and of course, like the technical reasons could

817
00:49:47,517 --> 00:49:48,767
be politically biased, right?

818
00:49:48,797 --> 00:49:50,357
Is to save their big friends, right?

819
00:49:50,367 --> 00:49:50,717
So.

820
00:49:51,352 --> 00:49:55,052
It's like, any, any kind of brokerage like that is going for a prime broker and a

821
00:49:55,052 --> 00:49:56,852
clearing house, so there's a stack rank.

822
00:49:56,932 --> 00:50:00,381
And, because of the delayed settlement, it's really naked selling, right?

823
00:50:00,421 --> 00:50:03,541
So you're selling and buying on your platform, if there's an imbalance, like

824
00:50:03,541 --> 00:50:05,161
your users are more buying than selling.

825
00:50:05,871 --> 00:50:09,591
Now, you haven't actually paid for it yet, and so they're worried you're

826
00:50:09,591 --> 00:50:11,601
going to be able to, if the price moves.

827
00:50:12,121 --> 00:50:15,791
And so, You know, they have to have a certain amount of, uh,

828
00:50:15,801 --> 00:50:18,921
working capital with their prime brokerage to guarantee their trades.

829
00:50:19,001 --> 00:50:23,261
But if they get like a massive, you know, crazy run of buying, they run out

830
00:50:23,261 --> 00:50:26,421
of capital and their broker, their prime broker cuts them off because they're like,

831
00:50:26,421 --> 00:50:28,121
well, we're not going to absorb that risk.

832
00:50:28,121 --> 00:50:30,601
You either post us, you either send us like tens of millions of

833
00:50:30,601 --> 00:50:33,121
more capital, or we're going to suspend trading on this stock.

834
00:50:33,891 --> 00:50:35,591
And they couldn't do it that quickly.

835
00:50:35,591 --> 00:50:35,851
Right.

836
00:50:35,931 --> 00:50:39,101
And so for the users, it was horrendous because, you know,

837
00:50:39,141 --> 00:50:41,790
they got stuck holding a bubble.

838
00:50:42,231 --> 00:50:44,161
And the fact that the trading stopped probably caused the

839
00:50:44,161 --> 00:50:45,521
bubble to collapse as well.

840
00:50:45,551 --> 00:50:48,241
And they've got to sit there and watch it fall where they can't react, right?

841
00:50:51,701 --> 00:50:52,621
Dysfunctional.

842
00:50:52,621 --> 00:50:55,511
I mean, the Bitcoin market never does that, you know, because it's, it's

843
00:50:55,521 --> 00:50:58,881
global, 24 by seven, it's, it's real time.

844
00:50:58,971 --> 00:51:00,141
There's no delayed settlement.

845
00:51:00,191 --> 00:51:01,501
Nobody's naked selling anything.

846
00:51:02,231 --> 00:51:05,491
You don't have these problems, but it shows like the structure problem.

847
00:51:06,051 --> 00:51:08,551
And then, I mean, the other thing, which is,

848
00:51:10,701 --> 00:51:12,471
I mean, the thing is a dog, right?

849
00:51:12,561 --> 00:51:15,141
It deserves to be shorted and the hedge funds for shorting it for good

850
00:51:15,141 --> 00:51:17,761
reason, because it's a defunct business.

851
00:51:17,771 --> 00:51:25,021
And, um, But, you know, if you're short, it's dangerous to short things.

852
00:51:25,171 --> 00:51:29,896
And so, you know, these crowded social media guys on Reddit decided to You

853
00:51:29,896 --> 00:51:32,896
know, play a game of chicken with the hedge funds and like basically

854
00:51:32,906 --> 00:51:35,496
bankrupt a few hedge funds along the way and cause the short squeeze.

855
00:51:35,506 --> 00:51:41,936
So as well as the hitting the limits of the market function due to the way it

856
00:51:41,936 --> 00:51:43,756
works and exposing the biases, right?

857
00:51:43,756 --> 00:51:45,966
Cause the hedge funds will be desperately calling in favors with

858
00:51:45,966 --> 00:51:47,296
a prime broker and they're big.

859
00:51:47,786 --> 00:51:50,986
So maybe the prime broker wants to keep them happy and doesn't mind

860
00:51:50,996 --> 00:51:54,526
screwing over the, you know, the retail users on GameStop, right?

861
00:51:54,666 --> 00:51:55,736
Sorry, on Robinhood.

862
00:51:56,636 --> 00:51:59,096
So it's a pretty ugly situation.

863
00:51:59,206 --> 00:52:06,576
Um, Yeah, so, uh, I mean, in Bitcoin terms, I mean, you have

864
00:52:06,576 --> 00:52:07,676
different, different games.

865
00:52:07,676 --> 00:52:10,626
I mean, I guess like Luna, Terra Luna was an example, right?

866
00:52:10,666 --> 00:52:15,876
That, that there you had basically what was pretty clearly a Ponzi to

867
00:52:15,876 --> 00:52:17,076
anybody who bothered to look at it.

868
00:52:17,126 --> 00:52:21,477
And I, I don't care about it, but the reason I looked at it was because, They

869
00:52:21,477 --> 00:52:24,657
were buying a lot of Bitcoin, I think like a hundred million dollars or something.

870
00:52:25,317 --> 00:52:27,227
And people were getting excited.

871
00:52:27,237 --> 00:52:31,047
Like, you know, Bitcoin, some Bitcoiners were saying, well, look, this is great.

872
00:52:31,107 --> 00:52:32,177
There's a new buyer in town.

873
00:52:32,307 --> 00:52:33,367
They're buying lots of Bitcoin.

874
00:52:34,127 --> 00:52:36,127
And I, my view was, well, wait a minute.

875
00:52:36,517 --> 00:52:37,727
Like, what are they doing with it?

876
00:52:38,027 --> 00:52:41,707
You know, are they going to like, is that Ponzi going to collapse and they're

877
00:52:41,707 --> 00:52:45,057
going to market sell a hundred million Bitcoin in an automated, you know, they

878
00:52:45,067 --> 00:52:46,587
have these automated market makers.

879
00:52:46,617 --> 00:52:49,367
They're kind of trading bots that.

880
00:52:50,412 --> 00:52:56,092
become dysfunctional if there's a huge reaction in the market and,

881
00:52:56,402 --> 00:52:58,692
you know, they could cause a stupid flash crash or something, right?

882
00:52:58,932 --> 00:53:00,082
At least in their local market.

883
00:53:00,792 --> 00:53:02,862
So my thought was, I don't think this is a good thing.

884
00:53:03,192 --> 00:53:04,852
I think it's some ponzi that's going to collapse.

885
00:53:04,862 --> 00:53:07,302
So I went and looked at it and I was like, yeah, that looks like a ponzi to me.

886
00:53:08,657 --> 00:53:12,347
You know, within a few months, it died spectacularly, right?

887
00:53:12,972 --> 00:53:14,092
Yeah, it was glorious.

888
00:53:14,657 --> 00:53:19,237
Yeah, and actually, it didn't look like they actually had finished automating

889
00:53:19,247 --> 00:53:21,777
the, the Bitcoin selling part of it.

890
00:53:22,527 --> 00:53:29,647
So I think some of that got sold through, you know, uh, you know, some kind of

891
00:53:29,677 --> 00:53:31,247
market maker that did it carefully.

892
00:53:31,837 --> 00:53:33,057
And I think they stole some of it.

893
00:53:33,712 --> 00:53:34,672
Like the insiders.

894
00:53:34,962 --> 00:53:36,732
So it didn't actually all get sold in one go.

895
00:53:36,782 --> 00:53:39,542
But if, if, if you just do a mock, you know, a dumb market, if you

896
00:53:39,562 --> 00:53:41,702
just hit market sell on something like that, you can wipe out the

897
00:53:41,702 --> 00:53:42,802
order book basically, right?

898
00:53:43,672 --> 00:53:49,592
So you don't, you don't, but I think it also shows that making a trading bot,

899
00:53:49,792 --> 00:53:57,102
I mean, the, the, the smart contract guys in Altcoins like to, think they're

900
00:53:57,102 --> 00:53:58,832
a bit naive about market function.

901
00:53:58,912 --> 00:54:02,587
So they will If there's a smart contract and it's magical, right?

902
00:54:02,587 --> 00:54:05,697
So they've got a smart contract and it's, it's gonna sell if this happens.

903
00:54:05,837 --> 00:54:11,467
And, and it's like, you know, either it's centralized, so Decentralized smart

904
00:54:11,497 --> 00:54:15,797
contract that has an API to a centralized exchange that's, you know, with, where

905
00:54:15,797 --> 00:54:19,057
the account is owned by a business entity that's not decentralized, or

906
00:54:19,587 --> 00:54:22,317
it's decentralized and the decentralized things are using these automated market

907
00:54:22,327 --> 00:54:27,427
makers, which are, have some liquidity and they have like some kind of mathematical

908
00:54:27,757 --> 00:54:33,567
curve where it will react to an imbalance of trade and put the price up.

909
00:54:34,197 --> 00:54:38,787
But, but the problem with those is that I think they only work within a narrow

910
00:54:38,787 --> 00:54:42,177
band, and if things get extreme, like there's a massive rush of selling or

911
00:54:42,177 --> 00:54:47,547
buying, people can pull their liquidity out, and the curve can get steep, and it

912
00:54:47,547 --> 00:54:49,117
can just get silly and stop functioning.

913
00:54:49,687 --> 00:54:53,307
So, that was what I thought was going to happen to that bitcoin, but it turned

914
00:54:53,307 --> 00:54:57,137
out, you know, they stole it, and it wasn't, they hadn't done the development

915
00:54:57,137 --> 00:54:59,277
work to add it to their automated market.

916
00:54:59,367 --> 00:55:00,667
Well, the thing that was automated.

917
00:55:01,372 --> 00:55:04,202
Suffered the most radical hyperinflation in history, right?

918
00:55:04,252 --> 00:55:06,892
Like, billions of percent in a few days or something.

919
00:57:03,682 --> 00:57:07,742
the crazy things that can happen on Bitcoin and kind of this still early phase

920
00:57:07,742 --> 00:57:13,182
where kind of things are still finding the equilibrium as more capital flows in.

921
00:57:13,182 --> 00:57:17,702
And I mean, the other thing that we've been at, uh, this week has been

922
00:57:17,702 --> 00:57:21,367
the, the Nostriga and the, this is another thing that's very early days

923
00:57:21,367 --> 00:57:23,112
and it's decentralized communication.

924
00:57:23,532 --> 00:57:26,432
And then just overnight, this is day two of Baltic Honey Badger.

925
00:57:26,782 --> 00:57:30,902
Uh, the news comes out that the CEO of Telegram has been.

926
00:57:31,127 --> 00:57:35,167
Arrested for, I don't know, the charges are, I guess

927
00:57:35,167 --> 00:57:36,467
they're in the news, but, but,

928
00:57:36,787 --> 00:57:38,497
Refusing to censor people.

929
00:57:38,577 --> 00:57:42,457
basically seems to be that, so, what are your thoughts about that whole

930
00:57:42,457 --> 00:57:47,477
situation, and maybe there's some, uh, um, solutions in the development pipeline?

931
00:57:47,527 --> 00:57:47,957
What do you think?

932
00:57:48,097 --> 00:57:51,947
Well, I mean, we have this book in front of us with the, uh, clown world logo,

933
00:57:52,537 --> 00:57:55,227
and that's pretty much the situation.

934
00:57:55,327 --> 00:58:02,597
I mean, the charges are, like, ludicrous on their face, and You know, there are

935
00:58:02,597 --> 00:58:09,077
lots of communication channels in the world and, uh, I think they were, I mean,

936
00:58:09,137 --> 00:58:11,687
you described it as censorship, but I think they were, what they were saying is

937
00:58:11,687 --> 00:58:13,437
like, he hadn't put moderation in effect.

938
00:58:13,457 --> 00:58:13,887
Well,

939
00:58:14,017 --> 00:58:14,517
Same thing.

940
00:58:14,627 --> 00:58:15,837
I mean, yeah, exactly.

941
00:58:15,937 --> 00:58:20,587
And I mean, I mean, actually some people are like, Pro moderation,

942
00:58:21,197 --> 00:58:25,827
anti censorship, because they draw a distinction, but I hate moderation too,

943
00:58:25,857 --> 00:58:32,427
because, you know, I used to, there are a few sort of mailing lists related to

944
00:58:32,427 --> 00:58:34,187
Bitcoin, some of them are still around.

945
00:58:34,757 --> 00:58:38,717
One of them was Cypherpunk's list, and one of them is the cryptography list,

946
00:58:38,717 --> 00:58:42,577
and the cryptography list was operated by an individual who has, who's still

947
00:58:42,577 --> 00:58:46,267
there, and You know, he's moderating.

948
00:58:46,957 --> 00:58:52,747
So, you know, like for example, there was a long discussion about Bitcoin like in

949
00:58:52,747 --> 00:58:55,727
2009 where people were saying, Oh, that won't scale and like blah, blah, blah.

950
00:58:55,747 --> 00:58:59,662
Like there's like, You know, a long discussion and he cut it off like, oh,

951
00:58:59,662 --> 00:59:00,952
that's enough talking about Bitcoin.

952
00:59:00,952 --> 00:59:04,822
I think it's kind of silly and you know, if you write a paper about

953
00:59:04,822 --> 00:59:09,032
it, maybe we can, maybe I will allow the conversation to continue.

954
00:59:09,062 --> 00:59:10,812
And that, that just enrages me, right?

955
00:59:10,822 --> 00:59:13,952
Because like, if I want to talk about something, I don't want anybody citing

956
00:59:13,952 --> 00:59:18,562
it's boring or They've had enough of the discussion, or they don't like the topic,

957
00:59:18,572 --> 00:59:22,002
or they don't like how you're saying it, like, you know, fuck that, excuse

958
00:59:22,002 --> 00:59:26,412
the French, but So, so like, moderation enrages me, basically, I hate it.

959
00:59:26,442 --> 00:59:32,362
So, yeah, I mean, the idea that the government should, know,

960
00:59:32,592 --> 00:59:35,892
demand moderation, I mean, actually, isn't there a, um

961
00:59:38,057 --> 00:59:40,047
Some kind of, uh, what do you call that?

962
00:59:40,057 --> 00:59:42,917
Like with the internet where you're a common carrier, so you're

963
00:59:42,917 --> 00:59:44,207
not responsible for the content.

964
00:59:44,277 --> 00:59:49,387
And so, at least in some countries, if you do moderate a content, you lose

965
00:59:49,387 --> 00:59:51,697
your common carrier status and you really don't want to do that because

966
00:59:51,697 --> 00:59:54,097
then you become responsible for what people are doing and saying on your

967
00:59:54,097 --> 00:59:55,667
platform, like if you fail at moderation.

968
00:59:56,222 --> 01:00:00,892
So like the fact that they are trying to insist that he moderate it would actually

969
01:00:01,692 --> 01:00:04,662
like lose his common carrier status and you don't want to do that, right?

970
01:00:04,742 --> 01:00:11,722
So, now I guess like architecturally the, the problem is that he could

971
01:00:11,722 --> 01:00:16,132
implement a moderation policy, uh, and I think there are people who

972
01:00:16,132 --> 01:00:17,462
get their telegram accounts banned.

973
01:00:17,552 --> 01:00:18,972
I've heard people complaining about that.

974
01:00:19,152 --> 01:00:22,532
So, you know, they're kind of probably in a bit of a gray area where they're kind

975
01:00:22,532 --> 01:00:25,672
of, you know, reactively censoring things.

976
01:00:26,392 --> 01:00:26,892
Um.

977
01:00:30,402 --> 01:00:36,052
the, uh, that, that exposes the difference between, you know, decentralized

978
01:00:36,362 --> 01:00:37,922
chat platform and a centralized one.

979
01:00:38,222 --> 01:00:43,932
And, and Twitter was like horrendous for, uh, I mean, I think people still

980
01:00:43,932 --> 01:00:49,182
get banned on Twitter unreasonably, but, you know, at least Elon cares about free

981
01:00:49,182 --> 01:00:52,562
speech and does a lot less of it and fired a lot of people who were doing political,

982
01:00:52,572 --> 01:00:57,292
I mean, there's like moderation for some kind of policy, but then there's like

983
01:00:57,352 --> 01:01:03,879
political interference, moderation, abuse, which unfortunately Twitter and a number

984
01:01:03,879 --> 01:01:07,809
of companies were doing in a very extreme way, like interfering with election

985
01:01:07,809 --> 01:01:09,925
discussions and all kinds of stuff, right?

986
01:01:09,925 --> 01:01:10,227
So.

987
01:01:10,667 --> 01:01:17,237
Yeah, I think the Nostr protocol is, you know, that's, that's

988
01:01:17,237 --> 01:01:21,967
showing that actually we need, we need more of that kind of thing.

989
01:01:22,297 --> 01:01:27,287
Um, so yeah, I don't, I don't know, you know, what's going on behind the

990
01:01:27,287 --> 01:01:29,667
scenes with Pavel Djurov at Telegram.

991
01:01:29,667 --> 01:01:33,557
Um, you know, maybe there's something they're trying to squeeze in for like

992
01:01:33,627 --> 01:01:35,277
access to some data or something.

993
01:01:35,277 --> 01:01:37,907
Like, I have no idea, or maybe they're just like.

994
01:01:38,682 --> 01:01:40,832
Don't like free speech.

995
01:01:40,972 --> 01:01:44,482
Somebody was saying that there is something political going on in one

996
01:01:44,482 --> 01:01:49,482
of the French jurisdictions, like offshore jurisdictions, where there's

997
01:01:49,482 --> 01:01:52,792
some political upheaval and people are coordinating their protests with.

998
01:01:53,762 --> 01:01:57,972
Telegram, so it could be related to that timing wise, who knows, but it's,

999
01:01:57,982 --> 01:02:02,382
it's like clown world ridiculous that, you know, a government or, I mean, it's

1000
01:02:02,382 --> 01:02:03,622
effectively a group of governments, right?

1001
01:02:03,622 --> 01:02:04,452
Because it's in Europe.

1002
01:02:04,842 --> 01:02:06,992
If you'd been in another European country, they would have done the same thing.

1003
01:02:07,672 --> 01:02:07,822
So yeah.

1004
01:02:09,077 --> 01:02:12,357
They're just losing the pretense of independence of law and the rule

1005
01:02:12,357 --> 01:02:15,917
of law, but they're just going to arbitrarily, you know, see somebody

1006
01:02:15,917 --> 01:02:19,977
off the street, like in a, you know, a third world tin pot dictatorship.

1007
01:02:20,047 --> 01:02:21,057
It's like insane.

1008
01:02:21,347 --> 01:02:21,647
Yeah.

1009
01:02:21,907 --> 01:02:27,007
Fortunately, fortunately there, they just, um, uh, increasing the,

1010
01:02:27,707 --> 01:02:30,897
the, the, the, uh, what's the word?

1011
01:02:30,897 --> 01:02:34,977
The pace of the, the process because like the, these things

1012
01:02:35,127 --> 01:02:36,417
have been going on for a long time.

1013
01:02:36,417 --> 01:02:36,597
Right.

1014
01:02:36,597 --> 01:02:40,437
When, uh, I remember the Pirate Bay founders in Sweden were.

1015
01:02:41,047 --> 01:02:44,457
were prosecuted on very loose grounds because they had a

1016
01:02:44,457 --> 01:02:46,717
website that provided links.

1017
01:02:46,737 --> 01:02:48,527
There were no actual files on the site.

1018
01:02:48,857 --> 01:02:51,487
And Google was pointing to their website.

1019
01:02:51,487 --> 01:02:54,377
So why are they guilty and Google not?

1020
01:02:54,777 --> 01:02:56,707
And so it's all grey area.

1021
01:02:56,707 --> 01:02:59,387
And it's like, where do you draw the line between moderation and

1022
01:02:59,387 --> 01:03:01,817
censorship and political censorship?

1023
01:03:02,267 --> 01:03:07,447
Uh, and, and there is, it's so clear to me that the, the, the people in

1024
01:03:07,447 --> 01:03:11,837
power, the so called elites, the most successful thieves are abusing

1025
01:03:11,837 --> 01:03:14,037
this on, on such a grand scale.

1026
01:03:14,617 --> 01:03:19,347
And the way out of it is not through another private companies, through

1027
01:03:19,697 --> 01:03:23,977
things like Nostr and Bitcoin, that we truly take the power back.

1028
01:03:23,977 --> 01:03:24,927
There's no other way.

1029
01:03:24,927 --> 01:03:25,277
And

1030
01:03:26,067 --> 01:03:31,087
this, uh, it's just, Oh, we need to spread the message about it and

1031
01:03:31,087 --> 01:03:34,447
get it out there and get people to adopt these things because that,

1032
01:03:34,477 --> 01:03:36,007
that is the only way to fight it.

1033
01:03:36,127 --> 01:03:36,667
Yeah.

1034
01:03:37,077 --> 01:03:41,447
I mean, it's true, you know, like it's in a way it's positive that there

1035
01:03:41,517 --> 01:03:46,047
are people who are fighting within the system, like Elon, who will, you

1036
01:03:46,047 --> 01:03:49,137
know, go to court or buy the company.

1037
01:03:49,287 --> 01:03:49,687
And,

1038
01:03:49,892 --> 01:03:51,737
His, his price tag is higher.

1039
01:03:51,737 --> 01:03:53,657
If anyone wants to censor him, they have

1040
01:03:53,657 --> 01:03:55,037
to pay a very much a higher

1041
01:03:55,042 --> 01:04:01,072
but you know, he may not be immune, like, you know, because, mean, he's doing the

1042
01:04:01,072 --> 01:04:05,492
right thing standing up for free speech, but they do have levers to attack him.

1043
01:04:05,562 --> 01:04:08,402
And he has some vulnerabilities, like, for example, the subsidies that a

1044
01:04:08,402 --> 01:04:13,722
Tesla company is receiving, maybe the military launch contracts that SpaceX

1045
01:04:13,722 --> 01:04:19,272
has, or just trumped up, you know, uh, political charges like Jurov, right?

1046
01:04:19,282 --> 01:04:22,152
So, you know, I mean, could that apply to Twitter?

1047
01:04:22,232 --> 01:04:22,912
Like, maybe.

1048
01:04:23,272 --> 01:04:25,917
It, it could be called, if it does, it could be called

1049
01:04:25,917 --> 01:04:27,837
a $5 trillion wrench attack,

1050
01:04:28,257 --> 01:04:28,767
like that.

1051
01:04:29,197 --> 01:04:29,927
basically.

1052
01:04:30,337 --> 01:04:36,167
So, um, so, I mean, like, it's, it's, you know, I think we should care

1053
01:04:36,167 --> 01:04:39,377
about the rule of law, like, if, if there are rules, they should be

1054
01:04:40,217 --> 01:04:44,617
impartially exercised by an independent judiciary, and the fact that that is

1055
01:04:44,617 --> 01:04:46,097
going downhill is, like, a bad thing.

1056
01:04:46,107 --> 01:04:52,157
So, in a sense, you know, us retreating into decentralized technology, Is,

1057
01:04:52,727 --> 01:04:57,407
you know, a defense mechanism for, you know, civilized society to continue

1058
01:04:57,407 --> 01:04:58,727
while governments are devolving.

1059
01:04:59,022 --> 01:05:03,592
But it should be a nice thing if governments want devolving and, um, but

1060
01:05:03,592 --> 01:05:08,532
I think there's things into play as well because if things are decentralized,

1061
01:05:09,292 --> 01:05:14,242
you know, while the establishment powers that are pulling the strings

1062
01:05:14,242 --> 01:05:17,282
behind things like the Jurov arrest, um,

1063
01:05:19,492 --> 01:05:21,822
they want some control outcome, right?

1064
01:05:21,852 --> 01:05:25,912
They resent that people can talk privately and coordinate on

1065
01:05:25,912 --> 01:05:28,172
channels and things like that, that.

1066
01:05:29,987 --> 01:05:33,477
If they could see that arresting somebody would have no effect,

1067
01:05:34,717 --> 01:05:35,927
they're probably not going to do it.

1068
01:05:36,497 --> 01:05:37,157
So you know,

1069
01:05:37,172 --> 01:05:37,512
yeah,

1070
01:05:38,164 --> 01:05:44,332
it's Nostr, and there are some people who are like lead developers, you

1071
01:05:44,332 --> 01:05:45,862
know, there's no central server.

1072
01:05:45,892 --> 01:05:47,422
There's no company operating a server.

1073
01:05:47,902 --> 01:05:53,392
You could like seize one coordinator or, you know, arrest that guy or shut down

1074
01:05:53,392 --> 01:05:57,212
that company or sue this person, but it's going to be pointless, you know, and it

1075
01:05:57,212 --> 01:06:00,002
might even have a stride stand effect that, you know, there were 10 servers.

1076
01:06:00,022 --> 01:06:01,972
Now there are a hundred and more jurisdictions or something.

1077
01:06:02,462 --> 01:06:07,992
So to that point of view, it forces a bit of internet physics on these people

1078
01:06:08,002 --> 01:06:13,482
that want to abuse establishment power, which is like, You know, Pi is 3.

1079
01:06:13,482 --> 01:06:16,412
14, you can't say it's 3 because the internet doesn't care, kind of thing.

1080
01:06:16,902 --> 01:06:22,372
So I think it's the, you know, it's decentralized things that erode the

1081
01:06:22,372 --> 01:06:26,062
internet physics and that things should be implemented in robust, decentralized ways.

1082
01:06:26,872 --> 01:06:27,122
yeah.

1083
01:06:27,152 --> 01:06:32,012
And, uh, I mean, the same logic that applies to Nostr sort of

1084
01:06:32,152 --> 01:06:36,472
applies to a plethora of other things like Fede, for instance.

1085
01:06:36,542 --> 01:06:36,892
Mm hmm,

1086
01:06:37,932 --> 01:06:41,582
things are going to be much harder to, to take down in the future.

1087
01:06:41,582 --> 01:06:43,562
And that's very promising.

1088
01:06:44,002 --> 01:06:46,852
Yeah, I mean, I think if you think about it from that point of view,

1089
01:06:46,852 --> 01:06:51,432
you know, we were discussing the trade offs between Feddy and Liquids.

1090
01:06:51,982 --> 01:06:57,137
The one advantage Feddy has is that You know, it has a higher rug pull

1091
01:06:57,137 --> 01:07:00,167
risk of a federation because you don't know who they are and some,

1092
01:07:00,227 --> 01:07:06,217
and they could be all one person, but it's, there are multiple of them.

1093
01:07:07,347 --> 01:07:11,467
So if, if, you know, and Feddy, the company is not operating them.

1094
01:07:11,637 --> 01:07:15,187
Now look, uh, Blockstream, the company is not operating Liquid, but you know,

1095
01:07:15,197 --> 01:07:18,417
the federation members, potentially, if there was like some kind of

1096
01:07:18,417 --> 01:07:22,667
major global crackdown on Bitcoin or something, could be told to stop, right?

1097
01:07:23,567 --> 01:07:28,447
Now, with FedE, they could stop some, but like people have all the tools

1098
01:07:28,447 --> 01:07:29,527
and could start all the ones, right?

1099
01:07:31,717 --> 01:07:35,027
Now, it's also true with Liquid, you know, like there's a lot of, most of

1100
01:07:35,037 --> 01:07:38,867
the technology is open source that, you know, you could stand up another

1101
01:07:38,867 --> 01:07:42,527
Liquid network and a few, like, very technical people have done that, so,

1102
01:07:42,567 --> 01:07:44,167
you know, for experimentation purposes.

1103
01:07:45,707 --> 01:07:48,917
And we're interested to take steps to make that easier, like to sell the

1104
01:07:48,917 --> 01:07:52,097
hardware, because part of the formula as well that we didn't talk about

1105
01:07:52,117 --> 01:07:58,352
is that With a federation, you know, it's, it's a blockchain, I mean, the

1106
01:07:58,352 --> 01:08:03,882
interpretation that people have, uh, taken from independent legal advice and so on,

1107
01:08:03,902 --> 01:08:08,072
from regular, like, regulatory expert independent advice, and from asking for

1108
01:08:08,072 --> 01:08:13,552
opinions from a few, a few government regulators, is that this kind of

1109
01:08:13,592 --> 01:08:17,672
collection of software decentralization, it qualifies as a blockchain.

1110
01:08:17,842 --> 01:08:19,712
That's the argument, and that's the opinions that,

1111
01:08:19,842 --> 01:08:20,802
that people have had, right?

1112
01:08:21,422 --> 01:08:27,902
But, um, Part, you know, if you compare that with Bitcoin, now nothing, nothing

1113
01:08:27,902 --> 01:08:29,672
as good as Bitcoin is as good as Bitcoin.

1114
01:08:29,672 --> 01:08:33,522
And if anybody generally invents some technology that would improve the picture,

1115
01:08:33,622 --> 01:08:35,142
Bitcoin would generally want to adopt it.

1116
01:08:35,682 --> 01:08:38,992
So it's like any kind of layer two is generally going to be inferior to

1117
01:08:38,992 --> 01:08:41,452
Bitcoin in, in multiple ways, right?

1118
01:08:41,892 --> 01:08:46,062
Um, including their lightning and liquid and FedE and all these things, right?

1119
01:08:46,062 --> 01:08:48,752
They're, they're making trade offs because if there was a silver

1120
01:08:48,752 --> 01:08:50,572
bullet, Bitcoin would already do it.

1121
01:08:51,092 --> 01:08:52,182
So the point is.

1122
01:08:52,807 --> 01:08:55,557
You know, like with Lightning, you get faster transactions,

1123
01:08:55,717 --> 01:08:56,687
but it's all a hot wallet.

1124
01:08:57,037 --> 01:08:58,207
So, you know, there's a trade off, right?

1125
01:08:58,767 --> 01:09:02,037
You get something, you lose something, and that's sort of inherent, I think.

1126
01:09:02,877 --> 01:09:11,157
But, um, So, I mean, what we're interested to do is to um, sell the HSMs, so

1127
01:09:11,157 --> 01:09:16,257
that people can, you know, and they're programmable, tamper resistant devices,

1128
01:09:16,337 --> 01:09:23,752
and so they do help the, um, um, The blockchain argument, right, which is the

1129
01:09:23,752 --> 01:09:29,172
architecture of Bitcoin that makes it neutral or censorship resistant is that

1130
01:09:29,182 --> 01:09:32,272
there are competing miners in anybody, then people that will mine things, right?

1131
01:09:32,272 --> 01:09:36,152
So if one doesn't mine it because they don't like your op return, or they don't

1132
01:09:36,152 --> 01:09:39,502
like something about, you know, some taint tracing, another one will mine it.

1133
01:09:40,432 --> 01:09:46,627
And What helps with that, with Liquid, I mean, that's possibly true, right?

1134
01:09:46,667 --> 01:09:51,737
You know, one, uh, block signer could refuse to sign and other ones would,

1135
01:09:51,817 --> 01:09:55,637
and it only takes two thirds of them to make us, to make, process it, right?

1136
01:09:56,367 --> 01:09:57,307
So that's one factor.

1137
01:09:58,007 --> 01:10:01,067
Another factor is it has confidential transactions, so it's harder for them

1138
01:10:01,067 --> 01:10:02,527
to tell what the transactions are about.

1139
01:10:02,837 --> 01:10:06,237
So like, you know, if you, if you want, if, if somebody has a

1140
01:10:06,237 --> 01:10:07,907
policy view that they want to like.

1141
01:10:08,612 --> 01:10:10,612
Block this type of transaction or something.

1142
01:10:11,122 --> 01:10:14,212
Maybe they lack the information to make their policy decision because

1143
01:10:14,212 --> 01:10:15,672
they enhance confidentiality.

1144
01:10:16,092 --> 01:10:16,972
So that's another factor.

1145
01:10:17,012 --> 01:10:22,552
But the third factor is that you have an HSM in place of the, so

1146
01:10:22,552 --> 01:10:26,072
it's a block signer instead of the miners, comparing two architectures.

1147
01:10:26,672 --> 01:10:27,062
And.

1148
01:10:28,472 --> 01:10:32,242
The block center is a piece of hardware, and so it's a black box.

1149
01:10:32,422 --> 01:10:36,172
You know, you can't like, reach in there and change its behavior

1150
01:10:36,512 --> 01:10:37,962
because you'll reset the keys.

1151
01:10:38,772 --> 01:10:41,192
And it's only running signed software.

1152
01:10:42,062 --> 01:10:46,692
So Blockstream doesn't have any kind of auto update for obvious reasons.

1153
01:10:47,112 --> 01:10:50,782
So the operators of the hardware, you know, they have the source code, they

1154
01:10:50,782 --> 01:10:53,232
can look at the changes, they can see there's nothing malicious about

1155
01:10:53,232 --> 01:10:56,492
it, they have to upgrade it, but once they've upgraded it, they can use it.

1156
01:10:56,862 --> 01:10:59,752
They can't, you know, open the box up and like change the software

1157
01:10:59,752 --> 01:11:01,192
in it because they'll reset it.

1158
01:11:01,822 --> 01:11:07,192
And so, you know, it's not a piece of software in a decentralized system.

1159
01:11:07,482 --> 01:11:11,442
It's a slightly less decentralized system, but with a piece of hardware.

1160
01:11:12,002 --> 01:11:16,992
And so, you know, it gets to a similar location via different technologies.

1161
01:11:17,032 --> 01:11:20,152
Confidential transactions and, uh, hardware tamper resistance.

1162
01:11:20,872 --> 01:11:24,422
So I think the hardware tamper resistance is a useful tool.

1163
01:11:25,182 --> 01:11:29,632
And as you may be aware, one of the very early sort of Bitcoin like

1164
01:11:29,632 --> 01:11:34,162
systems, uh, RPAL by Hal Finney, Reusable Proof of Work, is actually

1165
01:11:34,162 --> 01:11:35,492
using this tamper resistant hardware.

1166
01:11:35,602 --> 01:11:39,182
I mean, the much earlier first versions of it, they're trustworthy computing stuff.

1167
01:11:39,182 --> 01:11:44,042
So he bought an IBM manufactured tamper resistant hardware device.

1168
01:11:44,162 --> 01:11:49,612
And his system was, you would, you would mine using hashcash.

1169
01:11:49,622 --> 01:11:51,932
You would send it to his server.

1170
01:11:52,662 --> 01:12:00,682
And it would send you an e cash token, and so that would prevent the rug

1171
01:12:00,682 --> 01:12:06,452
pull inflation, because the, you know, him as the owner and operator of the

1172
01:12:06,452 --> 01:12:09,172
server couldn't change the software.

1173
01:12:10,512 --> 01:12:14,102
And the reason is that the hardware gives you a kind of call it a remote

1174
01:12:14,102 --> 01:12:18,252
attestation, but basically the hardware signs and provides to the users a

1175
01:12:18,252 --> 01:12:19,552
signature of what code is running.

1176
01:12:20,092 --> 01:12:21,422
And he can't influence that, right?

1177
01:12:21,432 --> 01:12:23,472
I mean, he can load new code, but then change the signature.

1178
01:12:23,482 --> 01:12:26,432
And so people can see, Oh, that, that new code is malicious.

1179
01:12:26,432 --> 01:12:27,792
I'm going to stop using it or something.

1180
01:12:27,792 --> 01:12:28,012
Right.

1181
01:12:28,592 --> 01:12:34,182
So I think that trustworthy computing or temp resistant HSMs are an

1182
01:12:34,182 --> 01:12:38,362
interesting building block for a lot of things like for cache, for FedE.

1183
01:12:39,097 --> 01:12:42,037
For lightning routing nodes, you know, cause they're hot wallets.

1184
01:12:42,057 --> 01:12:44,687
So if you can provide better security for lightning routing nodes, it

1185
01:12:44,687 --> 01:12:46,047
becomes safer to have big channels.

1186
01:12:46,057 --> 01:12:49,557
Cause you know, if somebody compromises a hot wallet, lightning

1187
01:12:49,557 --> 01:12:51,977
routing node, they could steal the channel balance, let's say, right.

1188
01:12:51,977 --> 01:13:00,007
So, um, and you know, as, as they become more accessible,

1189
01:13:00,377 --> 01:13:02,087
like if we, if we resell them.

1190
01:13:02,802 --> 01:13:04,232
Then that helps.

1191
01:13:04,232 --> 01:13:07,072
I mean, cause we're just going to like, it's a programmable device.

1192
01:13:07,072 --> 01:13:08,252
You can do what you want with it, right?

1193
01:13:08,252 --> 01:13:12,782
So you can use it to build like an arc thing or a cache thing, whatever you want,

1194
01:13:12,832 --> 01:13:18,552
basically, or to make, um, you know, to make an HSM for cold storage or something.

1195
01:13:18,572 --> 01:13:18,872
Right.

1196
01:13:19,212 --> 01:13:25,672
So like another sort of blockchain adjacent building block, which can be used

1197
01:13:25,672 --> 01:13:28,352
to harden some blockchain related things.

1198
01:13:30,142 --> 01:13:33,432
Sounds like an exciting new thing.

1199
01:13:34,102 --> 01:13:36,082
Looking forward to seeing that coming out.

1200
01:13:36,382 --> 01:13:38,822
Anything else you're excited about in the coming year?

1201
01:13:40,332 --> 01:13:40,802
Um.

1202
01:13:42,437 --> 01:13:45,837
So I mean, we've been working on a Bitcoin ASIC.

1203
01:13:46,377 --> 01:13:50,857
So really the idea was that a couple of things.

1204
01:13:50,867 --> 01:13:57,527
So at the time we started, so we acquired Spondulis, which is a company

1205
01:13:57,527 --> 01:14:01,987
that's been making ASICs, Bitcoin ASICs since 2013, I think, or maybe in 2012.

1206
01:14:02,507 --> 01:14:06,157
So they made multiple generations of Bitcoin ASICs.

1207
01:14:06,157 --> 01:14:11,067
And the team is like, you know, came from, you ASIC design company,

1208
01:14:11,067 --> 01:14:13,377
so they had some prior experience.

1209
01:14:13,447 --> 01:14:19,647
And I think the Bitcoin ASIC is a challenging type of ASIC design

1210
01:14:19,847 --> 01:14:24,327
because of the duty cycle and the hand optimization that's needed and so on.

1211
01:14:24,327 --> 01:14:28,527
So just say we have a team with a track record on, you know, we're making, we've,

1212
01:14:28,657 --> 01:14:32,707
we made an ASIC, we've done a shuttle run, which is a kind of a test run.

1213
01:14:32,737 --> 01:14:36,467
So we have sample chips that we're testing and continue to optimize.

1214
01:14:36,467 --> 01:14:36,487
So.

1215
01:14:38,227 --> 01:14:44,167
You know, the, the motivation really at the time was that all of the mining

1216
01:14:44,167 --> 01:14:49,427
manufacturers were in China and, you know, not that the foundries weren't

1217
01:14:49,587 --> 01:14:56,477
because none of the, um, kind of, uh, advanced nodes foundries are in China.

1218
01:14:56,607 --> 01:14:59,377
They have, they have foundries, but they're like a generation or two behind.

1219
01:14:59,797 --> 01:15:02,447
So, you know, you've got, but still there aren't many foundries.

1220
01:15:03,137 --> 01:15:03,527
So.

1221
01:15:05,617 --> 01:15:09,037
And that, that seemed potentially like a centralization risk and

1222
01:15:09,037 --> 01:15:12,557
China is like intermittently hostile to Bitcoin, like banning Bitcoin,

1223
01:15:12,567 --> 01:15:13,827
banning mining, things like that.

1224
01:15:13,837 --> 01:15:17,327
So, you know, it's not inconceivable they could apply pressure to those

1225
01:15:17,327 --> 01:15:21,297
companies to stop making Bitcoin miners or impose something, right?

1226
01:15:21,627 --> 01:15:26,097
So we thought it was, you know, potentially risk and we'd like to try

1227
01:15:26,097 --> 01:15:30,387
and reduce that risk for, you know, because we're interested in Bitcoin.

1228
01:15:30,517 --> 01:15:32,957
Um, So we embarked on that.

1229
01:15:32,957 --> 01:15:35,407
I think, you know, the, the situation has improved a bit.

1230
01:15:35,417 --> 01:15:39,027
There are a few more companies internationally making Bitcoin ASICs now.

1231
01:15:39,217 --> 01:15:44,307
Um, some talking about them publicly, for example, Block, uh, Intel was for a

1232
01:15:44,307 --> 01:15:46,197
while, but they, uh, exited the business.

1233
01:15:46,227 --> 01:15:52,687
I think they were having like general, like economic problems in the company.

1234
01:15:52,687 --> 01:15:55,387
So they, uh, cut back some divisions.

1235
01:15:55,507 --> 01:15:57,137
So they, they exited the business.

1236
01:15:58,382 --> 01:16:02,112
there are a few other companies that have been making ASICs like, you know,

1237
01:16:05,122 --> 01:16:09,532
yeah, so we're, you know, hoping that we'll have some more announcements

1238
01:16:09,532 --> 01:16:11,212
about that in the next year.

1239
01:16:11,472 --> 01:16:18,532
Um, and I think another motivation for having an ASIC is that none of the Bitcoin

1240
01:16:19,352 --> 01:16:21,232
mining companies would sell anybody ASICs.

1241
01:16:22,002 --> 01:16:23,242
So people who have made.

1242
01:16:24,362 --> 01:16:27,982
Bitcoin devices like block eruptors and space, you know, space heaters

1243
01:16:27,982 --> 01:16:30,202
and water heaters and things like that, which are kind of cool.

1244
01:16:30,752 --> 01:16:32,452
Um, they can't buy the ASICs.

1245
01:16:32,482 --> 01:16:34,892
They have to buy the miners and desolder the ASICs off them.

1246
01:16:34,902 --> 01:16:37,762
And of course you break some doing it and it's kind of inefficient, right?

1247
01:16:38,242 --> 01:16:44,222
So, you know, I think we were more interested to You know, allow people

1248
01:16:44,222 --> 01:16:49,302
to buy ASICs, like have some more like, uh, open innovation where people can

1249
01:16:49,312 --> 01:16:53,622
build, you know, different profile miners or consumer miners or appliances

1250
01:16:53,622 --> 01:16:55,222
with ASICs in for various reasons.

1251
01:16:56,902 --> 01:16:57,182
Yeah.

1252
01:16:57,342 --> 01:17:01,802
Um, so yeah, I think it's time to wrap this up soon.

1253
01:17:01,802 --> 01:17:05,002
So anywhere, anywhere else you want to, anywhere you want to

1254
01:17:05,002 --> 01:17:06,812
direct our listeners other than to.

1255
01:17:07,502 --> 01:17:08,092
Blockstream.

1256
01:17:09,322 --> 01:17:13,712
Um, no, I mean, I think it's an interesting time

1257
01:17:13,712 --> 01:17:14,752
for Bitcoin at the moment.

1258
01:17:14,952 --> 01:17:17,062
Um, we've also been.

1259
01:17:17,937 --> 01:17:20,347
You know, getting into the hardware wallet space recently

1260
01:17:20,347 --> 01:17:21,567
with the Jade hardware wallet.

1261
01:17:21,567 --> 01:17:24,017
So we're continuing to involve that, you know, improving the

1262
01:17:24,017 --> 01:17:26,567
firmware, improving usability.

1263
01:17:26,567 --> 01:17:32,637
Um, and so, you know, the differentiator for Jade is that it's full open.

1264
01:17:32,717 --> 01:17:37,197
Now, some of the other hardware wallets are also open hardware, like OpenSpec.

1265
01:17:37,207 --> 01:17:40,577
You could, you know, take the blueprints and build one, but the difference

1266
01:17:40,577 --> 01:17:44,487
with Jade is that it's even more open in the sense that it will work

1267
01:17:44,487 --> 01:17:47,227
on some IoT devices you can buy.

1268
01:17:47,907 --> 01:17:51,107
On the market today or from electronic like Fry's or an electronics store,

1269
01:17:51,107 --> 01:17:54,967
you can, you know, go, go pick some parts out of a hopper and pretty

1270
01:17:54,967 --> 01:17:57,917
much run it or snap a few things together and flash Jade on it.

1271
01:17:58,517 --> 01:18:00,737
Compile your own software, modify your software.

1272
01:18:01,347 --> 01:18:03,997
Now it won't, you know, it won't be as elegant a piece of hardware

1273
01:18:03,997 --> 01:18:07,717
or maybe be bulkier or have lumps sticking out of it, or, you know, no

1274
01:18:07,717 --> 01:18:11,447
case or something like that, but it's, it can also be pretty cheap, right?

1275
01:18:11,467 --> 01:18:18,057
You can buy a, lower spec device, you know, without the battery, without the

1276
01:18:18,057 --> 01:18:19,927
camera, and it will still function, right?

1277
01:18:19,937 --> 01:18:22,257
Because you can use Jade in different modes, you can use it with

1278
01:18:22,257 --> 01:18:24,107
Bluetooth, you can use it with USB.

1279
01:18:24,657 --> 01:18:25,847
You can use it with a camera.

1280
01:18:26,487 --> 01:18:30,087
And you know, when it's in Bluetooth mode, you can, of course, if you're using it

1281
01:18:30,087 --> 01:18:33,587
with USB, you're anyway powered over the USB, so the battery is not necessary.

1282
01:18:34,147 --> 01:18:38,817
But if you're using it on Bluetooth or with a camera, then the battery is useful,

1283
01:18:38,847 --> 01:18:40,167
but you can do without the camera, right?

1284
01:18:40,187 --> 01:18:46,497
So, you know, you can, you can buy one of these, uh, ESP32 devices for

1285
01:18:46,507 --> 01:18:53,407
maybe like 10 is able to function with Jade software on USB mode.

1286
01:18:53,787 --> 01:18:54,727
So that's pretty cool.

1287
01:18:54,807 --> 01:19:00,147
Um, so it, you know, it opens the door for emerging market people to do

1288
01:19:00,187 --> 01:19:06,637
things and for people who want to try building custom apps to, to do that and

1289
01:19:06,647 --> 01:19:09,757
like maybe send them back to us and, you know, we could, we could add them.

1290
01:19:11,582 --> 01:19:12,242
Fantastic.

1291
01:19:12,262 --> 01:19:16,432
So, again, it's awesome to see all this innovation and the drive

1292
01:19:16,442 --> 01:19:18,182
to decentralize all this stuff.

1293
01:19:19,032 --> 01:19:21,942
Democratize is a weird word, but that's what comes to mind.

1294
01:19:21,942 --> 01:19:29,612
To give the power to people to run their own things and sovereignty that way.

1295
01:19:29,852 --> 01:19:31,832
Well, I mean, it's, it's an interesting strategy.

1296
01:19:31,832 --> 01:19:38,482
I guess it comes partly from the open source mindset, which is, you know,

1297
01:19:38,502 --> 01:19:43,682
a lot of software companies in the kind of feels like tradfy world, like

1298
01:19:43,682 --> 01:19:47,892
the, uh, the traditional software world, like the Microsofts and Oracle,

1299
01:19:48,222 --> 01:19:49,752
it's all super proprietary, right?

1300
01:19:49,782 --> 01:19:53,547
It's like secretive, It's closed source, or Apple's another good

1301
01:19:53,547 --> 01:19:57,547
example, it's aggressively licensed, they try to price, you know, they try

1302
01:19:57,547 --> 01:20:01,787
to like muscle in to the application space and demand payment on the

1303
01:20:01,797 --> 01:20:03,297
downstream applications in Apple's case.

1304
01:20:03,957 --> 01:20:08,497
And the open source mentality is more, well, you know, the sec, the,

1305
01:20:08,507 --> 01:20:13,617
the, um, rising tide, you know, rises, rises or ships kind of thing.

1306
01:20:14,117 --> 01:20:18,747
That actually the ecosystem would grow faster and everybody would be

1307
01:20:18,747 --> 01:20:21,017
better if everything is super open.

1308
01:20:21,057 --> 01:20:23,517
Like it's open source, open hardware.

1309
01:20:24,757 --> 01:20:26,547
You get faster innovation on open networks.

1310
01:20:26,547 --> 01:20:28,337
You get faster innovation on open source.

1311
01:20:28,837 --> 01:20:35,837
And, you know, Bitcoin is more an area of, uh, friendly competition, right?

1312
01:20:36,027 --> 01:20:38,667
In the sense that, you know, the people that are competing are not enemies.

1313
01:20:38,837 --> 01:20:42,507
They're like comrades trying to like, you know, grow Bitcoin.

1314
01:20:42,507 --> 01:20:47,677
So I think there's one specific unique thing about Bitcoin, which is a lot of

1315
01:20:47,677 --> 01:20:51,187
things kind of have to be open source or you shouldn't really trust them in a don't

1316
01:20:51,187 --> 01:20:52,947
trust verify sense, like a closed source.

1317
01:20:53,912 --> 01:20:56,792
Hardware or software is something you should worry about because

1318
01:20:56,802 --> 01:20:59,382
it could have a bug in it or a backdoor and you wouldn't know it.

1319
01:20:59,997 --> 01:21:04,497
No, I mean, 100 percent we talk about that all the time, how

1320
01:21:04,547 --> 01:21:08,377
in Bitcoiners are inherently incentivized to help one another

1321
01:21:08,387 --> 01:21:10,437
because we help ourselves by doing so.

1322
01:21:10,437 --> 01:21:13,807
And it's, it's, it's, it's just awesome to live that way.

1323
01:21:14,047 --> 01:21:15,897
Like it's it's so rewarding.

1324
01:21:16,727 --> 01:21:18,267
You get to have conversations like this.

1325
01:21:18,672 --> 01:21:23,442
So, Adam, thank you very much for coming back to the show, uh, great

1326
01:21:23,452 --> 01:21:28,962
to see you and, uh, make sure you get a signed, uh, we'll sign you a

1327
01:21:28,962 --> 01:21:30,032
copy of, of Clown

1328
01:21:30,152 --> 01:21:33,622
I hope we can climb back from the precipice and I think Bitcoin is one

1329
01:21:33,622 --> 01:21:38,152
of the few kind of technologies and societal forces that is pushing in

1330
01:21:38,152 --> 01:21:39,292
the right direction at this point.

1331
01:21:39,312 --> 01:21:43,602
that is why we wrote the book, it's, uh, describing how, how the

1332
01:21:43,602 --> 01:21:45,402
process, what the process looks like.

1333
01:21:46,132 --> 01:21:51,562
So, yeah, hope you give it a read and tell us what you think, but yeah, Adam,

1334
01:21:51,562 --> 01:21:55,322
thank you again for coming on, this has been the Bitcoin Infinity Show, and thank

1335
01:21:55,322 --> 01:21:57,694
you for listening, and yeah, Adam, thanks again, this has been a great conversation.