you know, prospect of 10 million Bitcoins being bought, it may not be possible for
at all, like, for any amount of money because, you know, as more people try to
do that, the price will go up and then they won't be able to afford to do it.
I, uh, went to some kind of private meeting, like a bunch of like investors
and a few tech people just like general discussion some years ago.
And like a question I asked for the, in like Bitcoin holder investor or fund
manager type of people is like, well, what features would you value most?
Mm-hmm.
From the technical side for Bitcoin?
And their answer was surprising, which was like, Just don't break it.
Yeah.
Welcome back to the Freedom Footprint show, the Bitcoin
philosophy show with Knut Svanholm and me, Luke the Pseudo Finn.
For those of you who've been in the Bitcoin space for a while, our
guest today needs no introduction.
Joining us is none other than Dr.
Adam Back, co founder and CEO of Blockstream, the mind behind
Hashcash and a true OG Bitcoiner.
In today's in person interview, recorded at Baltic Cottony Badger
2023, shout out Hoddle Hoddle, we dive into plenty of important topics.
We discover Blockstream's current projects, we explore the developments
of Bitcoin's second layer solutions, and we debate their use
cases after hyperbitcoinization.
We even touch on the drive chain debate.
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And now, without further ado, here is Adam Back on the Freedom Footprint Show.
Yeah.
So a man that needs no introduction, sat, I mean Dr.
Adam back, welcome to the Freedom, freedom Freedom
Footprint show.
That's the name of a show, right?
Yeah, that's correct.
Welcome.
Um, yeah, the c e o of Blockstream and mentioned in the white
paper and all this stuff.
Great.
Um, I saw your panel, uh, yesterday with, uh, about, yeah, about things we
don't usually talk about, like price.
And it was a, a couple of takeaways.
Uh, There was a question during the panel like, do we have to
end the Fed before Bitcoin hits?
A hundred K, which I think is slightly oxymoronic because if you end the fed,
there's, there are no more dollars.
But there was also this, this am amazing observation, uh, that you made that
there are now, um, a million addresses with one Bitcoin or more in them, or
like with around one Bitcoin, right?
In, in each one of them.
Yeah.
So that's 1 21 of, uh, 21, is that a word?
Uh, of the entire Bitcoin supply.
So, uh, well, what happens when the next million people.
Want to do that and yeah.
That's good.
Starting.
Well, yeah.
I mean, it was a statistic put out a few months ago, probably from Glass,
no, or one of the analyst companies who are looking at on chain deer.
And I thought it was like positive rate because there are people like develop
a target so the, you know, the dollar cost averaging or they're buying as
they sell things or get some money together and they're trying to get
to a target of one Bitcoin another.
There are a million people who've got there or, or more I think is the metric
and say, you know, my initial thought was, well, 1 million is good, but that's
bullish, but maybe we can do better.
Like maybe we can get to 10 million in the future.
And I was like, wait a minute, that's probably not possible because
there are only 21 million Bitcoin.
And many of them are not on the market, right?
They've been cold bought and cold stored by people who've
already held them for years.
They're probably not selling.
And the people who just, you know, saved up and managed to buy a whole
Bitcoin, they're not gonna sell it because that was the target
they took some years to achieve.
Right?
Yeah.
So, you know, prospect of 10 million Bitcoins being bought, it may not
be possible for at all, like, for any amount of money because, you
know, as more people try to do that, the price will go up and then they
won't be able to afford to do it.
No,
that's, uh, yeah.
That's fascinating because like, the way I see the volatility in, in Bitcoin,
it's, it's mainly because the, the, uh, What Raheem said rest yesterday.
Like the, it it comes from the existing stock and not from the flow part of it.
So not from the newly minted or newly mine Bitcoins.
Uh, so the hard thing to to know though is what is that ratio like, how much of the
liquidity comes from the existing stock and how much is the newly mined bitcoins?
Hmm.
Yeah.
I mean there are a few like.
Positive reinforcements.
So one is, well, they could be negative in a down sense as
well, is the, uh, the miners.
So, you know, many of the miners are like prop miners, people mining for themselves
with a, with a company, uh, either public company or private company or individuals
with, you know, a garage full of miners.
They're trying to actually keep the coins right.
But they're having to pay the power bills.
And typically what they do is to spend all their money on miners and then
they sell a portion of the Bitcoin to pay for the power bill mm-hmm.
On their operation costs.
And in a bull market, you know, maybe they can keep 50, 70% of the
coins they mine and that's good.
But in a, in a bear market, Uh, they never have to sell 70% of the
coins just to pay the power bill.
So they're not keeping much, right?
But as soon as the price starts to go up faster than the hash rate can grow, then
they stop sell, they start selling less.
And so they, they take coins that were like regularly being sold on the market.
They take them off the market.
And so it's kind of an effect, a bit like a halving sort of a boost to, you know,
it creates some price momentum, right?
So price goes up for some random reasons, some good news, or
like a string of positive media coverage or something like that.
Then the miners will stop selling as much and you'll, and
it'll boost the price further.
'cause now suddenly less coins will sale rate.
So that's a kind of positive, uh, reinforcement.
So, so do you expect a a, a like Heinz catchup type moment, uh,
during the next cycle where, where there's not as much of a selloff
because there's just too few coins?
Like, is there going to be a well gradually then suddenly type moment?
I mean,
it looks a bit like it because the, uh, dollar cost average army is
just gradually, you know, it's like a tug of war game where they, they
keep buying every day and like the coins on exchange are just shrinking
and shrinking and shrinking and like, if it gets too low, something
explosive is gonna happen somewhere.
Right.
'cause you know, yeah, you can't, like if there are no, if a coin,
if an exchange gets out of coins, you can't buy coins for any money.
You've gotta temp somebody to deposit some coins that they intentionally
took off exchange to cold store.
Yeah.
Like an intent for that to be some time.
So the price might have to be quite high before they would do that.
So, you know, I, it is interesting, like also the.
It seems like, you know, there are different types of trading activity.
One is what I call price formation.
So it's people who are, you know, buying for the long term mm-hmm.
Or selling for tactical reasons where they, they don't have
the money to buy them back.
Right.
Like they're minor and they need to pay off some debts, or they have to
cover their power bills so they're not buying 'em back tomorrow.
And then, but then there's a lot of speculation and that's zero sum game
and doesn't really change the price.
It just adds liquidity.
And apparently, um, the, like, the price volume is, is more in a
derivative, like in the, I mean, in the sort of perpetual futures, so in
the high leverage area these days.
Right.
So that's, that's actually relatively zero sum, uh, I would say typically.
Right.
'cause it's high leverage.
Hmm.
So, um, Hmm.
Yeah, I've, I've heard a statistic from, from glass node that the, not only are
the, the addresses with one coin or less in them growing in numbers, but also
the, uh, addresses with 10,000 bitcoins or more are shrinking in numbers.
Hmm.
Uh, so the, the way I see that it is, this is a redistribution of wealth, really.
Yeah.
That sounds like the genie coefficient is improving, huh?
Yeah.
It's, it's a little hard to know for sure because, you know, some
of the bigger wallets turn out to be, Exchange balances or mm-hmm.
Funds or custodians that represent many users.
And also some of the more privacy conscious users will store their
coins and break them up into, you know, hundreds of parts.
Right.
So, yeah.
Yeah.
They've got a hundred Bitcoin, they store like one Bitcoin a
hundred times in different UT XOs.
So there's, there's error on both sides, but still, I think the
public data is useful because it's a indication of a generalized defect.
Yeah.
It's hinting at something.
Right.
So if you try to extrapolate this far ahead into the futures, like
two generations from now, like how big is the how, how, how big of a.
Portion of the total amounts of bitcoins are gonna be squandered away by this,
you know, reckless first generation of Bitcoiners that we are like, are we gonna
be able to make up inheritance plans?
Or like, how many bitcoins will there actually be available in say, 2050 or 20?
A hundred?
Like 20?
Well, I mean, if they spend them, it's uh, I mean, it's redistribution rate
because they'll spend them at a business.
It will either keep them or sell them on the market, which, you know, gives
somebody else an opportunity to buy.
So I'm thinking more
in boating accident terms.
Like how, how
reckless are people?
Oh, actual, actual, like backup failure, inheritance mechanism failure.
Yeah.
I mean, probably some.
I, I think, you know, the technology's improving slowly.
Um, but yeah, I mean, key management is, you know, not that easy, right?
I mean, the mechanism's easy enough.
You know, you write down the words, you do it on some kind of fireproof thing.
Maybe you make multiple, like, so there's redundant backup
or two or three or something.
Put 'em in different locations.
But I think what's harder is, um, intuition about where
is a good place to store it.
That's still gonna be there in like, 50 years or 20 years,
depending on how old you are, right?
Mm-hmm.
Um, like the physical world suffers bit raw.
People's memory is not as good as they imagine it is, so.
Mm-hmm.
You know, and some people actually have accidents, you know, like they have a
car crash or a boating, like literally they lose the, the backup or they forget
the extra good password they made and didn't use for five years or something.
So there can be losses too.
Yeah, for sure.
Yeah.
So, uh, from one thing to another, what is, what is
Blockstream working on right now?
What is the current projects
there?
Uh, lots of things.
So we're working on, um, lightning.
So we have this, um, protocol called Greenlight, which is a kind of client.
So, so when a, a Lightning Wallet interacts with the Lightning
Network, it, um, You know, it, it does certain network things, right?
It, it, it syncs with a gossip network, which gives it a map of the network.
It is a source row protocol.
So each client needs to know the full map of how to route to other people,
and it, it does various kinds of network information and to keep up with
the network, understand which routes are reliable and things like that.
So there's a certain amount of overhead and you can think about that
as the kind of analog of a, um, a full node wallet like bitcoin core.
Right.
so yeah, you, you've got a full node, kind of Bitcoin wallet and
a full node lightning wallet.
And then there are sort of client server modes where, you know, you, you trust a
custodian and it, it runs the node, or you have remote control wallets where
you run a node and then your, your phone wallet actually remote controls it.
The remote control.
But, um, so Greenlight is a, is another kind of protocol,
which is still self custodial.
You have your keys and you, you know, you verify the information you get from
the network and so you know, you know you have a good degree of security that
somebody can't trick you into spending the money in a way you didn't expect.
But it's sort of server assisted and so it makes a much lighter client.
The client doesn't need to sync as much data.
It doesn't need as much storage.
It can connect to the network, reconnect to the network after being
offline for a few days and immediately transact with high reliability and
normal, like full node type of line.
Lightning wallet will sync a lot of data and analyze it before it can do that.
So it makes a sort of lower bandwidth flow of storage faster, more reliable.
Lightning wallet basically.
Um, And so we've, uh, you know, worked with a few companies.
So Breeze is adopting that as a protocol and we're integrating
it into the Green Wallet too.
And that's available in, uh, kind of early access beta program.
And it should be live as well soon.
So that's, uh, interesting for, uh, like recent developments in Lightning,
um, and from a Core Lightning, which is the implementation of Blockstream
works on, and there are lots of open source contributors as well.
Mm-hmm.
Um, we have, um, some kind of, uh, user interface to control a node.
So if you do run a Core Lightning node, there's a user interface to,
you know, so you'd have to like come online, change the configurations
as the user interface for it.
And that's been, uh, it was already on Unreel and now it's available
on Start nine as well, which is another kind of Bitcoin full
node where you can install apps.
Uh, so there's a new app, which is Core Lightning with the user interface.
Um, and so there are a number of, um, interesting developments
between sort of this evolution of lightning becoming a bridging
protocol between other layer twos.
So there's another company called Bolt uh, bolts, which is doing submarine swaps.
So a kind of trustless swap historically between a Bitcoin U T X
O and a lightning Challenge balance.
So if you're a merchant and you're selling a lot of things and
you've got, you know, a lot of.
Bitcoin stacked up on a lightning channel.
You can swap it with bolts who will give you a U T X O.
Mm-hmm.
On chain.
And then you'll get your capacity back so you're ready to accept more payments.
So you can use it to take capacity out or you can do the opposite as a
user, you can use it to buy capacity.
And so you pay them A U T X O and they add balance.
And with the, uh, sort of rapid increase in on chain fees from, you know, the orals
and the descriptors and all that stuff, it created a natural problem for them.
You know, they were having trouble making these transactions complete.
Yeah.
And reliability.
And then a very short period of time, like in a week or two, they implemented.
A submarine swap between liquid Bitcoin, so on a liquid side
chain layer two and lightning.
So now you could rebalance an on chain lightning channel using a
different layer two Bitcoin, liquid Bitcoin, and it's, it's cheaper.
Like the liquid is not as congested as the main chain, and it's
faster because the blocks are one minute and two blocks is final.
And so then they had a way for you to basically rebalance
your lightning channel.
So the same kind of behavior, but using liquid.
And even after the fees, you know, the orals and the scripters, mm-hmm.
Phase like that fad faded, I guess when the feed fell to normal levels.
Apparently they were saying that the, uh, liquid Bitcoin swap remained
like a significant proportion of their ongoing swap traffic.
So people found that a convenient and faster way to rebalance channels
once they got used to it, basically.
So, so when the wizards broke Bitcoin, so to speak, they they actually helped.
Yeah.
Well it, it's, it is interesting 'cause like it seems that, um, there's
not so much proactive sort of work by service companies in Bitcoin like
exchanges and wallets and payment providers and swap suppliers.
They don't necessarily like proactively plan for what would
happen if the fees increase in the future, but when they increase.
They take some, uh, sort of disaster avoiding action quickly.
Uhhuh, right?
Yeah.
And so they just look around for what, what's the quickest, the quickest fix.
And they'll look at, you know, recent technology developments
or things they can do quickly.
And this is one of them.
So, yeah, I mean actually, you know, we can thank the, uh, inscriptions
for that, which is they created a fees spike, which made Bitcoin
more robust and, uh, scalable.
Right?
'cause people adopted another kind of technology that
offloads capacity draw on a
main chain.
It's, it's, uh, akin to the lockdowns driving the development
of video conferencing apps.
Mm-hmm.
Like,
well, here it's good because, you know, it means that, Now there's more U T X
O space for cold storage and censorship resistant payments on the main chain.
Mm-hmm.
Because, you know, if there're the same number of lightning channels,
you can rebalance 'em without touching the main chain, which is great.
Right?
Yeah.
And, uh, so what about the latest fad, this BIP 300 debate?
And like, I, I won't go to, into the details of that very thing, but there's,
there seems to be this eternal battle between, uh, Bitcoin conservatism, if
you will, and, uh, Bitcoin progressivism.
Mm-hmm.
Like, so, uh, have we already oscillated like what, what,
what's, what's your angle on that?
Uh, is it worth, like, how much should we resist change and how
much should we push for change and how hard is it to change it?
Like, do you see bitcoin ever hard forking again?
I know there are some issues that need to be resolved, but
Yeah.
I mean, I think technically most of these are soft forks
and, and there's a surprising.
Amount you can do with a software.
Like it turns out to be more powerful than people originally thought.
But I think nevertheless, the question is like, historically
Bitcoin has resisted any change that has not got widespread technical
Konsensus, like all the technical people agree it's the best approach
to a given like problem or mm-hmm.
A new feature.
And that, you know, the ecosystem like it, i e the Bitcoin investors.
Like it, 'cause the way I look at the, the fork was, is, you know, I
think a lot of people, everybody from different viewpoints learned from it.
I think, um, weren't sure how that was gonna resolve.
Some people thought miners had a lot of control, and so they lobbied miners.
It turned out they had very little control.
Other people thought developers had control, but, you know, the solution
didn't involve the developers.
And really it turned out that the market won.
You know, so the people that, I mean, I, I look at it like the.
Labor theory of value fallacy, right?
If, if I'm a Goldberg and I'm buying gold and some miners have a revolt over there
and decide they're gonna dig up some lead and expect me to pay for it for,
because it costs money to dig outta the ground, I'm like, I don't, I don't care.
I don't, I want gold.
I don't care how expensive it was to wind the lead, I don't want it.
And they're either gonna go bankrupt or they're gonna stop, right?
So I think that is ultimately what happened with, you know, with this
fork drummer, which is that, you know, the miners and the people lobbying
them were philosophically wanting to make a different trade off of
bitcoins, sort of dilute Bitcoins immutability and sensate resistance
and like decentralized robustness.
Trade that off for some cheaper, like on chain transactions.
Yeah.
And the investors said, no, we don't, we don't want that.
And they have a way to usay the digital gold, which they run a full node, and
if you mind something they don't like, it's automatic, they don't even see it.
Right.
And they certainly won't accept it.
So, and they set the price.
So, you know, the miners will just, it turn out, will mine whatever
is, uh, more profitable to mine when it comes to the crunch.
Right.
Hmm.
So now, um, I do think the.
The concept of Bitcoin immutability or ossification is important for long
term because change implies risk.
And you know, you want to like reduce risk as more value piles up on Bitcoin.
And um, I mean if you look at, let's say other internet things like T C
P I P, basic T C P I P version four hasn't changed materially in decades.
Right.
And like it still interoperates.
Mm-hmm.
It's essentially the same protocol.
Um, and so, you know, ideally you'd want bitcoin layer one to
be like that after, you know.
Yeah, yeah.
Various limitations are, are improved.
So the question is what changes minimally need to be there to get to that point?
And that's like not so clear 'cause it's still in a bit of r and d.
So, you know, um, I think.
You know, like recent op codes that's been discussed are like, uh, a p
o, so something to make, um, a more efficient variant of lightning possible
l symmetry and APOs any previous sale.
Um, another one is covenants.
So they're sort of a attached to use cases that people think are useful.
So, um, and that the, the second one, the sort of covenant use
case is attached to vaults.
Mm-hmm.
So I think, and I think that is a, uh, a significant improvement in cold storage
security, which means that if you have some Bitcoin in a safe and, you know,
you go away for a few days and when you come back, the safe's not there anymore.
You know, somebody's taking it away and like cut it open or something.
Yeah.
Now you need to be able to undo that transaction.
Like send a coin somewhere even colder.
Right?
And so a vault enables you to do that.
Mm-hmm.
And to share the undo transaction with other people.
So you could give it, you know, to your friends, it'd be kind of like a anti
kidnapping possibility also, right?
Mm-hmm.
Because, you know, if, if the, if you can give the cancellation instructions and
pre-sign transactions to third parties, they can say, well, uh, you know, I
can't reach the guy for a couple of days.
I'm getting nervous.
None of his friends have heard from him.
So we're gonna cancel all these transactions, and that will kind
of, so that's the vault concept.
So I think that is quite hard to do properly without, you know,
like a covenant, like op code
or something.
Couldn't, couldn't it be done with time locks?
Um, well, the thing is you need to sort of, I mean the, the, you
need another variable, like Yeah.
I mean, the effect you want is that, You can devolt.
So I can take some coins out of a vault and they're kind of stuck
in a time lock situation where I can spend them with a key, I have
access to after a week, let's say.
Um, and, you know, if I have the keys, I could spend 'em in a different way, right?
Mm-hmm.
In the meantime.
And so I need, I need to like pre-sign it with some keys I don't have anymore.
So then you have to kind of, the, the be, I think the best you can do to simulate it
is, you know, I have my cold wallet and I pre-sign all the ut XOs and then I delete
the keys, which is kinda scary right now.
Now my cold, now my wallet is a bunch of pre-sign transactions
and I have to back those up.
So that's, that's hard to do with a seed.
I have to like back up a lot of, so it's, it adds its own risk.
It's a bit of a difficult trade off because you are, on the one
hand, trying to have a good backup of the keys until you use them.
On the other hand, trying to be very sure you've deleted them so that you
can't override your vault mechanism.
So it's kind of a bit of a conflict.
Mm-hmm.
So it's hard to get to do it in a robust and like reliable way,
whereas the vault can do it.
'cause you can, you know, write a covenant allows you to write a sort of
restriction, which is to say, well I have the keys, but you know, the coins
are set so that I'm not able to spend them unless I spend 'em like this.
And so you can add the, the vault, the de vaulting as a restriction on the coins.
And then you don't need to delete keys basically.
So that's the, okay.
Yeah.
So you can simulate here, but not, not that well.
And like covenants also, I mean, most Bitcoin op codes are very low level.
It's kinda like a machine instructions in A C P U.
It doesn't do very much like each op code is like, you know, push a
number on a stack or add two numbers together, or verify signature.
They're like very low level things.
Mm-hmm.
Um, and so a volt is like the, sorry, the, the covenants are a bit like that,
you know, it, it requires a certain structure in the output transaction.
So it's a relatively simple thing.
And so of course once you have it, you can, you can do
other things with it as well.
Right.
Alright.
So yeah.
So what separates, um, liquid from, from these other proposed side
chains and drive chains and whatnot?
Like what, what's the, what's the key difference?
Yeah, so liquid is the sort of side chain you can build without.
New op codes.
So, and the way, the way it works is there's a federation, so a number of
exchanges and service providers operating a hardware security module that is, you
know, participating in a liquid network.
So they're running a liquid full node, which is a kind of extended
version of Bitcoin protocol.
So like liquid side chain is Bitcoin plus some extensions, basically.
Right.
And then they, and, and from the Bitcoin's perspective, the coins
look like they're in a big multisig.
Um, And these hardware security modules will, you know, accept
coins in and let people claim them on liquid as liquid Bitcoin.
Mm-hmm.
And if on the liquid side somebody requests to peg them out or like freeze
them or burn them on liquid and request them back on the Bitcoin side, then
the, uh, the hardware security modules will sign to follow that instruction
and give it back to somebody on Bitcoin.
So it has, um, you know, it's not as censorship resistant or.
Like, and, and not as good a place to do cold storage as Bitcoin, but
for its kind of general purpose of like medium sized transactions,
short term trading or transacting.
But it has some advantages.
So, uh, for example, one of the extensions is, uh, stable coins.
Mm-hmm.
So you could have other assets and so that's convenient because now you can
do kind of limit orders and atomic swaps between, you know, different assets.
Whereas on Bitcoin, there's only one asset is Bitcoin, right?
Mm-hmm.
So you get that.
Um, and so the difference is really that, you know, if something goes
wrong on liquid, Bitcoin doesn't really know or care about it.
All it sees is a multisig.
Mm-hmm.
Right?
Whereas I think there are a few different types of, Um,
merge mine, side chain ideas.
The original one evolved fraud proofs.
So the idea there was with the merge mining there would be, you know, the
Bitcoin miners would be also hashing the, uh, the side chain, so they wouldn't
like look at the side chain and see if it's valid necessarily, but they would
like put a timestamp on it or something.
Right.
So dedicate hashing power to it.
Yeah.
I mean, it's merged mines, so, you know, they mine bitcoin and then
they put the checks on off the most recent side chain block mm-hmm.
Into the main Bitcoin block.
But it doesn't, you know, if, if the side chain like has a bug and
forks like experimental or something.
Yeah.
It won't fork the Bitcoin network, you know, they can ignore it and
uh, typically the side chain could be, you know, the Bitcoin chain can
be progressing forwards, processing transactions, adding new blocks.
While the merge mining is doing a reorg, you know, like undoing
a transaction or oring something that was a mistake on a side chain.
So there's not really any pressure on a side chain to want to undo
Bitcoin blocks just to undo something on a side chain, because that's,
that's one of the concerns, right?
Mm-hmm.
It's like you get a lot of economic activity on a side chain and something
goes wrong and then they desperately wanna undo it, and then they come and
try to plead with the miners to okay, pay them to undo the whole chain.
Right?
And you, you want Bitcoin to like never go backwards.
Um, you don't want people
to shit Bitcoin on Bitcoin, right?
Yeah.
Well, I mean, you don't want to import the, the incentive
to undo mistakes onto Bitcoin.
It's just kinda like Ethereum, right?
They, they made some god awful mess.
They like screwed something up big time and the people affected
financially were the insiders and so they like, Undid a bunch of stuff.
Yeah.
And now there are two Ethereums.
Right.
And uh, so you know, if that was a Bitcoin side chain and not Ethereum, you
know, what would they have come and, and one that's tied to Bitcoin, like Yeah.
Block height.
Now would they, and they want to undo it, would they do come to the miners?
Is like, could you please undo that?
I mean, I think it's very difficult in Bitcoin, you know, people have tried that,
like a number of exchanges have got hacks.
For large amounts of money like Bitfinex back in 2015.
Mm-hmm.
They, they, you know, they resolved it now, uh, they got, you know,
they raised the money like long time ago, so it's long resolved.
But, you know, at the time people were wondering, and more recently, I
think last year or two, Binance had some hack and they came and talked
to you, tried to talk to developers or miners, like, could you undo it?
Like, I mean, not really, no.
You know, I mean, just, just imagine the chaos if it was undone,
you know, like the Yeah, yeah.
Just the accounting costs.
Like, 'cause other things could get replayed or double spent if something was
redone, it's, it's not remotely worth it.
No, no.
So it doesn't make any
sense.
So, so it would mess with the incentive structures basically.
Yeah.
So that's one concern.
And, and then the drive chain.
So the, the original side chain is like merge mind and it, and it
presents a compact proof to Bitcoin, so it adds a soft hook to bitcoin.
This is the concept, right?
Mm-hmm.
To, to verify a proof that most of the merge mining work like that
there's a certain amount of merge mine work on the side chain that
approves this withdrawal request.
Mm-hmm.
So it doesn't verify the whole side chain, but it can see that, you know, there's
a lot of merge mining that seems to be saying that the miners agree that this
guy should be able to withdraw this coin.
And then there's a time lock, kinda like with lightning, where somebody else
can sort of provide an even more work, like a, a higher block height mm-hmm.
With something that contradicts the first one and then they can cancel the withdraw.
It's kinda like a reactive security, like lightning.
So that was one version.
And a drive chain is a simplified version, so it uh, has no fraud proofs.
It just says, well, they make the peg out slow and so, If the users see
coins being stolen by a big conspiracy of miners, they have three months or
six months to do something about it.
And if you think about it, the, the scenario is that there's a
conspiracy between most of the miners.
So now the users, you know, Bitcoin users and investors can't really get the
miners to help prevent that because the miner's already in the conspiracy, right?
Mm-hmm.
So now Bitcoin basically has to undertake a U A S F like situation.
Mm-hmm.
To say, to like, sort of, you know, save that to the miners.
Look, we're gonna block this, this theft, and if you try to do it
anyway, you know, we changed the code.
If you change that, if you do it anyway, you're gonna fork off
the network and we're not gonna honor your coins, so don't do it.
And that, that was kind of like what happened with the Segway activation.
Mm-hmm.
And it was a very dramatic and kind of scary thing with some, a fair bit of risk.
So people don't want that kinda risk.
Right.
And so that's, that's the challenge for drive change.
Like the, the sort of disincentive to steal is kind of, uh, an expensive
exercise in risk terms mm-hmm.
For the main chain.
And people don't like risk on the main chain.
So that's, that's the problem.
I think, uh, like people wanting to opt into things is generally fine, but if
it, if it creates a cost or a risk, then.
It starts to be undesirable.
Yeah.
Sounds
way easier to just not temper with it.
Well, I mean it, it's interesting.
I mean, I think it's always interesting to discuss ideas because by discussing
them, people like invent new things or change their perspective.
Because I think before, like the last few weeks of Drivechain
discussion, people would've said they prefer hash rate controlled
side chains to federate side chains.
Mm-hmm.
Liquid and rootstock.
But I think if you ask them now, they'll change their, they will swap their view.
So now they're like, actually the federated side chain is much less
likely to create a problem for Bitcoin.
And it's much less likely that the, you know, the collection of dozens
of exchanges would have a conspiracy and try to steal the pegged coins.
'cause we know who they are.
Mm-hmm.
I don't involve a massive conspiracy and there'd be legal
problems and stuff like that.
Right.
Whereas if miners do it, it is kind of anonymous.
Um mm-hmm.
And it's more difficult to do anything about it.
So you don't know who to blame, for example.
Right.
Um, so I think even the discussion changed the perception and like,
it's instructed to look at what people don't like about it and why.
'cause maybe there's a way to.
Like make a safer mm-hmm.
Type of supply chain.
So, so how big a part of the discussion and how much influence does the
infighting on Twitter have on Bitcoin's development, like the A T I Q people
and all this stuff, uh, that we're talk, we talk about and like, uh,
um, well, I mean, I think there's like a mixture of people so.
You know, some people will just react, like, don't change Bitcoin.
It's like so morph as a philosophical, right?
Like Yeah.
Based on conservative, uh, you know, well, I mean, it's, it's true actually.
I, I, uh, went to some kind of like private meeting, like a bunch of
like investors and a few tech people just like general discussion for a
weekend kind of thing some years ago.
And like a question I asked for the, in like Bitcoin holder investor or fund
manager type of people is like, well, what features would you value most?
Mm-hmm.
From the technical side for Bitcoin?
And their answer was surprising, which was like, Just don't break it.
Yeah.
That was the number one feature.
Right.
And so that's very interesting.
Right.
'cause like they didn't even care about lightning actually.
It's like, it is like payments.
No, they care about investment.
Oh, that's good to hear.
So like if, if there's something like about key management or vaults
like, okay, like now I'm listening, but it's like about micropayments,
I don't really care about it.
So, no, I think like really you want a bit of both because, you know,
ultimately the value proposition of Bitcoin is the ability to, you know,
do the censorship resistant payments.
And we can get more of those by using something like lightning.
So if we can make lightning better, that also helps the kind of value proposition.
Mm-hmm.
And it also frees up space for cold storage, which is good too.
So,
yeah.
Alright, so, so what's this, uh, This unavoidable bug that is in
the code that needs to be fixed for the hard fork in like 2050 or 2090.
Or, I mean, what is that called?
I, I for, I think the name escapes 6 21 0 6.
Yeah.
That's the
one.
Uh, yeah, I think, I think it's kind of like, you know, the year 2000 bug.
Yeah.
Like some counter wraps around.
'cause it's a 31, it's a 32 sign, 32 bit integer.
Right.
So, so like, but I don't think it's an issue because it's like, you know,
so many decades away that you can just make a technical hard fork that was
fixed, you know, like five decades before it could become an issue.
And then nobody's running like five decades old code and nobody notices.
Right.
Or something like that.
So think it's very simple to fix.
Okay.
But it's like a technical curiosity that like, whoa, we can't fix that without,
okay.
So everyone's sort of relying that we will fix that just
because the sheer amount of time
that we have to fix it.
I mean, I think, I think the thing is if you make some in pop change,
It's very hard to coordinate that.
Everybody would upgrade and then nobody would accidentally like get
left off the network or something.
But you know, if it's coming in like a hundred years, okay.
Like they're not even in a rush to fix it.
Right.
Because you know, as long as you can fix it so far ahead that it's
implausible, anybody would still be running that old software.
Mm-hmm.
Then it's pretty easy to fix.
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So, so how is Liquid doing?
Like how is liquid adoption doing?
Like how, how, what's the developments like?
What, what do you see there and what do you
predict in the future?
Yeah, so I mean, unlike, uh, it's, it's mostly kind of organic.
So I guess like a little bit analogous to Lightning.
There are different types of startups involved, right?
So people who are building like the Lightning protocol and then the LSPs
and then, you know, applications and games and things like that.
So there's that kind of thing happening with liquid, with multiple startups
building on it and you know, some of them more organic and just, you, you never hear
about them and then they have a products, nobody new and it's in market and now
people are talking about it and using it.
So a number of things like that have happened over the last year.
So, I mean, one is, uh, site swap, which is mm-hmm a liquid
wallet, uh, and um, a kind of, uh, non-custodial central order book.
So you can.
From your wallet, you can, uh, place a limit order to buy
Bitcoin, like below this price.
And you, you sort of sign part of the transaction and you give
it to the server through the app.
And now, um, you can switch your phone off for your desktop app or what have
you, and somebody can come along and decide they wanna sell it to you.
And they'll give their partly signed part to the server, and a server just
combines them, takes its commission and sends it to liquid chain to sell.
And it's a kind of a trustless limit order.
So it's a way to do trading or buying or selling without custodial risk.
And actually they're integrating.
Hardware wallet support.
So you could even, you know, you could use a web experience to like click on the
prices you want and you scan a QR code and then you approve the transaction on your
hardware wallet saying, you know, yeah, I wanna buy Bitcoin at that price, and
I have some liquid tether in my hardware wallet and when it, when it transact.
So basically funds move between two hard or wallets.
So it's an extremely safe way to do trade without the kind of, you
know, tgo, uh, F G X, uh, quadri, all that kind of exchange custody risk.
So that's very interesting.
And you know, they even have, um, so on liquid, there are two types of assets.
There are like liquid Bitcoin and liquid tether things that are
just peer-to-peer transferable.
And then there are sort of, there's an option to make an asset, a security,
it's called amp, uh, a managed asset.
And so, um, The, the thing there is you can't, like, receive it or send it to
somebody who is not like whitelisted.
And a way you get whitelist is your role, like, uh, with an
exchange or something, right?
Mm-hmm.
so yeah, the, the, the way that you, you interact with it is, is like that.
But once you are whitelisted, it's curious because now you are transacting
something which is like a licensed registered security, but you're
transacting in a very pi feel, right?
Like, You know, send somebody 100th of a share as a gift or they can like,
you know, give me 10 euros for it in person, I can send it to 'em or I
can like agree an O OTC price mm-hmm.
And swap it with side swap.
Or I can put it on a market, on side swap all in a sort permissionless way,
but still like compliant with securities laws 'cause of the white listing.
So it's a kind of novel kind of merge of unlikely things.
Right.
Which feels like very permissionless, but like behind the scenes permissions.
And it's very simple from the blockchain, like from a liquid blockchain point of
view because all it sees as a multisig.
But, but, but all these things aren't, they like the, these are sort of bridges
between the Bitcoin world and the
fiat world as I see.
Yeah.
That one is, I mean another, another example is, I mean there are, there
are lots of, there are some like startup derived things and there are
some user behavior derived things.
So one user behavior derived thing is dollar cost averaging.
So we came across users who were, uh, dollar cost averaging on liquid.
Because the fees are low.
Mm-hmm.
And if they're, you know, buying $5 at a time, like if you withdraw from
an exchange, is expensive, right?
Mm-hmm.
And so their dollar cost averaging on liquid and then they'll get to a, to a
target, you know, like 10th of a Bitcoin or whatever the threshold is, and they'll,
they'll take it off onto cold storage on the main chain and they'll do it again.
So it's a kind of way to do something frequently and like amortize
the cost of going to A U T X A.
So that's one kind of use case.
And the other one was the, um, The bolts, like liquid atomic swaps, so
sort of connecting liquid and lightning, which was also like organic, right?
I mean, a startup decided they had a problem and like within a
week or two they had a solution.
So.
Hmm.
It's quite interesting things.
Um, and, you know, they're continuing sort of people issuing different assets on it.
Um, more wallets, adding liquid support.
So there's a new one that was announced at this conference called, uh, wbe,
which is a kind of a super app.
So it's a Bitcoin wallet and it's a liquid wallet and it's a root stock wallet.
Mm-hmm.
And I think they're adding lightning too.
So it's kind of all Bitcoin related layer twos and, and maintain in a single wallet.
Uh, green is a bit like that because it has.
You know, it has liquid Bitcoin and Bitcoin and more recently we have the
beta integration of lightning as well.
So kind of all three.
Mm-hmm.
But the wall be super app is even more, right?
'cause it includes root stock and plans to go between them.
But, but all of these, these things, like do they, do they
exist post hyperbitcoinization?
Like if in a, in a fully colonized world, is there a use
case for these things still?
Uh, yeah, potentially.
I mean, I think that, you know, the layer twos are sort of
a bit like T C P I P, right?
So they're sort of specialized protocols on top for different,
like application domains.
Mm-hmm.
So I think, you know, if, if lightning is specialized for retail
payments, then liquid is specialized for like maybe trading has some
additional confidentiality because of confidential transactions.
And I think another configuration that might come about in the future, I.
Is because Core Lightning works on top of liquid as well, so you can
have like liquid Bitcoin channels and then instead of rebalancing, Bitcoin
lightning channels with liquid, you can have liquid Bitcoin channels, right?
Mm-hmm.
And so, you know, for the risk, if, if the amounts are that are involved
in lightning are very retail, like not, not huge amounts of money, right?
Like maybe, you know, the phone is more expensive than the, than the
Bitcoin on it kind of situation.
Yeah.
Then maybe it makes a good deal of sense to anchor lightning channels in liquid,
which is kinda layer 1.5 and then that frees up even more space from the main
chain for cold storage because you don't get all of the lightning, you know,
transaction anchors and stuff like that.
And I think liquid, you know, liquid's, uh, capacity is sort
of similar to bitcoins because.
You know, the blocks are 10 times as fast.
'cause they're every minute they're the same size, but the confidential
transactions are about 10 times bigger 'cause of all the mm-hmm.
Uh, crypto stuff.
Um, but, you know, I think that would be, uh, an interesting trade off and
the sort of thing that somebody might, you know, like s did, somebody might
adopt and, you know, a, a future prolonged fee spike or something.
Right.
Yeah, you, you, your panel about, uh, when 100 k, you know, the nice provocative,
uh, title, lots of bullish energy in there in terms of, uh, the timeframe and, uh,
when the fiat price is going to go up.
But what do you see at the moment as the biggest long-term threat to
bitcoin?
Um, I'm not sure.
I mean, you know, for people who were involved, you know, 20 13,
14, 15, you know, banks didn't want to hear about Bitcoin.
Like if, if you were a business development person since talk to banks,
they would tell you before you go into the room, don't use the word Bitcoin, right?
Yeah.
And that all changed, you know, then every bank on the planet had
a blockchain r and d lab, right?
Mm-hmm.
And, you know, come forward a few more years and they're all vying to provide
Bitcoin related financial products.
And like, so I think in that same kind of timeframe, like 2013 to 2015, a lot
of people were quite worried and even before about, you know, regulatory bans
like, you know, China bans Bitcoin, but like thinking well maybe Europe
and the US or also ban Bitcoin and that, that would be a risk, right?
But I think I.
You know, that risk has receded a lot because, you know, the
regulators have regularized, you know, Bitcoin is property legally.
Um, I think a lot of technical risk has receded, like, you know, Bitcoin's
quality assurance has improved.
The re, you know, the, the changes have become more conservative and it got
through to block size wars and showed that, you know, the investors ultimately
were able to enforce immutability despite like, you know, a lot, a big array of
financial interests, wanting to change it for like, you know, uh, the economic
benefit of startups, I guess ultimately.
Um, so I'm not sure, like, I think the risks have receded on, on most
fronts, so I'm not really seeing like, You know, a big threat.
Um, so I'm not sure.
Yeah, it seems, it seems like, you know, I mean, of course, uh, a different
kind of threat I think, or risk could be that Bitcoin succeeds, but
emphasizing the investment asset use case and losing some sort of momentum
on various censorship resistant mm-hmm.
Soft ownership of keys.
And I do think it's like potentially a problem if too big a proportion
of Bitcoin's economic base is held by ETFs with like mm-hmm.
Corporate lawyers and fund managers reduce duties and stuff like that.
So, you know, I mean, ultimately the value is.
The, the use case, like the digital gold, the cold storage,
the ability to spend, that's the thing that banks can't compete with.
So, you know, the banks offering financial products is kind of
like, you know, VCs buying, or investors buying internet stocks.
'cause they thought mm-hmm the internet, the permissionless chaos
of the internet would be popular.
You know, they may not have liked the permissionless chaos, but they could
see they could make money from it.
Right?
So you don't want the guys that are writing a trend to.
Like break the trend or like erode the permission.
Right.
But this is a slightly more philosophical question.
Does we, can institutions actually own Bitcoin though?
Because like, not your case, not your coins and custodial, like the real
possessor of the Bitcoins is some guy or some guys with a multisig thing.
Yeah.
So, so how, how do you see that, like the relationship with between
ownership and possession in the future?
And like is, is Bitcoin, is owning Bitcoin more than just keeping a secret?
Like how do you see
that coming up?
I mean, certainly an indirect and more fragile ownership claim, right?
Yeah.
So, you know, if you, if you assume there are, um, very much more
credible like custodians, like, I mean already Fidelity is a, I think
has a custodian service that's probably the one of the highest tier.
But there are other like fairly high tier.
Uh, established financial players and provide Bitcoin custody
for a fee to corporations, but it's still indirect, right?
Because, you know, if you are an individual and you can get access if they
sell to individuals, or you're a company and something happens, like a court makes
a judgment against you, or law enforcement makes a judgment against you, then the
custodian doesn't listen to you anymore.
They listen to the third party.
Yeah.
It freezes your assets.
Right?
So then well, did you really own them?
Mm-hmm.
Well, kind of, you, you know, you, you had a a right to request them, which
they have this question to refuse if there's some overriding claim, right?
So yeah, you don't really have full possession of them anymore.
That's, that's the,
the risk.
Yeah.
And, and, and also if, if a custodian feels threatened by a government or
whatever, uh, I mean the, the one guy or the three out of five guys can, can just
bus off and go somewhere else and live their lives without them ever knowing.
Yeah, I mean, I guess the, um, probably the big custodians have,
you know, because they are custodying other things which are hard to undo.
Mm-hmm.
Like maybe artwork or like physical vaults for valuables.
And they have developed over, you know, centuries, like quite good, uh, what
do you call it, like cross checks and governance and procedures to make sure
that it's difficult for like, A small group of insiders who get corrupt 'cause
it, 'cause banks do have like tellers that go rogue and like Yeah, yeah.
People that try to steal, so they try to make a lot of, uh, cross checks and
controls in there to catch it early or to prevent it without like a huge
collusion or something like that.
Still, if, if this, um, you know, catch catchup effect thing
happens and Bitcoin a hundred Xs.
Yeah.
Like, so all of a sudden those 10 bitcoins are worth more than that.
Right.
Mona Lisa type pen look.
Well, I mean that's, that's a case for, for like the vault situ, I
mean the, the smart contract kinda script vault, which is that, you
know, the day-to-day operations.
The people operationally in control, you know, can DeVol and then
spend money out of the devolt or maybe manage a kinda warm wallet.
Mm-hmm.
But you know, there will be other people, a much wide array of people potentially
including people with coins in the custody who can like blow the whistle,
like, Hey, these coins are moving and nobody approved them and have like a
week's time or something to cancel it.
Mm-hmm.
And send it.
You know, somewhere much colder, which is like maybe extremely inconvenient to
access and you know, that that would be impractical for a day-to-day service, but
is a fallback if something weird happens.
Right.
But, but that's not in
place now.
Like No, I, it isn't.
I mean, but I think that's one of the reasons you, we probably should try
to build them, like either using the pre-sign transactions or with some
kind of vol, I mean, some kind of covenant technology to build them.
But we, as in, well, I mean like people who build stuff like
startups, technologists, companies.
Yeah.
So there's a mar Yeah.
You foresee a market for that, those kind of
services.
Well, I mean, as, as somebody who's like, you know, been involved in like the
technical part of custody and thinking, so if you actually do something, then
you start to think much more clearly and pragmatically about the risks.
Yeah.
You know, so if you think, even on a personal case, you know, you, you
make steel backup and you put it in a home safe, and then you think, well,
you know, what if I went away for the weekend and somebody swapped the safe?
Yeah.
For one that looks the same and I don't notice for a while, and then I find
I don't know the code and I'm pretty sure I haven't forgotten the code.
And then I realize they've swapped the,
or they just open the safe and look at
the words like, yeah, well, I mean, like, let's assuming they cut.
I mean, I think typically consumer safes are actually not that good.
So a, a skilled safe bracket can open them anyway, like bypass it.
But even if you assume it's good quality and they can't bypass it,
it could, you just take it and swap it and maybe you don't notice.
Right?
So if you start thinking about some of those things, then it's, uh, you
know, The physical backup can be taken.
That's the problem, right?
Mm-hmm.
So what would you do about that?
Well, you need to be able to cancel it, and then you need
this kind of digital vault.
And then if you have that extra technology, you would have an answer.
You know, obviously got security cameras everywhere and you,
and you see that it happened.
Now if it, if it was today, it is too late, you saw them get stolen.
So what?
They've cleared on a chain and they're gone, right?
Yeah.
And you can't undo them.
But if you have a, a vol process, yeah, you can undo it.
You have a week to like take it back.
Right?
So, but, but like, I mean, steel plates and all whatnot are.
The, the, there's sort of the normies now, but, but really what?
It's just your imagination that, that counts when come, when it
comes to, uh, storing Bitcoin.
I mean, a private key is a, a, a set of characters and, uh, a
seed phrase is a couple of words.
So say you hide the, in a poem, uh, and you store that poem in three different
locations, in three different countries, and nobody even knows that it is a seed
phrase, and it's impossible to tell.
I mean, there it is literally just your imagination, setting these
boundaries for what's possible.
And yeah, I think we, the, the bitcoin space is sort of like,
okay, this is the normies.
Now we're, we're doing steel plates and we're, where it's blatantly obvious that
the Bitcoin are there because it's a steel plate with seed, seed phrase on it.
So like, right.
Yeah.
It's not hidden at all.
It's like, it's like a gold bar,
right?
Yeah.
I mean, it is.
Yeah.
So, uh, so how do you see that?
Do you see like, uh, Other developments in the, like Bitcoin storage space?
Like are people using their imaginations enough?
Yeah, I mean, I think it's, um, I mean, certainly people have tried lots of
different strategies including, you know, having a password and memorizing
it or splitting things up and storing 'em in different locations or trying
to hide things very effectively.
Um, and I guess there's always a trade off between, you know, hiding it too well.
Mm-hmm.
So that, you know, if you have an accident, then people
can't find them or something.
Mm-hmm.
And that's probably happened a couple times and like in the last few years
to people who unfortunately had an accident and people couldn't figure out
like the backup strategy or, I think the other thing that could happen is
people can get like very creative.
And make some kind of complicated trail to solve for themselves and then forget
parts of it 'cause they didn't try it.
So I think it turns out that people's memory is a little bit
fallible if they don't frequently exercise it for a few years.
So I think that's, that's a trade off.
Right?
And, and I think for companies like somebody doing like a custodial
service, it's a little bit more complicated because they have to,
uh, manage the change of stuff.
So somebody leaves for another job and you need the security to remain.
So you can't, you can't like place, you have to make it somehow physical
so that, you know, not control that you can like, have somebody leave as
a documented standard and that person doesn't take part of the secret with
them sort of thing or something.
Right?
Mm-hmm.
Well, I think the only
other thing I've kind of got on my mind is, is with some talks about threats
and, and, uh, things that could go wrong.
Uh, what are you seeing.
Positively about how Bitcoin is doing in the world.
Is it, is it, is it doing the thing that you thought when you first heard about it?
Does that make sense?
Yeah.
Has your, how much has your view changed over the years of what this thing
is?
I mean, um, my view is, is is basically the same sense, like, I don't know, 1995
or something with electronic cash, right?
So, you know, David Chaum had developed this kind of cryptography for electronic
cash in 1985 in his PhD thesis.
And he's still around in the crypto space, but a older guy now, right.
He's a very clever cryptographer.
But I think in the mid nineties, there was a startup in the Netherlands that
David Schumer started to, you know, commercialize and make available
electronic cash using this technology.
And effectively in today's terminology, you would call it like a stable coin.
'cause that was like, you know, not dollar denominated, but euro or something, right?
Mm-hmm.
And, um, But yeah, so I think the thing that like, at least the Cipher punks
thought was exciting about that kind of technology was the bearer finality of it.
Mm-hmm.
Right?
That it's, you know, it's digital, but it's physical too.
Like, I, I own it and own it, I own it and nobody can take it off me.
Nobody can sense to me, nobody can prevent me transacting.
Uh, maybe nobody can even kind of detect of who paid who 'cause it, 'cause
that technology was extremely private.
Right.
And so to, to those people, that was extremely exciting.
And then the concept of smart contracts involving bearer finality
was extra interesting because it meant that a contract was final.
You know, if, if there's a, if there's a smart contract that says,
you know, you get paid when this.
Event happens, or when this task is completed and it's ver like it's machine
verifiable, then the fact that the payment is ve final means the contract's final.
So you can't, you know, you can't dispute it.
Mm-hmm.
So it's sort of extremely efficient, low cost, sort of, um, centralized reputation
based commerce on the internet, kind of in a, you know, in a gray market, fully
permissionless and global and anonymous.
Right.
So we thought that was really interesting for, we like the
people on the cyberpunks list.
Really interesting.
And like Bitcoin realized it.
Right.
So, you know, here we are and it's, it's working.
I mean, it's not quite as private as that tech was.
It's, um, that was, that had a, a side effect of being centralized and mm-hmm.
Vulnerable to that company shutting down, and then the central database
was lost and it was all gone.
Right.
So, yeah, I mean, I think the reaction to digit cash winding down and
seeing that fail if you held some of the coins was, wow, that central
point of failure is really bad.
It needs to be decentralized.
Like, how would you do that?
Mm-hmm.
And then, you know, there's all the discussions in the, I guess late
nineties, early two thousands about, you know, how, how could you possibly
build a decentralized electronic cash?
And I'm like, there were, there were things that sound like vaguely similar
to Bitcoin, like about mining and proof of work and smart contracts
and, you know, bynine in general's problem, all these discussions, but
nobody figured out how to do it.
And so Bitcoin.
Really, uh, made it happen.
So, yeah, I think it's great.
Like, you know, and like, I think that it, uh, changes people's viewpoint who
come in like, you know, the attraction of the kind of pure mathematical elegance of
having piece of digital property that's yours and can't be taken from you, can't
be eroded, can't be seized, can't be, you know, frozen, canceled or undone.
It's like super cool, right?
People get their head around now.
Of course we wouldn't be here if it wasn't.
That's amazing.
Right?
And so people are just like, it's quite interesting.
I went to PNI PS Oh yeah.
You know, in Prague and, um, They have a coffee shop in
the, uh, in the grand floor.
Yeah.
And you have to buy with Bitcoin.
And so, you know, we were talking to some people after the event, they
organized and they were like, yeah.
Their first interaction with Bitcoin was they came into the
coffee shop to buy a coffee and they knew nothing about Bitcoin.
They wanted a coffee rate, but after they learned about it, they got like
very philosophically interested.
So it, so basically it doesn't matter what angle you came from it, like whether
it's a friend or as an investment or it was a, you know, casual payment.
Like just how it works is super interesting and like, you know, the
wine virus that keeps everybody super enthusiastic for years and years.
Yeah.
Tell me about it.
Yeah.
Uh, yeah.
So.
What was that?
I, I just had something on my tongue.
Yeah, yeah.
About ownership.
I mean, since, since we've established that owning Bitcoin is nothing but keeping
a secret, how do you prove ownership?
Like in, in a ethical sense?
I mean, of course the legal systems are flawed and whatnot, and they can
prove all, quote unquote, prove all sorts of things that aren't necessarily
true, but like from a strict.
You know, information technology perspective, how do you really
prove that someone owns a Bitcoin?
Since it's just information in someone's head at the end of the day?
Is it, is it even possible?
Well,
I mean, I suppose the close analog is if, if they're willingly proving they could
sign a message or spend to themselves.
Yeah.
And that would be pretty convincing, right?
Yeah.
I can
think of a case where that would've been, uh, the right thing to do
to prove you're a certain person, but, but it never happened.
Uh, but, but still, if they refuse to and, and just use the boating
accident excuse or whatnot, like
how, yeah.
I mean, there's nothing you can do to prove it, right?
I mean, it, it even happens in some unrelated to Bitcoin court cases where I.
People have encrypted hard drives.
Yeah.
And you know, there's some investigation, uh, their equipment
is seized and the court demands that they decrypted data and they refuse.
Yeah.
And like basically after some kind of prescribed legal limit, they have to
let 'em go because no decryption, no evidence, presumption of innocence and
like some kind of prescribed legal limit on holding people for contempt of court.
If they refuse, you have to let 'em go.
Right.
So I think that's, that's kind of a precedent, right?
If you, if you can't prove it, like what are you gonna do?
Right?
Yeah.
And even like if I, if I do an non-chain transaction to obviously
buy a cup of coffee and there's a note in it saying, well, you bought a
cup of coffee and you bought it here.
And at this point, like still to me, even that is impossible to actually
prove that, that I made that transaction.
It could have been anyone else keeping the same secret.
Right.
Yeah.
Yeah, it's true.
Yeah.
So, well, I think it's important to keep identity out of the blockchain.
Yeah.
And you know, some people got excited about, uh, digital IDs and like having
kind of KY c certificates on chain and Ethereum even got on the train.
What was this?
The, uh, soul bound tokens.
Mm-hmm.
Another word for a digital certificate basically make a lot of sense to me.
But I think you wanna keep that stuff as far away from the blockchain as
possible because banks particularly, you know, the technologists that come
from the banking world, they're used to the concept that the, um, you know,
people could lose their online login.
And so as long as they have, you know, their passport and utility bill, that
individual is the owner of the asset.
Uh, so they, they kind of just gravitate by.
Instinct and momentum to wanting to like put identity stuff a blockchain and make
it a condition of the spending, right?
It's like, well, the guy with this passport or the guy with this fingerprint
or something, I'm like, no, no.
Like it should be, it's bearer.
It's a bearer asset.
Like it's, it's a bad idea to put identity anywhere near the blockchain.
And I like, so I don't even like people making decentralized.
Itd 'cause if they're in a blockchain, then sooner or later somebody's
gonna use it as a spending condition.
So like, keep it away from the blockchain if you ask me.
So in the same vein, like, uh, do you think we'll see cbdc
playing out, like as a real thing?
I mean, are are they already, like, what are we living in
and what are we looking forward
to?
I mean, that is, um, dystopian dark stuff, isn't it?
It seems like the.
The sort of Europeans and the American, like central bankers are getting FOMO
for, you know, the dystopian Chinese Yeah.
Kind of social credit score.
Freeze your money like, you know, uh, disfavor you financially if you
don't like conform kind of thinking.
And you know, I think they kind of want the, um, microeconomic control, right.
So, you know, they printed so much money and it kinda lost control of inflation.
And, and you like the levers they have to influence inflation
are super indirect, right?
Yeah.
So they, they put money into the system and it just flows into
banks that lend less or something.
Yeah.
And say, you know, if they could reach into your pocket and say, well you've
gotta spend this money in a week, or we're gonna take it back, you know, or you're
only allowed to spend it in this way.
They would love that.
'cause it'd be kind of like microeconomic control, but it's like extremely dark, uh.
Kind of concept.
So I'm just hopeful that democracies will just like say no.
Yeah.
The term programmable money is wrong.
Like pro programmable money is the same thing as programmable people.
That's what it is, right?
Because people use money.
Like it's just us.
At the end of the day, it's Bitcoin going to help
us avoid
that.
Yeah.
Well, I mean, I think there are some countries which have tried to phase out
cash, like to go cashless or even some European countries that have placed
legal limits on cash transactions.
Mm-hmm.
Or taken like 500 euro notes out of circulation.
And other countries that are still heavily cashed, like
Maltra is very heavily cashed.
Switzerland is very heavy cash, but Switzerland has like a
thousand frank note, which is worth like double that or something.
And they use it, you know, like Switzerland has, I think so many
thousand frank notes that there is like about six or 7,000.
Frank's worth a thousand frank notes or like six or seven notes per man,
woman, and child in the whole country.
So just imagine the amount of like high denomination currency
they have, uh, floating around nice companies and individuals.
It's very cash like Outlook.
Um, but yeah, so if they try to outlaw cash, like by policy and regulations,
then Bitcoin is a natural outlet, right?
Mm-hmm.
Well, we have global bearer bitcoin, electronic cash.
So what do we care?
I mean, we still care that you don't like make, uh, money a dystopian,
like fear money, a dystopian control point, but we have a, an outlet,
a safety valve, which is we can use the bearer Bitcoin and there's
basically nothing they can do about it.
Yeah.
Like the, um, banning of cash in, in Sweden or like going cashless was at
least played a part in why I made the decision to leave and like mm-hmm.
The, the cash is much, much more common in Spain and then, Yeah.
In, in, yeah.
The Mediterranean
countries in general.
Yeah.
I mean, I was always, uh, thinking like even before like Bitcoin
existed that you should really, I.
Use cash, even if it's inconvenient on principle, any way you can,
just so that, you know, governments don't get the idea that, well,
everybody's using debit cards anyway.
We could probably phase it out.
Right?
So if, you know, if I use cash for like hotel, for taxi, for train, for anything,
um, for a lot of people do that, it becomes difficult for them to, uh, change.
Uh, another thing about Sweden that I brought up with all the other
guests this, uh, this weekend is, is that I, I, uh, talked to Christiana,
the, the C E O of B T C X, if you're familiar with that exchange.
It's the oldest Swedish exchange and one of the oldest in the world.
Uh, so, uh, uh, overall, the, um, over the years they've had over 300,000 customers
and there's another big exchange as well.
And of course there's some overlap and, but then there's also like people
buying from international exchanges and getting their Bitcoin some other way.
So if you assume that, Uh, half a million Swedes have Bitcoin or
have access to Bitcoin somehow.
That's, it's quite a lot.
Right.
That's quite, that's 5% of the population.
It's 10 million people in the country.
Yeah.
So, so when I think about that, it's like, okay, so 5% of the population
have the, uh, ability to pay other people in Bitcoin right now.
And the entire population has the ability to receive them because, right.
Yeah.
Within the minutes.
Yeah.
So, uh, to me, the conclusion I draw is like, this economy is already here,
it's just below the surface, and it's just, If shit hits, hits the fan even
harder than it has, like, then it's just bound to pop out and just happen.
Like, yeah.
How do you see that?
Is there are, are we close to the boiling points
or like Yeah, I mean, I was, I was describing it as, um, a bootstrap
threshold where even like where there's enough people that own Bitcoin, that
even if all of the sort of k y c official businesses had to stop immediately mm-hmm.
That it would keep going with a gray market because, you know, it's
kinda like marijuana or something.
Now, you know, if, if, if enough people do that you can, you know,
ask a friend of a friend, like within a social network mm-hmm.
You can find somebody to trade Bitcoin.
Right.
Yeah.
So, and that's, that's clearly the case now.
Right.
You know?
You know, you are, you are in Bitcoin, but if you are not in Bitcoin,
you probably know who to ask for, who might know somebody who you
could trade some Bitcoin for cash.
Yeah.
It's the Kevin Bacon number equivalent.
Like,
so I think like clearly it's boost wrapped and like potentially
even internationally, right?
Because yeah, there are like unofficial international swap markets Yeah.
For delivering cash rate.
And that's the experience I have with traveling around to all these conferences
and meetups and stuff is like that.
It's, it's still small everywhere.
Then you have to take into account that not every Bitcoin wants to go to a
Bitcoin meetup or a Bitcoin conference.
It's just a small portion of us that do these things.
Right.
So, and, but even those things are, they're small, but they're everywhere.
Literally everywhere.
So, yeah.
Insanely bullish.
Yeah.
Well, I mean, I think the, the million, uh, U T x like full corner situation is
like insanely bullish because you're think like, well, could we get to 10 million?
It's probably not like economically possible.
No.
Like, could we get to 2 million?
I don't know.
Like the price might get pretty high before that could happen.
Right?
Yeah.
So like, it seems like we're not that much more adoption without
any like institutional buying or us spot ETFs or anything for just,
you know, things to get crazy.
Right.
Weird.
Yeah.
Yeah, because it's not, it's not that you double amount, the doub, the amount
of whole corners and price doubles.
Yeah.
It's
exponential, right?
Yeah.
It's much worse.
Yeah.
And, and it's getting worse over time because, The, um,
by worse, you mean better?
Yeah, yeah, better.
Like, like, I mean the, the uh, the liquidity, like the number of coins
that are available to get bought on exchange are like shrinking and
shrinking and shrinking, right?
Yeah.
So, you know, that means, you know, 'cause there's some kind of metric people
try to put like, well, you know, if a hundred million dollars of Bitcoin are
bought, how much does it put the price up?
And like, it's gonna put the price up a lot more if there are very few coins Yes.
Left on exchanges.
Right.
I, I think this has been a great talk, great discussion.
Talked about some, uh, kind of downsides, you know, things that
are risky going on right now, but also incredibly bullish at the end.
So, uh, is there anything else on your, your mind in the Bitcoin space these days?
Um, well, I mean, we're like a blockstream, we're interested
in like, Anything that, uh, has potential to improve Bitcoin.
So we're kind of got our fingers in lots of stuff, you know, like layer
two and manufacturing miners, but also simplicity, which is a kind of, sort of
long-term ossification technology, if you like it start the kind of technology
arc started in like before blockstream in like 2012 i r c discussions.
And so that, that is a sort of low level micro code self extensibility for Bitcoin.
And the idea is because of the formal semantics and formal proofs
that it could be a more secure, dependable kind of script than
the current Bitcoin script even.
And.
It's not fable by, you know, I think something like that is like, you know,
probably five years out at least.
But it is interesting to consider that there is, you know, a very credible,
serious engineering effort that could, you know, as a strong contender to get us to
ossification and, and like mean it, right?
Like the last soft fork.
We don't need to do like the kind of soft forks we do today after that.
Um, that's, that's like to me an extra bit of comfort because I feel that,
you know, the drip drip of ongoing soft forks is like a little bit of persistent
risk that mm-hmm would sooner like, you know, find a way to either modularize
like, so people can do things in like safe, you know, safe contained areas or.
Finalized bitcoin script.
So like it does what it does and you don't need to change it anymore.
And simplicity could do that.
Is it, is it inevitable to that you, uh, change the incentive structure
somewhat when introducing any soft
fork?
Like Yeah, I think so slightly.
You know, because I mean, even the fact that it, you know, like the, any previous
sound enables more efficient lightning.
Okay.
So maybe lightning uses less block space per mm-hmm.
Transaction or change changes, like I said, they, they're all gonna
change something a little bit.
Like maybe vaults change to cause storage behavior or maybe probably like
sell small things of course, but yeah.
Yeah.
Always a risk.
Adam, thank you so much for coming on and, uh, have a good, whatever
the rest of the conference is.
Yeah.
Thank you.
Thanks for having me on.
So what did you think of that episode with Adam Back?
We really enjoyed this one.
Adam clearly understands everything he's talking about, even if he's not Satoshi.
Can't blame us for thinking he's a likely candidate.
Anyway, let us know what you thought about this episode.
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