Latest / CRYPTO 101 / Ep. 761 Bitcoin Has a BIG Problem Nobody Wants to Talk About

Transcript

Ep. 761 Bitcoin Has a BIG Problem Nobody Wants to Talk About · CRYPTO 101

0:09
[SPEAKER_02]: All right everybody welcome back to another action packed high caliber episode here of the crypto one-on-one podcast I hope everybody is just having a fantastic morning noon or night because wherever you are in the world You're certainly in the right place because we are here with Paul Storts founder of layer two labs And of course my good buddy Brendan but Paul how are you doing?
0:33
[SPEAKER_00]: I'm doing great.
0:34
[SPEAKER_00]: Thanks for having me
0:35
[SPEAKER_02]: awesome.
0:36
[SPEAKER_02]: Really excited to have you and Brendan, how are you doing?
0:40
[SPEAKER_02]: I'm doing good price.
0:41
[SPEAKER_01]: I know it's good to be back in the normal swing at things.
0:44
[SPEAKER_01]: You and I were just in person banging out a bunch of different stuff, but feels good to be back at the native setup.
0:51
[SPEAKER_02]: Yeah, no, we had our in-person event here in San Diego.
0:55
[SPEAKER_02]: Man, it was a ton of fun.
0:56
[SPEAKER_02]: We got to meet a lot of subscribers and listeners.
0:59
[SPEAKER_02]: So yeah, ton of fun.
1:02
[SPEAKER_02]: And back to the Grindstone here with some more great interviews.
1:05
[SPEAKER_02]: So let's start here, Paul, a little bit.
1:08
[SPEAKER_02]: Just to get you acquainted with our audience, tell us a little bit about your background.
1:13
[SPEAKER_02]: And what kind of brought you into crypto, kind of from a philosophical or from,
1:20
[SPEAKER_02]: You know, first principal standpoint, like, why are you here?
1:22
[SPEAKER_02]: Why are you building?
1:24
[SPEAKER_00]: I have a background in economics and statistics.
1:27
[SPEAKER_00]: So it's from academia, originally.
1:29
[SPEAKER_00]: I discovered Bitcoin really a long time ago in 2011 from the Silk Road, a wired article I think it was.
1:37
[SPEAKER_00]: And I thought I was already too late because I was like, people are already using the Thundline to buy things online.
1:45
[SPEAKER_00]: And these are not investors, these are like, they would literally be people taking US dollars, swapping it for Bitcoin, the only way that could possibly complete their online drug transaction.
1:57
[SPEAKER_00]: And then the merchant would be selling that and then selling the BTC for US dollars.
2:03
[SPEAKER_00]: So these were 100% users, this is 100% adoption and product market fit.
2:08
[SPEAKER_00]: How times have changed?
2:11
[SPEAKER_00]: So I was like, this is already a cheap product market fit and it's too late to invest.
2:18
[SPEAKER_00]: So I was too late back then, but I eventually kind of figured out that that wasn't the case.
2:25
[SPEAKER_00]: I also was very interested in prediction markets, so that was kind of actually one of the first things I did in 2013 I designed this whole crypto prediction markets thing.
2:40
[SPEAKER_00]: Um, so that's how I originally got into all this stuff back in the day.
2:45
[SPEAKER_00]: So I've been into Bitcoin for a long time, about more than 15 years.
2:49
[SPEAKER_02]: Wow.
2:50
[SPEAKER_02]: Pretty much, yeah.
2:50
[SPEAKER_02]: I mean, a Bitcoin.
2:51
[SPEAKER_02]: I think the white paper was 2009, the first block was 2010.
2:55
[SPEAKER_00]: And there you are, the one paper was sort of like basically Halloween 2008.
2:59
[SPEAKER_00]: And then while the first block was January 3rd, 2009.
3:01
[SPEAKER_00]: So it was still George Bush was still technically president.
3:05
[SPEAKER_02]: The while way back when.
3:08
[SPEAKER_02]: And then from like an economic standpoint, right, like what kind of stood out to you about Bitcoin that you thought was unique?
3:15
[SPEAKER_02]: Like right now people are like, oh, it's a fixed supply.
3:17
[SPEAKER_02]: So if demand goes up and supply, you know, price will go up.
3:20
[SPEAKER_02]: But was there something that you were like, oh, man, this is unique from an economic standpoint?
3:26
[SPEAKER_00]: Yes, absolutely.
3:27
[SPEAKER_00]: And this is a wild ride, honestly, because you would think that more people who are from academia,
3:34
[SPEAKER_00]: economics would be interesting and Bitcoin, but really very few people were, and I would constantly get a comment, you know, they would say you're the only person from who is a mainstream background economics.
3:45
[SPEAKER_00]: I'm talking like in the year 2012 or the year, but it's still kind of a fringe thing.
3:51
[SPEAKER_00]: But to me, it's actually not that fringe because there's this whole, well, there's like neoclassical economics, just like a mainstream.
3:57
[SPEAKER_00]: But then there's this entire Chicago school of
4:04
[SPEAKER_00]: You know, it was a really big deal for a long time and in the 80s, free to choose, etc.
4:10
[SPEAKER_00]: So it was this huge, huge, um, idea and Milton Friedman, he was a huge skeptic of the Fed constantly.
4:16
[SPEAKER_00]: And he was always in favor of replacing what the Fed does like with like,
4:19
[SPEAKER_00]: a rule, like a formula, and at the end of his life in 2006, roughly, Milton Friedman was saying that we should just get rid of the Fed completely and replace it and just have Congress fixed the amount of high power money.
4:32
[SPEAKER_00]: So it was actually this top mountain of evidence, not even considering the Austrian school of economics, which is like it's on school and it has its own things to say and has its own strengths and weaknesses.
4:44
[SPEAKER_00]: But you know, they were talking like, there's Austrian, and there's like Chicago monotourism.
4:48
[SPEAKER_00]: This is like this big huge cohort of people in economics, who you would have thought.
4:54
[SPEAKER_00]: Anyone, let alone if you're in this school, just anyone who's like vaguely familiar with this school, what you would think every economist would be familiar with the different schools.
5:04
[SPEAKER_00]: You know, so you would think, anyone who could just fill out a note card that said, what is the tiny, what is the, what's the Milton Friedman like bullet points?
5:13
[SPEAKER_00]: You'd think all those people would jump in, but I really, I was very, very, unusual, and people would say this all the time at Bitcoin, they would say.
5:20
[SPEAKER_00]: Yeah, we've got like all these computer scientists, people, we've got these like Richard Stomman, open source, people, a hippie, coder, people, we have the gun,
5:33
[SPEAKER_00]: And I used to make a joke that they were four different types of Bitcoin or about like you have like New York, Austin, Texas, San Francisco, and Miami.
5:42
[SPEAKER_00]: And of course, Miami would be like the, I'm using it to buy drugs or, or, or prostitutes like weirdo Bitcoin or, you know, like they'll be like, but that was the joke is that they were the Miami Bitcoin was the real Bitcoin or and everyone else was doing some pretentious pretentious nonsense.
5:55
[SPEAKER_00]: So the New York people thought it was like a finance sort of thing.
5:58
[SPEAKER_00]: The San Francisco people thought it was like a cryptographer,
6:01
[SPEAKER_00]: hippy open source kind of thing.
6:03
[SPEAKER_00]: And then the Austin people thought it was about property rights.
6:07
[SPEAKER_00]: And then the Miami people had it right.
6:08
[SPEAKER_00]: They were right.
6:09
[SPEAKER_00]: It was about buying drugs on the internet the whole time.
6:12
[SPEAKER_00]: So that was the kind of joke.
6:13
[SPEAKER_02]: So yeah, everybody's kind of got it right in a sense, like, you know, people use a technology.
6:20
[SPEAKER_02]: It's kind of a agnostic technology and some people use it for good reasons, some people use it for bad reasons.
6:26
[SPEAKER_02]: But it really, you know, I think the Silicon Valley guys, they made a big push.
6:30
[SPEAKER_02]: Now you're seeing all the different tech companies.
6:33
[SPEAKER_02]: you know adopt crypto or integrate stable coins all the guys in Wall Street are focused on tokenization and say hey, how could we use the blockchain technology Not just for a currency, but for different sorts of applications in real world assets, which you know I think is kind of an interesting you know view point
6:52
[SPEAKER_02]: And then the libertarian property rights guys are still, you know, they're still right.
6:56
[SPEAKER_02]: They're still here.
6:56
[SPEAKER_02]: They're like, yeah, you know, I want my money free from, you know, the the opportunity for for state level seizure or censorship to tell me who I can transact with and what I can do with it and you know, I don't want people to, you know, be snooping on me, you know, and they want the whole privacy thing.
7:15
[SPEAKER_02]: So everybody's, that's why I say like Bitcoin's many things
7:20
[SPEAKER_02]: And it kind of always has bit, I mean, Bitcoin hasn't really changed, right?
7:23
[SPEAKER_02]: A lot.
7:25
[SPEAKER_02]: And so, yeah, I'm curious.
7:28
[SPEAKER_02]: I feel like that's one of the things I've heard you talk about in the past is like Bitcoin hasn't really changed much.
7:35
[SPEAKER_02]: And it seems like you've got some interesting views on Bitcoin core for some of the other forks of Bitcoin.
7:42
[SPEAKER_02]: And so I'd love you to kind of lay out your
7:47
[SPEAKER_02]: maybe like the in the classic sense, you know, people who own BTC or who develop BTC, you know, maybe what they're getting wrong in your view.
7:57
[SPEAKER_00]: Yeah, I was basically a Bitcoin Maximus for 15 years until basically this year.
8:02
[SPEAKER_00]: And even later, two labs was like a Bitcoin Maximus company, so to speak.
8:08
[SPEAKER_00]: But things were very different in the past and they're just different now.
8:12
[SPEAKER_00]: It's like, so I think it's similar to the Titanic or the fall of the Roman Empire or something where it's great for a while.
8:19
[SPEAKER_00]: And then people become overconfident.
8:21
[SPEAKER_00]: I say, oh, as soon as you say, the ship is unsinkable.
8:25
[SPEAKER_00]: then you hit the iceberg and everyone dies.
8:27
[SPEAKER_00]: So, and same with the Roman Empire, they were like, well, you're not just gonna take Rome.
8:32
[SPEAKER_00]: It's been here for a thousand years, but then they just, they just act from.
8:36
[SPEAKER_00]: So, in the past, there was this idea that Bitcoin hadn't made it yet.
8:41
[SPEAKER_00]: So, everyone was like, oh, we gotta work to make this project a success.
8:45
[SPEAKER_00]: No one would ever, it used to be the case that if Bitcoin was mentioned anywhere on the internet one time,
8:52
[SPEAKER_00]: by anyone.
8:53
[SPEAKER_00]: It would go on this little site.
8:54
[SPEAKER_00]: There was like a Bitcoin news like I've been in for a bit Bitcoin charts or something.
8:58
[SPEAKER_00]: And this would be it would it would update like once a day and if there was like one news thing there, it would be like someone is talking about Bitcoin.
9:07
[SPEAKER_00]: So it would be unthinkable, this, because a modern idea has taken over.
9:11
[SPEAKER_00]: This is Bitcoin has already won.
9:13
[SPEAKER_00]: We don't need to do anything.
9:14
[SPEAKER_00]: Let's just not break Bitcoin, Bitcoin's $2 trillion asset.
9:18
[SPEAKER_00]: So people have now, because we got a little bit of success, and everyone has now become paranoid, which is a big mistake.
9:26
[SPEAKER_00]: But in the past, everyone was kind of like, oh, so there were these regular upgrades, the soft fork.
9:32
[SPEAKER_00]: We used to do roughly two a year,
9:37
[SPEAKER_00]: I don't know, I used to calculate all these numbers, like, as a kind of, you know, stage trick.
9:42
[SPEAKER_00]: But I think something like, segway, maybe between the time it was proposed and when it was finally activated, that was like 26 months and then tap root, that was like 40 months or longer between when it was proposed.
9:54
[SPEAKER_00]: When it, if you could actually activate it on the network, let alone use it, let alone regular people could use it for anything.
10:00
[SPEAKER_00]: incidentally both said when the tap root r in my view mostly useless anyway because there was support the lightning network which doesn't work.
10:06
[SPEAKER_00]: So I'm a very heterodox bitcoiner because I kind of don't like bitcoin core.
10:10
[SPEAKER_00]: I think they're very lazy and complacent and they're not they have it they're kind of like the FDA where their priority is to just do nothing and not get blamed.
10:20
[SPEAKER_00]: And so we've become the sclerotic government institution that we originally wanted to burn down to some extent.
10:29
[SPEAKER_00]: And so I don't like Bitcoin Core.
10:30
[SPEAKER_00]: I don't like the lightning network.
10:31
[SPEAKER_00]: I did a huge debate against all the these lightning developers at TabConf.
10:37
[SPEAKER_00]: last year or the year and I think it was so that was like a huge like a Charlie Kirk one versus the entire room thing but you'd be surprised to everyone in the room and it was ended up taking the microphone to say that they agreed with me.
10:49
[SPEAKER_00]: So I think that we need a lot of
10:53
[SPEAKER_00]: We need a lot of like hard work and kind of dynamism and we only need a little bit, but we're not gonna get the tiny little bit that we need and everyone has become overconfident.
11:03
[SPEAKER_00]: Just we were so close to actually making it but instead this cult, this weird cult has formed that says, we never wanted privacy on Bitcoin anyway.
11:12
[SPEAKER_00]: We never wanted smart contracts on Bitcoin anyway.
11:14
[SPEAKER_00]: Should we have kind of a sour grapes thing going on?
11:18
[SPEAKER_00]: So,
11:20
[SPEAKER_00]: We're kind of floundering at the finish line, I think, with Bitcoin and I'm very concerned about that.
11:26
[SPEAKER_01]: So what are the drawbacks to Bitcoin core, or lightning network, or even some of these other Bitcoin forks that we've seen?
11:35
[SPEAKER_00]: Well, yeah, so the other Bitcoin forks, you know, doing a hard fork of the network is inherently kind of costly, because it splits, you want the network effect, you want the more people in the payment network to better, because you wanted to be like everyone and sort of Bitcoin everyone recognizes it as something they could get paid in.
12:01
[SPEAKER_00]: So that's what you want.
12:04
[SPEAKER_00]: So that's the problem with the other problem with the hard forks is that many of them are very, very low quality.
12:10
[SPEAKER_00]: So this is a big opportunity to compete with Bitcoin, compete with Bitcoin Core.
12:14
[SPEAKER_00]: But a lot of them have been very bad, including, you know, I could say a lot of stuff about Bitcoin cash, even though a lot of them were friends of mine and they are friends of mine.
12:23
[SPEAKER_00]: But they had this opportunity to compete and we could have maybe like a two-party system or something.
12:28
[SPEAKER_00]: You could have had like Bitcoin.
12:29
[SPEAKER_00]: Red Bitcoin Blue Bitcoin or A Bitcoin B Bitcoin or something like that.
12:33
[SPEAKER_00]: And they would compete.
12:34
[SPEAKER_00]: And that would keep both of them in line.
12:36
[SPEAKER_00]: But instead, you had one of them kind of fail horribly.
12:40
[SPEAKER_00]: And that just made people more overconfident and more complacent.
12:44
[SPEAKER_00]: Go, they ran to Bitcoin.
12:46
[SPEAKER_00]: Same thing for Luke.
12:46
[SPEAKER_00]: This is exactly the same story with Luke's Luke Dastioners thing where he was like,
12:51
[SPEAKER_00]: You made all this noise, everything he said was basically not true, then he creates his big hard fork and it's kind of going to be a failure and that's going to make everyone think, oh, you know what?
13:02
[SPEAKER_00]: You can't complete Bitcoin.
13:04
[SPEAKER_00]: Core BTC is the best Bitcoin.
13:06
[SPEAKER_00]: And you shouldn't change anything in BTC.
13:08
[SPEAKER_00]: Bitcoin is already won and everything's fine for some key door in BTC.
13:12
[SPEAKER_00]: So that's the problem with the
13:14
[SPEAKER_00]: the past hard forks of BTC.
13:17
[SPEAKER_00]: It's probably Bitcoin Core is, you know, like the proof is in the pudding, or the, you know, by the fruits of the tree, you know, you will know them, because they just don't really do anything.
13:28
[SPEAKER_00]: Again, we used to do the soft work.
13:30
[SPEAKER_00]: The soft work's just one example, but we used to do the soft work all the time.
13:35
[SPEAKER_00]: And in particular, it was not controversial.
13:37
[SPEAKER_00]: It was just a change to the code.
13:41
[SPEAKER_00]: that 51% of miners had to upgrade to before people could use it.
13:46
[SPEAKER_00]: So, in other words, otherwise it was exactly the same as every other code, which, of course, they Bitcoin core routinely does these changes all the time.
13:54
[SPEAKER_00]: They released people on a new version every six months.
13:58
[SPEAKER_00]: no matter what the classification people want.
14:02
[SPEAKER_00]: So they've stopped doing the useful change.
14:05
[SPEAKER_00]: They've allowed themselves to be bullied around by Twitter.
14:10
[SPEAKER_00]: And they don't want, instead of do the right thing, they just kind of are going along with the path of least resistance, the very little leadership.
14:20
[SPEAKER_00]: I also think that, again, in the past, there was this attitude of like, how can we make Bitcoin
14:27
[SPEAKER_00]: These days there's the attitude of just being afraid and they don't want to change anything.
14:32
[SPEAKER_02]: Don't want to rock the boat, right?
14:33
[SPEAKER_02]: Kind of like if it ain't broke, don't fix it.
14:35
[SPEAKER_02]: And I think a lot of people's minds, it's like, you know, Bitcoin works, you know, people get kind of understand, okay, you send something and you get a 10 minute block time, that's pretty consistent.
14:47
[SPEAKER_02]: You've got all the miners, you know, running the same.
14:51
[SPEAKER_02]: version of Bitcoin and it's all kind of, you know, working, it's held on to a two million or a two trillion dollar, you know, market cap or so, and so I think they're, you know, and kind of taking a little bit of a hands-off approach and experimenting, like recently like,
15:07
[SPEAKER_02]: You know, with, you know, other protocols like you said lightning network is a layer two and obviously your company's called layer two labs.
15:14
[SPEAKER_02]: I want to kind of draw some comparisons and stuff.
15:18
[SPEAKER_02]: But before I get there, I want to ask about what happened with another recent layer to hack on liquid network.
15:26
[SPEAKER_02]: And, you know, I believe it was several million dollars.
15:32
[SPEAKER_02]: And, you know, this is something that I saw that they got back a little bit of it, but there's still some 4,000 BTC.
15:39
[SPEAKER_00]: So.
15:39
[SPEAKER_02]: Yeah, like 4,000 Bitcoin, like, that's a lot of money.
15:43
[SPEAKER_02]: So tell us what happened with the liquid network hack.
15:46
[SPEAKER_02]: How did it happen?
15:47
[SPEAKER_02]: What's sort of the resolution there?
15:50
[SPEAKER_00]: Sure, well yeah, I mean Bitcoin is done very well.
15:52
[SPEAKER_00]: So I'm probably kind of pro layer two pros scaling and layers.
15:55
[SPEAKER_00]: So a Bitcoin is done very well.
15:57
[SPEAKER_00]: It's gone for 10 cents to $100,000.
15:58
[SPEAKER_00]: So it's been a huge success.
16:01
[SPEAKER_00]: And that's very important part of the story.
16:05
[SPEAKER_00]: The layer two's, we want to scale in layers.
16:10
[SPEAKER_00]: So it's actually fine for layer one to be relatively slow, relatively stable.
16:16
[SPEAKER_00]: Relatively conservative in what it does and then you just build something on top of that and that that could be that can take more risks or be fast so all that stuff's great and that's why the company has started in 2022.
16:33
[SPEAKER_00]: It's called Layer 2 Labs.
16:35
[SPEAKER_00]: And we need Layer 2s that are actually good.
16:37
[SPEAKER_00]: And the lightning network, I think, is just not a good one.
16:42
[SPEAKER_00]: So that's kind of a little bit of the background right there.
16:45
[SPEAKER_02]: Is there a certain thing that it does or doesn't do?
16:48
[SPEAKER_00]: Yeah, well, in particular, it's based on two ideas.
16:52
[SPEAKER_00]: The one is the HTLC, the Hashtel Timelock contract.
16:56
[SPEAKER_00]: And the other is these, if you have the bi-directional payment channels.
17:01
[SPEAKER_00]: It relies crucially on these two ideas and both of them actually don't work.
17:05
[SPEAKER_00]: So there's nowhere near enough space for everyone on the planet to open a channel and keep it open for, or because significant length of time.
17:14
[SPEAKER_00]: You have basically less than half a percent of the world's population could possibly open a channel and then keep operating it in the future.
17:23
[SPEAKER_00]: Even that number is very,
17:27
[SPEAKER_02]: So it's a scaling technology that doesn't scale right because I've used it before and it works and it seems I'll get this in but apparently it doesn't scale.
17:38
[SPEAKER_00]: So the other thing is the HGLC is that route between the channels, they don't work when the L1 fee rate is high or even volatile.
17:44
[SPEAKER_00]: So by the time the fee rate is too high, the amount of ink you would need to write the HGLC to the blockchain, if you guess how to dispute, is more than you would get.
17:54
[SPEAKER_00]: And so it's kind of like a court system where it costs a certain amount to go to court and get your money back.
18:01
[SPEAKER_00]: So if that amount is $20, then it still works for everything above $20, mostly it may be a work kind of around there.
18:10
[SPEAKER_00]: But if it costs $2 million to go to small claims court and get, you know, someone steals your bicycle and it costs $2 million to go to court doesn't make any sense.
18:19
[SPEAKER_00]: So if these are the technical reasons, there are an enormous list of equal, like what you might
18:31
[SPEAKER_00]: reasons why the lightning network has kind of infected everyone's brain.
18:37
[SPEAKER_00]: And so there's this whole thing called custodial lightning where they do a really really really good job of convincing you that you are using the lightning network, but you actually are not.
18:47
[SPEAKER_00]: And only the later do people realize that this is the case that the stuff that the app that they use never opened a channel It doesn't even you they don't even own any Bitcoin.
18:57
[SPEAKER_00]: They just have a They've just been giving credit in the app for something and they're just kind of hoping that you won't ask for that Bitcoin in a different form because actually They can't give it to you and they're just hoping that they don't get pulled from the app store as being you know custodial fully custodial banking app
19:15
[SPEAKER_00]: Um, and so to some extent this maybe this is a bunch of stuff that just doesn't matter like what doesn't matter if the lightning is custodial, what does it matter if, but this is actually my point as someone who's in favor of the side chain.
19:29
[SPEAKER_00]: So my point is, let's just give the people a long list of different apps, different, you know, blockchains.
19:38
[SPEAKER_00]: Some could be very centralized, some could be very custodial, but we'll just make them all big coin projects and we'll have them all be merged mine blockchains with BTC.
19:45
[SPEAKER_00]: Why goes through the song and dance of saying that this is the lightning network and saying that there's a payment channel and that's not true and saying that it used the HGLC when it's not true.
19:53
[SPEAKER_00]: So, I'm just saying why don't get rid of it.
19:55
[SPEAKER_00]: So, the lightning network has done a very, very good job with this magician's trick.
20:00
[SPEAKER_00]: They show you, they bring you up on stage and they show you, they say I'm going to saw this woman in half.
20:06
[SPEAKER_00]: And hundreds and thousands of people have said, oh, I used the Lightning Network yesterday and it worked just fine.
20:12
[SPEAKER_00]: And that's their big line.
20:14
[SPEAKER_00]: But they saw something that was in illusion, they're just gullible.
20:17
[SPEAKER_00]: But it's 99.99% of people have been taken in by this.
20:20
[SPEAKER_00]: But if you want to see conversation at a completely different level, you can see, you can play the tab comp debate, I did against all the actual Lightning developers, because these are people who work on it every day.
20:31
[SPEAKER_00]: And they had very little to say, including
20:35
[SPEAKER_00]: work.
20:36
[SPEAKER_00]: He took the stage for 10 minutes with just he and I to talk about all this.
20:42
[SPEAKER_00]: And yeah, I've had this talk that says basically this whole thing is a charade and it's going to burn down.
20:47
[SPEAKER_00]: And not only maybe two or three people there, this is a huge room for people.
20:51
[SPEAKER_00]: We spoke for an hour.
20:53
[SPEAKER_00]: only a few people were like, oh, you're wrong.
20:55
[SPEAKER_00]: Most of the other people just kind of shuffled their feet and many of them said, oh, I didn't go far enough.
21:01
[SPEAKER_00]: The, of course, this might have to say.
21:03
[SPEAKER_00]: So I think you can get a lot of, you know, the ultimate reality is a lot of people don't care how what's going on under the hood.
21:10
[SPEAKER_00]: So they don't care that they were shown a in illusion.
21:13
[SPEAKER_00]: But ultimately, the chickens will come home to roost, I think, on that, eventually, this is very similar to happen with liquid, where liquid blocks from was created to do the side chain idea.
21:24
[SPEAKER_00]: This is back in 2014, 2015.
21:27
[SPEAKER_00]: They were going to do this, this is the layer two labs idea by the way, of drive chain, which is the layer two labs will start it because blocks should never deliver this side chain idea.
21:35
[SPEAKER_00]: So the side chain idea is that you have these different chains, you have Bitcoin block chain layer one, but then you could also have what is essentially like a Solana block chain as an L2 of Bitcoin.
21:46
[SPEAKER_00]: There's no Solana token at all.
21:48
[SPEAKER_00]: There's no SOL.
21:49
[SPEAKER_00]: There's just BTC for everything.
21:51
[SPEAKER_00]: There's a BTC that does Monero or whatever.
21:54
[SPEAKER_00]: So there'd be like a bit, Manero, a bit, Solana, where there's no altcoins, these are all just Bitcoin projects, but they many then push the envelope on what's safe or what how expensive it makes the full node cost or what new experimental technology it uses.
22:11
[SPEAKER_00]: So that's the real sidechain idea.
22:13
[SPEAKER_00]: But you asked, you know, what do I have this huge gripe with liquid?
22:19
[SPEAKER_00]: What Blockstream did is they had the road to giant paper and then in Appendix A at this paper, they wrote in 2014 about side-chance.
22:27
[SPEAKER_00]: They said, well, you know, we can't actually do any of this yet.
22:30
[SPEAKER_00]: So just temporarily, and this is like 2014 we're talking about like October or something.
22:36
[SPEAKER_00]: They said, just temporarily, we can have a federation of people just sign the blocks that go, you know, the transactions that go in and out.
22:44
[SPEAKER_00]: And they will own all the BTC,
22:48
[SPEAKER_00]: And this is like the fall of Rome because they were like, well, we'll just cut this little corner here, and temporarily, but temporarily turned out to be permanently.
22:58
[SPEAKER_00]: They never got around to putting in a lot of hard work engineering work to make the real side change happen.
23:15
[SPEAKER_00]: about these are just like boxes that like filled with like thermite and there's all this so people would bring up blockstream and like a group chat.
23:23
[SPEAKER_00]: people would post like a gif of like a humorous gif of like someone's car just like exploding and like fire gun and stuff like from movie or something because it was like this is the liquid secured by thermite boxes or whatever.
23:36
[SPEAKER_00]: That was this kind of this joke.
23:37
[SPEAKER_00]: So anyway liquid is this thing and eventually some hacker figured out how to get the trick them in designing something else.
23:44
[SPEAKER_00]: Took all the BTC.
23:47
[SPEAKER_00]: and they then gave voluntarily, I think, three thousand four hundred BTC back.
23:53
[SPEAKER_00]: And then they got into this kind of online messaging war.
24:00
[SPEAKER_00]: And I think the person's gonna keep the 600.
24:02
[SPEAKER_00]: So it's highly embarrassing for Blackstream, but it's somewhat vindicating for me because I said, Blackstream should have done a peer to peer.
24:08
[SPEAKER_00]: There shouldn't be magical keys where if you get enough keys, you just take all the funds the next instantly.
24:17
[SPEAKER_00]: That's what they did and that's what drive chain what I invented is tries to not do that at all.
24:21
[SPEAKER_00]: So instead of having the 15 boxes, which are permanent, by the way, or to the extent that they are not permanent, you have to get the 15 people to swap out a key.
24:32
[SPEAKER_00]: So it's like,
24:34
[SPEAKER_00]: what difference does it make because they're the judge during execution or on to the next judges.
24:40
[SPEAKER_00]: So they instead of having these 15 things, I was saying you get up the miners do this part.
24:45
[SPEAKER_00]: The mining is totally decentralized.
24:46
[SPEAKER_00]: You come and go as you please, if you don't do the proof of work, you get cut from the team.
24:51
[SPEAKER_00]: So that's way better.
24:53
[SPEAKER_00]: Minors are geographically distributed.
24:54
[SPEAKER_00]: And of course part of my idea is that it would be much, it would be public transparent and slow.
25:01
[SPEAKER_00]: And so this idea would have completely sidestepped the liquid hack could not have happened with Drive Chain as my idea.
25:09
[SPEAKER_00]: So it actually looked, from my point of view, it looked really great for me.
25:14
[SPEAKER_00]: There's a huge, there's a big difference.
25:15
[SPEAKER_00]: This is similar to the lightning network where it's a deranged everyone.
25:18
[SPEAKER_00]: So everyone is unfortunately, it's like this magician's trick.
25:22
[SPEAKER_00]: And it's frustrating for me.
25:24
[SPEAKER_00]: Imagine if you're like a real physicist or something.
25:26
[SPEAKER_00]: And you're trying to say,
25:27
[SPEAKER_00]: You know, you can't you can't turn, you know, a glass into dove.
25:34
[SPEAKER_00]: So you can't pull an endless neck die out of and you can't create matter out of nothing.
25:38
[SPEAKER_00]: And people say they come to you and they say, I saw that it was in Las Vegas and I saw sky made a lion appear out of thin air.
25:46
[SPEAKER_00]: And you're like, you know, that's not what you saw, you know.
25:50
[SPEAKER_00]: Yeah, it's kind of a little bit grinding, but so the side chain idea has been corrupted by liquid basically as liquid was this cutting corners thing.
25:59
[SPEAKER_00]: And now everyone thinks that when they think side chain they think of liquid same as when they think layer two they think of lightning network.
26:07
[SPEAKER_02]: Or what people think, and the layer two, they think Ethereum, right?
26:10
[SPEAKER_02]: Because Ethereum has, you know, arbitrom and optimism and all of these different like layer two's, and they, it feels like that's what I want to say.
26:18
[SPEAKER_00]: That's what I want to tell you.
26:20
[SPEAKER_00]: Ethereum has a lot of problems, but I think Ethereum doesn't have this problem, where they at least were not going to lie about if what it is, the layer two is, or insist that it has to be payment channels.
26:32
[SPEAKER_00]: So as Ethereum had its own version of payment channels, but they have these other altos.
26:36
[SPEAKER_00]: So in this sense, Ethereum is a little bit healthier than BTC, which is a shocking thing because for years and years Ethereum was this totally like delusional, pie in the sky is very, very overly optimistic.
26:47
[SPEAKER_00]: We're talking, I'm talking like 2015 through like 2020, but now it's kind of switched places.
26:53
[SPEAKER_00]: So liquid, you know, you couldn't do anything useful with the side chain using liquid.
26:58
[SPEAKER_00]: Like, I would tell people, okay, I would start the conversation, they would say, I would say, on pro side chain.
27:03
[SPEAKER_00]: They would say, oh, you like liquid.
27:04
[SPEAKER_00]: I would say, no, I have to let out an angry side kind of because the whole point of the side chain is you'd be able to take something like Ethereum or something like
27:16
[SPEAKER_00]: Um, Monero, and you'd be able to say, okay, I can now replicate this as an L2 Bitcoin.
27:22
[SPEAKER_00]: I'll just take all the open source Moneroon.
27:24
[SPEAKER_00]: I'll turn it into a side chain a Bitcoin.
27:26
[SPEAKER_00]: But notice, that's exactly what you can't do with liquid.
27:29
[SPEAKER_00]: How would you do?
27:30
[SPEAKER_00]: You have to take it and go to the 15 keyholders and say, will you please custody the funds according to this hacked Moneroon node that I made?
27:40
[SPEAKER_00]: And if they just ignore your email, then you've got no one to go.
27:43
[SPEAKER_00]: So actually, it was really a night and day thing.
27:46
[SPEAKER_00]: And yet, this is the depth of everyone's confusion on this issue.
27:51
[SPEAKER_00]: And yet, everyone is talking about liquid as though it's the big coincide chain thing.
27:56
[SPEAKER_00]: So, and really it's sort of the opposite.
27:58
[SPEAKER_00]: It's kind of a twisted opposite.
28:00
[SPEAKER_00]: So, it's kind of been rough.
28:02
[SPEAKER_00]: It's been rough going for my, like, in terms of my definitions and philosophy.
28:06
[SPEAKER_00]: It's been a rough 10 years.
28:08
[SPEAKER_00]: But whatever, I'm trying to set it all straight with layer two labs and also with E-Cash.
28:14
[SPEAKER_00]: You catch.com.
28:15
[SPEAKER_00]: So I'm trying to like, this is like how it was all kind of original, these are the original meanings and the original utility of the side chain idea and the original definition of all these words.
28:25
[SPEAKER_00]: So I lost the definition battle like really long time ago, but still I think there's a reason why they had those definitions because those were really useful.
28:35
[SPEAKER_00]: The idea of the side chain was it's not an alt point.
28:38
[SPEAKER_00]: But it's a don't block chain.
28:39
[SPEAKER_00]: So you could have it be, you could have it any block size you want.
28:42
[SPEAKER_00]: You could push the envelope on decentralization.
28:45
[SPEAKER_00]: Like Solana is just like, we don't really care how expensive the full note is.
28:49
[SPEAKER_00]: So, but that's what you want is all shapes and sizes.
28:52
[SPEAKER_00]: So that was the idea that you could make all these things Bitcoin projects.
28:55
[SPEAKER_00]: And now instead it just means liquid and it just means it's clear to you just means a lightning network.
28:59
[SPEAKER_00]: So unfortunately, we're going to pay a very heavy price.
29:02
[SPEAKER_00]: Well, a lot of people are as a result of this just massive, massive, massive confusion of the
29:09
[SPEAKER_01]: Well, let's dive more into that, because I want to learn a little bit more about layer two labs, and I guess your guys view on how to fix this and how to approach this, right?
29:22
[SPEAKER_01]: And specifically, I want you to talk to us a little bit more about drive chains and E-cash, because both of those are really interesting, and you've been working hard.
29:31
[SPEAKER_00]: Yeah, drivetrain is my idea that I published as an idea like as a blog post format idea in back at 2015.
29:39
[SPEAKER_00]: This was a round one block from was getting started up.
29:41
[SPEAKER_00]: And this is the idea for how to do the peer-to-peer sidechain you know, as a technology, it wouldn't just be one thing.
29:49
[SPEAKER_00]: It was the technology you could just reuse.
29:51
[SPEAKER_00]: So you could make a hundred drive chains if you liked, or a hundred side chains if you liked, or a thousand.
29:58
[SPEAKER_00]: and they could kind of rise or fall their own merit.
30:02
[SPEAKER_00]: And that was the old idea, so that was drive chain.
30:05
[SPEAKER_00]: And then basically around 22, my friends and I realized that Bitcoin was having these problems of being delusional, self-confidence, Bitcoin has already won the ausification people who were taking over too quickly, too much emphasis on the lightning network which doesn't work at all.
30:23
[SPEAKER_00]: So we're like, oh, what do we do?
30:25
[SPEAKER_00]: So we create an organization to help
30:27
[SPEAKER_00]: really beef up the drive chain technology to make it so that so if we change so we first while we like coded everything we coded a bunch of example altus we made it so that actually you could activate drive chain without changing any lines of code and Bitcoin core we made it so that you could actually have different blockchains that aren't Bitcoin.
30:46
[SPEAKER_00]: could also activate drive chain.
30:48
[SPEAKER_00]: We tried to make good user experience and good like frontend, you know, stuff like that.
30:54
[SPEAKER_00]: So, layer two labs is created to produce like open source software, and it was created to advocate that BTC use a drive chain basically.
31:05
[SPEAKER_00]: Unfortunately, in that sense, it's sort of failed, even though it succeeded at many of the other things.
31:10
[SPEAKER_00]: It later to live set out to do like five or six extremely ambitious things, like very, very ambitious things.
31:17
[SPEAKER_00]: One of those was the idea that layer two labs would
31:22
[SPEAKER_00]: would advocate that BTC adopt Drive Chain.
31:25
[SPEAKER_00]: Of course, BTC has not adopted Drive Chain, which is BIPs 301.
31:29
[SPEAKER_00]: And Layer 2 Labs has not really adopted anything else either, even simple things like op-cat, which were originally in Bitcoin, only 13 lines of code, a lot of these starkware people, like there was a huge push for that.
31:48
[SPEAKER_00]: uh... in bitcoin but i went nowhere so no op cat no op ctv in bitcoin no so because we've started the beginning of the conversation bitcoin hasn't been doing any of these upgrades
32:00
[SPEAKER_00]: for a wide variety of reasons, most of them really bad, such as people conforming to each other and just people misunderstanding them.
32:11
[SPEAKER_00]: It's like, all of these are all soft forks.
32:12
[SPEAKER_00]: So these are all opt-in, ignorable, reversible upgrades.
32:17
[SPEAKER_00]: So these are, this is a light touch, as it is.
32:20
[SPEAKER_00]: It used to be like, hard fork was a hard, very difficult thing to get people to go along with, but the soft fork was very easy.
32:26
[SPEAKER_00]: Now, hard fork impossible, soft fork also impossible.
32:29
[SPEAKER_00]: And even in the Luke Destinier saga, it was like, even changing a Mempool policy rule, which has almost no effect on it, literally almost no effect on anything.
32:38
[SPEAKER_00]: That would became the big debate topic over the last,
32:42
[SPEAKER_00]: two years of Bitcoin, complete waste of time to even talk about that.
32:45
[SPEAKER_00]: So, Bitcoin is really floundering on this weird issue, but that was drive chain was a soft fork upgrade for Bitcoin.
32:52
[SPEAKER_00]: That was what that part of the question was.
32:56
[SPEAKER_01]: What about E-Cash?
32:58
[SPEAKER_00]: E-Cash is kind of like a completely different layer two labs was kind of like pro Bitcoin changed the system from within and E-Cash
33:10
[SPEAKER_00]: raise an army and attack the system and take it over sort of more of a different, which I think it's healthy to have all those alternatives out there.
33:19
[SPEAKER_00]: But E. Cash is more cynical.
33:20
[SPEAKER_00]: It says Bitcoin is never going to upgrade.
33:22
[SPEAKER_00]: It's not, in fact, it's not only is it not going to add drivetrain, but it's not going to add anything cool.
33:28
[SPEAKER_00]: And so we need, we need a credible alternative.
33:32
[SPEAKER_00]: So it's interesting, under the hood, the layer one software for E-cash is essentially identical to Bitcoin Core.
33:40
[SPEAKER_00]: Because this actually helps to compete with Bitcoin Core.
33:42
[SPEAKER_00]: They listen, whatever Bitcoin Core does, it's going to kind of match it over an E-cash.
33:46
[SPEAKER_01]: Okay.
33:47
[SPEAKER_00]: And then the DriveChimp stuff is handled in a separate activator, piece of software, so you have these different modules, it's different packages.
33:57
[SPEAKER_00]: without changing any lines of code in Bitcoin.
34:00
[SPEAKER_00]: You just have a second thing.
34:01
[SPEAKER_00]: Do that, Paul.
34:03
[SPEAKER_00]: So again, this is very, very useful because now you can bring all this stuff to Bitcoin, if you want, including Drive Chain, including Obcat, including like quantum resistant signatures.
34:11
[SPEAKER_00]: Because the quantum issue is one where the BTC people are going to
34:16
[SPEAKER_00]: really be tearing their hair out about who to disappoint because kind of no one wants to go into the arena without some kind of quantum plan or some kind of bullet point at least.
34:29
[SPEAKER_00]: But you have a very funny situation.
34:31
[SPEAKER_00]: I think to me this is a very funny situation.
34:34
[SPEAKER_00]: We have Michael Sayel or going
34:36
[SPEAKER_00]: don't change Bitcoin, don't change Bitcoin, he's saying developers are terrible and we shouldn't have them at all.
34:41
[SPEAKER_00]: In fact, he says funny stuff like that.
34:42
[SPEAKER_00]: But then, when someone asks about quantum, he has to give out some incredibly feeble answer where he says something like,
34:50
[SPEAKER_00]: the devs will push a fix or there will be an upgrade.
34:56
[SPEAKER_00]: He has to totally contradict everything, it's all philosophy.
34:59
[SPEAKER_00]: And so, because they don't know.
35:00
[SPEAKER_00]: So the quantum issue will be one where it will be psychologically very painful, I think, for the Bitcoin view.
35:06
[SPEAKER_00]: But of course, as I said, we could reuse an E-cash, the same technique used to bring
35:11
[SPEAKER_00]: bit 300 to Bitcoin without changing any lines of code, we can and have done that.
35:16
[SPEAKER_00]: So this is just again option.
35:17
[SPEAKER_00]: These are just optional.
35:18
[SPEAKER_00]: Because the software was always optional and ignoreable and reversible.
35:22
[SPEAKER_00]: So the software was always a light touch.
35:24
[SPEAKER_00]: That's right.
35:24
[SPEAKER_00]: It's so deranged that we stop doing it.
35:27
[SPEAKER_00]: It doesn't make any sense at all.
35:28
[SPEAKER_00]: It's like a bunch of birds walking around instead of flying.
35:32
[SPEAKER_00]: And it's like, you have the ability to fly.
35:35
[SPEAKER_00]: And they're like, I'm just going to walk around in there.
35:37
[SPEAKER_00]: our two legs and it's if you really could see how crazy it was you would see why I'm after being a Bitcoin Maximus for 15 years.
35:45
[SPEAKER_00]: I'm kind of like, well listen, let's just create this new thing as a demo of this is like what Bitcoin could be.
35:52
[SPEAKER_00]: And once people see it, I think they will
35:56
[SPEAKER_00]: be a lot more interested in all the other things I have to say because they don't realize like we could have all this Bitcoin tomorrow but the reason we don't is just because of everyone's derangement.
36:07
[SPEAKER_00]: Which is our problem.
36:09
[SPEAKER_01]: I'm curious where you stand on the Bitcoin ETS and then the Bitcoin Treasury companies then.
36:15
[SPEAKER_01]: Do you think that that's something that has worked out to be a net positive?
36:18
[SPEAKER_01]: Do you think it kind of fears us from the main purpose?
36:21
[SPEAKER_01]: Are you okay with it?
36:22
[SPEAKER_01]: Just not interested?
36:24
[SPEAKER_01]: It's a great question as well.
36:25
[SPEAKER_02]: And they're also going to have a bunch of air drop tokens, right?
36:28
[SPEAKER_00]: From the hard fork, technically, the hard fork was hated for a long time, because of Bitcoin cash and Roger Vier did the big, we used it with Bitcoin cash in 2017.
36:40
[SPEAKER_00]: He had Bitcoin.com and he went around telling everyone that his thing was the real Bitcoin.
36:44
[SPEAKER_00]: It's the same thing with Luke, by the way, Luke has done.
36:46
[SPEAKER_00]: He's just spent the last year and a half.
36:49
[SPEAKER_00]: saying that his thing and now he even won't rename it so that when he wants it to get his tiny new hard fork because we kind of had like a barbed in the high bar.
37:00
[SPEAKER_00]: Oppenheimer barbie thing because we have Luke's hard fork in mind both this year but they're like completely the opposite to each other.
37:05
[SPEAKER_02]: They're really weird.
37:07
[SPEAKER_00]: Mine is like carefully planned out over years, very intentional, and his, but mine doesn't get as much attention as his, but his is like this, his is about nothing at all, which is this overturned issue, and then he's, but of course they both, everyone wants to say their thing is the real Bitcoin except for me.
37:22
[SPEAKER_00]: I just say is a new name.
37:24
[SPEAKER_00]: I pick a new name because I think that's what people want.
37:26
[SPEAKER_00]: They want a different brand.
37:27
[SPEAKER_00]: They don't want people don't want words to mean Monday Tuesday Wednesday.
37:32
[SPEAKER_00]: The word means this, and then on Thursday all of a sudden means some new thing.
37:36
[SPEAKER_00]: Everyone, hey, everyone already has always hated that.
37:39
[SPEAKER_00]: So the hard fork was hated by many people, but really, this is a huge mistake, because the hard fork is just everyone gets new, free money, and return for doing nothing.
37:51
[SPEAKER_00]: So again, this is another example of how deranged everyone has become in Bitcoin, that the Bitcoin maximalism is so intense.
37:59
[SPEAKER_00]: And to some extent, you understand it because you don't want there to be total chaos.
38:04
[SPEAKER_00]: But someone can't, you can't just go up to Bitcoin and say, listen, I profoundly disagree with this direction that we're going right now.
38:14
[SPEAKER_00]: I don't think that Bitcoin is infallible.
38:17
[SPEAKER_00]: I think we may have made a mistake here.
38:21
[SPEAKER_00]: So I'm going to create a completely harmless second alternative that's almost exactly the same.
38:30
[SPEAKER_00]: And then people hate on, they will even hate on that.
38:32
[SPEAKER_00]: And you think, man, this is like, you know, what's wrong with this group of people, you know?
38:38
[SPEAKER_00]: Like, it's like, so that's the hard fork.
38:41
[SPEAKER_00]: Now we did some, the questions out of order here, because he asked the price estimate at the end, and I forgot.
38:46
[SPEAKER_00]: What was the first part was?
38:48
[SPEAKER_00]: Oh, the tradition company is the ETS.
38:50
[SPEAKER_00]: So it was sensitive additive in that they give more recognition to Bitcoin.
38:55
[SPEAKER_00]: They're, that's great.
38:56
[SPEAKER_00]: So they just add.
38:57
[SPEAKER_00]: This is just a new buyer of Bitcoin.
38:59
[SPEAKER_00]: This is a new person who's a Bitcoin fan.
39:02
[SPEAKER_00]: They're going to go out there and put on a Bitcoin share orange Bitcoin share with the big phone.
39:07
[SPEAKER_00]: The phone number number one and they're going to be like with a Bitcoin.
39:11
[SPEAKER_00]: The problem with the Treasury companies is very similar to what happened with lightning network and with side chains, which is that it has again, like confused everyone.
39:20
[SPEAKER_00]: It's not only additive, it causes this ecological confusion, because, well, the first one of the Treasury companies are kind of a bad idea if you know finance 101, which, as again, someone that was back around
39:36
[SPEAKER_00]: I know very well, because the company is supposed to have, this is like in an E.K.
39:41
[SPEAKER_00]: 101 textbook, but every company is supposed to have what they call, you know, a comparative advantage.
39:46
[SPEAKER_00]: Okay, I should be able to find buying bananas from the store.
39:50
[SPEAKER_00]: I should think, you know what, 25 cents for a banana, or whatever, dollar for like a whole bunch of bananas.
39:55
[SPEAKER_00]: That's a pretty good deal.
39:57
[SPEAKER_00]: What would it cost me to make my own bananas?
40:00
[SPEAKER_00]: kind of a lot because I don't live in the dry, dry climate and so it's amazing if you want to go to the, you go and get a gallon of milk or whatever and if I want to buy a Tesla car.
40:13
[SPEAKER_00]: You know, I can't make that myself, so it's completely hard to make all these things, or Microsoft Word or something.
40:18
[SPEAKER_00]: Now, the same thing if I want to invest in Tesla, if I invest in Tesla, I should be saying, you know what, starting my own car company, that would be a lot of work for me, or running one with someone else.
40:31
[SPEAKER_00]: I'll just invest because it seems like Elon Musk is pretty good at
40:36
[SPEAKER_00]: You know, running a tight ship and capital allocations, seems like that guy, you know, knows the thing or two about business.
40:43
[SPEAKER_00]: So I'll invest in Tesla.
40:45
[SPEAKER_00]: Now this is again, this is like kindergarten 101 economics.
40:50
[SPEAKER_00]: But the Treasury companies break this rule.
40:52
[SPEAKER_00]: They do something that is actually much better if you do yourself.
40:56
[SPEAKER_00]: If you buy Bitcoin yourself, yeah.
40:59
[SPEAKER_00]: Maybe with help.
41:01
[SPEAKER_00]: maybe with someone like a river, anantial or someone someone a bull bit coin where they will help you walk you through it.
41:09
[SPEAKER_00]: Some of these people do like a white glove thing and they say, this is how private keys work, this is what's going on.
41:14
[SPEAKER_00]: Because they know there's a lot of misinformation, there's a lot of scams out there.
41:17
[SPEAKER_00]: So if you buy a bit coin yourself, you know, it's basically very cheap, it's very private.
41:24
[SPEAKER_00]: You may not want to store it yourself.
41:26
[SPEAKER_00]: You may want to use treasure or yada yada yada.
41:28
[SPEAKER_00]: It's funny because people, they say all self-custies too much work, then those same people use the cold card, what you mean is hacked or something.
41:36
[SPEAKER_00]: So it's kind of like there's no safe options.
41:38
[SPEAKER_00]: But the point is, the treasury companies don't have a comparative advantage.
41:43
[SPEAKER_00]: So what the treasury companies say is deeply anti-bickcoin, if you actually just listen to it.
41:50
[SPEAKER_00]: But again, there's a whole illusion of being cast on everyone.
41:53
[SPEAKER_00]: The trick of the Treasury companies is they show up wearing the Bitcoin shirt, and they say, this is a pro Bitcoin project.
42:01
[SPEAKER_00]: And micro strategy is a pro Bitcoin, Bitcoin orange, blah, blah, blah, blah.
42:09
[SPEAKER_00]: But just think about exactly what it is they want you to do.
42:15
[SPEAKER_00]: They want you to take your own money that maybe you, let's just, you know, it's US dollars, but you could have bought Bitcoin with it, so if you could say it's Bitcoin, even if you want to make some clearer, the example, but they want you to give them money.
42:29
[SPEAKER_00]: They are going to buy Bitcoin with it.
42:32
[SPEAKER_00]: It's not an ETF where it's passed through to you.
42:35
[SPEAKER_00]: It's a float.
42:36
[SPEAKER_00]: It has a decoupled.
42:38
[SPEAKER_00]: It's a decoupled like,
42:40
[SPEAKER_00]: uh... you know legal entity you know what i mean because it's not like if you once because they can issue more strategy so i kind of explained in a convoluted way but the short part is that micro strategy gives you worthless paper stock that they can print at any time in return for your scare smoney so they give you the unlimited uh... the you know that they give you the altcoin or the token they which is micro shares of micro strategy
43:07
[SPEAKER_00]: They give you that and they buy the Bitcoin.
43:10
[SPEAKER_00]: And then now it's not, so the ETFs, at least there's a pass through, where they buy the Bitcoin, but it's theoretically your Bitcoin that you're on.
43:18
[SPEAKER_02]: All right.
43:18
[SPEAKER_00]: But with the Treasury companies, it's decoupled.
43:23
[SPEAKER_00]: Because they thought, and this makes no sense, but they thought this whole,
43:29
[SPEAKER_00]: Mnav they thought the Mnav premium would be going up and up and up so they thought instead of being one it should just be one for the ETFs.
43:36
[SPEAKER_00]: It's bolted down at one 1.0 But they're buying and selling based off of what people are doing precisely and so that makes perfect logical sense and you could say the ETF
43:48
[SPEAKER_00]: There could be, for these reasons, there's a long list of like kind of menusha reasons where all the money is in the 401k and the CEO has so many options, you know, when you're in pool, so for some of the money is like more conveniently in different pools so they would buy the ETF.
44:06
[SPEAKER_00]: Even this is worse than just owning Bitcoin yourself.
44:08
[SPEAKER_00]: Because now you have the middle man, you have agency costs, which is to say the ETF could do something you don't like.
44:15
[SPEAKER_00]: Whereas if you own your own Bitcoin, you're not gonna do anything.
44:18
[SPEAKER_00]: You do have potentially worse tax.
44:21
[SPEAKER_00]: Look what happened with the slapping all around the world, but the Netherlands passes law recently.
44:27
[SPEAKER_00]: It says all the crypto stuff is going to have unrealized, extra unrealized capital gains, tax of the, like, enormous amount.
44:36
[SPEAKER_00]: So you could have terrible tax,
44:38
[SPEAKER_00]: custody agency car.
44:41
[SPEAKER_00]: You can have all these costs associated with someone else buying.
44:44
[SPEAKER_00]: He's sick.
44:44
[SPEAKER_00]: Somebody I have someone else chew your own food.
44:46
[SPEAKER_00]: You know?
44:46
[SPEAKER_00]: It's like you can do that yourself.
44:49
[SPEAKER_00]: You don't really want other people getting their fingerprints all over.
44:53
[SPEAKER_00]: But with ETFs, you could at least have some kind of weighing of the issues.
44:57
[SPEAKER_00]: You could say, you know what?
44:59
[SPEAKER_00]: I'm not comfortable with all this weird private key address stuff.
45:04
[SPEAKER_00]: Like I'll
45:07
[SPEAKER_00]: And I'll get it through the convenience of the ETF.
45:10
[SPEAKER_00]: So with the ETF, I understand why it would exist, and why it would do well.
45:15
[SPEAKER_00]: And even especially when you want someone even want a black rock, like one of these killer people, like maybe they are specialists.
45:22
[SPEAKER_00]: And you're just some rich, you're some rich, elderly man, you're 70 years old.
45:26
[SPEAKER_00]: And you know, I cannot just let black rock take care of it.
45:28
[SPEAKER_00]: They can knock some heads together.
45:30
[SPEAKER_00]: and give my money for me if anything weird happens in the Bitcoin network.
45:33
[SPEAKER_00]: So that all makes some sense to me.
45:36
[SPEAKER_00]: Treasury companies have afraid not.
45:37
[SPEAKER_00]: But they were saying, oh, the Mnet premium went from one to two.
45:40
[SPEAKER_00]: And then you had the guy, the CEO, that Michael Salem, but that Fong Lee or whoever, that kind of Asian character, he was like,
45:49
[SPEAKER_00]: Oh, it goes from one to two.
45:50
[SPEAKER_00]: It could go from to 10 or to 20.
45:52
[SPEAKER_00]: But in reality, it went from one to two and then it went back to earth in and back to one, which is its final destination.
45:58
[SPEAKER_00]: But really it's final destination could be zero because it's a leaky bucket.
46:02
[SPEAKER_00]: because you have all this overhead for the Treasury companies.
46:07
[SPEAKER_00]: So why would you use a bucket that leaks when you have one at home that does not leak?
46:13
[SPEAKER_00]: Which is, you could buy it yourself.
46:14
[SPEAKER_00]: So I'm very skeptical of the Treasury companies as well.
46:19
[SPEAKER_00]: And I do kind of worry about
46:21
[SPEAKER_00]: shouldn't we be at least trying to give people the real experience, which is, this is what the full node is, this is what the key, because the key pairs, all that stuff, the full node, having you, create your own private keys, that's part of the Bitcoin experience.
46:37
[SPEAKER_00]: And the reason it's part of the Bitcoin experience is because it's to protect people.
46:44
[SPEAKER_00]: People can't, if you follow these steps,
46:50
[SPEAKER_00]: You know, the government could theoretically seize it or the ETF could just decide we're not paying it out to you unless you submit all this paperwork.
46:59
[SPEAKER_00]: So a lot of this stuff done in the name of convenience, people may regret and that's exactly what happened with cold card where.
47:06
[SPEAKER_00]: You know, we were trying, I mean, I was always a skeptic of this push button randomness situation.
47:12
[SPEAKER_00]: I was also skeptical of this whole dice roll, like I thought that was also kind of silly.
47:16
[SPEAKER_00]: But I had it, I advocated this idea where you'd like shuffle a deck of cards.
47:19
[SPEAKER_00]: Wherever you even better idea now where you just kind of move your mouse across the keyboard and it types up on just stuff in, that you can see.
47:24
[SPEAKER_00]: But from the past, I was like, you could have people shuffle a deck of cards, type in 2530 cards.
47:30
[SPEAKER_00]: That's not that hard.
47:32
[SPEAKER_00]: And then people would kind of be like, why do we want to do this?
47:35
[SPEAKER_00]: uh... and they're right that it's slightly inconvenient but the alternative was you trusted the random number generator on the device and that's what have with cold garden you lost all of your money so it's kind of like all these things are maybe a little tiny bit inconvenient you know but actually
47:53
[SPEAKER_00]: They all have a purpose.
47:55
[SPEAKER_00]: We're not asking it.
47:56
[SPEAKER_00]: They just stand up one leg and hop up and down for no reason at all.
47:59
[SPEAKER_00]: They actually, it's a reason.
48:02
[SPEAKER_02]: The full node is important.
48:03
[SPEAKER_00]: And the same with custodial lightning.
48:05
[SPEAKER_00]: custodial lightning.
48:06
[SPEAKER_00]: And then one day it was ganked from the App Store while the Satoshi you weren't wise.
48:10
[SPEAKER_00]: Because people figured out, wait a minute.
48:15
[SPEAKER_00]: This isn't like an open source software thing that's just library.
48:19
[SPEAKER_00]: This and they actually have all the money and they only say.
48:23
[SPEAKER_00]: So we advocate for a lot of things in Bitcoin that may be our temporarily a little bit in the community.
48:29
[SPEAKER_00]: Think about how inconvenient it is to learn how to drive a car.
48:33
[SPEAKER_00]: It takes a lot of effort and it's very dangerous, you know, and plenty of young people 40,000 highway deaths a year.
48:41
[SPEAKER_00]: So it's a shocking idea, but this is part of the American experience is that you get your car and you have your independence and now you can pick up your friends and you can go wherever you want to go, you can go on a road trip and is it dangerous?
48:55
[SPEAKER_00]: Yes.
48:56
[SPEAKER_00]: But, you know, you could say now I'm learning how to drive a car as too much work and then, you know, with the bitter comes the
49:10
[SPEAKER_00]: give people the real experience, which they ultimately will really want.
49:15
[SPEAKER_00]: Because it's not that hard to learn about the private keys and about the full node and about the randomness.
49:22
[SPEAKER_00]: It's actually not that hard.
49:23
[SPEAKER_00]: What's really hard is losing all of your money.
49:26
[SPEAKER_00]: And countless people have, I know many friends who they, their family grew up in communist takeover, like in Cambodia or in Estonia,
49:38
[SPEAKER_00]: places like that.
49:39
[SPEAKER_00]: And there's like, yeah, that's what's really expensive is having all of your property seized and then your family dying in a work camp somewhere or something like that.
49:47
[SPEAKER_00]: So that's I'm not trying to draw that line completely, but that is the idea of Bitcoin is that you would own your own money and it comes with a little bit of tiny, little bit of effort.
49:58
[SPEAKER_00]: Of course, in Bitcoin, we've done a very bad job of making it easy.
50:01
[SPEAKER_00]: So we tried it with our software.
50:02
[SPEAKER_00]: We tried to do a much better job with Bitcoin core.
50:05
[SPEAKER_00]: make it easy as possible to make it so that the full note is actually fun.
50:08
[SPEAKER_00]: And it actually does something so that you would say, oh, I like running this full note because it's cool stuff.
50:13
[SPEAKER_00]: It does and that the generating the keys is not that hard.
50:18
[SPEAKER_02]: So yeah, well, we're certainly looking forward to keeping tabs on the e-cash.
50:24
[SPEAKER_02]: October 31st hard fork.
50:28
[SPEAKER_02]: And everybody should check out e-cash.com.
50:30
[SPEAKER_02]: There could be something there for you.
50:32
[SPEAKER_02]: You know, in terms of, you know, if you are a Bitcoin holder, you could get the e-cash hard fork as well, automatically.
50:42
[SPEAKER_00]: Um, with that, yeah, free, free software published for free.
50:46
[SPEAKER_00]: That anyone can look at a modifier used in free coins.
50:50
[SPEAKER_00]: So, so as you can imagine, people in Bitcoin just hate it.
50:53
[SPEAKER_00]: They just don't like it at all.
50:54
[SPEAKER_00]: It's a worst idea.
50:55
[SPEAKER_00]: It's a worst idea in the world.
50:57
[SPEAKER_00]: But.
50:57
[SPEAKER_02]: Well, maybe we'll have this out on in a year or in a year or so, and we'll kind of get a little status update on how the projects unfolding, but until then, we hope everybody who is listening and enjoyed and Paul, we hope hope you enjoyed the conversation as well.
51:13
[SPEAKER_02]: Yeah, thanks for having me, guys.
51:14
[SPEAKER_02]: Thank you.
51:16
[SPEAKER_02]: You bet.
51:16
[SPEAKER_02]: All right, everybody.
51:17
[SPEAKER_02]: Take care, come back, same time, same place.
51:19
[SPEAKER_02]: Next week, we'll have some more great guests for you.