Citadel Dispatch

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Adam Back is cofounder and CEO of Blockstream, a company focused on building out bitcoin technology. We discuss his recent appearance in HBO documentary 'Money Electric,' the blossoming Swiss bitcoin city of Lugano, the early days of bitcoin, and his thoughts on ecash and nostr.

Adam on Nostr: https://primal.net/p/npub1qg8j6gdwpxlntlxlkew7eu283wzx7hmj32esch42hntdpqdgrslqv024kw  

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Outro Music by TIP NZ: https://primal.net/p/npub1hrctsg2qwu5gsp65gvj29968z460g0th755jq92c8uaz620lewmq6qk525

(00:00:01) Bitcoin and Inflation: Insights from Paul Tudor Jones

(00:06:02) Introduction to the Show

(00:06:55) Bitcoin in Lugano: A Growing Economy

(00:10:19) Bitcoin Documentary: Money Electric

(00:21:00) The Mystery of Satoshi Nakamoto

(00:31:05) Bitcoin's Early Days and Adoption Challenges

(00:38:00) Scaling Bitcoin: Liquid and Lightning

(00:50:02) Future of Bitcoin: Simplicity and Smart Contracts

(01:00:19) eCash Protocols: Cashu and Fedimint

(01:09:10) Nostr and Decentralized Social Media

[00:00:03] Unknown:

Let's talk about taxes, though. Okay. Because that's how the money is gonna get raised one way or the other. Correct. I think we have a screen, if we could, that I puts up a little bit of a menu here   of I don't know if it's options. Actually, they may not be options at all. There are plenty of options. There are plenty of options. There's there's not many ways to get where you need to go unless you start to do some of these things. Correct.   So the question is, of the of what's on the screen, you can you can let the tax cuts expire that gets you to your new screen. Yep. You have to let the tax cuts expire. You have to. Yeah. You have to let those expire. That's 390,000,000,000.  

[00:00:37] Paul Tudor Jones:

We're gonna have again, we're   we're gonna we're gonna be   broke   really quickly   unless we get serious about dealing   with our spending issues.   And and unless we and the only we can either I I don't know if we'll be able to cut spending that much. 60%  

[00:00:58] Unknown:

of our spending are transfer payments. But if you if you're if you think we're going broke for and and you think Trump is gonna be the president, he's not gonna let those tax cuts expire if he can avoid it.  

[00:01:09] Paul Tudor Jones:

The thing is He does not want the corporate tax rate to go, to 25% Yeah. As you're suggesting it'll have to. He's suggesting it should go to 15%. I'm saying that to just to get us to the point where we stabilize debt to GDP at where it is right now, here's what you need to do. You need to let the Trump tax cuts expire. That's 390,000,000,000   You need to raise the payroll tax on every single working person, 1%.   That's another big slug.  

[00:01:34] Unknown:

You need to What do you think that does to jobs?  

[00:01:38] Paul Tudor Jones:

We're clearly gonna have a period of contraction, which hopefully that's why I was gonna say it's gonna be really important for the Fed to be able to offset   the fiscal contraction area that's gonna come.  

[00:01:51] Unknown:

Then you wanna increase the individual tax rate in all the way to the top rate of close to 50%.  

[00:01:57] Paul Tudor Jones:

Now hold it. Yep. I don't wanna do any of this stuff.   What I'm telling you is is that we've gotta be serious   about where we are fiscally.   And so I'm giving you there's a whole set of options. Right? We could go in and cut 25%   of the of the federal workforce.   Some people may do that.   There's there's a whole there's a website where you can go look and play with all the options. You can raise the capital gains rate from 21 to 28%. That only gets you   $10,000,000,000 a year. It actually doesn't   get you what you need. So I'm simply showing Right. Some of the things that you can do. Yes. You'd have to raise   the tax rate on the top I think probably everyone over $200,   probably have to raise that to 49 a half percent. If you do all these things   all these things, ray raise the social security from 65 to 70. If you do all these things, means test, Medicare. If you do all these things,   all you do   is you get to a primary balance. What that means is you stabilize debt to GDP.  

You're still actually increasing your debt. Right. You're still actually increasing it because it excludes the interest cost, which, oh, by the way, the interest bill this year   is larger than every single line item except Social Security. It's larger than defense spending, larger than Medicare.  

[00:03:16] Unknown:

I wanna talk about, why you're here, which is Robinhood, and this conference. But before I do that, is this given all of the things you're saying, are you off buying gold and Bitcoin   and and how can something work?  

[00:03:27] Paul Tudor Jones:

All roads lead to inflation.   We're gonna end up if you so But does all roads lead to inflation? Therefore, gold is a good investment? Is Bitcoin a good investment to you? I I I'm long gold. I'm long Bitcoin. I think commodities are so ridiculously   under owned. So I'm long commodities.   I think most young people find their inflation hedges via the Nasdaq. That's also been great. Probably some combination.   I probably have some basket of gold, Bitcoin, commodities, Nasdaq, something like that. And I would owe 0 fixed income.   If I had my cash, it would be very short term. The playbook to get out of this, you see it in Japan right now. They have 2% inflation, 30 percent 30 basis points overnight. They don't wanna raise rates. The playbook to get out of this is that you inflate your way out and and you have a small tax on the consumer   and you run interest rates and nominal growth rate interest rates,   below inflation and nominal growth,   above inflation. And that's how you reduce your debt to GDP. So you're gonna have the Fed be they should be easy. They should be They should be easy. You want them They should You want them to cut. So just real quickly. Yeah.  

Every 100 basis points, given where our debt to GDP right now, every 100 basis points is worth about 90,000,000,000 a year to the deficit.   90,000,000,000.   So, yes, if we're trying to stabilize debt to GDP, we wanna run the most dovish monetary policy that we can without letting inflation become too much of a tax and acesary. So, yes, all roads lead to inflation. That's historically the way every civilization has gotten out is they've inflated away their debt.  

[00:06:07] ODELL:

Thank you, Adam. I was muted.  

[00:06:10] Adam Back:

Now we gotcha.  

[00:06:12] ODELL:

Adam gave me the the sign that he couldn't hear me.   Happy Bitcoin Wednesday, freaks. It's your host Odell here for another serial dispatch, the interactive   live show focused on actual Bitcoin and Freedom Tech discussion. That intro was a prolific   investor and billionaire, Paul Tudor Jones,   talking about   runaway inflation   and how the US government   has no choice but to lean into it.   He says he's long Bitcoin. He says he's long gold.   I think he says a lot of things that a lot of Bitcoiners have been saying for a long time now.   I have a great conversation lined up for us today. We have doctor Adam Back, cofounder and CEO of Blockstream here,   streaming out from Lugano. How's it going, Adam?  



[00:06:58] Adam Back:

Pretty good. Yeah. It's, just gearing up for the plan b conference in the next couple of days,   Friday Saturday,   and some pre event tomorrow, which I'm here for.  

[00:07:12] ODELL:

How robust is it there?  

[00:07:14] Adam Back:

Yeah. I mean, it's,   it's like Bitcoin central over here. Right? They've got   point of sale terminals and Bitcoin stickers in pretty much all of the shops.   And   they have   a Bitcoin   summer school at the   local university   and some initiatives from,   I guess, Tether and   Fulga, one one of the VCs, to   try and bring   Bitcoin startups   to to the area. And,   they've got some   participation   and   encouragement from the local mayor,   who's who's involved in the project. So   I think it's good. And,   I think it also helps to   keep people in the region. I think this otherwise tend to suffer brain drain where people get educated. They look to university and then they move to Zurich for finance jobs. So now they can move on to digital finance and stay   in this region.  



[00:08:15] ODELL:

Yeah. That makes sense. I mean, to the freaks that aren't aware, Zurich's about, like, a 2 hour train ride,   north from Lugano. Lugano is is closer to the Italian border.   I actually taught at the summer school that   Adam just mentioned,   back in July.   It's really cool. It's a beautiful it's a beautiful location. The people are super nice.   There's great food. It's expensive. It's a very expensive city.   I always joke that, you know, most of these Bitcoin circular economies that we start to see pop up are popping up in the developed world.   Well, Lugano is, like, the rich is, like, the rich version of that.  

I think they have I think they have 300 restaurants and stores now that accept Bitcoin,   and that's just cool. You you can literally you can you can pretty much live your life on a Bitcoin standard if you're out there.   So   that's awesome. I mean, I I was looking at the cast of characters that are gonna be speaking during the conference.   It's quite the lineup. It should be it should be a really great week, and I think you're basically you're basically just getting started. You're there a little bit early. Right?  

[00:09:26] Adam Back:

Right. Yeah. There's some, pre events like the day before the conference because people are gonna be here anyway. So if if people wanna do some   kind of Bitcoin layer 2 stuff   or, you know, application things.   It's convenient.  

[00:09:40] ODELL:

Yeah. Well, there's still time freaks. If you are in the European area,   consider jumping on the train and   heading over to Lugano. It should be it should be a really fun week.   And if you're in Italy, it's actually really convenient. I mean, I flew into Milan,   and I took the train from there when I came in.   And considering, I think their government just recently,   proposed a Bitcoin specific tax,   in in Italy. So I wouldn't be surprised if we see more Italian Bitcoiners move up to Lugano. Yeah. I I saw some of the Italian Bitcoiners saying it's it's nice at this time of year and,  

[00:10:21] Adam Back:

you know, to see the the this region, right, just across the border. So   they're feeling it.  

[00:10:28] ODELL:

Yeah. But they are. So, Adam, you just recently announced,   I guess before we get there, I saw your documentary. I saw your big screen debut,   Money Electric,   on HBO.   I think probably   the most high production quality Bitcoin film we've seen to date.   You know, 15 years after Bitcoin was created or invented or discovered, however you wanna put it.   We finally have a full featured   documentary,   and you were heavily heavily in it. It was, you know, you, Peter Todd, Samson,   like the main characters.   We got some appearances by Amir Takhi,   some other individuals.  

What what were your thoughts on the documentary?  

[00:11:19] Adam Back:

Well, I mean, I saw it afterwards. Of course, you can't tell what they're gonna you know, what story they're gonna assemble before because, you know, they ask lots of questions. They came to a number of conferences.   And I guess in between   times when they're filming, they thought of more questions they wanted to ask people,   more potential directions to take things, and then they,   you know, can sense it down into a story arc. Yeah. And it's it's kinda cool, like, I mean,   from the point of view that,   you know, it it exposes more a more general audience to Bitcoin.   And, of course, by participating, we hope they're gonna do something   informative and   that captures   what makes us excited about Bitcoin. You know, sometimes it doesn't get captured accurately, and I think the documentary   producers made a number of other documentaries, one which was about online privacy.  

So I think he was actually getting it and, like, getting into it. So I think he did a reasonably good job of,   you know,   explaining   where it you know, the history,   what people find exciting about it,   and,   you know, the nation state arc.   And,   of course, they gotta do it because   everybody's curious, the who is Satoshi arc, which is, you know, not the most,   productive thing.   But but it's a entertainment valley too. Right? They gotta, like, provide the entertainment. So I just hope it doesn't, you know,   cause too much fallout for Peter Todd. That's that's what I'd say because, you know,   obviously, now he's   sort of busy   birthday. He he was interviewed by Wired,   which is kind of big quite big,   online magazine that's been around for years. And,   I think he was able to provide some kind of proof a little bit like,   Jameson Lopfand for Hal Finney, which is, like, you know, Satoshi is busy emailing and   sending transactions to somebody. In his photographic evidence, Hal Finney was running a marathon. Right? So people are pretty convinced. Okay. I guess it's not Hal Finney. Right? So so I think Peter's been rummaging through   old photos and actually,   you know, found some contradictory things with with this theory.  

The problem is it's all speculation. Right?   You know, you you could pick anybody that's, you know, participate in bitcoin that was interested in electronic cash. I mean, you know, sometimes even there's a programmer who will do it. Right? And,   you can make a pro or con. Right? And it it's a fun game that people like to play. But,   you know, I don't I don't think we're gonna find out because,   you you know, it's been a lot of years since Satoshi   stopped posting on the forums. Like, I wasn't on the forums until myself until 2013, and he'd already left by, like, 2011, I think, is the is the year.   So, you know, there's no new information since then, and people have been fascinated   for all those years. Right? It's like, you know, what, 13 years now? So I don't think we're gonna find anything. So the rest of it is just   speculation, really.  



[00:14:18] ODELL:

Yeah. I mean, it was it was,   like, the first half an hour of the documentary   was I thought or or they did a really good job of, like, explaining how Bitcoin works, why it exists. Like, they did a really good job at that.   And then   and they they did a decent job with the block size war. And, you know, if you weren't around in   in 2016 and 2017 and 2018, it's it's really hard to explain what exactly happened if you didn't live it. And I think they did a decent job with that.   Obviously, they they brought in, like, Roger as, like, the Bitcoin cash guy to give his side of the story.   But I thought they did a pretty good job with that. Then a lot of it was a lot of it was the Samsung show. I presume Samsung was one of the main ring leaders, like, bringing it all together. Right? Like, traveling around with Samsung,   convincing small countries to adopt a Bitcoin.  



[00:15:14] Adam Back:

Yeah. I mean, I think that was the kind of what's next adoption arc.   Yeah. You know, going into the mom's dream.   Yeah. So I guess I guess, like, basically, what they covered is   what they thought was interesting   to tell the story because I I'm pretty sure they woulda had   you know, they interviewed a lot of people in multiple   locations   over over time. They were filming for a couple of years on and off, so they were in Riga. They were in in Lugano for for Lugano conference. They were in a Miami conference.   So they went they worked they did a lot of traveling. Right? And,   so,   you know, it's   I think they had all the footage to to tell most of the major points. So I think the story they told us is the story they wanted wanted to tell. It's really so it's kinda interesting that   they wanted to cover the nation state   kind of adoption arc as well.  



[00:16:07] ODELL:

I,   and then, of course, they had their hype, right, which was the the quote, unquote Satoshi reveal.   Yeah. I mean, to be clear here, you don't think Peter Todd was Satoshi?   No.  

[00:16:20] Adam Back:

I mean,   Peter has been doing   you know, it's public information. Right? But he's been doing   consulting for a lot of different people. Right?   And,   you know, he's he's trying to, you know, make money to pay rent. Right? So   it's pretty clear that he doesn't doesn't have,   you know he's not a wealthy guy. Right? And,   but also, you know, it's,   it's all, like, circumstantial,   I might say.   And I think he he also sort of,   showed some photos to Wyatt   showing he was   he likes, what he like, caving or spelunking? Like, climbing around inside clay caves and stuff, and he found some expedition for us,   right, a period of time where presumably Satoshi's busy doing something. I sit on the forums or something. Right?  



[00:17:15] ODELL:

Right. Yeah. I mean, a lot of it a lot of the interviews were in caves with him.  

[00:17:20] Adam Back:

Yeah.  

[00:17:22] ODELL:

I,   I mean, I guess   but what I just wanted to say, like, one of my favorite parts of the document. So I I   I sat down with,   my family, my my wife and my my son, and we we watched the documentary together.   We we try and we try and keep him   we try and reduce screens as much as possible with him, but we made an exception, for the documentary because it felt like a important occasion. And one of my favorite parts was during the reveal just like yours you're in the background just like your straight face, like, a little bit add them back smile. It was just, to me, it was very positive. And I I mean, I was what was going through my mind is Yeah. Go on. Change the I I was like, man, can you change the topic? Can we talk about something more productive?  

[00:18:09] Adam Back:

So  

[00:18:10] ODELL:

yeah. Yeah. I mean, the whole point is it doesn't matter who Satoshi is.  

[00:18:14] Adam Back:

Right. Exactly.   Yeah.   Well, you know, I mean, I I you you mentioned in the out in our intro that,   you know, discovered versus invented. I like I like discovered because,   you know,   it it's,   you know, something   like that   can eventually get discovered   because it's a it's a thing. Right? So it's like people realize that gold was good money,   and now we have digital gold. And so,   you know, the fact that you can   sometimes make better versions of things in a digital world. Right? You can, make a digital ignition for a car like, you know, mapping   the car, buses,   you know, physical   governor, and all that kind of stuff. Right? So it's it's a pretty common concept that you can   improve an analog system like digital. And   so the concept that that there could exist digital gold, which   robustly represents   physical gold   analog   is, you know, in a in hindsight, of course, right, it it looks like, yeah, I guess that should have existed. We should have seen that coming, but, you know, we didn't.  

Right? But I think, you know, the incentive for that to exist was there, and people were   sort of fumbling around   trying to figure out how to do it since   at least 1997. Right? It was just tricky. And, you know, Bitcoin, now that we have it,   it looks elegant, and we you know, you could understand it at lots of different levels. So people like, yeah. That's that's that's simple. I mean, yeah, it gets a little more complicated as you get under the hood.   But,   yes. That's why I think it could it could eventually have been rediscovered. Right? And you you see,   you know, people talking about surprisingly Bitcoin like ideas   in 9 98 and stuff like that. Right? You know, the the b money, the bit gold.  

And, actually, Peter Todd is on,   like,   a mailing list about   a peer to peer file sharing system. I think it's a Freenet   topic, which is kinda like a deterrent like thing for   storing encrypted fragments of files, being hard to censor,   and it happens to use HashCash for, like,   protecting against an all service. So then he was talking about HashCash and how Fiddy was in there   talking about it too. Right? So it's another another one of those conversations. But it seems like lots of people were   arriving at similar idea or trying to figure out how to make it work, and it looked hard. Right? And so I think, you know, kudos to especially whoever it is for   being ingenious enough to figure out the last mile that everybody else felt today.  



[00:21:00] ODELL:

Right. And put it all together.   Yeah. Yeah. I mean, I had I had Fran Finney,   on the show   a couple months ago, and I I asked her   what what was it like when when Hal first discovered Bitcoin   and, like, he first told you about Bitcoin. And she was like, at that point, like, he had   it was just another, you   know, another e cash project or another money project. Like, I he had been talking about these things for decades.   At at that point, you know, there was it was not it was not anything particularly interesting to me   or or or novel or new from her perspective. Right? Because there's just all these things are are compounding over and over on time,   until they all came together. I mean, he implemented,  

[00:21:44] Adam Back:

his own kind of   prototype e cache system called RPAU   in, 2004.   And the other thing about how is   is, like, you know, they they say Cypherpunks write code. He's the he's the code writer guy that's always tinkering with something. Right? So he reads a paper,   and then he explains it so that other people can don't have to read the paper. Right? So he he did that.   And, actually, that's I didn't read the Bitcoin paper. I read Hal Finney's summary of, trying it out. Right? So that's a typical Hal Finney thing that he's   he's got his fingers in everything figuring it out. Right?  

So,   yeah, it's,   it's in keeping. So she probably saw him doing the try it out and figure it out. Right? But the other kind of   funny thing about Hal Finning it figuring it out is he   probably in 2009, he posted something saying, hey. Maybe you should buy some of this. If it if it takes off,   it could be worth 10,000,000 a coin because, you know, there's 21,000,000   coins and all the things are worth 200,000,000,000 at that time. And people are like, wow. This this guy was like   you know,   people now will say that, like,   15 years later, but he said it before even at a a price or a user rate. Yeah. I mean, people think you're crazy when you say it now, and he said it  

[00:23:03] ODELL:

like, that was, like, a couple months after Bitcoin was launched.  

[00:23:08] Adam Back:

Yeah. I mean, it's before,   I mean, before the Bitcoin pizza even by a long time. Right? So it's pretty much  

[00:23:15] ODELL:

And   am I correct am I correct that when you originally   learned about Bitcoin you dismissed it at first. Right?  

[00:23:23] Adam Back:

Well, now what I was thinking is,   well, firstly, I was thinking, man, it's   because it there are the some of the previous electronic cash systems were centralized,   had extremely strong privacy, but you had to trust the server. So firstly, there's a mind shift. Right? Okay. This doesn't need to trust the server,   and we saw the centralized system, DigiCash,   failed due to centralization.   So they'd figured out   the the solution had to be decentralized. Right? It's already back in 98, but they know how to do it. And   so my thought was,   pity about it. It doesn't have more privacy, but it it's hard to do that harder to do that in a decentralized system, in a central one, so that is what it is. And then, like, okay. Well, at least he's solved the remaining he's made it real. Right? He's solved how to do it in a decentralized way, which is cool. But then I was like, well,   is it gonna bootstrap? You know? Let's wait and see. Right? So I was like,   you know, kinda sitting around checking in once in a while. And I think in 2013,   it popped up on Slashdot that it   broken through a dollar. So then I was like,   it's I guess it's,   maybe it's gonna happen. Right? So   and, so I started getting more   you know, start trying to figure out the technical details in 2013.  

So I went and read all the stuff that was available and there wasn't much at that time and then I found the IRC and asked all developers lots of questions, like, about how it actually works. And that's the only one I realized it has smart contracts because it doesn't say that in the paper. Right? So I was like, oh, that's that's really cool. Right?   So, yeah, then I did what people do. You know, they they get down the rabbit hole and they   get   super animated and captured by this idea and then they that's that's where you stay in the zone sometimes. Right? Which is the case for me. So it wasn't it wasn't so much like, oh, this is a bad idea or anything because we were trying to solve the problem. We just managed to make it work. But it's like, okay. Finally, somebody solved it.   But, okay, next hurdle is, are people gonna adopt it? Because a lot of things,   like, how Phineas RPAO got implemented,   and there's another one called Magic Money,   they were they were just kinda   demos or toys, and they never took off. Right?  

And so that was the question. Right? You know? Will it stay the hobbyist,   you know, sending each other I I the the the good one to to read is,   Drew Adam.   What's,   the guy's name? One one of the early   guys that was into it,   Bitcoin mining   in 20 not to 2009,   and then he kinda got bored and went away and kinda half forgot about it. But he, did an interview,   Dustin Trammell.   So he did a he did a podcast more recently,   and   it's, like, super interesting him describing the experience. Right? Because he was there when it was, you know, the tumbleweeds were blown by and Right. He was, like, user number 3 or something. Yeah. And there's, like, nothing really happening. They were on IRC. They did because I I was, like, you know, I I didn't look at it at that time. Right? I read I read some of the stuff. I read how Finney's thing. I was like, oh, let's see if it bootstraps. But these guys actually got in there and, like,   you know, at least operate it for a while till they got bored. And then the other one that's really interesting as well   is   the   some of the the emails that came out during the COPA trial. So you got you got tons and tons of messages   from,   the guy that was actually helping Satoshi with the,   you know, with the forums.  

His   his IRC handle is Sirius,   but he's into lost Loston now. Right?   And so so there there's yeah. Yeah. So so it's like   it it's interesting because you see the you know, because I was just like, oh, let's see the bootstraps. Right? But Marty and Satoshi, if if you read all those emails,   they're trying to figure out how to bootstrap it like it's a startup. Right? Like brainstorming about applications   that might entice people to try it,   what's confusing people   about how it works to write an FAQ.   It's like typical,   like, early stage startup things. So the fact that it boost wrapped is because people, you know,   try to help it. Right?  

So we never we never saw that, or, like, most people didn't see that and until this kind of internal discussion came up. So that's pretty cool. The Marty emails are fascinating. I think they came up as part of the  

[00:27:53] ODELL:

the CSW   lawsuits.  

[00:27:56] Adam Back:

Exactly. Yeah. Yeah. So they they did a huge kinda email dump,   that and somebody, like, read it all and summarized what it was about. It's, like, very cool. Yeah.  

[00:28:06] ODELL:

That was, like, part of the documentarian's   claim that it was Peter Thomas, Satoshi. Was there, like Satoshi said retarded in an email, so it must have been a young person, which I thought was a hilarious piece of evidence. Well, I mean,   I've been known to say that about NFTs and stuff. So, you know, like, we all say it right. Are you telling are you telling us something? I, Adam, I feel like part of the reason you had a smile on the back of your,   like, on the back of your mouth while you're in the background   of the reveal is because you you thought they were gonna pin it on you. You'd I I think it's I mean, I was hoping they wouldn't, but you never know. Right?  

I mean, you've had your own fair share of accusers   or   allegedgers or whatever saying that was you. Right. Right. Right.   Just to be clear, you're not Satoshi. Right?  

[00:28:53] Adam Back:

No. I mean, I I understand, like,   you know, in 2013 when I was going down the rabbit hole at some point, you know, after   that, it it dawns on me that, oh, shit. Maybe people would think I'm Satoshi. This is not good. Right? So, you know but then then I realized, well, there's, like, really not much I can do about it, so I kinda rolled with it. Right? But but,   yeah, you don't you don't really wanna be,   you know, suspected of, being so shitty because,   people might get the idea you have a lot of coins. Right? Yeah. You don't have the money to do you know, you don't have the money to, like, move house or to,   you know, give Put the target on that.  

Yeah. I mean, I remember Jameson Law posted a lot about he got he got swatted. Right? Right. Some crazy guys sent a SWAT team to his house, which coulda ended badly. During Beacon.   Yeah. It was that. Right? So it's the some of the big blockers maybe. It's just kinda activity. And, then afterwards, he took all these kind of   elaborate measures and was blogging about how to do it. You know? You gotta, like, buy the house through the shell company. You gotta, like,   take yourself off the registers and etcetera, etcetera, etcetera. It's a lot of work. Right? And it costs money. So   yeah.  



[00:30:08] ODELL:

Yeah. No. It's,   I mean, first of all,   the whole point is that it doesn't matter who Satoshi is.  

[00:30:16] Adam Back:

Right.  

[00:30:17] ODELL:

2nd of all, Satoshi,   whoever he is,   has   some of the best object I've ever seen in, like, the history of of of digital humanity.   Right. And it it takes it takes quite a big ego as I think a documentarian to   think that you crack the you you were the one who figured it out after after everyone   everyone has thought this question,   and you were the one who figured it out.   But third of all, like, false accusations, like, have real world effects. Like, I when I was talking to Fran, I mean, Fran is Fran and Hal, especially as Hal's health declined towards the end, like, it became a real a real problem for them. They were getting blackmailed and,   they were getting dragged. So it was, like, the last thing in the world they they needed to deal with while his health was declining.  



[00:31:05] Adam Back:

Yeah. For sure. Yeah.  

[00:31:09] ODELL:

So   you'd kind of just you look at Bitcoin. You're like, oh, maybe it doesn't get bootstrapped. You know, maybe it's just another one of these, you know, cumulative innovations that's happening in the space. I I   and then you come back to Bitcoin,   and you fall down the rabbit hole. I think this happens to a lot of us. Right? It's like it takes it takes 2 or 3 touch points before you're like, holy shit. And then once you're in, you're you're in in a real way.   And then you pretty quickly launch Blockstream. Right?  

[00:31:41] Adam Back:

Yeah. So so,   I was thinking,   you know, because I've worked on electronic cash systems before, and I'd implemented   the DigiCash algorithm   and another one,   called dish what's it? It's like digital credentials   by a a friend of mine who was   Chorn's PhD student. He made a he made a better ecash protocol. So I implemented both of those,   And   I,   the the DigiCash   company,   which is David Chorn's company, is operating out in the Netherlands, and they they set up a demo server. They promised they'd never issue you more than a 1000000 tokens, and they would   email you the tokens if you ask for them, like, airdrop them   and, like a faucet, basically.  

And so, you know,   some of the guys on the Cypherpunks list, including myself, figured, like, well, how hard could it be to bootstrap a value if this gets right? So we start selling stuff for,   you know, assuming they're worth a dollar, and there's only there's a million of them, so we figured, you know, if a few hundred people start trading stuff like t shirts and   I had those RSA t shirts, so I was selling those for for these I mean, they had no market value,   but if I sold a few for a dollar and all those other people sold stuff, we figured eventually there'd be a circular trade,   and you could give there's no bank interface to it, right, so the demo. So we kinda had a go at bootstrapping, and it and it ended badly because Digicash went bankrupt. And then the Yeah. It centralized the double spend database disappeared, so you couldn't prove if the coin was spent or not. So it kinda all blew up. So, you know, that that was the kind of context in my, I wonder if this one will bootstrap because, like, we actually tried to proactively bootstrap the previous one, and it all fell apart. Right? So clearly,   you know, what Stoches cracked is   the immediate reaction to Digicash failing because it's centralized was, we need some decentralized tech, but we know how to do it. Right? So now here it is. He's built it.  

So this time around, I just kinda, like, watched rather than   be the guy trying to, like, sell stuff to Right. Bootstrap it. Right?  

[00:33:47] ODELL:

Yeah. Right. But but so then yeah. I mean, I think the key here, right, the key here with Bitcoin was that it   that first of all, it wasn't centralized and that it was scarce. Right? And and it was a it's a different trade off model. Instead of going for   better privacy guarantees, it went with better security assurances in terms of rights.  

[00:34:09] Adam Back:

And that's what really   bootstrapped it. Yeah. And and, I mean, so when I went down the rabbit hole, I figured, well,   okay. It's bootstrap. It's bootstrapped. It's bootstrapping,   and, of course, you know, you get super excited about digital I mean, people were excited about digital bear cash back in the DigiCash days even though it was like a stable coin intentionally. Right? It didn't it didn't quite get to market, but it was the design would have been a stable coin effectively.   So Bitcoin is more than that because you've got,   you know, potentially an investment dimension. People can speculate on it, and I think that adds that's another kind of adoption,   another another reason people might adopt it. But people were plenty excited about   just bare unseasonable cash even if it was dollar denominated. Right? So, of course, to me, that is   awesome. Like, you know, I I find that stuff fantastic. So   so now I thought, well, maybe I can,   you know, figure out a way to improve your privacy.  

So I spent, like, months   trying to figure out,   you know,   how to make what became known as confidential transactions.   So, eventually, I figured that out, posted it on a Bitcoin talk forum, and then I go and ask the,   like, Bitcoin, was it IRC guys?   Yep. You know, do you think Bitcoin would adopt this? Like, I figured it out. Scrape it. I'm like, you know, that's it became apparent that it's hard to get Bitcoin to adopt complicated things. Yep. So rather than,   you know, rage quitting, which is what people do when they don't get their way, I was like, okay. I understand. That makes sense. So I figured let's try and make find a way to make Bitcoin modular   or layered   so that people can implement   in a permissionless way in a in a, you know, in a sandbox or a layer so it doesn't have to change the base layer. So   so I was like, you know, for a little while,   figuring out   different types of side chain ideas, and we got two way side chain.  

Now the full version of it needs an opcode, but you you know, that's back to square 1. Right? It's hard to get opcodes,   get consensus for opcodes. So there's a kind of simplified version   in this paper that we'd worked on.   And,   yeah, then I tried to recruit, you know, the, Bitcoin Wizards guys because the the the the brands have,   had to extend   and improve Bitcoin   to,   you   know, come work with me at Blockstream and, you know, recruited a friend of mine who is   now a VC to help us raise money.   And,   so, you know, there there was somebody actually,   who offered us $500,000.  

This is back in 2013, just a Bitcoin   person   to implement   the the core tech. Right?   Like, I was thinking, well, that's that's actually not anywhere near enough because you don't you can't just implement a piece of a library.   You need, like, wallets. You need a block explorer.   You know, you maybe need hardware wallet integration,   and you need somebody,   you know, to design user interfaces. Like, all the all the people that I knew, like, or on my wavelength, right,   the network programmers,   crypto people, they can write crypto libraries in UNIX back end code. They   they can't write, like,   user interface on Android or something. Right? So   you need you need, like, a range of skill sets, and so you need   to be able to hire, like, a wider set of people. So, yeah, so we we got it   and started   with the seed round and started implementing.  

And,   that became liquid, and along the way, the lightning concepts,   came together. So we we thought, well,   that's good because blockchains don't scale. Like, even if it's a layer 2 kind of side chain, that's still a blockchain. It doesn't scale. So we figured,   well, let's,   let's participate in lightning.   So   that could be a scaling solution. So we did that as well with, one of the implementations.  

[00:38:05] ODELL:

I mean, to be clear here,   saying it doesn't scale is is is is from a technical point of view.   The the the   obviously,   more people can use it over time. But this idea that,   with blockchains, this idea that every node effectively has the entire global state of every transaction that has happened.   It means that you are you're like in you're limited by physics, basically. Right? And Right. And so liquid is is effectively just another blockchain.   Right. That is tied to Bitcoin through what effectively amounts to a multisig.   So liquid shares a lot of the same scaling constraints at a high level as as the main Bitcoin chain does. But something like lightning,   individual nodes don't have to have the global state of Lightning transactions. They're they're basic payment channels. It's a protocol for batch payment Bitcoin payments.  

Yeah. It makes that really novel. And you guys have done a lot of work in that space in terms of maintaining Corelightning  

[00:39:09] Adam Back:

specifically.   Yeah. Yeah. And, actually, core lightning works   on the main chain, but it also works on top of liquids. So you can, in principle, have,   I mean, informally, they're calling it LOL,   liquid lightning on   liquids. It doesn't have a proper name. But,   Breeze,   who does a does a lot of, SDK work for to make it easy for wallets to integrate lightning,   has announced that they are gonna   work on adding   lightning on liquids   on liquid Bitcoin   as a kind of another trade off to sort of   help people when the fees get high or Right. You know, if they start staying high. Right? I mean, if we get into a bull market, that usually   you know, we had the JPEGs, and they subsided, and that caused a fee spike. But if you get into a bull market or more mention because because people are doing, you know, cold storage and sensitive resistant transactions on the chain, and they kinda need a UTXO. Right? So,   it could be that UTXOs   I mean, UTXOs are basically kinda scarce. Right? Only 70 per block.  

So onboarding in a way is,   can you get UTXO to cold store the Bitcoin you bought?   So, you know, that that opens a prospect   that   maybe lightning could be,   you know, for low values   happening on top of a kinda layer 1.5, like a liquid side chain.   And maybe it's an okay try trade off. Right? It's not censorship resistant like the main chain or not as good for cold storage, not as unseasonable.   But, you know, if the amount of money you're transacting you know, with Lightning, you already have a trade off, which is it's a hot wallet. Right? So   it has to be interactive. Like, it has to be online. It has to be online, etcetera. Yeah. So so, you know, it's it's not such a big difference to   sort of take that trade off,   and it could,   you know   it's a little bit faster, a little bit cheaper, a little bit more   scaled,   but,   you know,   liquid is also gonna have blockchain scaling problems once the adoption picks up.  

Right.  

[00:41:27] ODELL:

Yeah. And, I mean I mean, in practice, what that kinda looks like is is what Samsung is is building out with Aqua or,   and and the Amboss guys have an app called, Mi Banco, like, my bank in Spanish.   But this idea that basically, if you're if you're interacting with smaller amounts,   you settle on liquid. And then as those amounts get bigger, you can move to Bitcoin on chain, and then you use you use Lightning as kind of this this glue that allows you to make,   easy payments and and cross between the chains.  

[00:42:03] Adam Back:

Yeah.  

[00:42:04] ODELL:

And that that kinda makes sense to me. I I I think that makes sense. I think I think you kinda hit the nail on the head earlier in this conversation where you're like,   a lot of this stuff is, you know, is okay. Is it technically possible? And then it's you actually need the tooling out there that is actually easy to use for people. Right.  

[00:42:23] Adam Back:

Yeah.   I mean, part of that as well is the   the Boltz Exchange APIs.   Yeah. So they have   an API that lets you trustlessly swap   a Bitcoin UTXO for lightning balance so you can sort of suck money off your lightning balance and get UTXO, or you can send them a UTXO and they swap it for lightning balance.   And,   then during one of the fees spikes,   it it became difficult to offer that service. So they implemented the same thing   for liquid Bitcoin,   and that that was sticky. Like, people kept using it even after the fees subsided because, hey, you know, they're power users and they found something that was cheaper and faster. And,   and then, like, the thing that's kind of organic and fascinating   is wallets started using their API   as a way to implement Lightning.  

So it became a new kind of wallet architecture, and I think Aqua was supposed to do it, but there are a number of them now. Like, Bull Bitcoin has a wallet. They've started doing it.   So   I think Peach Bitcoin is doing it, and there's a couple more wallets in development doing this model.   So it's an alternative to, you know, LDK, which is,   the block spiral,   API for doing wallet stuff   or the l and d stuff that Lightning Labs does or Greenlight, which is the other Blockstream thing. So Blockstream has kinda got,   you know, part a footprint   in   2 competing ways to do lightning there. And it's actually 1   so and, basically, what you have is a liquid wallet, and maybe it's a Bitcoin wallet too. And when you wanna send somebody lightning, you just, you know, you call the Bolt's API. And you you in in the wallet, you can't really tell. It just looks like your wallet supports Lightning, but, actually, it's every time it's swapping   and it's, of course, it's very simple for the wallet. You don't even have any channels. You don't have any Lightning   intelligence in the wallet. Right? You just call APIs and it and stuff happens.  

So   just kind of, you know, one of the examples where   people build things   and inspire somebody else to, like, find a new use for it. Right? Right.   Build on top of it. That's cool. Yeah. Yeah. So,  

[00:44:36] ODELL:

The trade off being that, like, it's it's obviously centralized. You need bolts to be online, but it's it's  

[00:44:43] Adam Back:

they use atomic swap, so bolts can't steal your money in the process. Exactly. Yeah. It has a curious side effect. So, you know, the the this thing you mentioned that you gotta be online to receive a lightning payment. Right. So with these Bolt's wallets, you don't.   So you can receive an offline lightning payment because what's happening   is   the Bolt servers are online, and they receive your Lightning payment, and then they automatically send you the liquid Bitcoin, which can be offline like with Bitcoin because it's just UTXO based. Right? So as a as a, you know, convenient side effects,   those wallets actually have   very simple type   of offline lining receipt.  



[00:45:23] ODELL:

Yeah. That makes sense,   because Volts is handling the online requirement for you.   Yeah.   So would you say   I mean, it's kinda simple, but would would you say that the reason Blockstream was was created to begin with was to try and bring privacy to Bitcoin or or stronger privacy guarantees to Bitcoin?  

[00:45:43] Adam Back:

Yeah. It was to I mean, the reason I was trying to figure out how to make a modular thing like side chains was   so I could get confidential transactions into into Bitcoin. So we got them there indirectly. Right? So it's one of the   yeah. People use   tech for different reasons. So with liquids, you have   generalized asset support. So you've got, like, stable coins and even securities like MicroStrategy shares,   all this kind of stuff, and some,   bonds, so, like,   promissory notes, which is kind of business loan. In Mexico, it's a 1,000,000,000 and a half of those. But, yeah, it it's all covered by confidential transactions.   So if you go on a liquid block explorer, like the mempool, guys have 1. We have 1. I think Blockchain has 1 now too.  

You you just see a lot of stuff that says confidential, and you can't you can't read it. You can't tell. You can see, like, the UTXO flow. Like, you know, this   this UTXO,   you know, had changed the way in there,   but you don't know   how much or even what it is. You know? Was that tether? Was that liquid Bitcoin?   And so,   you know, that that that's,   interesting to people. You know? You get it's a formal privacy, like, confidentiality,   and it's that's also important for safety. You know? If you,   you know, flash a big UTXO, that's a security risk. Right?   So you you solve that problem,   and   it's,   it's a it's a form of privacy. Like, Bitcoin's had a lot of, incremental privacy   improvements over time, and this this is one of them. Now, of course, it'd be it might be interesting   eventually   if,   you know, if Bitcoin   itself   integrates something like confidential transactions.  

But there there is a bit of a debate about   the trade off, you see, because there's there's a sort of,   a long term question   about what happens if   discrete log gets broken. Like, if if Schnorr signatures are broken   and and this complex of transactions is using Schnorr signature like tech,   then, you know, either you lose the privacy   that you had   or you create a risk of inflation.   And so,   you know, that that's a awkward trade off because you don't really like either of those things. Right? Right.   And so and and the other thing with confidential transactions is they're big, you know. They take a few kilobytes per transaction.   So,   Bitcoin itself, you know, the the transactions are very small. So  

[00:48:17] ODELL:

It would make the scaling situation even worse.  

[00:48:20] Adam Back:

Yeah. I mean, so so effectively,   what happens on liquid is the block size is the same   as on Bitcoin,   and it has the witness discount the same.   And the the the big part of the confidential transaction is a kinda range proof, and so that goes in a witness space.   But the blocks are every minute, so you've got 10 times capacity. And it approximately cancels out so, you know, you get about the same transaction volume   per 10 minutes because you've got 10 times as much data. Right?   But, you know, if you do that in the main chain, you know, now now,   if a lot of people start using that, your transactions available, your UTXO is available, it goes down. So that's the other problem.  



[00:49:01] ODELL:

I mean, you said something fascinating in one of our earlier conversations,   which I never really considered, which is   that one of the concerns about increasing   block size on Bitcoin is,   the this idea that it would it would lead to node centralization and it would lead to minor centralization.   And and the core of that issue at the end of the day comes down to censorship protocol level censorship and selectively deciding which transactions are getting confirmed and which transactions aren't getting included in the block.   And confidential transactions, although they're bigger,   because you can't actually see what the amount is that's being sent,   the selective censorship would be more difficult in that situation,   which is an interesting   thought process to think about.  

But I I mean, would you would you agree that I think it's,   I mean, I think it's incredibly unlikely that we ever see confidential transactions on Bitcoin? I mean, Bitcoin's incredibly hard to change.  

[00:50:02] Adam Back:

Yeah. Yeah. Possibly not. I mean, there are there are a few things   that were in liquid before   Bitcoin.   Like, it had a Segwit like solution before Bitcoin because it was a new network,   so we didn't have to soft fork or hard fork anything. We just implemented   a malleability fix in the beginning.   And then but it's a similar concept. And then, I think   CLTV, one of the things Lightning needed, we added that first, and   it has,   it had Schnorr signatures early as well, the the open source.   So there's 2 parts. There's Elements, which is an open source library for building liquid light networks and there's liquid. So Elements   library had   Schnorr signatures first,   but, you know, they were improved before they went in Bitcoin.  

So I think sometimes it's useful for people to be able to program with things and try things and maybe even improve them   and then put them in liquid. So you've seen people and and and liquid also has covenants. So it has APACAT.   It has checksick from stack, which is another one. And then   a few years after those were introduced, we added about 30 helper functions to help you,   make it easier to program covenants by serial help like, serializing things that you need to create on the stack to, like, compare.   And   so some   like ARC, for example,   Turo's,   ARC company,   they implemented it on liquid   because, hey. You have covenants, and we can you know, they can do the,   more efficient version.  

You can   you know, the new,   lightning variant, LN Symmetry is the latest name for it. That needs something like APO, which Bitcoin doesn't have.   So,   somebody who used to work at Blockstream,   like, managed to implement   APO using about 200 opcodes and covenants.   So, you know, the extra, flexibility, you can try stuff out, basically. And sometimes you you don't really   really know if something works until you try it. Right? You know, people come up with theory.   But when you actually implement stuff, you know, the thing you didn't think about   bites you,   and then you realize that doesn't work and you have to fix it. So it is useful to   sort of,   preview things or try things on Liquid as well. And then the other thing which, you know, which   I think is a promising   Bitcoin long term thing is Simplicity itself,   which is a next gen   smart contracting system that was originally   proposed for Bitcoin back in, I think, like, 2012 or something by Russell O'Connor on a one of the Bitcoin channel IRC channels.  

And so,   you know, it's been a long time coming, but we have,   released, like,   we're gonna add it to liquid,   and we have a release candidate for actually doing that in test net for the first time.   So, you know, it's it's happening. I mean,   you know, hopefully, this year, but they have and if you if you look online, there is   slightly higher level language that you could program in that translates into Simplicity. Simplicity is like a microcode, like, very low level. So there's a kind of, you know, programming language that looks like a programming language you can type and a bunch of example programs and ID   on, on the website.  

And so I think, you know, why I think that could be interesting for Bitcoin   is it's sort of self extensible.   So   it could be the loss of fork is the way I was thinking about it. But if if Bitcoin has simplicity,   you wouldn't need   to debate trade offs for opcodes.   You could just   implement them.   And then if they were   heavy, like, they used   a lot of opcodes and were became a space   like, an efficiency problem,   then you could   implement them and then   and see. And because of the way Symplicity is designed to be   formally verified,   you can prove that the c code does exactly the same thing as the Symplicity code. And then your soft fork isn't really a soft fork because it doesn't change the behavior. It just makes it more efficient. Right? And you can prove it's the same. So, you know, if you if you're not mining and your machine's fast, you don't even need to upgrade. Right? So,   you know, like, if if Bitcoin had   simplicity,   Schnorr signatures could have just been implemented,   like, in line in a fairly efficient way because it exposes, like,   loads and loads of,   like, library calls into, like, all the all the crypto library, the big num library, the serialization, like, all of like, a bunch of useful stuff, basically, so that you can call it   without implementing it from scratch in a in a in a script system. Right?  

So it actually becomes surprisingly   compact to do useful things in it.   So, anyway, like, you know,   the time frame between,   Elements,   just the library behind Liquid, having Schnorr signatures and them arriving in Bitcoin, I think, was 8 years.   So, you know, it doesn't these things don't happen fast. Right? But Right.   I think it's it's very interesting to be able to also buy Bitcoin   because, you know,   we don't we don't wanna, like, cut off,   you know, future layer 2   capabilities   or, you know, better cold storage tech.   But, like, frequently changing the base layer is a is a risk that people feel too. Right? So   this could potentially   yeah. So this this could potentially   sort of solve both problems because it has   formal security   semantics, so you can prove things about it. So, arguably,   it's a more secure   and verifiable   scripting system than the current Bitcoin scripting system,   and, yeah, it's self extensible   so that you could,   yeah. Actually, there's there's a Satoshi comment on Bitcoin talk somewhere if you Google for Satoshi quotes.  

It's basically also an argument a plea for ossification. Right? He says, like, he rushed the Bitcoin scripting system   so that Bitcoin could be frozen for all time.   And, like, it's it's pretty impressive actually that he,   you know, he had this concept that that it you should he shouldn't change the base layer,   because this is before softwalls were even invented. Right? It's, like, right at the beginning.   Right. Anyway, the that that didn't work out because there   were bugs and they disabled some opcodes early on,   and it turns out   that it's not expressive enough to do   types of the the 4th you know, the types of things we wanna do,   but without making a, you know,   any a VM like mess, which a number of old coins have done. Right? So it's it's designed in a Bitcoin   UTXO model. So even though it's low level, it's still   all UTxo   organized   kind of system.  

So, you know, maybe in the longer term, we'll get there. Like, there's a pretty big gap between,   you know, soft fork opcodes these days. So   I was thinking,   well, it's a it's a bigger change. It's a soft forkable change.   And, you know, it it's   people will say simplicity is not simple because it's it's like a different programming system. Right? But the what Russ Russell means by   simple is that it's it's very low level. So it has, like, 9   operands,   which are like, you know, and and or and, like, very low level things. So those are very easy to understand in isolation, and then everything is built using them.   So that's what makes it you know, you you have formal definitions, formal semantics of what's happening because   it's all built out of building blocks that are,   you know, super clear mathematically exactly what this does. Right? And then   everything is built out of them.  

So,   yeah, I think it's   it's a potential   that   when we have discussions about opcodes,   apart from people, like, debating whether they even want the applications it enables, like, some people actually don't want an application, so they don't want the opcode, or they try to, you know,   restrict the opcode's flexibility so it can't quite do the application.   Right. A lot of the debate usually ends up being about   the different the different options like the bike shedding. You know? There's, like,   half a dozen  

[00:58:37] ODELL:

covenant Might do this one if we could do this one, but it's not worth the rest of this one. Yeah. So then you get people get stuck in, like,  

[00:58:45] Adam Back:

you know, comparison,   dilemmas. You know?   So so in a way, Simplicity wouldn't have that problem because, you know, the question is, do you want extensibility or not? Do you think it's secure or not?   And   that's it. Right? It has 9 operators. Like, you don't need anymore. You can do everything.   So   we'll see. It's like this is a this kinda debate is a long way out, but it might. Yeah. Yeah. I mean, and, basically, simplicity and all these other things are live on   Liquid right now. Right? So they're being tested? Yeah. Yeah. So the other things are Simplicity is live on a test net,   but that's a release candidate   for going live on the network proper. So we're pretty excited to finally get that thing, you know, to get the Simplicity   live.  



[00:59:34] ODELL:

And It's not live on Liquid yet?  

[00:59:36] Adam Back:

No. It's on a test on Liquid Testing it, but it is a release candidate, the first release candidate for actually going live. And part you know, apart from it being   comp you know, a lot of work,   the other reason we took we took a bit of delay on is we implemented this higher level programming language so you can   express the scripts in   you know, with variable names in   English, whereas the the low level stuff is almost like a mathematical   logic language. So it's quite hard to,   you know, program in. Right? And it just translates into that. So   you can you know, people can try that out and look at the example programs.  



[01:00:16] ODELL:

Got it.   So I'm I mean, I wanted to ask you about   what are what are your thoughts on these new bit Bitcoin powered eCash protocols like Casio? Have you have you looked at them at all?  

[01:00:31] Adam Back:

Yeah.   So, actually   I mean, there's a couple of them. So Casu is,   like, kinda single single signer. Right? So it's actually   pretty similar to the DigiCash thing in the past, except the way you get money into it is not with the stablecoin, but with Bitcoin in a   I guess, like, effectively, it's an IOU. Right? Because it's a single operator and it's software only, so there's not really any   tamper resistant   hardware kind of stuff.   And then,   you know, so there's an interesting trade off with e cash.   So   you get is   it's, you can't audit it, so you,   you know? Well, I guess that's negative. Let's start with a positive rate. So   it's very scalable,   and you get very strong privacy.  

Downside is you can't audit   it basically because of the privacy tech. It's a side effect, right, which doesn't seem like you can fix. And the side effect   is the e cash issuer could issue another coin.   And because the coins are not linkable,   you can't prove it.   And, you know, the the issuance is not like, on Bitcoin, the issuance is public. Right? You see Right. All the mined coins on this, you can't see them. So   you can see how many coins are held in escrow   for the IOU,   but   you can't prove that they didn't issue more tokens and they they could get away with that for a long time, right, until, like, basically, too many people took   coins out and yet people are still transacting that there's even even though there are no coins left in there. Right? That would tell you. You do basically have to empty it to find out. You'd like run that thing?  

Yeah. You need to run. So   yeah. So Trace Mayer used to try and start a run on the,   on the Bitcoin exchanges in January of a year, right, to see if they see if they have clothes on.   That's a good good idea.   So   so it's that. And then the other one is,   Feddy. And so, actually, that was   the Blockstream   research guys   implemented   the kinda library level, like, like, the the network levels protocol.  

[01:02:40] ODELL:

Fedimed. It was Eric Sirion. Right? Like, you guys Yeah. Yes.  

[01:02:44] Adam Back:

So Eric was in the Blockstream Research, and then   there's a startup that formed around it. So Eric went on to be the CTO, I think, of of,   of that company. He's a cofounder.  

[01:02:55] ODELL:

I think he mostly focuses on their protocols   still.  

[01:02:59] Adam Back:

Right. Right. And then that was, that whole thing was kicked off by Obi who had   sold his, UK exchange   and, wanted to do some more bearer stuff. I guess   the experience of running an exchange and dealing with banks and regulators kind of made him come back to the big Bitcoin roots. Right? Heaped you up in the dark.   Yeah. Yeah. So he he had to, like, redress the balance of commerce so,   you know, to feel good about Bitcoin again. So he,   figured   they'd use that version, and it and it has a bit of a better trade off. I mean, it's still fundamentally the same thing, but at least you've got, you know, you've got federation.   So it's it's actually the federation is basically the same concept as Liquid, right, except that the payload is not a side chain   that's auditable because it's a blockchain.  

Right. It's a it's a e cache system,   except this one is federated. So   you with a single one,   the the server is,   like,   blind signing.   So it's signing in an unlinkable way. The coins when you when you deposit them, getting back, you know, when you spend them. And here's,   like, a threshold of these servers are gonna blind sign it. So it's a way to   ever elevate the trust so you need, you know, the threshold of them have to include   to inflate and do that stuff. Right? Right.   But the other twist on on FIDI,   unlike Liquid so Liquid is,   you know,   a bunch of exchanges and wallets and different Bitcoin companies. Right? Whereas,   Feddy is community. So the the operators are,   you know, proposed to be   different community groups.  

So there's pros and cons to that. You know? I mean, I mean, the pro is you can get involved and you can start one. But the con is, you know, maybe eventually   somebody tries to rug pull it. Right? They start a fake,   you know, they start one with the intention   to all of the,   federation members are them.  

[01:05:01] ODELL:

There'll be rug pulls for sure.   Yeah. I mean, in both protocols, Cashew and Fedimint,   it was very important at at the base   the base level that anyone could run these things and that you'd have basically a   hopefully I mean, hopefully, at scale, what you see is you see this   this robust free market of effectively all these different mints. These banks that are are competing on reliability   and   reputation   and fees.   I mean, I I I particularly I'm kinda curious on your opinion just because to me, it's fascinating that you had   effective and you lived through this. You know? I didn't live through this. But, like, you have, like, DigiCash,   which was was   Charmony Cash before Bitcoin existed.  

It had good really good privacy guarantees, but it was centralized and and and you couldn't tell if there was hidden inflation or if there was a rug pull happening.   Then Bitcoin came around and Bitcoin has, you know, a cap supply.   It's completely auditable. It's transparent. It's decentralized.   It's very difficult to change by default,   but doesn't have any privacy. It doesn't have very strong privacy guarantees.   And then now all of a sudden you have Cashew and Fedimint that came out afterwards that basically linked the whole thing full circle.   It's like DigiCash   on top of Bitcoin.  



[01:06:23] Adam Back:

Yeah. Well, I mean, it is it is   doing some extra things, which is the DigiCash,   it needed a you know, ultimately, you needed a bank account.   Right. That's what DigiCash was going for. Right? So that you could send a you could transfer in euros or dollars or what have you and get your eCash   tokens,   and then, you could transfer them. Right? But they were table stable coins. So at least with   with this,   you have   Bitcoin denomination.   And, of course, we like Bitcoin now because it exists. Right? So   what it is kind of, ironic that you've got, you know it's come full circle or what have you. Right? Now you've got   DigiCash   denominated in Bitcoin, basically.  

But I mean, the federated version, I think that's new. I don't know if the DigiCash era guys had thought about Yeah. Making a federated version. The original federated,   e cache, actually, Greg Maxwell   wrote some library code to do it in,   I don't know, 2015 or something, but he didn't he didn't, like, do the network part. He just had the idea that you could,   you know,   sign   do the blind signing with a federation.   Hang on just a second.   I'm gonna need to get some more power. My battery is getting low. One sec.   You're good.  



[01:08:03] ODELL:

Sarah, you went really crazy with the smiley faces. I was about to meet you in the Nostra chat.   Huge shout out to   the freaks in the Nostra chat who have joined us and who have zapped the show. I see EZ, I have no bullshit Bitcoin, has has zapped 10,000 sats, the highest zap of the day.   Appreciate you all.   We good, Adam?   Yeah. For a bit. Yeah. Okay. We're gonna wrap shortly.   I mean, I I think the other thing with, like, the FEDIMENT, cashew stuff is is FEDIMENT, because it has the federated element,   isn't is way more complex.   Yeah. Like, Cashew the Cashew ecosystem has been moving way, way quicker, and there's been this, like, organic really strong   developer ecosystem that has   that has,   come to existence. And we haven't really seen it on the Fedimint side. And and just in general,   as a result, what you start to see happening,   is and and, you know, maybe it's just because it's early,   and it's it's still very early days for both of these protocols. But what you're kinda seeing happening is there's a lot of cache humans. There's many different cache humans you can choose from. There's not many Federman instances that you can choose from, because they're so heavy to run and because it takes a a certain level of technical   competence to run one without accidentally rug pulling people.  

Yeah.   And Cali specifically, who's kind of been like this   you know, he's, like, the lead maintainer, the   head head head visionary guy over there. He doesn't have control over the protocol. It's an open protocol.   They've done a lot of creative things. Like, you can have a wallet that has, like, a single front end on Cashew,   but it in the background,   your your money is actually being held in many mints. Right? And then you can pay a single lightning invoice with a multipart payment   from the many different mints. And then if 1 mint rugs or it has some inflation or something, you don't lose all of your money.   Like, he has this round robin   liability checker that's, like, basically   testing payments out of Mints. You know, it's not perfect,   but it Yeah. It does increase the trust model because it's Bitcoin, because you have lightning.  

There's there's a lot of creative things you can do to try and   minimize some of that trust, some of that rug risk that you see with a single  

[01:10:28] Adam Back:

Yeah. Admin. I mean, it's it is possible   to do,   you know,   that kind of privacy   with auditability,   which is,   the   0 coin, which was our academic paper by,   Matthew Green and some other people.   But   then it becomes expensive. Like, those coins are, like, 40 kilobytes of coin or something,   so your blockchain gets big.   But, you know, so maybe that that kind of thing could get optimized too. Right.  

[01:11:04] ODELL:

Well, it's it's fascinating to watch. Okay. Adam, last topic before we wrap.   You used Nasr in the early days, but you haven't really used it, you know, since last year.   Why? What are your thoughts on nastr? What do you what do you how do you think about that project?  

[01:11:21] Adam Back:

Well, I mean, I like that it's it's happening because   while Elon has,   you know, exposed some   very bad   political   censorship games. I mean, I call it censorship. Again, people will argue, whether censorship is possible if it's a   anyway, they they they were interfering with, like, the election process, and that is, like, purely   criminal activity. They should be doing it.   And, you know, the obvious thing to do so so Elon's fixed it, but he's he's still, you know, got people working on,   moderation related stuff, and people still get banned, you know, for spurious reasons.   So so the honest thing is, like, okay. Let's just take the central system out of it. So, you know, I should get onto it get back onto it. I think the the challenge with any social media network is people have got the   the network effect, and, so there's a lot of chatter on Twitter. But   there's,   maybe more focused,   narrow chatter on Nostra. Right? There's more Bitcoin centric.  



[01:12:25] ODELL:

Yeah. I mean, we've been we've been growing.   There's there's more and more people using Master every day, and, there's some really strong Bitcoin discussion there. So, I mean, we'd love to have you more active on it. Let me put it that way. It'd be great to have you more a part of it.  

[01:12:40] Adam Back:

Yeah. I should get on that.  

[01:12:42] ODELL:

Awesome.   Adam, thanks for your time. I know time is scarce. I know a lot of things are going on in Lugano, so, it's particularly great that you carved out some time for us.   Do you have any final thoughts, for the audience before we wrap?  

[01:12:59] Adam Back:

Yeah. I mean, I think it's,   like, I'm a technology optimist, so I think,   you know,   all good things are happening for Bitcoin, and it's here to stay. And,   you know, we can keep chipping away at decentralization   and privacy,   and,   you know, there is a use it or lose it on a lot of this stuff. So,   you know, use cash,   like paper cash if if you can. Use Bitcoin if you can. Use privacy tech.   And if a lot of people are using it I mean, the privacy tech works better if more people are using it, plus it becomes politically harder for, you know, politicians to be able to interfere. Like, some countries   are very heavy users of cash.  

Other countries try to, like,   you know, phase it out. Right? So Yep. Similar kind of thing.  

[01:13:49] ODELL:

Wonderful. Well, Adam, thank you for your time. Thank you for everything that you're doing in the space.   We appreciate you.   And,   until next time. I look forward to,   our chats are always great. I always enjoy them, so thank you again. Thanks for having me on. Awesome.   And huge shout out to our listeners. Thank you guys for listening. Thank you guys for sharing the show. Thank you for supporting. We are ad free.   We have no sponsors. We're supported purely by Bitcoin. And a huge shout out to the freaks who joined us in the Nostril live chat. Thank you all. As always, you can find any information about the show at sil dispatch.com.   Thanks, Adam. Cheers, guys.  



[01:14:39] Unknown:

Our world is chaotic,   but life found its way by channeling energy to bring order to chaos.   It is in our nature to seek signals amongst noise because it is through communication   and exchange that we evolve beyond the darkness of chaos into the dawn of civilization.   To efficiently shape the world with our voice. Now let the market speak. So we build, we sow, we trade, we grow to meet our wants and needs. We specialize and drive from the mind, our creations, into reality. We make progress in our process to get more for less, advancing society.   Forth dawn of the age of technology that harnessed the energy to reach prosperity.  

Our money embodies the power to reap what we sow, so the market becomes a channel for our collective energy to flow. When value is traded for value, we are aligned and so we evolve.   This is how amidst uncertainty,   life continues to grow.   But the dawn of tech gave rise to light speed information exchange. So to transact fast, we further abstract money from energy constraints   and became more aligned on a few large entities to coordinate trade, concentrating the power, resources, and authority to create   more and more of our money, distorting its signals, eroding its worth, and throwing us back into the darkness of chaos.  

When we destroy   the mechanism of money, we destroy our ability to navigate through uncertainty.   And when we can't trade value freely and directly, we must trust the few to govern the many. What happens when all our means center around an authority? Complexity fills   coerce   our actions. Can there be true innovation when there's no freedom of expression? What happens to our voice for one set? Shape social discourse, now whose ideas gets created and which problems get solved. Because our progress depends on hearing   and which problems get solved. Because our progress depends on hearing many sides to resolve, then why would we suppress the voice that shapes how humanity evolves? When we cut off the perspectives that make up society, we lose sight of the truth that forms our entire reality.  

Each person's contribution builds up. Our resiliency, did we forget these differences are what strengthens humanity?   When communication breaks, our words tend to silence. Our acts become violent and the world is divided the world is divided, and its darkness truth is twisted by our pain and our bias, eroding the common ground, making us more and more fragile.   To navigate uncertainty, we must solve for robustness,   so everything gets tried and tested by various efforts, until we discover the system that best coordinates us. Mirrors life's process of channeling energy to create signal from chaos.   In the era of technology, we transform energy into computational power to process the noise of free markets into structured order, and just by looking at numbers, we can derive how much power is required to reduce chaos and inscribe a flow of value for order verify that our transactions happened in line with shared rules. We don't need to seek trust.  

Transactions happened in line with shared rules. We don't need to seek trust when we can see proof. It is real time consensus that our lines is to evolve. This is how amidst uncertainty, our lives continue to grow when we uphold our own rules, we preserve our own work and   defend our own voice, which lets the true market emerge. The strength of the design lies in each of our participation since we are the nodes of channel our energy end to end. As we claim   responsibility to uphold our own rights, we radiate the power that brings our truth   into light.  

And when that dawn of light touches all parts of the glow and it ripples throughout society, and it returns us the hope that becomes the power that sparks humanity to thrive, that same power that fuels the creation of the mind. And when our mind and our money are truly set free and they transcend the limits   of past boundaries,   now knowing becomes owning and ideas become wealth. What happens now? We can all push to expand the edges of our existence and assume evolution when things are the hardest. As we hang for the light, we have to push through the darkness that is in these moments. We do what we do best. We take the chaos in the darkness and use our power to create. It is in these moments when we're all in alignment and afraid of a difference, ascends us to a highest and distant depth of it all. Know that hope is not gone. It is always the darkest before dawn.