Alex is Head of Ecosystem at Ark Labs. We discuss their new bitcoin protocol: Arkade. It can be used with the lightning network to make self custody bitcoin usage more powerful and accessible. This rip was in person, in Lugano. We are both here for the PlanB Forum.
Alex B on Nostr: https://primal.net/alexb
Alex B on X: https://x.com/bergealex4
Ark Labs: https://arklabs.xyz/
PlanB Forum: https://planb.lugano.ch/planb-forum/
EPISODE: 182
BLOCK: 920390
PRICE: 915 sats per dollar
(00:00:35) Arkade Activation Day in Lugano
(00:03:11) What is Ark? Positioning vs. Lightning and L2s
(00:04:32) Ark fundamentals: batching, VTXOs, and two-of-two with an operator
(00:08:38) Double-spend risks and the operator trust model
(00:10:24) Settling vs. zero conf: anchoring batches onchain
(00:16:04) Beyond cheap payments: programmable offchain Bitcoin
(00:18:12) Ark Lightning swaps and unilateral exits
(00:21:01) Unilateral exit costs, trees of transactions, and anchoring cadence
(00:26:17) Wallet UX: automating settlement and exposure management
(00:27:22) Ark vs. Spark: security model and settlement feedback to L1
(00:34:39) Onchain demand: Lightning realities, Spark cadence, Ark batches
(00:36:59) Ark is tech, Arkade is implementation
(00:37:45) Batch frequency and scaling: hundreds per batch, Taproot efficiency
(00:38:41) Covenants soft fork would cut interactivity overhead
(00:42:01) Users, servers, and always on clients: who runs what?
(00:45:02) DeFi on Arkade: loans, new opcodes, and secondary markets
(00:47:00) Credit, derivatives, and Bitcoinization
(00:55:06) Company model: Ark Labs, open source Arkade, and revenue
(01:01:02) Flagship apps strategy: neo-bank, swaps, prediction markets
(01:07:05) Try it today: arkade.money PWA and roadmap to native apps
(01:12:05) Operators landscape: competition, network effects, resilience
(01:15:27) Closing thoughts: adapt, focus, and take the white pill
more info on the show: https://citadeldispatch.com
learn more about me: https://odell.xyz
[00:00:02]
ODELL:
What is up, freaks? It's your host Odell here for another solo dispatch live from Lugano well, in person from Lugano. Another non live audio only rip because the vibes are high. I got good friend and arch aficionado,
[00:00:19] Alex B:
Alex b here. How's it going, Alex? Well, it's good. Great great spot to be recording. I mean the listeners aren't going to be have the privilege to see this view, but, it's pretty kick ass spot. Yeah, man. Indeed. The vibes are high. Kicked off the week the week a couple of days ago with our arcade day launch, and, the feedback's been insane so far. So, it's it's still early, but I think I think the entire industry needed some validation that, there was indeed some sense of progress possible, technology, you know, technology wise without having to, you know, without needing soft force, without needing, all of these very complex bit VM type of fraud proof systems. And, I feel like we're finally you know, we we could've spent six more weeks pushing, the limits of, like, our implementation, polishing, polishing, making more tests before putting it out there. But at the end of the day, you know, we've we went live in Riga, for a test event, couple of months back.
It went super well. We spent the last three months, you know, again, polishing, doing a lot of testing. But, ultimately, it's happening within the confine or, like, a circle of, you know, four, five, six devs. And so at the end of the day, you're getting to get this out there to the people, get them to play around. I I would very much say it's, you know, it's kinda like ARK's hashtag reckless moment right now.
[00:02:05] ODELL:
I mean, interesting comparison because I always I kinda always hated the lightning hashtag reckless. It's like bros. Like, you you just say hashtag reckless and I'm just like aping him with a ton of money. But, I I appreciate it. I like the idea of building in the open. I mean, so our I mean so I I thought this would be a good follow on conversation to my conversation with Francis. Yeah. Because he's very bullish on what you guys are building. Right. And because I've been watching from the sidelines for a bit, but my general premise in Bitcoin is that I ignore everything as hype Mhmm. Until I can actually use it in person.
And you guys proved it out that it at least works, in Riga, and I wasn't there, but I saw it from afar. And Francis actually has it working in an experimental mode in his wallet, in the blue wallet. So, like, that's enough validation for me that, like, this thing's actually, like, functioning. Yeah. So, I mean, let let's just let's just jump high level first. Like, what is ARC and why should people care? Is this is this a replacement for lightning? Is this a new layer two for bitcoin that that that competes with Lightning? Like, how how should be people be thinking about it? Yeah. I think interestingly,
[00:03:33] Alex B:
if I were to only answer those two questions, I would say it's lighter, these two. It's certainly not a replacement for Lightning. And I, I mean, I have a pretty peculiar opinion as far as that's concerned, but I don't consider ARC itself to be a layer two. ARC is more so, I would say, a set of technology, a new protocol certainly, that has been introduced to Bitcoin, which we can use to build, layer twos. But what is ARC fundamentally, is the system that allows you to create off chain execution, meaning an off chain layer just like lightning is able to process transaction off chain. But what's truly unique about ARC is the way that it settles the transaction that are happening off chain into the layer one.
And this is the concept of what we've been calling transaction batching. So instead of, for example, when you're using Lightning, you're closing a channel, you're putting a you're you're putting a transaction on chain, what we allow you to do is to settle potentially thousands and, of operation into a single output, but that single output is, coordinated between a large number of participants. So lightning is only two individuals creating channels,
[00:05:12] ODELL:
creating a channel between one another. Right. It's it's it's two parties doing a two of two multisig for batch Bitcoin transactions is lightning. Right? Exactly. Exactly.
[00:05:22] Alex B:
Whereas, with with with Arc, you have a a more of a multi party dynamic, but interestingly, it's also a two of two setup. Right? So what happens really is, like, think of ARC a bit, as you would just a contract where you deposit your money into, and the contract is sort of administered by, an operator, The ARC server, originally called the ARC service provider. Right. And that that operator, when, you deposit your Bitcoin into, that contract, will coordinate a batch transaction on chain. So that batch transaction will have an on chain footprint, and that batch transaction will create an output with spending restrictions.
[00:06:13] ODELL:
Okay. And
[00:06:14] Alex B:
your bitcoins that you deposited are going to be encountered by those spending conditions. There are two main spending conditions. One being a collaborative spending condition where you and the operator sign off on, the spending of your funds. Like a friendly close in lightning terms. I mean, it yeah. Exactly. Close. Close. Yeah. Exactly. It's well, in this case, it's not a close. It's just a method by which, you spend, your money. Because when you're doing a collaborative spend on ARC, you're not moving your money back on chain. You're actually collaboratives collaboratively spending your money off chain by way of the operator. Oh, but I'm staying off chain. You're staying off chain all the time. But collaboratively.
Yeah. Exactly. Because what happens is the operator
[00:07:10] ODELL:
Wait. So let's say you're the operator. Correct. And I'm a user. Yes. And I'm paying another user. Yes. Me and the operator are signing to pay the user c. Right? Exactly.
[00:07:22] Alex B:
Exactly. So what happens is I'm going to and it works exactly like Bitcoin works. Right? Okay. So it's a system of inputs and outputs. So what you're gonna do is you're gonna have, once you've deposited your Bitcoin into that contract, what you get is this notion of virtual UTXO's. Right? Now you have a sort of abstraction of your on chain UTXO in this off chain environment. Okay. And you can spend it just like you've spent Bitcoin on chain. So you're gonna give me a VTXO as an input and you're gonna say I'm gonna send it, to my friend over there, and I'm gonna sign off on that transaction, and I'm going to create what gonna happen is we're gonna create a new output for, whoever you're sending the money to, the recipient. But you're also gonna have a a change output just like on Bitcoin. Okay. Right?
And so that system allows you to continue chaining those off chain transfers in the same way. So once the recipient has his own virtual UTXO, which you've just sent to him, he can also send it to someone else. The operator is going to cosign and so on and so on and so forth. But what happens here, now it's really important to understand, of course, is that the, the reliability in these payments depends on the operator not signing conflicting transactions. Right? Okay. Because if you spend the same VTXO that you previously sent to a recipient and I double spend problem. I the yeah. Exactly. I, the operators say screw the recipient you previously send your money to, send your money to me now. Right. If I sign that transaction, then what happens is now we have two virtual UTXOs that, exist off chain. Right? That are spending the same original Bitcoin. Exactly. Exactly.
So what's likely to happen is that, you know, you the original recipient, was double spent basically, but there's a bit of a race condition. Right? It's like who gets to put their money on chain first, but it's not an ideal scenario. Who settles? What's that? Like who settles first? Yeah. Exactly. It's who gets to put pull that money. It's really who settles not more more more like, in this case, if you're double spending, you're gonna want to bring that money on chain. Like, pull it out of the system completely. So this is also something that's viewed in a lot of ways as the state chain trust model. Right? Yeah. It's this idea that the previous sender can collude with the operator to again sign a conflicting transaction. Now the way there's different ways that we address this, with with ARC and specifically with our arcade implementation.
One of the way that ARC generally is able to address this, unlike state state chains, is once you've received an off chain payment, you can treat it exactly in the same way that you treat, a zero call Bitcoin transaction. Right? Yeah. You can decide, okay. Actually, perhaps this payment is very valuable. It's a high volume a high amount transaction. I'm not gonna trust that payment until it gets confirmed into a block. Right. Now how do I confirm it into a block? Well, obviously, you could decide to bring that money back on chain, and turn it into a UTXO.
But you have the option with the operator to include the payment you received into a new batch. So the operator is always creating batches of transactions because there are new people that are depositing money into the arcade contract. You're like anchoring it on chain. Exactly. Exactly. It's a it's a bit of a on chain commitment.
[00:11:30] ODELL:
But but so, I mean, Francis explained this to us. It's actually probably better so correct me if I'm wrong. I I think it's actually probably better than a zero confirmation Absolutely. On chain transaction. Because a zero confirmation on chain transaction, specifically if it's in a high fee environment, I'm more trusting who is paying me because they might immediately send a higher fee transaction to themselves or something. Right? And then a miner is just gonna be economically rational and just find a higher transaction fee. With this, if if you wanna cheat me, if the if the payer is trying to cheat me, I have a restaurant. We're in Lugano. There's, like, 300 restaurants that accept Bitcoin here. Yep. I'm at a restaurant, and I'm paying them a CHF120 bill. Yeah.
They they're just banking on the fact that the the payee, the person paying them Yeah. And operator of ARC isn't colluding to to fraud them. Right? It's a little bit different. Right? Like, the two parties would have to collude It's very in order to to,
[00:12:36] Alex B:
to make a fraudulent payment. Exactly. And it's very, very, different indeed as you explained because we expect miners to be economically rational. Yeah. And miners are a globally set of decentralized entities with which with whom you have no kind of contractual agreement. There is no sort of, like, business context where their revenue line, their cash flow depends on their trustworthiness. Right? Yeah. And that's completely the opposite for the ARC operator. Right? Yeah. The moment that the ARC operator attempts to collude with a a user to double spend a transaction,
[00:13:19] ODELL:
all of that is very transparent. Is there proof there's proof of fraud, basically? Exactly. It's immediately apparent to everyone in the system. And So the merchant could, like, publish a cryptographically verifiable proof that's, like, I got defrauded by this operator. Exactly. I mean, we put safeguards in place
[00:13:35] Alex B:
even within our own system where we actually have an architecture with Arcade where we separate the signer module, which we call the arcade signer, which is kinda like a separate module within the software stack Yeah. Whose role is only to cosign these transactions, and the rest of the operator stack operates in a different environment. So in theory, because, you know, there is the scenario where the operator is not necessarily malicious, but perhaps the operator was hacked or something. Right? And somehow someone is is trying to It's a very real scenario. Exactly. Exactly. So we try to isolate the signing environment to make it as secure as possible, but we have also plans for safeguards in place where the actual operator software is going to immediately notice if there's an attempt to double spend and ideally will shut down the entire system. Right? So then everything comes to a halt.
But obviously, the the the neat thing with, something like our, Arc and Arcade is that if the whole system comes to a halt, at least every user has a unilateral spending path, to get their money back. Now, of course, in a scenario where, you know, the the system so, like, perpetually stops, then it's going to be a bit of a mess for people to kind of enforce their spending conditions on chain. Right? It's probably going to create a bit of a fee event. Do you know an Elphrat? What's that? Do you know an Elphrat? The Elphrat? Yeah. The she's her I just discovered her balcony's right there. Oh, okay. So we have a we have a I have Alex. I have Alex here. We're talking about art. Hi there. Hi. How are you?
[00:15:29] ODELL:
We have we're we're recording a podcast. You're on the podcast now. Is this the middle of a podcast? Yes. We're in the middle of a podcast. You're good. You're good. It's a pleasure to meet you. I don't think we've actually met in person. No. I mean, it was great. Fair enough. Well, we'll meet actually in person soon. Far as soon as There we go. To see you later. So, yeah, let's talk about yeah. By the way, Friggs, we're just sitting on a balcony in in Lugano, and, everyone's getting an education on Arc right now. I, yeah. So let's talk yeah. Let's talk about the so so the whole point of Ark, similar to Lightning, is that you have cheap, fast transactions for Bitcoin as a payments use case. I think that's, like, the main.
[00:16:19] Alex B:
Right? This is, like, the main I think this was the original intention. Yes. And it's certainly one of the one of the It's a key value prop. Right? I would argue it's not. I would argue it goes beyond that. I would say that the ability to make payments in a cheap and fast way is only one application. And this is kinda like the way this is where we, our collabs and and arcade, as our implementation of the ARC protocol, perhaps diverged a little bit from, I would say, the original, design, if you will, or kinda like the original vision. Because we were very much working towards implementing this, and as we were doing this, we realized, well, hold on. Like, this off chain environment is great, yes, to do cheap instant fast transfers, but it also allows you to do all kinds of interesting programmable setups, things that people were trying to do on Bitcoin originally by spending UTXOs with different script configurations, doing things like escrow, and and and doing things like, you know, okay, maybe a Satoshi dice that's not for everyone. It certainly does doesn't belong on chain. It's a bit of a waste of block space.
But, ultimately, it's the ability to use the UTXO model and use Bitcoin in a way that is native, in a way that doesn't require putting your money into a bridge, putting your money into a side chain federation, maintaining the unilateral exit property, but building on top of that primitives that allow for a bit more versatility in terms of, programmable environment, in terms of Bitcoin finance. So a lot of ex you know, there's a lot of applications of that obviously we can we can get to. I get but there's a bunch of there's a bunch of there's a bunch of things to unfurl here. Yeah. Yeah. First.
[00:18:18] ODELL:
Okay. So, so the cool thing to me is and the freaks already know this if they listen to the rip with Francis is the cool thing is, for better or for worse, the ecosystem has kind of been built around lightning. So so the cool thing here is that you can use an Arc Wallet with Lightning swaps, and you don't have to deal with network effect or whatever. You get all the benefits of Arc, and then you're just automatically paying and receiving from Lightning and and settles in Arc. Right? So we get that going for us. But the number one thing and so so he's doing a similar setup to this with Liquid. Exactly.
But the problem is with Liquid, you're reliant on the swap provider to be able to get out and get your Bitcoin out. And the cool The federation. Yeah. And one of the cool things about ARC is that I can exit without permission. Exactly. So can we just go real quick, like, how does that look? Like, how do I how do I I've yeah. I've let's say, you know, you say hashtag reckless, but let's say I'm just reckless. I put in a Bitcoin. I'm trying to get my Bitcoin out. You know, I got a 100 I got a 120 a $110,000 stuck in Arc. How do I get that money out? Yeah. I mean, it works exactly how lightning works, really.
[00:19:33] Alex B:
So like I mentioned to you before Yeah. When you're depositing your Bitcoin into that our contract, if you will, you're signing a set of spending conditions. Right? Yeah. The major one, the optimistic one is the collaborative one with the operator. Right? 99%
[00:19:49] ODELL:
of the times, the operator is gonna sign with Exactly. Yeah. But then the other one,
[00:19:54] Alex B:
you know, the emergency case one Yeah. Is the unilateral exit. So when you deposit your Bitcoin there, you sign a transaction that says, hey, I can put my pull my money on chain. It's like a pre signed It's a pre signed transaction. It's a pre signed transaction. No. You can spend it to, to to to really I mean,
[00:20:14] ODELL:
yeah. You you Am I delegating the address ahead of time? Is my wallet delegating the address ahead of time and saying this this on chain address is my exit address or something? Not necessarily. No. Not necessarily.
[00:20:24] Alex B:
You can what you do what happens is you can spend that output, the share of that output, right? Yeah. That that what we call the batch output. You can then spend it however you want to. And so, you know, that's basically the gist of it is you have a pre signed transaction which you can which is a valid transaction that has been mined into a big And the operator could be offline like And the operator could be completely offline just like your channel counterparty could be offline or your LSP could be offline. The only caveat,
[00:20:57] ODELL:
What's the caveat? The caveat is that What's the catch?
[00:21:02] Alex B:
There is
[00:21:03] ODELL:
potentially more transactions. So it's not only a single transaction. So I'm paying huge fee burden? Is that what it is? I mean, yes.
[00:21:11] Alex B:
I mean, it depends really how big, the because all your transaction is basically in the tree of transaction. Right? It uses taproots. Right? Right. So There's a shit ton of transactions in in one transaction. Exactly. When you're putting your money in that contract and sending spending those signing, signing those spending conditions, there are other people that are doing the same thing at the same time. So you're collaborating in a big transaction with the operator and other people. So depending on how many people are in that transaction, in that on chain transaction with you, you might have to put, you know, from three to eight transaction on Oh, not a ton. Not a ton. I mean I mean, again Is it like a thousand transactions or Well, theoretically, it could be a thousand transaction. Yeah. But that's something that's manageable because basically what happens, right, is when you're spending your money off chain, you're creating a new vtxo.
So you're expanding the tree, Right? Initially, you have a an, a tree that is inscribed that is, you know, committed to on chain in that original transaction. And then as you're spending your VTXOs off chain, you're expanding the tree further, but it only exists off chain. But every additional step creates an additional transaction potentially. Right? Okay. So you're chaining those transactions, and it is the case that you could be adding to the cost of unilateral exiting. But this is also why this notion of anchoring is important. Right? Because you can build your applications and your wallets so that the wallet is going to recognize that eventually the depth of the transaction chain is too large, and this is creating a risk where, yes, if you have too many transaction to publish, it might actually be on an on economical to actually get out. Right? It's like you're trying to spend 5 you have a $5 UTXO, but now it costs you $20 to spend on on change. Which is fine. I think that's a fine trade off. Yeah. Well, yeah. I mean, that trade off exists in lightning as well. Yeah.
[00:23:24] ODELL:
And so Yeah. You can't have, like people are like, oh, the beauty of lightning is like I'm receiving five sats or whatever. But you can't. Yeah you can't economically
[00:23:33] Alex B:
enforce that on chain. Exactly. And so what happens is by way of being able to periodically incur again So basically you have think of it as like you have a UTXO set that exists off chain, right? Right. And you're making a bunch of transactions and then your UTXO set evolves over time but eventually you want to have better assurance. Right? You don't wanna have this dependence on the operator for security reason, but you also don't wanna have, an increase in cost of your potential unilateral exit. So what you do is you take yours your set of UTXO's off chain, your VTXO's, and you commit them by joining a batch. Right? So again, the the operator is creating batches all the time. You tell the operator, hey, I wanna commit my UTXO to, to to Bitcoin.
I'm gonna join the batch. And then by doing that, you get a fresh set of UTXOs. Obviously, it's the same exact amount that you put in settled. That you put in minus some fees, and that is now settled. That's exactly we we call it a settlement process. And by doing that, you remove the security dependency, but you also don't have any chain transaction anymore. So you have a set of VTXOs that haven't been spent in the past, and therefore, you know, maybe now instead of adding eight transaction to put on chain 10 transactions, you're back to to e four. Right? So you can always kinda, like, periodically do this, and it doesn't have to be, like, an active process. The wallet The wallet solution is consolidated. Exactly. I was talking to Francis, you know, they have this, model in, in liquid with, so like they've graduated wallet model. Right? Where if you have if you have too much money in liquid, eventually this the wallet is going to kinda like auto swap to an on chain balance. Yeah. To protect you against that exposure. I like that. So you can create the same type of model with ARC where if you have too much exposure to the operator, you're going to swap, you're going to settle into the next batch, and now you're clean again.
[00:25:46] ODELL:
I like that. I, okay. I mean, one of the cool like, in practice, like, the in practice, we're just giving everyone with a balcony a free podcast. In in practice, you have the user like, the user's wallet's gonna automate a bunch of this stuff. Exactly. Right? They're not even gonna be thinking about this. That's probably the coolest part. So I just wanna flip the script a little bit. Like, a lot of the people that listen to the show are developers and they're building product. Yeah. And they're thinking about the issues with building self custody lightning wallets. It's very difficult. I think lightning has clearly found product market fit as, like, this kind of glue that Yeah. Connects different wallets together and this, like, standard interoperable, protocol that allows you to pay and receive very easily.
You know, if you're gonna pay from, like, Stripe to River to Binance, to or to Primal or something, it just fucking works. Yeah. And you just know it's gonna you know it's gonna work. But at the end of the day, when, like, the actual builders are trying to, like, make a self custody experience, it's very, very difficult. Yeah. And so a lot of them are looking currently at Spark Yeah. And, probably to a lesser extent, Arc. I think there's a lot of excitement about Spark. So what is your to to the builder out there, to the person who's, like, building a wallet, what is the how should they think about the differences between Spark and Arc? And this is, like, me also dog feeding my own question because I've been thinking about this a lot as well. Sure.
[00:27:39] Alex B:
I I mean, I would say the major difference is, what we've been discussing. Right? Is the security model underlying the entire system. So in a way, we share a lot of similar properties. Right? The off chain transfer of our v t x o's is the exact same security model as the off chain transfer of Spark
[00:28:02] ODELL:
Bitcoins. Right? They don't call it GTXs but it's kind of the same. Right? It's pretty much more or less the same.
[00:28:08] Alex B:
Where the major difference lies really is that once you're in Spark, you're perpetually exposed to the operator dependency of trusting that he does
[00:28:21] ODELL:
not double spend your Bitcoins. But is it not the same trust model? Where is the trust model breakdown compared to ARC?
[00:28:28] Alex B:
Well, the difference with ARC, right, is that depending on the application or depending on the value you're receiving, you have the option to settle.
[00:28:41] ODELL:
But doesn't doesn't Spark also have unilateral exit or no?
[00:28:45] Alex B:
Spark has unilateral exit, but unilaterally exiting is fundamentally different
[00:28:51] ODELL:
than having the ability to settle. Because when I'm settling Yeah. I'm not exiting the system. You're staying in the system, but you're getting better security guards. Is that what's happening? Exactly. Exactly. So Spark is like almost all it's like all or nothing? Is the Spark difference in that regard? Spark Spark is either you trust the operator
[00:29:10] Alex B:
or you go back on chain. Or you exit. You exit completely. Which obviously, I think, ultimately the option, you know, I think we're building those systems because we imagine that eventually the cost of exiting is going to be rather prohibitive. Expensive. Yeah. It's gonna be expensive. So for me that's kind of like the major difference. Something else that, for I think builders that are a little more, I don't wanna say ideological but kinda like conscious of the sort of holistic parts of the Bitcoin system is that when you consider a system like Spark where you're moving that money off chain Yeah. You're transacting all the time but you're not, you know, ideally you're not going back on chain. Right?
But the problem is there is no feedback mechanism between the off chain and the on chain layer. And what I mean by that is that spark creates little to no demand for the Bitcoin block space. No on chain burst. That's a benefit and a curse. Right? I mean Depending on how you look at it. If you're if it depends on who's paying the the cost of this block space consumption, of course. But in a way, for the system, it ultimately is a bit of a downside. Right? Because you would expect to have something that sure does not require a single individual to effectively pay the security budget of Bitcoin. Right? Right. Because we all know that's very unlikely to happen.
But you have this expectation that these layer twos are going to kind of, like, feed back some sort of economic demand. Like, even with Lightning, like, every Lightning channel is an on chain transaction.
[00:31:05] ODELL:
Right? At least two it's probably two on chain transactions, an open and a close. Yeah.
[00:31:09] Alex B:
But the interesting thing that we're seeing seeing with Lightning, we all had this notion that sure, as Lightning gets more popular, indeed, it's going to result perhaps in more, you know, on chain, like channel opening, channel closing, kind of rebalancing operations, and all of that. But what we're, I think, noticing right now. Right? Because I think Lightning has never been more popular than it is. Yeah. Regardless of whether you wanna make the case that a lot of the usage is custodial. Mhmm. There is, there is significant adoption of Lightning.
But what we're seeing is that when you think about the optimal use of Lightning, you know, it's a bidirectional channel system. And the sort of mathematically optimal use of that those channels is perfectly balanced. Right? There's people receiving and sending. People each counterparty is receiving and sending to the other counterparty equally. Right? Yeah. And because the only reason why you would need to do channel closer or reopening channel or rebalancing is because you have an imbalance. One side is paying too much. Exactly. Saving too much. And this was the case early on with Lightning. We had a we forced a lot of applications, a lot of use cases into these sort of very convoluted, lightning network, flows where all the money was going in one direction.
And then that node is sucking up all of the liquidity in the network. And the only way for that node to redistribute or rebalance is to hit on chain Yeah. And then and then generate transaction. But now we're getting to a a stage where I think the lightning network is getting getting a lot more healthy. We have better balanced relationship between those channels. And as a result, it actually doesn't create,
[00:33:09] ODELL:
on chain demand. Right? Well, those are because, like, the
[00:33:13] Alex B:
the b cashers were kinda right. Like, we have kind of hub and spoke to Oh, yeah. No. A 100%. No. The b casher were absolutely correct in that. And, like,
[00:33:22] ODELL:
they're like, like, async can manage liquidity better than
[00:33:27] Alex B:
me managing my lightning. Oh, I mean, yes. Exactly. So, so you know, this
[00:33:32] ODELL:
But yeah. So like so so what the result is you just don't see that much on chain activity from the lightning channel. Exactly. Exactly.
[00:33:40] Alex B:
And so But you still see some. I mean, it's paying for a bit of a negative thing. You still see some. And to be fair with, with something like Spark, you also Yeah. What would the on chain activity be on Spark? Basically, they need to create also kinda like,
[00:33:57] ODELL:
fees settlement transactions?
[00:33:58] Alex B:
There's there's I mean, it's not exactly what I would call settlement transactions. But with state chains, at least for now without, you know, covenants or anything like that, but eventually the state chain expires. Okay. Right? Because the state chain is based off fresh? Yeah. Yeah. The state chain is based on decrementing time locks. Mhmm. And eventually, you run run out of time to decrement. Right? So they need to kinda, like, swap this into a a new, a new, state chain tree, if you will. Mhmm. But that is kinda very minor,
[00:34:37] ODELL:
sort of footprint on How often are they doing that? I I don't know how often they're doing it right now. So how often is how often is Arc hitting the chain?
[00:34:45] Alex B:
Well, I mean, at the moment, you know, we're just bootstrapping, so it's it's negligible right now. But what I envision, what we envision Yeah. What I envision is that, Arc is going to be Arcade is going to be a significant driver of demand for Bitcoin block to the tune of So is Arcade the company? Creating transaction. No. So ArcGods is a company. Okay. But ArcGid is the implementation of Arc. This comes back down to what I was saying earlier. Right? Is that Arc is not a layer too because Arc is not a network. Like Lightning is a network. Right?
Arc is more like and this is going to require some, knowledge outside of Bitcoin, but ARC is more like roll ups. Okay. Roll ups and Ethereum and other networks are a same kind of architecture like ARC. They are client and server sort of system. Right? Okay. All a massive users connect to the same server and interact with each other. The servers keep in the state. Exactly. Exactly. And so just like roll up is not the layer two, the layer two is base from Coinbase. Right? The layer two is Arbitrum, the layer two is OP Optimism.
So in the same way that there is going to be different Arc implementation, there is the guys also their own flavor of a layer too, but if they call it Arc, it's going to be a little bit confusing because ultimately ARC is the technology underpinning the so they might I mean, their own reference implementation is called bark. So maybe they call it bark. Right? And there's So we're gonna have ARC, it's bark and Well, I I mean, so the one of the reason why we also kinda not pivoted, but, you know, when all in in the arcade direction is we felt then that we were able to kinda, like, own our entire narrative and kinda, like, control That's why you keep saying arcade, arcade, arcade. Arcade. Yeah. I mean, it's important for us because all like I said, ARC
[00:36:45] ODELL:
has evolved quite a bit from what it was originally proposed as and what we feel like is the best application of it. But Okay. But I interrupted you. I interrupted you. So on and I'm gonna interrupt you to find people that I've interrupted you. Yeah. So how often do you think at scale, like, how often is an ARC operator
[00:37:06] Alex B:
I think your name? I I I think the ARC operator is going to be creating commitment transaction every five seconds. Oh, shit. So, like, a bunch of block. Oh, so we're gonna be filling, like, the the the the the shit out of the block, you know? Because basically, depending on what the user is doing That's interesting. I mean, you know, all ultimately, globally, you know, and what I'm talking about is a is a perspective where, like, you know, we have a a fucking a trillion dollar economy in arcade. Right? Right. Right. And so what happens then is you have different set of users, different set of applications that are all looking to settle their off chain balance
[00:37:45] ODELL:
at different times. Right? But does that not get prohibitively expensive?
[00:37:48] Alex B:
No. Because you're advertising the cost of settlement across, a 100 A billion users or something. No. Well, not not a billion. Hundreds or thousands of users. So so when you're creating one batch. Right? Yeah. Right now and it's so it's still early days. But right now, you know, we're we've been able to do test. We haven't necessarily pushed the limits, but we're feeling pretty confident about adding, for example, like, around a 100 user in a single batch. So it's a 100 user that are splitting the cost of a single on chain transaction. No. That's not bad. That on chain transaction is a vanilla Taproot one out one input two output transaction. Right? So it's it's very cost efficient
[00:38:30] ODELL:
and, you know, obviously No. Yeah. So that's not that bad. Yeah. Exactly. And that's the big thing like if you get CTV or something, that would be cheaper. Right?
[00:38:39] Alex B:
It would not really be cheaper. No. So what is the soft fork change? The soft fork change, it depends who you ask. But really, from our perspective, what it would allow us is probably a little less overhead. So, yes, you know, we'd probably be able to squeeze a bit more people in, like, a batch.
[00:39:04] ODELL:
Per transaction. Per transaction
[00:39:06] Alex B:
because we're also removing, like, a round of communication. Okay. Right. Because when we're creating that transaction, the operator say, hey, I'm creating a batch. Who wants to join that batch? Right? And then the users say the user register for that batch. Right? So it's almost like a coin join coordination. Right? Yeah. Like the user has to be online. There is exactly. There's there's some interactivity required there. Right? And so it as anything that involves interactivity, if you introduce a covenant soft fork, then you're removing some of the interactivity. So they might not have to be online to be a part of it. They're gonna be online they have to be online to kinda, like, declare their attempt to join the batch and specify the settings, but they're not going to have to stay online as long to wait for the feedback from the because all they're gonna do is they're gonna sign the transaction.
And because we have covenant, they're gonna say, this is a transaction that I want. This is the output that I wanna give my take care of it. And the operator is not gonna be able to change any of that. Either he takes it or leave it. Mhmm. And then that that's over. Whereas with the, you know, without Covenant, there's a bit more interactivity. We really don't think that it's a big deal because, ultimately, it's also, like, the interactivity is a problem if you're thinking of your set of users as strictly users that are on mobile phones, maybe with spotty connections and whatever. Yeah. Absolutely, those those users exist and, you know, there's gonna be a need to create solutions, improve the efficiency of the system to better address this.
But ultimately, especially for what we're building which goes beyond, you know, retail payment, really, it's very possible a large set of our users are actually people running servers already. Really? Why? I mean, for example, think of Nobody runs servers. No. That's not true. I mean, a lightning node is a I know. I hate it. We don't wanna run lightning nodes. Well, we don't wanna run lightning node. Well, we don't wanna run lightning node. But lightning node infrastructure provider, right, can use So they're running it. So they they might be running a server, but So if I'm using Bullwala,
[00:41:16] ODELL:
they're running the server. Well, I mean Is that what you're thinking in your head? I don't know which server you're Well, no, no. I'm saying it's still early, but I'm saying in a year in five years or whatever, if BullWallet is using ARC, and I'm using Bull on mobile Yeah. You're saying they're running the server? The ARC server? Whatever. I don't know. The interactivity that you need on the Verizon server. No. I mean,
[00:41:43] Alex B:
they're going to run a piece of software on their server that will allow you, yes, to perhaps,
[00:41:50] ODELL:
get that the mitigation is what I'm saying for the loudness? Like, is that how you're thinking about it? Or Yeah. There are things like that. I mean, I'm on the average user isn't actually gonna be running a server. Like No. No. No. No. There's zero expectations that the average user is running a server. They're gonna be on mobile actually probably. Like, if you wanna talk about, like Yes. Yes. And no. It depends on the a 100,000,000, a billion people using Bitcoin, they're gonna be running it on mobile. They're not gonna be running it, server twenty four seven.
[00:42:13] Alex B:
Yes. But that is only the perspective of, only a section of the market that we're building for. Right. Fair enough. A part of our market is also going to be market makers creating, markets Like, DeFi shit. DeFi stuff. Right? Yeah. And the DeFi stuff guy is going to have a desktop running. Most likely, he's never gonna turn it off. Okay. So let's talk about the DeFi stuff because we've been mostly talking about payments. Yeah. Like, what do you see there? I mean, there's a lot of low hanging fruits. Right? We're thinking about, like, just Bitcoin back loan. Obviously, you can do that on chain in very sort of, like, conventional multi signature escrow if you wanna get a little more Huddle Huddle or something. Exactly. Huddle Huddle, Debitfy, Firefish, and and all of them, or you can do DLCs if you feel a little more fancy, you know. Yeah. Like, what Lava is doing. But ultimately, you know, when you're instantiating those contracts, you're required on chain block space. Eventually, that's going to be prohibited. It's getting expensive. It's getting expensive. Obviously, if you're processing a loan for, you know, 1 Bitcoin or like $5,000,000,
[00:43:21] ODELL:
maybe not a big deal. Right? Right. I'll pay a $30 fee. I don't give a shit. Exactly.
[00:43:25] Alex B:
Exactly. But ultimately, there's also kinda like the experience around the instantiation of the loan. Right? If you wanna create a consumer retail application where you don't wanna have to get the user to wait, you know, for a block confirmation to get his, you know, whatever. They're borrowing US dollar. They wanna you know, they have to wait right now to for the confirmation. UX billing. Exactly. Exactly. So in ARC, we have this instant execution environment that allows us to address this. But it gets even more interesting. Do you think the end user in that situation is running a server? Like, I'm taking a $10,000 loan running a server. Right? No. There's no need for that to run a server. Okay. Yeah. Absolutely zero need for that to to run a server. Server. The only thing running the server is the ARC server. Right. That's the server that that everyone connects to. Okay.
So I I can I confused that for a second? I was a little bit Yeah. No. When I yeah. No. When I meant when when I when I said server, I just meant, like, you you know, the different clients, you know. So you have clients connected to the the client can be also like a node, you know. The client can be Like, maybe running on a start line or something. Yeah. So yeah. Exactly. Someone that's running a start a start nine. So they're not running the Arc server software, but they have a device that's always on is what I meant. Right? And it's connecting to their phone or whatever. It's it could be connected to their phone. Exactly. Right? You could have this kinda like watch tower. You could operate your own watch tower. Again, I don't expect most people to do that. Right? Right. But so yeah. Loans is an interesting case.
And, you know, we can get even more, fancy with that because when we're introducing with ARC, in Arcade really is that because we have this off chain environment that operates outside the confine of Bitcoin consensus, we have the ability to enforce spending conditions that are not available on Bitcoin. Right? Okay. So what we're doing is we're actually introducing op codes that don't exist on Bitcoin. Okay. We're using the server to enforce spending conditions and, you know, you can think of anything like from UpCats to whatever. In reality, what we're doing is direct introspection.
Right? So it's more like what the the opcodes that are already on liquid right now. Yeah. So we're getting rid of the inefficiency of op cap because op cap is just yeah. Sure. You can do everything with it, but it's actually the the least efficient ways to do it. So we have op codes and script components that allow us to design systems where, for example, we can, if you have a loan market
[00:46:09] ODELL:
Yeah.
[00:46:10] Alex B:
We can actually create a secondary market for the collateral of the of of the of the users that are taking loans. So you can kinda like say you you've given a loan or whatever, you can trade those loans positions and to the average person that doesn't mean anything. But in the financial world, this is exactly how these things work. Right? These kind of like loans, these kind of structured products And then they're like a liquid secondary market Exactly. For loans. Exactly. Exactly. And so Interesting. So this is this is strictly for loans. So do you think that's a bigger market than payments? Oh, absolutely. A 100000%.
[00:46:47] ODELL:
At least in the short to medium term. Right?
[00:46:50] Alex B:
I think Or just in general? No. I I think in general.
[00:46:54] ODELL:
I think in general. Because I really So it's more like a financial derivatives protocol.
[00:47:00] Alex B:
Yeah. I mean, that's what DeFi is. Right? DeFi is financial derivative. And I think the big, big, big, breakthrough from that respect is the fact that actually, the it is the cycle of financial derivative. It is the cycle of financialization of Bitcoin. Right? When you look at Bitcoin treasury companies and what Michael Saylor is doing okay. So there's two components to what Michael Saylor has been doing. Right? One which had kinda like Ponzi like seemingly Ponzi like dynamics for quite a while, which is this notion that he would just accumulate Bitcoin and raise more capital via ATMs or via Yeah. So he's talked about Bitcoin. And and then there's just like perpetual, like, this this flywheel they call. Right? Mhmm.
But, interestingly enough, I think the markets mature and the markets also realize that this this strict accumulation flywheel was not enough to command, an actual higher and not meaning, you know There shouldn't be a premium. So should There should I mean, there should not be a premium strictly off of that. So then it becomes a conversation around, okay, how do you leverage your balance sheet. Right? Right. You have 600,000
[00:48:13] ODELL:
Bitcoin. What do you do with it? Exactly. And this
[00:48:15] Alex B:
is The perpetual credit Yeah. The exactly. The preferred stocks where you're creating fixed income financial instruments that are collateralized by Bitcoin that allow people in the fiat markets to get exposure to a certain asset that gets them a certain amount of yield with strong, you know, backing assurance. So when you think about I mean, ultimately, regardless of, okay, this is happening in TradFi. We don't necessarily approve with all of the Right. Mechanism behind it. But it's like, yeah, if you have a product that you're you're telling, someone you're gonna get them 10% yield and this product is collateralized by five x Bitcoin. It's probably pretty damn safe. Right? Yeah. So what they're creating is You're busy after assume that Bitcoin is going to zero or it has no Bitcoin. Or that it's just gonna stall and not grow. Right? Yeah. And what what this is really is credit. You know, more than more than derivatives, what this is is the the emergence of credit on top of Bitcoin. Right? And I think credit And so ARC is the protocol version of that in a way? I mean, ARC ARC is ARC is the ARC is the the the financial stack, the technology stack that can enable people to create credit instruments without requiring the counterparty risk architecture that TradFi, requires. Right? Because sellers coins ultimately are It's like six different layers of counterparty risk. Well, exactly. Say they're like a on coin base. Right? And all of that. Whereas I was having this conversation with Preston when he came to our arcade day and he was like, what if you have an on chain treasury?
What if you have a contract that is able to create so there's Seller has this, this product that's SDRC, right, Stretch. Yeah. So what if you have a contract where anyone in the world can deposit their bitcoin to it, they preserve you in a lot of low So I guess synthetic stable coin, basically. That's exactly what it is. No. But, like, I mean, people
[00:50:10] ODELL:
the problem is is that it's so obfuscated, that it's actually way more than just trusting Coinbase. Right? Like, you're trust if you're interacting with it, first of all, you're like trusting your brokerage, then you're trusting Coinbase, then you're trusting like executive leadership,
[00:50:27] Alex B:
MicroStrategy. There's multiple layers of counterparty risk Yeah. In the current setup. No. Exactly. And you can't reduce that significantly. Exactly. Because the game here, if you're introducing credit, with all things credit is like what is the credit worthiness of that product. Right? Yeah. And in the TradFi system, the credit worthiness is basically rubber stamped by companies like Moody's and all these rating agencies, right, that have access perhaps a little bit more, but still remains super opaque, you know, financial states. You know, like, so they but again, like you said, there's so many layers of counterparty risk that it's hard to get an accurate pricing in the market. And they've focused on Moody's book about 02/2008. Exactly. Exactly. Exactly.
Whereas if you have an on chain structured product, it's all there in the open. Like, so you can evaluate the credit risk, you can evaluate the technology risk, and you can make, you know, a a judge. So I'm not saying obviously these things are not for everyone. Right. Right? The average person is probably not to have to gonna have to be concerned with any of this. I would recommend everyone to just buy it. It's, you know Stammable Stacks hats. Stammable Stacks hats. Right? But there are people that are dealing, you know, with specific financial situations where they need to hedge their risk in one way or another. They wanna get you know, what if you just wanna get exposure to NVIDIA, but you don't you don't wanna have to buy the equity? Because you you currently exist outside, you know, you only have Bitcoin. You ex you exist outside of the TradFi system. You don't wanna pull your Bitcoin into a bank account to have to buy Nvidia.
Well, what if you can find a counterparty that's going to collateralize a product that's going to give you immediate exposure to, Nvidia? That product is gonna attract the, NVIDIA stock price and it's gonna be collateralized with Bitcoin. So in a way, you're able to ride whatever wave you want wave you wanna ride but, you know, without ever having to go through the equity purchase product. So we think that's kinda like Injection. The we think this is something that the arcade can do. And again, yeah, sure. It's probably more interesting for large financial institutions and things like that. But ultimately, I mean, there are things where because like you said, the idea of a synthetic stable coin, like maybe there's a case to be made. Like we're in Lugano, we're in the home of Tether. What if Tether decides and one of the I I tweeted about this and I think it's fascinating to think about because you look at Tether who is dominating the stable coin industry at the moment. Yeah. It's like not even caught. Yeah. And one of the thing that is truly special about them is that every competitor that is trying to catch up with them are, creating those systems where they're sharing the yield, right? They're they're they're they're sharing a portion of the yield they get from the treasury because they wanna incentivize people to To use it. To use their stable coins so that they can grow. Because otherwise, they're just gonna use Tether. Whereas Tether, they're not sharing so if you use USDT, you're not getting any of your They're all business models that keep the They're keeping everything. Yeah.
But then, what if Tether decides, okay, I also wanna create a system where, the users have some sort of yield. Right? I think I wanna share the wealth with them, but I don't wanna touch my treasury yield. Yeah. Well, they have a balance sheet of I don't know how many tens of thousands of Bitcoin. They have over a 100,000 Bitcoin. So they can move that to arcade, create a synthetic stablecoin, which actually is not really a stablecoin. It's, think of it like a neobank. Right? You're depositing your money into that account, and it's a savings product. Right. You get USD denominated tracking. Right? So it's a stable account balance that tracks USD.
But what happens is because, you know, this is collateralized by Bitcoin and Bitcoin appreciates in price, they can you know, what if Bitcoin has a CAGR of 35% and they give you new 7% in interest? Right. And they keep Right. Yeah. So if you're strictly interested in hedging maybe your Bitcoin holdings or for people, you know, that are. So what I what I think is gonna happen is, yes, I fully expect stable coins, normal treasury TBL backed stable coin to continue growing. There's a full trust in TBL. You're gonna have you're gonna have a dynamic where people like Tether are going to be able to collateralize synthetic stable coin, systems that are going to be perhaps as interesting and perhaps even more than, you know, the the normal USDT.
So you have two different dynamics there. And, I mean, I don't know how it's gonna play out, but it's gonna be super interesting.
[00:55:07] ODELL:
That's interesting. Okay. I'm gonna change gears real quick. So so you have a company called Arc Labs. Yep. And that's who's paying your salary. Correct.
[00:55:21] Alex B:
What's your role at Arc Labs?
[00:55:23] ODELL:
Head of ecosystem. Head of ecosystem. H o e. Okay. What is so that's a for profit business. Right? Absolutely. And then arcade and everything else is open source, fully open source stack. Right? Correct. So what is the business model? Do you have a business model for our guests? I mean What is the business model? Well, I mean, if you think about Arcade
[00:55:45] Alex B:
and, the way that it's currently structured, we are the one operating the operator. We're running the operator. And so, for example, when you're running the operator, you're earning a portion of the fees, specifically when it comes to settlement. Right? Okay. So we expect the off chain transfers to be practically free. Right? Because this is just the database update. So that's not really a money maker. Well, the off chain execution is not necessarily a money maker. Okay. But what happens is when you're when users are settling, right, because there's this liquidity component that we haven't, discussed. Right? With with with Ark and with Arkage, which is Which is liquidity component. Yeah. The liquidity component is when the users are settling, when we're creating those batches. Yeah. The person that is putting up the collateral, you know, creating that on chain transaction and the associated Bitcoin in that UTXO is the operator. Right. Right? So he's using his own liquidity. And so that liquidity, is effectively an opportunity to, you know, you need to charge an interest to the users that are, you know, using this system. Right? So you get so like a Bitcoin native yield. Right? Mhmm. So you're able to capture value in that way.
[00:57:01] ODELL:
What does that look like? What does it it looks like a transaction fee is what it looks like? It's a transact yeah. For the user it's a transaction fee. And it's like what, like the 1% range or something like that? No. It's gonna be probably,
[00:57:12] Alex B:
much smaller than this.
[00:57:14] ODELL:
Okay. But you think it just scales? There's just so many transactions. Exactly. It's gonna scale with volume.
[00:57:19] Alex B:
It's going to it's going to have different profile. It's almost like, because imagine I create a batch because, again, that's the other thing we didn't think talk about. And Probably, we shouldn't because this is getting into the details, but there's an expiry aspect. Right? Okay. And so depending on the batches that you create, it's just like in anything in finance. You have different, durations. Right? So if the operator has to, tie up his money into a batch for six months, then they're going to charge a higher interest rate because, you know, that liquidity is locked up for longer. If it's short, then that interest rate is going to be smaller. Right. Because then the moment that this batch expires, they get their liquidity back. They can do you redeploy it. Right? So I mean, it's it's very hard to model exactly how it's gonna play out. Right? Because it's a market. It's impossible to predict how, people are gonna use it. But that is one of the fundamental, revenue model for for our collabs.
And ultimately, you know, obviously, certainly it's an infrastructure play as well. Those are difficult. They they are, you know, quite a challenge to monetize, but I think in a way, you know, and me coming from, you know, originally having worked at Blockstream Yeah. In the early days and, you know, the the original promise of of Blockstream is kinda like this this red hat type of model Yeah. Open source model. Well that was the first thing I thought of when you said infrastructure. It's like the red hat model. It's it's basically what I hope happens and, you know, no shade to the Blockstream people, but I think, ultimately, I think our class succeeds, where, you know, Blockstream perhaps was not able to, which is kinda like
[00:59:07] ODELL:
It's something on, like, the liquid side. Right? Exactly. Exactly.
[00:59:11] Alex B:
But,
[00:59:12] ODELL:
And what does that look like? That looks like b to b support contracts and stuff like that? Or Yeah. Exact I mean, there are there's interesting ways, you know, it's still early days.
[00:59:21] Alex B:
And right now we're gonna be the run running the arcade operator. Yeah. But it's also possible that, like, say a JPMorgan comes knocking through our door and say, hey, like, we like your tech, but, you know, we don't want you guys to be running our We wanna operate it. Yeah. We wanna operate it. Right? Yeah. So then what happens is, yes, you have like a kinda like a service contract agreement where, like, you're deploying, you're maintaining the infrastructure with them, you're advising them on all of that, and they run the operator and it's something like that. Right? But they still want you to kinda manage it. Right? I mean, you I mean, maybe they have a team also internally that manages it, but it's also, like, you know, you're you're creating, you're innovating, you're contributing back. Right? Exactly. I mean, to be clear here, I think
[01:00:05] ODELL:
the holy grail would would be for you to be a sustainable profitable business that manages an open source protocol. Like, that's fantastic. Because, like, I've I've been in the trenches raising charity charity funding for
[01:00:22] Alex B:
for open source software, and it's difficult. It's like a never ending grind. Right? No. No. No. Exactly. I'm a capitalist. Like, ideally, you have a sustainable Yeah. But it's gonna be hard. It's gonna be a hard grind. Well, I mean, we have another there's also there's another component because we're fully convinced of the challenges of this and Yeah. One of the thing that we also sort of realized very early on is that, the most, you know, when you look at the end of the day at the outside of the Bitcoin industry and the crypto industry in general, so the most popular platforms, some of the most popular products, the most successful ones have been the ones that also launched with some sort of like, what you would call like a flagship product. Right? Yeah. So think of something like hyper liquid. Yeah. Right? There's kind of like the hyper liquid blockchain with no one really used. And the hyper crushing like the actual Hyper liquid is the flag ship product and they're just printing money, right? It's like bid max on chain, right? Yeah. Or so imagine exactly. Exactly. So imagine So is that actually on an it's on their own l one? They have their own chain?
Yeah. But, you know, it's, it's it's I feel like it kinda came out of nowhere. It's it's a it's a it's a blockchain that's run by, like, like, 10 validators.
[01:01:34] ODELL:
Right. It's like Tron. Yeah. So But anyway, your point is is like they have this BitMex that runs on the chain and that's what everyone Exactly. No. But yeah. Exactly. So my point is it's important
[01:01:46] Alex B:
to have a vision of like what is the best application of the technology that we're building. Right? Because if you're building this entire software stack, it should be especially us. I think and that that I think that was also kinda like where, you know, Blockchain has been struggling is they were, you know, fundamentally technologist,
[01:02:07] ODELL:
engineers They're like little too many engineers about it. They were like, we're not gonna build the apps. Exactly. Exactly. Other people can build the app. Whereas whereas
[01:02:15] Alex B:
our background, when you think about, Tierro, Marco, and the the, like, Kooks now who's our CTO with BTC based server, like, we have some sense of protocol design and we're developing the the back end, but we're also very much product people. Right? So we we think that because we have an intimate knowledge of how the system works, we also should have the ability to build the best applications on this system. You can monetize that app instead. Exactly. So one of the thing that we're thinking about quite a lot is actually bringing back back, what Marco started with Fuji on, on on on Liquid, which Fuji was, the basis, the foundation for Bitcoin backed stable coin. Yeah. But it was based on this synthetic product model. Right? Which could apply which they originally productized to apply to the Bitcoin backed stable coin, but which we can use to build an entire financial stack. So our thinking is like okay, what if we find a couple of partners and we build the next
[01:03:15] ODELL:
the true next Bitcoin backed NeoBank. Right? Yeah. Where I mean, you know what I would like and take this with a grain of salt, like a a proper Bitcoin Poly Market competitor. Like a prediction market. Exactly. Like, I feel like art could be ideal for that. A 100%. We have, like, we have, like, a design, like, scraps of design to how to Like, I've been waiting for prediction markets for Exactly. Fucking a decade. And then, of course, like, it's a Polygon
[01:03:42] Alex B:
project that, you know, defines product market fit. Well, what you need, you know, what you need, to to be able to do this is these, these liquidity pool, primitives. Right? These these AMM primitives. And you haven't been able market maker primitives. Yeah. So you haven't been able to do to get that in a in a way that is, you know, Bitcoin. Again, sometimes I hate to use that word, but really I don't know the better alternative, but like Bitcoin native, like close to Bitcoin. It doesn't require counterparty risk. And we're able to do that, on on arcade.
You know, it's on the road it's on the road map. I don't know if we're gonna be the one building it, but yeah. These are the kind of things that we think of it. I think that could be a killer product. There are when you think about it, there are really like I I think I can count like in a single hand or perhaps two, the amount of actual defi products and services, with product market fit. Right? And a lot of these involve, like, a very small set of technology
[01:04:44] ODELL:
premiums. What is it? It's like stable coins, loans Uniswap. 100 x Just swapping. Pressing the 100 x x button and prediction markets. Yeah. Well, yeah. And then yeah. And then swap. And then I feel like a huge product market fit in the space is just like if I had an app that I could just, like, click a 100 x. Yeah. Like the UX was just like a big like I just load it up with Bitcoin, just press 100 x on it. Yeah. Like a Binance. It was just a Binance, but, The opposite is stay humble success, but there's huge product market for it. A 100%.
[01:05:14] Alex B:
A 100%. Yeah.
[01:05:16] ODELL:
But, yeah, your your point is just like and there's some, like, base level primitives that enable all of those. Exactly. It's not like, you know, for a while early on,
[01:05:24] Alex B:
even if you were just mildly as an outsider interested in tracking what, like, the Ethereum ecosystem was doing or, you know, for a while, they were talking about smart contracts, putting smart contracts on blocks to Your refrigerator. Yeah. Exactly. And then now it's really, like, you know, all of this facade really fell apart completely, I would say, like, this cycle where it's very much explicit that the use case for, what they've been building with, like, you know, like, what is the biggest app? Pump dot fund or Polymarket? Yeah. So it's full degeneracy, and, you know, Polymarket is a bit of degeneracy in its own way. It has different interesting application, actually. You know, it's kinda like leveraging the markets to be able to, see where the world is going.
But, ultimately, yes, it's just like there really isn't, like the reality is that we're just rebuilding the financial system and everything that's always existed in the financial system.
[01:06:22] ODELL:
But My partner my partner at 10:31 says it interesting. It's it's, a lot of people say, like, the financialization of Bitcoin, but it's really the Bitcoinization of finance. Yeah. That's But you're not really coming maybe you can make the argument that prediction markets are something novel that just weren't possible, but most of it is
[01:06:44] Alex B:
just improving on what has already existed Oh, yeah. By the way. Yeah. It's it's things that always existed with, different forms of collateral. Yeah. Right? Collateral assets. So what I say is just like it's like twenty first we had we had we have twenty first century, assets. We need twenty first century infrastructure. Right now, it's already on twentieth century infrastructure.
[01:07:05] ODELL:
Awesome. Okay. And before we wrap, so in practice, like, users excited about ARC, like, is there a way for people to play around with it now? What's the timeline like? What are we looking at? Yeah. We have our reference wallet implementation available at arkade.money.
[01:07:23] Alex B:
Okay. So it's arcade with a k, a r k a d e. So you can use that to send, receive on chain, off chain. Is that like a PWA that's a web app? It's a PWA right now. Okay. And we're gonna be trying to make improvements to that. You know, it's not a necessarily a commercial project for us. We're not really in the business of, like, making a reward product. Yeah. But it's It's like a proof of concept. Exactly. It's useful for us to help us guide also the direction of, like, how we implement the protocol, what are the UX quirks that we need to think about to help the developers build on top of our platform.
So but people are free to use that. It supports Dolts, native swaps. So, you know, arguably, I would say, okay. Right now, you know, it's still a beta product. The arcade, main net is still a beta platform, but, we're gonna get very close, especially if someone, I think, decides to maybe port that into, you know, iOS native or Android native environment where you have a little bit more, perhaps better security as well, you know. And if someone decides to do that, I think, you know, very, very quickly, this is gonna turn into something that rivals all of the best, lightning wallets out there. Because I truly believe, as much as I respect the people that have been building, in this in this lightning industry for, forever, I truly believe that the model of, user channel, you know, this paradigm of retail wallets having channels open to the LSPs is obsolete. Yeah. It was, never going to scale in the first place because the technical challenge are one thing and they're pretty, consequential, but ultimately it's a matter of economics and like the economics of it don't make sense. It's gonna be too expensive. You cannot have a Phoenix that operates channels for billion users.
They're just gonna have liquidity stale everywhere. That'd be insane. Yeah. So, you know, and then they're gonna have Even as it is, they have, like, I mean, I don't know how many users they have. They maybe have 50,000 users or something. And it's it's And like load node is fucking huge. Yeah. And it's mildly expensive. Right? I mean, depending on okay. If you're sending $10 $10, maybe
[01:09:38] ODELL:
maybe not. But Well, if on chain fees go up, it'll get very expensive too. Yeah.
[01:09:44] Alex B:
So so yeah. People can try this out. Otherwise, you know, arcade0s.com is our website. Okay. We've got what I think is a pretty decent set of documentation around, you know, our subjective implementation of the ARC protocol and how we see the vision evolving, specifically when it comes to building applications. Because this is going to be really, I think, what brings people because, you know, we had this notion of building on Lightning for, a long time. Like you said earlier, like, it just doesn't like, it's it's not a thing. Like, you can realistically, you cannot build anything on Lightning but, like, a wallet or, like, a a back end infrastructure for settlement or things like that. But in terms of building applications that, you know, people are expecting, to interface with financial products and all of that, you know, my goal as head of ecosystem is to get the people that moved on and try to build whatever they wanted to build on other networks because they had no alternatives, bring it all I know it's a bit cliche, but I truly think like there's some talent there that we can bring back to Bitcoin. Yeah. And it's going to, make the entire stack a lot better. Because the financialization, it sucks in a way that, yes, the suits are here and they're dominating and they're everywhere.
And for people that bought into the original ideals, it's a feels a little uncomfortable. But I truly think it's the stepping stone to the to the medium of exchange goal that we all are pursuing. It's like you wanna have a financial infrastructure in place where the people that are accepting Bitcoin for payments at a large scale, eventually, they have financial tools to kind of, like, if they need to hedge themselves They never have to leave the system. It's a yeah. Exactly. You need to close the loop, and this doesn't happen on the vacuum. You know, you need, like, you need professionals. At the end of the day, like, the bankers, yes, like, there's a class of bankers that are purely extractive, but banking happens to re for a reason. It's a question of capital allocation. Right? It's a question of, like, you know, creating liquidity in the system, and we're not quite there yet. But I think this is the process we have to go through until we get to truly, like, you know, hyperbolic Bitcoinization.
[01:11:57] ODELL:
Fair enough. I've got one last question for you, actually. So like right now, Arc Labs is running, I guess, an arcade instance. I don't know how you refer to it. But like Operator. We call it the arcade operator. So you're running an operator. But you expect there to be there's gonna be many of those. Right? It's gonna become a competitive landscape or how do you looking at that? I mean,
[01:12:18] Alex B:
I I do expect there to be in the future different instances. Because like I said, maybe it is the case that Robinhood
[01:12:26] ODELL:
comes and say Right. Or JP Morgan or something. Yeah. Exactly.
[01:12:29] Alex B:
But it's hard to predict exactly. Like, I wouldn't say there's going to be There's not gonna be a thousand. Yeah. There's not gonna be a million of them. Is there gonna be a thousand? I'm not even sure. It's like a network effect thing. Right? Yeah. Exactly. Like, there are benefits to network effect in fact in this case. Right? And ultimately, like, you know, there is this and this gets into a different conversation, but really like like if we have a technology like this where okay. Say in the best case scenario we have a thousand of these entities Yeah. Spread across the globe in a very decentralized way. Right? It doesn't have as many nodes as Bitcoin but it doesn't need to. Right? Because this is the second layer. Right.
But if we have like a thousands of these competitive market dynamics actor, right, again this is the promise of, like, we're we're recreating banks and these are not going to be the banks of the past that custody your asset. Right? But these are going to be the banks of the future that allows people, innovators to build products and services and where your self custody fund can interact with, without while preserving your sovereignty. But what do banks do is they create markets. Right? They're more like a coordinator. Right? Exactly. They're a venue for capital. Right? And that's what those entities eventually I think are going to It's like what it's, I mean, it's like Hal Finney's original vision. And exactly that's exactly what it is. I think, you know, Hal Hal said that they would issue, their own, currency. Right? Right.
I I don't know exact I don't imagine necessarily that this specifically is going to play out. But certainly, when you think about it, like and I I saw some some Bitcoin treasury guys say that. It's like it's it's very much a little bit like what,
[01:14:17] ODELL:
Bitcoin treasury companies are. Right? What is a bank? But like Bitcoin treasury companies are like almost like a hack in comparison to something like this. Right? Because it's, like, it's not Bitcoin native. It's not cryptographically
[01:14:28] Alex B:
verifiable. It's not Oh, yeah. I mean yeah. Yeah. I mean but I think they're just, like, the the early manifestation. Right? Right. But would you agree would you agree in premise
[01:14:36] ODELL:
that, like, a successful ARC scenario
[01:14:42] Alex B:
is one where there's more there's more than one operator. Oh, yeah. A 100%. The question is, like, there there there probably isn't a shit ton of operators Yeah. Because of network effect. Yeah. But there'll be a competitive marketplace for operators. Because you want the competition. Right? You want That's what keeps it user centric. Exactly. Exactly. You want the rates and and ultimately there is like, you know, there are there are scenarios that are pretty disastrous if there's only one operator Right. And then the operator goes away and it's like, oh, yeah. People have like, You can exit. You can exit, but now there's a fucking there's one door and there's 1,000,000,000 people trying to get out of that door. It's gonna be a bit of a mess. Right? And then also, like, all financial products would just not work for whatever. Yeah. No. Exactly. The whole fucking system, the grind is still a hole. Yeah. That's not, like, the best outcome. Fair enough. Okay. Awesome. Alex, this is fantastic.
[01:15:31] ODELL:
Thank you for enlightening us. Do you have any final thoughts for the freaks before we wrap?
[01:15:38] Alex B:
I mean, freaks just don't get caught up in the noise. Ignore all of the stuff that you're, probably, you know, all of the medias right now. The social medias are are being plastered with. Specifically, when it comes to the Bitcoin community, I think, you gotta focus on and I'm not necessarily wanna put the spotlight on what we're doing, but there remains, like, a contingent of people that are pushing the boundaries of what's possible in Bitcoin, not coping with, like, you know, this new reality. I always say, like, the more interesting people, that I meet in Bitcoin is are the ones that have been able to adapt, to, the change. Right? And to kinda, like, you know, kind of like, roll with the punches a little bit. And I think a great example of that was, was Francis, at our, arcade day the other day. Francis Pulia, Notorious, like Laser Eye Maxi, Anti Ship Corner, Supreme said verbatim that arcade for him is the first thing ever where he actually started considering that there might be value in DeFi, you know. Yeah. And it was, like, impressive for me and I think I was really grateful to to hear this because I know that Francis is smart enough that, like, you know, you don't need to fucking, like, be completely orthodox with everything.
You need to be able to kinda, like, adapt to the reality of what you're building. And so yeah. Whether it's us or whoever else, like, I mean, you know, all of the spam stuff, man, that's a distraction. Like, it really is, like, it's a way for, whoever is pushing all of that stuff to distract you from the progress that being being made. So yeah. Just just take the white pill a little bit and then and stop just, getting caught up in this in in in in this stuff. There's a lot of great things being built. I love that. I can relate to that. Anyway, freaks,
[01:17:38] ODELL:
hope you enjoyed this conversation. Maybe, maybe not. There'll be more conversations from Lugano that I'll publish. We'll see. As always, all links, for the show right silhouettedispatch.com. Share with your friends and family. I'll put all of Alex's relevant links in the show notes. Yeah. As Alex said, stay focused, stay humble, stack sets. Thanks, Alex. Peace.
What is up, freaks? It's your host Odell here for another solo dispatch live from Lugano well, in person from Lugano. Another non live audio only rip because the vibes are high. I got good friend and arch aficionado,
[00:00:19] Alex B:
Alex b here. How's it going, Alex? Well, it's good. Great great spot to be recording. I mean the listeners aren't going to be have the privilege to see this view, but, it's pretty kick ass spot. Yeah, man. Indeed. The vibes are high. Kicked off the week the week a couple of days ago with our arcade day launch, and, the feedback's been insane so far. So, it's it's still early, but I think I think the entire industry needed some validation that, there was indeed some sense of progress possible, technology, you know, technology wise without having to, you know, without needing soft force, without needing, all of these very complex bit VM type of fraud proof systems. And, I feel like we're finally you know, we we could've spent six more weeks pushing, the limits of, like, our implementation, polishing, polishing, making more tests before putting it out there. But at the end of the day, you know, we've we went live in Riga, for a test event, couple of months back.
It went super well. We spent the last three months, you know, again, polishing, doing a lot of testing. But, ultimately, it's happening within the confine or, like, a circle of, you know, four, five, six devs. And so at the end of the day, you're getting to get this out there to the people, get them to play around. I I would very much say it's, you know, it's kinda like ARK's hashtag reckless moment right now.
[00:02:05] ODELL:
I mean, interesting comparison because I always I kinda always hated the lightning hashtag reckless. It's like bros. Like, you you just say hashtag reckless and I'm just like aping him with a ton of money. But, I I appreciate it. I like the idea of building in the open. I mean, so our I mean so I I thought this would be a good follow on conversation to my conversation with Francis. Yeah. Because he's very bullish on what you guys are building. Right. And because I've been watching from the sidelines for a bit, but my general premise in Bitcoin is that I ignore everything as hype Mhmm. Until I can actually use it in person.
And you guys proved it out that it at least works, in Riga, and I wasn't there, but I saw it from afar. And Francis actually has it working in an experimental mode in his wallet, in the blue wallet. So, like, that's enough validation for me that, like, this thing's actually, like, functioning. Yeah. So, I mean, let let's just let's just jump high level first. Like, what is ARC and why should people care? Is this is this a replacement for lightning? Is this a new layer two for bitcoin that that that competes with Lightning? Like, how how should be people be thinking about it? Yeah. I think interestingly,
[00:03:33] Alex B:
if I were to only answer those two questions, I would say it's lighter, these two. It's certainly not a replacement for Lightning. And I, I mean, I have a pretty peculiar opinion as far as that's concerned, but I don't consider ARC itself to be a layer two. ARC is more so, I would say, a set of technology, a new protocol certainly, that has been introduced to Bitcoin, which we can use to build, layer twos. But what is ARC fundamentally, is the system that allows you to create off chain execution, meaning an off chain layer just like lightning is able to process transaction off chain. But what's truly unique about ARC is the way that it settles the transaction that are happening off chain into the layer one.
And this is the concept of what we've been calling transaction batching. So instead of, for example, when you're using Lightning, you're closing a channel, you're putting a you're you're putting a transaction on chain, what we allow you to do is to settle potentially thousands and, of operation into a single output, but that single output is, coordinated between a large number of participants. So lightning is only two individuals creating channels,
[00:05:12] ODELL:
creating a channel between one another. Right. It's it's it's two parties doing a two of two multisig for batch Bitcoin transactions is lightning. Right? Exactly. Exactly.
[00:05:22] Alex B:
Whereas, with with with Arc, you have a a more of a multi party dynamic, but interestingly, it's also a two of two setup. Right? So what happens really is, like, think of ARC a bit, as you would just a contract where you deposit your money into, and the contract is sort of administered by, an operator, The ARC server, originally called the ARC service provider. Right. And that that operator, when, you deposit your Bitcoin into, that contract, will coordinate a batch transaction on chain. So that batch transaction will have an on chain footprint, and that batch transaction will create an output with spending restrictions.
[00:06:13] ODELL:
Okay. And
[00:06:14] Alex B:
your bitcoins that you deposited are going to be encountered by those spending conditions. There are two main spending conditions. One being a collaborative spending condition where you and the operator sign off on, the spending of your funds. Like a friendly close in lightning terms. I mean, it yeah. Exactly. Close. Close. Yeah. Exactly. It's well, in this case, it's not a close. It's just a method by which, you spend, your money. Because when you're doing a collaborative spend on ARC, you're not moving your money back on chain. You're actually collaboratives collaboratively spending your money off chain by way of the operator. Oh, but I'm staying off chain. You're staying off chain all the time. But collaboratively.
Yeah. Exactly. Because what happens is the operator
[00:07:10] ODELL:
Wait. So let's say you're the operator. Correct. And I'm a user. Yes. And I'm paying another user. Yes. Me and the operator are signing to pay the user c. Right? Exactly.
[00:07:22] Alex B:
Exactly. So what happens is I'm going to and it works exactly like Bitcoin works. Right? Okay. So it's a system of inputs and outputs. So what you're gonna do is you're gonna have, once you've deposited your Bitcoin into that contract, what you get is this notion of virtual UTXO's. Right? Now you have a sort of abstraction of your on chain UTXO in this off chain environment. Okay. And you can spend it just like you've spent Bitcoin on chain. So you're gonna give me a VTXO as an input and you're gonna say I'm gonna send it, to my friend over there, and I'm gonna sign off on that transaction, and I'm going to create what gonna happen is we're gonna create a new output for, whoever you're sending the money to, the recipient. But you're also gonna have a a change output just like on Bitcoin. Okay. Right?
And so that system allows you to continue chaining those off chain transfers in the same way. So once the recipient has his own virtual UTXO, which you've just sent to him, he can also send it to someone else. The operator is going to cosign and so on and so on and so forth. But what happens here, now it's really important to understand, of course, is that the, the reliability in these payments depends on the operator not signing conflicting transactions. Right? Okay. Because if you spend the same VTXO that you previously sent to a recipient and I double spend problem. I the yeah. Exactly. I, the operators say screw the recipient you previously send your money to, send your money to me now. Right. If I sign that transaction, then what happens is now we have two virtual UTXOs that, exist off chain. Right? That are spending the same original Bitcoin. Exactly. Exactly.
So what's likely to happen is that, you know, you the original recipient, was double spent basically, but there's a bit of a race condition. Right? It's like who gets to put their money on chain first, but it's not an ideal scenario. Who settles? What's that? Like who settles first? Yeah. Exactly. It's who gets to put pull that money. It's really who settles not more more more like, in this case, if you're double spending, you're gonna want to bring that money on chain. Like, pull it out of the system completely. So this is also something that's viewed in a lot of ways as the state chain trust model. Right? Yeah. It's this idea that the previous sender can collude with the operator to again sign a conflicting transaction. Now the way there's different ways that we address this, with with ARC and specifically with our arcade implementation.
One of the way that ARC generally is able to address this, unlike state state chains, is once you've received an off chain payment, you can treat it exactly in the same way that you treat, a zero call Bitcoin transaction. Right? Yeah. You can decide, okay. Actually, perhaps this payment is very valuable. It's a high volume a high amount transaction. I'm not gonna trust that payment until it gets confirmed into a block. Right. Now how do I confirm it into a block? Well, obviously, you could decide to bring that money back on chain, and turn it into a UTXO.
But you have the option with the operator to include the payment you received into a new batch. So the operator is always creating batches of transactions because there are new people that are depositing money into the arcade contract. You're like anchoring it on chain. Exactly. Exactly. It's a it's a bit of a on chain commitment.
[00:11:30] ODELL:
But but so, I mean, Francis explained this to us. It's actually probably better so correct me if I'm wrong. I I think it's actually probably better than a zero confirmation Absolutely. On chain transaction. Because a zero confirmation on chain transaction, specifically if it's in a high fee environment, I'm more trusting who is paying me because they might immediately send a higher fee transaction to themselves or something. Right? And then a miner is just gonna be economically rational and just find a higher transaction fee. With this, if if you wanna cheat me, if the if the payer is trying to cheat me, I have a restaurant. We're in Lugano. There's, like, 300 restaurants that accept Bitcoin here. Yep. I'm at a restaurant, and I'm paying them a CHF120 bill. Yeah.
They they're just banking on the fact that the the payee, the person paying them Yeah. And operator of ARC isn't colluding to to fraud them. Right? It's a little bit different. Right? Like, the two parties would have to collude It's very in order to to,
[00:12:36] Alex B:
to make a fraudulent payment. Exactly. And it's very, very, different indeed as you explained because we expect miners to be economically rational. Yeah. And miners are a globally set of decentralized entities with which with whom you have no kind of contractual agreement. There is no sort of, like, business context where their revenue line, their cash flow depends on their trustworthiness. Right? Yeah. And that's completely the opposite for the ARC operator. Right? Yeah. The moment that the ARC operator attempts to collude with a a user to double spend a transaction,
[00:13:19] ODELL:
all of that is very transparent. Is there proof there's proof of fraud, basically? Exactly. It's immediately apparent to everyone in the system. And So the merchant could, like, publish a cryptographically verifiable proof that's, like, I got defrauded by this operator. Exactly. I mean, we put safeguards in place
[00:13:35] Alex B:
even within our own system where we actually have an architecture with Arcade where we separate the signer module, which we call the arcade signer, which is kinda like a separate module within the software stack Yeah. Whose role is only to cosign these transactions, and the rest of the operator stack operates in a different environment. So in theory, because, you know, there is the scenario where the operator is not necessarily malicious, but perhaps the operator was hacked or something. Right? And somehow someone is is trying to It's a very real scenario. Exactly. Exactly. So we try to isolate the signing environment to make it as secure as possible, but we have also plans for safeguards in place where the actual operator software is going to immediately notice if there's an attempt to double spend and ideally will shut down the entire system. Right? So then everything comes to a halt.
But obviously, the the the neat thing with, something like our, Arc and Arcade is that if the whole system comes to a halt, at least every user has a unilateral spending path, to get their money back. Now, of course, in a scenario where, you know, the the system so, like, perpetually stops, then it's going to be a bit of a mess for people to kind of enforce their spending conditions on chain. Right? It's probably going to create a bit of a fee event. Do you know an Elphrat? What's that? Do you know an Elphrat? The Elphrat? Yeah. The she's her I just discovered her balcony's right there. Oh, okay. So we have a we have a I have Alex. I have Alex here. We're talking about art. Hi there. Hi. How are you?
[00:15:29] ODELL:
We have we're we're recording a podcast. You're on the podcast now. Is this the middle of a podcast? Yes. We're in the middle of a podcast. You're good. You're good. It's a pleasure to meet you. I don't think we've actually met in person. No. I mean, it was great. Fair enough. Well, we'll meet actually in person soon. Far as soon as There we go. To see you later. So, yeah, let's talk about yeah. By the way, Friggs, we're just sitting on a balcony in in Lugano, and, everyone's getting an education on Arc right now. I, yeah. So let's talk yeah. Let's talk about the so so the whole point of Ark, similar to Lightning, is that you have cheap, fast transactions for Bitcoin as a payments use case. I think that's, like, the main.
[00:16:19] Alex B:
Right? This is, like, the main I think this was the original intention. Yes. And it's certainly one of the one of the It's a key value prop. Right? I would argue it's not. I would argue it goes beyond that. I would say that the ability to make payments in a cheap and fast way is only one application. And this is kinda like the way this is where we, our collabs and and arcade, as our implementation of the ARC protocol, perhaps diverged a little bit from, I would say, the original, design, if you will, or kinda like the original vision. Because we were very much working towards implementing this, and as we were doing this, we realized, well, hold on. Like, this off chain environment is great, yes, to do cheap instant fast transfers, but it also allows you to do all kinds of interesting programmable setups, things that people were trying to do on Bitcoin originally by spending UTXOs with different script configurations, doing things like escrow, and and and doing things like, you know, okay, maybe a Satoshi dice that's not for everyone. It certainly does doesn't belong on chain. It's a bit of a waste of block space.
But, ultimately, it's the ability to use the UTXO model and use Bitcoin in a way that is native, in a way that doesn't require putting your money into a bridge, putting your money into a side chain federation, maintaining the unilateral exit property, but building on top of that primitives that allow for a bit more versatility in terms of, programmable environment, in terms of Bitcoin finance. So a lot of ex you know, there's a lot of applications of that obviously we can we can get to. I get but there's a bunch of there's a bunch of there's a bunch of things to unfurl here. Yeah. Yeah. First.
[00:18:18] ODELL:
Okay. So, so the cool thing to me is and the freaks already know this if they listen to the rip with Francis is the cool thing is, for better or for worse, the ecosystem has kind of been built around lightning. So so the cool thing here is that you can use an Arc Wallet with Lightning swaps, and you don't have to deal with network effect or whatever. You get all the benefits of Arc, and then you're just automatically paying and receiving from Lightning and and settles in Arc. Right? So we get that going for us. But the number one thing and so so he's doing a similar setup to this with Liquid. Exactly.
But the problem is with Liquid, you're reliant on the swap provider to be able to get out and get your Bitcoin out. And the cool The federation. Yeah. And one of the cool things about ARC is that I can exit without permission. Exactly. So can we just go real quick, like, how does that look? Like, how do I how do I I've yeah. I've let's say, you know, you say hashtag reckless, but let's say I'm just reckless. I put in a Bitcoin. I'm trying to get my Bitcoin out. You know, I got a 100 I got a 120 a $110,000 stuck in Arc. How do I get that money out? Yeah. I mean, it works exactly how lightning works, really.
[00:19:33] Alex B:
So like I mentioned to you before Yeah. When you're depositing your Bitcoin into that our contract, if you will, you're signing a set of spending conditions. Right? Yeah. The major one, the optimistic one is the collaborative one with the operator. Right? 99%
[00:19:49] ODELL:
of the times, the operator is gonna sign with Exactly. Yeah. But then the other one,
[00:19:54] Alex B:
you know, the emergency case one Yeah. Is the unilateral exit. So when you deposit your Bitcoin there, you sign a transaction that says, hey, I can put my pull my money on chain. It's like a pre signed It's a pre signed transaction. It's a pre signed transaction. No. You can spend it to, to to to really I mean,
[00:20:14] ODELL:
yeah. You you Am I delegating the address ahead of time? Is my wallet delegating the address ahead of time and saying this this on chain address is my exit address or something? Not necessarily. No. Not necessarily.
[00:20:24] Alex B:
You can what you do what happens is you can spend that output, the share of that output, right? Yeah. That that what we call the batch output. You can then spend it however you want to. And so, you know, that's basically the gist of it is you have a pre signed transaction which you can which is a valid transaction that has been mined into a big And the operator could be offline like And the operator could be completely offline just like your channel counterparty could be offline or your LSP could be offline. The only caveat,
[00:20:57] ODELL:
What's the caveat? The caveat is that What's the catch?
[00:21:02] Alex B:
There is
[00:21:03] ODELL:
potentially more transactions. So it's not only a single transaction. So I'm paying huge fee burden? Is that what it is? I mean, yes.
[00:21:11] Alex B:
I mean, it depends really how big, the because all your transaction is basically in the tree of transaction. Right? It uses taproots. Right? Right. So There's a shit ton of transactions in in one transaction. Exactly. When you're putting your money in that contract and sending spending those signing, signing those spending conditions, there are other people that are doing the same thing at the same time. So you're collaborating in a big transaction with the operator and other people. So depending on how many people are in that transaction, in that on chain transaction with you, you might have to put, you know, from three to eight transaction on Oh, not a ton. Not a ton. I mean I mean, again Is it like a thousand transactions or Well, theoretically, it could be a thousand transaction. Yeah. But that's something that's manageable because basically what happens, right, is when you're spending your money off chain, you're creating a new vtxo.
So you're expanding the tree, Right? Initially, you have a an, a tree that is inscribed that is, you know, committed to on chain in that original transaction. And then as you're spending your VTXOs off chain, you're expanding the tree further, but it only exists off chain. But every additional step creates an additional transaction potentially. Right? Okay. So you're chaining those transactions, and it is the case that you could be adding to the cost of unilateral exiting. But this is also why this notion of anchoring is important. Right? Because you can build your applications and your wallets so that the wallet is going to recognize that eventually the depth of the transaction chain is too large, and this is creating a risk where, yes, if you have too many transaction to publish, it might actually be on an on economical to actually get out. Right? It's like you're trying to spend 5 you have a $5 UTXO, but now it costs you $20 to spend on on change. Which is fine. I think that's a fine trade off. Yeah. Well, yeah. I mean, that trade off exists in lightning as well. Yeah.
[00:23:24] ODELL:
And so Yeah. You can't have, like people are like, oh, the beauty of lightning is like I'm receiving five sats or whatever. But you can't. Yeah you can't economically
[00:23:33] Alex B:
enforce that on chain. Exactly. And so what happens is by way of being able to periodically incur again So basically you have think of it as like you have a UTXO set that exists off chain, right? Right. And you're making a bunch of transactions and then your UTXO set evolves over time but eventually you want to have better assurance. Right? You don't wanna have this dependence on the operator for security reason, but you also don't wanna have, an increase in cost of your potential unilateral exit. So what you do is you take yours your set of UTXO's off chain, your VTXO's, and you commit them by joining a batch. Right? So again, the the operator is creating batches all the time. You tell the operator, hey, I wanna commit my UTXO to, to to Bitcoin.
I'm gonna join the batch. And then by doing that, you get a fresh set of UTXOs. Obviously, it's the same exact amount that you put in settled. That you put in minus some fees, and that is now settled. That's exactly we we call it a settlement process. And by doing that, you remove the security dependency, but you also don't have any chain transaction anymore. So you have a set of VTXOs that haven't been spent in the past, and therefore, you know, maybe now instead of adding eight transaction to put on chain 10 transactions, you're back to to e four. Right? So you can always kinda, like, periodically do this, and it doesn't have to be, like, an active process. The wallet The wallet solution is consolidated. Exactly. I was talking to Francis, you know, they have this, model in, in liquid with, so like they've graduated wallet model. Right? Where if you have if you have too much money in liquid, eventually this the wallet is going to kinda like auto swap to an on chain balance. Yeah. To protect you against that exposure. I like that. So you can create the same type of model with ARC where if you have too much exposure to the operator, you're going to swap, you're going to settle into the next batch, and now you're clean again.
[00:25:46] ODELL:
I like that. I, okay. I mean, one of the cool like, in practice, like, the in practice, we're just giving everyone with a balcony a free podcast. In in practice, you have the user like, the user's wallet's gonna automate a bunch of this stuff. Exactly. Right? They're not even gonna be thinking about this. That's probably the coolest part. So I just wanna flip the script a little bit. Like, a lot of the people that listen to the show are developers and they're building product. Yeah. And they're thinking about the issues with building self custody lightning wallets. It's very difficult. I think lightning has clearly found product market fit as, like, this kind of glue that Yeah. Connects different wallets together and this, like, standard interoperable, protocol that allows you to pay and receive very easily.
You know, if you're gonna pay from, like, Stripe to River to Binance, to or to Primal or something, it just fucking works. Yeah. And you just know it's gonna you know it's gonna work. But at the end of the day, when, like, the actual builders are trying to, like, make a self custody experience, it's very, very difficult. Yeah. And so a lot of them are looking currently at Spark Yeah. And, probably to a lesser extent, Arc. I think there's a lot of excitement about Spark. So what is your to to the builder out there, to the person who's, like, building a wallet, what is the how should they think about the differences between Spark and Arc? And this is, like, me also dog feeding my own question because I've been thinking about this a lot as well. Sure.
[00:27:39] Alex B:
I I mean, I would say the major difference is, what we've been discussing. Right? Is the security model underlying the entire system. So in a way, we share a lot of similar properties. Right? The off chain transfer of our v t x o's is the exact same security model as the off chain transfer of Spark
[00:28:02] ODELL:
Bitcoins. Right? They don't call it GTXs but it's kind of the same. Right? It's pretty much more or less the same.
[00:28:08] Alex B:
Where the major difference lies really is that once you're in Spark, you're perpetually exposed to the operator dependency of trusting that he does
[00:28:21] ODELL:
not double spend your Bitcoins. But is it not the same trust model? Where is the trust model breakdown compared to ARC?
[00:28:28] Alex B:
Well, the difference with ARC, right, is that depending on the application or depending on the value you're receiving, you have the option to settle.
[00:28:41] ODELL:
But doesn't doesn't Spark also have unilateral exit or no?
[00:28:45] Alex B:
Spark has unilateral exit, but unilaterally exiting is fundamentally different
[00:28:51] ODELL:
than having the ability to settle. Because when I'm settling Yeah. I'm not exiting the system. You're staying in the system, but you're getting better security guards. Is that what's happening? Exactly. Exactly. So Spark is like almost all it's like all or nothing? Is the Spark difference in that regard? Spark Spark is either you trust the operator
[00:29:10] Alex B:
or you go back on chain. Or you exit. You exit completely. Which obviously, I think, ultimately the option, you know, I think we're building those systems because we imagine that eventually the cost of exiting is going to be rather prohibitive. Expensive. Yeah. It's gonna be expensive. So for me that's kind of like the major difference. Something else that, for I think builders that are a little more, I don't wanna say ideological but kinda like conscious of the sort of holistic parts of the Bitcoin system is that when you consider a system like Spark where you're moving that money off chain Yeah. You're transacting all the time but you're not, you know, ideally you're not going back on chain. Right?
But the problem is there is no feedback mechanism between the off chain and the on chain layer. And what I mean by that is that spark creates little to no demand for the Bitcoin block space. No on chain burst. That's a benefit and a curse. Right? I mean Depending on how you look at it. If you're if it depends on who's paying the the cost of this block space consumption, of course. But in a way, for the system, it ultimately is a bit of a downside. Right? Because you would expect to have something that sure does not require a single individual to effectively pay the security budget of Bitcoin. Right? Right. Because we all know that's very unlikely to happen.
But you have this expectation that these layer twos are going to kind of, like, feed back some sort of economic demand. Like, even with Lightning, like, every Lightning channel is an on chain transaction.
[00:31:05] ODELL:
Right? At least two it's probably two on chain transactions, an open and a close. Yeah.
[00:31:09] Alex B:
But the interesting thing that we're seeing seeing with Lightning, we all had this notion that sure, as Lightning gets more popular, indeed, it's going to result perhaps in more, you know, on chain, like channel opening, channel closing, kind of rebalancing operations, and all of that. But what we're, I think, noticing right now. Right? Because I think Lightning has never been more popular than it is. Yeah. Regardless of whether you wanna make the case that a lot of the usage is custodial. Mhmm. There is, there is significant adoption of Lightning.
But what we're seeing is that when you think about the optimal use of Lightning, you know, it's a bidirectional channel system. And the sort of mathematically optimal use of that those channels is perfectly balanced. Right? There's people receiving and sending. People each counterparty is receiving and sending to the other counterparty equally. Right? Yeah. And because the only reason why you would need to do channel closer or reopening channel or rebalancing is because you have an imbalance. One side is paying too much. Exactly. Saving too much. And this was the case early on with Lightning. We had a we forced a lot of applications, a lot of use cases into these sort of very convoluted, lightning network, flows where all the money was going in one direction.
And then that node is sucking up all of the liquidity in the network. And the only way for that node to redistribute or rebalance is to hit on chain Yeah. And then and then generate transaction. But now we're getting to a a stage where I think the lightning network is getting getting a lot more healthy. We have better balanced relationship between those channels. And as a result, it actually doesn't create,
[00:33:09] ODELL:
on chain demand. Right? Well, those are because, like, the
[00:33:13] Alex B:
the b cashers were kinda right. Like, we have kind of hub and spoke to Oh, yeah. No. A 100%. No. The b casher were absolutely correct in that. And, like,
[00:33:22] ODELL:
they're like, like, async can manage liquidity better than
[00:33:27] Alex B:
me managing my lightning. Oh, I mean, yes. Exactly. So, so you know, this
[00:33:32] ODELL:
But yeah. So like so so what the result is you just don't see that much on chain activity from the lightning channel. Exactly. Exactly.
[00:33:40] Alex B:
And so But you still see some. I mean, it's paying for a bit of a negative thing. You still see some. And to be fair with, with something like Spark, you also Yeah. What would the on chain activity be on Spark? Basically, they need to create also kinda like,
[00:33:57] ODELL:
fees settlement transactions?
[00:33:58] Alex B:
There's there's I mean, it's not exactly what I would call settlement transactions. But with state chains, at least for now without, you know, covenants or anything like that, but eventually the state chain expires. Okay. Right? Because the state chain is based off fresh? Yeah. Yeah. The state chain is based on decrementing time locks. Mhmm. And eventually, you run run out of time to decrement. Right? So they need to kinda, like, swap this into a a new, a new, state chain tree, if you will. Mhmm. But that is kinda very minor,
[00:34:37] ODELL:
sort of footprint on How often are they doing that? I I don't know how often they're doing it right now. So how often is how often is Arc hitting the chain?
[00:34:45] Alex B:
Well, I mean, at the moment, you know, we're just bootstrapping, so it's it's negligible right now. But what I envision, what we envision Yeah. What I envision is that, Arc is going to be Arcade is going to be a significant driver of demand for Bitcoin block to the tune of So is Arcade the company? Creating transaction. No. So ArcGods is a company. Okay. But ArcGid is the implementation of Arc. This comes back down to what I was saying earlier. Right? Is that Arc is not a layer too because Arc is not a network. Like Lightning is a network. Right?
Arc is more like and this is going to require some, knowledge outside of Bitcoin, but ARC is more like roll ups. Okay. Roll ups and Ethereum and other networks are a same kind of architecture like ARC. They are client and server sort of system. Right? Okay. All a massive users connect to the same server and interact with each other. The servers keep in the state. Exactly. Exactly. And so just like roll up is not the layer two, the layer two is base from Coinbase. Right? The layer two is Arbitrum, the layer two is OP Optimism.
So in the same way that there is going to be different Arc implementation, there is the guys also their own flavor of a layer too, but if they call it Arc, it's going to be a little bit confusing because ultimately ARC is the technology underpinning the so they might I mean, their own reference implementation is called bark. So maybe they call it bark. Right? And there's So we're gonna have ARC, it's bark and Well, I I mean, so the one of the reason why we also kinda not pivoted, but, you know, when all in in the arcade direction is we felt then that we were able to kinda, like, own our entire narrative and kinda, like, control That's why you keep saying arcade, arcade, arcade. Arcade. Yeah. I mean, it's important for us because all like I said, ARC
[00:36:45] ODELL:
has evolved quite a bit from what it was originally proposed as and what we feel like is the best application of it. But Okay. But I interrupted you. I interrupted you. So on and I'm gonna interrupt you to find people that I've interrupted you. Yeah. So how often do you think at scale, like, how often is an ARC operator
[00:37:06] Alex B:
I think your name? I I I think the ARC operator is going to be creating commitment transaction every five seconds. Oh, shit. So, like, a bunch of block. Oh, so we're gonna be filling, like, the the the the the shit out of the block, you know? Because basically, depending on what the user is doing That's interesting. I mean, you know, all ultimately, globally, you know, and what I'm talking about is a is a perspective where, like, you know, we have a a fucking a trillion dollar economy in arcade. Right? Right. Right. And so what happens then is you have different set of users, different set of applications that are all looking to settle their off chain balance
[00:37:45] ODELL:
at different times. Right? But does that not get prohibitively expensive?
[00:37:48] Alex B:
No. Because you're advertising the cost of settlement across, a 100 A billion users or something. No. Well, not not a billion. Hundreds or thousands of users. So so when you're creating one batch. Right? Yeah. Right now and it's so it's still early days. But right now, you know, we're we've been able to do test. We haven't necessarily pushed the limits, but we're feeling pretty confident about adding, for example, like, around a 100 user in a single batch. So it's a 100 user that are splitting the cost of a single on chain transaction. No. That's not bad. That on chain transaction is a vanilla Taproot one out one input two output transaction. Right? So it's it's very cost efficient
[00:38:30] ODELL:
and, you know, obviously No. Yeah. So that's not that bad. Yeah. Exactly. And that's the big thing like if you get CTV or something, that would be cheaper. Right?
[00:38:39] Alex B:
It would not really be cheaper. No. So what is the soft fork change? The soft fork change, it depends who you ask. But really, from our perspective, what it would allow us is probably a little less overhead. So, yes, you know, we'd probably be able to squeeze a bit more people in, like, a batch.
[00:39:04] ODELL:
Per transaction. Per transaction
[00:39:06] Alex B:
because we're also removing, like, a round of communication. Okay. Right. Because when we're creating that transaction, the operator say, hey, I'm creating a batch. Who wants to join that batch? Right? And then the users say the user register for that batch. Right? So it's almost like a coin join coordination. Right? Yeah. Like the user has to be online. There is exactly. There's there's some interactivity required there. Right? And so it as anything that involves interactivity, if you introduce a covenant soft fork, then you're removing some of the interactivity. So they might not have to be online to be a part of it. They're gonna be online they have to be online to kinda, like, declare their attempt to join the batch and specify the settings, but they're not going to have to stay online as long to wait for the feedback from the because all they're gonna do is they're gonna sign the transaction.
And because we have covenant, they're gonna say, this is a transaction that I want. This is the output that I wanna give my take care of it. And the operator is not gonna be able to change any of that. Either he takes it or leave it. Mhmm. And then that that's over. Whereas with the, you know, without Covenant, there's a bit more interactivity. We really don't think that it's a big deal because, ultimately, it's also, like, the interactivity is a problem if you're thinking of your set of users as strictly users that are on mobile phones, maybe with spotty connections and whatever. Yeah. Absolutely, those those users exist and, you know, there's gonna be a need to create solutions, improve the efficiency of the system to better address this.
But ultimately, especially for what we're building which goes beyond, you know, retail payment, really, it's very possible a large set of our users are actually people running servers already. Really? Why? I mean, for example, think of Nobody runs servers. No. That's not true. I mean, a lightning node is a I know. I hate it. We don't wanna run lightning nodes. Well, we don't wanna run lightning node. Well, we don't wanna run lightning node. But lightning node infrastructure provider, right, can use So they're running it. So they they might be running a server, but So if I'm using Bullwala,
[00:41:16] ODELL:
they're running the server. Well, I mean Is that what you're thinking in your head? I don't know which server you're Well, no, no. I'm saying it's still early, but I'm saying in a year in five years or whatever, if BullWallet is using ARC, and I'm using Bull on mobile Yeah. You're saying they're running the server? The ARC server? Whatever. I don't know. The interactivity that you need on the Verizon server. No. I mean,
[00:41:43] Alex B:
they're going to run a piece of software on their server that will allow you, yes, to perhaps,
[00:41:50] ODELL:
get that the mitigation is what I'm saying for the loudness? Like, is that how you're thinking about it? Or Yeah. There are things like that. I mean, I'm on the average user isn't actually gonna be running a server. Like No. No. No. No. There's zero expectations that the average user is running a server. They're gonna be on mobile actually probably. Like, if you wanna talk about, like Yes. Yes. And no. It depends on the a 100,000,000, a billion people using Bitcoin, they're gonna be running it on mobile. They're not gonna be running it, server twenty four seven.
[00:42:13] Alex B:
Yes. But that is only the perspective of, only a section of the market that we're building for. Right. Fair enough. A part of our market is also going to be market makers creating, markets Like, DeFi shit. DeFi stuff. Right? Yeah. And the DeFi stuff guy is going to have a desktop running. Most likely, he's never gonna turn it off. Okay. So let's talk about the DeFi stuff because we've been mostly talking about payments. Yeah. Like, what do you see there? I mean, there's a lot of low hanging fruits. Right? We're thinking about, like, just Bitcoin back loan. Obviously, you can do that on chain in very sort of, like, conventional multi signature escrow if you wanna get a little more Huddle Huddle or something. Exactly. Huddle Huddle, Debitfy, Firefish, and and all of them, or you can do DLCs if you feel a little more fancy, you know. Yeah. Like, what Lava is doing. But ultimately, you know, when you're instantiating those contracts, you're required on chain block space. Eventually, that's going to be prohibited. It's getting expensive. It's getting expensive. Obviously, if you're processing a loan for, you know, 1 Bitcoin or like $5,000,000,
[00:43:21] ODELL:
maybe not a big deal. Right? Right. I'll pay a $30 fee. I don't give a shit. Exactly.
[00:43:25] Alex B:
Exactly. But ultimately, there's also kinda like the experience around the instantiation of the loan. Right? If you wanna create a consumer retail application where you don't wanna have to get the user to wait, you know, for a block confirmation to get his, you know, whatever. They're borrowing US dollar. They wanna you know, they have to wait right now to for the confirmation. UX billing. Exactly. Exactly. So in ARC, we have this instant execution environment that allows us to address this. But it gets even more interesting. Do you think the end user in that situation is running a server? Like, I'm taking a $10,000 loan running a server. Right? No. There's no need for that to run a server. Okay. Yeah. Absolutely zero need for that to to run a server. Server. The only thing running the server is the ARC server. Right. That's the server that that everyone connects to. Okay.
So I I can I confused that for a second? I was a little bit Yeah. No. When I yeah. No. When I meant when when I when I said server, I just meant, like, you you know, the different clients, you know. So you have clients connected to the the client can be also like a node, you know. The client can be Like, maybe running on a start line or something. Yeah. So yeah. Exactly. Someone that's running a start a start nine. So they're not running the Arc server software, but they have a device that's always on is what I meant. Right? And it's connecting to their phone or whatever. It's it could be connected to their phone. Exactly. Right? You could have this kinda like watch tower. You could operate your own watch tower. Again, I don't expect most people to do that. Right? Right. But so yeah. Loans is an interesting case.
And, you know, we can get even more, fancy with that because when we're introducing with ARC, in Arcade really is that because we have this off chain environment that operates outside the confine of Bitcoin consensus, we have the ability to enforce spending conditions that are not available on Bitcoin. Right? Okay. So what we're doing is we're actually introducing op codes that don't exist on Bitcoin. Okay. We're using the server to enforce spending conditions and, you know, you can think of anything like from UpCats to whatever. In reality, what we're doing is direct introspection.
Right? So it's more like what the the opcodes that are already on liquid right now. Yeah. So we're getting rid of the inefficiency of op cap because op cap is just yeah. Sure. You can do everything with it, but it's actually the the least efficient ways to do it. So we have op codes and script components that allow us to design systems where, for example, we can, if you have a loan market
[00:46:09] ODELL:
Yeah.
[00:46:10] Alex B:
We can actually create a secondary market for the collateral of the of of the of the users that are taking loans. So you can kinda like say you you've given a loan or whatever, you can trade those loans positions and to the average person that doesn't mean anything. But in the financial world, this is exactly how these things work. Right? These kind of like loans, these kind of structured products And then they're like a liquid secondary market Exactly. For loans. Exactly. Exactly. And so Interesting. So this is this is strictly for loans. So do you think that's a bigger market than payments? Oh, absolutely. A 100000%.
[00:46:47] ODELL:
At least in the short to medium term. Right?
[00:46:50] Alex B:
I think Or just in general? No. I I think in general.
[00:46:54] ODELL:
I think in general. Because I really So it's more like a financial derivatives protocol.
[00:47:00] Alex B:
Yeah. I mean, that's what DeFi is. Right? DeFi is financial derivative. And I think the big, big, big, breakthrough from that respect is the fact that actually, the it is the cycle of financial derivative. It is the cycle of financialization of Bitcoin. Right? When you look at Bitcoin treasury companies and what Michael Saylor is doing okay. So there's two components to what Michael Saylor has been doing. Right? One which had kinda like Ponzi like seemingly Ponzi like dynamics for quite a while, which is this notion that he would just accumulate Bitcoin and raise more capital via ATMs or via Yeah. So he's talked about Bitcoin. And and then there's just like perpetual, like, this this flywheel they call. Right? Mhmm.
But, interestingly enough, I think the markets mature and the markets also realize that this this strict accumulation flywheel was not enough to command, an actual higher and not meaning, you know There shouldn't be a premium. So should There should I mean, there should not be a premium strictly off of that. So then it becomes a conversation around, okay, how do you leverage your balance sheet. Right? Right. You have 600,000
[00:48:13] ODELL:
Bitcoin. What do you do with it? Exactly. And this
[00:48:15] Alex B:
is The perpetual credit Yeah. The exactly. The preferred stocks where you're creating fixed income financial instruments that are collateralized by Bitcoin that allow people in the fiat markets to get exposure to a certain asset that gets them a certain amount of yield with strong, you know, backing assurance. So when you think about I mean, ultimately, regardless of, okay, this is happening in TradFi. We don't necessarily approve with all of the Right. Mechanism behind it. But it's like, yeah, if you have a product that you're you're telling, someone you're gonna get them 10% yield and this product is collateralized by five x Bitcoin. It's probably pretty damn safe. Right? Yeah. So what they're creating is You're busy after assume that Bitcoin is going to zero or it has no Bitcoin. Or that it's just gonna stall and not grow. Right? Yeah. And what what this is really is credit. You know, more than more than derivatives, what this is is the the emergence of credit on top of Bitcoin. Right? And I think credit And so ARC is the protocol version of that in a way? I mean, ARC ARC is ARC is the ARC is the the the financial stack, the technology stack that can enable people to create credit instruments without requiring the counterparty risk architecture that TradFi, requires. Right? Because sellers coins ultimately are It's like six different layers of counterparty risk. Well, exactly. Say they're like a on coin base. Right? And all of that. Whereas I was having this conversation with Preston when he came to our arcade day and he was like, what if you have an on chain treasury?
What if you have a contract that is able to create so there's Seller has this, this product that's SDRC, right, Stretch. Yeah. So what if you have a contract where anyone in the world can deposit their bitcoin to it, they preserve you in a lot of low So I guess synthetic stable coin, basically. That's exactly what it is. No. But, like, I mean, people
[00:50:10] ODELL:
the problem is is that it's so obfuscated, that it's actually way more than just trusting Coinbase. Right? Like, you're trust if you're interacting with it, first of all, you're like trusting your brokerage, then you're trusting Coinbase, then you're trusting like executive leadership,
[00:50:27] Alex B:
MicroStrategy. There's multiple layers of counterparty risk Yeah. In the current setup. No. Exactly. And you can't reduce that significantly. Exactly. Because the game here, if you're introducing credit, with all things credit is like what is the credit worthiness of that product. Right? Yeah. And in the TradFi system, the credit worthiness is basically rubber stamped by companies like Moody's and all these rating agencies, right, that have access perhaps a little bit more, but still remains super opaque, you know, financial states. You know, like, so they but again, like you said, there's so many layers of counterparty risk that it's hard to get an accurate pricing in the market. And they've focused on Moody's book about 02/2008. Exactly. Exactly. Exactly.
Whereas if you have an on chain structured product, it's all there in the open. Like, so you can evaluate the credit risk, you can evaluate the technology risk, and you can make, you know, a a judge. So I'm not saying obviously these things are not for everyone. Right. Right? The average person is probably not to have to gonna have to be concerned with any of this. I would recommend everyone to just buy it. It's, you know Stammable Stacks hats. Stammable Stacks hats. Right? But there are people that are dealing, you know, with specific financial situations where they need to hedge their risk in one way or another. They wanna get you know, what if you just wanna get exposure to NVIDIA, but you don't you don't wanna have to buy the equity? Because you you currently exist outside, you know, you only have Bitcoin. You ex you exist outside of the TradFi system. You don't wanna pull your Bitcoin into a bank account to have to buy Nvidia.
Well, what if you can find a counterparty that's going to collateralize a product that's going to give you immediate exposure to, Nvidia? That product is gonna attract the, NVIDIA stock price and it's gonna be collateralized with Bitcoin. So in a way, you're able to ride whatever wave you want wave you wanna ride but, you know, without ever having to go through the equity purchase product. So we think that's kinda like Injection. The we think this is something that the arcade can do. And again, yeah, sure. It's probably more interesting for large financial institutions and things like that. But ultimately, I mean, there are things where because like you said, the idea of a synthetic stable coin, like maybe there's a case to be made. Like we're in Lugano, we're in the home of Tether. What if Tether decides and one of the I I tweeted about this and I think it's fascinating to think about because you look at Tether who is dominating the stable coin industry at the moment. Yeah. It's like not even caught. Yeah. And one of the thing that is truly special about them is that every competitor that is trying to catch up with them are, creating those systems where they're sharing the yield, right? They're they're they're they're sharing a portion of the yield they get from the treasury because they wanna incentivize people to To use it. To use their stable coins so that they can grow. Because otherwise, they're just gonna use Tether. Whereas Tether, they're not sharing so if you use USDT, you're not getting any of your They're all business models that keep the They're keeping everything. Yeah.
But then, what if Tether decides, okay, I also wanna create a system where, the users have some sort of yield. Right? I think I wanna share the wealth with them, but I don't wanna touch my treasury yield. Yeah. Well, they have a balance sheet of I don't know how many tens of thousands of Bitcoin. They have over a 100,000 Bitcoin. So they can move that to arcade, create a synthetic stablecoin, which actually is not really a stablecoin. It's, think of it like a neobank. Right? You're depositing your money into that account, and it's a savings product. Right. You get USD denominated tracking. Right? So it's a stable account balance that tracks USD.
But what happens is because, you know, this is collateralized by Bitcoin and Bitcoin appreciates in price, they can you know, what if Bitcoin has a CAGR of 35% and they give you new 7% in interest? Right. And they keep Right. Yeah. So if you're strictly interested in hedging maybe your Bitcoin holdings or for people, you know, that are. So what I what I think is gonna happen is, yes, I fully expect stable coins, normal treasury TBL backed stable coin to continue growing. There's a full trust in TBL. You're gonna have you're gonna have a dynamic where people like Tether are going to be able to collateralize synthetic stable coin, systems that are going to be perhaps as interesting and perhaps even more than, you know, the the normal USDT.
So you have two different dynamics there. And, I mean, I don't know how it's gonna play out, but it's gonna be super interesting.
[00:55:07] ODELL:
That's interesting. Okay. I'm gonna change gears real quick. So so you have a company called Arc Labs. Yep. And that's who's paying your salary. Correct.
[00:55:21] Alex B:
What's your role at Arc Labs?
[00:55:23] ODELL:
Head of ecosystem. Head of ecosystem. H o e. Okay. What is so that's a for profit business. Right? Absolutely. And then arcade and everything else is open source, fully open source stack. Right? Correct. So what is the business model? Do you have a business model for our guests? I mean What is the business model? Well, I mean, if you think about Arcade
[00:55:45] Alex B:
and, the way that it's currently structured, we are the one operating the operator. We're running the operator. And so, for example, when you're running the operator, you're earning a portion of the fees, specifically when it comes to settlement. Right? Okay. So we expect the off chain transfers to be practically free. Right? Because this is just the database update. So that's not really a money maker. Well, the off chain execution is not necessarily a money maker. Okay. But what happens is when you're when users are settling, right, because there's this liquidity component that we haven't, discussed. Right? With with with Ark and with Arkage, which is Which is liquidity component. Yeah. The liquidity component is when the users are settling, when we're creating those batches. Yeah. The person that is putting up the collateral, you know, creating that on chain transaction and the associated Bitcoin in that UTXO is the operator. Right. Right? So he's using his own liquidity. And so that liquidity, is effectively an opportunity to, you know, you need to charge an interest to the users that are, you know, using this system. Right? So you get so like a Bitcoin native yield. Right? Mhmm. So you're able to capture value in that way.
[00:57:01] ODELL:
What does that look like? What does it it looks like a transaction fee is what it looks like? It's a transact yeah. For the user it's a transaction fee. And it's like what, like the 1% range or something like that? No. It's gonna be probably,
[00:57:12] Alex B:
much smaller than this.
[00:57:14] ODELL:
Okay. But you think it just scales? There's just so many transactions. Exactly. It's gonna scale with volume.
[00:57:19] Alex B:
It's going to it's going to have different profile. It's almost like, because imagine I create a batch because, again, that's the other thing we didn't think talk about. And Probably, we shouldn't because this is getting into the details, but there's an expiry aspect. Right? Okay. And so depending on the batches that you create, it's just like in anything in finance. You have different, durations. Right? So if the operator has to, tie up his money into a batch for six months, then they're going to charge a higher interest rate because, you know, that liquidity is locked up for longer. If it's short, then that interest rate is going to be smaller. Right. Because then the moment that this batch expires, they get their liquidity back. They can do you redeploy it. Right? So I mean, it's it's very hard to model exactly how it's gonna play out. Right? Because it's a market. It's impossible to predict how, people are gonna use it. But that is one of the fundamental, revenue model for for our collabs.
And ultimately, you know, obviously, certainly it's an infrastructure play as well. Those are difficult. They they are, you know, quite a challenge to monetize, but I think in a way, you know, and me coming from, you know, originally having worked at Blockstream Yeah. In the early days and, you know, the the original promise of of Blockstream is kinda like this this red hat type of model Yeah. Open source model. Well that was the first thing I thought of when you said infrastructure. It's like the red hat model. It's it's basically what I hope happens and, you know, no shade to the Blockstream people, but I think, ultimately, I think our class succeeds, where, you know, Blockstream perhaps was not able to, which is kinda like
[00:59:07] ODELL:
It's something on, like, the liquid side. Right? Exactly. Exactly.
[00:59:11] Alex B:
But,
[00:59:12] ODELL:
And what does that look like? That looks like b to b support contracts and stuff like that? Or Yeah. Exact I mean, there are there's interesting ways, you know, it's still early days.
[00:59:21] Alex B:
And right now we're gonna be the run running the arcade operator. Yeah. But it's also possible that, like, say a JPMorgan comes knocking through our door and say, hey, like, we like your tech, but, you know, we don't want you guys to be running our We wanna operate it. Yeah. We wanna operate it. Right? Yeah. So then what happens is, yes, you have like a kinda like a service contract agreement where, like, you're deploying, you're maintaining the infrastructure with them, you're advising them on all of that, and they run the operator and it's something like that. Right? But they still want you to kinda manage it. Right? I mean, you I mean, maybe they have a team also internally that manages it, but it's also, like, you know, you're you're creating, you're innovating, you're contributing back. Right? Exactly. I mean, to be clear here, I think
[01:00:05] ODELL:
the holy grail would would be for you to be a sustainable profitable business that manages an open source protocol. Like, that's fantastic. Because, like, I've I've been in the trenches raising charity charity funding for
[01:00:22] Alex B:
for open source software, and it's difficult. It's like a never ending grind. Right? No. No. No. Exactly. I'm a capitalist. Like, ideally, you have a sustainable Yeah. But it's gonna be hard. It's gonna be a hard grind. Well, I mean, we have another there's also there's another component because we're fully convinced of the challenges of this and Yeah. One of the thing that we also sort of realized very early on is that, the most, you know, when you look at the end of the day at the outside of the Bitcoin industry and the crypto industry in general, so the most popular platforms, some of the most popular products, the most successful ones have been the ones that also launched with some sort of like, what you would call like a flagship product. Right? Yeah. So think of something like hyper liquid. Yeah. Right? There's kind of like the hyper liquid blockchain with no one really used. And the hyper crushing like the actual Hyper liquid is the flag ship product and they're just printing money, right? It's like bid max on chain, right? Yeah. Or so imagine exactly. Exactly. So imagine So is that actually on an it's on their own l one? They have their own chain?
Yeah. But, you know, it's, it's it's I feel like it kinda came out of nowhere. It's it's a it's a it's a blockchain that's run by, like, like, 10 validators.
[01:01:34] ODELL:
Right. It's like Tron. Yeah. So But anyway, your point is is like they have this BitMex that runs on the chain and that's what everyone Exactly. No. But yeah. Exactly. So my point is it's important
[01:01:46] Alex B:
to have a vision of like what is the best application of the technology that we're building. Right? Because if you're building this entire software stack, it should be especially us. I think and that that I think that was also kinda like where, you know, Blockchain has been struggling is they were, you know, fundamentally technologist,
[01:02:07] ODELL:
engineers They're like little too many engineers about it. They were like, we're not gonna build the apps. Exactly. Exactly. Other people can build the app. Whereas whereas
[01:02:15] Alex B:
our background, when you think about, Tierro, Marco, and the the, like, Kooks now who's our CTO with BTC based server, like, we have some sense of protocol design and we're developing the the back end, but we're also very much product people. Right? So we we think that because we have an intimate knowledge of how the system works, we also should have the ability to build the best applications on this system. You can monetize that app instead. Exactly. So one of the thing that we're thinking about quite a lot is actually bringing back back, what Marco started with Fuji on, on on on Liquid, which Fuji was, the basis, the foundation for Bitcoin backed stable coin. Yeah. But it was based on this synthetic product model. Right? Which could apply which they originally productized to apply to the Bitcoin backed stable coin, but which we can use to build an entire financial stack. So our thinking is like okay, what if we find a couple of partners and we build the next
[01:03:15] ODELL:
the true next Bitcoin backed NeoBank. Right? Yeah. Where I mean, you know what I would like and take this with a grain of salt, like a a proper Bitcoin Poly Market competitor. Like a prediction market. Exactly. Like, I feel like art could be ideal for that. A 100%. We have, like, we have, like, a design, like, scraps of design to how to Like, I've been waiting for prediction markets for Exactly. Fucking a decade. And then, of course, like, it's a Polygon
[01:03:42] Alex B:
project that, you know, defines product market fit. Well, what you need, you know, what you need, to to be able to do this is these, these liquidity pool, primitives. Right? These these AMM primitives. And you haven't been able market maker primitives. Yeah. So you haven't been able to do to get that in a in a way that is, you know, Bitcoin. Again, sometimes I hate to use that word, but really I don't know the better alternative, but like Bitcoin native, like close to Bitcoin. It doesn't require counterparty risk. And we're able to do that, on on arcade.
You know, it's on the road it's on the road map. I don't know if we're gonna be the one building it, but yeah. These are the kind of things that we think of it. I think that could be a killer product. There are when you think about it, there are really like I I think I can count like in a single hand or perhaps two, the amount of actual defi products and services, with product market fit. Right? And a lot of these involve, like, a very small set of technology
[01:04:44] ODELL:
premiums. What is it? It's like stable coins, loans Uniswap. 100 x Just swapping. Pressing the 100 x x button and prediction markets. Yeah. Well, yeah. And then yeah. And then swap. And then I feel like a huge product market fit in the space is just like if I had an app that I could just, like, click a 100 x. Yeah. Like the UX was just like a big like I just load it up with Bitcoin, just press 100 x on it. Yeah. Like a Binance. It was just a Binance, but, The opposite is stay humble success, but there's huge product market for it. A 100%.
[01:05:14] Alex B:
A 100%. Yeah.
[01:05:16] ODELL:
But, yeah, your your point is just like and there's some, like, base level primitives that enable all of those. Exactly. It's not like, you know, for a while early on,
[01:05:24] Alex B:
even if you were just mildly as an outsider interested in tracking what, like, the Ethereum ecosystem was doing or, you know, for a while, they were talking about smart contracts, putting smart contracts on blocks to Your refrigerator. Yeah. Exactly. And then now it's really, like, you know, all of this facade really fell apart completely, I would say, like, this cycle where it's very much explicit that the use case for, what they've been building with, like, you know, like, what is the biggest app? Pump dot fund or Polymarket? Yeah. So it's full degeneracy, and, you know, Polymarket is a bit of degeneracy in its own way. It has different interesting application, actually. You know, it's kinda like leveraging the markets to be able to, see where the world is going.
But, ultimately, yes, it's just like there really isn't, like the reality is that we're just rebuilding the financial system and everything that's always existed in the financial system.
[01:06:22] ODELL:
But My partner my partner at 10:31 says it interesting. It's it's, a lot of people say, like, the financialization of Bitcoin, but it's really the Bitcoinization of finance. Yeah. That's But you're not really coming maybe you can make the argument that prediction markets are something novel that just weren't possible, but most of it is
[01:06:44] Alex B:
just improving on what has already existed Oh, yeah. By the way. Yeah. It's it's things that always existed with, different forms of collateral. Yeah. Right? Collateral assets. So what I say is just like it's like twenty first we had we had we have twenty first century, assets. We need twenty first century infrastructure. Right now, it's already on twentieth century infrastructure.
[01:07:05] ODELL:
Awesome. Okay. And before we wrap, so in practice, like, users excited about ARC, like, is there a way for people to play around with it now? What's the timeline like? What are we looking at? Yeah. We have our reference wallet implementation available at arkade.money.
[01:07:23] Alex B:
Okay. So it's arcade with a k, a r k a d e. So you can use that to send, receive on chain, off chain. Is that like a PWA that's a web app? It's a PWA right now. Okay. And we're gonna be trying to make improvements to that. You know, it's not a necessarily a commercial project for us. We're not really in the business of, like, making a reward product. Yeah. But it's It's like a proof of concept. Exactly. It's useful for us to help us guide also the direction of, like, how we implement the protocol, what are the UX quirks that we need to think about to help the developers build on top of our platform.
So but people are free to use that. It supports Dolts, native swaps. So, you know, arguably, I would say, okay. Right now, you know, it's still a beta product. The arcade, main net is still a beta platform, but, we're gonna get very close, especially if someone, I think, decides to maybe port that into, you know, iOS native or Android native environment where you have a little bit more, perhaps better security as well, you know. And if someone decides to do that, I think, you know, very, very quickly, this is gonna turn into something that rivals all of the best, lightning wallets out there. Because I truly believe, as much as I respect the people that have been building, in this in this lightning industry for, forever, I truly believe that the model of, user channel, you know, this paradigm of retail wallets having channels open to the LSPs is obsolete. Yeah. It was, never going to scale in the first place because the technical challenge are one thing and they're pretty, consequential, but ultimately it's a matter of economics and like the economics of it don't make sense. It's gonna be too expensive. You cannot have a Phoenix that operates channels for billion users.
They're just gonna have liquidity stale everywhere. That'd be insane. Yeah. So, you know, and then they're gonna have Even as it is, they have, like, I mean, I don't know how many users they have. They maybe have 50,000 users or something. And it's it's And like load node is fucking huge. Yeah. And it's mildly expensive. Right? I mean, depending on okay. If you're sending $10 $10, maybe
[01:09:38] ODELL:
maybe not. But Well, if on chain fees go up, it'll get very expensive too. Yeah.
[01:09:44] Alex B:
So so yeah. People can try this out. Otherwise, you know, arcade0s.com is our website. Okay. We've got what I think is a pretty decent set of documentation around, you know, our subjective implementation of the ARC protocol and how we see the vision evolving, specifically when it comes to building applications. Because this is going to be really, I think, what brings people because, you know, we had this notion of building on Lightning for, a long time. Like you said earlier, like, it just doesn't like, it's it's not a thing. Like, you can realistically, you cannot build anything on Lightning but, like, a wallet or, like, a a back end infrastructure for settlement or things like that. But in terms of building applications that, you know, people are expecting, to interface with financial products and all of that, you know, my goal as head of ecosystem is to get the people that moved on and try to build whatever they wanted to build on other networks because they had no alternatives, bring it all I know it's a bit cliche, but I truly think like there's some talent there that we can bring back to Bitcoin. Yeah. And it's going to, make the entire stack a lot better. Because the financialization, it sucks in a way that, yes, the suits are here and they're dominating and they're everywhere.
And for people that bought into the original ideals, it's a feels a little uncomfortable. But I truly think it's the stepping stone to the to the medium of exchange goal that we all are pursuing. It's like you wanna have a financial infrastructure in place where the people that are accepting Bitcoin for payments at a large scale, eventually, they have financial tools to kind of, like, if they need to hedge themselves They never have to leave the system. It's a yeah. Exactly. You need to close the loop, and this doesn't happen on the vacuum. You know, you need, like, you need professionals. At the end of the day, like, the bankers, yes, like, there's a class of bankers that are purely extractive, but banking happens to re for a reason. It's a question of capital allocation. Right? It's a question of, like, you know, creating liquidity in the system, and we're not quite there yet. But I think this is the process we have to go through until we get to truly, like, you know, hyperbolic Bitcoinization.
[01:11:57] ODELL:
Fair enough. I've got one last question for you, actually. So like right now, Arc Labs is running, I guess, an arcade instance. I don't know how you refer to it. But like Operator. We call it the arcade operator. So you're running an operator. But you expect there to be there's gonna be many of those. Right? It's gonna become a competitive landscape or how do you looking at that? I mean,
[01:12:18] Alex B:
I I do expect there to be in the future different instances. Because like I said, maybe it is the case that Robinhood
[01:12:26] ODELL:
comes and say Right. Or JP Morgan or something. Yeah. Exactly.
[01:12:29] Alex B:
But it's hard to predict exactly. Like, I wouldn't say there's going to be There's not gonna be a thousand. Yeah. There's not gonna be a million of them. Is there gonna be a thousand? I'm not even sure. It's like a network effect thing. Right? Yeah. Exactly. Like, there are benefits to network effect in fact in this case. Right? And ultimately, like, you know, there is this and this gets into a different conversation, but really like like if we have a technology like this where okay. Say in the best case scenario we have a thousand of these entities Yeah. Spread across the globe in a very decentralized way. Right? It doesn't have as many nodes as Bitcoin but it doesn't need to. Right? Because this is the second layer. Right.
But if we have like a thousands of these competitive market dynamics actor, right, again this is the promise of, like, we're we're recreating banks and these are not going to be the banks of the past that custody your asset. Right? But these are going to be the banks of the future that allows people, innovators to build products and services and where your self custody fund can interact with, without while preserving your sovereignty. But what do banks do is they create markets. Right? They're more like a coordinator. Right? Exactly. They're a venue for capital. Right? And that's what those entities eventually I think are going to It's like what it's, I mean, it's like Hal Finney's original vision. And exactly that's exactly what it is. I think, you know, Hal Hal said that they would issue, their own, currency. Right? Right.
I I don't know exact I don't imagine necessarily that this specifically is going to play out. But certainly, when you think about it, like and I I saw some some Bitcoin treasury guys say that. It's like it's it's very much a little bit like what,
[01:14:17] ODELL:
Bitcoin treasury companies are. Right? What is a bank? But like Bitcoin treasury companies are like almost like a hack in comparison to something like this. Right? Because it's, like, it's not Bitcoin native. It's not cryptographically
[01:14:28] Alex B:
verifiable. It's not Oh, yeah. I mean yeah. Yeah. I mean but I think they're just, like, the the early manifestation. Right? Right. But would you agree would you agree in premise
[01:14:36] ODELL:
that, like, a successful ARC scenario
[01:14:42] Alex B:
is one where there's more there's more than one operator. Oh, yeah. A 100%. The question is, like, there there there probably isn't a shit ton of operators Yeah. Because of network effect. Yeah. But there'll be a competitive marketplace for operators. Because you want the competition. Right? You want That's what keeps it user centric. Exactly. Exactly. You want the rates and and ultimately there is like, you know, there are there are scenarios that are pretty disastrous if there's only one operator Right. And then the operator goes away and it's like, oh, yeah. People have like, You can exit. You can exit, but now there's a fucking there's one door and there's 1,000,000,000 people trying to get out of that door. It's gonna be a bit of a mess. Right? And then also, like, all financial products would just not work for whatever. Yeah. No. Exactly. The whole fucking system, the grind is still a hole. Yeah. That's not, like, the best outcome. Fair enough. Okay. Awesome. Alex, this is fantastic.
[01:15:31] ODELL:
Thank you for enlightening us. Do you have any final thoughts for the freaks before we wrap?
[01:15:38] Alex B:
I mean, freaks just don't get caught up in the noise. Ignore all of the stuff that you're, probably, you know, all of the medias right now. The social medias are are being plastered with. Specifically, when it comes to the Bitcoin community, I think, you gotta focus on and I'm not necessarily wanna put the spotlight on what we're doing, but there remains, like, a contingent of people that are pushing the boundaries of what's possible in Bitcoin, not coping with, like, you know, this new reality. I always say, like, the more interesting people, that I meet in Bitcoin is are the ones that have been able to adapt, to, the change. Right? And to kinda, like, you know, kind of like, roll with the punches a little bit. And I think a great example of that was, was Francis, at our, arcade day the other day. Francis Pulia, Notorious, like Laser Eye Maxi, Anti Ship Corner, Supreme said verbatim that arcade for him is the first thing ever where he actually started considering that there might be value in DeFi, you know. Yeah. And it was, like, impressive for me and I think I was really grateful to to hear this because I know that Francis is smart enough that, like, you know, you don't need to fucking, like, be completely orthodox with everything.
You need to be able to kinda, like, adapt to the reality of what you're building. And so yeah. Whether it's us or whoever else, like, I mean, you know, all of the spam stuff, man, that's a distraction. Like, it really is, like, it's a way for, whoever is pushing all of that stuff to distract you from the progress that being being made. So yeah. Just just take the white pill a little bit and then and stop just, getting caught up in this in in in in this stuff. There's a lot of great things being built. I love that. I can relate to that. Anyway, freaks,
[01:17:38] ODELL:
hope you enjoyed this conversation. Maybe, maybe not. There'll be more conversations from Lugano that I'll publish. We'll see. As always, all links, for the show right silhouettedispatch.com. Share with your friends and family. I'll put all of Alex's relevant links in the show notes. Yeah. As Alex said, stay focused, stay humble, stack sets. Thanks, Alex. Peace.
Arkade Activation Day in Lugano
What is Ark? Positioning vs. Lightning and L2s
Ark fundamentals: batching, VTXOs, and two-of-two with an operator
Double-spend risks and the operator trust model
Settling vs. zero conf: anchoring batches onchain
Beyond cheap payments: programmable offchain Bitcoin
Ark Lightning swaps and unilateral exits
Unilateral exit costs, trees of transactions, and anchoring cadence
Wallet UX: automating settlement and exposure management
Ark vs. Spark: security model and settlement feedback to L1
Onchain demand: Lightning realities, Spark cadence, Ark batches
Ark is tech, Arkade is implementation
Batch frequency and scaling: hundreds per batch, Taproot efficiency
Covenants soft fork would cut interactivity overhead
Users, servers, and always on clients: who runs what?
DeFi on Arkade: loans, new opcodes, and secondary markets
Credit, derivatives, and Bitcoinization
Company model: Ark Labs, open source Arkade, and revenue
Flagship apps strategy: neo-bank, swaps, prediction markets
Try it today: arkade.money PWA and roadmap to native apps
Operators landscape: competition, network effects, resilience
Closing thoughts: adapt, focus, and take the white pill
