Citadel Dispatch

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EPISODE: 0.2.0

BLOCK: 681951

PRICE: 1837 sats per dollar

TOPICS: the liquid network, bisq, bitcoin privacy

@adam3us: https://twitter.com/adam3us

@wiz: https://twitter.com/wiz

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[00:00:00] Unknown:

Do you have a strong view about cryptocurrencies like Bitcoin   given all the things you just said?  

[00:00:07] Unknown:

I think that it is healthy   to have   competition   in currency.   I think that, we're looking at a very interesting   future competition. For me,   it's it's less interesting to talk about central bank digital currencies.   I'm interested in the people who are more oriented toward the decentralization   of monetary and financial power, who really wanna return money to its basic function   of being a reliable unit of account, a dependable store value.   I'm not suggesting that the cryptocurrencies   have attained that because, for the most part, when you wanna buy something with them, you you still have to translate them back into the local currency, and so their value seems to move. But I do appreciate the idea   that you want a currency that means the same thing on both sides of a of a supply and demand transaction   between the producer and the consumer,   And that is where price signals do their magic if they are accurate   and they provide clear signals to all parties involved in the transaction.  

And so it's it's very interesting to see how this will shape up between   sovereign created currencies   and privately created currencies,   and you'll get back into the old arguments. It's useful to look at monetary history   between Robert Mundell   and Milton Friedman   and looking at Friedrich Hayek who predicted decades ago   that you would have   private currencies   that would compete and provide a better product   than sovereign provided   currencies.  

[00:02:28] Unknown:

What is up, freaks?   Happy Bitcoin Tuesday. It's your boy, Matt Odell, here for another Citadel dispatch.   This is episode 20.   Pretty fucking crazy that we're already 20 dispatches down.   Citadel Dispatch is the interactive live show about Bitcoin distributed systems privacy and open source software.   That intro was Trump's Fed nominee, Judy   Shelton,   who sounded like a Bitcoiner to me.   That was kind of crazy to hear her talk about it like that on CNBC.   Free nations should be prioritizing open monetary competition.   Shout out to the freaks supporting the show.  

It would be nothing without you guys.   I wanna keep this ad free forever.   No sponsors.   Community funded.   This is how we do it.   So thank you.   And shout out to the ride or die who are here for another live show.   Without you, this would be nothing.   So   our platforms now are Twitter, Twitch, and YouTube as usual, but, also, we are now streaming live to Bitcoin TV,   which is pretty fucking cool, which Wiz is hosting himself.   If you do watch it through Bitcoin TV, you cannot use,   the live chat to to be a part of this,   but it is what it is. We are working on it. We are iterating, and it's fucking dope.  

And then last but not least, I just wanted to shout out to everyone that comes in through,   both of our audio streams, but especially,   those in the Sphinx tribe   and Breeze and other podcasting 2 point o apps. It's pretty cool that we can stream value,   directly   to content creators, and being a part of that equation with you guys is really special. It's it's really cool seeing the Satch stream in.   With all that said, I mean, I'm really excited about this show.   As I said, it is the 20th dispatch and seems really fitting,   that we have Adam back here, a legend in the space and cofounder of Blockstream.  

How's it going, Adam?  

[00:04:35] Unknown:

Pretty good. Always lots to talk about in the,   Bitcoin   tech space.  

[00:04:41] Unknown:

And we have Wiz joining us again.   Project you know, one of the project leads at bisque   and mempool dot space,   and also happens to be a Liquid Federation member. So today's topics of Liquid, Bisque, and Bitcoin privacy are gonna be particularly   suited to him. What's up, Wiz? Welcome back.  

[00:05:02] Unknown:

It's always a pleasure, Matt. Thanks for having me.   Me.  

[00:05:06] Unknown:

Happy Bitcoin Tuesday, guys. It's been a long week. It's I'm excited to be here.  

[00:05:13] Unknown:

It's, Wednesday here. But  

[00:05:17] Unknown:

Good morning, Liz. I appreciate you waking up at, 4 in the morning for us.  

[00:05:22] Unknown:

It's it's cool, Matt. Anytime. Only for you and Adam, though. Nobody else.  

[00:05:27] Unknown:

Yeah. I was just saying I'll be more likely to be going to bed at 4 AM than getting up at 4 AM. So Like a true cyberpunk.   Yeah.  

[00:05:38] Unknown:

So so, guys, I mean, I I figured the best place to start is Liquid. I mean,   I don't think there's enough open discussion about the Liquid network. I think it's an interesting tool available to Bitcoiners.   I think one of the things that people tend to,   I think they tend to miss with these types of discussions is that we have many tools available to us. They all have different trade offs,   and they aren't necessarily mutually exclusive.   You can use many tools, or you can use none of the tools. You get to choose what you want. That's what's cool about Bitcoin to me.   So with all that said, Adam, do you wanna give,   our audience, you know, a quick   explanation of of why they should care that the liquid network exists?  



[00:06:27] Unknown:

Yeah. It's,   it's a different layer 2,   And it was bought shortly,   I guess, a year before   I set about, you know, trying to form Blockstream,   I was   now I got interested in Bitcoin and went a rabbit hole like everybody. And my background was electronic cash,   privacy enhancing technologies,   and   kind of applied crypto. And so   I thought one   area that Bitcoin   could be improved was privacy and fungibility. So I   spent, like, a few months trying to figure out the most efficient space efficient way to do confidential transactions.   Well, what it wasn't called at that time, but what became known as confidential transactions.  

So it's a way to   encrypt   the   amounts   in Bitcoin transaction.   You don't know how much money on transact kind of private math.  

[00:07:43] Unknown:

I think we might have lost Adam there. Wizz, can you hear me?  

[00:07:48] Unknown:

You're just fine, Matt.  

[00:07:52] Unknown:

Okay. So,   while we have, you know, we're doing this live, while we have Adam,   just reset real quick,   we'll proceed to Wiz. Wiz,   you are   a Liquid Federation member.   It's kind of odd if you look at the Liquid Federation members. There's a lot of exchanges and large companies,   and then there's just wiz there.   Do you want to tell the freaks, you know, how that happened, why that happened, and what that means to you?  

[00:08:26] Unknown:

Yeah. That's probably a good place to start.   I I think it all kinda started with the   the so called block size debate. Right? At some point, there was this realization that, Bitcoin fees would go up   and kind of pump forever.   And so if you're gonna have a small base layer blockchain,   then you need a number of,   layer 2 blockchains or side chains or off chain solutions like lightning, liquid, etcetera.   And so I was very interested in the, the elements core side chain project and the technology that Blockstream had developed.   They   they were they published, like, a really cool, actually several white papers on the Blockstream website about side chains and about, the liquid one more recently.  

And, like Adam was saying about the confidential,   transactions,   and, you know, other base layer privacy   features they have, which I thought were really cool.   Hey, Adam.  

[00:09:27] Unknown:

I think I dropped her.  

[00:09:31] Unknown:

Yeah. Welcome back.   I was just I was just saying,   I I got really interested in liquid and, I think I tweeted at Adam actually one day. I said, Adam,   why why wouldn't a bunch of cypherpunks, like individual cypherpunks,   you know, kind of fork the elements project and make our own liquid instance   for the community.   Right?  

[00:09:57] Unknown:

Yep.   Yeah. And actually,   there's a there's a Telegram group. Right? Where a bunch of people were discussing Right. How they might do that. So I was like, wow, this is really cool. I joined the discussion   and made a suggestion which was to,   do something first, which is sort of less work, and then move on to running a full network, which is to operate   a second peg.   So   the   in liquid, the blocks are   signed by block signers, and then there's also a PEG   manager, which is operate by the same HSMs.   And   those keys are the same in today's liquid network, but they don't have to be. So   you could actually introduce   a second   peg that was operated by completely different people. And so it struck me that   it would be easier to, you know, set up some HSMs or software   operate by different people around the world with,   you know, some kind of 2 out of 3   or 11 out of 15 or some suitable size   and have a Cypherpunks   bitcoin, like a CBTC, 7 RBTC.  

So I think that'd be pretty cool to, to get there.  

[00:11:21] Unknown:

Yeah. I remember we had discussed that, very early on. And at some point, I remember we were talking and you said, well, why don't, you know, wouldn't it make more sense to collaborate,   you know,   it   it yeah. At least in the in the beginning or to until we figure out what we wanna do. And I I remember,   you had kinda invited me to to join the federation and   and kinda collaborate.   So I'm I'm glad that,   you know, I'm glad to be a member of the federation. It feels really cool to, even be now part of the oversight board to be able to,   you know, kind of, talk to all of these large companies and,   you know, oversee them,   so to speak on behalf of, like, the BIS community or the Bitcoin community,   and   it's it's it's pretty cool. It's it's it's   also going back to,   like, what I was saying when you dropped out was, the small,   or the the so called block size debate.  

Mhmm.   Bitcoiners   obviously have seen very low fees,   up until very, very recently, the past few months,   and so there wasn't,   a really obvious need for   layer 2. Right? Even lightning was pretty much dead the past couple years,   but we all know it's coming. Right? Matt Matt said, the other day on the show,   bitcoin fees are bitcoin fees are designed to pump forever,  

[00:12:44] Unknown:

which is very That one triggered a lot of people.  

[00:12:49] Unknown:

Well users want users want the best of all worlds right? They want the perfect security of the Bitcoin blockchain, they want the perfect privacy,   they and they want it all for free, right? They want low fees too.   But that doesn't really work because   you need, you need to pay for miners   and   obviously, we're doing that by inflating the block, the Bitcoin supply now.   But as it transitions to,   you know, directly users paying the miners, with the transaction fee market,   on chain transactions are gonna gonna become very,   expensive, and this is something that,   people need to accept and people need to understand.  

And so,   this is the this is where the trade offs begin. Right? I think Adam Adam put this, in the in the tweet, a few months back. He said it's kind of like when, the Internet was starting   and,   congestion control was getting added into the TCP layer. Right?   There was this huge   debate. Well, we didn't need congestion control before so of course the users want to have,   you know, as much bandwidth as possible. They don't wanna like,   have, like, a fee market, so to speak.  

[00:14:00] Unknown:

Right, Adam? That that Yeah. Yeah. I mean, I was trying to make an analogy that would resonate with people   who are familiar with,   you know, routers and operating ISPs   and entities. So, no one no one you do you run your own ISP. I guess that one, made me, you know, was, like, something that paused to you. But, I guess, my point was that,   you know, people are suddenly saying, well,   Bitcoin transactions are always cleared for, like, once Toshi buy in the past, why is why is this this force change? And,   really, it was just the, you know, you know, like, the Internet was extremely unloaded   and so   the flow control protocols never got to work out. No packets got dropped through to congestion.  

And, you know, suddenly you have the AOL effect and   perpetual September and more users than it can cope with.   And, of course, the flow control   gets to work out and then people get upset. Like, why where is this FlowControl coming from? I don't like FlowControl. I was like, yeah. But I mean, what are you gonna do? You know, there's more demand than   possible   capacity.   It has to   degrade gracefully. I mean, I I think I I might say something more controversial   actually   about   main chain blocks based stepping away from liquid or lightning.   I saw some questions about, why liquid instead of lightning, so maybe we'll come back to it in a sec. But,   I mean, I think even just about   Bitcoin alone, the main chain,   and, you know, Matt's comment, fees are gonna pump forever.  

I think that, to me at least, Bitcoin is about,   you   know, bearer like, empowering end users with   bearer hard e cache that can't be seized and you can spend.   And   so it, you know, it doesn't have to be   cups of coffee.   But I think if   the demand for block space got extremely high because there's lots of traders, that's one problem,   or institutions or whales   such that,   you know, the fees got to be consistently,   I don't know, $1,000   a transaction or something, I would become a moderate big blocker, I think, at that point. Because I think that would have,   you know, priced out   the different shared use case. By that, I mean, the the use case the banks can't compete with. Right? So if you crowd out the   main use case, that's a problem.  

So,   you know, one of the thoughts with Liquid actually was that   it's if you've got traders   and I understand not everybody's a trader. Right? A lot of people just cold store. And I think that's   a winning strategy as far as it goes.   But the the traders are just moving, you know, Bitcoins and other assets between exchanges.   So they're going from,   like, Bitfinex custody to,   I don't know, Bitsy or some other exchange,   and   is one custodian to another. So the fact that they send out on the Bitcoin chain is is essentially spam. Right? Because   if they could if they had another way to transfer from custody of exchange a to custody of exchange b, Bitcoin chain doesn't need to see that, and they don't even get any benefit from themselves.  

And also the people that are trading like that, they are,   completely fee insensitive. So it's I think it's generally accepted that most of the   fee escalation   is related to impatient traders. And the the reason they don't care is, you know, maybe the average transaction size is $10,000   or $50,000,   something like that. And they're gonna be paying,   you know, 0.1 to 0.2 percent   fees for the trade.   So, you know, whether they have to pay 10¢ or a dollar for transaction,   they don't they really don't care. So they just look at  

[00:17:55] Unknown:

what's the fee, and then they'll double it and send it. Right? Just to be sure they're in the next block. So And yeah. Adam, let me jump in here real quick, because I feel like we're getting into the weeds a little bit without giving a a good overview.   Yeah. 1st first comes first.   The   tell me tell me if this is a decent,   TLDR, you know, quick summary of of what Liquid is. Liquid   is essentially   a multisig of,   partners   that are running this network,   and you can move Bitcoin into that multisig   to then transact on this side chain. That is called a peg in, or you can move you can move Bitcoin off of that, and that is called a out. And the peg in is a perm is a permissionless   system where anyone can can peg in at will into this this multisig side chain.  

And then,   the peg out is requires,   the federation members to allow that to happen. Would you agree on that summary?  

[00:18:56] Unknown:

Yeah. I mean, there's actually,   so a few things there. That's that's correct.   And for people's expectations   because, you know, when when liquid was first announced, some of the wording was about exchanges and traders. So people assumed,   oh, you'd have to be in exchange to transact on it or something. But actually, you know, the exchanges don't generally transact.   It's just users. Right?  

[00:19:26] Unknown:

And and just to jump in, so so and I missed a point. The reason a user would do that is because in return, they get low fees, quick confirmations,   and confidential transactions, which is what you talked about earlier where where the amounts are blinded. So when you look on chain, if you look at a Liquid Explorer   as opposed to a a Bitcoin Block Explorer, it won't show you the amounts that are being sent between people. It will still show you the addresses. It'll look like a Bitcoin address, but it's a liquid address.   But it doesn't show you the amounts, and   and and in regards to tokens, it won't show you what token is being traded either. So that's why a user would   consider switching into into liquid.  

Now you mentioned something about traders.   I think we should just really talk about this in passing because I really feel like it kind of has hurt liquid adoption so far in terms of my audience,   because it it has as you said, it kind of   it made people think like, oh, well, I'm not a trader, so I shouldn't care about it. In terms of traders, what you mentioned is that they're willing to pay higher fees, and that is because on chain,   what the scarce resource that is being traded is is that block space.   So you're being charged based on the amount of data you are sending,   not the amount you are sending. So all else equal, a user that's sending a $10 transaction   and a user that is sending a $2,000,000   transaction,   if they're paying the same fee rate,   they're they're gonna end up paying the same absolute fee, but, obviously, the person who is sending the larger amount is gonna be paying significantly   significantly   less percentage wise than the person paying the lower amount.  

Now if when you add lightning into the mix, lightning fees are based on the amount you send.   Liquid, I guess, is is probably more similar to Onchain Bitcoin in terms of what their that fee market should look like, but it just hasn't been tested yet. Right? There's just not that much volume there. So right now, it just acts as a   a very, very cheap transaction chain.   Would you agree on that assessment?  

[00:21:30] Unknown:

I think I'm going to switch networks briefly because   I heard what you said, but it was breaking up on and off.  

[00:21:39] Unknown:

Okay. No problem. We'll be here when you come back. Consider a Chromium based browser   and incognito mode or whatever, you know, so all your extensions are disabled. Wiz, what'd you think about my explanation?  

[00:21:52] Unknown:

I was using Firefox.   So let's try that.  

[00:21:57] Unknown:

Yeah. I guess that's,   that's pretty decent explanation.   It it is really,   complex,   and very, very technical, very deep,   you know, understanding of cryptography is required   to to really, learn about all these things, and I I'm not an expert on this at all.   I'm more of a   server guy, network engineer.   You know, I grew up in the data center, so I'm   I'm good at running Bitcoin nodes, basically. And   the the cool thing about Liquid for me   is that, it's it's an actual blockchain,   and it's optimized   for, like Adam said, or,   like exchanges. Right? So,   obviously,   I I I guess we'll get into this later on, but,   lightning is really cool in my opinion for,   you know, if you wanna if you go to this restaurant all the time or a cafe or a bar, you know, and you open a channel to them, you can do lots of,   coffee transactions,   you know, with your trade channel to the bar, and anytime you can,   you know, publish that channel state to the the network and settle it on chain.  

So it's a really cool way of   essentially batching   many many transactions into a single on chain transaction.   And liquid   is kind of that too. Right? It's,   it's   it's taking lots of transactions   that are between the members of the federation   and, and also   of the other users   of the,   of the of the side chain and kinda batching them all into a very few amount of,   Bitcoin on chain transactions. So they both,   they both kind of,   you know,   make the usage of the Bitcoin base layer blockchain more efficient.   So,   Adam, are you back now?  

[00:23:55] Unknown:

Yeah. Yes. Yeah. Yeah. Back.   So right.   I think Matt was pointing   at the   the peg in versus peg peg out asymmetry.  

[00:24:09] Unknown:

No. I mean, I went farther than that. Okay. But I I think I said everything.   I I think I I think you would agree with me. I tried to give a high level summary of the fee structure between Liquid, Lightning, and Onchain,   and why someone would wanna use Liquid,   and why you mentioned traders to begin with, and and why they pay significantly less fees in terms of percentage because they send larger amounts.  

[00:24:37] Unknown:

Right.  

[00:24:38] Unknown:

Yeah.  

[00:24:40] Unknown:

Yeah.   Did you wanna go into   the, kind of, security   model for  

[00:24:48] Unknown:

Yes. So I wanna I want you to claims?   Yeah. So so so, basically,   we started off this this dispatch with, you know, Bitcoin has had many tools available to us. They all have different trade offs.   Every time a new tool gets added to a Bitcoin user's arsenal,   that makes me happy.   This is one of the reasons why I started dispatch. This is one of the reasons why I've been doing tails from the crypt for over, you know, almost 3 years now,   is because these tools are awesome that we have the ability to use them, but not everyone needs to use them, and not all of them are suited for everybody.   So in the case of Liquid,   I think a good place to go here is, you know, what are what are the trade offs to Liquid? You know, what are the concerns?  

What are you know, what should people   weigh in their heads when they're deciding whether or not they're gonna use Liquid versus on chain versus Lightning?  

[00:25:41] Unknown:

Right. I mean, I think that,   you know, from a user perspective,   it's it's another trade off.   And   so it's   it's not as unseasonable or unfreezeable   because, you know, there remains a possibility   that this federation of businesses could shut down,   and then, you know, you'd have to get funds out of it.   But   it's,   it has extended functionality like confidential transactions and other assets like stable coins, you know, Tether and so on.   And it's cheaper and faster for the moment. So, you know, that that depends on usage. Right?   If, usage grows a lot, it could end up with the same fee situation as Bitcoin.  

And the capacity is similar to Bitcoin   in terms of transactions   per   hour or something. So it's,   you know, maybe 1 and a half or 2 times as many that might grow a bit when we   improve the crypto efficiency with bulletproofs.   So it's not hugely different to Bitcoin.   And,   but I think one interesting   comparison here is   if you look at the   old   electronic cash system by David Chaun in the nineties,   It had the property of extremely strong privacy.   So, like,   0 cash, zcash, but even better in principle.   But it's completely centralized.   And so because of the really strong privacy, there was no way at all for them to do any selective censorship.  

They couldn't tell anything. You know, the the company operating the bank with the double spend database   just literally couldn't correlate anything.   And so   there was   no real   censorship risk   because no no information left to figure out what's a sensor,   but it was a risk that could shut the whole system down. And so you have that property.   And Bitcoin has a property that,   you know, there's there's some kind of pseudonymity based privacy,   but, you know, the amounts are visible,   the UTXO history is visible,   and you can kind of piece together some information from that.   But it's very decentralized so, you know, if even if you find something that that, you know, a given   country wants to block or something, it's pretty hard to do because their mind is everywhere and the mind is anonymous. So it's got a different model.  

And I think liquid lies in between the 2. So that's my assertion   that liquid is,   you know, in some ways, a bit closer to the TRON system because it has more crypto fungibility. The confidential transactions adds meaningful   privacy. They're not as good   as the TRON model,   and   it's a bit more centralized, and it's still   more decentralized than   single server tool model.   So it's somewhere in between those two models.   And so, you know, for for general use, I think one   interesting way to use it, and we've seen,   you know, organically   more users doing this, is   to   put sort   of moderate amounts into liquid. Like, not cold storage savings, but, you know, spending money amount of money you're gonna spend online in a month or something like that. And then you can transact trip cheaply, and then you can, you know, take funds out and put them back in with a, peg out or peg in.  

And that you know, the peg out and peg in is a little bit analogous to the lightning,   crypto channel, closer channel.  

[00:29:23] Unknown:

With the difference with the difference being   with with lightning, you can close the channel. Either party can close the channel Right. At will.   Right?   But with but but but   but do you   is is is there is there too much?   I I mean, I think the goal, right, is ultimately   some kind of atomic swap system for liquid.   So wouldn't that just alleviate the whole peg out thing? Like, the peg out is more for, like, a settlement of of, like, major, like, the federation or whatever.  

[00:29:58] Unknown:

Well,   yes. So   what's,   there are lots of different ways to pick out.   Many of them are countless   and some of them exchange based. And exchanges often have,   like, 2 tier sign up processes where you can get through the 1st tier and do crypt only, and then you get through the 2nd tier if you want wire transfers. So if you're doing, like,   liquid Bitcoin to Bitcoin, you could make exchanges  

[00:30:24] Unknown:

with just a But then we have   yeah. But then we have a centralized custodian,   probably gonna have to have KYC.   So so just just unpack this here. The fear is, right, the fear is   is you have funds on liquid.  

[00:30:40] Unknown:

Yeah.  

[00:30:41] Unknown:

You have them as liquid Bitcoin.   Hopefully, you don't have too much, but you have well, let's say, well, you have whatever funds you have as liquid Bitcoin, and then the federation   gets   you know, they get compelled   to freeze the network or their their their funds get seized, the the multisig gets seized. And this is why multi jurisdictional is involved, and you have all these different companies to try and reduce that risk. But that is the fear. Right? The fear is that happens and you can't get back out, that you lose your Bitcoin. It's the same idea as, like, a custodial risk,   but, obviously,   you know, significantly better than just trusting a single custodian. Right?  



[00:31:17] Unknown:

Yeah. I mean, I think one thing that's I mean, there's a couple of points. So one is that there are multiple ways to   go   between liquid and Bitcoin   to to get out.   One is   to atomic swap with another user, and there is   a tool to do that.   So that would be just 2 users that that happen to wanna go in the opposite direction.   And, you know, as we've joined market and things like that, sometimes user services just bring up where people, you know, market may they don't mind go backwards and forwards, take a small fee.   They speed it up for somebody else. They give them privacy.  

So it's that. And then there are   3 services that are   kind of, accountless, like, no sign up. So one is SideShift,   another is Flip, another was liquidity.   And they they like websites or   Telegram bots, things like that. And you basically, you know, put your addresses in, you pay a small fee, and they they swap it. And that was It's like old school shape shift. It's like  

[00:32:22] Unknown:

Yeah. Momentarily   custodial with no account, and they just do there's a third party that does the swap for you.  

[00:32:29] Unknown:

Right. And the new one, which   just appeared out of nowhere in the last, you know, few weeks that people have been talking about is this side swap port.   And that has integrated some of these things into   a smartphone app,   which is   kinda curious,   but it's,   it's very nice. Use it simple to interface in a way,   which is it's technically only a Lick wallet. You know, the other wallets that Blockstream made,   the Aqua Wallet and Agree Wallet are both liquid and Bitcoin wallets, but Sideswap is technically only a liquid wallet.   However, you can   interoperate Bitcoin by a peg in and peg out, so there's a tab for that. And   so if you want to pay somebody on Bitcoin, you peg out. If you want to receive some money   from a Bitcoin   wallet, you do a peg in. And so that that's your user interface. Now   both of the peg out and the peg in   go via the service. So it has the same kind of behavior   as   the side swap oh, sorry. The,   you know, liquidity   side shift and so on.  

But they also   are doing some atomic swaps. So in in wallet, you can swap   liquid Bitcoin for,   Liquid Tether or for Euros   EURX,   which they're the issue which side swap the company's issuer of, actually.   So   and some of those things   are are atomic and it you know, they're evolving and improving it over time. So they just did a release. It looks like   today, actually, where they added a peg out feature, which which was missing in the previous version.   And so   there's a there's a Telegram channel. It's called,   sideswap_io   on Telegram.  

And they're talking about their road map and stuff. So it seems like they've got a lot of trustless things planned, like   user coordinate. Because they're the   they're the kind of counterparty in all the swaps at the moment, but they're interested to support   user swaps so that different users can come in,   coordinate on it in its way. So I think there is an opening there for them to do   some more trustless   peg in and peg out where,   you know, you automatically pay them and they pay you from there. You automatically pay them in liquid Bitcoin,   and they give you   Bitcoin and MainChain, but in atomic fashion. Right?  



[00:35:00] Unknown:

Right.   So the the the the fear, right, the fear is   is that custodians   block the exit. Right? So so it it there's 2   the way I look at it is there's 2 ultimate solutions here   or mitigations.   Maybe solutions is the wrong word. It's too absolute.   22 mitigations, and that's either user driven peg outs,   the ability for a user to basically execute a peg out,   on their own without a you know, the federation easily being able to stop them, which seems pretty complicated to me, and I I don't know if you want to go into that.   Alternatively,   some kind of atomic swap market that is distributed rather than centralized. Something like   a like a joint market   type of situation where it's coordinated   loosely between the actual users   themselves. I mean, I I guess a bigger thing would be using Bisc,   but that that's more heavy that's more heavy. Like, I'm envisioning kind of some kind of lightweight   marketplace   app   that allows you to be on both sides.  



[00:36:05] Unknown:

Would you agree? Well, I mean, I think I think that yeah. I mean, Biscuit is one way.   HODL HODL has some   liquid Bitcoin slash Bitcoin   swaps and trades and loans and things. So you might be able to do it on hold as well, and that's evolving over time.   But, you know, even with the sideswap app, if they get the   you know, as as they improve it,   if they get   the atomic   swap out,   even though it's,   you know, a centralized company that's doing it, you don't really have to trust them   because you either get your main chain Bitcoins or you keep your liquid Bitcoins. Right? So your main remaining so you don't have that tertiary risk that the, you know, centralized service provider   Like side shift ads. Been complete. Yeah. Then they could take your coins and pay you and, like, oh, man. That's now you'd have to argue about it online. You may not get your money back.  

With the the other kind of binary risk is the the whole federation shuts down for some reason.   So that one,   yeah, that's that's a,   you know, that's that's a side effect of the   current architecture.   And   but the the transitory risks, I think, are fixable   because of this kind of atomic   cross chain   swap.   And that could be   it sounds like looking at what Sideswap was saying that they are   interested to allow users to   put offers, like, you know, some kind of built in board. So it's not really an order book in the sense that there's a   a custodian,   but an offer like you can offer to swap for a fee.  

And I guess they'll match or let you search it or something. So they're developing that.   So that but that would also be, I presume I mean, that would have to be, you know, atomic. Right? Because users could otherwise exit scam each other. Right?   So that that kind of thing's possible,   and that that is a kind of mixture of,   you know, a coordinator   role, which is the wallet back end and   users placing offers. So I think it's it's kind of an app wrapper around something   disk like   for, you know, subset of use cases.   So about you you mentioned another thing there, which was   that I should I should explain actually why,   the peg out asymmetry is there. So   it's actually not to do with,   policy   but   security,   which is if you,   the   the block signers, so there are, you know, all these different exchanges   and people involved, like, who is this one of the, participants in the network.  

So some a subset of them are operating   servers,   you know, with firewalls and stuff and also an HSM inside. So the keys to the peg and a block signering in the HSM.   And HSM is running a lot less code, so it's easier to control,   you know,   remote hacking risk for the HSMs. It's gonna be very hard to get keys out of that. But the server itself, you know, obviously, it's it's locked down as far as you can, but still Internet exposed server.   So in   theory,   if you,   if somebody could hack,   you know, 2 thirds of the host computers,   the the internet servers,   and then   override their instructions to just tell the HSM   to peg it out to this user address,   the whole you know, the   the liquids   kind of peg wallet would basically become a warm wallet of some kind. Right? Because you've got Internet exposed hosts.  

Yes. The keys are on HSM, but if the Internet exposed hosts operating system and code was compromised, they could just tell the HSM to do things and the HSM wouldn't understand enough   to prevent it.   And so   when we were designing this in   2014   or so, Greg Maxwell hit on the idea   of improving the security   by having the peg outs be only go to,   off, you   know, offline hardware wallets   of   liquid members.   And   in that way, if somebody would compromise,   you know, succeed in compromising of the servers and override the HSMs,   they have to provide a proof to the HSM. The HSM can verify by itself   that   the   the payout is going to go to an address   controlled by one of these hardware wallets belonging to the members. It's it's technically   a zero knowledge proof, so you don't really know which one   and just proves that the address was derived   from one of these, XPUBs.  

And so that's that's the concept. Right? But if it's becomes much less attractive to hack it, because all you do is you pay   the Bitcoins   to a liquid member,   and that liquid member could,   you   know, peg out legitimately, so it's not so interesting to them.   And, you know, there's a bit of a trust assumption that they're less likely to just try and take the money because people know who they are. So so the trade off chosen was,  

[00:41:14] Unknown:

slightly more more trust in the federation   at   the benefit being   less risk of, you know, complete loss of of the system, right, from an external actor or something.  

[00:41:27] Unknown:

Yeah. It kinda makes it,   colder in a way. So it means that the you know, in one way of thinking, the PEG funds are cold.   Like, you can move them around inside the network logically,   user to user. But if somebody wants to take them out,   they actually go to a cold wallet.   And   then what typically happens is one of the service providers like   SideShifts   or, you know, SideSwap,   the FinEx, you know, one of these exchanges.   There are some people that are, like, prop traders. So companies do trading. So those guys,   they are actually gonna give you   the funds that you requested to pay out from their own,   like, hot wallet, cold wallet, and and then they're gonna fetch it out of the peg out wallet later when they run out of funds.  

So that means they they absorb the risk, basically.  

[00:42:19] Unknown:

So what so so an advantage of being a federation member is that you're able to, you know, to do that process yourself to your own cold storage.   The   so so enlighten me here,   from from when from reading the website,   my understanding   is   there's a significant   amount of federation members,   but at any given time, only 16 are active. Is that is that correct?  

[00:42:47] Unknown:

That's a side effect of   the current implementation.   So   the current federation is   11 out of 15, and that was kinda hard coded in the first version. And we're in the process of rolling out   an upgrade that switches to dynamic federations   that can support larger numbers and people leaving and joining.   So I should clarify as well that Blockstream is   in a technology provider.   We are not able to do auto upgrades. The   liquid   boards   will, you know, look at, let's say, the release notes and and see if they like an upgrade. And they have to actually   depending on what kind of upgrade it is, they have to physically   be in front of and,   you know, push buttons on the on the hardware box. So it's not, like, remote upgradeable of the Internet for security reasons. And it's actually interact with it. And we we can't upgrade it, and that's by design.  

So,   yeah. So that will become more dynamic at the time. So yeah. But but at the moment, it's an 11 of 15. And if you look around on the block explorer, you can find the peg wallet, and it stands out because it's an 11 of 15   signature. And another   interesting topic is there's a CSV,   so a time block   and a 2 of 3 as well,  

[00:44:09] Unknown:

which we can explain what that's about. Yeah. So, I mean, a lot of people have questions about that because of, I guess, there was,   like, there's an aging thing, and then it went back to the 2 of 3,   which represents a security risk. But before I get to that, just real quick, it's 11 of 15.   So,   like, Wiz is not a part of that 11 of 15. Right?  

[00:44:32] Unknown:

Yeah. So the the   the the problem is that the   original, version of liquids was hard coded to 11 of 15.   And since the and there there were 15 members at launch just a few years ago. Right? But now there's, like, over 50,   and some people are,   you know, happy to use the network services of another   member, and you can pick out without having HSM. So you don't need to be   there's a kind of list of of   just submit like a hotdog wallet x pub.   Okay. So they some people submit too. Right? Because they got 2 different applications or So when the XPUB is is   is approved. He's he's got an approved XPub, but he's not running an HSM yet. Right. Right. And so there are people that may never wanna run HSM because, you know, they're they're cloud oriented   or they don't have a machine room.  

People do.   And so that but at the moment, the other problem is   it's not that dynamic.   And so   and, actually, changing the federation membership is,   you know, tricky. You've got to think about the game theory because,   you know, if   if somebody was to attack the system from the inside,   you know, and they voted somebody off, they could do that iteratively until they controlled it. Right? So there's there's a bunch of you know, it it requires more than 2 thirds   to to do a change, and it's for that kind of reason. So there's a bunch of logic   about how the   federation can evolve, and it can't be too quickly either because   the coins in the peg have to change, you know, the key because the keys have changed in a time. Right?  

So it's,   it's not trivial, but the end result is you've got,   you know and I think the other way to think about it is   even though it's built in a different way,   it's a kind of   blockchain assembled out of instead of minors,   HSMs,   HSMs can change which moves it, you know, with Dynafed, it moves it a   bit less from a kind of fixed group businesses towards something   that's dynamic and evolves. And that's that's So how does that look?  

[00:46:44] Unknown:

How how do you mean? How does how does, like, the Dynafed look in practice?   Because this is the the future goal. Right?  

[00:46:53] Unknown:

Yeah. It's I mean, yeah. We've we've,   we made a release   recently   of the,   elements d, which is the full node for liquids. And, you know, power users can run 1 and you run a Bitcoin node and an elements node, and they they talk to each other.   And that can verify everything about the chain, the pegs, and the liquid transactions, and so on. So that the most recent we saw about is   dynamic federation is ready,   but, you know, the next release and the next release, I needed to,   actually get it active. So it's not active yet, but that's something that's happening, I'd say, in the next quarter or so.   And, of course, it's it's, you know, subject to the liquid members   like in the the feature set and upgrading to it. Right?  

And once they have that, there's there's likely to be some changes because there's, you know,   new participants in the network since a couple years ago,   you know, like Sideswap, for example,   or   Liquidity. There are lots of people who are quite active in building products and services like Vulcan.   They've got, you know, Liquid Taxi,   Marina   Browser,   plug in wallet.   So there are lots of active   department service companies that would have liked   to run a functionary but couldn't because of the lack of dynamic   change in the network. So   that will enable that that change to happen.  



[00:48:20] Unknown:

So but but how's the they, like, will rotate? Is that what happens? It's like they rotate randomly?  

[00:48:27] Unknown:

No. So today, with 11 of 15,   there's a kind of,   there's a consensus protocol,   and the block is proposed in turn by, you know, round robin. So in a circle, each proposes, and then blocks have to be signed by   2 thirds of them. Actually, all of them that are online, try to sign.   And   with dynamic federations, it's not rapidly changing.   It's just if, you know, if somebody goes out of business, then you probably wanna remove them because,   now, maybe they sell their equipment,   right, if they go bankrupt. Or, you know, you get somebody new that wants to join that's starting a new application, like, SiteSwap, for example. And if you heard about them until a few you know, till probably recently,   and they're doing a lot of stuff. So, now, they joined the liquids.  

Right. And maybe they would wanna run a function array, let's say. So   then that would basically be   up to the Liquid Federation   to, like,   discuss amongst themselves to add them and then mechanically to add them   to call some APIs   on the   on the liquid,   hardware   servers   to add this new   new block signer.   And that would you know, it's it's not   you know, it's something that has to be done relatively slowly because the   the PEG keys have to, you know, they go from,   you know, let's say 11 or 15 to   12 or 16 or something to keep the threshold.   And so,   you know, and if somebody left at the same time,   you've got to move the keys the coins off the old multisig onto the new multisig.  

So you can't, you know, you can't turn over the keys too quickly   or the redundancy for control of the,   ability to roll the coins forward in the peg wallet could get degraded.  

[00:50:23] Unknown:

So   okay. So so that that make that makes sense to me.   We had,   so first of all, I I we have Freaks in the chat. By the way, Freaks,   the way I I consider dispatch, you know, I think it's hosted by the audience.   I I'm just the moderator, and that that is is one of the reasons why the format of the show is the way it is. So I appreciate you all throwing comments into the live chat here,   whether that's through Twitter, Twitch, or YouTube. I do personally think Twitch is is the best, for that,   but I appreciate you all. We have a bunch of freaks in here basically saying that liquid is centralized. I want to just make it very clear to the freaks   that this is an obvious trade off decision   by by   it it is not liquid was never meant   and will never be meant to replace   regular   the the the Bitcoin network. It never was meant to replace a Bitcoin network.  

It it is making a clear centralization   trade off. It is being more centralized   for lower fees,   quicker transactions,   and the ability to adapt at a quicker pace than Bitcoin can. Like, that that is that is literally the trade off that the side chain has made. That is going to be more centralized. The question is   is if we can make a network   that sits alongside Bitcoin   that is not too centralized   where you have censorship,   but is is centralized enough   that you that you have those benefits that come with it.   Right. So on that topic,   we had this major concern. I mean, to be honest, I think it was a little bit blown out of proportion because   as far as I'm concerned, liquid is still in the beta phase, and it definitely was   at the time.  

But we had this situation where,   I I guess   the the liquid funds in this in this multisig aged past 2015   blocks 2015   blocks,   I guess right before like, that's basically a difficulty adjustment,   amount of blocks. I'd I I imagine that's not a coincidence, and then reverted back to this 2 of 3 emergency   thing,   where the 2 of 3 keys were held by Blockstream   HSMs,   in geographically distributed locations.   Should we talk about this this concern and and how it's been alleviate it has been alleviated since then, I believe. Yeah. Yeah. So it was it was actually  

[00:52:51] Unknown:

so first of all, let's just talk about the 2 or 3 to explain   why they're there, and then how they how the   behavior   diverged from what it should have been.   So,   basically,   the 2 of 3 is   a sort of disaster recovery   plan and the keys are actually not, you know, they're on.   They're in very cold storage. They're not loaded in anything. They've never been used. They're they're there   for a kind of very,   hopefully, very unlikely   eventuality, which is enough hardware breaks and enough   and it physically fails and enough   liquid members fumble or fail it back up,   and you lose one too many keys to recover the funds. And now that could potentially be because, you know, there's, like, 100 of 1,000,000 of dollars in it already.  

So   and that could become, you know, a 1,000,000,000 or 10,000,000,000   depending on usage and market cap and what what people use it for. So   the defensive   kind of Bitcoin thinking was, well,   it will be kind of irresponsible   to have no disaster recovery plan just in case the unexpected   actually happens. Right? And there are certainly Bitcoiners around who really wish they had a better backup plan,   who would have a lot more Bitcoins today if they had, you know, a second backup kind of thing. So, you know, clearly, it would be very easy to remove this 2 or 3. And there's, like, you know, a few lines of code, delete that 1. Then it's 11 to 15, then there's no backup plan, and   there's no, oh, Blockstream could do something.  

So   but I think it's the right thing to keep the backup plan. So then, you know, the other thing is, obviously,   we actively don't   want   the ability to   touch the funds.   So it's not just,   a 2 of 3. It's 2 of 3 with a time lock.   So it's kind of dead man's switch. Right? So what's supposed to happen   is that   the 2 of 3 would only ever become active   if the network stops processing transactions   for about a month. Like, it literally   ceased to   process blocks,   which   3rd of the note.   And so   if that time was met, you know, the the blocks are still being produced, the   the keys in the the the coins in the   the wallet should keep getting pushed forward into the future. Now it would get   kinda spent or spent forwards or pegged in or pegged out, and it would just, you know, keep getting pushed forwards. And that's how it's designed. That's what it's supposed to do.  

So   and that's that's kind of neat feature because it means that,   you know, we have Blockstream has either 3 backup keys, geo distributed, cold storage,   but   they're not hot unless, like, they have no actually no power   until the network stops   for a protracted period of time, which, you know, normally it's signing once a minute. Right? So that's a pretty extreme   kind of downtime situation.   But now where it where it came and stuck, well, it it it ran its problems is that   we, we had this kind of confluence of bugs, basically.   So   there is a target time window   where   it tries to roll transactions forward if they haven't been otherwise spent by a peg out. And   it it was supposed to be   4 weeks, but it was where the HSM code had 2 weeks and the host had 4 weeks. So it was a mismatch.  

And so   it left the window   where it's trying to roll them forward shorter than it should have been.   And then there was another bug that was kinda related.   And   we   were aware of the bug   at, you know, after some time,   and   started trying to fix it. But then things got kinda crazy with COVID. And,   a number of   Fungsturi members   were kind of locked down, so they couldn't and because of the security features, you know, that   you have to be,   physically upgrade on particularly on the HSM,   it made it difficult to quickly,   you know, to fix this. But   what there was a period where there was something like 870   coins that were   Right. Like, it's about 40 minutes, and that was the worst point. But, you know, so we found a more creative way to fix it,   basically, by upgrading a subset, and that was enough. I mean, it's all,   like, fixed properly   over time,   but, you know, there was an immediate kinda   4 node upgrade,   I think.  



[00:57:44] Unknown:

The fix is extending   the lock time?  

[00:57:49] Unknown:

Well, yeah. It's just to set it should have been, which is,   4 weeks on both the   and the host. And so it starts   to roll forward. I think it's 2 weeks before expiry. So if if they're less than 2 weeks, so if they're more than 2 weeks until expiry,   it just leaves them sitting there because they make it organically used for a for a peg out. So   Yeah.  

[00:58:13] Unknown:

My question is is I guess the fear is   is Blockstream in a position   to   force that situation to go into a 2 of 3?  

[00:58:25] Unknown:

Are are  

[00:58:26] Unknown:

are are agents members allowed to block it able to block it? Is is basically my question. Yeah.  

[00:58:31] Unknown:

Yeah. So, I mean, I think that all of this   bug,   you know, we have no remote   grades.   They have to source code everything.   And,   so long as they keep transacting,   you know, the keys could be posted on the Internet and nothing would happen effectively. Right? Because they'd be powerless. I mean, that would be a good thing to do because if the network ever did stop for, like, a couple of weeks,   that that would be risky. But just to illustrate,   they have they should, you know, by design, have no power   unless the network stops for   so that's that's the trade off. And, you know, I've I've even though that,   has its has its risks, I think the risk of funds loss is   sufficiently high. It's good to have this   this kind of, backup situation.  



[00:59:28] Unknown:

So to be clear, a plurality   of federation members can stop this from going to the 2 or 3 period. Right? Basically,  

[00:59:36] Unknown:

as long as the network   continues to process blocks, it shouldn't happen.  

[00:59:42] Unknown:

Okay. Awesome.   Can you tell us anything about the HSMs? Or  

[00:59:49] Unknown:

So   I mean, not that much, really. I mean, this we're working on a second version. We've deployed a couple of the new version ones, which have more   kind of tamper detection   Mhmm. Circuits and things like that than the first one. I mean, the first one has some kind of key zeroing tamper stuff as well, but the new one has more.   It's kind of more powerful, more modern HSM that we designed.   And   what we're thinking to do actually is when we get the Dynafed   deployed is to   open a lot of it. So open open, you know, the source for the HSM and sell the HSMs.   The people are interested to operate liquid like networks or to operate,   you know,   different pegs into it. So at the moment, there's one peg which is operated by the same services of block signer. But in principle, there could be other pegs operated independently, and you could choose   which peg you like the, you know,   the independence   and,   commitments, privacy, and so on. I   saw one question in the in the chat score about a minute ago, which I thought was quite interesting   related to this, which is the question was, there have been a case where the Federation has blocked a peg out. And so   the answer   is,   not no. That that won't happen because   technically the peg out is is only going to the   hardware wallets   of the   federation members. Right? And so   if,   you know, you you would go to the sites what wallet and post your Bitcoin address, and then they would pay that from their   from the coins they have,   in their own wallet.  

And if they run out of coins in their own wallet, they'll they'll have you wait until   the peg out happens, and then they'll give you the coins that are pegged out. So as far as I know, it hasn't happened. But, technically, the drip peg out is to, you know, this this kind of offline   hardware works. Right?   So,   you you mentioned something else there, Matt, which was,   we have a plan, like,   a a road map, a new design   to have direct user packouts. And so I think it's Andrew Polstra who thought of this idea. So recall the original   offline hardware wallet design was Greg Maxwell's   way to improve the security.  

So more recently, Andrew Polstra, who's, head research   at Blockstream,   Hit on the idea that you could allow direct user peg out   and still have   sort of similar security,   effect by making it slower.   So,   you know, lots of people can run full nodes. So if there was ever a peg out that didn't correspond to   you know, if if coins left the wallet that didn't correspond to a matching peg out, lots of people would notice and complain.   And so   if you made a process where there was an API for,   you know, a threshold of the HSMs to   retroactively   lock a Pega in progress, you know, the default is most likely   that will never happen, and they'll just go out, but they'll be delayed by,   you know, a 100 blocks or something that will give humans time to react if something goes wrong.  

And that would achieve   a sort of similar effects   without   news pass through the hands of the middle man, you know, sort of somebody who's gonna give you their own coins and then fetch them out of the,   out of the wallet.   I mean That that was idea.  

[01:03:28] Unknown:

Basically well, first of all,   we have freaks in the chat asking,   what an HSM and HSM is, which means   that, the majority of the freaks coming in through the audio feeds are are are also confused. That means hardware security module.   Basically, a physical device that is encoded   to a certain set of rules.   For for a Bitcoin, the way you could think of it is like a purpose built hardware wallet that's always connected to the Internet,   and is signing based on a specific set of rules,   to to reduce,   the risk of any kind of hot wallet   attack.  



[01:04:08] Unknown:

Yeah.  

[01:04:10] Unknown:

So so, Adam, I mean, what what you're basically saying is and, I mean, this makes a lot of sense to me, and this is why I keep rattling the atomic swabstrum,   is is is basically   the easiest way to mitigate the risk of of not being able to exit liquid   Bitcoin   exit the liquid network,   is is competition, is having a lot of different,   you know,   lot of different   people, organizations   offering the ability to swap out.   Hopefully,   technical improvements in terms of, like, kind of distributed decentralized   atomic swaps.   But also on top of all of that, I mean, I think the fact that confidential transactions exist on liquid,   and you can't see the amounts,   adds another layer that makes censorship more difficult,   just because transactions are more private on the network.  

On that note, I'm I'm kind of curious.   I think the confidential transactions   aspect really cool on Liquid, and,   you know, it's kind of I know it's a hot button issue. It's something that I I want to I I kinda wanna see on chain Bitcoin as well,   but we have it on liquid right now, and I can play around with it on liquid.   Is there a specific reason why?   So confidential transactions   is blinds the amounts.   Right. It blinds the amounts, and then   and then   there's   we're we're calling it with your confidential assets, I think, is what you're calling the fact that it blinds the tokens. Correct?   Right.  

And so so so if you're sending Tethr or if you're sending a 100 sats, you can't tell which which is happening.   Or it could be   it could be like a a a spaceship in Samsung's,   video game, like an NFT in Samsung's video game or a 100 sats or tether, and you wouldn't tell what it is, and they can all be coin joined together.   Is there a reason why   stealth addresses haven't been added to liquid   versus   because the stealth addresses is this idea where,   I mean, the show is a perfect example with dispatch. If if I could post a stealth address,   and then people could donate and don't they don't completely docks the amounts and who's donating. Is there a reason why stealth addresses aren't on liquid yet?  



[01:06:37] Unknown:

It would it would be comparable.   I think   that I mean, I I was pretty interested in stealth addresses and try to find ways to,   make them more efficient. I think the downside of self addresses is the recipient   basically has to   try to decrypt every every stuff transaction   that goes on the blockchain, period. Right? So it's like CPU heavy for the recipient.   It's just a little tricky to do it on a smartphone, for example. Right? So you have to download all   transaction. I mean, if every transaction is stealth transaction, which should be ideal,   you'd have to download them all. You have to be a full node. You have to, like, try and decrypt them all.  

So that's the kinda downside. I know some trade offs as well. People like, oh, you know, well,   I will make sure that mine,   like, start with this number. I'll only try to decrypt a 10th of it something, but then you've got less privacy. So, yes, sir, the the overhead is the issue.  

[01:07:35] Unknown:

So, I mean, this is a this is a particular use case that I've been focused on pretty heavily because I've been trying to,   I've been independently trying to help, like, activists and stuff accept Bitcoin privately.   And, like, the the   the dream, right, is that they can post, like, a text string,   and they can just receive   Bitcoin in a private way. Right?   And   it it kind of I mean   I mean, Adam, you're a legend here. I I'm I am I am just a a mere mortal. I just use these things.   It seems like Monero has figured out a way to do this stealth address   where I they can just post a a string of of of letters and numbers, and they can just receive donations in a in a relatively private way.  

Can Liquid be that as as well? Like, can Liquid have that stealth address, Krishna? Like, what what am I missing something here?  

[01:08:29] Unknown:

No. I mean, there there are lots of things   which would be possible   with wallet support.   So   Liquid is very Bitcoin like, but with   extensions for confidential transactions and things like that.   And so,   you know, how how the wallet   presents   that to users, some of the features are, like,   wallet only. They don't need network changes. Right? And so   stealth addresses are like that. It doesn't doesn't need any network. It doesn't need, like, a soft fork or anything. You can just do it.   Usually send some extra data or not true or something.   But   so I think it's a trade off you could do in a wallet and it just has a cost. You know? Now you need a full node or you need to   semi trust a server to scan them for you, but at least the whole network can't see it.  

And   yeah. I mean, I think if   that could be made more lightweight or people would just deal with it, right, run full nodes and live with this cost,   ideally,   staff addresses would be the default type of address. Because if you think about it, it's very convenient that you can have   an address that you can safely reuse. Like, having to keep changing addresses is very confusing to use this. So it's kinda ideal   solution. And I tried for a while to see if I could find a way to,   you know, accelerate the crypto or find a different way to do it, but I didn't find any way to do it. So we stuck with this kind of, you know, heavy CPU stuff.   And   actually, I mean, about the,   you know, Monero   things, it it actually adopted,   you know, a bunch of stuff that,   we did at Blockstream or that I proposed before Blockstream. So   I proposed   a way to shrink the   original   linkable rigs ring signature by 50%. And they, you know, they went off and hard forked it in. So I was like, well, okay.  

They actually do r and d and deploy it. That's cool. And,   and more recently, they did,   they added confidential transactions to the ring sync. And   there's another variant of,   the   the way that Monero does things, which is more scalable, actually. So at the same time, I proposed   confidential transactions. I proposed   kind of,   way to   send,   other people dust. So,   if you think about you could do this in liquid. It just would require client support.   So   which is if the wallet just, you know, grabs other addresses and sends people   1 sat or 0 sat or something Yeah. That'd be great. And the wallets accept that and just ingest it and use it,   it doesn't it doesn't have the forever growing UTXO set   side effects that the linkable ring signature does, but it has the same basically, the same kind of privacy side effect.  

And so I thought that was pretty cool. And I'd actually propose that at the same time as confidential transactions, but, yeah, it was   more ideas   and how people implemented.  

[01:11:44] Unknown:

So, I mean, Adam, you brought it up.   Look, I'm I'm very privacy focused. The freaks here know this. The audience here knows this.   You know, is is to me, I think the whole idea of focusing   liquid on traders,   you know, I could get I'll I literally could give 2 shits. I do not care,   what the traders use. I understand, like, it has knock on effects for for   the regular users in terms of them not using our chain   space, which is fantastic.   But   confidential transactions,   really fucking cool to me.   So so   like, do you agree that there's there's, like, there's I think there's, like, an area for for Liquid to excel in terms of of increasing   p to p, person to person transaction privacy,   transactional privacy in an easy accessible way.  

Like you said, like, little things, like like self shuffling self shuffling on with confidential transactions   actually can improve your privacy.   Self shuffling   on Bitcoin on chain, you just look like an idiot, and you're spending a shit ton of money like an idiot. Right?  

[01:13:00] Unknown:

Yeah. Actually, that was one of the things that Greg Maxwell got excited about   confidential transactions   when he realized because Greg was the original,   proposer of CoinJoints   some years before. I don't know. Like, 2011 or 12 or something.   And so when he realized that confidential transactions   work   very well with coin joins and actually make any join a perfect coin join because you don't you don't know anything about the amounts, which is usually what creates the problem for coin joins.   And I got I thought that was pretty, you know,   more exciting   and got enthusiastic to put that together sort of thing. So it's certainly be possible to,   you know, run,   you know, port port one of the coin joint wallets to liquid, for example. It's very similar, and it and it would be much more effective because, you know, all these debates between Samura   and   Wasabi   about, you know, change management and value matching and stuff like that.  

I think a lot of those things are simplified because you can basically join anything to anything. It doesn't even have to be the same asset type in liquid. But, you know Exactly. It could be an NFT. It could be Tether. It doesn't fucking  

[01:14:11] Unknown:

matter. Right.  

[01:14:12] Unknown:

Yeah. So that's cool.   And   right.   Let's see. Backtracking a bit because we got got off on a lot of topics there.   We do the the the   the, like, the, disaster recovery key.   That was,   how that why that's there, how it got fixed. Oh, yeah. So something else I was gonna say is that the,   you know, the fact that liquid is federated   is   actually, you know, just a side effect. So the original side chain white paper   proposed a soft walk to Bitcoin. Now we actually implement this. Matt Corella did that, you know, in the early days when he was at Silver Blockstream.   And   that would be kind of fully pit to peer side chain. So if your soft walk to Bitcoin is similar in concept to drive chains. That's that's another method.  

And so then the   the soft walk in Bitcoin would have, you know, just enough   awareness of   small proofs from the side chain to verify   that,   these pagans are, you know, from the from the side chain into the main chain are authorized, and then you don't need any HSMs or signers. It's like, you know, miners are effectively processing that without any keys.   And so I think it would, you know, be very nice to get back, you know, to get that next. So we just did, you know, the federated model because   there there were more technical challenges. And you wanna, you know, start somewhere and improve from it. Right? So we did the federated one first. We're   about to do the   dynamic   version, and   we're thinking about how to do how to do the next one. So I saw   Sergio,   from Rootstock has another   new idea and then there's a drive chain   thing that Paul Storz has been working   on. So   now it takes   it's it's a, you know, it's an adventurous and complicated soft fork to make to Bitcoin, right, to support side chains. But   I think   it's, you know, it's a very useful   soft work because it allows,   you know, more decentralized   opt in features,   for Bitcoin.  

So yeah. The the, you know, the side effects of the federation are   are felt because we we really want to get to the   fully paid to pay. The other thing that kinda complicated the fully paid to pay version is you're you're effectively trusting miners, sort of, you know.   More so than with direct Bitcoin.   Because with direct Bitcoin,   everybody's running a full node and they can verify   all the blocks. So if one miner goes crazy, you can ignore them. Right? And it doesn't matter that much. But with,   with the side chain,   you're sort of,   you know, the majority of the hash rate, basically, if it was dishonest, could steal from the side chain wallet, you know, side chain peg wallet.  

So that's the trade off with side chains. And you can't really,   you know, make a soft walk rule to verify   the side chain blocks because if you do that, it's not a side chain anymore. It's, it's an extension block, and people don't like that for a good reason.  

[01:17:32] Unknown:

Adam, do you do you think we'll ever see Confidence transactions   on main chain?  

[01:17:38] Unknown:

I hope so.   It'd be a certainly a much more interesting   debate to have,   than a block size debate from a few years ago.   And I'm I'm thinking it might be,   you know, a different set of people arguing on different sites. Right? You know? I think so too.   You know, because because I mean, I I I also suggested to people when they were having, you know, the block size debate that it would be   a logical thing to do   to increase the block size a bit, you know, like 4 times or something,   and put in confidential transactions at the same time   with the same kind of argument I was making about, you know, liquid being   a trade off in between   the very private churn server   and Bitcoin   pseudonymity based model,   which is that, you know, what are the side effects of a bigger block? Well, you know, it's more expensive to verify   There's increased risk of,   you know, minus centralization. And what's what's the consumer minus centralization? Well, selective censorship.  

So if you've got more privacy that kind of counteracts   some of that centralization censorship risk. So I would say, I mean, you can't really   measure it exactly, but I'd say there's a reasonable argument to be made that, you know, the more fungible it is, more private it is,   the bigger a block you can   handle   without that creating a, you know, a bad side effects. Because the miners don't know what to sensor, basically.   Yeah. And you get you get a bit of that in liquid, but any kind of, you know, light version of it. I mean, confidential transactions are not, you know, silver bullet. Right? Because you still have   the transaction graph. It's just you really can't tell what's changed and what's payment and   what what type is what, so it gets lost pretty quickly.  



[01:19:30] Unknown:

It's easy to break the heuristics.  

[01:19:32] Unknown:

Yeah. Much easier. Yeah.  

[01:19:34] Unknown:

Wiz, you've been quiet there for a while. Are you still live?  

[01:19:38] Unknown:

I'm here, and I've been,   listening to Adam. Yes. I I yeah. I had a lot of thoughts about the, the federated model because,   I know we'll we'll get to BISC later, but BISC is also a federated model. And I think this is this is kind of an underrated,   thing or a lot of people are maybe afraid of it because they don't understand why,   you would make a federation in the 1st place. But,   the way I think about is that every transaction has, like, I don't know, maybe 4 or 5 properties.   So, obviously, security, privacy,   censorship resistance,   the, the cost of the transaction, and the speed of the transaction. Right? So I guess that's 5. And they all kind of,   trade off on each other. Right? Obviously,   we all know on the Bitcoin, main chain, if you use a higher fee, then you'll get a higher speed.  

And,   likewise, if you want some additional functionality,   if you want to be able to trade,   then maybe you need more op codes in your transaction,   when you approach, like, smart contract functionality. So the size of the transaction gets larger, and so therefore,   your fees will will also be larger.   And, so so all of these security privacy,   functionality,   censorship resistance,   speed, and cost   are all affecting each other. And, if you change on any one of the variables,   then the entire equation kinda changes. So, of course, users want everything. Users want everything. They want the security of the Bitcoin main chain. They want, base layer privacy. They want censorship resistance.   They want the transaction confirmed right away, and they want it all for free or low fees. But,   unfortunately,   you know, this is this is the downside of digital scarcity.  

There's only 21,000,000 Bitcoins. That's what gives Bitcoin its value.   But, at the same time, the same digital scarcity means that the space in Bitcoin's blockchain   is scarce, and so that,   will also increase in value. The, you know, the actual bytes. As you said,   Bitcoin fees are designed to pump forever.   And so   it hasn't been super relevant to to worry about Bitcoin on chain fees for a long time until recently. And now,   just a a couple weeks ago, we saw fees. I think they were over 300   SaaS per v byte.   And so,   a typical on chain transaction was approaching,   I think like 25, $30.  

And   if you extrapolate this out and you realize, okay, maybe not this cycle, maybe 5 years from now or 10 years from now, yeah, a Bitcoin transaction could cost several $100 or even more.   And so,   how do you how do you address this? Well, there's,   the the fed the federated model is one way to kind of balance the equation of security and privacy and,   and speed and and cost and functionality. So,   obviously, with liquid, you know, you're trading off some of the security. You don't have the,   Bitcoin base layer   security that that blockchain provides.  

Maybe,   you know, you you lose a little bit of censorship resistance. Maybe I mean, the the privacy gives you censorship resistance,   so it's so it's it's in a different way. If you use,   Liquid, then you actually gain privacy because of the confidential transactions,   and the fees are lower. Right? So you're kind of trading that security to gain privacy,   to gain cheaper fees,   and also speed with the one minute block times. And so you you every federated model or side chain,   or even other altcoin chains, they all are making trade offs. Right? Like, there's no free lunch where you get everything for free anymore.   The time of 0 fee transactions and even low fee transactions is,   probably gone. So   this is why we use federations. And,   with Bisk, for example,   Bisk is also a a type of a federated model where,   people want to trade.  

And, obviously, Bitcoin's base layer does not support,   random people trading with each other. And so,   one one really funny thing I think is that,   people are really afraid of liquid. A lot of Bisq users are really afraid of liquid because it's a federated security model, but they seem to forget that best Bisc is also,   a type of federated security model.   If there's any type of   trade dispute,   so so a long time ago, Bisc originally started out with a 2 of 3 multisig model. And we talked about this on your other show,   Tales from the Crypt, I think about almost 2 years ago.  

The 2 of 3 security model   is,   extremely insecure because   say say,   say Adam and Matt are going to trade some Bitcoin for some USD and, Wizz is the arbitrator here. You know? So these are the 3 key holders of our 2 of 3 multisig.   Well,   that's great if,   all the 3 people are actually separate people. But when you're dealing with, anonymous people on on a marketplace with like, Bisq,   If I'm the arbitrator, I can just go to the Bisq market and take all of the offers, and now I control 2 of the 3 keys. And I can steal all of the funds, and there's nothing that you can do about it. So   Bisc realized this a long time ago that the 2 of 3,   security model   with anonymous parties,   is not secure. And so this changed to a similar,   time lock,   trade protocol. So,   as Adam explained, liquid has this really cool 11 of 15 multisig   with a time lock that will degrade to a 2 of 3 multisig   after, set amount of time. I think it was 4 weeks, you said.  

Well, bisque trades,   if if 2 people wanna trade with each other on BISC,   sometimes one person,   it's called it's also called like an option trade.   Say you,   take an offer to buy Bitcoin on disk,   But then as soon as you take the offer, the price tanks by 20%.   Well, maybe you change your mind and you don't wanna make that payments now. So in other words, you you want to default on the trade. Even though your security deposit was,   say it was 15%,   well, the price went down by 20%. So it actually makes sense for you to just abandon this trade.   Well, your security deposit and the seller's funds are locked in this,   2 of 2 multisig.  

And if the other guy just disappears,   that would lock those funds forever.   So the BISK trade protocol also has a time lock where it's 2 of 2,   I think it's, 10 days for,   yeah, I think it's 20 days, is the hard time limit for a fiat to Bitcoin trade. After 20 days, it degrades to,   a a single sig where it just gets donated to,   BISC, basically. Right? So you now you're totally trusting   the BISC Federation,   in in the case of,   someone walking away.   So for the most part,   the bisque trades,   the 2 trade counterparties are financially incentivized   to complete the trade together   just between themselves. But if there is a problem,   then you essentially have to trust the Bisc Federation   with that trade capital and the security deposits,   that they're going to mediate and, you know, examine any evidence. Did the guy make the payments or not? And then,   reef you know, do a refund   of the,   trade trade capital to the the correct person.  

And so the Bisc Federated model has its own governance structure.   It's not a company. It's it's it's a DAO. Right? It's a decentralized   autonomous organization,   and we you know,   there's only realistically, like, 15 or 20 people,   you know, who are the pseudonymous   BIS contributors that have the voting rights   to,   you know, participate in this DAO. Of course, anybody can,   but it's mostly the the contributors of BISC. And the more contributions you do, the more voting rights you get.   And so, you know, I have a few percent,   voting power in the Bisk DAO,   and maybe the the OG founders have a little bit more. You know, it depends on how much you contributed.  

And from the DAO, you can have proposals,   you know, you you can make decisions,   without a company. And everyone's in a different jurisdiction. Some people are totally   pseudonymous. So that's how the BISC Federation kind of achieves this,   multi jurisdictional   censorship resistance.   No one country's government would be able to easily shut down the BISK DAO. And from that, we can actually,   have some federated,   seed nodes for example. Right? So in the BISK Federation, I think there are 4 seed node operators. Right? It's,   me, MZ, Devin, and Micah,   I think are the 4 guys. And we also have,   some other semi trusted,   you know, in this federated security model services like the price feed. If you put an offer on disc, the price changes ever, once per minute   to the bisque price index, which is our,   again, federated,   kind of price oracle service for what the price of Bitcoin is. So if you say, I wanna create a Bisk offer that's, you know, 10% premium on the market,   every one minute, your bisque node will connect to   either me or the other price server operators,   price services, get the price of Bitcoin that we say is the price, you know, based on the open source software running, and your bisque node will adjust the the price. Obviously, if one of the price server   operators was malicious,   they could say the price of Bitcoin is $1. Everyone would lower their   offers to a dollar and, you know,   you know, you could buy some really cheap Bitcoin. Right? So there's a lot of trust in the Bisk Federation in this,   Dow,   organization.  

And liquid also, you know, when you use Liquid, you're trusting the federation   and its governance structure and its functionaries   to,   you know, do what they are entrusted to do. And,   that's why I just think it's so strange why,   Bisk traders would feel comfortable with the Bisk Federation, but not the the Liquid Federation.  

[01:30:29] Unknown:

I'm  

[01:30:30] Unknown:

Yeah. I mean sorry. I I think another thing is   comparable maybe   is people will,   you know, they'll use hosted wallets   like,   you know, Cash App or Exchange Wallet and things like that. Or I guess PayPal   is is a kind of has bought some of these things you can buy Bitcoin, but you can't draw them.   And so,   you know, some people will use that, but if they if you hear that liquid is federated, they'll say, no. I can't use that. Right? Or they'll use a single exchange capability, but they don't wanna use a federated custody. So I think   it's it's counterintuitive   and   Bitcoin is a benchmark. So everything new gets compared to Bitcoin and then people wanna be persuaded why it's   better than Bitcoin. And, of course, nothing is better than Bitcoin because if if there was a way to improve Bitcoin, it would have already done it. Right? So   any any layer 2   is generally   making cutting some corners, making   something worse   in one way to get some benefit in another way. So maybe not using lightning as an example.  

You get,   very cheap, very fast final transactions. And so why didn't Bitcoin do that? I said, oh, yeah. Well,   okay. Let me tell you. Right? You've got managed channels. You've got hot wallet risk. It's okay. People start to call on the idea. But for the use of sense, it's but you just can't, like, you know, move everything out of Bitcoin into Lightning.   And, of course,   Lightning need to,   you know,   settle into   and do arbitration between channel court disputes or have you.   So and I think,   see this   similar   maybe with   a lot of old compare,   you know, how decentralized really   are many old clients? Like, look at maybe Binance Smart Chain or Ethereum   or EOS. And, like, dozens of them, and I'm not familiar with how they work. I mean, I guess, XRP is another one.  

So many of these things are actually when you get down to it, federal stake   or one party earns, like, 70% of the coins   and it's proof of stake or one party,   you know, controls the,   list of,   what they call in XRP, like, URLs or something. So   I think it could make a reasonable case that Liquid is   more decentralized   than many of these things. It's just that, you know,   Bitcoin doesn't have a marketing department. So and and we and it doesn't have a coin to sell either. Right? So it's like, it's bitcoin. He uses you opt into this layer if the trade offs make sense to you. But there's nobody with, you know, a big marketing budget to,   advertise it, No. Overadvertise   and exaggerate   it. It's decentralization   or   or something. Right?  

So   I think we tend   to fall into the same bucket as that and and various companies and individuals contributing to   tools and code into it and around it.   But there's nobody really   no. There's no native coin. There's no ICO. There's no, you know so it's just Bitcoin layer 2 stuff. And that has a side effect of   much less colorful marketing   and more   kind of focusing on the   technical it's kind of more engineer   led thinking or something, right, where there's not really much advertisement.  

[01:34:08] Unknown:

So, I mean, basically, what  

[01:34:10] Unknown:

Go ahead.  

[01:34:12] Unknown:

I mean, basically, the argument is is is we see,   in the so called cryptocurrency world,   basically,   the these chains, these projects that have decided to go more centralized,   they're almost doomed   to be superseded by someone who decides to go even more centralized. And we had Ethereum Oh, absolutely.   It went more centralized than us. So then Binance   and CZ went to BSC,   which is the same exact Binance Smart Chain, which is the same exact,   APIs   and calls, contract calls as   as Ethereum, but it's even more centralized so the fees are cheaper.   In the case of of something like Liquid though, it's it's a way to try and channel that   move to a more centralized model   while still maintaining the Bitcoin unit of account   and allowing Bitcoin users to actually flex and use that. It's it's it's more complimentary   than a competing centralized chain. It's a it's a it's a complimentary centralized chain. It's a side chain. Right? Which is is the term that is that has been used frequently.  



[01:35:24] Unknown:

Yeah. Yeah.   Something something else that people are often not aware of is that because because they will say I think it was   a question in the chat,   quite a while ago   about   talk about liquid versus lightning.   And so they think people will tend to think about it as, like, it's a choice or it's there's some positive competition between Bitcoin and Liquid and Lightning. Like, you know, if Lightning wins, that's good because it sucks transactions off Bitcoin. It makes Bitcoin transactions cheaper and faster   and creates more value for those users. But what they didn't realize is that actually   lightning   is a kind of caching layer   and   while it works on top of Bitcoin, it also works on top of liquid confusingly.  

So   the c lightning implementation is that this   there were originally 3 main implementation lightning. I think there might be 4 or 5 now. But   the c lightning, which is by Rusty Russell, who's a ex Linux kernel developer that works for Blockstream. And Christian Decker, Lisa and I got   are our 3 developers working on that. And that implementation   is called c lightning.   You know, it's it's it works on Bitcoin, but it also works on liquid.   And so you can establish a   liquid   Bitcoin   lightning channel   by funding it with liquid Bitcoin. And, of course, the fees are cheap and the channel setup is fast.   And the enclose is fast and cheap, and closing channels   would escalate compared to when you opened it can be problematic. Like, that's that's a pain point sometimes for   It's a major pain point. Yeah. So I think it's an interesting trade off potentially because   people are typically not putting   huge amounts of money into liquid.  

Sorry, into into lightning.   So maybe you could accept the kinda are.   Reduced well, yeah. Simple luck in Well, it's still Adam Adam.  

[01:37:30] Unknown:

Like, tell me, am I crazy here? So future future Bitcoiner   has so so one of the things I think liquid could be useful for is,   we have a bunch of outputs.   We care about privacy. I don't wanna consolidate them because I'm gonna link all of them together,   but fees are rising. Right? And I'm worried about fees increasing.   Is is there a scenario where a user   does an atomic swap   from a my chain UTXO.   My I'm worried I'm worried about this UTXO. I wanna consolidate it, but I I don't wanna link it to my other UTXOs. I do an atomic swap into liquid. I open a liquid lightning channel, and then in liquid lightning, I do an atomic swap into Bitcoin lightning.   Is that a reasonable scenario? Is that something that we could see in the future, or am I just   being crazy?  



[01:38:23] Unknown:

I think yeah. You can you can do that. And some people have I mean, it does look like some people are interested to   sort of accumulate.   I saw somebody in the side swap channel saying they were doing this. They would   buy liquid Bitcoin in small amounts   Yeah. And store them in a liquid wallet.   And then, you know, that was like the daily stock or the weekly stock. And after they built it up   a bit more, they take it out to the main chain and cold store it. And they felt that that, you know, cheaper partial custody   and they take it to real cold custody when they got enough to make it worth paying the main change in fees.  

So that's cool.  

[01:39:03] Unknown:

That's obvious.   That that that's gonna happen. That that it makes sense to me that the stacker and this is my audience. Right? Is is the guy who's doing he's he's doing his daily his daily stack of $10, $15. He does that into liquid,   and then he he comes back on chain. Because if he tries to do that on if he tries to do that on lightning, self custodial, it it he has to deal with inbound liquidity and stuff. It becomes a major pain point, but you could do it on liquid easily.  

[01:39:31] Unknown:

Yeah. I mean, liquid is   I guess, has   simplicity   advantages   in user experience because you don't have to manage channels.   You can receive money when you're offline. You can store the coins in a in a hover wallet, things like that. So   it feels a lot more familiar to Bitcoin.   Not quite as cheap or fast as Lightning, but that's a trade off.   And because you get confidentiality   too, but Lightning has, you know, onion routing and privacy in a different way. So but then what you were saying about   liquids lightning on liquid connecting with lightning on Bitcoin,   that's like,   it it should be possible   to have   a lightning route   where hops in the lightning route are different. You know. First hop is Bitcoin, next hop   is liquid lightning, the next hop   is main chain lightning.  

And, you know, you get paid   in Bitcoin or in liquid and you, you know,   it gets sort of converted along the way because   there are a lot   of places where you can basically do one for   paying any network fees for liquid Bitcoin versus Bitcoin. So it's not like you know, if if if you were to do that   where one hop was tether on liquids, and you can certainly make,   you know, a liquid channel that's funded with liquid tether or something.   I'm just curious. But   if you do that, then the lightning node needs to be like a trading bot or something to hedge it. Right? Because it doesn't really want to sell Bitcoin.   So if the channel's all Bitcoin, but some of the hops are liquid Bitcoin, some of them are mentioned Bitcoin, you could have a mixed   liquid and lightning   network with channels that go through it. I think that could be interesting.  

And,   you know, if if people are using   lightning   for   lower values in the user dimension,   maybe the   trade off   of lightning   on top of liquid makes sense. Right? Because if they're putting   a $100 into it,   maybe they're happy putting that into liquid. And then   the lightning channel will be,   you know, it feel nicer. Right? It'll be cheaper to set up. It'll be cheaper to shut down. 100%.   Yeah.  

[01:42:02] Unknown:

I love this. I feel like we're brainstorming live. I mean, I was so so I mean, I I was just on,   shout out to our boy, Chaz. I was on his show,   Ellen Junkies, lightning junkies.   Obviously, they're a little bit biased towards lightning over there.   The biggest cost to using Lightning   is when you have to hit the chain, right, when you open.   Yeah. If you're a new user, you're trying to onboard new users,   and fees are crazy,   and Bitcoin's trading at $200,000   a coin,   then then, like, they have to hit the chain to open a channel at   $50 in   transaction   or something, $60 a transaction.  

If they could do that through liquid, that's a major advantage.  

[01:42:48] Unknown:

Yep.   So somebody's asking a question. What about stablecoins like USDC?   Also, there are some stable coins on liquids. There is LCAT, which is,   Canadian dollars issued by Bull Bitcoin, which is a Canadian   kind of stacking also stacking Great exchange. Buying Bitcoin. So, yeah, the really Bitcoin that goes. And   so they're the issuer of the LCAS and it's,   it's a very fun stablecoin. Because it's not really a stablecoin. It's a voucher, and the only way to redeem it is to buy Bitcoin with it.   So you can't, like, get your Canadian dollars back. You just have to convert it into Bitcoin.   But you can it's stable in the price of Canadian dollars while you have it. And so people actually use it a little bit to,   kind of pay Canadian dollars around.  

And there's Tether is on liquids   and   Eurex, which is a euro,  

[01:43:39] Unknown:

by the same Which is run by Sideswap. Right? Yeah. Exactly.  

[01:43:43] Unknown:

And there's some more, like,   those are the big ones, but there's a Japanese Adam, Adam. Stablecoin.  

[01:43:49] Unknown:

Adam, as far as I'm concerned, Sats are our stablecoin.   On this show on this show, we don't we don't like to talk about,   the trusted third party,   stay so called stable coins.   As far as I'm concerned, they call them stable coins, but they only go down, and they call Bitcoin not a stable coin. They call Sats not a stable coin, but it only goes up. So as far as I'm concerned, I would prefer the stable coin that only goes up.   Yeah. But all that said,   so so liquid,   if we go into liquid into lightning,   this this makes a lot of sense to me. This I this idea of using Liquid as a way to onboard onto Lightning if   if you're of a lower value   lower value user.  

Am I correct in thinking that it's easier to do atomic swaps once we have them on Lightning, whether that's Liquid Lightning or   On Chain Lightning,   like, regular Lightning?  

[01:44:51] Unknown:

Well, I mean, the the this wallet work needed in either case. So it looks like   sideswap   can do   main chain swaps, and I guess they're gonna get more trustless over time,   liquid for Bitcoin.   And the there is,   Lightning   on Liquid. Grubles has some channels and stuff. It's not very big network, and it needs to be   integrated into more wallets.   So it's using the kind of c lightning,   which is a command like, Linux command line kind of lightning space.   So but, you know, it it should be fairly easy for   somebody   who can I mean, many of the lightning wallets open source? Right? And   lightning   on liquid is plus or minus the same as lightning on bitcoin. So for somebody   with the right skill set, they could basically fork   a main chain lightning wallet and make a liquid lightning wallet with it. And then there's another   interesting thing, which we're discussing there, which is, well, why not go further and make a combined lightning network that can route between the 2? So that would be a cool thing, but it's a project for something to do. I think, you know, it it should work, but there's a little bit of development work in there.  



[01:46:09] Unknown:

Wiz, what what are you thinking over here?  

[01:46:12] Unknown:

Well   okay. So   yeah. There's a lot of topics to to kinda touch on. Right? I mean, it   okay.   Another thing about the,   I guess, the   well, okay. So one of the first points made was Liquid was originally created for exchanges, but then they kind of opened up   the full node software,   to everyone. So any user can now,   use LVTC   and,   you know, issue assets or do any, really, you know, confidential transactions, which is which is really cool. But, especially for the the use case of this,   or or even, like, before we even get into that, like, there's this,   I don't know. There's, like, this meme on on Twitter I saw. Like, someone said, like, oh, Liquid is a shitcoin, and I thought that I thought that was funny. Liquid is not even a a coin. Liquid is just a blockchain. I guess they were referring to, like, LBTC,   but this is, this was said by someone who has coins on, like, Kraken or some centralized exchange.  

And if you don't understand the,   it it's kind of like this progression of   so a lot of people say, like, I want I want something to be trustless. Right? But there's if you think about it, there's actually really no such thing as, like, trustlessness.   All you really ever do is spread the trust around to more people and,   add more checks or, slow it down with more time locks, but you can never, like, eliminate trust. So for example, if you walk up to a vending machine   and you put a coin in the vending machine, you're trusting the machine that it's gonna actually dispense the drink and not just steal your money. And likewise, when you,   you know, sit down at a restaurant and order some food, the restaurant is trusting you that you're going to,   pay the bill at the end of the meal.  

And if there is a dispute, you know, they would call the police or take you to court or something, and there's some kind of,   dispute resolution process in all this.   And the way you,   the way you typically solve this problem in the real world, in the fiat world,   is by introducing a trusted third party. So for example,   if I go to the restaurant and I have, you know, an American Express credit card,   I don't trust the restaurant and rest restaurants doesn't trust me, but we both trust the,   bank to,   guarantee the transaction   and to,   sell everything. And of course, the bank takes their cut.  

So   now when you extend that into the crypto,   space,   even on the Bitcoin blockchain,   you have, miners. Right? Like,   everyone knows the risk of a 51% attack. If the you're you're always trusting that the majority of Hash Power   will,   not just mine empty blocks, and they'll actually mine   your transactions and everyone's transactions in into the blocks.   And   this,  

[01:49:19] Unknown:

works. Wait. Wait. Wait. Wait. Wait. Wait.   What?   Wait. There there's 2 different things. Right? There's a 51% attack, and there's the chance of   of miners not mining your blocks, and not mining your transaction. Right? But but but if you raise your fees, if you we we can have we can have a censorship situation without a 51% attack, and we can have a censorship position with a 51% attack, but it's a different scenario.  

[01:49:45] Unknown:

Right. So the the the risk of censorship resistance is,   kind of   the the the combat to that is the financial incentives. Right? So by putting   transaction fees,   on your transaction, you're,   you know, you're saying, I'll, you know, you're putting, like, a bribe or or a bounty on your transaction. If anybody minds this, they can get the fee. And that's why   miners will   prefer to mine blocks full of transactions instead of empty transaction. There's also the, like, inherent,   incentive   that if the miners just mined empty blocks,   they would kind of destroy the,   the net the value of the token in the network, which is, something they would have had to invest in by building their, mining   hash power,   facilities and hardware. So there there's a lot of incentives which make the miners always wanna mine full blocks as much as possible.  

And if you take that if you start with that point,   and you say,   okay. I'm I'm gonna trust literally any miner out there with hash power. I don't care who it is, but I will, you know, you you're trusting the majority. You're trusting the collective,   community of miners   to be honest and do your transaction to a block.   And then if you if you kind of trade off that a little bit and you,   say, okay.   Maybe I don't need to trust, you know, thousands of people. Maybe I only need to trust, like, hundreds of people or or thousands of anonymous people. Maybe I only need to trust, like,   a 100 reputable people or something. Right? Like, I I know that if I give my Bitcoin to, you know, Mark Carpelles,   you know, he can gox me. But if I   spread that trust around to 15, 20, a 100 people,   and they're all checking each other,   it's much much less likely that, you do this. So there's a lot of,   gray, like not gray area, but, like, this is like the spectrum of sliding scale where you start   with a single   centralized   trusted third party.  

You move up to a multisig   model or you, you know, from beyond that, you move up to a federated model.   From beyond that, you move up to, like, decentralized model and then at the very top   would be a fully distributed,   like bitcoin   mining base layer level of security.   And so,   obviously,   Bitcoin is optimized for maximum security, but it's extremely expensive   to   pay all of those miners to, you know I mean,   Adam knows this even better than I do. I mean,   to build a mining facility is like, alright. Start by buying some land,   building a building,   high voltage power lines, high voltage transformers.  

You're essentially building a data center just without any redundancy. So, you know, it's you could easily spend 1,000,000 of dollars   in your facility. And so the Bitcoin security is the most expensive,   but it's,   probably the most secure,   system that humans have ever figured out how to build. And so if you don't need that level of security, if you're just doing if you just wanna stack a $100,   you know, maybe you don't need   this,   Bitcoin based layer on security. Maybe you're fine with just trusting   20 reputable,   friends or companies or or whatever. Right? And so this is kind of why I think liquid is cool is because   especially with dynamic federations,   you can just   trade off. You can you can have that option. Right? And if you, you know, if you're gonna do a $1,000,000 transaction, then, of course, you're gonna use a Bitcoin based layer. If you're gonna do, like, a medium   sized transaction,   maybe you wanna,   use something like liquid. If you're gonna do a $5 transaction at the at the cafe for coffee, maybe a lightning channel is best you hit, and it's always about using the right tool for the job. So   with what you when you talk about liquid as a technology,   I believe it's like the best,   middle   balanced,   trade off where you trade off a little bit of security for a ton of additional,   privacy and new use cases and lower fees and faster confirmation times. It makes sense for a lot of use cases, not all use cases. Like you said, a lot of people will always prefer when when you talk about cold storage, yeah, you should you're not gonna use liquid as your, you know, to store your entire life savings.  

It's kinda like,   a hot wallet in a in a way or maybe a warm wallet. There's some   maybe there's no terminology for this yet. But if you keep, like,   95% of your money   in offline multisig   cold storage on the Bitcoin base layer, but you have, like, 5% of your money in   a bank account, in fiat currency, or lightning channels, or, you know, liquid,   banking liquidity. Dollars.   Exactly. Like, that,   makes sense,   to have that kind of,   the best tool for the like, when you go to the supermarket and you wanna buy some food,   you know, you're not gonna be doing a Bitcoin  

[01:54:59] Unknown:

base layer transaction. Right? You're just The overwhelming majority of people have their wealth stored in trusted options.   So if in a hyper Bitcoinized world,   we have trusted options on top of Bitcoin   that are better than the current trusted options because at least you have proof of reserves, at least you have certain guarantees,   that's not the end of the world. Like, this idea that, like, everything needs to be   at the same level as Bitcoin on chain is just untenable. It's not a thing that's gonna happen,   and that's fine. These are things that give give Bitcoin users more options. Right?  



[01:55:38] Unknown:

Right. Yeah. And it goes back to the block size debate. It it was,   now, you know, you could get a Raspberry Pi and throw Umbrel on there and run bitcoin core and even elements   core, and a dozen or so apps all on this very very cheap computer, and you can fully verify everything.   And if, you know, this goes back to the block size of it. If you make the blocks big for some reason to try and make the transaction fees less,   then, you know, you probably can't run-in a Raspberry Pi anymore,   and it leads to centralization, etcetera, etcetera. So there has to be a balance for everything. Not not just the the Bitcoin,   block size itself,   but for middle transactions and for coffee transactions. There's, there's the right tool for the for the job for every type of transaction.  

And   those are so far, I think we've only, mostly   talked about   simple payment transactions.   But if you wanna talk about, maybe the cooler features of liquid like simplicity where you you can actually do some,   smart contract functionality   or issuing some assets for some reason. Like, say, I have a coffee shop   and, you know, I'm gonna issue coffee coffee tokens. So if you have one of these,   wiz coffee tokens, you can come to my coffee shop and redeem it for a coffee, that type of utility token.   It's so cool to just be able to issue that on the liquid side chain. It eliminates   the need for so many,   you know, shit coins out there that all they do is just issue tokens. And   it's so nice to be able to have a liquid side chain with Bitcoin as its native token,   but also the the ability to do, more interesting use cases,   with, you know, different levels of privacy and,   speed and and lower cost.  



[01:57:30] Unknown:

Yeah. Actually, Grubbles made   an interesting   comment. So, like, not Grubbles on Twitter about   the,   so some debate about   swapping into altcoins   and and, like, a justification for altcoins privacy coins. And so he he made the point that,   you know, if you if you swap into an old coin, you're now exposed to its its price.   And there is no peg. Right? So, you know, you have to you have to do a   trade. So it's kind of like,   you know,   there's some analogy basically that   there is no peg, but there's a market. Right? So you have to find somewhere to trade it,   and you're exposed to its price movements.  

And   if the coin was centralized in it, stopped allowing transactions or something, you'd have a kind of a different problem.   Yeah. So I think   that   if Bitcoin gets   too, you know, too   I mean, I guess I guess the point is people sometimes mistake   technology limits for intent.   So by intent, because we all like Bitcoin and censorship resistance   and bearer of properties and so on,   that we would like everybody to enjoy those benefits   and be able to afford it for their use case because people are, you know, have different amounts of income and savings in terms of the world.   But then the technology has limits.  

So then   it has I mean, basically,   prices there   is the thing that   distinguishes. Right? So   but I think there might be a future where   new technology arises that that creates a different problem. You know? Like,   if there are very scalable Snarks so that the,   the blockchain is doesn't include all the transactions. It just includes, you know,   a few 100 kilobytes of snark proofs or something and that proves   anything. You know, it proves that every every transaction in the block was valid and then the coins are   just proofs that   their transaction was   in that block,   then,   you know, maybe maybe you have   a chance to make it very scalable,   and it'll be hard to get anybody pay for fees   because,   you know, there's no limit.  



[02:00:13] Unknown:

So so, Adam, I'm I'm, like, I'm curious, like,   on that topic, like, where do where does the liquid fee market come into play? Because right now,   I can pay 0.1 sats per byte for a transaction, which is Yeah. By the way, makes me feel like a fucking baller that I can just pay that for a transaction, and then it just gets confirmed right away.   The way I look at it is the whole point that we have the transaction fees is because me, humble node runner, who's running a node through fucking Tor on a Raspberry Pi   needs to be protected so that I'm allowed to run it, which I completely respect   on chain. But with Liquid,   you have these these federation members   that are running high performance hardware connected to very high bandwidth connections.  

So what is the limit? Right? Like, if liquid gets successful,   do do does the block size increase on liquid very easily? Like, why why would there what situation ends up where there's fees on liquid   that are high?  

[02:01:21] Unknown:

Yeah. I mean, I think   the blockchain is a hard scale.   So you could push it a bit further because   but I think you do want   power users to be able to verify, you know,   to absorb that receive that much information over a reasonably fast   consumer Internet connection   and buy, you know, a gaming PC or something that can keep up,   you know,   sync a chain from scratch and then keep up with it   in, you know, like, a week or something. Right? And so   that will start to puzzle in it.   If you if you go beyond that, I mean, you know, it's just a bit of base at that point. Right? So you just won't give up. I think the verifiability is important because   so I mean, another thing that is   not so intuitive is that,   at least for the assets on on liquids,   the   the people with the full nerds could   fire the block signers   and, you know, elect new ones amongst themselves and resume the chain from the lost good state. So let's say the the block signers   start doing something that, you know, a bunch of users didn't like or some of the businesses relying on it didn't like.  

They could take the chain and resume.   Now, of course,   they could take, you know, tethers and assets and things with them, but the Bitcoins, they'd have to peg out. And,   you know, if if the box signs refuse to give them their coins out, that's that's a different problem. But generally speaking,   they can resume the chain.   And   so it's important for them to be able to run a full node to check   that the blocks are valid. You know, the blocks the blocks are signing about and don't have double spends and so on.  

[02:03:08] Unknown:

I think I I guess the question I'm asking is, so so for the pegged assets, for things   like Tether or NFTs or whatever pegged asset you wanna talk about,   you know, EuroX or whatever, LCAD,   those things, it really doesn't matter what chain they're on because   the centralization   risk is is happening at the issuer side. So they can move if if if they're angry at at the Liquid Federation, they can move to whatever fucking chain they wanna move to. And we and we've already seen that happen. We've seen that happen with Tether. They went to Ethereum, then Ethereum fees went up, then they went to Tron.   You know? Now they're coming back to liquid.  

They they can go wherever they want because, ultimately, what you are doing, you're trusting Tether. You're trusting Right. The people that are holding the USD.   So,   I mean I mean, with with all that said,   the the the the point   is   is if we're   talking about   this this idea of of of trust,   How does a how does a user   level that?   Like like, I I don't understand   exactly how a user realizes   what they're what they're gonna do in terms of,   like, do they trust Onchain versus Liquid?   Does Liquid   the the key is is is with Liquid,   I'm I'm trying to I'm trying to figure out how does the federation   like like, why would you be a federation member   if your fees aren't going to go up over time? How how does   like, where does where does the game theory   follow where the federation member   wants to secure the network   if if their fees are are just staying,   you know, at at their basis? Yeah. I mean,  

[02:05:11] Unknown:

so,   I mean, today, the fees don't actually go to the federation members. They go to Blockstream.   But then Blockstream is using them to offset   some of the peg wallet,   transaction costs.   And   I think you need I mean, you need fees to avoid spam,   and so the fees need to be in Bitcoin. They can't be in assets because they make a print, you know, ridiculous number of assets and pull up the chain using those fees. So I think Bitcoin is Liquid Bitcoin is the right asset to use for   fees.   But I don't you know, nobody's really trying to make money from the fees directly because they don't have mining costs   to be free. Right? So it's more like,   you know, the spamming, the people being   functionaries and block signers are   you know, they're trying to run a business. They're like   sideswap   that is   charging   swap fees. It's like 0.1%   swap fees.  

Some of those swaps you can do yourself cheaper, but they're less convenient.   Or exchanges. So they're getting   kind of more use case use out of it. So they're willing to   or they're philosophically interested. Right? So they're they're running a node, but the node isn't like a profit center.   It's more the the indirect benefit.   So, yeah, that's that's the fees. And   oh, one thing to say about the fees as well. So 0.1   sets per v byte, but, they're confidential transactions, so they're a bit bigger. But still, you know, it works out,   like, less than 1 I think a little less than 1 set of byte,   but that always works kind of thing at the moment.  

So I think your your general point, though, I agree with, which is   it would be a reasonable thing   to   increase the block size a bit   on liquids   if if the feast, you know, if it filled up and the feast started to get annoying.   But you can't you can't go kind of crazy. Right? Because the CPU   cost would get out of control. The bandwidth cost will get out of control. And if if nobody can verify it, then it's not really a blockchain anymore.  

[02:07:25] Unknown:

And you just But, like, how does the how does the federation members like, why why are they federation members? Like, what do they I I feel like they should they need to be making money off of it to be,  

[02:07:37] Unknown:

Yeah. I mean, so they've all got You know? Right. I mean, they've all got some use case. So, I mean, site like TechSight Swap. Right? They are,   they're making these commissions on the trades in the wallet. Right? So the swap they're sort of accelerating swaps and facilitating   Bitcoin to   liquid Bitcoin to liquid Tether   or Bitcoin to liquid Bitcoin   cross chain, and they're taking commissions on it. So that's how they make their money. And so,   I think the other part of it is, you know, they wanna be able to trust the network security. And one way to do that is to be to be part of it.   So to to operate, you know, 1 15th of it or something. Right. And look look around it who else is doing that. So there are people that have hypothesized   that   in a very far future where Bitcoin doesn't have   any subsidy left and it's all fees   that, you know, once it one hope is that while the fees will come will provide enough money for the miners to,   you know, make a profit, continue to operate, and provide security to the network. But another theory could be   that people who run Bitcoin related businesses maybe wanna do a bit of mining just keep the network secure and protect their Bitcoin related investment.  

So that's the theory I did some Bitcoin mining on. I was like, well,   you know, here here is me complaining that Bitcoin is too Bitcoin mining is too centralized.   It's Bitcoin. There's never to complain to. So I guess I better do some mining. So, you know, I figured   a percentage of what I was comfortable with doing mining.   And I put some I put some money into mining. And that way, I felt like I mean, of course, I didn't make a dent, you know, like, turning fraction to a percent, but I figured that it doesn't take that much. I think it's like, you know, a few percent of Bitcoin's total market cap, you know, completely decentralized Bitcoin hash rate.   So I think something like that could apply   kind of thinking   is the more present and liquid because there is no mine. Right? I mean, there's there's no reward   as such.  

So the it's already jump started to that situate, and they're not doing for the fees. They're doing it for well, because we're running we need to run a business on it, and we need to build trust   what's going on. So we're gonna we're gonna do it.   So it's kind of   jump start jump there to that. I mean, some sometimes layer twos and altcoins   experience that would only happen in the far future for Bitcoin. So it's kinda done one of those, I guess. And it seems to, you know, people there seems to be a queue of people that wanna get, you know, like, get function rates. So as soon as Dynafed   is ready, there are people that are, you know, keen to operate 1.  



[02:10:19] Unknown:

Yeah. So, I mean I mean, basically   I mean, there's incentives to be a a a liquid   federation member.   The those incentives aren't the fee. It isn't the fees. Like, you're not becoming a federation member to make fees.   Right.  

[02:10:40] Unknown:

And that's okay. You you could get into   kind of weird conflict too. Right? If if   if there were fees   and no rewards,   maybe some of the federation members want the blocks to be as small as possible.   The fees are really high.   Other ones like, no, our use case needs retail payments. You're killing the use case for us. You're getting some complex. So   the way it is at the moment,   nobody's really they just they just want to work, work reliably, spoil lots of use cases.   And to act as, I guess, in a way, I kind of,   sort of reduce,   you know, off   that can   support bigger blocks and, you know, more CPU to verify all these   confidential transaction proofs.  

But that would be a problem on the main chain because it   would be, you know, censorship risk. But for a side chain,   you know, it's opt in. Right? So   people don't have to you know, they can tolerate it being more centralized because that's up to the people that opt into it.  

[02:11:53] Unknown:

Right.  

[02:11:54] Unknown:

And when you talk about, like, why,   why become a member of the Liquid Federation and what are the incentives,   I think   it it's funny. I actually saw something on Twitter that made me laugh. Someone said,   Wiz   is,   part of, like, the liquid cartel, so he's trying to hijack Bisk   and make it use liquid or something   hilarious.   And they don't realize the reason I joined liquid was   to be able   to represent, like, the interest of the BIS community,   you know,   by participating in the governance on the board or just being able to, like, verify   things,   you know, internally   or being able to,   you know, provide liquidity   or something. I will. Right? Exactly. Like, those those are the incentives, right, is to participate in the network,   as a as a member. Not not for any direct financial incentives. Right?  

Obviously, I run a lot of stuff for Bisc. And so,   I also want to be able to,   provide this, you know, similar services or maybe   bridge services between the liquid and bisque,   community. So   that was the incentive for me. I don't know. It's kind of like, okay, on the Internet, the Internet also has governance.   Not to, like, go off topic, but the Internet being a peer to peer network,   does have a governance structure. And,   you know, I've even, like,   tried to,   get elected to the executive council of the Internet in Asia Pacific and, you know, other, like, fun stuff. But it but just being a part of the Internet, you kind of want to   participate   in the the policies or the governance. You you kinda wanna have a say,   in how things work and not only and then the other side, you want to   be part of the discussion   or you wanna, you know, just just have a have a say in things, how they're running. So the I would say from a membership perspective, those are,   the incentives. Then, of course, I think, Matt, you would agree as well. Before you   recommend your friends to use something, you also wanna be intimately familiar with how it works and 100%. Verify it yourself. Yeah. So so that was, you know, before I suggested to Bisk that we should consider adding,   you know, support for the liquid chain,   I I wanted to, like, fully verify it myself and and, get comfortable with how it works. And   that was cool. Like, even when there was,   that issue that, Adam mentioned earlier with the, the time lock,   2 weeks versus 4 weeks thing. I actually asked Adam. I was like, can you send me the the source code for this thing? I kinda wanna verify it. And sure enough, you know,   you know, I was able to get all the source code and actually verify what was what was going on. And I thought that was   that was really cool to be able to,  

[02:14:51] Unknown:

to ask for that. Right? And to be clear here, like   like, you're you're   I appreciate the fuck out of you. I mean, you're hosting bitcointv.com,   which hosts its hosts all of our archives for civil dispatch,   and we've had issues with people hosting that shit.   I mean, like, you're   you there there's there's no clear financial incentive for you to do what you do. You're putting yourself in a more vulnerable situation,   being a Liquid Federation member. I I cannot I work through all the different scenarios.   Yes. I'm a little bit biased because Wiz is a friend,   and he's been on dispatch multiple times. But, like, honestly, like, there's there's no way for him to make   money here. Like, the like, if anything, he's losing money being a federation member.  

You put it all together, that's that's how it comes out.   I I I wanted to Adam,   while I have you, and   I appreciate the fuck out of you. Like, it's fantastic that you've been here for this conversation. I think this has been a really very conversation for the audience.   6102.   This has been famously called the 6102 Bitcoin show,   because   he refuses to dox himself. He's only doxed himself once on voice, and that was on the Stephane Levera podcast.   But besides that, he's never actually doxed his voice.   And and he wants to know,   and I'm very curious as well. So so he did channel me in this question.  

Is it possible for us to do a multiparty transaction   on Liquid,   without   doxing the information, like, doxing the amounts,   and the destination of the individual transactions to the other people of the party. Basically, the idea is, is it possible to do a coin join without unblinding your confidential transactions?  

[02:16:57] Unknown:

Yeah. You just need the blinding factors to add up between the inputs and the outputs.   So   I think you don't really need to know anything   about   the types of values of the other parties, just that you get out the same amount that you put in.   And you have to do some kind of, you know,   coordination game where partially signed messages are passed backwards and forwards. So there's,   for people doing   some kinds of Bitcoin stuff, you come across PSVT, which is a kind of file format for partially signed Bitcoin transaction. So there's an extension to that called,   PSET,   which is by,   actually, Andrew Chow is the person who worked on both of those, and he works at Blockstream. So he's been working on PSET, which is a way to, you know, adds   liquid extensions to   this, kind of   message format and adds blinding factors and things like that to it. So something like that should be possible.  

And   yeah. I mean, the the intuition is basically   with the blinding   stuff,   the the   in Bitcoin, the   inputs, you know, the values of the inputs have to add up to the value of the outputs plus the fees. And in liquid,   the value of the inputs of each type have to add up the same value of the same type   and that, you know, there could be multiple types in there. Right? But the inputs have to add to the outputs.   And   the way that happens with the blinding factors is the blinding factors have to sort of cancel out on each side. So   it's it's mathematically possible to,   you know, join with something where you don't really know what it is or how much it is.  



[02:18:44] Unknown:

That's great. I mean, that that that's what we wanna see.  

[02:18:50] Unknown:

Oh, something else I was gonna mention because we were talking about sort of privacy and confidentiality is the,   coincidentally,   the,   confidential transactions   is the building block   used in a in a few different things, including   member Wimble.   So   when,   Greg Maxwell used to be the CTO of Blockstream but is now, you know, independent,   he,   he was implementing it. I've mentioned to him that,   you know, with this range proof, you wouldn't need   a signature because the range proof itself is kind of proof of ownership.   And that is, you know, like a a first step along the way to Mimble.  

Mimble was   sprung on the log by another pseudonym actually.   But   as a site liquid basically has the building blocks in it already   to do member wonderful like behavior, which is instead of doing a transaction   with a signature   and binding factor, you just, you know, make an opt true transaction. There's no signature.   And   knowing the blinding factors,   is what enables you to spend. And you and you have to know the blinding factors to spend.   And then you need to, you know, you need to do something and you need to make a wallet   that understands this kind of different way to use the liquid   blockchain formats. So that's another thing that could be done potentially in wallets.  

And then the, you know, the only   thing missing for Liquid for mimble and bull then would be that it's not, you know, making you some mathematical properties that lets you delete the history of mimble and bull transactions. But it's kind of curious that you get the,   you know, the kind of claimed   privacy benefits from them or something. It should be possible today even.  

[02:20:45] Unknown:

Yeah. That's a good point. There's a lot of, like, I I think we're just seeing the very beginning of   what's gonna be,   possible with this   basically new global financial   system.   There's this, very famous post by Hal Finney on the Bitcoin talk forums where he's talking about, the future of Bitcoin banks and Bitcoin banking.   And I think,   Adam also tweeted about this,   in the past too when, Hodo Hodo implemented their   decentralized lending platform on top of Liquid.   And it's and it's kind of like,   this is this is the future of,   Bitcoin banking is is some kind of side chain with liquid   that, of course, settles,   on the base base layer Bitcoin blockchain   and uses Bitcoin as its,   token of accounts, as a unit of account. But the side chain itself   can do all kinds of really cool stuff   that the Bitcoin base layer wouldn't,   be able to do.  

And   this is this is also why I'm so interested in liquid. Right? Because we're just we're just seeing the surface of,   you know, what new op codes or what new contract functionalities.   And and, maybe this is a good time to to talk about Biscuit a little bit, like, with with,   you   know, we we talked about the   the the kind of, okay, coffee transactions   or day to day transactions for daily stack or, you know, large settlement transactions that batch batch a lot of things. That's like the obvious   use case of a side chain or or any of these things is, okay, Bitcoin base layer fees are getting high, so let's batch a bunch of transactions on liquid or lightning   to get the fees down. And then we'll settle on chain,   eventually at some point. But the real other side of the cool stuff you can do with a side chain like liquid is the new functionality.  

Right? And this is this is, like, where you can you can just, you know, imagine the future of,   like, hold to hold to lend is a cool example. Right? They if you're not familiar, they have this,   on chain on in a liquid contract. They'll lock   up Bitcoin or they'll do some kind of atomic swap. I'm not too familiar with the technical details, but your, LVTC   and your USDT,   are in this really cool, multisig swap,   contract. Right? So you can you can fully verify everything. And I think that's the real key   to,   the future of Bitcoin banking is that okay. Back in the day, if you go back to the gold standard,   you know, you would have,   a bank vault. A bank has a vault with a bunch of gold bars in it. Well, how many gold bars do they have in the vault? Nobody can really verify that easily. But more importantly,   how many gold certificates did they issue out? Right? Are they a fractional reserve or is it a full reserve?  

Is it,   I think they're, you know, like are they fully,   are they do they have a 100% reserves or not? And that's the really cool feature about Liquid that's underrated.   Is that if you imagine Liquid   as some kind of bank,   that's issuing like, not gold certificates, but like Bitcoin certificates or Bitcoin I use like with with the LVTC token,   essentially is is that you can fully verify not only the holdings of this   Liquid Federated   Bank,   but also the liabilities. And I don't know of any other system where this is really possible, where you can fully   verify both the assets and the liabilities   of, this type of,   side chain. So that's really cool,   that you can do that with Bitcoin   or more accurately on top of Bitcoin   to enable actual banking use cases like peer to peer lending   or,   you know, Bisc is another good example. Bisc on top of Liquid with more privacy and and lower fees. That's where Liquid is really going to shine. And that's,   why I'm bullish on the future of of, liquid for this, functionality.  



[02:25:00] Unknown:

Yeah. I mean, the Huddl Huddl stuff is interesting. I don't know if you guys ever had them on, but they could explain it more. But I tried it out a little bit, and it's We had them on.  

[02:25:09] Unknown:

You're technically a sponsor of of the greater podcast, but not a sponsor of this show. We have no sponsors on this show.  

[02:25:17] Unknown:

Cool. Yeah. I mean, it's just basically, like, a 2 or 3   trustless escrow,   and   it's quite   a   low risk way to collect interest on US dollars because   the person who borrows them has to over collateralize it with Bitcoin. And as the lender, you get one of the keys   for   the for the s for the, collateral.   And so,   you know, unlike the other lending platforms where you you basically give money to a middleman, you don't know what they do with it. Yeah. If it's like   laying out, you know, what risk is. You can actually see the the coins   called,   guaranteeing the loan. And   so, yep, it seems to be,   you know, there's more people wanting to borrow than there's dollars to borrow. So any any money that goes in there just gets used up immediately.  

So, you know,   it's,   it seems to be pretty active. And actually, the main   borrowing   they   have tether on,   a couple of net liquid is the one that gets misused on that one for some reason.  

[02:26:29] Unknown:

Yeah. I mean,   they get a lot of shit. They get actually get a lot of shit about,   supporting Altcoin.   Altcoin   supported I see.   Or AltJade supported,   like,   stablecoins.   Yes. They What's interesting is what's interesting is they actually have a lot of trouble with the confidential transactions.   Yeah. It it actually ruins their setup. It makes it way more difficult for them to use,   liquid USDT   versus regular USDT.  

[02:27:04] Unknown:

Right. So there's a dispute, like, there's because it's 2 of 3. If the lender or borrower gets in dispute, like, you underpaid or you didn't pay as much as the city did, they can't tell because it's confidential.   It's kinda great. I love that. You have to. So we added a feature. I mean, we needed to add it anyway, but we kinda rushed it for them, which is   in the green wallet.   You there's, you know, you click on it. It takes you to the explorer,   but it's still confidential. And we made another a new feature for the explorer, which is you click on it,   and it sends the   blinding key   in a in a URL path as a, you know, comment field. So the the web server doesn't see it, but there's JavaScript in the browser to decrypt it, and then you can see it. So you can share that with Huddl Huddl,   and then they can see what who's telling the truth, basically.  

But without that feature, they would kind of, who do we believe here?  

[02:27:56] Unknown:

Well, I'm fine with that. That the feature not a bug.  

[02:28:00] Unknown:

So Well, that's how this that's how Bisc has to I mean, I think Bisc actually requested that feature first. Yeah. Yeah. Yeah. So if I'm the mediator on a trade dispute,   and   if you wanna you the the burden of proof is on the,   buyer in this case. They need to prove to the mediator   that they sent the LBTC to the certain address, and the only way to do that is exactly what you just said by revealing the lining key. That's why originally when we launched,   LBTC trading on BISK, we actually had to,   require the users to use, like, an element's core full node because   at the time, the green wallet didn't have that feature.  



[02:28:39] Unknown:

Yeah. Well, the green wallet actually,   won't send to a non confidential address either. It's kind of,   it really wants you to use I mean, the network would support non confidential addresses and elements can, which elements is kinda like Bikki, but for liquid.   But Green and Aqua   are confident only, basically.   So yeah. But now that there's a a URL   on the explorer that can encrypt it in JavaScript, so it's kinda nice.  

[02:29:08] Unknown:

So I mean, so, Adam, like like, one of the cool parts about Liquid, right, is that, like, all the API calls, everything is exactly the same for Bitcoin.   Like, if you already implement Bitcoin, it's super easy to implement,   Liquid. Right?  

[02:29:23] Unknown:

Yeah. I mean, actually, Novak from Coldcard was talking about this the other day,   on on one of the  

[02:29:30] Unknown:

He's been on the show many times.  

[02:29:32] Unknown:

But I get he   he was talking I guess he's talked about in a couple of places. But, anyway, basically, what you're saying,   you know, liquid is very easy to do because all the API calls are the same. There's some small extensions to do the confidentiality.   But once you adapted for that, basically,   you know, there's your tool chain,   your application stack.   It it all works in its low friction.   And so   he was,   you know,   the one thing you need is the is the crypto library for confidential transactions. So Bitcoin has   the main library that it uses is Libsec p, which is all crypto.  

And   the same   developers that work on Libsec p   added the confidential transactions implementation.   So there's a link sec p version with,   sec p's. So it has the   confidential transaction range proofs and things. So   he figures the main challenge is to,   you know, get that running on a cold card, and it feels like the rest will be quite simple. So that'll be pretty cool if,   you could support in cold card   as well.   Yeah. That's for now. There is already a liquid support in,   Ledger,   not like, the ledger hardware works as well, like, in NOS.   And, of course, Blockstream made the, you know, the   Jade as well to have,   content transaction support. And, actually,   it turns out that the hardware wallets have, like, rather   small memories and slow CPUs. So JADE is   significantly faster and more memory   because it can do well, I mean, it has a QR code reader on it as well, which which takes more resources because it has a camera and screen. And   it has   yeah. We we knew that we would wanna do confidential transactions on the   on the processor as well. So it's got, like, a kind of dual core 32 bit   wrist chip.  



[02:31:34] Unknown:

Yeah. Jade is really cool. I I, played with that a bit. I think the probably the one thing that most Bitcoiners would   want on their wish list if they were gonna,   use Jade would be, like, an easier ability to self host everything on, like,   for example, like, if they have a Raspberry Pi at home,   maybe Blockstream could make an app for the Umbrell App Store that's like the Jade,   how do you call it? PIN,   server side PIN back end? Is that what it was called?  

[02:32:05] Unknown:

Yeah. I know what you mean. It's kinda like PIN PIN server or something.   So, actually, I mean, we should explain what that is. Hey. Most hardware wallets are,   you know, I can cite it. It's protected by a pin,   but particularly   it's showing none of them are that great mostly. But, you know, if if you   if if somebody steals   it and they've got a lab, there's a chance they could get get your keys out of it and steal the coins.   And so some of them have HSMs oh, sorry. Secure elements   that are supposed to be hard to extract keys from.   But it turns out most of them   there's 2 CPUs, there's a secure element and MCU, a kind of general purpose CPU. And what happens is when you power it up,   you give the PIN to the secure element and it gives the mnemonic and the keys to the application processor, and then it's already in the application processor.  

So the distinction is not that great to the different models, you know, whether it's a serial element or not.   The application processor ends   up doing the signature because serial elements don't have, like, DSA signing capabilities.   So in any case,   you know, JAD is   partly one of one of the thought processes we wanted to be that I can fully open source hardware that   you could buy off the shelf hardware and run it on it. So buy like a m 5 stack   type   of variants. There's a variance like a fire that you can   get down with the firmware open source and flash it yourself. And now you have, like, a Jade functionality.   And,   but then it's not gonna have a secure element. So we we figured, well, what can we do about this? And the thought was   to use a challenge response   protocol with a server so that if you get the PIN wrong three times, then you can't decrypt what's on it. And so the mnemonic and keys are encrypted.  

And they're encrypted with a key that's kind of, you know,   split between the server and the client. So the server couldn't decrypt your stuff either.   But you can't decrypt it without challenge response to a server. And so if you fail 3 times, the server will say no. And then you you can recover it. You just have to reset it and put your mnemonic in again.   But it protects you against somebody attacking it even though it doesn't have a screw on it. But the question there is so what Wizz was saying is, well, what if I wanna run my own PIN server and I don't wanna rely on this, you know, Internet has to PIN server.   And, yeah, we we released the source code for it, and it's pretty small. It's like a bit Python code that, you know, answers this challenge response,   counts down to 0, and then locks you out and deletes the keys or what have you.  

So it's pretty cool actually to, you know, to put that on a Raspberry Pi and hide it somewhere and you connect to it over   Tor. And then, you know, if somebody gets your hardware wallet, it's gonna be pretty hard to   override the pin lock out,   if you can't find it.   That way, you have one less dependency.   So,   yeah, that's possible. I think we need another,   we need   to to   have another firmware update for Jade to   to add the configuration option, but the server part is open source already  

[02:35:20] Unknown:

to use it. Yeah. Right now, I think you have to actually   change the hard coded,   PIN server back end URL in the  

[02:35:29] Unknown:

Right. JT firmware and then, like, refight. Yeah. Yeah. If you're building your own, you could do it. You got the source, and you can just change the URL. But we wanna   make it so that even with the stock, like, pre flash jade,   that you'd be able to change it your own server.  

[02:35:44] Unknown:

Because it it's kinda similar.   Like, a lot of friends will ask me to be, like, their, key buddy. Right? So they'll say, like,   can you just hold on to one of my keys of my multisig setup or,   you know, Raspberry Pi. Can you just, like, host my Raspberry Pi for me on your network or something like this? Mhmm. I think that would be a and it's a good service. Right? Because I have plausible deniability. I don't know,   what they're doing. I'm just, like, you know, hosting service.   But, that would be a cool   kind of   service to to provide is that, kinda like a self hosted Casa or something like this, where you you have a multisig,   signing, and then you could define whatever rules. And I think, with NVK's product, like, the cold card or something that you you could add, like,   Right. You could add multiple,   devices   in, like, multiple jurisdictions to create your own,   you know, cool, like, multisig setup. So   you could have 1 Raspberry Pi in one country with this hardware device and then in a different country, you know. And that way,   you you know, you're much more seizure resistant. Right?  



[02:36:56] Unknown:

I mean, you could at least do it   with cold cards in every jurisdiction that you want to put them in. Right. But then you have to actually travel to those countries. Right? Right.   But, like, but it's it's only him. Like, he's the only one, like, fucking going with this shit.   But I love him for it. You know?  

[02:37:15] Unknown:

I think it's cool.  

[02:37:17] Unknown:

No. It's very cool. I agree.   Yeah. This is fantastic. I so so, Adam, before we leave here, I I wanna talk about, the blockchain satellite.   Oh, yeah. I think it's a very cool   thing you guys are working on.   I I think we should talk to the freaks, talk to the audience about how,   it does require trust, but it doesn't require as much trust as you would think.   You wanna talk about this a little bit?  

[02:37:50] Unknown:

Yeah. Sure. So,   actually,   it's a   common   question   because,   you know, the satellites I mean, people don't necessarily know the details about   what outline of how satellites work, but they're basically quite there's not much intelligence in the satellite. So most intelligence is on the ground on a on the uplink.   And so we're running,   several physical   uplink sites that we control.   And, I mean, a lot of people will rent space in a satellite uplink colocation or something, but we have our own uplink.   And   that gives us a bit more independent control that maybe is, you know, interfering with our equipment.   And, we run a full nodes   on on those   and include the data in a way that,   gives redundancy for the satellite and upload it. And so   then you get the client equipment or different types of equipment, most recently in the base station, which is a kind   of power over Ethernet   flat panel dish. So you pretty much   connect it,   mount it, point it the satellite, and connect it with the Ethernet cable to your router.  

If you have,   you have a p power of Ethernet   capable router. If you don't have, you just plug in the power injector.   And it it relays,   basically,   lots of stuff about Bitcoin, you know, real time transactions, blocks us in their mind,   and a full block history actually   lightning gossip,   data updates,   and the Bitcoin client source code as well, vertically.   And all of a lot of redundancy and error correction so that, you know, you can get a power cut for an hour and you still recover and all that kind of stuff.   So then the question that arises is, well, wait a minute. Now I'm trusting Blockstream for this data, and they could send me,   you know, bad blocks or sends us a sends the transactions and send trusting one person is is a bad idea. And   so and what Matt was saying is that counterintuitively,   it's actually   not really trusting us very much because   the Bitcoin blockchain is kind of signed   by miners in a way, you know, all the all the proof of work on it.  

So for   for us as the node operator to to modify anything, we would have   to do a lot of, you know, we have to do a lot of money. Right?   And so,   you know, the data that comes out of the block site, you feed it into,   a Bitcoin node that is extended with this   forward error correction decoding.   Actually, the data that comes out of the box set is UDP.   And then   you feed those UDP   forward error correction packets   into,   Bitcoin that's been extended with   fiber,   optimized for satellite use, and it decodes it, basically.   And you get a full node. So the full node's verifying the proof of work and the transaction validity, so we can't do very much.  

And the other thing you can do   is   verify it with very low bandwidth.   So if you just get something to give you a recent,   you know, block hash more recent block, and you can check it's in your blockchain, and you know everything is correct up to that point.   And there are and that you know, you could get them to read you that over a phone call or   there is a   there's a phone number that Grubles has in his profile. I think it's, like, 1800 BLK hash or something like that. And if you call that number,   it,   it reads you the the most recent block hash, like a time service.   You can go to that. So that's that's kind of idea. And   a little bit analogous to   being on a Bitcoin pitch, you know. If if one of your have on average 8 peers, and if one of them   I was trying to figure which is invalid data, you would just read by the other ones.  

Ah, yes. The number is 1833   BLK hash. So if you call that, it will read you stuff about the   most recent block hash.   Yeah. So   if if you're on a peer to peer network and you've got, you know, 8 neighbors and one of them is very fast in feeding you most of the data, but you realize it's it's lying to you, you'll discover that because one of your low bandwidth neighbors will feed you,   you know, a more work block that conflicts with it. And then you'll you'll realize something's wrong   and, you know,   disconnect the fast node or ignore what it's saying.   So it's the idea. So the the block site is kind of like that. Right? It's a it's an extreme version of that, which is a very fast node single there, and then you have, you know, a very slow kind of   almost   human speeds that will check someone. And and some people use it, you know, they're not fully offline. They just use it, you know, you you could use it on a multiple network. So you could have other peers,   but just with very low bandwidth. So then you would automatically get that kind of cross check and just save on   Internet traffic.  

And I think the main   know, for a lot of people, the interesting another interesting about the box set is   privacy because it's it's received only. Nobody knows your IP address. There's no   Bitcoin,   you know, other Bitcoin node in the IP address, so you've got very strong privacy.   And   it,   protects you, you know,   if you serve it.   Those can be,   you know, political or just   accidents.   Day before we released   base station   version, there's a Canadian lost its Internet connection because of beaver 8 through the,   like, a kit like a rodent 8 through the fiber cable to the whole app. So stuff stuff happens. Right?   Yeah.  



[02:44:06] Unknown:

I mean, that's fantastic.   I I think   I think people underestimate   how powerful it is that we have a satellite just literally broadcasting,   Bitcoin block data nonstop 247.  

[02:44:21] Unknown:

Can you get Elon Musk to make, like, a competing,   not competing, but a complimentary service? So, like, you don't have to just trust the Blockstream satellite, but you can get, like, multiple satellite peers.  

[02:44:33] Unknown:

That'll be cool. I mean,   once there is one I mean, people often ask,   will   the blocks that become redundant   after Starlink is,   you know, more widely deployed than available?   And the answer actually is no because Starlink is a routed network. It's kinda like you know, GSM or 4 g data in the sky. So it's, you know, there   are uplink   and then satellite satellite laser links.   And so it's not really broadcast. It's it's point to point, and the data is only available to subscribers. So they could selectively cut you off.   You have to probably identify yourself to pay to sign up for it. Whereas   and so the same day, if lots of people downloaded it, it would, like, use a lot of data because I mean, we've done it, you know, like, on the Internet.  

Whereas the box that is   just surplus.   Yeah. And it I mean, there's there's, like, you know,   4 satellites   and 5 transponders   covering most of the globe.   And so we just got massive coverage areas that are literally receiving the same data.   And then there are some areas where there are 2   2 different satellites covering the same area, and then we send different,   forward error correction   code   of the same data. So if you if you receive both, you can you can buy, like, 2 dishes or 2 2 base stations. And then you'll get the block history twice as fast, and you'll get blocks and half the latency and stuff like that. So it can assemble   you know, you can receive from either one and it works. But if you receive both of them, you just get the data faster. So it's kind of a neat   trick of forward air correction codes.  



[02:46:17] Unknown:

Yeah. I'm kinda jealous I don't have my own satellites to also host  

[02:46:21] Unknown:

such a service. Mhmm.   We don't either. They're they're, like, very expensive. We're leasing bandwidth on,   on, like, commercial satellites that have satellite TV and other, like,   industrial, like, data uses.   So we have probably about an HDTV channels worth of bandwidth and which   is,   you know,   optimizing,   like,   custom compressor for   Bitcoin transactions.   So it's actually kinda cool. Like, Peter will work on a bit and   implemented it. And,   the question is on the Bitcoin network. It it's,   basically, losslessly compresses   Bitcoin transactions   with, you know, just with the transaction context.  

So that saves a bit of space.   So there's there's lots of optimizations that went into it. And   yeah. So we can squeeze, you know, full stuff out of, 1.5,   megabits   of, raw raw data. But it it will Right. Fully sync a node from scratch, which is kinda surprising. Right? You just plug this thing and leave it there for, I don't know, week or so, and you'll have a synced node from scratch.  

[02:47:35] Unknown:

What I kinda like about it is,   I mean, I guess credit to the big the blockchain marketing strategy,   is this idea that   if if a government wanted to stop the blockchain satellite, they'd have to take out TV.   They'd have to take out other   Well, one thing that's it's not like just your satellite.  

[02:47:56] Unknown:

Yeah. If there's one thing that's gonna upset people, it's gonna lose their TV. Right?   Yeah. I mean, we also because there are some overlapping   coverage zones, we try to get   because because the satellites   are owned and operated by different   international companies. And   so   we tried to get different operators for overlapping satellites. So if one   if one got   like, it fall back on the other one or something like that.   The satellites is they are we'll say, well, what happens if the Internet connection   goes down at the uplink site.   We actually have satellite redundancy for that because   the west uplink is looking at the east   downlink.  

You know? So   if the   if the Internet connection goes down on the west uplink,   which is heading out towards,   Europe and Africa,   then what will happen is the latency will get worse, but it will get the data from the, you know, the next satellite over.   Like, it will go up and down and up again kind of thing. So we wanna eventually get another one,   like another uplink site in Europe or Asia so that we can make a full circle. So we got 3,   you know,   3 ground   uplinks   so that if there's Internet at any one, then the whole system would keep running. At the moment, it's, you know, it's only double redundancy.   That's so cool. Is that why you named the company Blockstream? And Google No. That was, like, coincidental, but it does seem appropriate in that context. Yeah.  



[02:49:39] Unknown:

Because the logo kinda looks like,   satellites around the Earth or something.  

[02:49:45] Unknown:

Yeah. That's   kinda sound like a stream of blocks, I guess.  

[02:49:53] Unknown:

I mean, this has been great so far, guys. I appreciate   yeah. Hit us, Adam. Go.  

[02:49:59] Unknown:

Yes. So another question people keep asking is when Jade,   we know we're working on supply chain, so we should we should be able to get back on preorder within a couple of weeks, hopefully.   And yeah.   And I guess I guess they're also a nice price point at $40.   So our thinking is really the,   you know, we want to make it open source compatible so people can run their own, like, build their own. So it might be a way to avoid supply chain risks.   And, you know, they got the source code so they can add, submit features, or, you know, do other things with it   and   keep the cost down. So we've managed to make it   arguably similar security as a secure element without having the cost of a secure element.  



[02:50:48] Unknown:

That's pretty cool. Like, if you combine a low cost Raspberry Pi with the Jade, in in, like, a package and,   there was some kind of jade app for the Raspberry Pi,   for the the ping,   back end server. That would be a cool,   kind of Christmas gift or present for new Bitcoiner friends   to help them get started in, like, a self sovereign way. That way they would be able to do,   like, Bitcoin   or liquid Bitcoin or lightning or,   even, like, Tether kind of assets on top of liquid, all with their same Raspberry Pi and Jade Wallet setup. Right?  

[02:51:28] Unknown:

Right.   Yeah.   There's   a number of different, there's a company called Start 9, which which makes   right, like, Bitcoin full nodes, and they have some sort of decentralized   peer hosted apps.   I think it's like a chat app. I think they have,   an elements node on it or or an option to install  

[02:51:54] Unknown:

or something. My understanding is that their,   full node product doesn't use an external s SSD yet. So,   they're, like, they use a prunes,   Bitcoin d note on the SD card only.   I see.   So I guess that's to get the cost down or maybe just make it easier. But I could see why you would wanna combine that with,   like, the Jade device to get the the overall cost down. And, also,   we're working on the mempool,   Explorer app   for the start 9 Labs,   res not Raspberry Pi platform.   So that would be really cool. Since they have that liquid node, we could actually have the mempool explorer   on both the main chain and, liquid side chain all on that Raspberry Pi.  



[02:52:42] Unknown:

Yeah. I mean, it's it's kinda cool that you can run your own block explorer too. So,  

[02:52:48] Unknown:

one click installation. Yeah.  

[02:52:50] Unknown:

Yeah.   Also good for privacy.  

[02:52:56] Unknown:

Yeah. Originally, like, that was the original vision of the the project, and we started using the Blockstream,   fork of electris for our, production server back end. But when we wanted to get it working for home users on Raspberry Pi,   it's just too heavy. Right? It's it's meant for, like, high performance server. So we had to do a lot of work to   kind of, get it working with the Roman z Electris,   which   which can run on a Raspberry Pi. But if if you're trying to, like, explore an address with more than a 100 transactions or so, it'll just,   give up. Right? Because   it doesn't have,  

[02:53:38] Unknown:

that full index. That's the trade off. There seems to be a lot of, like,   Electrum.   I mean, Electrum's being a kind of   a back end for   indexing   Bitcoin data, basically.   And there are a few different like from personal server, they they export like Electron Pro. So Blockstreams,   open source explorer is also an Electrum server. So, actually, the Aqua Wallet is an Electrum client, and it connects   to the Blockstream as an Electrum server. But you can you can point Electra other Electrum clients at   Blockstreams,   Black Explorer, actually.  

But in terms of the the footprint   of the thing, I think it's   the, fastest and most scalable   Electrum server you can get at the moment, but it's it's a bit of a beast. Right? It indexes everything can   because everything. So it chews up or it doesn't fit in Raspberry Pi very well, and it's it's kinda overkill for, like, a personal use.   It's it's designed to, like, you know,   through thousands of thousands of user.   So, yeah, I think it's right. Yeah. I mean, that's what we use for the production.  

[02:54:58] Unknown:

Yep.  

[02:54:59] Unknown:

Good.  

[02:55:01] Unknown:

Yeah. On on mempool space, we have several servers running it, and it's just a beast.   And and I I, it's really cool, though, that it has its own,   like, REST API, and a lot of,   applications and Bitcoin wallets   all integrate, like, a lot of, transaction,   broadcast   services.   A a lot of, people use this API. I would actually estimate that the   the Blockstream, Electris API that   you use on, Blockstreams Explorer and that we also use on the Mempool Space Explorer   is probably, like, at least 10 times as popular as the actual,   Block Explorer,   website itself. Right? Just because of all the other integrations and,   and wallet apps. And and also because, it's available on the Tor hidden service onion. So Mhmm.  

Anybody can can query   transactions or addresses in their custom application or broadcast transactions,   but over Tor so their, privacy is protected. I think that's,   really cool, and more people need to to run these,   Explora API servers.  

[02:56:10] Unknown:

Yeah. I mean, actually, somebody proposed that   it wouldn't be that hard to,   mirror   blockchain   dot infos APIs   so that people could run their own blockchain dot info kind of, right? Because it it has a few rest APIs that are just coincidentally a little bit different to the Explorer ones. But, you know, the Blockstream Explorer has,   like, a send API. You can send transactions through it.  

[02:56:40] Unknown:

Right.  

[02:56:42] Unknown:

And I think at times the blockchain dot info,   like,   gets a bit out of date. You know, I think it it it all nodes.   It doesn't appear to be made well at times. So   it could be good for people because there there were, like, you know, actual wallets and services that rely on its APIs.   So I think it might be good for them to sort of self host,   and so it'll be easier for them to self host if the APIs were the same. So that's the kind of missing  

[02:57:12] Unknown:

feature. That was that was one of the things that I think, contributed   to mempool's,   app getting so popular is that for the fee estimation, we,   implemented the same API as I think earn.com.   And then, of course, since we're using your back end, we we support the same API as the Blockstream Explorer. So it's nice to be able to,   now on the Raspberry Pi,   App Store,   you know, distributions to be able to have normal home users just do, like, a one click   installation   and have that API back end up and running   quickly and very easily.   And then now what we're seeing is a lot of, wallet apps. I think Specter supports,   of course, they support blockstream.info   and mempool.space,   but more importantly, they support the next option, which is, like, self hosted mempool space back end. Right? So you can just point it to your Raspberry Pi. And I think that's,   that was kinda like the vision for the for the project, right, is to be able to empower individuals to self host very easily.  



[02:58:17] Unknown:

Yeah. It's pretty cool. I I think that self hosting is good. I mean,   sometimes   people write   kind of web mash up applications,   and then they rely on third party   service and APIs, and they cannot import,   accidentally import trust or service   reliability risk,   basically.  

[02:58:43] Unknown:

Have not not to change the subject. I know we're getting on, like, the 3 hour mark.   But,  

[02:58:49] Unknown:

did you want to, talk about BISC a little bit, Matt? I don't know if we still have time. Yes. Just hit us real quick on, and we're gonna have you back, Wizz, so don't worry about it. Don't worry   about,   us missing us missing this. But I I I think it's very important. I think Bisk is the one of the most important projects in Bitcoin.   We've been very clear about that   here at Cielo Dispatch.   So hit us with it. You know? What what what is the future of BISC?   What where where do we have to be concerned, and and where are you coming at it?  

[02:59:26] Unknown:

Well,   it's interesting you say Biscuit is one of the most,   important projects. It it's probably the only project that touches actual fiat money. Right? Like,   all of the other,   cool   Bitcoin projects are   kind of like crypto to crypto or layer 2 or side chain   or or basically,   using   almost all, crypt cryptography based.   And Bisk is is like the only project that dared to,   touch actual fiat money. And so it it's a really unique challenge to,   to, like, make Bisc work,   I mean, for a number of reasons. Like, obviously, the the fiat payment systems in every country are totally different   and, every fiat currency has its own markets,   with its own with their own challenges and and stuff. But but more so than all that, you're taking all of that and you're trying to implement it in a decentralized and censorship resistant way.  

And,   that's like, we we talked about liquid a lot and and other,   systems for censorship resistance, but,   it seems like   the the on chain fees are going to pump forever.   And so, unfortunately,   since Bisk was   developed a very long time ago, it's, like, over 6 years old now, I think.   Bisk was developed in this time where   the the thought of of an on chain fee market was like a very distant future away. And now that it that it's kind of here,   you know, Bisc is is kind of forced to to figure out some,   scaling,   you know, options. And and and   understandably,   like,   the it it's not it's not an easy, problem to solve. Right? Because Bisc is really Bisc users are really enjoying the, the security and the privacy   and the low transaction fees. But now that the the fees go up,   they're gonna have to, you know,   like, if you wanna do a $100 trade on bisque, you're not gonna spend 20 or $30 for on chain fees. Right? It just totally prices out   a lot of these use cases. And so   now the users are in a situation where,   we kinda have to go back to the drawing board and say, okay. Well, how can we   how can we make bisque version 2,   you know, to to solve   not only the fees issue, but a lot of the other issues that DISC,   has encountered over the past several years.  

Maybe, you know, maybe we can try to improve the user experience.   Maybe we can try and,   make it more social or more community oriented. And and it's it's a challenge. Right? Because everything is is a balance. And if you,   you know, say say you implement   support for liquid as a base layer, as an optional second base layer,   then, you know,   maybe you have to, like,   maybe you have to bootstrap a new market because now you're not just doing, like, Bitcoin to USD. You would have to have, like, an   LBTC   to USD market. And so,   you know, market makers will show up and provide liquidity, but it it it just gets more and more difficult. Right? And then you you also have, like, the the technical,   implementation under the hood. You have to support multiple blockchains now   and,   that increases, like, the computational cost. Like, Bisc is already,   pretty heavy app. But now if you, you know, add support for a different base layer, what are you gonna use? More CPU.  

So then the UX also could suffer. So it it's very,   difficult to to solve this problem without,   you know, really   sacrificing,   some some important points.   And so,   yeah, it's it's a it's a difficult problem. And I think the future of this, like, in the version 2, will probably be more   like a generic   contract   execution   system.   So maybe the security will even be not part of the basic protocol. This is this is still, like,   conceptual and and being discussed and proposed. But,   say   say,   Matt, you and I wanna trade some Bitcoin for some Fiat,   and, we kinda know each other,   but we you know? So so you there's some reputational,   clout there. Like, maybe that,   you know, that that's that's, like,   good for some use cases, but bad for privacy. Right? Like, you wanna be able to trade   anonymously with other anonymous individuals, but still have security. Right? So so you want to,   you don't maybe you don't want a reputation system. Right? Or maybe you want a pseudonymous reputation system. So these are all the kinds of decisions that   we're gonna have to figure out in version 2. And I think for now, the only real optimizations we can do are,   obviously,   adding support for layer 2 stuff like liquid, which is, similar to Bitcoin. So it's not   super difficult to to add that, but it still is, a big challenge. And then   optimizing   the,   the on chain usage on the on the main chain. Right? So   maybe,   you know, maybe Biscuit is still gonna be very popular if you wanna buy $10,000   worth of Bitcoin. You don't mind paying 20 or $30. Right? But for the $100 trades,   maybe those guys will,   decide to go to liquid or some some other, you know,   some other venues. So it it's a really tricky,   problem to solve. Right?  



[03:05:26] Unknown:

Yep.  

[03:05:28] Unknown:

I I thought Adam was gonna jump in there. I I look.   I I 100% agree. I think BISC is   like I said, I think it's one of the most important projects that we have in the space.   I appreciate you going in into detail about it,   because I feel like,   people take it for granted. People don't realize,   people don't realize what the stakeholders of each of these projects put forward   to to make those projects what they are.   And at the end of the day, like, we can talk all about censorship resistance.   We can talk about distribution,   but it comes down to people. Like, people are running this shit. Right? And and if you talk about it at scale, people are running   people are running shit, man. And and and they're they're vulnerable.  

Wiz is one of those people,   and he just fucking throws himself out there. So I I appreciate everything he fucking does.   I appreciate what bisque   what they what the stakeholders are bisque working on,   and I look forward to what they have in store for us. I I I would say to you is is I look forward to seeing you in Miami.   We're going to have a live civil dispatch   directly from our citadel in Miami.   That will be a rented citadel, but it'll be a fantastic dispatch.   So I look forward to that. I mean, we're we're gonna be talking about   the the best needs to transition, basically.  

Best needs to transition from a low fee environment   to a high fee sustained environment.   And,   that's going to be a messy transition, but it's a transition that has to happen.   And we are gonna watch that happen here at dispatch,   and we're gonna try and   we're gonna try and explain   where all the stakeholders are coming from, basically. Would you agree, Wiz?  

[03:07:42] Unknown:

Yeah. You raised a good point. It's like,   I don't think anyone appreciates, like, the amount of, hard work by really smart people,   at Blockstream that went into, like, the element side chain project   and how much work goes into, you know, coordinating   the liquid federation,   or, you know, how much hard work went into the bisque, project. Like, everyone kinda   naturally takes the the tools for granted or the on chain fees, like, the low fee environment for granted. Everyone takes the security of Bitcoin for granted. Right? It's just,   so easy to do right now, like,   5 sat,   you know, on chain transaction and have it confirmed. But,   once those fees get up,   people get really,   yeah.  

Then that's actually the stated mission of the the mempool project, is to,   help the Bitcoin community transition to a multilayer ecosystem, right, where we have these   layer 2 or even layer 3   systems that enable new use cases like like liquid and bisk,   new new banking. Right? You can do peer to peer lending or you can do,   trading of of different fiat currencies even. Right? That's,   that's the real future because,   in my opinion, KYC is   the illicit activity. Right? And,   all of these layer 2 and layer 3   banking systems   basically implement similar banking services that you would get from a traditional fiat bank but without KYC. Right? If you want do it?  



[03:09:27] Unknown:

Should we do it? Adam, Adam, check this out.  

[03:09:31] Unknown:

Are many places to buy Bitcoin.   They collect your personal information   and jeopardize your privacy.   K y c is the illicit activity.   This is open source.   It does not collect user data.   You keep your private keys.   I love that.   Shout out to Pedro.  

[03:10:10] Unknown:

Couldn't help myself.  

[03:10:12] Unknown:

The awesome designer who made that. Yeah. And I think that's the   that's the real   that's the real future, right, of of all of this hard work is that,   we get to we get to rebuild the banking system,   on our own terms using cryptography and and decentralized systems. And we get to decide   what is the correct balance of security and privacy and censorship resistance and cost and speed   and user experience. Like, we get to   build all of these new things. And,   it's honestly it's like a sometimes it's a thankless job. Right? Like, when you see these trolls on Twitter saying liquid is a shit coin or bisks it's like, come on, guys. Like, we're we're trying to build a new system for everyone here,   and it has challenges like any other project, but even more challenges because you're trying to build something in a decentralized   way, in a censorship resistant way, where you know the government's going to,   not be happy about what you're building. Right? And Adam is the, you know, the OG cypherpunk here, you know, doing he he's been doing it longer than any of us, like printing source code on t shirts, right, and and all kinds of crazy stuff. This this war is not   a new,   war. Right? It it's it's all about freedom for the people and,   freeing them not only from   fiat debt slavery, but also from mass surveillance and and capital controls and and and all of these horrible things. So,   we're doing this for the community,   and, you know, maybe have a maybe have a little bit more   respect for one another,   you know, developers in the space. Like, let's not troll each other so much. We're all on the same team here. If if one project is making a privacy,   enhancing tool, that's great. You know? Like, let's let's collaborate and work together. Let's not, troll each other and and, fight with one another. It's just a waste of all of our time. We should be working together because we're all on the same team.  



[03:12:22] Unknown:

100%.   100%.   Fuck yes.   Adam,   appreciate you coming and coming on the show. I think the show has been fantastic. I think this was a great episode of dispatch.   I think it it perfectly fits episode 20.   It's been a long time, guys. It's been a long time, Freaks.   Every Bitcoin Tuesday, I think of you guys, and we're gonna continue this forever,   because   you support the show. It's a 100% community funded. We don't have sponsors. We don't have ads,   And you guys you guys make it what it is.   Adam, thank you for joining us. You're a fucking legend.   We appreciate everything you do. Do you have any final comments for the freaks before we end this?  

Very quiet.  

[03:13:19] Unknown:

Is Adam is Adam there? No. No. I was muted. Sorry. Yeah. No. So thanks for having me on. I I think the,   you know, more privacy and fungibility in, Bitcoin layer 1 or layer 2 is gonna be interesting to see,   and we wanna see it.   So let's,   see how that goes.  

[03:13:37] Unknown:

Fuck yes.  

[03:13:41] Unknown:

Yeah. I think I think what you said earlier, Matt, is, the way I try to do all the projects is, that I that I work on is is exactly that same model. No   altcoins, no advertisements,   no,   you know, you can't degrade any of that things. No KYC. Right? Like, that's the real   important thing is to to give the community exactly what it wants, and, that's what the show is.   And that's what,   all the the projects that Blockstream is putting out and and all of the community projects. It's just for the people.  

[03:14:14] Unknown:

Yeah. I mean, to be a 100% clear, like,   I'm a like,   I've decided   that our future is gonna be dominated   by   free open source projects. And I mean when I say dominated, I mean   we will fail. We will we will be in a horrible situation if we don't have free open source projects,   there to support us.   And I want to run this   show as a free open source project.   And as a result, there'll be no ads, no sponsors. I want this to be a 100% community funded.   I I I also want to announce   that we've officially launched opensats.org,   the proper Bitcoiner,   free open source foundation.  

It is called Open Sats Initiative,   but we are a foundation, but we're we're an initiative.   And the idea is is that you can contribute as a Bitcoiner, you contribute,   and we're gonna provide it to open source projects, all free open source projects,   not, quote, unquote, open source projects, free open source projects. We have a very strong board.   We will argue, and we'll make sure that your stats go to the right place.   And even if you donate fiat, we will   we will automatically convert that over to Bitcoin and hold that as Bitcoin. All grants will be provided   in sats.  

So that's opensats.org.   Literally officially launched as of 45 minutes ago,   and we're about to go really fucking hard. This is an this is an initiative   that I've been very excited about, but I had to be very quiet about.   So there you go.   I wanna do a big thanks for Adam back,   for joining us. Big thanks for Wiz for joining us a second time. I love you both. Thank you for all the work you've done.   You're my people. Appreciate you both.   Thank you for joining. This has been fantastic.  

[03:16:24] Unknown:

Thanks a lot, Matt.   Thanks.  

[03:16:27] Unknown:

Cheers, guys.   I love you freaks. That was a fucking great fucking dispatch.   For the record, I'm gonna be bringing a bunch of hats to Bitcoin Miami,   Bitcoin   2021, June 4th, 5th.   So if you want a hat,   reach out to me on Keybase or Telegram.   I will mail them out as well   if you must. If you're not gonna be if you're not gonna be there, it'll be a shame, but I will mail them out. So just reach out to me on Telegram   or Keybase, and I will send you a lending invoice, and we'll make it happen.   If you want a dispatch hat.   Besides that, quinsolo.comquinsolo   dotcom   has a solo dispatch   fucking flask   that is up for giveaway.  

And the only way you can get it is if you   message in the sphinx tribe   of Scylla Dispatch. The Scylla Dispatch Sphinx tribe, the first one to message stack or die,   gets it.   So cheers to all of you.   Appreciate all you guys who came in and and listened to this,   and, stay on both Stack SaaS. I'll see you guys on Thursday for a rapid hold recap, and I'll see you next Tuesday for the next   Bitcoin Tuesday.   So dispatch.   Love you all. Peace.