Citadel Dispatch

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TOPICS: tornado cash sanctions, crypto wars of the 90s, code is speech, anonymous contributors, liquid, fedimints, confidential transactions, mining

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(00:01:15) Introduction and funding of the podcast

(00:03:01) Ways to support the podcast

(00:04:18) Discussion about the Baltic Honey Badger conference

(00:56:43) Confidential transactions and their implementation

(00:57:51) CT implemented using simplicity and script size

(00:58:46) Fees for using confidential transactions

(01:00:13) Timeline for implementing simplicity and confidential transactions

(01:01:30) Bitcoin's resistance to change and the need for overwhelming support

(01:03:26) Federated Chaumian mint (Fedimint) and its potential

(01:06:44) Interoperability of Fedimint with lightning and liquid

(01:18:58) Blockstream's focus on mining and the acquisition of Spondoolies

(01:22:59) Estimating the percentage of energy consumption dedicated to Bitcoin mining in 50 years

[00:00:31] ODELL:

Happy Bitcoin Wednesday, freaks. It's your boy, Odell, here for another Citadel dispatch.   I know it's been a long time coming since our last proper dispatch.   I've missed you, freaks. I've hoped you've missed the show as well.   Have been going through some family situations,   so I am out of the studio,   but I'm using this as an opportunity to get some great guests in, via remote,   and this show will be the start of that.   Before we get started, of course, Cielo Dispatch   is a 100% funded by you guys. It's a 100% audience funded with no sponsors and no ads. I appreciate all the support I've been getting from you all.   The easiest way   to contribute to the show is through podcasting 2.0.  

There are multiple podcasting 2.0 apps. Some of my favorites are Breeze, fountain, and podverse.fm.   You simply download the app.   You load it up with stats. You search Siddle dispatch, and you press subscribe.   Then you choose how many stats per minute you think the show is worth to you,   and it will automatically stream sats directly to my lightning node as you listen. It's extremely empowering seeing all the sats come in every day,   and I really do appreciate all the support.   You can also support the shows through something called boostograms on podcasting 2.0 where you do a one lump sum payment,   and you attach a message to that.  

As is tradition, I will read,   some of the highest boostograms   that, dispatch has received since our last show.   We have CA Danner with 50,000 sat saying, always learning something new even if most too technical for an artist.   So here's my shameless plug. Happy to have 10 paintings keeping you company at Bitcoin Park, Matt Odell.   We are fortunate enough, as, CA Danner said, to have a bunch of her paintings on display and for sale at Bitcoin Park in Nashville.   We also have   we have at Bon,   with 7,779   SAD saying boost chain continues. Matt's explanations on KYC and expanding on privacy is not secrecy. It was perfect. Well said and articulated that far into the pod and bottle. Appreciate everything you do. Enjoyed listening to this one guy this one, guys. Thanks.   And then we have   Bonsko with 16,969   stats. Hitting the boost button for the first time. Thanks for going over these hot button topics.  

Also, I like the way Odell says button.   So you're welcome. I said button again.   You can also support the show by going to sale dispatch.com.   I have a BTC pay server there. You can pay on chain or lightning.   I also have a pay NIM. That's Odell. Very easy to remember. It's linked to atsaledispatch.com   as well.   And we are in a bear market, so if you do not have Sats to spare,   one of the easiest ways to support the show   is to subscribe on your favorite platforms.   Dispatch is available on all podcast apps. You just search Zillow Dispatch.   Pressing that subscribe button, pressing that auto download button really does help the show. Leaving a good review or a bad review, any kind of reviews are always helpful. I'm not gonna tell you how to leave a review.  

Dispatch is also available on YouTube,   Twitch,   Twitter,   and we have our matrix chat, which you can access by going to dispatch.com,   including that cild chat button. As always with dispatch,   we love our live audience, so thank you to all of you who continue to join us live.   That live chat is piped in from Twitter, Twitch, YouTube, and Matrix,   allowing us to address your comments and questions,   while we are live on the show. It makes it a truly unique experience.   With all that said, I wanna keep this introduction really tight,   because we do have a great show, and we do have a bit of a time constraint. We're gonna limit this one to at least, at the very most, an hour and a half, but we're gonna do a lot of really good topics here.  

And I'm fortunate enough to have return guest and absolute legend,   Adam Back here. How's it going, Adam?  

[00:04:25] Unknown:

Yeah. Pretty good. Never a dull day in Bitcoin land.  

[00:04:29] ODELL:

Never a dull day. That's that's for sure.   I guess before we get started, you just got back from, Riga, from the Baltic Honey Badger. How was that experience?  

[00:04:40] Unknown:

Yeah. I mean, it's been a couple years, but,   always one of my   favorite conferences kind of,   you know, very Bitcoin focused.   The Huddl Huddl team who run puts it on   does a good job of   kinda curating   what kind of topics they wanna see. And so they keep it   informative and,   you know, some technical tracks and,   kind of medium size, you know, so not too large, not too small terms of attendee counts.   And some so so it's good good place to have all sort of conversations and see people. I love the size. The size it's like the ideal size. It's, like, 500 people.  

[00:05:21] ODELL:

Yeah. That's great. It's like a nice balance between a small event and a large event. Super high signal. I was there in 2019.   Truly a special experience.   They do put on a good show. I was really disappointed that,   I had to drop out last minute, due to family,   But,   I was I I will say I was not surprised to hear all the good words after the fact. I had I had massive FOMO. I I think it at least the 2019 one and from what I've heard is was similar this year. I think it's I think it's the single best event   of the year.  

It's just a it's a truly special experience, and Riga is just a really, really fantastic city.  

[00:06:03] Unknown:

Yeah. Well, it's good to go back there anyway.  

[00:06:06] ODELL:

So, Adam,   one of the we have many topics that I'd love to go over with you.   But first and foremost, a topic that has been a major discussion on dispatch partly because,   it it feels like a lot of other shows don't wanna touch it,   because it is a   it's a it's a bit of a sensitive sensitive topic   is   since I last had you on, we had this Tornado Cash, sanction event where they sanctioned a smart contract on Ethereum   that provided privacy to users,   and   they targeted the developers. They took the code off the off of GitHub, which is a centralized platform that hosted the code. It's owned by Microsoft,   and they arrested one of the developers in the Netherlands.  

I mean, while we have you on, we're so grateful to have you on. I mean, you were involved in in the crypto wars of the nineties,   which I personally think has never really ended.   It's just continued.   And I'm I'm curious on on your thoughts here about about the tornado cash situation similarities,   with the export controls put on PGP in the nineties,   and how you think this like, how how does obviously, this is an Ethereum tool, but,   how do you how do you think this impacts all the work being done on Bitcoin?  

[00:07:30] Unknown:

Well, it's   certainly not a good   direction. In terms of similarities, there are a little bit similarity with   the trouble that Phil Zimmerman had for a period of time when he got investigated for,   I guess, exploiting,   the implementation of ours of, you know, encryption in PGP,   which was   export restricted at that time and is isn't really, in an effective way.   Effectively, the rules changed some years ago now. But, you know, nevertheless, the   I mean, the concept that a government   or justice system could   make an order,   telling somebody to, you know,   unpublish code or modify code is   a is a bit of   legal adventurism, I would say. And   I saw coin center,   you know, pushing back against that strongly and looking to contest   that.  

Now I think the other thing is that   sort of you don't want a bad legal precedent of something to stand.   And,   you know, effectively,   the   legal process itself you know, I'm not legally qualified by any means, but just observing. It seems to be a bit chaotic with,   you know,   the general   sort of combative   nature of common laws that,   you know, the   prosecution   whittle them down.   And you've got to assume that just as a merit course,   the prosecution is   knows full well that most of the claims are exaggerated or are are false. And it's just a way to, you know,   land somewhere. And, unfortunately,   at least in the US, there seems to be a lot of   attempts to sort of plea bargain so that somebody would agree to something that doesn't really make a lot of sense, but they just want it to end from their own perspective. Right?  

That's that's kind of recipe to get to a bad precedent. So   I'm certainly hopeful that Coin Center and others   put some, effort into,   you know, prevent to sort of pushing back on a bad precedent getting developed here.  

[00:10:00] ODELL:

So, I mean, at the core of this of this argument is is that in America,   speech is protected and code is speech.   That was the core of the argument,   back in the nineties.   Am am I correct? Were are you were you the one who printed the T shirts with with the RSA code on it? Yeah. That was me. Actually, recently, Blockstream,  

[00:10:23] Unknown:

did a rerun.   So they published the old T shirt or a small modification of it, just just for kinda historic   purposes, but I guess kinda topical to this   development.   Yeah. And and, you know, I mean, at the time, the the point   of that bit of code was to sort of say, you know, what what's the distinction between,   you know, electronic publication and   print publication or speech and Leticia is a kind of, you know, something that's   small enough to print. And Leticia is kind of silly to,   you know, have speech restrictions on or writing restrictions on. None of none of which   kind of, really are   makes sense in the US context. Now, of course, the, Tornado Cash is more international in flavor, and I I don't know the specifics of   the Netherlands. But,   I think another factor which you saw with,   there was an Ethereum fellow who   got himself tangled up in North Korea somehow   that you never know,   you know, what I I guess some of the the accusations are,   you know,   not public at this stage.  

And, you know, from the outside, we won't know   what's going on exactly, but sometimes it can get sort of blurred where,   you know, maybe the person did something   semi related   that is actually what got them in trouble   more than,   you know, the issue at hand, which which is,   of concern to the wider   Bitcoin ecosystem.  

[00:12:05] ODELL:

Right. I mean, the the particular case you're talking about was Ethereum core developer, Virgil Griffith,   which, you know, maybe code was a   a a a portion of that   situation, but, ultimately, he he went to North Korea. And   I believe   the the allegation, at least, is that he gave a   gave a seminar to North Koreans on how they could use it to evade sanctions,   which is strictly illegal in America, at least.  

[00:12:34] Unknown:

Right. Well, I I mean, other countries too. Yeah.  

[00:12:38] ODELL:

Yeah. So maybe there's   a you're you're you're basically saying that, potentially, there's something that we don't know about the tornado cache cases, not just related to the code.  

[00:12:47] Unknown:

Right. I mean, it can we because, I mean, I think prosecutors   generally is a pen.   And, actually, it varies by country.   But   hang on a second.   I think my connection is not very good. I still hear you. You sound good over here. Oh, yeah? Okay. Good.   So, yeah, I mean, it's, it varies by country a bit, but,   you know, I think   we we won't know exactly   if if there's some other issue behind it. And I think prosecutors tend to like to,   you know,   pick cases where they think they have a reasonable chance of winning.   And so, you know, some kind of combination case where   someone does something that's kinda clear cut   plus something they would like to push, you know, push the envelope on, then they tend to pick those, which is kind of unfortunate for our perspective.  



[00:13:43] ODELL:

So they can get some kind of legal precedent there. So there's there's, like, 2 there's 2 elements here.   One element is   from from what I take from what you're saying is that the this should be fought in court, and you think that at least the code side   based on what happened in the 9 days, the code side should be considered protected speech in America,   and and that should be defended in court and will probably be upheld.  

[00:14:08] Unknown:

I mean, I certainly hope so, you know.   And I think that,   you know, I think people in the, justice system   sometimes lose track of who they work for. I mean, basically, they're there to,   you know, enforce   societal norms, not to get into misadventures   of, you know, eroding civil liberties and changing the balance of society. So   I hope that's,   that is prevented here.  

[00:14:36] ODELL:

So,   I mean yeah. So that that is that is one side. What do you say to   I mean, there's there's a group of Bitcoiners,   and, I mean, there was a portion of of the Cypherpunks   before Bitcoin even existed   that believe   that   we should be building systems outside of,   outside of state control,   outside of the legal system.   Do you believe this is a a dual pronged front? Like, you build the tools, you use the tools, but also you fight it legally through the necessary channels?  

[00:15:15] Unknown:

Yeah. I mean, I guess if you if you have to   I mean, I'm also a fan of the kinda   publish anonymously   phenomena and have   a decentralized system, which is, you know, the effect that Bitcoin has because   it's, not not really possible   for,   you know, somebody to sue Bitcoin. I mean, where would you start? Right? Right. That's one of its strengths. And of course,   the, you know, the fact that Satoshi   stayed   anonymous,   stepped away,   you know, many years ago now.   And,   you know, so there's there's not really anything in the way of   a hierarchy or identifiable   control point, I think, is is beneficial.  

So in a way, this is a stress test of   relative decentralization, and I guess we'll push   privacy tech to be more decentralized.  

[00:16:14] ODELL:

So, I mean, with with you specifically in Blockstream, I mean, you guys have obviously been building in the open, for quite some time now.   Does does this case   change your viewpoint on,   I don't know, building on lightning, liquid, other layer twos, building on Bitcoin? Like, do you do you think there'll be more   will we have more   pseudonymous devs, more anonymous devs,   working on these systems? Do you think that's what the trend is gonna be?  

[00:16:45] Unknown:

I mean, I I think it would you know, I've said for a while, I think it would be good if Bitcoin itself had more   anonymous developers   because, you know, it's a it's an extra layer   of protection.   And, can you still hear me? Yes. I can. Clearly.   Okay. Good.   I I you sound choppy to me at times, so   I don't know if the audience is experiencing that.   So and and for Lightning itself, I think it's, you know, it's quite decentralized.   It's   the infrastructure is operated by   individuals   such as it is. I mean, it's all peer to peer.   And,   you you have self custody or a reactive security model version of self custody,   you know, for   kind of more federated systems   or   like liquid, which is,   you know, perhaps,   a bit more geared towards   traders   and providing an incremental   sort of security and confidentiality   advantage   over transacting on a single centralized exchange,   then,   you know, you are   sort of   somewhere in that zone where you're relying on a group of companies, basically.  

And so that is what it is, but clearly it's, you know, it's a better protection   against a centralized failure than   trading on a single exchange, which is which is what many yeah. Most people do by volume. Right?  

[00:18:24] ODELL:

So we have, winsome hacks in the comments saying that the audio sounds good to him.   Freaks, definitely, if you're in the comments, keep us updated. If the audio becomes an issue,   we would appreciate that.   So, Adam, I mean, so you brought up liquid.   Does,   obviously, Liquid is is being built out in the open. It's being run. There's the federation members are all known.   There is a privacy component to Liquid with confidential transactions.   Do you   has has this case changed your viewpoint on Liquid going forward, or,   you know, how do you how do you think about that?  



[00:19:03] Unknown:

Not too much because,   you know,   the the operators of Liquid   are, by and large, exchanges   or entities that are anyway,   you know,   providing   some form of customer facing service. Right?   And so,   you know,   there's there's a possibility from time to time that   companies like   that could have users that become,   you know,   targets of different kinds of legal action. Right?   So that's something that that, you know, they have  

[00:19:43] ODELL:

Now we lost you.   I'm not hearing you, Adam.   Apologies for weeks while we   wait on Adam to come back in to the room.   I am still here.   I appreciate you all.   Live remote show. This is one of the reasons why I've been trying to do more in the studio, but he's leaving and coming back.   And he is back.   Hey, Adam. We lost you for a second there.  

[00:20:15] Unknown:

Yeah.   So, evidently, there was a network problem. It's just that the bandwidth is enough to keep going until it wasn't someone with a different network. You know? Okay.   No problem at all. Yes. But I was just saying  

[00:20:29] ODELL:

just drop out and come back in like you did.  

[00:20:31] Unknown:

Yeah. So what I was saying is that, basically,   with liquid, many of the   network,   you know, participants who operate block signers   are already   providing,   you know, basically, custodial service in the sense of, you know, if it's operated by   a Bitcoin exchange or something like that. Right? And so, know, of course, it's much harder for   an for something like that to happen with Liquid because Liquid is operated by,   you know, a dozen   15 or   more   different companies in different   countries and so forth. Right? So   it would be procedurally much harder, and   the UTXOs in it are not   identified in the same way that, you know, the balance of the given exchange account.  

It's typically got KYC associated with it and so on.  

[00:21:28] ODELL:

So, I mean, one topic one,   concept that I talk about a lot on dispatch is this idea of   of trade offs,   particularly,   between convenience and security, convenience and privacy, convenience and censorship resistance.   And, you know, with this Tornado Cash situation specifically,   a lot of people have said, okay.   You know, we obviously have privacy tools that are used on Bitcoin for collaborative transactions.   We have join market, which   does not have a centralized entity that runs it, but then,   we also have,   Whirlpool and   Wasabi that use a centralized coordinator, and people say, can can't that coordinator be targeted?  

The way   I tend to look at it is,   you know, if if we're able to use more convenient options that have some kind of centralized element to them that make them more convenient,   it behooves us to use those options while we can. But if   push comes to shove   and we're we're not able to use those options for whatever reason,   we can go towards less convenient,   more censorship resistant, more robust options.   Is that kind of how you view liquid? As long as as long as this federation is is legally allowed to stand as is,   then then maybe that's enough, and we get this convenience advantage. But if for some reason,   there are legal challenges or   prosecutions or or whatnot,   then we move to to more censorship resistant options instead.  



[00:23:13] Unknown:

Yeah. I mean, I think there is something to be said for   sort of   the parallel existence   of more decentralized   and censorship resistant   technologies   so that   it it makes it less interesting   for,   you know, some organizations   to try and censor   the easy to use thing because they they know ahead of time that,   well, people will just switch to this other system. You know? It'll become a little less convenient, but they won't be prevented from   their activity.   Now, of course, liquids,   you know, main use case is kind of transacting   and   limit orders and swaps and things in   sort of,   peer to peer   noncustodial   trades like on sideswap and t decks and bit metrics and things like that. So you get a bit a bit so it's more about kind of confidentiality.  

There's a bit of indirect privacy because   every transaction is kind of bit like, a pay join.   Right? Because there's there's enhanced ambiguity about,   you know, the types of the assets in a transaction and the values of them,   where in in Bitcoin, because you don't   have that confidentiality   of   being bit   then,   you know,   people are analyzing the chain can   draw some differences from values probably.   So you get a bit, but, you know, the the primary   like, people people use technology for what they find interesting to use it for. Right? So there's certain people using   liquid for all kinds of different things. But   I think the main use is these kind of,   you know, more decentralized than single exchanges, less custody risk than single exchanges,   trade offs,   to to sort of reduce their single exchange custody risk.  



[00:25:21] ODELL:

So, I mean, what you're talking about there, just to bring it back for the audience that might be a little bit confused, is Liquid has something that you guys are calling confidential assets, which is on top of confidential transactions. So when you send a transaction,   not only is the amounts   hidden, but also what is being traded is hidden. So if it's Tether, for instance, or if it's,   liquid Bitcoin   on chain, you can't you can't tell the difference.   So if you make a transaction   when we talk about these chain surveillance firms, when you make a transaction, they're essentially,   doing a probability analysis of of whether or not money has changed hands or if someone's sending to themselves.  

And   and confidential assets breaks that probability analysis to a degree at least as more people are are using liquid.  

[00:26:11] Unknown:

Yeah. I mean, I was a fan of, also,   PayJoin, formerly called   paycheck endpoint.   And,   that was something that, you know, Blockstream,   sort of helped organize a kind of brainstorming   hackathon workshop   on   and a number of people that were interested   in private tech, like developers and pro core researchers   came to that.   And pay to endpoint or pay join was the   idea that came out of it, which is basically that   and and I I believe   the B2C pay server actually implemented it in their wallet as well and a couple other wallets did. So so the idea is that   as   part of a transaction,   there's a there's   a a benefit to the recipients to sort of defrag their wallet a bit, I. E. To   sort of combine and tidy up their change.  

And so effectively, they are opportunistically   joining some of their UTXOs with a payer's UTXOs, and that makes it a bit more ambiguous   about   how much is being paid and what's changed and what's not, you know, what's the payment.   So   I think that's an interesting thing because it's it's possible to do that pay to pay between 2 wallets.   It actually saves money, you know, so it reduces fees   overall   over time.   And   it's,   you know, it's an action that nobody can argue about. Like, yes, I wanna defrag my wallet, and, yes, I wanna make payments.   And, sure, you know, I have some privacy while doing that.  



[00:27:50] ODELL:

Right. So in a normal transaction,   a normal transaction has inputs and outputs.   The inputs are almost always,   the same individual, the sender, but in a pay join, it's a collaborative transaction where the receivers   is contributing 1 of 1 or more of the inputs,   so that that, when you're doing the analysis, you can't just assume   that all inputs belong to the sender,   because it it could be a pay join. It could be a collaborative transaction.   We haven't really seen that much adoption of   pay join. Why do you think that is?  

[00:28:26] Unknown:

I think it's kind of, you know,   most wallets are pretty busy,   you know, keeping up with   new new developments like Taproot and   Descriptors.   I I I would like to see, you know, more page join integration. That's something we   wanna get done in in the green wallet as well.   And   so I I think if   you sort of research, it's possible to   find, like, 2 or 3 wallets that have it. So, you know, you can sort of   vote with your feet by adopting wallets that support it or adopting   kind of self hosted,   merchant tech, like, pizza pay server that supports it and making sure the configuration's up.  

[00:29:14] ODELL:

Yeah. It just seem it seems like there's just a lot of friction there.   Also, I mean,   from my perspective, it also requires,   interactivity. Right? So you need you need the receiver to be online to do  

[00:29:28] Unknown:

it. Yeah.  

[00:29:30] ODELL:

Which works for   in person transactions. I mean, I know samurai has their own implementation of PayJoin   where essentially, like, if if you're already making a an in person payment or a payment with someone you know,   presumably, they can be online for that payment when they're doing the receiving. And with BTC pay server,   the idea was if you have this merchant that's already always online with a Hot Wallet because of lightning,   they could do the same with PayJoint and be ready to do the interactive transaction.   It is a little bit disappointing that we haven't seen   more uptake of it. Basically, the general concept for the audience is   if we got, like, 5 or 10% of transactions to be doing this, it basically provides cover for the remainder   because these these surveillance firms can't can no longer assume for any transaction that the inputs all belong to the sender,   because the transactions, by and for the most for the most part, will look like a normal transaction. Like, there's not a clear   distinction on chain like you see with other collaborative transaction types like CoinJoin.  

Right.   So before we move on from Liquid, you guys had just recently announced Xdex.   Do you know anything about that?  

[00:30:48] Unknown:

Yeah. I mean, it's another   kinda non custodial,   exchange tech.   So,   basically,   with liquids, you can,   well, let's back up a bit. So with a Bitcoin transaction,   there's a simple rule that the the inputs have to add up to the outputs,   plus a change.   And on liquid, that's extended a bit. So, you know, you can have different types of assets coming in. You could have some tether coming into a transaction and some Bitcoin coming in to transaction.   And the rule is that the the inputs of each type have to add up.   And   so consequence of that is it's relatively straightforward to make   a atomic trade and actually   to place a a limit order.  

So, you know, even with a hardware wallet, you could approve a transaction, and the keys never left your hardware wallet. And, nevertheless, you've got a limit order on a   kinda decentralized order book or even a centralized order book, but one that doesn't have custody of your assets. And there are a few   variants of that. One is the   TDEX and xDEX is a so TDEX is a is a liquid wallet and and a Bitcoin wallet.   And it has peggings and,   you know, so Xtex is them and and a decentralized exchange system. Another one is Sideswap,   and Bitmetrics is a automated market maker concept, which, is using Symantec.  

So that's that's what that's about.   And, basically, the way that works is you   you know, if you wanted to sell a Bitcoin for   $19,000,   you would   put 1 Bitcoin   into the transaction and send the change to yourself,   and then you would put your own liquid address to receive   19,000   Tether   out, and you'd sign that part of the transaction   with the right sig hash, and then you give it you know, either broadcast it in a in a decentralized exchange network, so a PetSpa network,   or you give it to a sort of bulletin board that manages an order book.   And then anybody can take it. All they have to do to take it is put enough tether in.  

So it's kind of anyone can spend if you pay.   And so that that gives you the effects that,   you can actually place, you know, even out of the market   limit orders and just leave them sitting there. And,   you know, if somebody pays for the price, then then, you know, the trade happens and it appears in your your   software or Huddl wallet. And if they don't,   it just stays there. And if you, you know, if you wanna cancel it, you either rely on   a centralized   kinda order book manager   or you,   you double spend yourself to robustly get rid of the transaction.  

[00:33:38] ODELL:

So, I mean, to compare that to something like ShapeShift   or   SideShift,   dot AI,   Those those platforms that allow you to basically go to a website and trade one asset for another asset are they're custodial in nature. You're you're essentially trusting this decentralized entity to hold your funds in that interim period.   Like, the transfers go through pretty quickly if it works, if everything goes according to what they say it's gonna happen, but you have a moment of custodial risk. With this setup,   my understanding, correct me if I'm wrong, is   you're trusting the centralized   entity to basically coordinate and and match make,   but you're not trusting them with custody of the funds. Correct?  



[00:34:26] Unknown:

Correct. Yeah. I mean, that's the way   so so, I mean, the the private keys for the coins   stay in your software or hardware wallet.   The   infrastructure to match the trace of   x t d x or,   centralized in the case of SideSwap. Now SideSwap is also a kind of mobile app and a desktop app.   But because the order book is noncustodial,   it's much easier for them to operate it   without, you know, with with a simpler licensing or no licensing.  

[00:35:01] ODELL:

Right. So, like, to bring it back again,   so, like, if you have, like, an outstanding limit order on Bitfinex   while you're waiting for that order to get hit,   you have custodial risk. But in this case, you could have an outstanding limit order,   if Bitcoin hits a certain price,   without actually putting anything   up for custodial risk.  

[00:35:23] Unknown:

Yeah. And and, I mean, I think it's a little   you know, you like, if you're trading, you've also gotta think about   how long you're exposed. Right? So,   you know, if it's   an immediate swap, like, yeah, I wanna sell out the current market price and swap some Bitcoin for Tether,   and you do that on Sideswap   or ShapeShift,   your, you know, your your   exposure, like, how many minutes your custody expert is probably under a minute. Right? So pretty fast.   But   with these limit orders, they could sit there for weeks or months. Right? And so then people start to get nervous to think, well,   you know, maybe I shouldn't put the coins in exchange   in custody risk.  

I will monitor the price and put that on later if it happens.   And   so you get this kind of trade off where the exchange liquidity   for to sort of be robust against flash crashes is pretty thin because people don't, know, there's a there's a point where they think if their trade is unlikely to happen, they don't think it's worth the custody risk. And so the exchange of it works, you know, some of them are a bit vulnerable to flash crashes because, you know, where they'll fall below. I think Bitfinex is generally   pretty robust because there's a lot of   pro traders and bots and market makers and algo traders and stuff that will,   you know,   arbitrage against other platforms or make decisions.  

But some of the more retail exchanges will just flash crash, you know, like, 500 or a1000 below a bit for next price. And that's partly because people can't leave   you know, they don't want to leave out of the money limit orders on there because they're worried about custody risk. So I think this could help, you know, as well as reduce the risk of something like Quadriga happening to you,   you know, which you which you never know.   Right? Ultimately   Right. Even if exchanges, you know, not not doing something untoward like Quadriga did,   they can always get, you know there's always a small risk that they get hacked or an insider hacks them or something. So  

[00:37:24] ODELL:

this kinda largely takes that out. And they get shut down by regular or something like that.  

[00:37:30] Unknown:

Right. I mean, that has happened too. I think that,   I think   BTC   e may have had that problem.   The regulators seized the exchange at some point.  

[00:37:43] ODELL:

Yeah. They stormed his vacation house in Greece, and they've drove an undercover car through the gate. And he walked out in his robe while he was still signed into his computer, and they seized everything.  

[00:37:53] Unknown:

Mhmm.  

[00:37:56] ODELL:

Yep.   So so, I mean,   it's obvious it's it seems pretty obvious to most people   watching, watching liquid development that, you know, liquid   has not really gotten much adoption.   Do you think things like will   increase that adoption? Like, what what do you think is the reason why so few people seem to be using liquid right now?  

[00:38:22] Unknown:

Yeah. I mean, I think it's somewhere in the original,   you   know, lightning   by   value, but not by volume. So, Bitfinex published some data   where they have both liquid and lightning integration to say that the,   you know, the volume was similar, but the average   liquid transaction, like the liquid deposit withdrawal was larger than the average on chain Bitcoin one. What was and and whereas the lightning ones was on average   much smaller.   So I guess that says something about, you know, people are interested to hide values when they're doing larger things perhaps.   And   the these decentralized   order book technologies are   relatively recent. So Sideswap,   you know, got got kinda dropped on the market last year. It's not not something we were aware that was in development. But, you know, they released this thing, and it had the   trustless limit orders in it, which is pretty cool. And, you know, they're continuing to innovate on that to make it more convenient. They've recently added desktop support.  

So I think that the technologies are reaching maturity.   And, you know, there's a there's a potential for,   you know, an existing   custodial exchange to mix these type of orders. Right? Because they could be   the maker or taker against the trustless trade from their   online order book as well. So I I think, you know,   one way to look at it is   once   it's available   on a platform where you can switch to a platform that has reasonable liquidity and market making,   you know, basically, why would you go back? Because the custody risk is something that,   you know, worries most traders or it should. And so, you know, if you can get the same kind of service   for types of trades you do without having that, and particularly if it has, you know, hardware wallet integration,   that's that's a pretty nice situation.  



[00:40:18] ODELL:

So, I mean, I guess, to be a 100% clear here,   using using liquid rather than using on chain Bitcoin or using   Lightning   brings additional custodial risk to the end user because because if you use liquid, there is an element of custodial risk. It's just minimized because it's a federation. It's essentially can be treated as, like, a multi sig custodian.   But if you look at it from a trader perspective,   their current option is a purely custodial platform with a single custodian.   So they have a a strong incentive, a strong advantage to move over   to liquid tools   because that custodial risk is greatly reduced, and they have additional privacy. Would you agree with that?  



[00:41:04] Unknown:

Yeah. I mean, I think there's also I agree with that. I mean, it's it's clearly   a significant incremental improvement   for a trader,   because,   you know, for something to,   you know, impact their   coins   would require   cooperation from   lots of services globally, you know, some threshold of them. Now I think there's also something subtle about   custody versus,   you know, some kind of automated peg. And so usually when people   talk about custody, they're thinking about,   you know, something with human discretion and identity and stuff involved. Right?   Where   with Liquid, even though it's, you know, it's   you've got something like lightning, which is   automated and people running nodes, you can   create a lightning channel and you can close down a lightning channel and so on. In liquids, you've got the peg. And even though the peg is not purely software, you know, the HSM has been operated by   exchanges in different parts of the world,   it's nevertheless   unattended,   fully automated, and even the operator of it, if they wanna override its   behavior, they basically have to   tamper with the hardware.  

So it's it's a kind of   different trade off. It's not as decentralized as Bitcoin,   but it is unattended. And that's where that terminology   functionary comes from, which is sort of,   you know, something that sits there and does a task in an automated system.  

[00:42:39] ODELL:

Got it. That's an interesting point.   So we have Arun Cerf in the matrix chat.   He made an interesting point just to go back to our pay join,   conversation real quick. That if you copy a BTC pay server payment link   and they have pay join enabled, and you paste into Sparrow, it will automatically use that by default, and you recently changed,   how that is visible on BTC pay server   side, so it's more visible. So, hopefully,   that will result in more people using it.   He also has a question for you, Adam.   He wants to know if you think it's practical for people to contribute anonymously if they've already contributed publicly previously.  

[00:43:23] Unknown:

Yeah. I think so. I mean, you just,   don't wanna be too chatty. Right?   So, I mean, talking about nontechnical topics or writing long form text, I think, is   more likely to reveals stylometry.   And I guess there is an analogy for coding style, but in a in a project like Bitcoin, people usually try to fit in with a style of surrounding code anyway.   So I think that's plausible.   And, you know, you can   sort of I mean, any any developer is   is gonna have some kind of developing history, typically some open source history, but   it's great if, you know, somebody new to the ecosystem   who hasn't read open source code starts that way as well. So   I think it's all valuable,   and it it insulates Bitcoin from,   you know, political pressure that could be put on individual developers. I mean, I think ultimately, Bitcoin is   fairly well insulated from that because,   you know,   the binaries have to get built from the code. There are lots of people reviewing it. Lots of people cross verifying   the deterministic builds. And   but it's, you know, relatively implausible that a users would refuse to run it,   if there was something bad.  

But still, it's it's good to have, you know, developers who are not   impacted or having to be concerned about these kind of   issues.  

[00:44:58] ODELL:

Yeah. I mean, I think,   this goes back to what we talk about a lot on the show just in general,   that most of the stuff is not black and white.   If you can make certain improvements,   like contributing   anonymously   separate, If you've already   contributed, from your known legal entity,   legal identity,   that's still an improvement even if it's not perfect.   That, you know, there are obviously areas where you can make mistakes.   Like Adam said, you can compare that to,   we we've seen that with with Satoshi, people trying to unmask Satoshi going back and and going through   miscellaneous writing, stuff like that to try and compare that to other sources   of information.  

So the more information you have out there, with your legal identity, the more likely it is that that that can be attached,   to your pseudonym, but,   it's just a net. It's just straight up a net improvement at least on on the plausible deniability side probably for a for a lot of these contributors if they if they choose to   contribute anonymously in addition to contributing publicly.  

[00:46:11] Unknown:

Yeah. I I I think that the   confidential transactions I mean, talking about   things like PayJoin   and   Coin Joins in general.   One of the interesting properties of confidential transactions, and bear in mind that originally confidential transactions was   I proposed it for Bitcoin   as a a way to improve privacy in Bitcoin itself. And then I found that, you know, because it's a relatively complicated change, it'd be difficult to get that integrated to Bitcoin.   And so I spent you know, try to find ways to make Bitcoin more modular, which is how we came to be working on side chains to do that. And so then we were able to get, you know, confidential transactions in the side chain. But I remain hopeful that eventually,   the Bitcoin main chain might,   get consensus to   integrate,   confidential transactions with Bitcoin directly.  

And the beauty of that for, you know, protocols like PayJoin and CoinJoin   is that every join is perfect because you don't have to worry about,   you know, values,   giving the game away at all   because only visible to the sender and receiver.  

[00:47:19] ODELL:

Yeah. So, I mean, I'm glad you brought this up because I wanted to bring it up. You you had mentioned something similar in our last rip,   the epic 3 hour rip,   and you mentioned it kind of in the middle, and it's a it's a very controversial topic.   And you kinda got a pass on it. I don't know if it was from people missed it or just the fact that you're an absolute legend, so you're allowed   to talk about controversial things without   people going crazy.  

[00:47:47] Unknown:

But Well, they they should critique me because, you know, that's that's part of the don't trust  

[00:47:52] ODELL:

verify. Right? But Well Yeah. That's what we appreciate about you. But   I I mean, you said specifically,   not only   would you like to see confidential transactions on Bitcoin,   but you coupled that with another controversial statement,   which was   not only if not only implement confidential transactions on Bitcoin, but also we could increase the block size as a result,   because we'd be less at risk of minor censorship.   Do you still stand by that? You you'd like to see both happen on Bitcoin?  

[00:48:25] Unknown:

Yeah. I mean, I think, you know, the   I I would like to see confidential transactions.   And, of course, the   the downside with confidential transactions is the transactions are a bit bigger because of the range proofs.   And so   with SegWit,   there's,   you know, a space reserved for   I mean, it's not a separate data stream, but, you know, there's there's a different discount for   witnesses,   I. E. The signatures.   And   with   confidential transactions, you could potentially have us, like, even more discounted witness space for the range groups.   And so that would give you,   you know, potentially more data,   which, you know, in literal terms is more data transferred per block.  

But   that might be,   you know, useful to get to get people   to to wanna use them because otherwise,   what will happen is it will reduce the number of transactions you can get   done per block,   because they're bigger. Right? So I think that's they're sort of been interrelated.   So that's that's why   and, yeah, I think the argument is, well,   as you as you run-in the audience, you know, the argument would be that,   you know, why do we not want   too much data? It's so that we avoid the risk   of selective censorship coming. And,   you know, if if there's more privacy,   that's another way you avoid selective censorship. So, you know, somebody who wants to sense something can't figure out what's going on, so they don't know what to sense it. And so that's maybe a bit of a   a a boost to censorship resistance to offset   some of the increased data   footprint.  



[00:50:16] ODELL:

Yeah. I mean, it goes it goes to reason that,   just to bring people back if if you were not around during the 2017,   block size wars.   The basic premise is is,   the more bandwidth required, the more data being transferred,   the more likely minor centralization   happens, and we we have less distributed miners. And then as a result, if you have less distributed miners,   and less people   being able to use their own node because of higher data requirements,   it would   result in,   in more in more censorship because it'd be, you know, a more centralized system. But if if we had   your thought process goes, if we had confidential transactions there, even if mining became slightly more centralized,   those centralized miners would not be able to pick transactions to censor because they wouldn't really know what was happening.  



[00:51:14] Unknown:

Yeah. To a certain extent. And so you could think about that as an offset. And, of course,   you know,   it's it's a bit of a gray area to argue,   you know,   which trade off is   if it's a net win or not. Right? So it's a that's people would have to have develop an opinion about that. And so the main argument against confidential transactions on Bitcoin is that,  

[00:51:40] ODELL:

it'd be harder to detect   inflation,   unknown inflation happening with Bitcoin. What do you say to people that levy that argument?  

[00:51:50] Unknown:

Yeah. I mean, I think it is, it's a valid concern,   and it it seems   some Altcoins with more complicated forms of privacy have new misses in that regard.   So   now with confidential transactions, there are 2 versions.   1,   which   uses Alkamal commitments   where you mathematically,   prevent inflation like inflation is not possible,   And Pedersen commitments where   if ultimately,   you know, Schnorr signatures were broken   in the far future, then   inflation could become possible.   And that that's all excluding, you know, software bugs, But Bitcoin is you know, the the the technology for confidential transactions sounds   counterintuitive,   but actually the building blocks are, you know, basically the same   as   Schnorr signatures and ECDSA. So it's using   quite conservative   cryptography assumptions.  



[00:52:51] ODELL:

And correct me if I'm wrong, the latter, the Peterson commitment model is what Monero is using right now. Right?  

[00:52:59] Unknown:

I think so. Yeah. And it's actually what liquid uses as well, coincidentally.   And I think that's an okay trade off for liquid because in liquid, you're not really looking And  

[00:53:13] ODELL:

what's the advantage of using that over the too long. And what's the advantage of using that over the the El Camal version?  

[00:53:23] Unknown:

I mean, I think the purchasing commitment version was just   developed earlier. The El Camal   observation came a bit later.   Also,   Alchemical is a little bit bigger.   So there's more More data.   Yeah. Not just incrementally, though.   So it's not prohibitive.  

[00:53:42] ODELL:

So if if if we were to see confidential transactions on Bitcoin,   that that would be a hard fork. There were and people need to remember that anyone can fork Bitcoin   whenever they wanna fork Bitcoin without permission.  

[00:53:57] Unknown:

I mean, it's it's a bit of a gray area whether that'd be a hard fork or not. So   Johnson allowed   so no. It was it wasn't him. It was   Felix Weiss had proposed a way to soft fork confidential transactions.   And it was a bit   complicated,   but it looked to   kinda work.   So there there are a couple of avenues where it could be softwalt, and then, of course, it could be done in a slightly simple way of hardwalt.   So,   yeah, maybe it could be soft  

[00:54:28] ODELL:

thought. Do you realistically   speaking, do you think we'd we'll ever see that?  

[00:54:39] Unknown:

Sure. I mean, I think one other track   to simplicity,   and that may actually be more attractive to people in a way. So   what simplicity is   is a kind of second generation scripting   language, which was designed for Bitcoin and, you know, has also been worked on for Liquid.   And   that is   lower level   and   basically brings a security and formal proof focused low level   kind of almost bit illogical language,   to Bitcoin   in the in the future, which   allows extensibility   so that, you know, something like the Schnorr signature could be implemented from scratch.   And,   you know, it   it it has this concept of Jits, which are kinda access to lots of lower level libraries. So the actual   implementation of, something like Schnorr remains remarkably compact.  

And   so the point there is something like simplicity   would probably   allow,   you know,   enough extensibility   that confidential transactions could be implemented as as as well as, you know,   covenants and many other things that people might want to try.   And so, you know, now that, of course, this is this is all some distance away,   Simplicity is not in   liquid yet, but we're hoping to get it get it there later this year so people can try it out.   And so eventually,   I I think Simplicity is potentially   the best option for ossification of of Bitcoin,   because, you know, it enables this extensibility.  

So it could be the last soft fork sort of thing. Right?   And   so that that might be   an easier topic for people to get consensus on. It's it's basically introducing   security   and formal proof focused   extensibility into Bitcoin.  

[00:56:44] ODELL:

And so, like, what would what would that look like in practice? It would look like you'd basically have the option of using confidential transactions   or the option not to?  

[00:56:53] Unknown:

Yeah. I mean, I think,   you know, it's,   anything you build I mean, simplicity is,   you know, very   conceptually similar in terms of,   you know, UTXO organization. It's soft forkable itself as a new   Tap scripts or SegWhip version,   and it just has a different encoding and a low level   implementation. So   and then the Bitcoin wallets tend to have a form where   the recipient   is gonna choose,   you know, his own spending scripts, and the sender may not even know what it is, right, because it could be hashed.   And so, you know, if if users wanna opt into some scheme that requires both sender and recipient,   then that's that's gonna work between them.  

And people who don't have that will you know, they'll get a non confidential output, which is possible with   with, confidential transactions. You can mix confidential and nonconfidential.  

[00:57:51] ODELL:

That's   interesting. So we we have Arndtirf   again in   the matrix chat asking,   would   CT implemented using simplicity result in very large scripts?  

[00:58:07] Unknown:

Maybe not so large because you would be relying on jets, which are kinda library calls to,   you know, big number libraries, big arithmetic operations. And so   at the highest level, if basically all you're doing is gluing together,   you know, hashing and big number operations and elliptic curve not apply and things like that,   then   the the program is quite small at that point. And it is   kind   of log scaled. So if there's anything repetitive about it, it it gets   generally   smaller by log scale.  

[00:58:45] ODELL:

Got it.   But there would be in in practice, there would be   if you were using confidential transactions in this way, you'd be paying higher fees than if you were just doing a regular Bitcoin transaction.  

[00:58:59] Unknown:

Yeah. I mean, that that is something, you know, some people have talked about,   the concept of whether   now that I mean, that's just a side effect of people using different transactions that applies today. But   the   you know, in the specific context of confidential transactions, some people have offered the opinion that,   you know, the fee should be the same whether you use it or not to encourage people to use it.   Uh-huh. Because you get, you know, you get more privacy and confidentiality if everybody's using it. And if there's no financial   you know, if the fees aren't higher for using it, then you might as well use it kind of thing. Right?  



[00:59:37] ODELL:

Right. There's there's 2 trains of thought. It's it's   make if you make privacy cheaper, then more people will use it. But if you can make it at least the same cost, then also Right. More people will use it.  

[00:59:52] Unknown:

Yep.  

[00:59:54] ODELL:

That's interesting.   So, I mean,   just to put you on the spot here,   10 years   10 years using Bitcoin with confidential transactions,   what how likely is that percentage wise? Is it greater than 50%   in your mind?  

[01:00:13] Unknown:

Yeah. Maybe that would be around that   range. I mean, 10 years is is, you you know, in Bitcoin development, it's very methodical,   and it takes it takes some years for   features from Liquid.   And this has happened before in a sense that liquid had   Schnorr signatures, well, elements, the open source of liquid,   the the base that is implemented in had Segwit   and Schnorr signatures in the past. And, you know, that itself took   probably 5 years or something until,   you know, there was a concrete   proposal. And and the version that Bitcoin has is actually improved and fixes some limitations with that early version.   So I think Liquid has shown itself useful as a kind of,   test bed in a way for life value and new features.  

So possibly, you know, I mean, I think if simplicity is possible and interesting to people   and you'll get confidence in the security assurances that it provides,   then, you know, a lot of things become possible to   innovate on faster in a in a permissionless way.  

[01:01:23] ODELL:

So the way I kinda look at it is, you know, Bitcoin, one of the main value props of Bitcoin is that it's is extremely hard to change.  

[01:01:31] Unknown:

Yep.  

[01:01:33] ODELL:

And and as a result, for changes to happen, there needs to be,   like, a ground swell of support. There needs to be overwhelming support for a change to happen, and it's hard to measure that overwhelming support.   But when I look at, you know, the privacy situation with Bitcoin, obviously, it's a major focus of this show and my time.   I kind of view it as   if we start to see, which I expect, if we start to see more   state attacks on individuals, you know, Bitcoin is very robust   at the protocol level against states, but at the individual level, there's a lot of privacy vulnerabilities of of people getting pressured.   If we start to see more of that happen,   then all of a sudden, there will be more support and more momentum to improve   Bitcoin privacy guarantees. Would you would you agree on that thesis?  



[01:02:23] Unknown:

Yeah. I think so. I mean, you certainly see that with   the sort of the way that Bitcoin   the human part of Bitcoin anti fragility works. You know, for example,   that after the big block   situation, you know, the big block debate drama was resolved,   You saw since that point a lot more   initiatives towards running full nodes, education about that,   improved ease of doing that, and I kinda hold push to do that. And I think that's sort of been part reactive. Like, you know, if you if you verify with your own node, then you're much better protected against   unwanted protocol changes.  

So I do think the system   learns and the anti fragility is people,   you know, adopting tech and pushing for,   you know, educating the wider community to to adopt things and change things.   So  

[01:03:19] ODELL:

yeah. I mean, I've said and then more robust as a result.  

[01:03:23] Unknown:

Yeah. Yeah.  

[01:03:27] ODELL:

Just to change gears here a little bit,   since you were last on,   you know, Blockstream has,   provided open source funding to this new concept,   originally called Mini Mint, and now it's called Fediment.   Since then,   a for profit company has also been spun up called FETI.   That is kind of leading the charge here in terms of   of development and rollout to users.   They expect to have a wallet in people's hands,   by the end of the year, maybe early January.   What are you what are your thoughts on Fedimint as a concept?  

[01:04:08] Unknown:

Yeah. I mean, it's it's interesting, and it has,   you know, led to some different trade offs being considered that hadn't been   really   contemplated before.   So the original   idea with the Federated   Charmint   was this kind of a big   very private you know, in terms of privacy,   bitcoin denominated utility coin. And so we   contemplate   it at Blockstream,   you know,   the basically base been able to redeem it for Blockstream,   you know, swag and services like they're on a mining. Sorry. They they're on a satellite buying T shirts, buying hardware wallets,   just buying mining.  

And, of course, because it's pit spear and spendable, people could use it for other website integrations and things like that. So we'd approached it from that point of view originally, which is a little bit more centralized and and   has a clear trust story, which is, well, you know, as long as Blockstream honors   the settlement to you, you could sort of reuse them, gift them, and potentially redeem them.   But since and and there was a prototype of that that Craig Maxwell had implemented, I think, around about   2015, 2016,   something like   that. And   but that was just at kind of library level. So since the   sort   of refresh of that idea and Eric,   working with our you know, in our research team to   build   the you know, to tie it to the federation.  

I mean, the divisional one was just library level, but to make it work concretely, you have to have   the coordination mechanism for federation to   kinda have a group of peoples   a group of nodes sign it. So it's a bit of, like, coordination glue, and that coincidentally is the same kind of logic   that liquid uses. Right? So to coordinate   block sync block signatures and things like that. So   it's a bit of overlapping tech there. And   then arose the idea that communities   of people could could run the nodes, which is a kind of new concept. And, of course, it has its own trade offs, but   it's nevertheless quite interesting,   new experimental   kind of trust model, if you like.  



[01:06:30] ODELL:

And, I mean, a key a key aspect of the Fetterman proposal is   is that   you   that they're interoperable with each other. All the different Federman are interoperable with each other using lightning.  

[01:06:43] Unknown:

Yeah.  

[01:06:45] ODELL:

Do you like, that has obviously been a   you know, going in and out of liquid has has been a pain point, I think, in liquid adoption. Do you think   Fedimint might find greater success   because of that interoperability built in?  

[01:07:03] Unknown:

Yeah. I mean, I think the idea of gluing things together with lightning is quite interesting because,   starting point, the e cash tokens on different Fedimint would be,   you know, incompatible and not directly acceptable.   But then you get a kind of, you know, arbitrage or exchange process where,   different can   accept   lining deposits and withdrawals, and that becomes a rapid way to do that. I think another interesting potential which has been less discussed, but   something that people were chatting about, during   the Baltic Honey Badger Conference last weekend is the idea that the   Fedimint federation,   you know, it's issuing   ecash coins with privacy   from a federation   that those could potentially be simultaneously   issued into liquid as an issued asset.  

And,   you know, that the the Federman Federation could sort of offer to convert between,   you know, a liquid issued asset and a eCash coin.   And so those could become   you know, it could it could become   another kind of connecting technology so you can   move assets backwards or forwards using Lightning   or using   Liquid. And, you know, to put that in context, and another   kind of design aspect   federation that is signing the blocks   with a multisig   and the HSMs, and then there's   another federation which is managing the peg wallet. And in principle, they could be different federations.   Today's liquid configuration,   they're the same federation. Right? And so the idea here is that you could actually have multiple pegs,   and they could be managed with that same code or they could be managed in a different way.  

You know, the same code in HSMs or it could be managed in a different way where, you know, given   Fermium   just issues   liquid tokens, which represent a claim   on the bitcoins that it that it has in its multisig wallet,   spread across the federation.   So that would be   an interesting additional   kind of 2 network visibility   of of the same   kind of issuer coins that are backed by Bitcoin.   And   also a way to use the kind of   decentralized order points we're talking about, like sideswap and   to swap liquid Bitcoin   for some of these wallets like tDEX has actually the ability to do a trustless peg in. So you can, like, peg   Bitcoin into liquid Bitcoin.  

And   SideSwap has a way to swap   Bitcoin and liquid Bitcoin bidirectionally as well  

[01:09:59] ODELL:

in in wallet.   In practice, Fedimin wallets could be   a convenient   and relatively private way of moving back and forth from liquid   and lightning or on chain Bitcoin?  

[01:10:12] Unknown:

Yeah. I mean, I think it's sort of,   you know, interesting to see   interoperability   and new configurations   arise,   because, you know, it it could be convenient to different people. For example,   what Bitfinex reported about the,   typical transaction sizes   on lightning   versus liquid versus main chain   that, you know, they saw larger transactions on liquid, medium size on Bitcoin, and small on lightning.   So that could allow, you know, different size of transactions to to transact perhaps where it might push the limits   of lightning liquidity, let's say.  



[01:10:55] ODELL:

So, I mean, the major trade off with Fedimint wallets,   will be essentially custodial risk.   Now that custodial risk is attempted to be minimized because,   ideally, multi sig custodians will be used. So you'll need a   quorum. You need a, you know, majority of   of those of those federation members to to to get a rug puller   to have them exit scam and take your money.   But, also, at the same time, if you have that majority, they can,   inflate the supply of of the ecash tokens, the internal tokens within the Fedimint wallets,   which is almost it's like a a more quiet rug pull.  

What what do you say to people that that say that the Federman design is dead on arrival for that trade off?  

[01:11:47] Unknown:

I mean, it is a trade off.   I mean, I think the   you know, it has some advantages as well as having that trade off. So one is that,   you know, the re the reason that you articulated,   it could suffer from inflation   is a side effect of the privacy and the fact that   this kinda it's not really a a blockchain. Right? So it's it's not auditable.   It's easy with the unlinkability of the eCash coins.   Of course, you are you do get a benefit of the federation, so you have to have high degree of collusion before that could happen. I think something could you know, some things could be done to harden it. So   we've been interested for a while to provide,   liquid   functionary hardware to developers as a as a kind of programmable HSM.  

And with that, you could,   you know, you could you could use some extra features. You could use a tamper resistance.   Some of these chipsets have   TPM   remote attestation, so it's basically a way to provide   sort of hardware assisted   assurance   of what code is actually running   on on the   HSM.   I know it's a bit of a foreign concept for people that, you know, a distributed thing could be running HSMs, but why not? You know? I mean, effectively,   something like the cold card auto signer is a a kind of HSM that you can buy, you know, a very small one,   and implement things on. So I think that   and and and, actually, you know, Intel and Arm Chips have   some basic kind of   TPM security functions on them. So, you know, you can you can make use of them additively.  



[01:13:30] ODELL:

Right. So, I mean, that trade off can't be removed completely,   but the risk could be mitigated to a degree.  

[01:13:37] Unknown:

Mhmm.   Yeah. Yeah. And I mean, I think, you know, the other context is,   you know, people have looked at lightning versus liquid,   and,   you know, it's   sort of   lightning   is   is kind of barest of custody. You're not trusting any other parties. Right? But   on that so that's on the kind of trust dimension. But on   the security dimension, you're you're ultimately running a hot wallet, right, where   I think Liquid has   arguably   better security assurances but lower trust assurances. So there's some kind of trade off in different dimensions.   And so it really ultimately depends what you're doing. And,   you know, you can get some of those benefits of hardening from   for for phentermine too.  

But, yeah, I think you need to pay a bit of attention as   to who's operating the federation.   Now in in the case of where that's clear, it's an identified set of companies effectively where,   you know, if they are in the in the sort of providing exchange service typically. Right? So,   you know, they wouldn't want to   exit scam because it would impact their   their   main business.   Where with a Federman, you know, if it if it's, you know, people trusted in the community, there's a risk that somebody from outside the community might trust the wrong person or something.  

[01:15:12] ODELL:

Right. I mean, I expect   there'll be many different   federation models using Federman. Some will be public. Some will be anons.   Some will be small community leadership. Some will be a combination of the above,   and and users will essentially choose what what they prefer.  

[01:15:31] Unknown:

Yeah. I mean, I was thinking it might be interesting   for   a kinda hybrid between   companies   and individuals,   but not too many companies.   So the companies   in isolation couldn't freeze funds, basically. And then they could provide a bit of   security assurance without being   a freeze risk.  

[01:15:56] ODELL:

I mean, you could actually set it up so the individuals couldn't collude on their own either. They would need companies.   So then   both Yeah. Sub entities   couldn't do it without   someone from the other side defecting.  

[01:16:09] Unknown:

Yeah. So maybe you could get a bit of   I mean, I think you   need one to be larger to override the other. Right? Because,   you know, if if companies   wanted to freeze things, then   the the end user our user type of use nodes need to be able to override them. And that means that, you know, they could still access GAM, but it's just harder because they have to reach a higher threshold.  

[01:16:38] ODELL:

In general, would you agree with the premise that the ideal situation is that Bitcoiners have many different tools with many different trade offs, and they're able to choose which tools,   fit their needs best?  

[01:16:51] Unknown:

Yeah. I think so. I mean, they're certainly desirable. And I think one observation   which, you know,   I learned over the years and we found out, you know,   saw repeat of Blockstream, is that   you learn by doing in the sense that,   you know, we build something now,   and   it improves our understanding of the system behavior and sometimes leads to ideas that were not previously known of how to improve them. So,   you know, I think, for example,   with confidential transactions,   you   know, Greg Maxwell and myself try to size optimize it to make to make to make the bridge proof smaller.   And then, ultimately,   Peter and Greg went to see,   you know, Dan Bonet, one of the academic crypto researchers   at in in the Bay Area University   there and, you know, explained the problem statement. And out of that conversation and collaboration ultimately came bulletproofs, which was a lot more, you know, and something that people hadn't envisaged, which was,   you know, kind of snark like construct,   but using the same kind of,   you know,   conservative and   simple security assumptions that Bitcoin uses.  

So, you know, I think by   building things and trying things,   we might arrive at something beyond, you know, that's more than the sum of the parts. Right? So, yeah, this has got some trade offs. But now that we're looking at the trade offs closer and thinking about them in a different way,   maybe ultimately we make, you know, a new leap or   we see more end users   adoption   and programming around   TPMs, which are you know, even the technology's been around that haven't been that widely used for peer to peer security protocols, for example.  

[01:18:41] ODELL:

That makes sense to me.   Okay. Let's change gears again,   to people who haven't been paying attention.   It might not be obvious to them,   but I have noticed that Blockstream   y'all at Blockstream have   gone pretty hard into mining. You're almost a a Bitcoin mining company first now.   You wanna talk a little bit I mean, you you recently I don't even know when it happened. Maybe it happened a year ago. You guys acquired Spoon Dooly's,   an ASIC manufacturer.   What what is the strategy over at Blockstream,   with mining?  

[01:19:20] Unknown:

Yeah. So, I mean, generally, we've been focused on,   you know, decentralization,   privacy,   and   sort of defending, hotening, and improving Bitcoin. And,   actually, from the initial   launch of the company in 2014, we were already   to do some as I thought about how   improve my   would be, you know, if every ecosystem company that's doing things related to Bitcoin and the processing exchange, whether it's etcetera,   Did a bit of money, the money would be more decentralized.   And,   you know, we started doing that after some time and then   expanded that to providing hosting to other companies, which is you know, has been a great area for us over the last few years,   to the point that we're managing, you know, quite a lot of megawatts. In fact, you know, more than some public mining companies even though we're a private company, so we don't disclose the actual data.  

And so one of the   obvious areas of concern,   which has been escalated by, you know, the final   actual   attempted ban of mining in China. You know, there's there were threats of that for many years. But Right. Finally, something actually happened that, you know, visibly moved the hash rate and saw relocation of equipment   is that China became a little bit more   hostile to to   Bitcoin or similar to the Bitcoin mining, and yet many of the   so almost most of the equipment that people are mining with is actually,   you know, the boards are manufactured and assembled in China by Chinese companies. Right? So there's a little bit more of a geopolitical risk there.   And, also, just for,   you know, diversification,   it will be good to have a minor   manufactured war   internationally. And   so we'd actually mine some of Spondylus equipment, you know, back some years ago and and quite liked it. It's kind of rack mount form factor,   high build quality.  

So different form factor, kinda more data center,   and fitting in standard racks, that kind of outlook.   And so we got we got the opportunity with the b round,   q 3 last year to bring them into the blockchain fold, and they've been working on, you know,   doing their thing and   making an ASIC, making a minor. So that's something that's ongoing, and we hope to have,   you know, more progress on that we can talk about going into next year.  

[01:21:53] ODELL:

But you guys plan on releasing your own ASIC?  

[01:21:56] Unknown:

Yeah. Yeah. I mean, actually, the whole system, you know, the ASIC,   the the finish miner, and then control boards, everything that goes into that. Of course, we favor the open source approach.   Quite like what brains has been doing with the open firmware, so we probably look to collaborate with them on that.  

[01:22:15] ODELL:

That's exciting. I'm looking forward to, what you guys build there.   So, I mean, on the mining front,   I've been going down this thought experiment with   a lot of my Bitcoin buddies,   and I'm curious on your opinion since I have you.   In 50 years in 50 years, just to put you on the spot, what   what do you think the total   percent of energy consumption in the world will be dedicated to Bitcoin mining? Out of out of total energy consumption,   what percent will will go towards Bitcoin mining in your mind? Just a rough estimate.   We're not gonna hold you to it in 50 years.  



[01:23:00] Unknown:

It's hard to project that far forward, but I think I think it's,   certainly a lot less than   what people would assume because it's a,   you know,   it's a commodity economic situation.   So if people push up the hash rate too much, the profitability drops and the hash rate drops. So it's it's in a kind of equilibrium.   And, of course, the,   you know, the the   the harvings   are happening over that kind of time period would start to reduce the number of coins mined quite a lot   as that exponentially reduces.   And then the final thing, which is kind of a big area of unknown is,   you know, what is the,   what is the top of the s curve? You know, how much of   global   monetary use does Bitcoin capture? Right? So we end up in the safety in a moose situation with   a new gold standard,   being Bitcoin.  

But I think even in that case,   you know, which in today's money is,   you know, in the   several $100,000,000,000,000   range,   you can you can estimate, you know, based on future difficulty,   many hard things in the future and that kind of price point that it's quite practical. And I think the other point is that,   you know, typically,   civilization   grows along,   increased power. So wealthier countries   have more available power,   and, you know, wealth generation   is correlated with access to power and, you know, types of power. So I hope the future is,   you know, a future where humanity will develop a lot more power resources   from various sources, whether that's, you know, nuclear fusion   in the future,   solar, wind, hydro.  

You know, there's an enormous amount   of underused power in the world. And,   you know, I mean, actually, to get to give an example of kinda underutilized power, we have,   one day a center in Montreal, Canada.   And   that   the Quebec province of Canada has a lot of hydro resources, only some, like, 65 hydro dams.   And most of that power is unused.   And there's actually enough   unused hydro power that's, you know, connected to the grid and ready to use   that could power the entire Bitcoin network just out of the unused power. So, you know, of course, there are lots more hydro resources globally,   both constructed   and,   you know, untapped.  

So even on the hydro side, there's a lot of upside. And, of course, I think Bitcoin is a great vehicle for   providing   the   sort of business fundamentals to fund   building more power infrastructure to kind   of drive economic growth for the future.  

[01:26:02] ODELL:

So, Adam, I mean, I appreciate   deliberate and insightful answer there, but I'm gonna have to put you on the spot. Do you think it's gonna be less than 5% or more than 5%?  

[01:26:11] Unknown:

Less than 5%.  

[01:26:13] ODELL:

Interesting.   Okay. Well, we'll readdress this in 50 years, and we'll see   we'll we'll see how close you were.  

[01:26:20] Unknown:

Yeah.  

[01:26:23] ODELL:

I just I think that's an interesting it's just a really interesting thought process because you you see, like, the Elizabeth Warrens of the world.   A lot of the anti Bitcoin, anti proof of work people say that, you know, Bitcoin is gonna consume a lot,   of energy, but then you talk to some of the most bullish   Bitcoiners,   particularly in the mining space,   and they almost uniformly say under 5%.   Yeah. So there's a there's a massive disconnect there.   I just feel like yeah. It's interesting.  

[01:26:53] Unknown:

Well, I mean, I think that, you know, as as you see in the Quebec province of Canada, right, that   government policy   is   often misaligned with   their stated intent.   So, you know, it's it's hard for governments to operate   as efficiently   as a free market.   And,   you know, so they're foregoing,   you know, economic activity for the Quebec province in the tune of 1,000,000,000 of dollars per year because they're choosing not to sell power.   That's, you know   so some it's extremely hot almost entirely hydro. Right? So it's it's pretty much neutral environmentally   because the heat is dissipate anyway because they just open up the sluice gates and pour it downstream on all these dams. Right?  

So,   you know, I think   that is,   you know,   a source of   economic wealth that could,   you know, be used to further expand power infrastructure,   increase employment, bring wealth   and jobs to the region. And so,   you know, I think,   ultimately, those jobs go to to other regions.   That's that's how how things evolve.  

[01:28:10] ODELL:

Yeah. I mean, I guess,   from my thought process, why it might be higher than 5%   is, you know, Darren Feinstein of,   Core Scientific,   released some stats on on wasted energy   and lost energy in America,   specifically,   and it was it was significantly more than 50% is lost or wasted.   So   in my mind, I feel like Bitcoin eats a lot of that waste   because it's it provides a direct financial incentive.   So I do wonder, like, in the commoditization   of ASICs, when ASICs have much larger life cycles, they're easy to   to acquire. They're   incorporated in bunch of different things that we use on a day to day basis. Specifically, in my mind, I'm constantly thinking about, like, water heaters and   and and and, you know,   water heaters heating your home, stuff like that.  

I feel like Bitcoin will will dominate a lot of that current waste that's happening because there's a direct financial incentive. So that that's kind of where I come from when I think it could be higher.  

[01:29:17] Unknown:

Mhmm.   But I guess we'll see. We'll find out. Yeah. I mean, I think some of the waste is because some types of power source   are slow to start and stop, and then and then you've got an excess that you can't   you know, that people get paid negative power rates to get rid of. Right. You know, put space heaters outside and heat the environment with or something   or burn off, you know, fast, you think, and things like that, which is not so great for the environment.   And so,   yeah, some of some of the other power sources don't have that problem. Like, they're faster to spin up and down.   So maybe that's an evolving thing too.  



[01:30:00] ODELL:

I have another question for for you from the chat, from the matrix chat. This comes from Communer.   He was wondering if you've ever read, the book Mandibles.  

[01:30:11] Unknown:

I have not.  

[01:30:13] ODELL:

I'm thinking about it. Mandibles is a book that I've been talking a lot about because it goes through a hypothetical situation of the US going through a hyperinflation,   event.   Mhmm. And there's just a lot of similarities to to what we're seeing today, but,   I encourage all the freaks to to give it a read. It's an interesting thought process,   and you, Adam. I mean, I don't know. You're a busy man, so maybe the  

[01:30:41] Unknown:

audiobook.   Alright.  

[01:30:43] ODELL:

I, I just wanna thank you for joining us. I know you I know,   I know time is scarce, and I really do appreciate,   your thoughts. And, I mean, I appreciate all your contributions to the space.   You   really are,   you're just you're you're you're just an amazing human being, and and we really do appreciate you. I think I speak for all the freaks. I like to end the show with final thoughts from our guests. So, Adam, you have any final thoughts for us?  

[01:31:14] Unknown:

Yeah. I mean, I think that   Bitcoin's   drive for progress is is basically   kinda like the act of fragility. Right? So it's the kind of   combined enthusiasm   and energy of   all of the Bitcoiners.   So I think, you know, we're we're gonna win, basically, because   it's like the,   you know, the mind virus that captures everybody's imagination and pulls more and more people in.   So   yeah. I mean, I think, you know,   of course, the   the price is volatile, but that's, you know, that's a short term thing in the long term.   The adoption is doing, and a lot of the adoption metrics are, you know, still pretty impressive over the last year even.  

[01:32:04] ODELL:

I I love that as final thoughts. We are we are gonna win. We're gonna win, freaks, and,   it's been it's an it's an honor and privilege to be a part of this movement with all of you and Adam.   I just wanna thank Adam again for joining us. I wanna thank all the Freaks who joined us in the live chat. You guys make this show truly unique. I wanna thank all the freaks who continue to support the show, whether that's through SATS,   direct financial support, or,   whether that's through subscribing to the show on your favorite platform, leaving a review, sharing with friends. It really is appreciated, and I couldn't do it without all of you.   With all that said,   cheers.  

Stay humble in Stacks Sats. Thanks, Adam. Thank you.