Video: https://youtu.be/OwJL0J_nPDE
00:00:00 - Intro Matt Odell
00:05:35 - Coinjoins & Coinswaps - With Ben Carman, Craig Raw, Fontaine, Nicholas Gregory
00:50:03 - Funding Open Source Bitcoin Developers - With Mike Schmidt, Adi Shankara, Ben Price, Conor Okus
01:17:10 - Lightning Payments (The Future Of Commerce) - With Andre Neves, Ben Arc, Rockstar Dev, Alyse Killeen
01:55:27 - Mempools With Wiz, Murch, Gloria Zhao, Sergej Kotliar
02:37:28 - Lightning Privacy (Concerns & Solution) - With Niftynei, Tony Giorgio, Evan Kaloudis & Shinobi
03:17:46 - Sidechains (Benefits & Tradeoffs) - With Paul Sztorc, Chad Barraford, Muneeb Ali, Diego Gutierrez Zaldivar, Burak Keceli
03:58:38 - Federated Chaumian Mints (Keynote) - With Obi Nwosu
04:12:43 - The Future of Bitcoin Privacy - With Eric Sirion & Obi Nwosu
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Well, today's gonna be another absolute banger. Okay. We got a great group of people, great lineup. We have you know, I'm let me try and think of some of the panels we set up. We have, the next one coming up is gonna be coin joins and coin swaps, lightning privacy, lightning payments. We have a side chains panel, a mempool panel. So an absolute fire lineup for today. Keep the high signal content going over here on the open source stage. Once again, I just want to thank everybody who helped make this happen. I mean, there's a team of 10, 20 people back there that no one sees. I make sure all this goes smoothly.
We got all these production guys in the back. Really couldn't do without them. We also have a panel today on open source funding and raising money for developers. If you were here yesterday, I talked about, my initiative at opensats.org. My cofounder will be on that panel. What I didn't mention and that I should have mentioned is that we are accepting applications for projects and contributors to be listed on opensats.org. So if you are a contributor, if you are a developer, or you're a maintainer of a project, make sure you submit it so we can get you listed. We have some people listed already. So you can go to opensats.org. You can donate to our general fund where we contribute a 100% of the proceeds, to board selected projects, or you can actually choose the individual projects you want to do. Now, when you go to that donation page, some people said, oh, it says email name is required.
That's only if you check the tax deductible. If you check non tax deductible, you don't have to provide us any information. You can just donate SATs directly to the cause. What else do I have on my homework that I'm supposed to talk about right now? We have raspi blitz auction happening at 3 o'clock. There's gonna be 3 Raspberry Pi Blitz nodes available for that. Proceeds of that auction will go 50% to Open Sats, 50% to RASPY blitz development. So if you want a really nice hardware node, consider coming for that, and supporting a good cause at the same time.
I just wanna say that, you know, these last 3 days, I mean, it's been 6 months in the making, 8 months in the making, has been extremely rewarding. You know, this is a global movement. A lot of times, people get caught up in a lot of drama and a lot of bullshit. But at the end of the day, we have passionate people around the world, that are moving this mission forward, that are contributing to open source projects, that are contributing to code, that will outlive all of us, and we can't do it alone. So being able to meet all of you, talk to you in person, is just really one of the most rewarding rewarding things. And I know it can feel exhausting at times. It can feel overwhelming.
But, one step at a time. You know? We get through it together. And, I really do think, we can we can make the world a better place in a very actionable way. You know? So appreciate all of you. Unfortunately well, fortunately and unfortunately, I've been basically in this room all 3 days, so I haven't been to the main stage. But there was some really great talks that I heard about yesterday that I do if, you know these things, it's very hard to view all the content in person, so do consider checking out all the video on demand after the fact. Everything was recorded in high quality. I know Foday had a really great keynote yesterday, talking about his new Bitcoin Africa conference, which I'm really excited about. I really like this this blossoming communities that are happening in the developing world. They're extremely powerful.
Had a absolutely insane freedom panel, that really is what this movement is about. So go check that out. And, of course, the guy who stole the show, Mahler's, Jack Mahler's had his announcement about nearly 50% of US merchants starting to accept Lightning with no KYC, payable from any Lightning wallet. And we have 2 panels today, Lightning Privacy and Lightning Payments, that are gonna be highly relevant to that conversation, so the timing could not be better. Anyway, with all that said, I love you all. We're gonna fucking do this thing. I hope you enjoy today. Huge thank you to the Bitcoin Magazine team for putting this all together and getting this this fantastic space.
Huge thanks to our sponsor, Cash App, who also helped make this happen. This was this is not cheap. This is not cheap, and I really do appreciate it. And thank you to all our open source contributors and all around the world, especially those who couldn't make it. Appreciate you all. Let's do this.
[00:05:39] Unknown:
Hello. Hello. Hello. How's everyone doing today? Glad to be back here in Miami. I'm, humbled and honored to be presenting this this panel with this great cast of builders over here. It's a very important panel on CoinJoin and CoinSwap, which are some, you know, essential tools that, we can use to give Bitcoiners privacy on chain. My name is Evan Kaludis. I'm an application developer. I'm the founder of Zeus, a lightning wallet, and, I've got quite quite a cast here today. Let's let's start from the left. I got, Ben Carmen from Bitcoin Company.
You've been working on some stuff with coin joins and lightning. It's called Ellen Vortex. Right? Yeah. Yeah.
[00:06:26] Unknown:
I made a proof of concept application to open up lightning channels inside of a coin join, and so hopefully, we're actually launching it soon.
[00:06:35] Unknown:
Yeah. Super exciting. Excited to play around with that. Next, we got Craig Roth from, Sparrow Wallet, which is my favorite way to manage my on chain funds. He's recently added support for, doing samurai Whirlpool coin join transactions, and, you've also got, like, payment stuff in there. Yeah. So it's really cool to see another wallet, implement those, 2 tools, and it's gonna be fun to get into that in a bit. Next up, we got Fontaine. How are you doing today, Fontaine? Good. And you? Great. So, Fontaine, you've got a iOS application fully noted, and, you've recently implemented a UI in there for managing, CoinJoin instances, or join market instances, which are a form of CoinJoin, that use, like, a maker taker model. Right? Correct.
Excellent stuff. Really excited to have more tooling, more UI for joint market. So that's great. And, last up, we got Nick Gregory, from Mercury Wallet. He has a new product. It's a it's a state chain wallet that performs coin swaps. It's quite a bit different from, CoinJoints, but I I was been messing around with it this week, and I've been loving the experience so far. So excited to get into that as well. So, yeah, I I don't think we really gotta get into why Bitcoin privacy is too is important in in this volatile world where we're seeing, you know, people getting deplatform from platform from, different, accounts and, all the turmoil in the world between, you know, people in Ukraine and Russia, dealing with their governments and the situation there.
People living just generally under authoritarian regimes and, you know, more closely, what what's happened in Canada with the the trucker protest and, you know, the scrutiny that people have gotten after, you know, making these Bitcoin driven donations. So let let's kick into the difference between, CoinJoin and a CoinSwap. You know, there's a lot of similarities, but very distinct methods of, you know, getting, on chain privacy. So anyone wanna give us, like, a good overview of, you know, what a coin join really is, what it consists of?
[00:08:58] Unknown:
Sure. I'll have a go at that. So I think the issue that we're trying to address with both Coin Joins and Coin Swaps is the fundamental issue that Bitcoin is nonfungible. Right? So we wish that we had non we we wish we had nonfungibility at a protocol layer. We don't have that. So we have to address that on application layer, and both coin joins and coin swaps are attempts to do that. They differ in the sense that, with a coin swap, you are effectively swapping out one coin's history for a different coin's history. So for example, you may have 2 coins of the same size, and then you're trying to say, well, I'm going to swap my history with yours, for example, Evan. With a coin join, what we have is a number of, different participants come and they join together to basically create what we call, for the most part, an equal output coin join where we have a set of inputs and a set of outputs. And the outputs are all the same size. And if they're all the same size, then it's very difficult to tell where the ownership of funds went after the fact. So particularly, if we have multiple rounds of coin joins, we have this anonymity set which builds over time.
So we are the so the chief difference between the two is that instead of swapping one person's history or one kind of individual's history for a different history, what we have is swapping your history for the entire coin join and a nimbit nimbitiset that you are taking part or at least that part that applies to you. And that's the kind of the difference as I see it between the 2.
[00:10:33] Unknown:
Cool.
[00:10:34] Unknown:
Yeah. That's a great overview. So now, coin swaps, at least in in the case of Mercury Wallet, are being built off of, a state chain. Nick, would you wanna get into,
[00:10:45] Unknown:
you know, what what a state chain is for Sure. So a state chain is it's another Bitcoin layer too. So obviously not as well known as the others like a side chain or lightning network, but it was an idea that was drafted in a paper written by Ruben Sanson in 2019. And it's a way of basically transferring your private keys or new TXOs off chain. And yeah. So we we built the first version of this and essentially we swap the coins and we swap the private keys and it's non custodial. So the first use case was coin swap. Now, it is different than coin join in that, you know, you're essentially swapping history.
So there are some positives. The positives are is that there's no one chain chain of a coin join. The negatives is that you could end up with a undesirable coin, for example. To deal with that issue, we we build a sparse Merkle tree of all the coin swaps. So if you were ever in a situation where you coin swapped with a coin that you don't necessarily wanna have, you could prove that you participated in the coin swap because we've attested to the Bitcoin network. So
[00:11:50] Unknown:
Very interesting. Very interesting. So, so as a
[00:11:55] Unknown:
what do you say? Like, an orchestrator of the state chain. Right? Yeah. I mean, the way to view a state chain at a high level is, I think someone termed it once, like, virtual open dimes. So essentially these open dimes now we can swap them. So long as they've got the same denomination, we swap them using a similar protocol to the 0 link, but so we don't know who's swapped with who. But as part of our state chain implementation, we provide a kind of coordination service, which swaps these kind of virtual open dimes or UTXOs.
[00:12:24] Unknown:
So let's say you got scrutiny, for example, from, like, you know, state actor, would you guys be able to blacklist, UTXO's from participating?
[00:12:34] Unknown:
Well, we do actually have a blacklist with, like many of the joint coin joint coordinators, because if people misbehave, that's a DDoS attack. So if someone was to participate in a coin swap and constantly not, you know, let the coin swap complete. Yeah. Like join the round and exit out just to, like, throw off the process so that less coin is getting mixed. So we had to implement that coin swap anyway. But long term, we're looking at making the coin swap more blinded. We're looking at integrating with Lightning and with Schnorr, we can do more blinding scenarios where blacklisting wouldn't even be possible. And that's our approach.
Yeah. We could have made it blinded from day 1, but there are a lot of UI challenges. Yeah. But, you know, with certain events that happened this year, we're kind of accelerating that as you can imagine.
[00:13:22] Unknown:
Yeah. Let's get there. That would be nice. How about other risk with state chains? Do users have, you know, to worry about these state chain orchestrator,
[00:13:32] Unknown:
you know, perhaps running off with their funds? Well, that you know, with every layer 2, there are compromises. Indeed. So if the state chain entity was to cooperate with a previous owner, in theory, they could steal the funds. We've built a load of things to not let that happen. We have a we use an HSM on the back end to delete the free, the the private keys, the key shares. But also I think the the biggest reason we wouldn't do that is because every time a state coin is created, you have essentially a backup transaction. If the state chain entity was to cooperate with a previous owner, you would have evidence that that that would that would have happened. We call it proof of scam. So you can always prove that the, you know, that the state chain had misbehaved. And I think that's probably the biggest, weapon we have to say that we're gonna cooperate because you can, you know, cryptographically prove we, you know, stole the funds.
That's great. And you know who I am. I'm here. Yeah. Yeah. Wouldn't be good.
[00:14:28] Unknown:
So, so, yeah, we touched on blacklisting, at least within the context of, you know, state chains. Anyone wanna make any comments about what we've seen with some of the other CoinJoin coordinators, as of late. I know that's been a point of contention, and, you know, I figured we get some spicy discussion in. Ben, you look you look like you have something to say. Yeah. I I used to work at Wassabi, so it's really sad to see, like, that they, they did do that because,
[00:14:56] Unknown:
like, for one, like, I can understand being, like, we don't want the Bitfinex hack coins going through a coin joint and someone coming and arresting me. But for 2, they're not they're, like, they're not even taking that stance or thinking, like, we're gonna use, like they're talking about, like, using Elliptic to, like, coin to, like, do chain analysis in every coin that comes in. And, like, that's just awful. Like, so that's, like, sad to see and, like, really it kind of shows the, like, benefits of things like joint market where it's like there is this no coordinator. No one can stop it. No censorship there. So, like, you know, the corn the having the centralized coordinator is nice because, you know, it creates this nice incentives where they can, you know, make money and develop the wallet and do all this stuff, but, you know, also has this obviously, centralization is not the best and we can, you know, censorship comes in. So, it's sad to see but I think, you know, luckily in the in the space, there are other alternatives. It's not the only option
[00:15:51] Unknown:
so we're doing fine, I think. Yeah. So, like, not only do you have the options of going to another coordinator system entirely like Samurai Whirlpool or, you know, getting rid of a coordinator entirely and going to, you know, make or take your protocol sort of, like, join market. But, you know, other people can run their own wasabi instances and, you can just choose not to mix with the main, company. So, yeah, it's not it's not the end of the world. Right? We're having this, you know, diverse market of, you know, these privacy providers of sorts come in to provide these services. But it is a little, upsetting when people, like, preemptively decide to do these things without, you know, It's a lie.
It's a lie?
[00:16:39] Unknown:
It's not the truth. So, like, don't look at it like you're preempting back to the point. There's a legal side to the story. Now we there's field out information that legally protect me to work. That protects us. We you know, we're in a
[00:17:05] Unknown:
Gotcha. Gotcha. And and, you know, honestly, would love to give Wasabi a voice. Would have loved to have, someone from Wasabi on stage, but, unfortunately, we couldn't make that happen. So, we could move forward unless anyone else has any other comments on that.
[00:17:27] Unknown:
Well, look. I mean, you know, the reality is, as far as we know, there are no rules or regulations that state that one needs to blacklist UTXO's coming into a centralized coin join service. That's as far as we know, and that's coming from zk Snacks, the makers of Wasabi themselves. Right? That's what they have said to us. So they're not aware of anything. It's from what they've they've said. We're not aware of it anything. Certainly, I'm not. So and and just, you know, the the the the difficulty of trying to actually create that regular if you think about what a coordinator does, it takes a number of different inputs and it just organizes them. Right? So to try and legally block that kind of activity is going to be difficult because how do you avoid that blocking a lot of other critical services in this world. Right? You know, I mean, what we're talking about is not something dramatic. There's no custody of funds. You know, there's a lot of things that are not going on on there. We're really just talking about taking a few bits of data and reorganize us us in them, and that kind of happens on the Internet for a number of different services, often with financial amounts involved. So, you know, I don't know. I I think that it's it's really not good for the Bitcoin world when we start seeing services trying to approach things in a way that, you know, really highlights the the the fact that we have this non fungible.
It's a it is a fact that it exists, but we shouldn't be trying, particularly as a privacy service, to push that forward. Right? The more that that happens, the worse things get for everyone, And, it's really sad to see.
[00:19:16] Unknown:
Okay. Moving forward, coin joins, coin swaps, can do do you guys see them as being complimentary, supplementary? Can they be used in tandem? And if so, how would you guys propose they'd be used?
[00:19:36] Unknown:
I think they, they should be used in tandem because, like, if you're gonna do a coin swap, for 1, you're just gonna give someone your coin, and now they could see, like, your whole history. So if you don't wanna dox, like, your coin's history to this person you're coin swapping with, then you would wanna coin join beforehand to see, like, okay. You don't know I bought this Bitcoin on Cash App or something. So, then they would, like, know you'd hide it there as well as, like, have a larger anonymity set going in to protect you because, it's a it's like a economic or, like, a, you know, a state act would have high incentives to come in and just do coin swaps all day to try to see who's coin swapping. If you come in with a CoinJoin, output, they would not be able to totally tell. Like, because if you just came from an address you withdraw with from, like, Coinbase, they'd be like, oh, this is, Ben Carman's coin, and then, you know, the coin's office is useless now. So if you came in with a coin join, they'd have much harder time figuring out who it is. So I really do think, like, both of them together just complement each other extremely well.
[00:20:34] Unknown:
Yeah. I agree. I think, we're really just scratching the surface, and I'm sure people are, you know, doing their own mixes of stuff. But moving forward, it'd be really cool to see some services, sort of combine the 2, take the best properties of each and be able to pass it on to the user. Nick, you had some ideas about other tools that could be used in conjunction, at least with your project and and coin swaps.
[00:20:59] Unknown:
Yeah, I mean we're looking to make things more blinded and that's like essentially work a lot more with lightning. So rather than to take a fee on our state chain, which, you know, certain companies could see the fee and basically figure out that our coins had participated in the coins, what we would take a lightning fee up front, issue a kind of like a cholmang token, and that would be redeemed for, like, a stake coin, and then that would make it slightly more blinded. And and we've looked at coin joins as well as a kind of on the withdraw process. But I think as always, you know, do you want So from the withdrawal process, you mean like, so going pegging out of the Stakecoin? Like Yes. Yeah. Okay. Interesting. But, we put that on on the draw because we're more focused on lightning. But, and people understand there's a lot of things you can do, but the UI challenges are kind of harder than the technology behind it. Yeah. We I think all technology here uses Tor. That's an unreliable,
[00:21:53] Unknown:
hard network to work with and Getting your start on Tor.
[00:21:57] Unknown:
And getting that working on a UI that, you know, everyone can use is is a challenge, and that's probably why but I think that's improving. So
[00:22:06] Unknown:
So you you mentioned a very interesting thing there, like, a lot of application challenges putting together an app to make everything, work smoothly at the end of the day for the user. You guys think that more progress can be made at the protocol levels with these sort of things, like coin joints, coin swaps, other similar tools, or you think we need more focus on, the UI, UX, the applications that we're giving the users? Like, where is the bigger room for improvement would you say?
[00:22:34] Unknown:
I would say, we could really do with cross input signature aggregation. It would be a major improvement and not just to the privacy layer of Bitcoin, but to the scalability as well. Right? Indeed. We have less data going into every transaction. So for me, that is a very fundamental improvement. And I worry that I don't see it being talked about a lot. I think it's been very briefly mentioned here on the stage maybe once in the last 2 days, and I'm really hoping to see more, being done. I know that it's not a simple thing. I'm I'm very aware of this. It's very complicated.
[00:23:13] Unknown:
You know, it's a great challenge to implement. You know, we people have been thinking about it for many, many years. It's, you know, if it was easy to do, it would have been done by now. But, Craig, you wanna give us, like, a little overview of cross input signature aggregation, what it means as, like, an overview?
[00:23:31] Unknown:
Sure. So, basically, right now, every, Bitcoin input that you, spend, you have to provide a signature which shows that you own it. And so we right now construct a transaction, and for every input, we have to provide this. Now that only not only bloats the size of the transaction action, but with with Snore, what we can do is actually aggregate them down to 1. And that enables us to not only decrease the size of the transaction, which is good from a scalability point of view, but in fact, it can make privacy focused transactions like coin joint transactions actually cheaper to make.
Right? So that's a very important fact. Generally, what we've seen in the history of Bitcoin is that advances happen when the cost to the user becomes less. Right? Ultimately, everything is driven by money. This is a monetary net network we're on. And if we're looking for things to actually get adoption, one of the reasons Sigrid has adopt opt adoption in this world is because it was cheaper to do. So for me, that's a really important thing. It not only will enable Bitcoin to scale better, but it will actually make people turn to privacy focused transactions sooner than they might otherwise. Yeah. Absolutely. Yeah. Bitcoin,
[00:24:49] Unknown:
by all of its design, it teaches us that the incentives are imperative. And CSAA, or cross input signature aggregation, not only makes it possible for us to, like, turn every transaction into a coin join, but it's, like, you know, incentivizes that economically, which is the amazing thing. So, you'd actually be paying more to not get in on a coin coin join and, improve the privacy of yourself and others. So, yeah, that would be quite a advancement, and, you know, I I hope, you know, it just doesn't go to the wayside and we could find a way to bring it to Bitcoin. That would be incredible. Fontaine, haven't heard from you too much. You wanna talk a little bit about, fully noted why why you picked join market to put in as opposed to perhaps one of these other centralized coordinator?
[00:25:46] Unknown:
Yeah. The whole idea with fully noted is you run your own self hosted server, Bitcoin Core, and join market is exactly it works the same way as fully noted. It's just built right on top of Bitcoin Core. So it was a kind of a perfect match architecturally for the app and just kind of the mental model of how the app works. I'm, yeah, I'm very excited about adding join market. It is it's it's very it's mind blowing how it works and kind of the just the cryptography that goes into it to prevent civil attacks, I think. You know? It's I think it's the reason I like joint market is because I've just my own intuition tells me it's harder to civil attack joint market than a centralized coordinator, especially the ones where it's cheaper to keep, you know, remixing your coins, I think.
So and and, obviously, with what has happened recently has shown light that, you know, central centralized servers where you're doing privacy related stuff probably is gonna be a target.
[00:26:50] Unknown:
Right? Yeah. Yeah. Absolutely. We're we're definitely gonna see more scrutiny in the coming years.
[00:26:56] Unknown:
I'm just yeah. I'm happy to that it's approved on the App Store and that it's out there. And I need to write some more tutorials and get some more people teach people how to use it, basically, and get it easier to install JoinMarket, which a lot of the node packages now they have they are running it, but they need to be running the wallet daemon
[00:27:12] Unknown:
and setting up a service for that to easily easily connect. Yeah. So we we've had join market. It's been a project for for some years now. Mhmm. And, you know, most people have had to just interface with it via CLI or, like, very, like, basic web interfaces. So I am ecstatic to see all this progress being made in terms of the UI for it. And and it's funny because, you know, you don't don't have the centralized coordinator making fees and facilitating the development of its software. So, you don't have, like, a team that's been incentivized to, like, you know, put out a really nice UI like Wasabi or Samurai has. So it's really been sort of, you know, up to the community to, you know, get together and and put stuff together, hook into the API, and and make something presentable for users. So it's been really awesome to see people like yourself putting out, you know, this UI.
We've seen some efforts from from others like the Bitcoin design community, and I know Gigi has been deeply involved in in the the web UI. That's that's an outfit. I believe it's on Umbrel now. It it's called Flow. What is it called?
[00:28:18] Unknown:
No. I'm not sure what it's called, but, yeah, they did release it very recently, and it's actually, like, very pretty. So it's good to see.
[00:28:24] Unknown:
Yeah. Yeah. So, it's, like, a great start, and and I'm really excited to see that project iterate. And, yeah, let's let's see more. I I I know there's some people working on some other mobile apps. Like, it would be great if, we could get those Android users on. Mhmm. So, yeah, that has been an awesome awesome, development to see. So, yeah, more join market stuff. Ben, you wanna get into some stuff with, coin joins and lightning? Let's dive a little into some LN Vortex stuff. Sure. Yeah. Like,
[00:29:04] Unknown:
lightning kinda has this fundamental problem right now where when you have a lightning channel, you just to tell people about the channel to prove you're not lying about it, you just say, like, this is my UTX, so my channel is in. So everyone can see, like, you know, this node owns this channel, and then you just look at the opening inputs in there and be like, oh, okay. This is his wallet. And, he docks a lot of your on chain privacy here. So what most or if you're privacy minded, what you should be doing is, like, coin joining through, like, something like Wasabi or Whirlpool or join market or doing a coin swap with, like, Mercury Wallet or something.
And then so you have these new coins, and then you open the channel. So when people see that you have, c t x o, they don't know your actual hoistory. They can't see, like, oh, you got these coins from Coinbase or something. So, but that still is not the best because, you know, you you're not having to do, like, 2 or 3 transactions all on chain and that takes up a lot of space. So, I tried to solve this by building vortex, which is basically a way to instead of doing a coin join then opening a channel, you you just open a channel in a coin join with, like, multiple other people. So it is just, you know, you're for 1, saving on chain space, and then 2, like, you know, your lightning node is gonna be online, like, 247, at least it should be. So why not just have this thing coin joining all the time as well, very small on chain savings by opening a channel with multiple people.
[00:30:32] Unknown:
So it's not just taking, like, your next pub from another, you know, wallet that you have mixed and, using that to open up channels. It's like you're doing the coin joint right into the channel open.
[00:30:45] Unknown:
Yeah. Precisely. So, it it's really nice because then you just, like, have your channel in there, and if you do it in private channel, then people just don't know, like, what is what this is, which, you know, really benefits you. So so how have you how have you designed it? Like, you got your own coordinator in there that's putting Yeah. Yeah. So it's, the coordinator model because, that's a lot easier to build, sadly. But, so there's a coordinator just, like, you know, make sure everyone's queues up, and then you queue up, and, everyone opens the channel at the same time. So what are your plans for that? Are you gonna run your own coordinator or you just put the software out there? It might be illegal. I don't know. So maybe someone on will run it, but yeah.
[00:31:27] Unknown:
You know, perhaps a NIM can Yeah. Step up to the plate and help us out. Yeah. I I wouldn't wanna see how the blacklist developed. You know, Johnny will push the pressure on you. So, let's try to steer clear of that. Yeah. Yeah.
[00:31:41] Unknown:
No. I I we have talked to some lawyers about it, and, apparently, it's like, don't say CoinJoin. We need to call it collaborative transactions now. And it's just, this isn't for privacy. It's for cheaper on chain. I'm a businessman. I'm trying to save money. So, there's actually, like people seem okay with that now. So yeah.
[00:32:00] Unknown:
Cool. And where would you say the state of the project is right now? It seems very early. Right? But,
[00:32:08] Unknown:
it's it's functional. Right? Yeah. I've I've on reg test, I've opened the lightning channel, so it works. I'm I've been working like, I'm too busy right now with my, like, real job. But Yeah. Startup life is hard. Yeah. Startup life sucks, but it's also great. But, I actually talked to, like, a bunch of people here, this week about it, and, I got people few people to commit to actually, like, paying money to try to build a UI for it. So once I have that out, it'll be very easy to launch. So I I should be launching in the next month or 2.
[00:32:40] Unknown:
Yeah. Dope. Maybe we should talk about trying to get that into Zeus. That'd be pretty cool. Very damn. Yeah. I've been thinking a lot about, Coin Joins and relationship to LN and what we can do to, you know, give users the the interfaces and and the tools to be able to use them in tandem. So, yeah, I've I've been working on some external account imports from XPUBs to pull into Zeus with the LND PSBT API. And I very much would like to, you know, get some coordination with some of the coin joint projects to provide the ability to do some, you know, external signing for, like, you know, you know, unfunded, unsigned PSBT that Zeus passes it and going back. So that would save you from having to, like, transfer make a transaction to, you know, from your samurai or whirlpool to Zeus.
But, you know, your solution cuts out that extra step. Like, just go from the coin join right into the Lightning channel, and I find that fascinating.
[00:33:50] Unknown:
Yeah. I mean, it's weird because, like, a lot of people, like, if they wanna open a Lightning, you know, a lot of their, like, their process is, like, either, like, send from, like, you know, their exchange or their hardware wallet to, like, you know, Samurai, mix it, do, like, you know, 2 or 3 on chain transactions, then send it to the LND wallet, then open the channel. So it's like you're wasting all this block space and spending all these fees, and it really sucks. So At least you're propping up the fee market. That's good. Yeah. So, you just do it all in one nice channel. Yeah.
[00:34:25] Unknown:
Great. So let's take it back to, you know, protocol stuff versus application stuff. Do you guys see any other things substantially that application develop I mean, we we got into CISA earlier, you know, and we've said that there are a lot of, enhancements that we can make on protocol layers. But what more can application developers do to make these tools more accessible?
[00:34:59] Unknown:
I mean, there are some things like with addition of Taproot now, we can do some new fancier things that we couldn't before since, like, we do have the raw pubkey on chain now. So you could do things like a ring signature and other stuff that, you know, you won't block as an on chain. We could do that for, like, proofs inside your coin joint. So, there's probably now room for a lot more, different models and, like, 0 link or something to actually create CoinJoints. I know, like, some people are working on research on that, but, it would be cool to see someone, like, you know, now they have Taproom and all these other new properties, let's, like, try to build out things that, like, actually use it and, because that was, like, largely a privacy upgrade and with it, we should be able to, like, create new kind of coin joint protocols or, at least improve them currently. And, we haven't really seen that yet because it's only been a couple months, but Yeah. I would love to see that happen. Yeah. We're just starting to kick off,
[00:35:54] Unknown:
you know, what Taproot is gonna bring to the table. You know, Lightning Labs and and Taro was a pretty big announcement, and it's gonna have a lot of repercussions. But, yeah, I would love to see, you know, more tooling, through, like, Tapscrubs and really getting creative with that to bring people better privacy. So that would be exciting.
[00:36:14] Unknown:
Yeah. I think the one one thing we should also consider is that, you know, unless we do away with, which, frankly, without a hard fork, I don't see it happening, this kind of issue of Bitcoin being basically non fungible at product layer. Right? If you can see the amounts, unfortunately, there is a coin history, and you can trace it back over time. So unless we can do away with that, we're gonna have to deal with the fact that we have to build something on the application layer. And then, really, you're talking about, you know, the idea of anonymity sets. Right? So you you're sort of one of a number of people, and, obviously, the greater that group of people, the more anonymous you are.
So it's one thing to talk about, you know, how can we have new tools, but we also have existing tools today. And every time you launch a new tool, you're gonna have to possibly start from 0 on that anonymity set. Right? So that crowd is gonna start off with 1. It's gonna go to 234, and it takes time. It, you know, it takes time for that tool to get out there. It takes time for people to trust trust the the tool for clients to be written at how many wallets are going to adopt the same tool or what is everyone going to have to use one wallet? So, you know, I think it's dangerous to constantly be looking into the future and saying, well, what could happen? Right?
Because we might end up in a place where if we don't push the tools that we have today, then by the time we get to the tools that we think might be better, the world has changed to the point that those tools are seen as not good. Right? But if we use the tools that we have today, it changes the mindset of people, and it changes how society views it. So if CoinJoin becomes, you know, a widely used thing today, then that will change the way that society views it. And I think it's important not to wait too long to actually use the tools because as I was saying, the crowd grows. And as the the crowd grows, which not only helps the anonymity of your coins, but it also changes the way that the rules and regulations of the world will form.
So, you know, I think there's a different way to see it.
[00:38:26] Unknown:
And it's, like, very true to, like, we really aren't using all the tools we have available today. Like, we won we're talking about Taproot, but, like, liquid has existed for years and has, confidential transactions, which is, like, perfect for coin joints where you could have unequal amounts and, like, do all these spends, you know, it is, you know, slightly different trade offs with it being the, side chain and kinda custodial. But, it would be perfect as a privacy tool and, like, no one is using that as as build something, which is like, that would be, like, amazing. I would use that all the time if someone built where you could coin join on there and do all these unequal amount, things, and then, atomic swap back into real Bitcoin. Like, and, you know, no one's built that in, like, 4 or 5 years, and, like, we really aren't using our tools yet. And,
[00:39:09] Unknown:
like, yeah, that's something we need to press on. I think we also need funding. Like, there's a lot of there's not much money in developing wallets, especially self sovereign wallets. You know? So yeah.
[00:39:22] Unknown:
Yeah. It's it's very few players, you know, helping facilitate the building of these things, but, you know, we got some good actors that we're extremely grateful for. Like, HRF. HRF both through us a Bitcoin each at about the same time. And, yeah, it's really awesome that we've been able to use those sets wisely and continue to build out our prod products. So, you know, shouts to HRF and Alex Gladstein, all the good folks over there for for supporting us. So that's great. But, yeah, we hit on a lot of great points right there. I think it's very important to hit on, you know, perfect being the enemy of good and, you know, people holding out to, you know, for privacy tools that may you know, better properties or whatever or whatnot.
But you know, that that's like speaking from a position of privilege. There are a lot of people that need Bitcoin privacy today. And, you know, how do we support those people? I think by and large, like, the best way is to get in on these mixes with people, use the tools, and help increase those anon sets. And, you know, we saw it even with the the construction of this panel, that, you know, CoinJoin, CoinSwaps, privacy in general on Bitcoin has a bit of a stigma. People, or some companies in the space don't want to touch it with a 10 foot pole, and and that's really unfortunate.
But what can we do to try to destigmatize Bitcoin privacy, which is is a human right?
[00:41:08] Unknown:
I think the the most important thing is to use the tools. Right? That is the the number one thing. We we have to, not only use the tools, but encourage others to use them, explain them. And, you know, I I have, like, a a thing I like to say, like, normalized CoinJoin, you know, or coin CoinSoft. They're not normal normalize these things because they they they they really like privacy. If you believe it's a basic human right, then Indeed. You know, why should we feel ashamed to just aim aim for that? Because that's all that a CoinJoin is doing. It's just giving you financial privacy over your coins.
So, you know, the the sort of worries and we sort of laugh at each other and smile and say, well, maybe it's illegal. But actually, we need to take the the kind of, in my view, the firm view that it's not. Right? I think that we shouldn't kind of, have this kind of half view. We should actually be brave and say, you know what? What we're asking for here is not something which is, you know, in some way strange or, you know, not kosher. It's really just a normal thing that we should all want.
[00:42:26] Unknown:
Yeah. And, you know, it it's people have this misconception based on, you know, I guess, Bitcoin's history, darknet markets that, you know, why would you want privacy? Are you trying to buy drugs? Are you trying to support terrorism? And it's it's that that couldn't be, you know, further from the truth. It's like when you make a purchase, right, like, do you want the person that you pay to know how much money you have and to follow you to every other store that you go to? No. No. That sucks. That's garbage. Do you want your employer to know what you do with your money after every paycheck. No. Never. Hell no.
[00:43:13] Unknown:
So all purchases need to be frightened.
[00:43:17] Unknown:
Indeed, whether it be, you know, something as simple as getting, you know, medicine for you or your family or, you know, making other sensitive transactions that, you know, other people shouldn't, you know, know, like, these tools are imperative, you know, especially in a world where, you know, there's this increasing push by the state to by not just the state, I suppose, but also corporations to know as much information about your life and your finances. 1st and foremost, it's important that, you know, we don't just try to we don't just recreate these tools in this, you know, open blockchain system and that we give users the ability, to take back some of that privacy and only selectively reveal the information that they want to reveal.
[00:44:09] Unknown:
So It's,
[00:44:10] Unknown:
it's weird because, like, I can understand if you're, like, I don't care if Twitter sends me targeted ads because, you know, I'll buy Tide Pods or whatever. But your Bitcoin privacy is extremely important because, like, for 1, it's stored like, the history is there forever. So even if you fuck it up, it's gonna be fucked. Yeah. Yeah. Like, that's there's no getting the toothpaste back in the tube if you make an error with your on chain,
[00:44:34] Unknown:
interactions. So you gotta make sure you're doing it right from the get go. But even then, there's still a lot of challenges, like your anon set deteriorating over time. You know, perhaps some people that are in your mixes, they'd begin to KYC themselves as they're trying to sell Bitcoins perhaps through, you know, some of these exchanges? Don't do that, guys. Don't do that. Yeah. It's it's a can of worms, really. So, you know, what what else can can people do?
[00:45:08] Unknown:
Education too. I think, OpenNoms is really great. He's just constantly helping people out and excellent resources. If you highly suggest looking at his GitHub and going through all his information.
[00:45:23] Unknown:
Indeed. Indeed. Just put us through quick And I think what goes along along with that is, you know, any, service that that blocks, you know, coin joined funds, you know, take them off. You know, don't be afraid to call them out because, effectively, we have 2 forces pulling in the world. Right? We've got the sort of call them governmental forces that are pulling us towards the regulation, the KYC side. We need something on the other side, and that has to be us. Right? Who else is it going to be? Who else is gonna stand up? If not us, then who? Exactly.
[00:46:01] Unknown:
Yeah. It's you know, I said earlier that, you know, privacy is a human right, but rights are not granted. They're taken. And it's gonna take a lot of, you know, push from us or or pulling if we're using the pulling analogy, to to pull things in the direction we want to see them. So that's gonna take individuals stepping up. That's gonna take developers and and projects stepping up. That's gonna take companies stepping up and saying, no. This is the right thing for us, for for our users, our customers, and and for humanity as a whole. Because the alternative that we could, you know, very rapidly decline into is, you know, a, totalitarian hellscape of sorts where every transaction is recorded and known about from, you know, your personal transactions at the pharmacy or regarding to your health to the pocket change that you give to your son.
Do you really wanna live in a world where you have to get permission from the government or or, you know, tell them about spending money you give to your kids. I sure as hell don't. So, yeah, we're coming up on time soon. We've got about 2 minutes to wrap up. Do you guys have any closing thoughts?
[00:47:30] Unknown:
Thank you for having me.
[00:47:33] Unknown:
Thanks for being here, and thanks for building some awesome tools.
[00:47:38] Unknown:
Yeah. I would just say if you don't coinjoin, it's not or coin swap. You should try them out. It's, like, actually very easy to do, and it's monumentally beneficial for you. So, like, I know a lot of people are daunted. It's like, oh, that's the nerdy Bitcoin people that it's like that's what the hardcore people do. It's like, no. It's, like, I could get my mom to use, like, any of them. They're they're not that hard. So you should try it out if you haven't done it before.
[00:48:01] Unknown:
Yeah. Absolutely. Get on your Umbrella, downloads, join market, check out Mercury Wallet. I've been having a great time planning with with it this week, and, it's just super easy to use. Just deposit, auto swap. I'm just running around and increasing my in onset.
[00:48:19] Unknown:
Yeah. It's it's great to have, you know, users that test it. I mean, when we went into alpha, some guy decided to create the state chain torch, and we learned so much in those 3 months. You know, it was passing around on Twitter. People were finding bugs all over the place, and that really helped harden the product and get it to where we could be production ready.
[00:48:37] Unknown:
Yeah. It's important to test and try these tools and figure out, you know, where the bugs are, the rough spots. And, yeah. Yeah, I encourage everyone to go out and run your coin joints, try some coin swaps out, and to keep using these tools to help proliferate them and, you know, make privacy better for yourself, but also for others.
[00:48:58] Unknown:
And if we can get some more clients as well, you know, the more wallets that implement these tools would would be great. You know, you might think that I I sort of enjoy being, you know, one of only 2 world multiple clients, but, really, I wish there were 5. I wish there were there were 10. For me, that that that would be great. It not not only derisks the entire space, but it just makes it much more accessible to everyone because everyone comes in with different tools. Right? So, if there are any devs in the or do or do the audience here really think think about building this stuff in because it's not like we have forever to do it. Right? Time is critical. This is a Yeah. Very much an unsolved area of Bitcoin today. And the more people that are working on it, the faster or the more chance we have of getting to a a place where I think we all want to be.
[00:49:45] Unknown:
Indeed. So if you're an application developer out there, please think critically about your users' privacy and, you know, consider implementing one of these tools into your wallet. And, Yeah. On that note, let's call it. Thank you all for joining me today. You've been a great discussion.
[00:50:10] Unknown:
Good morning, Miami. Welcome to the developer Bitcoin developer funding panel, open source funding. My name is Mike Schmidt. We have a great panel here. My esteemed colleagues, we have Adi Shankara from Summer of Bitcoin, Ben Price from OpenSats, and The Bitcoin Company, and Connor Okus from Spiral. Before we get started, I I don't know if Matt is out there, but I just wanted to get a round of applause for Matt Odell in putting this together, this open source stage. So some quick introductions. Mike Schmidt, I head up Brink. We are a 501c3 not for profit organization who's focused on funding developers that are working on bitcoin protocol, bitcoin core, and, Lightning Technology.
We are currently funding 12 developers that are working on that technology right now. And they're in the form of grants as well as, our mentorship program for young younger developers. And we have an office in London where some of them are congregating and trying to build that out as a bit of a hub. And we also publish the, Bitcoin OPTECH newsletter, and you should subscribe if you haven't already.
[00:51:29] Unknown:
So, Connor, do you wanna do Yeah. Sure. So my name's Connor. I work at Spiral. Spiral is an an initiative within Block, formerly Square, and we're focused on, improving the open source Bitcoin ecosystem through a number of different initiatives. One of those initiatives is our grant program where we fund over, at this point, 2 2 dozen or so developers and designers and some project managers as well, all working on various types of Bitcoin projects from, like, Bitcoin Core itself to lightning infrastructure projects to SDKs that make building on top of Bitcoin a lot easier. And, we have a global footprint as well, so our grantees are from all over the world, from from India to Australia to to Southeast Asia, America, Europe, and more. And we want to kinda continue that trend and support developers from other parts of the world as well.
And just a just a quick shout out to some other organizations who also fund open source Bitcoin development, the likes of of, like, Micah at Brink, and, what Ben is doing at Open Sats, and some other organizations like Gemini, Kraken, Coinbase, bit bitmex, all all support an an open source, funding, and it really is a a community effort. And it's really good to see, you know, funding for for for development moving in in a positive direction, really. So, like, I'm really I'm really happy personally to to to continue to see that.
[00:53:04] Unknown:
Ben?
[00:53:06] Unknown:
Hey, everybody. My name's Ben Price. I actually have a for profit, and we started a nonprofit. The for profit's called the Bitcoin company. It's kind of starting as rewards and loyalty company and moving towards kind of a full stack bank. That's the way we think that we can kind of bring Bitcoin to the most people or consumers in the world. And then what we're here to talk about or what I'm here to talk about today is OpenSats, which recently launched, which is really exciting. That is a 501c3 not for profit, with a mission of supporting contributors to free and open source software, specifically around Bitcoin.
It's a the board is full of a bunch of Bitcoiners. We're definitely staying focused there. But technically speaking, it's all free and open source software. Anything that helps Bitcoin flourish, needs a lot of, I guess there's a lot of, like, technical, technical dependencies, that that can help Bitcoin succeed. So we're we're looking forward to funding all of those. And, you know, shout out to the I think I think the developers get a lot of love here, but there's a lot of, ways to to contribute back to open source, including design, code review, research, just general education.
So we're really, looking forward to supporting kind of anyone contributing back, not just developers.
[00:54:25] Unknown:
Adi?
[00:54:26] Unknown:
I'm Adi. I'm the founder and lead at Summer of Bitcoin where, together with an incredible group of open source developers, designers, and sponsor organizations, we are helping university students learn about Bitcoin and contribute to open source Bitcoin projects. One of our flagship programs is where a university student contributes to an open source Bitcoin project under the guidance of a mentor, and, is paid a stipend in BTC. A number of our graduates have gone on to contribute to Bitcoin core or joint organizations like Chaincode Labs, Galloway, and.
[00:55:03] Unknown:
So I'd like I'd like to frame the discussion with, a story that I think is is interesting. I was at a Bitcoin related event, and I ended up talking to an engineer from an unnamed altcoin. And we were discussing funding, and it and it so happens that he was involved with a project that happened to raise some funds. And their token scheme, however it were, ended up netting them $300,000,000, of which that's not all developer funding, but a lot of that would go towards developers and building the protocol and surrounding libraries. And, I I hadn't even heard of this particular they're not even in the top 40 and if if you if you believe in the the market cap metric. So you have a non top 40 network raising $300,000,000 and we we don't have that sort of scheme in Bitcoin.
I would say Bitcoin is a little bit more bottom up as opposed to some of these organizations that are top down. Mhmm. And the folks here on stage are part of that bottom up ground effort. And so so, Connor, to you, how do you guys at Spiral think about the prioritizing open source? Like, why put your energies there? Why is why is Spiral putting their energy there? Why is Jack getting behind it? Maybe you can talk about a little bit of the the motivation there.
[00:56:37] Unknown:
Yeah. So, I mean, open source software in general open source development in general is, like, very synonymous with, like, public collaboration, self organizing community. All of the source code is open, available for anyone to kind of download, use, modify, contribute to, and and create projects and, third party projects as they kind of kind of see fit. And I think at Square, Square is obviously an org a Square or Block as a as a organization that has leveraged a lot of open source tools. And, Jack, it's no secret that, you know, Jack is a a big advocate of Bitcoin and Bitcoin being very much in alignment with blocks and squares policy and agenda of economic empowerment empowerment.
It was, very much a sense of, like, what is the best way we can contribute back to the open source ecosystem? Because like Mike just described, there is no rule model behind it. Like, a lot of these large organizations are using tools which we might consider, like, public goods in the in the physical world, and governments have very much taken on the responsibility of providing those services, whether it be, you know, the street lights, the roads, the bridges, military, for example, and we fund that for our taxes. But, I'm pretty sure everyone in this room wouldn't exactly want open source and software to be provided by their government. So we're we're a we're a team. We're we're an initiative that's, like, focused on providing funding for for open source developers, designers who are ultimately trying to push the Bitcoin ecosystem forward in a number of different ways, whether it be privacy, scalability, decentralization, developer experience, whatever it is, and just providing the support for them to kind of make those projects, a reality and sustainable over the over the long term.
[00:58:45] Unknown:
You you talk about supporting these projects or or individuals that at Brink, we we sort of think of this, sort of like a funnel. There's there's and there's this developer funnel for specifically for, let's say, Bitcoin contributing, and you have people who have a programming background who maybe start watching some videos, maybe they attend summer Bitcoin program. Maybe they attend chain code residency or Jimmy Song's course, and you they kind of work their way through sort of leveling up their their expertise in order to get to a point where you could be funded by somebody like a spiral, and I'm sure there's similar funnels for non Bitcoin core contributing. But how do you get people interested? You know, Adi, you you guys are focused on university students in terms of that funnel that I sort of outlined.
Why focus on that demographic?
[00:59:40] Unknown:
Sure. You know, that's really an important question and, is at the heart of what summer of Bitcoin is all about. If you look at the common trajectory of a university student today, you know, in 1st year of their colleges, especially someone who's studying computer science and training to become a software developer. In in their 1st year of college, they pick up a programming language. By 2nd year, they're solving obscure programming puzzles online to get that internship at Google or Facebook by 3rd year. And by the time they graduate, the biggest aspiration is to have an assortment of big tech AI jobs in their kitty. And so they end up joining one of these big tech companies where they're delegated to a team that know, is maybe resizing buttons or changing fonts every few months.
But, of course, you know, if you're lucky, you get to join a team that harnesses people's personal data, while those same people feel insecure about their lives as they compare themselves to others. And then maybe make them feel a bit better by showing them ads to buy stuff that they never needed in the 1st place. That's the norm. The exception is, of course, if you didn't do well in programming puzzles, then you know, you compensate by telling your friends that, you're too adventurous for big tech and that you're joining a Fintech startup, where again, the most that you do is pry on people's private transactions and, you know, in the hope of selling them dirty credit.
What is really not well understood is that joining Big Tech today is like joining Big Cola. Both their business models revolve around triggering the same molecule in your brain. And even if you keep the moral case aside, on the innovation front, you know, you can argue that, the sugar water we're drinking today is the same that it was 20 years ago. And, the search engine we use today is the same that it was 20 years ago. At Summer of Bitcoin, our message is, if you are in university and you're a budding technologist, you want to work on frontier technologies that flip the way the world runs. Working on Bitcoin today is like working on the internet in the nineties.
It might make sense to get some. But not only get some, but also work on some in case it catches on. There's also a case to be made for, you know, focusing on university students and introducing them to Bitcoin. Bitcoin is a political movement as much as it is a technological movement. You're forced to pick a side either as a global status or as a sovereign individual. And, as free citizens who believe in the promise of sound money, we need to ensure that those in universities today are on the right side of the future because in fact, they are the future.
And this is aside from the fact that and this is aside from the fact that, the youth is and will be an important constituency that, no politician can afford to ignore.
[01:02:40] Unknown:
Then, Adi's sort of talking about getting recruitment, getting people in early, bought in, and sort of, like, recruiting in that developer pipeline. In addition to recruiting, there's, we we share some similarities in that we need to raise funds from the community. And so there's recruiting, there's fundraising, and then there's just a general awareness that there is this need and there is talent that is looking to be funded and there is talent that needs to be cultivated. Of those challenges, what challenges do you see from your perspective at OpenSats? Where where can we do better?
Where are the challenges?
[01:03:24] Unknown:
I think it's it's an interesting problem because you have to, like, kind of address all of those issues. There's a study, I think, Okcoin released recently. I think, like, not a lot of people actually know what like, how Bitcoin is developed. I believe a lot of people think developers are paid or maybe there is some natural funding mechanism from mining. So I think like the first thing is general education and awareness to the community that this thing doesn't really maintain itself, like, in a in a stable way. You you need to let corporations, you need to let users, you need to let anyone leveraging the technology, You need to make sure they're aware that it's it's funded by a group of developers and designers and coders who are really just, like, not rationally acting. They are providing the they're providing, maintenance and, these things for free. No one nothing in the world is free, but we're we're lucky enough to have a few people out there who really care about the the mission and the vision of, you know, Satoshi, to actually build on this thing. Take like, these are some of the smartest people in the world dedicating, their time for free in in many senses. So, you know, I think the first thing is making sure that users, businesses, anyone leveraging the technology knows that it's important to give back to the people maintaining it.
And then secondarily, you have these pipelines of maybe it's students or, you know, well trained developers coming into the system. But again, it's it's not economically we're we're all we're all big winners here. We're logical thinkers. The economically rational thing to do if you're a brilliant coder is to go work for Facebook. If you if you really want Bitcoin, go get a $1,000,000 a year job and buy some Bitcoin, like, screw the screw the code base. Right? But that's that's not what we're that's not what we're relying on. We need a way to, like, build from the ground up, like you said, to create an actual self sustaining ecosystem.
And in order to do that, I think instead of relying on 1 or 2 large, you know, exchanges or corporations to do the majority of the funding, well, that's important. That moves the needle. But it's really, I think, to create a self sustaining ecosystem, you need, like, a grassroots movement where everyone gives back a little bit. If everyone who's leveraging Bitcoin, everyone who benefits from it, gave back just a little bit, well, then we have enough to we have enough funds, enough funding, enough training, to actually, like, continue to sustain the ecosystem.
[01:06:07] Unknown:
So, Adi, Ben touched on potentially some concerns that somebody might have starting their open source development career, if you will. Financial was the example Ben gave. What do you hear in talking with these younger folks who may be considering a career in in open source? Like, are there concerns? What are they excited about?
[01:06:34] Unknown:
Sure. You know, we've had about 20,000 university students from over 50 countries around the world apply to our program this year. And the most common question that every student starts with is, will their governments ban Bitcoin? And as they go through our resources, you know, talk to us and join our seminars and, you know, study Bitcoin just like they would study TCPIP in a networking class. And remember, these are computer science students who are arguably grappling with concepts much harder than those that constitute Bitcoin. They quickly go from, you know, hearing about Bitcoin in the media as being this illegitimate child of technology to realizing that the Bitcoin network is, in fact, decentralized enough, resilient enough, secure enough that even if you were to shut down all nodes but 1, the network could still run as is and bootstrap itself again.
That, you know, the Bitcoin protocol is in fact one of the most important and beautiful innovations of the 21st century that can change the course of human history. That understanding, you know, coupled with the energy and clairvoyance that the youth can bring to the table is striking and remarkable to see. Having said that, there's a ton of noise in the space with other crypto ecosystems, the lavish marketing budgets, and catchy memes. But, you know, so we get all kinds of questions around proof of stake and why can't we have our own coin to decentralize dentistry. But, those get quickly answered by themselves when they figure out why is HTTP the most dominant way of exchanging information over the Internet and how Bitcoin is similar in terms of being the dominant way of exchanging value over the Internet.
We have this internal aforism in in in our cohorts where and it goes like blockchain has only 2 applications. 1 is money, and the other is marketing. And, you know, you as technologists, you know, we understand that it's never the means, it's never the marketing that changes the world. It's technology that works as intended that does. When it comes to helping these students, you know, discover careers in Bitcoin, there's a ton of thought and work yet to be put in. And, and congratulations to organizations like Spiral, Chaincode Labs, Brink, and OpenSats for leading from the front line and, and showing us the way.
[01:09:02] Unknown:
We've we've talked a bit about individuals and how they can kind of progress and and contribute, but there's also a lot of the work that Spiral's doing is is project based. And and and those projects also go through a sort of evolution from sort of ideation one developer onwards.
[01:09:20] Unknown:
How do you guys think about that progression at Spiro? Yeah. So we're we're we're gonna publish some some content about this very soon, and we're we're very much thinking about it in this kind of 4 stage process, which I'll try and go through very, very quickly. So phase 1 very much revolves around, like, a proof of concept. So an individual, a team of developers have an idea that is gonna help move the ecosystem forward in areas of of that we talk about security, privacy, decentralization, or whatever it might be. And at this stage, they're very much trying to develop their project architecture.
They will be doing some pitching to organizations such as ourselves, who would provide no strings attached funding to help them get off the ground. And so, like, a a successful exit from that phase might like, some alpha piece of software that it has a code base that makes it easy for new contributors to understand what is happening and, also contribute to it as well as perhaps wider buy in from the from the wider Bitcoin ecosystem. Phase 2 is this kind of community development process. So everyone here is very much aware that this this Bitcoin thing that we're building, this new money, has a huge community behind it helping to drive it forward. And, we want to see that developed developed for individual project projects as well.
So projects might do this by creating a project website, which clearly outlines the vision for the project, helps new people understand how they can contribute, maybe outlines, their road map as well, and perhaps some start developing some some async communication channels, whether it be on Discord or Slack or IRC, as well as raising awareness for their projects as well, whether it be podcast, articles, or social media. And, again, a successful exit from that phase might look like they have multiple contributors who are fixing various types of bugs, adding documentation, or adding new features.
Phase 3 is this kind of multi entity funded phase where we hope to see a project, fully sustainable by having multiple, multiple donors. And this might be facilitated and made a bit easier if a project starts to develop a foundation around their project that makes it easier for larger organizations who now see this piece of technology as, like, a critical part of their tech stack. And want to find an easy way to to donate without having to do the kind of long process of due diligence on individuals and and contributors maybe outside of their their jurisdiction.
And so a successful exit from that is again, multiple entities fund funding a project, and we start to see this project being used in production environments close to, like, beta type type of software. And then lastly, it's like we try we want projects to be sustainable without Spiral. So if Spiral were not fund funding this project, it wouldn't collapse, and it wouldn't cause significant damage, to the project ever. And at this stage, the project's really kind of developed its own culture, its own identity, and can can truly stand alone without a single entity. And so we we very much look at these projects as active projects within the Bitcoin ecosystem that will be around for for the super long term and ultimately, you know, be a part of of of Bitcoin's Bitcoin's legacy. So that's, like, how we we we try to try to think things through and hopefully hopefully, you know, keep funding as as decentralized as possible.
[01:13:04] Unknown:
Then Connor mentioned, one way that a company can contribute to the space is if they're using the software, they can financially support it. You're in an interesting spot because you're both a for profit company with a Bitcoin company and OpenSats donating on the charitable side. So being in that unique position, how do you when you have your Bitcoin company hat on, how do you think about contributing to the ecosystem?
[01:13:36] Unknown:
Yeah. That's, that's a really interesting one, and, like, hopefully, it's a challenge that the open source ecosystem can kind of do better on. There are a few, I think, good really good actors in the space who are doing what they can to give back at least financially. But there's tons of ways to give back. Like, we're we're a poor start up, I can't just donate $1,000,000 to open source, as much as I would love to. So earlier we talked about, you know, developers themselves maybe not being economically incentivized or it's not economically rational for them to pursue open source projects outside of just goodwill.
But, like, as a company, why would it help? I think recruitment is a big one. I got Ben the car man and Connor in the audience. I think, without without us, you know, going to these hackathons, without us giving back to some of these open source projects, I'm not gonna be able to recruit them. Like, that that's what that's what drives a lot of people in this space are working on the these projects like that. I can't always just say add a widget, add a button, and they're gonna be satisfied with their job. So for me, there is some recruiting benefits, some marketing benefits. You know, I I also think that, like, when you the the beauty of open source is that you can build on it and I can build on it and we both benefit. Like, it is a public good that we both win from developing on top of. It's more secure. It's faster. It's it's better maintained.
And so, like, as you just continue layering on as a company building on these, like, core packages, whether it's Bitcoin s or or, you know, tons of open source things that we use, everyone wins. And so when I give back or with with the big bang company, you get you get a benefit as well. I also think, like, there are some ways, like, especially us. We're consumer facing applications. So a little bit of what we can do is education, highlighting projects that we really like, giving bounties for, you know, things in our road map that, we just don't have time to develop. One thing that we've tried to hack together is we go to hackathons, and we add prizes to the end the the very end of the pool. So a lot of a lot of the issues is hackathon projects are sometimes kinda half baked. They get 80% of the way done and then no one finishes them. So, you know, as a bootstrapping startup, what I can do is go give someone another $500 or a little bit of Bitcoin to finish that off, write a blog post about it, get their actual project out there, and hopefully users on it.
So so there's a lot of ways to give back including, like, the the one that I'm most excited about. We just, like, we rolled out referral codes, in our application. So this is an easy one. If you sign up with the, you know, the word open sats or donate, every time you make a purchase through us, a portion of your proceeds go to, fund, you know, Bitcoin core development. And so that's, like, you know, little things that just you know, we're gonna we're gonna be streaming stats towards, Bitcoin core developers, you know, every day, all day. And so I think it's just these little things.
You have to get creative. Like I said, if you if you got you got a $1,000,000,000, just throw some money at some devs probably. If if you're poor like we are, you gotta get creative, but there's there's a lot of really, interesting ways to do it. And I didn't name them all, but, you know, that's that's what we've come up with so far.
[01:16:45] Unknown:
So we clearly have a lot to say since we're over time. So I I can speak on behalf of these guys. I'm sure to say if you if you wanna learn more, feel free to grab any of us after this and and we can discuss more. And I would give these guys a round of applause for the work they've been doing.
[01:17:36] Unknown:
Yeah. He's a good man. Listed all the time.
[01:17:39] Unknown:
You know, before we dive into all that, I'd love to just do a quick introduction of all our guests here. Maybe, you know, say who you are and, like, what kind of experiences you have in lightning, but, like, more specifically in the commerce space itself. So, Elise.
[01:17:52] Unknown:
Great. So I'm the outlier on this panel as the non dev. I'm a VC investor that's focused purely on Bitcoin. And last year and this year, we've been focused a lot on lightning and how it can impact commerce in developed and emerging markets.
[01:18:09] Unknown:
Aleif, us developers love spending time with you, so I'm glad that you're with us. I'm a rock star dev. I contribute to BTC based server. Started the whole thing with Nicholas, and then I am VP of engineering of at Strike. Yay? Are there Strike people here? Okay. Yeah. Strike started from a small team that open source team that did Zap Wallet. I'm sure a lot of you are familiar with that. And then I was employee number 1 specifically for Strike, and, here I am today.
[01:18:50] Unknown:
So I'm Ben Arck. I'm a Bitcoin hobbyist tinkerer, and I tried to encourage a few years ago more of a maker scene, so we make our own nodes, but we should also be making our own points of sale hardware, hardware wallets, ATMs, vending machines, all these things which are going to run on Bitcoin and lightning payments. And there wasn't much of a scene there, so I wanted to try and build 1 and then make some projects which people could build, and then from that, I then developed I started Ellen Bits, which is a really nice sort of wallet account system you can put in your node. It's a bit like WordPress for your node. You can extend it in any direction which is relevant to you, so if your merchant has got extensions and so on. So, yeah, just a hobbyist tinkerer, who's, you know, been lucky enough to kind of break new ground with some of the cool lightning
[01:19:33] Unknown:
stuff we're able to do. Cool.
[01:19:37] Unknown:
I'm Andre Neves, CTO and cofounder at Zevity. We are a gaming fintech company, so we build tools for game developers and gamers to enable the powering of your game points, your game rewards, your game assets in Bitcoin, right, through Lightning. So I'm just honored to be in this panel with all these great gentlemen and
[01:19:56] Unknown:
ladies. So thanks, Tony, for for standing up. Yeah. Yeah. Yeah. Thank you, guys. My name is Tony Georgio. I'm a I'm a Lightning developer myself working at Impervious right now. So let's get started with some, like, groundbreaking news here. So, Jack Mahler's, yesterday announced, from Strike some huge integrations, that really, like, changed the game for even the United States, the ecommerce space, but also the physical commerce space as well. Rockstar, would you like to kinda, like, give us some perspective there and, like, you know, what was the announcement and, like, how how what, you know, what does it mean to you?
[01:20:31] Unknown:
To me, when I said here I am, it's like culmination of all the work that happened over past 2 years and what it is, like, 10 months for me. And, I'm very unfortunate that this panel is, like, after Jack's speech. Last year, it was easier. It was, like, my panel, the Jack's speech because it's so hard to follow after Jack. Right? You like the announcement? Yeah. Yeah. Yeah. So it's it's just, again, culmination of everything that we've been doing, for the last few years. And as Jack was so excited, yeah, with that buying coke over tour. Our yeah. We we couldn't name it like that, but it is all about that. It's about having that freedom to use the money that you want to use and spend it how you want to spend it.
So glad that that came out and I'm looking forward to some other announcements that are coming soon.
[01:21:39] Unknown:
Awesome. It feels like, lightning announcements are just left and right these days. I wanted to talk a little bit about, you know, Lightning as Commerce payments. You know, we really enter this era here where we haven't been able to do commerce in the way that, like, Lightning Network changes the game. We have, the near instant payments of Lightning. We have micropayments, Both, you know, the traditional credit card networks and even Bitcoin on chain layer itself aren't able to fully service, you know, some of the amazing use cases we can get with Lightning. I'm really curious about, from your guys' perspective, all the unique, you know, innovations happening in the Lightning space, just across the board. There's you we could have a whole panel just on that. But, you know, from your own experiences, like, what is really exciting that we're now able to see in in in just like the digital space itself that Lightning now enables?
Anyone could start off with that. So, I mean,
[01:22:34] Unknown:
that's the thing which attracts me to working on Lightning is that feeling of breaking new ground, and there's that kind of concept of scheomorphic design, like, we've got a new tool set now to do things with money we should not have been able to do, and then to try and imagine those things and and and and and and build the tools and and experiments, and it's quite hard, and that's why you need sort of real world use case and real world feedback from people using the technology. So most of the stuff I put was off the back of a, you know, a bar in Berlin, which accepted Bitcoin, and now you think you've got whole countries, which are accepting Bitcoin and like doing they have lightning payments. So you get all this great data coming in, which makes it a little bit easier to innovate, but you're dead right, and it's a it's kind of like a snowball of ideas, so something which I was I'm really excited about with Lightning is is just being able to split payments at point of sale. So, you know, you pay for something, and then within that piece of production, like a coffee shop, for example, everybody could just be paid instantly into their wallets, and that's something which is only possible by using, you know, these sort of lightning transactions, but you could scale it up to, like, larger production.
So you could have, like, you could buy your laptop and the payment could be split to different manufacturing distribution, and it could be split down again into those different departments. And then as well as, like, it could impact via tax. So, you know, if if there is a Bitcoin future, then tax collection will be hard and one more easy way to collect taxes, you know, our point of sale is through value added tax, and when that happens, perhaps the user could say, well, I want x amount to go here, I want x amount to go there, and it's instant tax at point of sale. So that that but imagining those kind of use cases for for for money is is very hard, and this is why I like Ellen Bits. Like, a lot of that concept of splitting payments, for us, just came from an extension where Crypto Graffiti did a DJ set, then we had a QR code on the screen, people could tip, and and then if they tipped enough, they would get a download link for the song, but then every time they tip, 90% would go to the music, producer and then 90 10% would go to the DJ himself, and it was just that one time when we experimented with split payments, we then experimented with it more, now we've got an extension specifically for split payments. So, yeah, it's it's you have all this kind of legacy, baggage from the ex of what you think you can do with money, and then, now we have this new type of money, this new theoretically, we've known that this thing would be possible, but we have been able to have tiny, tiny, tiny, little transactions, then thinking of new designs and new projects and new things you can build on top of it is very exciting, and a great place to be, you know, in the space. And that's why we saw this great innovation because obviously, you know, we're expanding it with the tool, which didn't previously exist for developers and, yeah, and builders.
[01:25:08] Unknown:
Yeah. I think one of the one of the beautiful things about Bitcoin is that it turned this new form of money, made it digital and fully programmable on Lightning, makes it so much more approachable. Right? So this is a very good example of how, you know, we're just scratching the surface of what it can do, what it what is able to be done with Lightning. I think an example is looking at the dot com in 2,001 and looking out, you know, right now we're streaming 8 k video games across the Internet. It doesn't matter where you are in the world and you have low latency, the people building the backbones of the Internet back in the day were not thinking of serving 8 k video games, right? They were thinking of maybe sending messages across. So I think we're just scratching the surface now with money, and money is such a societal, an important piece to society, and I think that's going to revolutionize much more than just money, it's going to revolutionize industries, it's going to revolutionize how society and citizens interact with each other. And I think Lightning is just that pivotal piece, and you're seeing that with all the adoptions and announcements, Stripe, Kraken, BitPay, Robinhood, right? So it's it's really that pivotal climax piece, and I think next 2 years is going to be tremendous growth for Lightning, and and we're just, you know, just happy to be here building on this technology, you know, with everyone.
[01:26:21] Unknown:
On the start up side, we're also seeing very early stage companies take a broader range of, experiments and projects, forward. And so, for example, we're seeing the integration of Lightning payments for brick and mortar, retail transactions like we saw with led by Ibex, Mercado, and El Salvador with the adoption of Bitcoin as legal tender. We're seeing the same sort of happen online. We are seeing experimentation now with browser extensions so that you can have your Lightning wallet sort of follow you around on the web. I think that we underestimate how broadly, payments exist in the world. Everything where we're transacting where there's some value, of course, payments is important. And through Lightning, we're able to now do that efficiently. So for instance, a portfolio company that we invested in Synch Chat, which I bet a lot of people in this room are familiar with, where, Bitcoin can just be your native financial chat, currency.
So it's been interesting to see opportunities emerge for entrepreneurs in the lightning space, recently.
[01:27:30] Unknown:
And it really is snowballing as well, isn't it? When you walk around and you meet some of the people who are building things and the product all the projects now which are now having lightning, I was saying to someone, like, I think a year ago or something, I was able to kind of keep abreast of most of the projects which were in Lightning were being built, you know, the free and open source stuff and and some of the companies as well. But now I just can't keep up. Like, there's there's so many great projects. That's right. So we're probably talking to a a few 100 founders
[01:27:53] Unknown:
a year. And, although sometimes I think Bitcoin gets maligned for being less dynamic or creative, we're seeing the exact opposite on the venture side. So the types of moonshots that people are taking are just much more broad, and ambitious. Maybe, I can also bring up that it's been nice to see the design space open up through changes made at Bitcoin core level. So earlier this week, we were we were just talking backstage about an announcement that came out before the conference, which was Lightning Labs' Taro announcement, which was a result of something that was enabled because Taproot was activated last year on Bitcoin Core. So Taro will ultimately allow you to, exchange stablecoins, for example, on Lightning Network, which I think will have I anticipate will have a great impact on commerce on Lightning.
[01:28:50] Unknown:
I think one of the really cool pieces about Lightning, and just piggybacking off of that, is that, there are so many companies and so many teams building so many different things. And unlike layer 1 Bitcoin, which is a consensus based mechanism, we all have to agree to the way the system works. With Lightning, it is it is different, right? It is not like that. So, Ben and I can have an agreement and we can exchange value on Lightning even though no one else in the network has the same agreement. And I think that is beautiful because it leads to a lot of innovations. You have things like, well, Swell, you have lnurl, you have lightning address, you have lnurl POS, and these are just things built on top of lightning.
So it's great for innovation, but it also creates for potential segmentation, right? We're not talking about certain companies pursuing this, certain companies pursuing that, and so it's just a very exciting space. It's very innovative and very fast paced, you know, strike ships all the time, 70 ships all the time. It's it's it's fascinating to see the speed at which technology is evolving. And I think, again, I'm just going to say it again, I think we're just scratching the surface. Just last, I believe it was 2 weeks ago, Zebedee released a product called Zebedee Streamer, which basically allows any person, any content creator from anywhere in the world, essentially, to put a QR code in their stream and have interactions with their audience members, right? So you're now breaking that 4th wall between your audience who used to be a passive participant of this engagement and is now using a tiny little bit of Lightning, transaction to interact with you, to send you a message, and so you you break that 4th wall. And this is something that is platform agnostic, right? We're just using Lightning, it doesn't matter if you're using on Twitch or YouTube or wherever it is you're streaming. This is just one of the products that allows, you know, people to interact, so you can get your audience in Japan, can help you in your guild, in your quest, or in your in your stream if you're in the United States or in your Brazil or in India. Right? So the beauty of Bitcoin being global enables for these types of innovations, which weren't possible before. You can't easily send a dollar to your friend in Japan. How does that actually work? Right? And with Bitcoin, you know, and with Lightning, it's instant.
So I think that's that's a very exciting
[01:30:58] Unknown:
What I like about,
[01:31:00] Unknown:
you know, people building more products and and, projects like with the, video streamer, so, with ln euro pay, so that you're using ln euro and with lnurl pay as part of the stand where you can attack attach a memo note. And for for most use cases, that's not really very useful, or people weren't using it early on. Whereas, because I but we got a similar sort of extension in LN Bits, And then having been able to pay a note and then on your pay and then write a little note. And then for the the the, you know, the the viewer of of YouTube stream, for example, being able to see that comment pop up in the video with a little animated GIF or something is very cool. And then that means so it kind of guides the the direction of, you know, what sort of stuff is what sort because I don't know, as a wallet standard, obviously, the wallets need to implement these things.
So it's almost like chicken and egg, like, without them implementing, you can't build Right. For those for that for those implementations, but then, you know, without you building something to show that there's a need for it, then they're not gonna implement it. So it's it's a really interesting kind of watching watching those protocols kind of evolve,
[01:32:07] Unknown:
specifically something like Aligneur because it's so ground up and built by developers. Because for me, the biggest thing is not not just about technology, but about companies growing. That's when you were saying there were new companies getting started, it'll ease you. Also, like, existing companies, when you look at Strike as a company growing I don't know. Where where are my Strike employees? There we go. So you see oh, over there over there. We're everywhere. But there is, like, Manuela, Frank, Casey, Joshua, Pablo. Like, all this exciting talent that's joining not from, you know, companies you never heard of, but these are people that are joining from either companies that are still not in the game, but will be like Google, or companies that are getting into the game like Robinhood.
So I'm really excited that Lightning as a protocol is facilitating all of that and I'm looking forward to see how things will develop.
[01:33:04] Unknown:
Yeah. Absolutely. So we touched on it a little bit on this panel already, but I wanna talk about, for a second a little bit about how the Lightning Network, this open monetary network, is able to facilitate payments all across the globe. You know, we talked about, you know, sending payments to someone in Japan, you know, micro payments at that level. You know, Andre, do you want to kind of, like, you know, get into that a little bit more? Now you have gaming communities probably all around the world. Right? How has, how has being able to stream, you know, micropayments, being able to, you know, have 2 users that don't know each other on complete side of the world. How has this impacted their lives? And and and, you know, down the panel, we can get in, like, El Salvador and other emerging markets are use using it. Yeah. I think for for us specifically at Zebedee, we actually have a very large,
[01:33:49] Unknown:
Latin American community of users, Brazil specifically. We recently announced an integration with BIPA, which is a Lightning based exchange in Brazil, and that in that integration, you actually can receive your SATs inside of Zebedee by playing games, by winning tournaments, and then you can, you know, one button click send to your Beeper account, which automatically FX converts into Brazilian reais, right? So we're talking about using Lightning as the rail in between and at the Edge nodes you can use FX conversions. So, what we're seeing in Brazil is that, Brazil is one of the most connected countries when it comes to people that have access to the Internet.
Everyone has smartphones, etcetera, and it's a huge gaming, you know, community as well. So folks are playing games powered by Zebedee, and they're earning Satoshis, and while these are primarily microtransactions, and we're talking a 100, 200, a 1000, a couple 1000 Satoshis, it's not actually micro. The impact is actually macro. What we're seeing is that people are accumulating these Satoshis, and whenever they're ready, whether they want to use the Satoshis themselves, the Bitcoin itself, or they want to transfer back to the Brazilian reais, they can do that, and the impact is is very measurable. We we have seen people pay their rents. We have people pay their grocery stores. We have people, you know, buy buy medicine for family members, and this is all enabled by, you know, the ability of having money that is global. We are an American company, American based company. We couldn't do that if you know, to to someone in Brazil because we can't easily send that value across to them. Right? And now in Bitcoin with Lightning, Lightning is is digital money, it's it's programmable money and it lives on the Internet. Right? So all of that is possible and the impact is very real. Brazil is just the first, you know, country that we're seeing that that big change is happening, for us in the gaming industry, but I think there's there's many, many more. I think, you know, nations in the African continent are are you know, emerging markets are exploding through the roof, adoption and, you know, financial inclusion and all of that. So I think it's I'm gonna repeat myself. We're just scratching the surface.
Lightning is going to essentially take over. It's going to be the story that we're going to be talking about for the next 5 to 10 years, and it's great to be here at the very beginning. Right? I think that's where we're headed.
[01:35:58] Unknown:
Yeah. Rockstar, do you maybe wanna, like, shine a little bit light on El Salvador and some of the, you know, some of the life changing impacts that, you know, people the citizens there are able to utilize from know, remittance payments to, you know, ecommerce or sorry, physical commerce themselves.
[01:36:17] Unknown:
Yeah. I mean, that whole story is, yeah, very personal for me because, yeah, it was on the inside, this whole thing was happening. But for me, the fact that, you know, one of us, a Bitcoiner like Jack, can go to El Salvador and practically change the change the trajectory of history of a country and get them to adopt that first. Bitcoin as a link legal tender bill is is just amazing. And, as Andre is saying, with scratching the surface, leave. Yeah. That's just 1st domino. And for us that hey. Yeah. For us that have been in midpoint for so long, it's just something that we have been expecting because state and money will be separated.
[01:37:06] Unknown:
Yeah.
[01:37:07] Unknown:
Yeah.
[01:37:10] Unknown:
I think
[01:37:12] Unknown:
faith and money will be separated, and, we are going to fix the money, fix the world. Because when you see, for example, what happened in Canada, I mean, it's just crazy that you have people honking, people donating for people to honk, and it's not even that people that are honking are getting their bank account shut down. It's people that send $20 to them. And so I understand politicians and they are trying to, you know, keep keep things running, keep fulfilling promises that got them elected, but I mean, come on. You know? At at certain point, you need to realize you are not going to make it and look to solutions, not just invent problems to stay in power. And I would even expand that beyond countries like it's even when you see what's happening with Bitcoin and so many people trying to control Bitcoin and narrative around Bitcoin.
What they need to hear and understand is that you know, Bitcoin doesn't need you, you need Bitcoin. So yeah. Right. Mister Wonderful, he is GBS. I mean, man, we don't need you. You know? We if if we need, we we have Peter Thiel. Like, thank you very much. So yeah. Thank you. And I look at math always and go with, you know, stay humble. So I'll, yeah, I'll stay up. I'll stand there.
[01:38:57] Unknown:
Awesome. I'd like to kinda get into, the little bit of the different roles that we have here on on this panel today, you know, we have, you know, we have custodians, like, servicing Lightning payments on behalf of users. We have open source tooling for self sovereign individuals to actually, you know, do Lightning payments on their own, both sending and receiving. And we have a VC here, Elise, you know, investing in some of the, you know, most groundbreaking, companies, you know, moving at lightning speed, and, like, a technological level that, like, we really don't see so much in in the real world. So I'd love to kind of just hear the the importance of, like, each of your roles that you have, in lightning here and and, you know, even maybe the dichotomy between, you know, custodians and and open source development. So like, Bin, do you wanna like kind of talk about like some of the open source tooling that, like, you have created on, with Alan Bits? Yeah. So,
[01:39:48] Unknown:
with Alan Bits, you can, you know, run it just for yourself, or you can run it for your friends or family, or you can run it for a business, or you can run it for the whole world if you want to and be custodian for other people's funds, then obviously you'll have to tackle the regulatory stuff and whatever else. So I I'm not I think within Bitcoin, you know, not your node, not your rules, like, you should run your own node. We need to make that as easy as possible, and we are making it as easy possible with all the great projects like Umbrella 1 and RaspiBlitz and and and then my nodes and all these sorts of things. But it's also okay to appreciate that some people will, outsource that security, to somebody who they quote unquote trust, And hopefully, that, you know, the amount of money which they would leave on that service would be minimal, and it could just be like a sort of scrub service or semi custodial bit relay Bitcoin service, where Bitcoin so say if you've got someone offering a custodial service and then they're receiving lightning payments, then to have it just loop out to on chain when the amount gets too big, then as a custodial service, maybe your security threat model is that you're just leaving, you know, a couple of 100 quid on this service.
And then it's like, okay, well maybe for what I'm using it for, then maybe I don't need to promote, oh, no, it's easier not to, and some people will do that. So we need to we need to be aware of them doing that, and then we need to build for them, but do it in such a way that we can encourage them to then run it themselves, so it's not hard to run themselves. So yeah, you have, like, you know, custodial and you have non custodial, and I think a lot of companies, like, you know, like Galloway, like Allen Bits, like, we're exploring stuff in the middle. You know, what's in the middle? Is it community banking? Is it sort of scrub services? Could we get, you know, all that liquidity which is sloshing around in people's lightning wallets? Could we pool it together, and then could those pools be used as a funding source for custodial service services? So, you know, in a protocol y way, it's, you know, the funds aren't being held by the service provider, and then there could be some potential yield for the people who allow allow their Lightning funds to be put into that pool. So I think there's some really interesting work on decentralizing custodianship and and and that murky area in the middle.
[01:41:58] Unknown:
So my I think that's really important because actually one of the most important pieces of Bitcoin and Lightning, is the optionality. Right? It's a permissionless system. You can choose how deep in the stack you go. So if you're, you know, a self sovereign individual and you want to own the entire stack and you want to be your own bank, you have that capability. You know, you can run a Bitcoin Core Node, you can run a Lightning Node, you can have channel you can do literally everything yourself. I think it's a big ask to assume that each and every person in the world will eventually do that. I think the optionality is really, really important, and you having hybrid models, having custodial models, having non custodial models is one of the big value propositions of Bitcoin and Lightning. You know, it's you serve your own needs, you get to serve your own needs. So, in a world where everything online and in real life can have a value attached to it, I think everyone will be involved in Bitcoin in one way or another, even if you're not running the software yourself. I think there are different use cases. You know, thinking from our side of the Zebedee side, if you're a giant games publisher, you likely don't want to run you know, your banking infrastructure yourself because of lots of regulatory burdens, because of infrastructure costs and etcetera, so you're going to outsource that to a bigger custodian who's focusing on that. But if you're a general user or you're a community bank with, you know, you and your family want to have a node at home and you want to run that and manage that yourselves, you can do that, right? So this is completely different to traditional finance. You can't just get a banking license as a person and and and sort of begin being a bank yourself. Bitcoin allows for that optionality, gives you that permission, permission listed in system, right, and then you get to choose. If you are a sovereign individual in Bitcoin, you get to choose how far you go, how deep you go, how technical you go. Lots of people run their email servers, lots of people don't run their email services and they choose to use Gmail. Right? Lots of people use accounts like Zebedee and Stripe, and lots of people will run their own Lightning nodes at home. So the optionality to me is a really important piece and it's how we're going to grow to 1,000,000 and billions of Lightning users instead of every single person having their own Node at home as an essential piece of it. Lightning is the future and we need to make it approachable and reachable to all types of users, whether you're technical or not. Right?
Yeah.
[01:44:15] Unknown:
Yeah. If you'll just add to that to someone that is working on both custodial solution, with, strike and then non custodial with BTC based server. I, often get messages of my BTC based server instance, there is this problem, that problem. So, yeah, it is about us creating the tools that facilitate the future. And to me, one of the most natural use cases for Lightning is that, big custodians, specifically exchanges. So big shout out to Jesse and Pierre for Kraken Yeah. Integrating Lightning Network. Yeah. It's running large. Yeah. Because for me, when we have big exchanges like that, it's it's such a natural use case because you don't even need to deposit in exchange and get exchange hacked, but rather, you will have your funds in channel.
And yeah, it can rebalance with your dirty fiat. So yeah, it's all about providing a range of solutions and then people can pick and choose.
[01:45:26] Unknown:
And that's the original, you know, with Lightning, that's what Satoshi's original vision, wasn't it? It was, Antigox and the unidirectional payment channel. So it's really nice to see the exchange is actually, you know, implementing it. Yeah. Direct channel with Mt. Gox. Yeah. They could do so you could do high speed, high frequency, likes to the the funds. Yeah.
[01:45:46] Unknown:
Yeah. At least on the VC side of things, like, how, like, how how do you see your role in the lightning space?
[01:45:51] Unknown:
So our role is to be a collaborator and resource provider, and I think of it as a service provider for the founders that we work with. And then if we're doing our job well, it helps accelerate what the founder would have done without us. That's the goal. I also, though, think of us as a way to organize capital to provide resources for growth, in the field, which is more challenging in Bitcoin and Lightning than in Altcoin spaces, for example. And so it's important for us to be able to talk to, you know, Bitcoin OGs that has stacked a lot of Bitcoin about why they should contribute back to the innovation ecosystem, but then also to folks that might not get Bitcoin yet about, why they should care.
And on that second group, one of the catalysts for people's curiosity spoke spoke around this earlier, is that because it's more flexible, it can meet people in communities where they're at. At. So for instance, what Zebedee is doing for gamers, is banking them, basically, in a way that makes sense for the population and can't be done with traditional financial tools. But it can also do that in emerging markets or for lower socioeconomic status populations where traditional finance can't serve them either. And so it's been, so that's our job, is to recognize the opportunities that the protocols present to create new utility and then find the founders that are going to be able to to execute and provide for these populations.
[01:47:35] Unknown:
Awesome. Amazing. So we got about 5 minutes left. I did want to kinda get into, you know, almost the flip side of things. What if, what if the Lightning Network is not, the future of commerce here? Like, what if what if, Lightning Network ends up being used in other use cases? Like, is Lightning good enough the way it is? Do we need to, like, like, what needs to progress to move it to the next to the next level? It is, from there. Like, do we need additional payment protocols to be able things like Bolt 12 to be able to service some of these use cases? Are there gonna be alternative, like, subnetworks within the Lightning space or even, like, additional, you know, layer 2 or layer 3 solutions on top of Bitcoin? So, you know, as kinda like final thoughts here, like, what do you guys see as as Lightning as the future of commerce? Is it the future of commerce? Yeah. I can. We had a really good talk in the backstage about it. Maybe
[01:48:28] Unknown:
me and Andre were talking about if you have additional hubs it's not direct channel success of payments is 77. Yeah, 77. And then it goes down from there. It's like but yeah, maybe maybe you can expand on that then, Al. Yeah.
[01:48:43] Unknown:
I think, you know, to me, one of the important pieces of of Lightning is interoperability, right, in Bitcoin. Layer 1, we all agree on everything. It's a consensus based layer. Layer 2, we have some agreements, but like we said before, different participants can have separate agreements and and still transact value. As we Stack the Layers, as we continue building the Bitcoin Stack, I think it's really important to maintain that interoperability, as with things with LNURL, Lightning address, and so forth, and I think if we reach a scenario where certain companies are doing this, other teams are doing that, some certain people are doing this, and they can't speak to each other, you lose a very vital piece of Bitcoin, which is the ability to send money to anyone, anywhere.
So we're working very hard for it to be the future, but there's also lots of business interests for companies, there's also incentives, there are different for certain teams. So it would be a shame if we were to split and Lightning becomes separate things to each team. And that's when, in my opinion, Lightning could come to not be the holy grail that we all want it to be. So I think it's it's a matter of communication, but it's a it's a very tough problem. Right? How do we engage as community members, as company companies to to agree on standards that are being built as as we're building them? Right? And Bitcoin and Lightning are are sort of standardized now, but what about the rest of the things that are being built on top of it?
So I I think that's one of the the big interesting points. Yeah. Yeah. It's
[01:50:11] Unknown:
when you look at the way that lightning specification developed which was really good with like bolt 1, bolt 2, like bolt all the way to bolt 11 and then from there, we've expanded. And now we are at this point where will we sit down and talk about specifications, improve them, or, like, what will be the path forward? Because for me, you know, maybe maybe payments is not the future of lightning. Maybe tokens are. You know? I offer that thought to you. What I am really excited about though is alternative layers too. So CoinPool as a proposal has came out.
And, I see that in future, there will be a lot of development there because there are such such natural use cases for that. As someone working on BTC pay server, it's like, if you just overpay your merchant now you're masking the amount that you pay to merchant and only merchant knows it, can blank it out. And whatever you overpay can now become a part of the pool. So sort of like what samurai is doing. But let's see. Yeah. Let's see. And, invitation. If there are any more NIMs like me, shadowy supercoders, come to b t c pace server matter most, then let's talk about coin.
[01:51:33] Unknown:
So a lot of what I think can help advance Lightning for payments and make Lightning payments more reliable, including in when there's multiple hops in the payment is being built now. So Lightning is still early. There's an opportunity for, that many companies have described, for instance, voltage recently, I think, at this conference. There's an opportunity to be more, efficient in how you manage your nodes and channels, and businesses have the same opportunity. And so I think it's one of the strengths about the Bitcoin community is that we're really, self evaluative. So we're hard we're hard on ourselves. We critique ourselves. And I think that makes us much stronger, but we also have to remember that it's just very early. And so some of the picks and shovels that need to be built for lightning to be the future of commerce are being built today. We're trying to fund them.
One of the things that makes me most bullish, though, about Lightning for the future of commerce is to see the sort of feedback loop that companies like Zebedee or Strike, Ibex Mercado, Lightning Labs have been using in terms of the adoption and infrastructure cycle. And so, for instance, we saw in El Salvador, a real, like, love and appreciation for lightning the protocol. And then we saw perhaps some difficulty or challenge, for emerging markets where households might have, you know, a a one ratio of how much they make and how much they need to spend each month, it's harder to tolerate Bitcoin's volatility, at least now before we're in a a you know, before everything's denominated in Bitcoin. And so as part of that feedback loop, we see companies thinking about how to offer the protocol without exposing forcing exposure to Bitcoin's volatility. And so those sorts of quick iterative, loops based on feedback from adoption will, I I think, position Lightning to be in a really good place to dominate commerce in the future.
[01:53:32] Unknown:
Yeah. I mean, I I think that, sorry. I think that, Lightning any money, medium and exchange money, which we're gonna be using in the future, will be built using Lightning. Currently, we're just at the stage where it's, you know, messy and there's all this, you know, it's the free and open source way, isn't it? You're making the sausage in public, and everyone can see all the ingredients which go into it, and it's messy. It's not like a closed source system. So it seems very chaotic, and it seems like things are breaking, aren't working, and then you have payment failures. But, you know, the reason people have payment failures is because they haven't balanced their channels properly, and now there's always great services which are exploring how to do that in a more automated way and, you know, solutions for fixing that.
So, yeah, like and this is what I was saying before about the, you know, having real world use gives you all that great feedback, like in El Salvador. The thing which is obvious for anyone who went there was the payment rails, fantastic. Medium of exchange sucks because you got the volatility. It's the volatility of Bitcoin, and then we know one day that Bitcoin will have enough liquidity, so it won't be volatile, but then how will it get there unless people are using it as a stable medium of exchange? So the idea of these stable coins, which can bring in Bitcoin liquidity, which we can use temporarily and so we get to that, you know, mass where, the Bitcoin price just can't move because it's so incredibly liquid.
[01:54:49] Unknown:
I think that's the inevitable kind of next step for Bitcoin. It's very exciting. Yeah. Yeah. Well, I wanna give, everyone a round of applause for these amazing panelists.
[01:54:58] Unknown:
Thank you guys so much.
[01:55:51] Unknown:
What's up?
[01:55:53] Unknown:
What's up? Is my mic on? Hello? Hello. Hello? Hello? Can you hear me? Testing 12. Testing 12. Here we go. Line up over here. Oh, I can see us. Hello? Testing 12? Test testing 1. Yeah. What's up? Can you guys hear me okay? Cool. So this is the mempools panel. My name is Wiz. I'm the co founder of the mempool open source project and, operator of the mempool.space block explorer website. And, this is the mempool panel where we're gonna bore you guys to death. We'll blab on for hours about the mempool. These are some really cool shadowy supercoder, cypherpunk people. We're very fortunate to have here today. Why don't you introduce yourself?
[01:56:38] Unknown:
Yeah. Thanks. My name is Serhii Koeppler. I'm the, founder and CEO of Petri Phil. Yeah. Many of you probably know we do we let you buy anything you want with.
[01:56:51] Unknown:
Cool. I think I'm okay. My name is Gloria. I work on Bitcoin Core, mostly in the mempool codebase and surrounding areas such as mempool validation, transaction relay, and mining. When I say as a preface. When I say the mempool, people often on Twitter say I don't know what I'm talking about. I mean the mempool as in the code base area, just just to say And I'm founded by Brink, which is a nonprofit dedicated to Bitcoin research and development.
[01:57:24] Unknown:
Hi. I'm Mersh. When I talk about the mempool, I mean, the transactions that are unconfirmed and are shared between all the different nodes that run and have their own unique perspective on the mempool which just overlaps largely. So the mempool is an abstract concept that just treats this overlap. And I I used to stare a lot more at the mempool when I was at BIPCO as a back end coins team member, because we had so many customers that would get stuck transactions or just needed advice when and how they should send their transactions. Now I'm at Chaincode Labs and while I'm still interested in mempool and, yeah, I sometimes do the mempool weather report.
[01:58:13] Unknown:
Yeah. We love those mempool, weather reports from merch. You haven't had you haven't done any while though. Maybe we maybe if we ask real nice, they'll do one for us today. But let's start with the the basics. Sergei, do you do you wanna like just break it down for everyone who's not already familiar? What is a mempool? Why do Bitcoin nodes have them? How do they work? Why are we so interested in the mempools?
[01:58:40] Unknown:
There's a lot there. Yeah. I mean, the basic thing is that that, you know, when you send the Bitcoin transaction, it doesn't go right into a block. Right? Where does it go? It goes into the mempool. So the mempool is, is the the pool of transactions that are, waiting to be performed into a block. A Bitcoin node will receive a transaction. We will check if it's valid, put it in the mempool, and we will have written this stuff, and they'll pass it around to all the other Bitcoin, nodes that it knows of. So there's, each has its own perspective, but there's also some level of shared knowledge of what are the transactions that are waiting to be confirmed.
And and so, I mean, from my perspective as CEO technical CEO of a company that makes many Bitcoin transactions and have customers making Bitcoin transactions to us. Especially back in 2017, when the transaction fees were really high, it became, I mean, really financially important because we were spending 1,000 and tens of 1,000 even on dollars on transaction fees almost on a daily basis. And so it created a strong incentive to, like, keep an eye, right, because the most important thing is that Demandpool is sorted by the fee rates, right? So that transaction that has a higher transaction fee will be sorted higher, and it's going to be prioritized first by the miners, which are then working based on you know, financial incentives.
Right? But then it becomes important to, you know, to set a fee that is just high enough, but not too high because then you're wasting money, right, but not too low because then the transaction is not going to go through maybe ever or maybe in a long time, right? And so fine tuning that is super important. And I mean, this is something where that's gotten infinitely better in the past years, But that's kind of how my interest got sparked into it. And I still do as a habit, even though the mempool isn't as crazy as it used to be. I I still watch it. I I show I was showing the people that I have it on my phone, yeah, you know, in my, in my Safari.
Yeah, just to keep an eye on, like because you can see, you know, you can see a lot of stuff in the main poll of, like, what is going on? Who's making the transactions?
[02:01:02] Unknown:
What are they doing? Where are they going? You know? You you learn a lot of stuff. Yeah. If you're watching it, I don't think that Yeah. That that's a good way to put it. It's kinda like the transaction queue of the Bitcoin network where whenever you use Bitcoin, it just goes into there first, then it's this very interesting, area to monitor and and visualize. Right? But one thing you mentioned that was really interesting is, how the high the transactions fees got last year. Actually, this is a good question for Merck. And maybe I think we have a slide for this, the history of the last, last year.
Could you guys show that first slide? It's, it's basically the, the BEM pool chart of the last 3 years.
[02:01:45] Unknown:
Mersh, do you wanna give us your nice weather report? What's what's going on in this chart? Well, more of an historical weather overview. So in in the last year, we had the interesting situation that from mid December, 15th December until 2nd June, the MEM pool never fully cleared. So there was always at least one block worth of transactions waiting to be confirmed. And, for some time of that, even the default mempool limit overflowed. I think we are gonna touch on that a little later maybe. And, so the colors that you see here, hopefully yes. So the the lowest bar is, you see color bands here. Right? And the color bands are fee rates, and the size of the bands indicate how much data is waiting to be included in blocks.
So at the bottom, you have this pinkish tone there. That's, just over default min relay fee, which is 1 satoshi per v byte of transaction data. And then it I think yellow goes up to, like, 30, 40, or even
[02:02:55] Unknown:
100.
[02:02:55] Unknown:
Yeah. Yeah. A 100. So, generally, the the mempool is just a visualize or this this chart we're looking here at here is a visualization of the waiting queue of payment promises to be turned into payments by being included in blocks.
[02:03:15] Unknown:
Yeah. It was, it was pretty crazy last year. I think it was, around December of, I guess, 2020 when we saw the fees start to rise and the mempool was just congested all the time until about the Miami conference last year. Right, was right around when it when it and that during that whole time, it was just totally congested. And you had sometimes you pay, like, as much as, like, 300 sats per vbyte just to get into the next block, like, 20 US dollars just to do an ordinary Bitcoin transaction. It was really a unique time in in Bitcoin's history, I think. We hadn't really seen that kind of sustained fee market really before.
[02:03:55] Unknown:
And and just to point out sorry. There's a common expression. There is no the mempool. And likewise, this chart that you are seeing is not a canonical view of, like, the mempool of the Bitcoin network. Right? This is just whizzes node, which happens to have a very large maximum pool size. But, I don't know if you guys can still see oh, if you could bring up the chart again. Sorry. I think it goes up to like 400 it goes up to like 200,000,000 virtual bytes. But actually, the default mempool size is 300 megabytes, and a lot of that is taken up by metadata, 75%, in fact. So most mempools, like ordinary non wiz nodes and not mining nodes on the network are only keeping up to, like, 75, 1,000,000 virtual bytes worth of transactions. So they actually wouldn't even see the peak of those mountains.
But, of course, actually, they're keeping the top,
[02:04:51] Unknown:
section of the fee rate, not the bottom. Yeah. And I think we have a slide of what that looks like. Can you go to the next one, to see what a normal nodes mempool looked like last year? Yeah. This is it. Corey, you wanna walk us through what we're looking at here? Yeah. So
[02:05:05] Unknown:
in April or so, right, they're purging all of the so okay. Sergei mentioned that we sort the mempool in transactions based on their fee rate. Right? And I guess the first thing I probably wanna mention is individual fee rate is not what matters. Ancestor package fee rate is what matters. So in in Bitcoin, we have a unique transaction structure where it's made of inputs and outputs. Right? We all know what the UTXO based structure is. So you can have you can have transactions dependent upon each other inside of the mempool. So you can be spending trans you can be spending a UTXO that doesn't exist in the blockchain, but it exists in a transaction that's still in the mempool. That makes sense. Right? Hopefully, everybody
[02:05:54] Unknown:
understands that. But but how did the Bitcoin network change during this time of, consistently high fee rate environment and and transactions getting purged? Like, what was the experience like for a normal
[02:06:06] Unknown:
Bitcoin user at this time? Yeah. So I think if you had a 1 stop per v byte transaction that you that you broadcast around April or so, and as the mempool filled up, your transaction was probably purged by most of the mempools, most of the nodes' MEM pools. Right. Because there's this common,
[02:06:25] Unknown:
belief that, you can just always send a transaction at 1 SAP per v byte, fee rate and eventually it'll get confirmed. But, this is a common misconception, right? I mean if if the mempool is constantly full, your low fee transactions will get purged out of the mempool.
[02:06:44] Unknown:
And, There are other mempools, that, have lots of True. And they do rebroadcast. Like, when it goes down, you can see, in in if you bring up the chart again, it's like Follow at us. Look at the chart. Down from the peak. You can see, like, over there, it's like some of the transactions are coming back, actually. Like, in the on the right half. You can see that the pink ones are, coming back up. Right? Right. So the red color may or may not be. The red color is, like, 1 sat per vbyte,
[02:07:13] Unknown:
and that light blue color is, like, maybe, what, 20 ish? So after all the higher fee rate transactions around 20, SATs per vbyte got confirmed, then you can see the the low fees of 1 SAT per vbyte started to get rebroadcasted in network. And So how did how did Bitrefill handle that, during that time? Like, don't you guys allow people to buy gift cards
[02:07:41] Unknown:
with with, like, 0 Conf transactions in the mempool? Like, how did you guys, handle this? Well, this is this is exactly why we have to do that. Right? Because otherwise, the customer might be stuck forever and ever and have a horrible experience and support tickets and, confused refunds and exchange rate. There's 2017, when this was even worse, crazy than it was on the chart here, yeah, it was a kind of formative time for us. We were really, like, struggling. At the time, we were mainly doing low value phone refill transactions, you know, sort of, like, the typical, like, $5, $10 transactions. And I mean, we've done a lot of things. You know? We developed, like, that we ourselves recommend a fee rate for the customer. Right? So we, like, our web server monitors this or our version of this, and based on that, computes a recommendation that we give to the customer. And these days, most wallets do that automatically, but we also sort of, like,
[02:08:46] Unknown:
make sure. But isn't that a huge risk for your business? I mean, if I go on your bidrefill site and buy an Amazon gift card for, like, $1,000 and send you a low fee
[02:08:57] Unknown:
transaction That's RBF able.
[02:09:00] Unknown:
Well, if if it's if it's RBF able, then we're not going to do the 0Conf. I mean, you're gonna have a bad user experience. Yeah. But but if you do that, then presumably, you're you're savvy enough to to be able to fix the bad user experience yourself. But, I mean, the risk factor I mean, people think that Bitcoin transactions are, when they're unconfirmed, are are trivially reversible, And and that's not true, at least not today.
[02:09:28] Unknown:
You know, you need to collude with miners. Is that is would you guys agree with that statement?
[02:09:33] Unknown:
I I think it has been shown that if you're willing to put in the effort you can very successfully double spend transactions even after they've been broadcast, but you do have to really put in some effort right now.
[02:09:47] Unknown:
We don't accept just any transaction. Right? We we there there's there's a bit of magic going on where we're checking that and make sure. Right? So, I mean, the the low hanging fruit stuff that you have in mind, I mean, you know, doesn't the goal isn't to double spend it. The goal is just to trick us, right, into believing that we got the money where we didn't. Right. Right. That's the trick. And I mean, we've been doing this for 7 years now. I think it has happened in 7 years, 1 or 2 times, and we do, like, you know, more than a 100,000 transactions every month. Right. You know? So, like and compare that to to credit cards where you, like, standard fraud rate is, like, 5%, and and then, you know, it's, like, a cost of doing business. So and here it's, like, twice ever, and, like, it was because of bugs that we fixed.
[02:10:35] Unknown:
I think it's still important to to distinguish, though. It's a little bit of a gentleman's agreement not to do it, and there's no tools to do it easily. There's a very few people that would have the knowledge and maybe connections to to reliably double spend. And so, yeah, I I agree that from a business perspective and planning and and, like, risk factors, you you can, discard that risk for the most part. But, fundamentally, from how the mempool works, there there are some policies that help with this, but it's not actually while a transaction is unconfirmed, it is unreliable. And it just so happens that the policies and the the behavior of of our society, our Bitcoin society, tends to to confirm
[02:11:28] Unknown:
with with our needs in regard to to Well, no. There's thieves and hackers and crooks that use Bitcoin as well. So, you know, it's not just the the nice people at the Bitcoin conference.
[02:11:37] Unknown:
Yeah. Fair. Yeah. Well, also, you you have customer accounts. Right? It's not that people are coming in No. No. Not customer. Well, we do, but that's not Okay. Related to that. Alright. Yeah. I'd love to continue talking about mempool attacks because the first time we met,
[02:11:50] Unknown:
for me I mean, we all know that transaction relay in a distributed system is, like, notoriously unreliable. And there's I I think I know more than anyone that there's tons of attacks and it's a dangerous place. And so when I first met you and you said you accept 0Conf transactions, we had a very heated debate about whether or not that's safe. And I I think, you you did manage to convince me that for you at least, it's it's it's difficult to convince the logic on top of your Bitcoin operation
[02:12:28] Unknown:
that you are going to be double Yeah. It sounds like if you're gonna be sending a $1,000,000 to someone, you might wanna wait for 6 or 12 confirmations on the Bitcoin blockchain. But for your particular threat model where you're selling gift cards of relatively small dom denominations, you know, and mitigating the double spend risks. Like you said, no RBF. They have to use a reasonably high fee rate, etcetera, etcetera. It sounds like you've figured out how to
[02:12:58] Unknown:
manage this risk for your And I mean, let's be very, very, very clear here. I in no way say that you should rely on unconfirmed transactions. Yeah. Don't do that. It's advanced level kung fu. You need to have people that do it and spend hours figuring it out, monitoring it, evaluating, improving it, and so on. Something that you can do if you're a company and you have people working on this full time. It's not something for the common man, right? But there's also I mean, it depends, if you're like, if your buddy is paying you back $10 for lunch, you don't have to sit there.
You can set it to the low fee transaction. And in fact, for, I think, quite a few I mean, maybe we can talk about the trustless aspect because I think it's very interesting about how Bitcoin is all about the trustless. But if you actually look at most actual Bitcoin transactions, there's always a very high degree of trust between the parties, right, in the sense of, like, you know, hey. We pay someone's salary in Bitcoin. Right? Okay. We're not gonna double spend our employee because then it's not gonna go to work next week. Week. Also, it's unethical, and it's, like, not normal human behavior. Right? So for for, like, for a lot of transactions, there is a mutual trust. Right? And in that situation, you can set the mempool fee to 1 set per byte, and it's going to confirm eventually. In worst case, if it happens that suddenly there's a big spike like that, well, then you'll figure it out. You know? It's gonna be a little bit of a hassle. Yeah. I think that's the big takeaway is that the fee rate you use or
[02:14:27] Unknown:
whether you accept the transaction on 0 comp or 6 comps, it all really depends on your individual threat model and use case and amount of the transact it's it really depends. And so for some people, they can always send 1 SAP per vbyte. Even if it takes a year to get confirmed, they'll wait because they just might be sending it between 2 of their same wallets, and they know they're not going to double spend their own transaction. But, if I wanna say, hey. Let's let's buy a $1,000,000 worth of gift cards, I'm pretty sure you won't accept the zero comp for that. Right? But what about, layer 2 networks?
[02:15:04] Unknown:
Oh, yeah. Exactly. I wanted to point out that all of this is assuming that transaction propagation is based on this perfectly fair the transaction,
[02:15:15] Unknown:
the more the faster it's going to get mined. And that's not quite true. Right. So how does that apply to, like, lightning, for example? If I have a lightning node and I have to force close a channel,
[02:15:26] Unknown:
how do the fees work with that? Yeah. Okay. So this is something I spend a lot of my time thinking about because in all layer 2 contracts, you have a particular set of conditions that makes fees extremely important and dangerous. So one thing is when you're doing a lightning transaction, right, you and your counterparty are negotiating the fee rate well before you're ever going to broadcast it because the whole point is you're going to exchange these transactions and payments and only settle on chain if you really need to or when both of you decide to close the channel. Right? So what really goes wrong is when you have a unilateral close, as in your counterparties trying to cheat you, your counterparties went offline, whatever it is. Something went wrong. So now you need to broadcast your transaction.
And that might be hours, days, weeks after you decided what the fee rate on that transaction is going to be. And if your counterpart is trying to cheat you, there's no way you're gonna sign an RBF with them because they're like, I'm trying to steal your money. Why would I give you another signature? And so that combination makes it quite dangerous. So for example, if we go back to the second slide where the fee rate the the minimum fee rate of the mempool went from, like, 1 sat per vbyte to, like, 20 sat per vbyte. Let's say you open a lightning channel and, you know, you have some HTLCs going, and you negotiated a fee rate of 10 or even 15 sats per vBuy on your commitment transaction.
But then something goes wrong and you need to broadcast. Well, the commitment transaction will straight up not even make it into anyone's mempool. Maybe it will make it into Wiz's mempool because his is still the floor is still one Zap per vite. But for the most part, it's just not gonna work. And then you say, oh, Gloria, what about CPFB? Right? Commitment transactions have anchor outputs, so either counterparty in the lining channel should be able to attach a very high fee rate child to their commitment transaction. And news flash, the first transaction will not make it in and we're actually only validating transactions individually.
So we'll reject the first one. We'll look at the high fee child, and we'll say, well, these inputs are not available because they belong to a transaction we rejected. And so oops. Sorry. Neither of them are getting in. So it sounds like lightning has a pretty big security hole right now based on what you just said. Exactly. This is, this is why I'm excited to be here today to tell you everything's broken and we need to fix it. No. But I I think this particular issue again, we have not seen a fee rate market like that since April of last year. And I'm not saying that there is a reliable attack that, you know, attackers can always execute.
But if you think about it as, you know, 100 of 1,000,000,000 of dollars of capital is locked into lightning contracts and other l two contracts, and, you know, the fee rate market or the, you know, usage of the mempool becomes less predictable. We're not able to say, oh, in one week's time or in one month's time, we know that there's gonna be room in the mempool for a 10 sat per vBuy transaction. These attacks become more and more critical. And again, this is on a very long time horizon. Right? So as as protocol developers, we're thinking about something like this, where it's like, okay, when you're building an l 2, hopefully there is a seamless interface between l 2 and l 1.
And I think mempool is where that security assumption really breaks down. Because to to put it simply, lightning and all other l two protocols have a security assumption that you will always be able to mitigate counterparty risk by by broadcasting something on chain to, you know, revoke their funds or to, know, get your justice transaction in. And that assumption is not always true. It's not always false. Okay? Not to scare everyone.
[02:19:34] Unknown:
But I think this is going to become more and more dangerous, and we need to we need to fix it. But also on the scaring part, like, I mean, normal lightning wallet when it opens a channel, it sets that fee pretty high. Yes. So it sets it to a level such that it's relatively unthinkable, even if 2017 were to happen again, that it wouldn't, even make it into people's mentals. It's it's definite I mean, you you can imagine it happening, but it's, like, it's it's unlikely. You know? Yeah. So essentially all the,
[02:20:06] Unknown:
unilateral closes overpay heavily because they cannot so, maybe to pick up your point from earlier. The only thing that has, propagation guarantees in Bitcoin is blocks. We guarantee that we will deliver blocks to other nodes so that everybody can catch up to the best chain tip. Transactions do not have propagation guarantees. We forward them at best effort. Generally, it means that all transactions get to all other nodes in a minute or so. And once they're in a block, of course, as part of the block, they do get propagated. But before that, the unconfirmed transaction do not have guarantees.
But essentially, the L twos rely on the assumption that there are guarantees for transaction propagation.
[02:20:51] Unknown:
So that that's where the the problem comes. And Sergei, I think you run a pretty large, lightning node for your business. Can you tell us any stories? Has Bitrefill ever seen anyone trying to, steal funds out of a lightning channel during that time? I guess it was April of last year. Did you see any, shenanigans?
[02:21:11] Unknown:
Probably not. No. We we we've we've had shenanigans,
[02:21:14] Unknown:
but they're like someone made a mistake and accidentally, you know, their wallets started doing stuff. And so we we've, our things to slap them and and so on. And then and then the person reached out and say, hey. I'm I'm I fucked up. You know, you gotta help me out, and we help out. But I think it's also, like, important to to keep in mind, again, like like we talked about that, like, a financial transaction has a level of trust. Right? So for example, at Bitrefill, like, our biggest channels are going to be, with with other companies. Right? True. So we'll have a big channel or multiple channels with Stripe or Bitfinex, BlueWallet, Asank, and so on. Right?
And so it's not like, you know I mean, Bitcoin is built for, like, the wild west, you know, everyone for themselves. But they can't. In in reality, most of it isn't. Right? I mean, just because, imaginably, we could, with a very sophisticated attack like this, you know, rob our good friends at a strike of money, doesn't mean that we do, you know, we have business coming in decency and so on. So it depends. And Lightning Channels have a certain trust factor in them by default, in that you kind of rely on the person, like, keeping their node up and running and not doing anything stupid and so on, which is like a weak trust. Right? But there is a little bit of a type of trust. You don't trust them with your money, but you trust them to not mess things up.
[02:22:42] Unknown:
I think we actually see this in many layer 2 networks or or maybe more broadly technologies built on top of Bitcoin where there's not only the anarchist, you know, trust of the base layer blockchain. For example, if I had a channel open with you and for some reason my node got messed up and you've had to, like, force close the channel and you got those funds, we have some kind of reputation or relationship together. I would say, hey, can you, you know, let's settle up properly. I think this is quite common, like you said, in the b to b space where Bitcoin banks essentially have very large channels between each other or Bitcoin payment processors or merchants selling gift cards, etcetera.
And, I I think this is this is one part of the, maybe to to mitigate the risk in a in a different way from from what you mentioned earlier. Okay. Sure. Lightning has some security holes or threat models, maybe need to be adjusted for when the mem mempool gets full all the time. But one of these mitigations is actually the social maybe capital part of it.
[02:23:46] Unknown:
I mean, how do Yeah. Sure. But, like, just maybe to play doubles advocate or to provide a perspective of someone who is trying to design our policy rules and our mempool for the the node runners that are using a Raspberry Pi. You know, the people in countries where this is the most free option for them to transact and their government is actively trying to censor or sorry. You know, someone is trying to censor or freeze their ability to use money for whatever it is that they need, that may or may not be politically, accepted there. Right? Like, we want the default option to be, as minimal as possible, as private as possible, as censorship resistant as possible. So, of course, there are many, scenarios where there is a social aspect or there is a legal framework with which people can use to, externally to the Bitcoin and lightning assumptions to, you know, figure out how they're going to transact.
I think the most private, you know, censorship position, blah, blah, option should be the default.
[02:25:04] Unknown:
I strongly agree. I mean Yeah. With everything that you say and with everything that you do is super important. I mean, we're building Bitcoin to survive in wartime. Right? I just sort of added in there because Yeah. Yeah. Maybe maybe people get the impression that Right. Shit shit, the fees goes up. All all of my money is gonna be stolen from lightning. Right. That's not necessarily the case. You know? I mean But we're talking about a sort of a risk, that is theoretical, highly unlikely, requires a sophisticated attacker in a special set of circumstances. We need to fix that risk. Right? And that's what you're doing. Yes. And and the great people at lightning and so on. Yeah. But, you know, we it's it's important to know
[02:25:45] Unknown:
Yeah. I like that we have balance. How exposed you are. Yeah. Balanced voices on on this account. I want to jump in here now too. So, I mean, it's easy to build a trusted relationship on a default of no trust necessary. Right? You can sort of upgrade your relationship with somebody else by adding a trusted relationship and then you can do more things than with the default. But, yeah, it is important that it works for for well, Bitcoin is the money of enemies. Right? Taj said that.
[02:26:15] Unknown:
So do you recommend someone to open a would you recommend someone to open a lightning channel with their enemy?
[02:26:20] Unknown:
No. I don't think that that you you do open yourself up to a little bit of abuse. If you have a lightning channel with someone, they can make it hard for you to get your money back. They can brief you for the fees for opening the channels and things like that. But, generally so we have the the base layer where you don't have to need a lot of trust. And then, of course, you can build business relationships on that, and you can do more with that. It's sort of like we have a very simple stupid base layer in Bitcoin, and then we build the complex things at the edges and on top because it's easier to go that direction than vice versa. Going from a trusted trust necessary to an untrusted, would would you want to open a bank account with somebody that you know is gonna try to steal money from you?
Nobody suggested that here. No. No. No. I'm I'm just illustrating.
[02:27:12] Unknown:
Yeah. And, obviously, hopefully, nobody gets the impression that I'm criticizing lightning or thinking that they're building too fast. But I think in Bitcoin, we have more of a philosophy of building bottom up. So, you know, we have our base layer, no trust required as security model is as difficult as possible. And then we're slowly, you know, we're slowly building up to a scalable payment system that can handle the, the thousands of transactions per second that, honestly, we cannot fit into a block right now. Right? So we cannot afford to not build lightning or, you know, some scaling solution. But the way that I think we do things, not what I like about Bitcoin development is we build bottom up, and we do we put security first.
I think I think that's the way we should think about things and what I really like.
[02:28:07] Unknown:
So Yeah. I think we we covered a lot of the very interesting past of the mempool historical data trends and now we just kind of touched on the present state of the mempool and how it affects various threat models for various use cases, but what about the future? Mert, you usually give us, like, a weather report of what's going on in the mempool, like, how about a prediction? What's the future weather report for the mempool? What do you think is gonna happen? How is the mempool gonna change over time?
[02:28:36] Unknown:
That's very interesting and I've been thinking about that. But, I I mean, I I don't know. But so, from the stats that I'm seeing, I think that, the number of payments has been growing pretty steadily. The amount of money that is being sent has been growing pretty steadily. And what led to this congestion in the last year was that there, were just more and more transaction happening transactions. And, eventually, the block space was completely getting used. And the block space supply is pretty inelastic. While you're slightly below it, it'll clear every night or at least every weekend, and, the fees will will calm down again.
As soon as you overshoot a little bit and the number of transactions that get submitted to the network exceed the available block space, it'll just continue growing. Right? Because there's not enough new block space to to clear it out. And so we had a bit of a demand shock, after the market. 1st, we had a supply shock and then we had a demand shock. 1st, China kicked out their miners and, the hash rate went down by 47%, I think, at the peak. And, then just around the same time, Blockchain dotcom, who is responsible for about 30% of all transactions, finally updated from paid to public key hash, addresses to paid to witness public key hash. So the the inputs went from 148 bytes to 68 vBytes on each input. So they they were less than half the size. And suddenly this being slightly over the blocks based demand went to, oh, we we're like at 90 ish percent of the block space being used and fees dropped through the floor. And then the the hash rate, regenerated maybe even faster than some people expected. Some people were, like, it will take a year for all these companies to resettle and
[02:30:37] Unknown:
now those they were heavily incentivized to get those miners Oh, yeah. As soon as possible. So blocks were coming faster and transactions were smaller. At least, you know, blocking.com's,
[02:30:48] Unknown:
So so in a way, I think we'll we'll see a couple more, demand shocks. For example, with pay to tap route, It took now almost 5 years, but we're at 83% Segway transactions now. And, with Taproot, I assume a similar pattern. It will take a few years for use cases to come up. But then especially for multisig, multisig will be a lot cheaper to do with key path spends on pay to taproot. And, keypad spend in pay to tap route is only 58 VBIZ. Mhmm. Whereas, for example, a 2 or 3 multisig, even with native segwit right now, is a 105. So, or or older formats are a 140 or 297 for legacy even. So the the demand from multisig transactions will go down a bunch, and then, Lightning is actually maturing maybe a little quicker than than, so for example, Rusty said building lightning will be a 20 year effort. And, now people are reporting that they're they're routing thousands of transactions only for their own node that they're administering from home. So I think that the smaller payments will be pushed out to the payment layer to Lightning.
The, multi sec transactions will move to these more efficient formats. So for the middle term, probably block space will remain relatively abundant. But we will, if payments continue to grow and I mean, conferences certainly seem to grow, then we will always have some demand. And what last year showed, I think, is that that transacting on Bitcoin is valuable enough for a lot of people that they were willing to pay significant fees. And we have at least 2 more havings or so until the the subsidy is, gonna start to be really small.
[02:32:40] Unknown:
It sounds like a typical market free market economy where you have, limited supply and or I guess maybe a variable supply and a variable demand. And if the demand ever exceeds the supply, then, sure, the prices go up. This is just basic economics, but will we ever see a time where the demand constantly exceeds the supply and the mempool is just constantly full and transactions are getting priced out essentially. Well, one thing I want to add,
[02:33:08] Unknown:
sorry to steal a bit, is demand is not just comprised of how many people are using Bitcoin to send money. Right? And and this is this goes further than just, like, oh, some of it's happening on lightning, which we don't see on chain. Or a lot of it is happening on lightning, actually. And, you know, as you alluded to, there's plenty of ways that wallet developers can save users money simply by making smaller transactions. There are so many advancements, at least that I know that exist in the Bitcoin Core Wallet and can be used to save users money.
And in the enterprise world as well to batch payments or fee bump in a more smart way, shout out to CardCoins for doing batched RBF payments, that save users money. So, like, I don't think block space or, like, demand for block space necessarily shows you how many people are transacting with Bitcoin. That that's my main point. Because I think when people see empty blocks or when when they see, like, an empty mempool, they're like, oh, nobody's using Bitcoin, and that's just not true.
[02:34:18] Unknown:
Right. But but also to elaborate on on that is that, again, if when blockspace is cheap, people will use it. When it's very, very expensive, people feel pain and they try to solve it in different ways, right, and we talked about that. You can That's time. A ton of optimizations. And, I mean, we've seen massive improvements, in in optimizations in the mempool over the past 4 years from I mean, it was originally interesting because it it was so hilariously bad.
[02:34:47] Unknown:
Right? And now nobody's doing any hilariously bad stuff. It was funny, right, how how batch transactions were sort of starting mid 2017. And then after that huge spike in 2017,
[02:34:58] Unknown:
a lot of people very quickly started rolling that out. Right? Right. And that's that's, of course, because users are heavily incentivized to optimize their use of Bitcoin's blockchain space. Right? Once those fees spike up, yeah, let's let's prioritize that Segwit implementation, right, or let's move our low low value transactions to layer twos.
[02:35:19] Unknown:
And and and that's when we saw a huge lightning adoption too. Right? But so that's and and and so there are that there's a upwards pressure, which is Bitcoin is growing and there is more of everything. Right? But there are downwards pressures. There are optimizations. There's other solutions, you know. Someone, might say, hey. But you know what? We can actually solve this particular thing in a centralized way, and it moves off of there. There's a lot of different ways of of achieving, you know, the same goal. Right? And so when when the price is high, that creates, an incentive for for someone to rethink of it. I mean, I've always expected there to be a Bitcoin payment service provider at some point, that just like takes Bitcoin here, completely centralized. It takes some Bitcoin here, sends the Bitcoin there and just does it all on chain, but it still hasn't happened.
We've been the so I mean, these things, will probably start happening, when especially during this, because the mempool moves, it doesn't grow, nice and steady. It moves in in extreme spikes. Yeah. Whenever the market's pumping hard, everyone wants to move their money to exchange and withdraw. And there's a lot of stuff that's algorithmic here in terms of fee estimation and a bunch of other things. So oftentimes, it's not even a human. Where, like, there's bots that they will send from one exchange to another exchange. And I think the coffee transactions are getting pushed out, priced out of Bitcoin, right? And and that's, like, the future of Bitcoin is that we migrate to this multilayer ecosystem where sometimes you use Lightning or Liquid or some custodial service. Right? Well, it might. I mean, you'd be surprised with how many really small transactions are still happening on chain. I mean, I agree. I mean, I'm a mega Lightning fan. I want to move it to Lightning, but a lot of people use on chip Bitcoin for really small transactions. So they'll even at 1 cent per byte, they pay like a pretty high percent
[02:37:07] Unknown:
of the value to to make In a way, it's a Alright, guys. I guess we're out of time for our our panel, but but thanks for sharing your, very passionate opinions on the, state of the mempool and the future of the mempool.
[02:37:21] Unknown:
I guess that's it. Thanks. Thank you, and glory to you, Quinn. Thank you.
[02:37:57] Unknown:
Well, hello. We're here to talk about why lightning is not private. It's, it's it's, you know, as the b cashers would say, doomed to failure. It's never gonna work, all all that. So welcome, Evan Kaludis from, Zeus Lightning, Anthony Ronning from Infurvius, Nifty Nye from Blockstream. And, yeah. In all seriousness, lightning is kind of pitched as a magic privacy solution. You you hop on Lightning, you you spend your money over Lightning, and there's nothing to worry about. Like, no information leaking. It fixed the, privacy issue.
And the technical reality of that is not quite. So I guess to start, you know, the the whole issue between sending and receiving there. I guess wild card, anybody wanna talk about the issues in terms of when you receive money, all the information that just leaks out into the world that a lot of users might not be aware of?
[02:39:08] Unknown:
Yeah. I think, to start off, senders have amazing privacy on on lightning, from a general level. You know, there's some, you know, trade offs there, and you can get into the weeds on that. But when you're sending payments, you can, you have, like, onion routing messages going across the network. So, you know, you don't really know where it actually came from. You don't even know if the previous hop that a lightning, lightning payment is going through is actually who it is. But like you said, like, receivers on the other hand, it's it's a little bit of a different story.
You have to, like, give information out to another person in order to get paid to actually receive money. So, some of that information that's leaked is like, you know, alias names, IP addresses. If you have any unannounced channels, you know, you you may leak those as well, in order to get paid down those channels. So there's a there's a lot of, you know, areas where receivers need to be a little bit careful, especially, like, if someone is just, like, posting invoices onto, like, Twitter or something, and it's just, like, completely, you know, doxing all that information to the open world. So, like, you know, I think I think there is some, like, you know, a lot of privacy gains that we can get on lightning. I think it comes down to the users not shooting themselves in the foot and having a little bit more education on, like, what to do and what not to do, when it comes especially when it comes to receiving on Lightning.
[02:40:28] Unknown:
We're sort of multifaceted, though. Like, application developers, they need to give users the tools to be able to not shoot themselves in the foot, but we also need to see some changes at a protocol level, I believe, to really get to where we wanna be.
[02:40:43] Unknown:
Yeah. I think, like, the one thing maybe that's kinda interesting to ask about Lightning privacy too is, like, it's more private than being on chain. Right? Like, when you do, like, can you sit down and you, like, look at it? Like, transacting on lightning is like a step change function in how private your actual transactions are. So, like, just when you're making transactions, if you're gonna make a transaction with Bitcoin, like, kinda I think I think it's I think it's true that it's more private if you're doing it on Lightning. So if you had to pick on chain versus Lightning and you're concerned about privacy, that's definitely the right choice. Right? Oh, yeah. Definitely.
[02:41:17] Unknown:
Okay. Especially if you're sending, you know, or switching.
[02:41:20] Unknown:
Well, I mean, it's it's definitely more private, but just it's not quite the the perfect solution, you know, that it kind of gets generalized about. But, you know, speaking of solutions to receiver side privacy, you know, there there's a number of protocol proposals, rendezvous routing, route blinding, trampoline routing that could potentially level that to the point where receivers are at least more private than they are now, if not on par with senders. You guys have any favorites there in terms of which one to go with?
[02:42:00] Unknown:
Yeah. I I you know, from from the protocol level, I haven't read, a lot of the specs. But I think, like, in general, just speaking at a high level, the ability to give out, like, you know, receivers need to give out some information to get paid. Ideally, that information, like, doesn't reveal anything about them. So it could have, like, you know, a lot of, you know, maybe fake hops. Maybe it's like maybe it's like with rendezvous or or or route lining. And it's like, you know, get your payment to this location, and then that location will will, you know, get the payment to me. Kind of the gist of that. So, you know, there's, it it kinda like cuts that separation where like, okay, everything previously we don't know where it came from, and then everything after we don't know where, you know, we don't know where it's going either. So I think there's, like, a lot of protocol advancements that that could happen,
[02:42:47] Unknown:
as especially for receivers. But, yeah, I'd I'd be curious, like, if if you looked at, you know, where we are at with, like, being able to implement some of that on the protocol level. Yeah. So there's a couple different proposals. So what we're kinda talking about is, like, when you send a payment right now, usually, you if you wanna receive a payment on Lightning, you create something called an invoice. You give it to someone. Invoice has a bunch of information in it. Right? So it tells you who you're paying, how much you're paying. Usually, there's a description of what you're buying, etcetera. So invoices themselves leak basically all of your transaction data. Like, that's the whole payment. That's the whole transaction is in the invoice. Right? So, there's some questions about, like, okay. Maybe we can if is there a way we can produce an invoice that doesn't tell you exactly which node on the network you're paying, but can pay to some intermediate node, and then that intermediate node will be able to figure out how to get to the person who actually wants to receive the payment. So So this is almost like I guess we call those, like, proxies in, like, normal networking stuff. Right? Yeah. And and it's interesting because a lot of the proposals, it's not really just, you know, making the data go away. It's like deferring to which parties are privy to who the receiver is.
[02:44:03] Unknown:
So, you know, privacy is not just about, like, flipping a switch on or off. It's about selectively deciding who you want to know that information.
[02:44:12] Unknown:
Yeah. And, I mean, you know, when it when it comes to, like, the the 3 proposals, we're we're discussing, like, rendezvous routing, route blinding, trampoline routing. It's really they're all kind of in a way, like, doing the same thing just like little subtle differences. Like, Gavin or Lisa, I mean, do you guys, you know, have have any kind of thoughts in terms of the the privacy trade offs between the 3 of them? Like, the the benefits you can get out of, rendezvous versus route blinding versus trampoline and potential negative sides to that, depending on which one gets implemented?
[02:44:53] Unknown:
Yeah. So, like, I'm gonna be honest. I'm not as familiar with all the differences between, like, all three of them. I know that, like, as far as, like so all of these are, like, ways that you basically can find another node to, like, you know, finish the payment for you to the actual destination. In terms of, like, what's being worked on currently, I know that the route widening thing is currently implemented in core lightning, which is a project I work on, and there's an a few other teams that are working on route binding currently. So in terms of, like, out of these three things, which is the most likely to get over the line first in terms of, like, being accessible to the most people who are running lightning, it'll definitely be route binding. I don't I was just talking to one of the maintainers of the async project. They're working on their route binding stuff.
I can't remember. I think trampoline routing is the one that we're supposed to be doing this year also, just for that and stuff. So maybe that'll be there soon. But these things are, like, actively proposed. Like, they're currently in progress, and, I've been tasked with asking if you if you're a developer and you wanna, like, get involved in improving some of the payment routing privacy on Lightning, we could definitely use some help reviewing the route blinding PR, which I think is number 765 on the bolts, repository.
Cool.
[02:46:13] Unknown:
Evan,
[02:46:15] Unknown:
any thoughts on which, path we should take here?
[02:46:20] Unknown:
Yeah. Route blinding is exciting because we have, I would say, the most tangible stuff. But, really, I I don't think we're gonna really get, like, a full understanding of what all the implications and and limits are really until we're testing it out in the wild. So I'm very excited to see that tooling out in, you know, various node projects out in the wild and people just trying it and and figuring out where they get caught up and whatnot. So, you know, wherever I can, either 3 of these, you know, methods, I would love to get them into so people can try them on the go and, you know, just give it a give it a shot. And, you know, since these all these methods are really just about, like, changing up how the routing goes goes, like, instead of just having the the sender figuring out the path to it. It's gonna be interesting to see if people also have, any pains with unable to to being able to find, like, a path to make their payments. So that's the trade off with a lot of these proposals. It's like you're gonna be able to, get selective privacy in a lot of ways, but it may make for a worse UX in terms of actually completing that payment.
[02:47:32] Unknown:
Anthony?
[02:47:33] Unknown:
Which one should we go with? What what's the the Yeah. I don't even think it's, like, mutually exclusively. Like, I think we've, you know, we've had, I think the Electrum lightning implementation was, like, kind of the first to implement trampoline routing, which was kinda cool. I don't know anyone using that Python, you know, node. I don't know if you should. But it's, like, it's, like, you know, awesome to be able to, like, innovate and, like, all of us like independently in all the different node implementations. Kind of like experimenting with different things and and contributing or hopefully contributing back to the specification process. So we can all kind of all benefit from it. So, and I think I think async has also like a boom and a trampoline route in, themselves. So, you know, I think there's, like, combinations of things that we could all use to kind of, you know, may you know, maybe it's possible to use trampoline routing with route planning in a way or, you know, think you know, vice versa. So, I, you know, I would I would really just like to have, like, the most amount of, like, privacy options for users on lightning. But, like, again, I I do agree with everyone here that, you know, probably route binding, you know, I I haven't looked at it, deeply enough to, like, see any, like, connotations with it. So, like, I think in general Mhmm. I think, you know, it's pretty well, supported as as far as, like, we should probably do route blinding.
[02:48:50] Unknown:
Yeah. It's really just the nitty gritty, getting into the details, and and finishing the spec off and more experimentation. Yeah.
[02:48:58] Unknown:
Well, alright. I've been trying to keep my mouth sipped a little more than, my panel the first day, but just trampoline routing. I kind of have an issue at a high level with just like the idea of outsourcing the route construction to a third party because, you know, in theory, you you can just kind of nest different trampoline nodes together and then have, like, the first one, you know, just get the route from you and then go on to the next one and the next one. And like any onion routed system, you you don't know, like, if this is the final destination I'm routing to or another trampoline node.
But in practice, you know, a a node doing trampoline routing and route selection is probably gonna be very publicly visible and known. Oh, yeah. And you still have information like the, the time step for the, refund path in an HTLC to look at with a maximum length that can have. And, like, all the the little metadata that kind of piles up where it's like, well, in theory, like, you can just link the different trampoline nodes together and they don't know, like, what the final destination is. But in practice, you know, there there's probably gonna be some things you can suss out, like the length of the route. Obviously, you know, if, let's say Blockstream had a trampoline node and I go there first, but then route to async, well, like, Blockstream's node is gonna see, oh, that's async's node. Like, that's just another trampoline hop.
So, I mean, is is maybe pitching that as a privacy solution kind of a a misnomer?
[02:50:46] Unknown:
Is that not more of just a scaling solution for light wallets? Yeah. I think that might so I haven't looked at it closely. I would probably need to go back, but I think that that intuition is probably pretty good. So, basically, the idea of the trampoline route is that you can, if if you're using a trampoline route, you don't have to understand how to get to every node on the network. So it saves you a lot of data as a node because you can offload the path riding, the path finding, like, responsibility to someone else in the network. I think it's for a fee. I think you get paid if you do, like I think there's, like, some, like, little, like, earn some money by doing a trampoline route thing in there. I feel like an extra fee for constructing route for someone, a partial route, I should say.
So then the idea is that if you have, like, a mobile phone and a wallet and you wanted to send a payment from there, you only need to know how to construct a route to get to a trampoline node and then you can get your payment sent from there. Like, then the trampoline node will figure out how to send it to anyone else on the network. Yeah. Yeah. I know. So, like, I think, like, all of these things, like, these are, like, routing level stuff. Right? And so I think it's kinda interesting to talk, like, okay. What exactly what sort of data are you leaking, like, when you're routing a payment? Right? So we talked a little bit earlier, like, when you have an invoice, invoice is basically, like, the part of figuring out who to pay and how much to pay them and for what. Right? So it's, like, invoice level. And then there's, like, okay. Once you have the invoice, you use the invoice to, like, figure out the route you're gonna take to your payment.
And then once you've, like, figured out the whole route finding thing. Right? Maybe you're using trampoline and someone else is finding out the route for you. What data is in a route, you know, this route finding thing? It's gonna be the amount of money that you're sending. It's gonna oh, great. Thank you. It's gonna be the amount of money that you're sending. Right? So you still wanna know, like, how much money you're sending and hello? Okay. I think it's still on. Great. So yeah. So there's kind of like that. Like, the the level of information that you got kind of is different sort of depending on where in the payment process, etcetera, that you're you bind yourselves. Right? One thing that's kinda interesting is talking to Matt Goralu who works on Spiral, they do LDK stuff right before this is, one of the current kind of issues with these, like, so payments. So when you send a payment across the network, usually, they're wrapped up in things called onions. Right? And so you do onion routing, which means that when you get a payment, you can see who sent it to you and you can see where it's headed. But you as the person with the in the middle of this route have no idea where it came from before it got to you and where it's going after the next hop. Right? So we already have that level of, like, privacy and lightning that already exists. Yep.
We're talking about, like, sort of, like, different levels of, like, ways you can make those route, those onions, and how do you make sure that maybe you don't know exactly who the last person is when you're constructing the onion. That's what blinded past due. That's what trampoline does in some sense, I think. Yeah. Anyway, so, like, one of the things with, like, this this routing data then is, like, you wanna be able to hide how far you've gone from the start point and how far you are from the finish. But there's some, like, there's kind of a tension here between that and, like, this other parameter that we send in these packets called the CTL v lock. Right? Lock time. So that you can kinda use I think, like, you can do I think, I think there are researchers that have done basically analysis on, like, the CLTV lock that kinda tells you how far you are in that path. So, like, if someone knows how many hops away you are, they can kinda look back and maybe figure out where you came from and where it's going, etcetera. So, that's kind of like, okay, how do you that's like that those kinds of questions are like, okay, how do you deanonymize or, like, figure out where a payment's going given that you didn't see the invoice, etcetera?
If you have the invoice, like I said, you usually know exactly where it's going. We're trying to fix this with the Bolt 12 stuff. Bolt 12 use blinded path, so you'll be able to, as a receiver, not tell people that you're the node being paid. You can instead provide a little bit of a route of how to get to you, and so you send that with the request to be paid. Person who gets the request to be paid will pay to the beginning of this path that you've constructed, so they don't see where it goes after it gets to that, like, start point, basically.
[02:55:14] Unknown:
But that's all, like, payment level stuff. Sorry. I didn't Yeah. And then along along the same lines, with with analyzing the c you know, the the time lock. You can even, like, analyze the timing too. So, like, if if, like, a payment normally takes, like, a certain amount, you know, per hop, and you can even, like, analyze how long each hops have certain network latency. You could even, like, try to, you know, like, attempt to, like, figure out where in the network, a node may have been sending from. There's been some research on that level and then but on the flip side, there's been, a lot of research or at least like one paper into how we can actually, construct routes at the sender level to kind of take paths that are not the traditional path. That way, you know, if I'm always going through a couple of different nodes, you know, maybe maybe they can analyze that. Oh, well, it's probably coming from this location over here. Mhmm. They may not know exactly who's making the payment, but they can kinda make some educated guesses.
But what's cool is that you can actually, like, construct the you know, it's you construct the payment yourself and maybe that guide kind of goes along the lines of like, you know, maybe we shouldn't just like hand it off trampolines to construct the routes ourselves. But if individuals are able to do these, like, nontraditional, you know, routing algorithms, pathing algorithms, then then we can actually, like, try to attempt to get, you know, better privacy and, you know, better heuristics there.
[02:56:38] Unknown:
And so I think core lightning by default will choose a more random path than just, like, the cheapest or most direct route. I think we use, like, a fee budget. So we give you a budget to try and get to there. And so that way, trying to, like, kind of use not necessarily the most obvious way to make your payment happen, which is cool.
[02:56:58] Unknown:
Well, I mean, that that's just like a a massive issue that I think is is really, are are we gonna be able to solve that one? Because, like, what that really boils down to is is, like, timing analysis. I mean, if you zoom out and say the NSA gets really interested in what's happening on the lightning network, well, they can just watch everybody's nodes and, oh, that that string of packets, that's exactly the size that proposing an HTLC messages. Oh, and then and then something zipped back the other way? Oh, okay. Did, you know, did that confirm or refund?
And just watch the the packets and go, well, the whole protocol is spec'd out. Like, you you know exactly, like, what the size of adding an HTLC is, removing it, like a pre image flowing back through the route and okay, like, oopsies.
[02:57:55] Unknown:
Yeah. Go ahead. Yeah. It's just a major problem. So a nation state actor with that god level view of the network and ascertain, like, some serious information. And, you know, there's been some ideas as to how to throw some extra noise into the network to sort of obfuscate what's actually happening. But, you know, that all comes with additional cost. Right? You know, it's already tricky to run a node, processing a lot of packets, you're moving a lot of Sash around too especially. And, we need to acknowledge that, you know, with these ideas that are being proposed, it's gonna increase the cost of node operation.
[02:58:37] Unknown:
And, well, I guess, you know, not not to put you on the the spot, Anthony, but, I I hear you have a little project going on, in regards to testing the, the privacy and effect of, unannounced channels.
[02:58:53] Unknown:
Yeah. So about a year ago, I wrote a paper on Lightning privacy. And as I was, you know, just really just documenting, when I knew about it, I learned, I learned quite a lot doing that. And, you know, one of the things is like, we call, private channels private. But they're they're really they're really not. They're more along the lines of unannounced channels. So whenever I'm a node and I have, you know, let's say I have all private channels, if I wanna receive down them, I create an invoice and I give that invoice to other people to to pay me. I basically have to, like, docs my, you know, unannounced channel. So with that unannounced channel, they can see the UTXO, the unspent transaction output that went into that channel. And then from there, you kind of have the leakage of of all the things from, that can be leaked on Bitcoin privacy like on chain. Some of that follows and kind of flows into the value network as as an inherent, you know, problem for privacy as well. So, one of the things you can actually do is, you know, probing on the lightning network. Because actually I don't I I consider it kind of a big problem in the space.
I don't like that probing happens. I, you know, I don't like that it kind of is, you know, allows that, but probing is basically sending a whole bunch of fake information and finding information that is not, like, traditionally public. So it could be balances. In my case, what I'm trying to do right now and and I did a hackathon with Paul Miller in Austin a few weeks ago, where we're kind of proving this out with the LDK toolkit. You can actually probe, 4 private channels to see if they exist between 2 nodes. If me and me and Evan here have a private channel,
[03:00:31] Unknown:
so I can also tell them about that.
[03:00:35] Unknown:
If, if we have an unannounced channel together and say it's, like, for, like, 10 Bitcoin because, like, you know, we're really rich peoples. You know? So, it's not to say it's, like, for a huge amount. It's all on his side. He he opened up the channel. I'm doxxing you, bro. This is so bad. You you can actually you know, if I'm connected to the general lightning graph, you can actually try to probe through through my channel and, like, try to attempt to guess the UTXO that is between us. And if you're able to guess the UTXO between us, there's a different error message that it gets, like, sent backwards. So you kind of get into a situation where, like, once it proves it out, you know, once you actually probe all the way through, like, you create this fake payment in a way where, like, Evan basically has to come back. His node will come back and say, give it an error message. Like, I can't I can't redeem this fake payment that you made.
So so but the fact that he is the one that gave that error message, like, proves out that there is this unannounced channel between us. And and from there, you know the amount, you know, the UTXO, the addresses it's associated with, and, like, all of that is, like, possible today. And and me and me and Paul finally, like, took the time to actually, like, create a proof of concept of doing that, and I'm hoping to, run that over the next couple months and, you know, release, release what my findings there. Because it's like, you know, we can, you know, we we love lightning. Right? I think that's I think, you know, a lot of us here really love, you know, some of this stuff and it's like, if this is possible, I want it to be like revealed. Like if if if if I can do this, you know, multibillion dollar firms can do this, you know, triple letter agencies can do this. So I would rather us do this and find this information out and try to make the lighting network better.
[03:02:20] Unknown:
Yeah. I mean, there there's no security in this security theater. But yeah. I mean yeah. If if it breaks, let's break it now while things can still be fixed instead of 5 years from now when who knows how many countries are are trying to plug into lightning and use that as payment rails. Yeah. That But, kind of a related, but little little hard shift here. Who wants to talk about the, gossip protocol and routing tables and, figure out why we still explicitly docks the UTXO associated with with a public channel so that the whole world can just follow where those coins go after channels close?
[03:03:11] Unknown:
So this is like so I would call this, like, a different level of privacy. Right? So what we've been talking about beforehand is, like, payment level privacy. Like, I wanna make a transaction on Lightning, and so we've been talking about some of the, like, pros and cons in sending invoices to people and then sending payments, etcetera. This is kind of so this level of privacy that we're talking about is, like, gossip the gossip network and UTXO level is more like what kind of so the information that you are leaking or finding out the privacy here is which UTXOs or, like, outputs in Bitcoin belong to which nodes, right? So it's tying on chain outputs and balances, to, like so basically the account balance of any one Lightning node, how we use that to figure out, what kind of implications does that have.
So I think it's kind of interesting actually that, like, this information is, like, completely separated to a large extent from your transaction data, right? So, that's a big contrast from transacting on chain. When you make payments using on chain Bitcoin, that becomes public record for everyone whereas when you're transacting on Lightning, it's ephemeral. People kind of have to be watching for your stuff to go through or, like, constantly monitoring balances, etcetera, to even see the payments moving, etcetera. Anyways, this is like gossip stuff. The way that Lightning works is for these are for announced or public channels. Right? Unannounced channels kind of escape this. When you make a Lightning channel, you're creating an on chain transaction that creates a UTXO output.
That UTXO output contains the balance of the channel. What so there's 2 parties in a Lightning channel. Who owns what amount of that total balance is, like, kind of an open question. That's what you might use the probing stuff that we were talking about earlier to figure out. But the on chain transaction, like, typically, if you're using the version 1 of, like, channel opens, usually, that balance is all on one side to start with, generically speaking. Anyways okay. So you have these UTXOs. It would be all great and good if you didn't have to tell it. You could open a channel, and you don't tell anyone that you made a UTXO on main chain. That's what an unannounced channel is. But it makes it really hard for people to use that channel to do routes for payments if you don't tell them about it. So if you were trying to start up a lightning node and earn money routing payment traffic from your node to someone else's, you would need to publicly announce them. The way that you publicly announce them is via something called the gossip network. Where is it gossip network? Do we call it the gossip network?
[03:05:53] Unknown:
Like Well, we don't wanna inflate people with it being with lightning network.
[03:05:57] Unknown:
But, yeah, it's definitely a distinct part of the system for sure. Yeah. So there's this, like, gossip thing where basically you make a message and you say, hey. This is me. This is my channel buddy. Here's our pub keys that we put into the, like, on chain transaction somewhere. Here's where you can find it on chain. Go verify verify it before you use this as a route. So this is what we're talking we're talking about routing table. The routing table is basically a list of all of these on chain transactions and the current balance like, the balance the total balance of the channel, right, and who is party to that. Right? So if you have all these balances and all these node connections, you can build a connected graph with balances, and then if you want to send a payment, you can look at this graph of data and figure out how to get from Tony's node to that guy's node, and go through the graph that way.
But the downside to that is that you're telling people where your on chain transactions are and you're associating them with your node ID, And this is public data that anyone running a everyone running a Lightning node is hopefully getting, so if there's if you're an organization like, Chainalysis or some other, such organization that has a large body of output data like chain, like on chain data, and they've been working really hard to tie identities to those on chain payments. Now they already know kind of what some of your transaction history had been and then you tie it, you put it on a lightning node, and then you use that to open a channel, all of a sudden, someone who's, like, managed to figure out your identity in another arena now knows which lightning node is yours and which channel like, what your balances are in the network. So that's like a little kind of, I think, further out. Anyway, so gossip is like, really bad for on chain privacy, especially if you're trying to route.
[03:07:55] Unknown:
Yeah. And, Rusty, you your coworker actually has a new proposal to kind of fix that where instead of explicitly doxing the channel UTXO and associating it to a specific channel, a node can just take one UTXO and prove, like, I'm a node. I have real Bitcoin, and then not have to specifically connect it to their channels so that, you know, opening and closing, that that's not leaked. They just have their their one little bit of Bitcoin to prove, like, I actually have money to route, but I'm not gonna tell you the UTXOs to my actual channels.
[03:08:34] Unknown:
Yeah. And this, like and so this is the kind of things like that. I think Rusty's proposal is a sort of thing that we would also need to adopt before you get any privacy improvements for Taproot. Right? Because so for those of you who aren't familiar with Taproot, it basically makes it such that a lightning channel goes from having a very specific on chain footprint to being, like, a single signature and looking like kind of any other, like, output on chain. But without changing the way that our gossip and our route table building stuff works, it's going to be very difficult to, stop publishing that information anyways. But okay. But, like, so Rusty's proposal though then, like, the other consequence of this is you use gossip. The reason you do the gossip stuff, right, is so that you can build the route to send the payment.
If we move away from publishing exactly how much money exists between 2 parties, how are you supposed to figure out where you can send payments or where there's, like, capacity to send your payment. Yeah. Route route finding becomes
[03:09:35] Unknown:
very difficult.
[03:09:37] Unknown:
Well, I I think that, like, Rusty's proposal has a pretty elegant solution. It's just have, like, an amount for the the UTXO you're tying to your node, and then some multiple of that is how much you're allowed to advertise in terms of, like, channels. It's like you have, like, 1 Bitcoin locked up. Maybe you can advertise, like, 10 Bitcoin
[03:09:59] Unknown:
as channel. That sounds like fractional reserve lightning to me. I don't I don't want that.
[03:10:06] Unknown:
Oh, but, I mean, I mean, seriously, it's it's I think that is an elegant solution because the reality of why you docks these UTXOs in the first place is literally just to prove, like, you actually have control of Bitcoin so that my wallet isn't spinning the wheel all day trying to route payments through people who don't actually have channels that, you know, there's no way to route a payment through. And I I think that this would work. And and, you know, people concerned about denial of service or just, like, the the multiple being way overblown.
Well, you know, just set it up as a curve. Like maybe you you toss 0.1 bitcoin on there. Okay. Maybe you can only advertise 0.2. But if you get up to throwing a whole Bitcoin on there, maybe, you know, 5. Like, just adjust that curve
[03:10:58] Unknown:
to kind of prevent, like, being able to just pretend you have a 1,000 Bitcoin when you you just have 1. So what tier you are in the federal banking system depends on, like, how much capital you have on chain. I'm like Yeah. I mean, it sounds it sounds like it'll trend towards centralization almost at that point where we have major hubs, and we're not really, like, you know, locking up at at the at the other layers. So I don't I don't know. Yeah. It is it is it is a potential solution. I think, like, for, so we're talking about, like, how to do this for, like, public channels, but I think there is, like, one thing to maybe, you know, explain here is that there is some work right now on actually untying the unannounced channels from the UTXO right now. So there's a short channel ID aliases that is being worked on, by a few different teams, I believe, where you can actually, like, between me and my channel partner, we come up with this scheme where we make a fake alias for our channel ID that is not directly derived from the UTXO information. And then if we do that, then, you know, we are the ones that are aware of this. So I share, you know, an invoice with with my routing hints in there. It gets it gets to Evan. And then from there, Evan knows this, like, fake, you know, channel ID between us, so he just goes ahead and sends it to me. And then from there, it becomes exponentially harder or, like, almost, you know, impossible to guess that short channel ID. And even if you guessed the fact that, you know, me and Evan had a channel together, you wouldn't necessarily or you wouldn't even be able to get the, the UTXO amount or the other information associated with UTXO. So I think there's some great, you know, privacy improvements for, short channel alias IDs, that I'm excited about.
[03:12:47] Unknown:
But, I mean, you you like, the public channel still needs to be addressed. Like, you know, one of the, I think, key points in that massive, privacy article you wrote is if you have a private channel, well, you're receiving money through it. So whoever you open that channel with, probably has a bunch of public channels, and eventually that's gonna close. So if if that private channel closes and they still have a balance on their side and that winds up later in a public channel, it's you can very easily deduce, okay, that last transaction was a private channel closing and now your UTXO with that balance can be followed on chain. It's okay. This is probably involved in lightning.
[03:13:31] Unknown:
Yeah. Exactly. And then and then on that note, if there is, it it even works both ways. If that private channel, like, you know, it gets closed and there's some on one end, some on the other, and they both open the public channel, with other nodes, you even can tell the exact channel between the two nodes that there was probably a private channel between. So like, yeah, you There's all kinds of on chain analytics and that's one of the things I wanna eventually do with this with this project I'm working on right now where, like, I actually try to analyze all the possible UTXO's that may be associated with a node and start at that point instead of just brute forcing through every, Paydoo public, script hash on the on the network. So, so, yeah, there's a lot of, like, weird on chain analytics that you can kind of link back to a to a specific node, and that's that's one of them. Will Taproot help with that? I think I think Taproot, I think there will still be that UTXO that could end up in public channels. And then if we if Taproot can't help with the public channel aspect of it, then that's still vulnerability. I think one of the things I'm excited about, with Taproot and privacy that I think we can, you know, start, you know, slowly incrementing towards is the ability to, you know right now, I can look at all the, you know, pay to, public script am I saying that correct? I always screw up the initials there. Pay Pay to what? Pay to witness script hash. Yeah. I could look at all the pay to witness script hashes and try to, like, use that as my baseline Mhmm. For brute forcing all these all these unannounced channels.
But if everyone starts moving towards Taproot and everything looks like a normal spend, even even, like, channel openings and and and, cooperative channel closings, then it makes it a lot harder to it's a it's a bigger set that I have to brute force or anyone has to brute force, if we start, like, in general and if the Bitcoin space starts adopting Taproot even more.
[03:15:25] Unknown:
Yeah. It's gonna be a great step in the right direction to get Taproot channels. I feel like we'll get them this year. Obviously, it doesn't solve everything, but, it's a nice foundation to work off of for sure.
[03:15:40] Unknown:
Any wild card topics in the last 2 minutes?
[03:15:44] Unknown:
Oh, I just wanna make, like, kind of a public service announcement that if you are paying an invoice with lightning and you're using a centralized service that's not your node, you are leaking your payment data. So none of the stuff that we talked about about, like, timing analysis or, like, looking at payment traffic flow or probing is is gonna matter because you've just told someone who you're paying and how much and why. So, like, one thing this is why we're really excited on core lightning about Bold 12 is that it makes it possible to hide a lot of that information and still have someone else make a payment on your behalf.
[03:16:25] Unknown:
You know, that that is actually a really good point. When when you're using the Lightning Network yourself, like your own node, your own channels, there is that asymmetry where the sender is extremely private. Like, that whole dynamic is very private and receiving is not. And when you're dealing with a custodial wallet, it's almost the inverse. Like, you're leaking everything about who you're paying to that custodian, but when you hand out an invoice, all anybody can tell is they're using this wallet.
[03:16:57] Unknown:
Yeah. And and to even further expand on that, like, you I could have my own node, you know, not using any custodial services or anything. And if I, like, put in my invoice, like, this is for drugs, and I give that to a strike user, Strike can associate my public key with drugs, and that and that, you know, could put me on a blacklist of some extent. So, like, even if and I give an invoice, I don't know how they're gonna pay me. So like they pay may pay with their node or they pay with strike and if But if they paid with strike or another custodian then now they link me to drugs and that's that's no bueno.
[03:17:30] Unknown:
So, yeah. I guess last note, don't use custodial wallets that take your personal identifying information and buy drugs on the Internet, but, we're out of time. So, thanks everybody for doing this. This was a blast.
[03:17:57] Unknown:
Some friends in
[03:17:58] Unknown:
the audience.
[03:18:00] Unknown:
Okay. Cool. Is this thing on? Okay. Great. So side chains, tremendous potential for this panel. I don't know. It could be the best most important talk in the whole conference. Will we will we live up to that potential? I don't know but we're gonna give it a try. So first, before anything happens at all, I'm gonna go a little on a little spiel here. So what is a side chain? The idea is no altcoin needed ever. It doesn't matter the excuse or the use case or how fringe or whatever it is. No altcoin. So, you can have a different chain. You can go multi chain. You can go you can hard fork the rules. You can go proof of stake. You can do merge mining, whatever. But there's no altcoin. There's just 21,000,000 coins, 21,000,000 BTC that travel among the chains. That is like the side chains concept.
And all kinds of other concepts have hovered around it for years but that is the side chain concept. So I do wanna hasten to add one thing though, which is that you can have other things on, the blockchain like stocks, bonds, NFTs, whatever. And sometimes people use that for collateral or to do other complicated things. But the point is there's no altcoin like as money, as like a rival investment or a rival network. It's all on Bitcoin. So that's that's the concept. You guys wanna you guys wanna comment on, you know, what is a side chain side chains, etcetera?
[03:19:27] Unknown:
Oh, yeah. Let me first of all, you start my let me introduce myself first. Right? My name is Burak. I'm, I'm a Bitcoiner, a Bitcoin dev, and a Bitmetrics founder, which is a covenant based automated market maker on Liquid. So to give some color on sidechains, right, and on Liquid overall, a sidechain is by definition a separate blockchain with no Sheikcoin. Right? Bitcoin is the underlying asset. This is really cool because you can experiment with new things like confidential transactions and some advanced scripting primitives without introducing any market, any asset class for obvious reasons. That pretty much sums up.
[03:20:01] Unknown:
I I think yeah. It's interesting because, well, the original paper for for a site chain was issued at the end of 2 2014 by Blockstream. That was the original idea. And the concept is like the native asset of the secondary chain is Bitcoin. So it's and that is it because there are other assets issued. Now Lightning is doing it. Liquid has been doing it. Restock is doing it. So you can have other assets, but the importance is what is the native asset, the asset that is used to pay for the fees of the network. So that creates a level of alignment between the secondary network and the Bitcoin network that is very unique. Because here in decentralized economies, like economic alignment is key, is what makes you an adversary or makes you like, yeah, a collaborator. And I think that's the concept of why the concept of sidechain is so important because it's about extending Bitcoin but avoiding creating adversary networks to Bitcoin, creating full alignment in the economic level with Bitcoin.
[03:21:09] Unknown:
Yes. Everyone in the same group and everyone in the same team, but also freedom to develop your own software.
[03:21:17] Unknown:
So do you want a comment on sidechains now? Well, it's kinda funny because, like, the idea of, like, sidechains and l twos and these terms we've come up with have become kind of blurred over the years. Like, things have expanded in terms of what can and cannot happen. So it to me, it becomes more complicated to kind of, like, to kind of put these things in boxes. But, in my view, like, anything is a side chain that contributes significant value to the on the other the underlying asset or analyzing chain. That's how I view it.
[03:21:46] Unknown:
Okay. Great. I have a proposal. So I guess so you're sort of he's this guy right here, is the represent Barak is the representative of sort of the liquid network kind of. Does that you know? Yeah. I mean, I'm the liquid shell. Speaking. He's the liquid shell, I guess. And then we have RSK, and then we have a Thorchain over here. And then I have, a proposal for Bitcoin. BIP 300 to bring side chains to to Bitcoin on layer 1. So you can look that up, BIP 300, or you can go to drivechain.info. Separately, I wrote long ago, I wrote a side chain what was supposed to be a side chain for Bitcoin, but this was before side chains even existed called Truthcoin, which is a peer to peer oracle thing. So that's kind of what I'm particularly interested in. But so now let's we're gonna have to talk about the difference between all of these different things because there's a big spectrum of what is called, a side chain now.
From my point view, this is a little like the the whole what happened to the word blockchain where a bunch of people started to, like, change it around. And, so I I like I really feel like I have the oldest and most pure original definition, but then we have some other. So now liquid is basically a multisig output on Bitcoin, with none of the side chain logic necessarily in well, there's nothing. I guess you would maybe would agree or disagree, but there's really nothing that separates the 11 to 15 multisig for liquid from one that I could just make an 11 to 15 multisig, you know, tomorrow.
I could generate 15 keys and make 1. And then there's no there's no real fundamental difference. Or maybe you would disagree. I don't know. I think from an onstream standpoint, yeah, Bitcoin funds, yeah, living in on chain 11 out of 15. Yeah. Yes. And then I'll say BIP 300, basically, what it does is, like, 4 times per year, it tries to get 32 bytes from the external world. So, like, from the side chain or altcoin world. And those 32 bytes are, speaking very generally, the the TX idea of a withdrawal transaction. So getting the money over is very easy. Getting the money going moving up from layer 1 to layer 2 into the side chain is very easy. But having it come back is only 4 times a year. Very rare. One transaction where many people can ride along in that transaction but this is like the one kind of connecting tissue and then, that's not supposed to be any inconvenience to the user because they can swap the assets using some kind of HTLC or using an exchange or something like that. So then we have let's go to RSK. I mean, you guys have, used the hybrid model in the past. You guys wanna want to maybe use 5 300 someday, or then Sergio has this sort of alternate proposal that's very similar. Very similar. Talk about that? Or Yes. I I think the the hybrid because
[03:24:31] Unknown:
also in implementation details of of this multisave that you are creating, there are a lot of, important things. Because one thing is, like, if the pegs or the the people signing, the transactions to get back from the side chain into Bitcoin, have access to the keys, to the to the private keys. It's very different if they don't have access and they are only providing, like, the machine and the connectivity to the network. And I think both Liquid and and Rudstock in in that sense choose to have HSMs to have how how are security modules, so the the pegmatologists cannot have access to the security keys directly, So they can only unplug the keys, but they cannot really steal the funds. So that limits their action a lot.
So that's that's one thing that is important. But, again, I think this is just a temporary system that we have because we don't have something like drive chain in place where if you really want to have a trustless or trust minimize interaction between 2 blockchains, you need to have a way for 1 blockchain to understand the transact the SPE, the simple payment verification, so the other blockchain. And in the case, for example, of Rustock, Rustock can understand the SPVs from Bitcoin. So it can really create the Bitcoins on Rootstock based on a Bitcoin transaction coming into the into the pool of resources for the side chain. But on the other way, Bitcoin cannot understand, you know, a transaction from Woodstock. And this is a little bit of what we are trying to sort out with drive chain. It's that how we make Bitcoin understand the side chain to make actions based on something that happened on another blockchain?
Once you have that, you don't need any, you know, you don't need the specatories or signatories. You you can really do blockchain to blockchain, much like Sergio back in 2012 proposed with the p two bull protocol. And and I think but, I think it's yeah. That we are in a process. Bitcoin is hard to change, and it's good that it's like that. But but I think eventually, we will get there. So it'll take, like, between 4 and 5 Yes. 5000000 years. Yeah. Yeah.
[03:26:41] Unknown:
And, but so I maybe I should've made this clear. It's for anyone who doesn't know, Rootstock is like Ethereum on Bitcoin or whatever. Did anyone bother to mention that? It's kind of important, but we didn't mention it, I think. So this is like anyone who wants to try out, you know, anything in the EVM, anything that Ethereum does, You just do it on Bitcoin. No need for, you know, ETH.
[03:27:03] Unknown:
And they are doing it already. It's like, we have all the DeFi protocols. On the Boost stock, in that case, everything secured by the Bitcoin miners. That's another thing that I didn't mention, but Boost stock has another thing that Rootstock is secured by the Bitcoin miners, the network, not not not the peg or the sidechain, but the network is run by the Bitcoin miners. So 50 of the world are protecting good stock now. And so you have a smart contract with DBM compared to the smart contracts but secured by the Bitcoin miners paid with Bitcoin.
So that's another element. It's like RooStock in that sense as a sidechain is not only using Bitcoin as an asset, using Bitcoin as a time stamping system to to to settle the state of the network, but also contributing to the Bitcoin Securities is like the most energetic sites that you have in that sense because we are also
[03:27:57] Unknown:
yeah. Yeah. I got a lot for that. So I was gonna get to that later, but then I'm sorry. I don't want it. Yeah. Maybe yeah.
[03:28:04] Unknown:
Yes. Right. Yeah. Maybe, compared to 2 side chains. Right? By the way, the from the side chain definition, right, it's a blockchain with no Shecoin. And by that definition, we have only 2 side chains to my knowledge, and that is Liquid and RSK. I don't know any third option to my knowledge. So things like, you know, 4 chain and Stacks and, you know, defi chain, all this crap, these are not side chains. Right? These are
[03:28:30] Unknown:
Oh, god.
[03:28:31] Unknown:
By that definition, these are just centrally heavily pre mined Ponzi schemes coined by the insiders.
[03:28:38] Unknown:
We we Oh my god. If if I may. Yeah. No. If that's okay. Yeah.
[03:28:43] Unknown:
So I think fundamentally, you might call, you know, Thorchain shit as you just did. Yes. But, fundamentally, what Thorchain is doing is actually changing the fundamentals of Bitcoin itself. You cannot have Bitcoin be successful and but ask, you know, uncle Brian Armstrong without you can get in and out. You need a decentralized exchange to do that, and you cannot use a multisig to do it because you're gonna require up to 15 or 20 people to be part of that process. You have to use threshold signatures because you can have it more or less as money as you want, and in in Thorchain's case up to 250 theoretically, to order to properly decentralize a mechanism to get in and out of Bitcoin. Now if you if you have a mechanism to move in and out of Bitcoin in a decentralized way without using KYC or anybody giving you permission to do so or being being censored, to not just Bitcoin to other really important networks like Monero, for example, that is a game changing concept. So to call it a shitcoin,
[03:29:37] Unknown:
a bit weak. I I I want to Okay.
[03:29:41] Unknown:
First of all, did you something like
[03:29:43] Unknown:
because I don't see Thorchain as a side chain. It's more like a it's a glue Yeah. I don't think it's a blockchain. No. In a way. Thorchain, as I understand it, is this, is sort of a helpful way of swapping different assets. Yeah.
[03:29:55] Unknown:
Yeah. Thor Thorchain is building a d five network that is agnostic to chain, and it treats every chain available to the really important d five protocols of the AMMs, lending, interest accounts, all sorts of things we have planned as a project. And to me that fundamentally changes defi in itself because every system today just kind of appeals to a particular ecosystem, which kind of sucks fundamentally. The idea that the Ethereum network produces, d five protocols and treats Bitcoin as a second class citizen because you have to take on additional risk by using wrapped assets and take additional it's that's fucking stupid. We should be able to have DeFi available to everybody in the industry. I don't fucking care if it's Bitcoin. I don't care if it's Doge. I don't care what it is. Giving people the freedom of choice to choose the one of it what what they want to earn yield on or get in and out of. Of. That's what freedom is all about. That's what Bitcoin is fighting for, freedom, not specifically just one thing. That's true. But, certainly well, you know, as a side chain, a proponent, obviously, choice, you know, I agree with you. Choice is is not only the best
[03:30:57] Unknown:
way of doing things. It's also, like, a kind of a moral issue where, you know, if someone is allowed to sell their Bitcoin for stuff or sell it for US dollars or swap it, they should be able to spend it to a weird script or whatever. But here's I have some questions. I got a road time for Thorchain questions. So first of all, there's there's a Can I clarify on that a bit? You know, for chain
[03:31:16] Unknown:
so, I mean, these are the claims. Right? You can you can the idea of for chain is to have, like, a separate network that that where you can, you know, swap cross chain assets in a cross chain interoperable way, right, supposedly. But the way it works is really it you know, when you look at the Bitcoin, like, the Bitcoin lives on Thorchain, is on a multisig. Right? And that What? Sorry? It lives on a multisig. Right? Uh-huh. What what does where do Bitcoin funds live in then? This is a threshold signature. That's very different than a multisig. Yeah. It's a threshold signature. And the signatories, part of that setup, are are are randomly picked by the by a subset of Torching validators. Right? Mhmm. And I think you have around 100, more or less, validators right now. Yep. All over a 100. And and in order to become a validator, you have to, you know, you have to sort of lock in or, like, like, 2 x ruin, more 2 x value 2 2x more collateral than the actual asset, as far as I know. And We'll leave an economic security over trusted security? Yeah. So you have a security exception here. Yeah. A serious security assumption. So, it is a threshold scheme. Right? Bitcoin funds live on chain on a threshold scheme, and the majority signatories can steal from that, if if incentives are misaligned. Right? And the the security assumption of blockchain heavily relies on the tokenomics of blockchain.
It relies on the economics in the sense of people are self interested, and they don't want to burn up on money. That is fundamentally flawed because that I mean, because it relies on its tokenomics. The economics of fortune, they run the Sheikcoin. But not only that, it doesn't also scale because, you have to collateralize Bitcoin two times, right, with another asset. Imagine Bitcoin being the global reserve currency at some point, right, which will hopefully happen. But in that case, you cannot really collateralize Bitcoin with another asset that is with a superior asset that is to it. Collateralizing Bitcoin.
[03:33:17] Unknown:
Oh, it's more of an insurance spot. No? It's like a It's ensuring that from a monetary perspective, anybody who's a part of the network is always incentivized to do the right thing because if they don't, they will lose far more than they actually hold. Yeah. You're costing as bonds. Right? That is similar to Collateral. So but this is a previous question in my view because I don't think Torch
[03:33:37] Unknown:
is not posing itself as a Bitcoin side chain. No. It's more of a and as you say, you know, it's a DeFi product platform, inter blockchain. Chain? Right. We don't label as a side chain on our, you know, website or any of these kind of things. I think because at the end, it's about, like, the intellectual honesty. As long as you don't pose yourself as a Bitcoin side chain because most of your concerns is, like, are about, like, creating a proper Bitcoin side chain. And I agree if you only time stamp the state of your network on the on the Bitcoin blockchain, then, you know, that's not necessarily a sidechain if the native currency of the of the sidechain is not Bitcoin. No? So so I agree with that, but that's not actually how door changes position themselves. So it's more about an interpretive Well, then to address to address your concern, right,
[03:34:26] Unknown:
in most cases and scenarios where people kind of, you know, hold Bitcoin in one form or another, in almost all cases, it requires trust of a few people running a Mobysig somewhere in the world. Yeah. Of course. Much rather trust economics and mathematics
[03:34:41] Unknown:
over the the the altruism of you hand like, a few individuals. Of course, pretty much anything realized for us. I mean, Liquid does not claim to be decentralized. It is Federated. It is what it is, and it's honest. Right? Okay. But, wouldn't it be better if it was?
[03:34:54] Unknown:
Well, do we want to have decentralized? Of course. Doesn't it be like a key thing where, like, like, Satoshi put forth? That is, like, that is a process because Bitcoin had 1 Bitcoin miner and one developer when Satoshi You're absolutely right. So so we need to stop, like, thinking of decentralization as a boolean thing. It's like it's decentralized or not decentralized. Actually, decentralization is the process. And I think the important thing is that we keep decentralizing things and hardening things so they can become a public good, and they are they're for the service of humanity. So it's not about, like Yes. You know, saying this is centralized. Centralization of this. Yeah. So Rootstock and and Liquid are the only side chain that exists today because they took a kind of, like, what you may call
[03:35:34] Unknown:
The purist approach. But but it was very smart because they were able to actually do something where they have, they have this multisig output that is supposedly controlled by and supposedly there are hardware security modules, but, there's no real way of anyone knowing whether or not there are. Thorchain is not really, as I understand it, there's no way to when you run Thorchain, you have to run every a node of every subsidiary, you know, of every altcoin and every and Bitcoin and probably have to do all these things. The I I think that the the way side chains really should work is is sort of the opposite where you should really that your full node should be ignoring everything else as much as possible. That is what makes it so nothing on those other networks can become your problem. So I don't know if you, have a comment on that, but we have a one distinction we can draw is that in BIP 300, what I in liquid and in Rootstock right now, we have this situation where there's a 11 of 15 kind of committee that controls where the Bitcoin go.
And in BIV 300, it would be basically the miners or the mining process. And in Thorchain, there's this sort of competitive struggle where you stake Rune and then you get, like, you get locked into a, so that's one that's one difference along this spectrum that I guess we can, But we were discussing something before getting
[03:37:05] Unknown:
all that. It's like that model is suitable because of the time because they are transferring value on a certain period of time. So the back in collateral is mostly on insurance spot. So basically, once the transaction is settled, they can replenish the insurance spot. So that's good for managing flows. But in the case of, Liquid and and Rustock, you are managing stock because you are actually locking large amounts of Bitcoin for long period of time. So the same model cannot be applied. So Oh, you're doing that on 4 chain too, though. No. But if imagine if you have 3,000 on a validator. I mean, you have to, like, spread among multiple validators. But again, from a working capital efficiency, which was your point there is like very inefficient, but you you would end up having double the the working capital. It's like you need to have insurance for if you want to have 3,000 Bitcoins, you need to have insurance for 3,000 Bitcoins in your mobile. So it works very well when you are like swapping assets and moving having flows, but not when you want to custody your or log value as as you do on a side chain. But people do. I I mean Okay. Let's move on to something else, which is that They can move. Which is that,
[03:38:18] Unknown:
is it sometimes I ask as a kind of joke, like, who are the 15, liquid key holders? Because they kind of keep it a secret. I think I know who they are, but they don't. You know, is that do you think that's, like, an unfair question or, kind of how is the key ceremony performed? I as someone who's proposed something where there's a a decentralized process involved, I sometimes think it's a little bit funny when the the, you know, look I can I can certainly empathize with their desire desire to do something, get something working in the real world, but sometimes I think this is a this is a fair question? You right now, you give the Bitcoin to these 15 people, and you just hope that they give it back to you, basically.
And so the question is, who are these 15 people? And I I ask that question sometimes on Twitter, but do you think that's
[03:39:01] Unknown:
Yeah. So I don't know. I think that could be maybe a also an internal objection to liquid maybe, and maybe not. This is the way this is set up, but there is a saying, you know, liquid is a DynaFET and Ethereum is a staticFET. So we also don't know who you know, with the proof of sec transition 2.0, we also don't know who these validators are or the who are the initial 70% pre mine holders are,
[03:39:25] Unknown:
essentially. But what's it's really important though if you wanna, stop collusion of any kind is that everybody who's holding part of the multiethnic in this case, that they don't know who they each other are. Everybody has to be anon. No there's nobody in the I don't know who runs the validators of fortune. I don't fucking wanna know who runs the validators. And they don't have to know who's running the validators either. So even if they wanted to collude, they have no mechanism to do so. But in the multi, I say commonly in a lot of designs implementations,
[03:39:50] Unknown:
it's publicly known who they are. Or if they're not publicly known, in your case, they know each other in most cases. Well, the thing is in order to be privileged to run a Torch Chain validator node, you need to post s bonds. Right? The the the token and that is 100% pre managed Bitcoin. Right? I'm sorry. What? Hang on the question. Torch Chain, the run. The the the shit coin of fortune. Right? It's it's 100% pre mined Shitcoin. Right? It's a 100% shitcoin? It's pre mined. It's pre managed Shitcoin. So you can't you guys, the foundation.
[03:40:17] Unknown:
I think I I think I should go there and slap those ass, like, little Smith style. Right? You think anything so? Just kidding. I'm just kidding. So, yeah, you guys, the foundation, whatever the team can easily run a run it well later on because you guys have to stay. Right. But it's important for the security of the network that the nodes are and the people who are running it are anonymous. If they're not, they can collude and steal the funds. They can go and steal the shit coin they want, but the net the network is fundamentally designed in a much more secure way than the way liquid is. But we don't know how how is the distribution the the room distribution is like. Can Well, I don't know who the 15 validators of liquid network are. What's like But it is essentially pre mine. The foundation, the team can easily run these 100, you know, all these 100 validator nodes. Okay. They have to stick. Yeah. You're so you're saying why? That's the point. Because of the work. Because I don't know the names and addresses of everybody who holds a room token. It's a security issue? No. But I think the point is, like, if you have enough resources, you can be the you have a serial attack. You can run all the nodes yourself that that is like the so so the economy I'll tell you this right now the team does not run any nodes
[03:41:18] Unknown:
verify it. Alright? Let's go back to your point that you raised before, which is the security budget, merge mining, fees concept, which is that security budget is the total amount of money that we pay to miners, and we want that to go up because that is the cost of an endless 51% attack. And in side chains, if they are merge mined, all that money goes to the layer 1 miners. So that seems like an easy slam dunk, win. But in liquid, the all the money, the transaction fees go to a wall controlled by Blockstream. So I don't but that's a disadvantage, I guess, of that particular Yeah. Right now, it's the way it's set up, but this might change, of course. Yeah. It may change. They could put it in, like, an like, a some kind of, what is it, obtru or something where just they can miners can just steal it, take it immediately. That would be kind of interesting. Could be. Yes. I don't remember exactly what RS RSK has been merged mining for a very long time. Why don't you talk a little bit about that? RSK started with 5% of the hashing power of Bitcoin of the Bitcoin market. What was it? The percent? January 2018.
[03:42:20] Unknown:
So it's actually the first productive sidechain in the world was Rootstock. So and was launched in January 2018 with 5% of the hashing power of Bitcoin and since then now we have between 40 60% of the hashing of power of Bitcoin secured in the rootstock. And how it works is like 80 percent of the funds go to the miners, to the Bitcoin miners, and 20% goes to the other key actors. Indeed, the federation is one of them. Software development is the other. So we have this model where, you know, the fees of the network go to fund the key the key elements of the network. And in that sense, when you think of a sidechain, you have, yeah, what we were calling not sidechains, like they don't have Bitcoin as their native currency, but you have networks that time stamp on Bitcoin. That's one thing. So so in a way time stamping the state of the network, not like Stacks or the other ones. So that's time stamping. The following stage is like having Bitcoin as an native asset like Liquid does still not contributing to the network. And on the following stage, it was the word. It does the 3 things. You know? It's like time stamping the state of the network, you know, using Bitcoin as a native currency and also contributing to the security of the Bitcoin network. And in that way but I'm not saying anything is bad.
It's like it's just like this is what it is and I think all side chains are good because for me, extending Bitcoin is protecting an asset for humanity that is very important, that is having a neutral reserve of value asset that can remove most of the worst in we have in the world. So so it's like the level of peace that Bitcoin can bring to humanity, you know, deserves our devotion in terms of, like, creating value on top of lithium however we can. You know? But then, of course, we have always our aspirations that I agree with you. What you're contributing is very valuable as well. Then, you know, time will tell if your model can be, you know, a tag single attack or not or or your intentions. I I think at the end, that's the only thing that matters. You know, at the beginning, people was very suspicious of of the Rustic team as well. But now 6 years after, I think people has a clear understanding that we keep going in the direction of decentralizing everything, like being true and honest to the Bitcoin Ethos. So again, this is not only technology. This is a human
[03:44:44] Unknown:
thing as well. A good point there because I think we should encourage the general market to experiment, try new things, be creative, be innovative. We shouldn't shit on people because they're doing in a different way than what you might do. It's like, I agree with that mentality.
[03:44:57] Unknown:
You should encourage creativity. Yeah. But, it's not necessarily the case that every there's no neutral idea. Right? Every idea you promote, you're demoting the rest. So that's not quite, you know, you can't just be unlimited. You can't be open minded to an unlimited extent. That's exactly the same as being closed minded to an unlimited extent, in my opinion. But,
[03:45:18] Unknown:
okay. Thanks, Logan. Okay.
[03:45:20] Unknown:
So let's move on to, maybe ossifying Bitcoin and, other things. We might maybe shrinking the layer 1 block size or some of these crazy ideas that have been tossed around where side chains enable all this kind of free wheel But let's put drive chain in and then ossify it. Yeah. Exactly. That's what I yes. That's that's my opinion. Because Because every change is a a potential problem. And, you know, we have there's been controversial changes in the past, and there have been, you know, there's been a lot of controversy. That's also but it One thing that I wanted to make to know, and on this exact point that you 2 were just talking about, It's very unlikely. In Bitcoin, it's everything has to everyone has to agree on what the protocol rules are, and this is very unlikely that this is going to the controversy has just gotten worse and worse. And as the community grows, I just think it will not possibly, get any better. So I think that the ossification we have to do something other than what we're currently doing, which is,
[03:46:15] Unknown:
this kind of weird committee or something. Yeah. We have to definitely do something. Yeah. I think, I think we'll we'll I think we'll definitely get get there right. I think we'll definitely have some probably actually trustless SPV side chains at some point. I think simplicity could help in this, given the, you know, the extensibility and expressivity. You know, maybe in 20 years from now, who knows? But I think we should definitely work on towards that.
[03:46:40] Unknown:
I think ossification or crystallization of proto of decentralized protocols is part of the process. It's like, you know, you want it the more decentralized a protocol it is, the the tougher it is to change it, and that's part of the process. And you want that because the more decentralized it is, the the less prone to attacks or or conservative efforts to manipulate the protocol can can happen. So I think for me, ossification is a feature, not the value. That's why I say, you know, let's bring, like, drive chain or a way for Bitcoin to expand, and then let's freeze it in a in a world forever. It's like, yeah, we want to Bitcoin to be ossified to be in mutual as as much as immutable as possible, but we want also because it's protecting, as I said, the more valuable asset for humanity today that is Bitcoin. So so we want that to happen. It's the only,
[03:47:31] Unknown:
kind of sustainable way to actually achieve the goal of ossification, I think. Yeah. For those of you who don't know, ossification means, like, we just stop changing the protocol, and we don't, you know, we don't make any changes, arguably including, like, improvements. We just say, like, just it is what it is. It's like long division or something. We're not going to change it. And, because every change is kind of a risk. Yeah. And so the I think the only real way to actually do that to achieve the ossification is to make sure that there is some kind of, safety valve or something for some something someone out there with a very good idea or a very fringe idea or some kind of experimental idea that might succeed but sort of probably won't. You need to have something where that can get into Bitcoin without it bothering everyone else who other people who may hate the idea and not want it running on their computer at all.
[03:48:21] Unknown:
Yes. And and also, like, creating these expansion channels or path for Bitcoin also we can think that Bitcoin will be in the future the core infrastructure of the whole financial system of the world so not only the reserve of value of the world, but also will enable, you know, the the local currencies, everything to be issued and handled by the same security network in different chains that will expand the core, like the bottom layer, the Bitcoin layer on top. And then, you know, nobody can question Bitcoin itself. It's like, you know there's all this discussion about energy. Okay but if with 5% we can serve any human being the financial needs of any human being in the world you know that's nothing. I mean come in I want to put 5% of the energy of the world to the service of humanity. Yes. So so the question shouldn't be how much energy Bitcoin, gets, but how much value we get from that energy.
And and if we are really serving every human being in the world. And I think that's why we need to extend between because otherwise it's only store of value. It's only for the 20% of the population who can store value for 2, 3 years. At least for now, of course, if Bitcoin goes down in volatility and becomes but hyperbitcoinization is not going to happen in the next decade or in 2 decades. So so we need to like, if we want to get to that hyperbitcoinization, we need to to create the path forward and and serve the whole humanity in between.
[03:49:52] Unknown:
So one thing like the the it's kind of universally endorsed that Bitcoin should scale in layers. And, the traditional financial system also scales in layers with those, like, commercial banks and there's, like, the Fed, the US Fed, European Central Bank, and then there's, like, the Bank of International Settlements selling like a big tree. And so I just kinda want to throw out the idea that side chains is very fully consistent with this with this idea of scaling in layers. And I think it's actually the best realization of the idea, but I don't know if other people agree with that or not. I don't know. What do you think about that? Do you think that that makes any sense? Yeah.
[03:50:27] Unknown:
Maybe. Yeah. Yeah. It might. Yeah. Probably makes sense. Yeah.
[03:50:30] Unknown:
One note I had here that I wanted to just throw out. It's kind of an interesting thing. It's very different. But the idea of of fun, of people having fun. I remember Bitcoin, you know, when it was a smaller group, it was a little easier to have fun. Now everyone has to agree on all these things. I think that I think that side chains might restore some of a sense of fun because people are free to do their own weird idea, and people don't have to agree in, like, the Bitcoin development process that it's a good idea. And maybe you can have an idea that's just good, and you don't have to justify it or explain it to other people. You can just do it. Right? And then you can just try and get customers. And I was just wondering if you have any thoughts on this. This is kind of a weird little note that I had to throw out there. Like, this idea of of sidechains and fun. Does this make any sense to you at all or is this just crazy?
[03:51:15] Unknown:
Yeah. I think, yeah, you know, bringing some new stuff to Bitcoin is really hard. I think most people are taking the most the the more conservative side on this. And I think we've seen some competing proposals so far on covenants and side chains. I haven't had a chance to read up the 300 or so. It's really hard for me to, you you know, add some comment on this. I I but I think I remember back in Twitter on in a space, the main objection was the the majority hash rate can steal from the right chain. Maybe Yes. Yeah. That was the common objection I remember. But, hopefully, we'll get there. Yeah. I mean, we'll hopefully get trusted sidechains. But in the meantime, let's experiment, you know, with federated sidechains. Think of that as the test net of Bitcoin.
And you can build, you know, smart contract primitives and with some, you know, advanced scripting primitives. And whether it's liquid and RS key, you can, you know, try to build things on Bitcoin,
[03:52:09] Unknown:
on on layers of Bitcoin. Yeah. Yes. I do. You know, do I just defend the 300 for a second. It is true that the majority hash rate can steal all the coins, but it takes them 3 months, to do that, so or or 6 months. Best case scenario, it takes 3 months. So it's deliberately designed with that, reality in mind. And in fact, there's very little if 51% of the hash rate is against you, there's very little that they they cannot steal from. So for example, they could steal from the Lightning Network by just censoring the Justice transaction. So I'm not saying that to spread any fear of the Lightning Network. I really just think the whole criterion of the 51%. When I designed it, I literally had in mind, like, if 51% are against you then you're probably screwed no matter what. And so with that that kind of open concept of them being able to pull any 32 bytes they would like out of the world, it is it's deliberately the the the slow 3 month withdrawal is deliberately designed to address that, thing. But I think it is fundamental. There's nothing you could do. Like, if you had a a side chain based on zk SNARKs, 51% of the hash rate could simply censor out all the zk SNARK messages, and then you would never know anything. So I think I think it's a fundamental limitation that absolutely nothing can improve on. So I sort of took that as a kind of minimal assumption and tried to push it all the way through. But I think, people who should read, give BIP 300 to read, and decide what you think for yourself.
Yes.
[03:53:33] Unknown:
So yes. Regarding your question, I think, yeah, side chains are fun. It's like I mean I I mean, it's like we have in Roozedog, like, now, you know, NFT marketplaces, for art. For example, curated art instead of, like, just JPEGs, like real artists, like, who are publishing their ownership rights in and certifying those on Rusto with the hashing power of Bitcoin, paying with Bitcoin for the arts. So it's a lot of fun. It's like, then you have DeFi. You have lending protocols being used in Latin America. Thanks to this. So that you have a p two p monetary system backed by Bitcoin running on restock. So you have a dollar backed by by Bitcoin. Thanks to the side chain, which I think is the best stable asset in the world because it's basically you don't have to rely on a third party. It's called money on chain. It's the protocol. So so yeah. And, so so you have all these things that, you know, are happening thanks to sidechain and are being secured by the hashing power of Bitcoin and are being paid all the transactions and operations are paid with Bitcoin.
So I mean, if that's not fun, I don't know what it
[03:54:49] Unknown:
is. Well, it's for at least speaking personally, I mean, I had a lot of fun, you know, thinking up and innovating, doing something complete novel that for most people wrote it off as if it's not possible, including even like Eric Voorhees in the beginning. Now he's, like, one of the biggest advocates of the project. So the idea for me, at least for me personally, I love innovating. I love design. I've been doing it for a very long period of time. I, like, I like to challenge myself. I even spent 6 months working on a project that was mathematically impossible to work on just because it was so fun. And so I love this area of of innovating in side chains or blockchains or whatever because there's so much to be done here. This industry is like a little infant baby that needs to become matured, and I decided to devote myself to this this idea. And so I have so much fun every day other than the stress force. But so much fun every day kind of designing and building and building this this network. Yeah. It's really fun. I mean, in Liquid, we with Taproot, we had a a set of new new additional opcodes bundled with Taproot, like, last year activated. So you can, you know, build around covenants and smart contracts already on Liquid. It's it's really fun.
[03:55:49] Unknown:
Yeah. And I I worry that, you know, if we don't have side chains, we'll have a lot of people show up. They'll be really excited. Then they'll try to get involved with Bitcoin core development or something, and they'll get really discouraged. And then, you know, we see a big proliferation of, you know, this is as you may have noticed, all these other altcoins, and everyone's doing altcoin. And so I think it's partly just because it's so easy to do an altcoin. It's so difficult to do something in Bitcoin. So the the idea is to sort of maybe address that problem. So now we're running low on time. Does everyone want to show something and make a point to tell people where to find you and things like that. How about we do that? We gotta we wanna go back in reverse order maybe?
[03:56:27] Unknown:
I'll be I mean, I'll link myself available on the other side of these doors if anybody wants to ask questions or whatever or go deeper into detail. I don't sure we don't have time here, which is perfectly fine. So I'll be on the other side of those doors. You're welcome to come up and ask me questions and drill me if you want to. But, this world is just starting, and I'm so excited to be a part of it for sure.
[03:56:44] Unknown:
Yes.
[03:56:45] Unknown:
Yeah. I think you have to stay wild, stay curious. Like, I think this is a brand new world. I do disagree with him. He's not a baby. He's a toddler. So no. But it's, like, definitely, it's in in its infancy, and and everything is there to be built. And we are, like, really starting to meet the real people. So of course if you want to go to the Roofstock town here, the whole Roofstock community is there, People building on Rustic. So and I'd be there. And my Twitter is Dieguito, like the Diego in Spanish. So I'm happy to talk to you as well if you if you're willing to.
[03:57:26] Unknown:
Yep. Only small countries use liquid.
[03:57:29] Unknown:
Mhmm. What is it? That's
[03:57:32] Unknown:
it. Only small countries use Use liquid because of Yeah. Yeah. I think we'll be we'll be seeing a continuous a trend towards that. I think Samsung has been doing a great job. Bitcoin pulling on liquid bling countries, and we're seeing interesting stuff happening on liquid, you know, in terms of security tokens and, you know, all other stuff.
[03:57:51] Unknown:
That's awesome. What's happening right there is, like, almost surreal for all all of us. Like, in Salvador, like, after so many years, like, yeah, pushing for Bitcoin and seeing it being used in real life. But it's, like, almost magical. You know? It's like and I I I'm very happy that Liquids helping on the bonds and the tokenization of assets for the government. That's that's great. Cool. And so I'm again, I'm Paul Storz. I have a
[03:58:18] Unknown:
I've been researching side chains for a very long time. So you can read about my proposal, BIP 300. You can read on my blog, truth coin.info. I have many other side chain designs and commentary. So that's it, I guess. So thank you very much.
[03:58:34] Unknown:
Right.
[03:58:43] Unknown:
So he put an intro talk before us. I hope there's not too much overlap with our things, but we'll we'll see, I guess.
[03:58:51] Unknown:
It's been a great conference so far, and thank you very much for coming. I am going to talk to you about the very exciting subject of Federated Chaumian Mints, or what I believe is effectively the 3rd pillar of the bitcoin open source ecosystem. Now when making this comp when making this talk, I wanted to think about and reflect on why we are here, and I I don't mean in the existential sense, and I don't mean why we're here at Bitcoin 2022. I mean, why are we here at the open source stage? I think the reason we're here is because we understand how vital open source software is to the bitcoin ecosystem, and ensuring that bitcoin achieves its ultimate objective of separating money from state.
Now we understand that Bitcoin is a global scale decentralized, decentralized spelled in the UK way, by the way, not the US way, Censorship resistant money. Now core to that, and no pun intended, is Bitcoin core, which is a global scale decentralized, censorship resistant form of money and store of value. Now over the last few years, we've seen the 2nd pillar appear, which is lightning, which again is a censorship resistant, decentralized, global scale payment network, but I believe we are missing a pillar. What we do not have and what we need is a censorship resistant, decentralized, global scale form of Bitcoin custody.
Well, at least until Feddymint came along. Now before I go into details as to, or give you an overview of what Fedimint is, I think it's important to understand why a decentralized Bitcoin custody system is so vital. And to understand that, we need to understand what are the current options if you want to custody your Bitcoin. Now the first option, funnily enough, is third party custody or with a non cockney accent, 3rd party custody. Now this is where you entrust your Bitcoin not to yourself, not to a friend, but to a third party. Someone who you don't know, I. E. A stranger. Now way back when we would trust our Bitcoin to unregulated exchanges such as MT Gox, and as we all hopefully know that didn't end well.
What would happen is if you trust your Bitcoin to someone who doesn't know you, they would either not look after it properly and it will get stolen or lost, or they themselves will run off of your Bitcoin. So in response to this, a number of people tried to set up regulated exchanges. I was one of these. 8 years ago, I set up a Bitcoin exchange. Now the intent was good. I wanted to, and all of the others, wanted to set up exchanges to resolve these problems, but we resolved 1 and created a new problem. You see, what we were asking people to do is to, and we educated them to do, is to take their fiat and use it to buy a censorship resistant money, and then put it on an exchange which was regulated by a regulator.
Regulators exist to regulate. Another word for regulation is censorship. So you don't have to be a genius to realize that's also in time not going to end well. Now, this is not hyperbole. I, over 8 years, saw increasing level of regulation coming down the line, and now today we are seeing whatever your view we're seeing Ukraine Russia where Russians around, innocent Russians around the world are being lost, are losing their access to their Bitcoin. In the European Union, we're seeing new regulations come into place which effectively prevent or make it very difficult for people to gain personal custody of their Bitcoin.
So what was the solution to this? We advise and educate people to use first party custody. This is where you are taking full personal responsibility for your Bitcoin. Now from a censorship resistant point of view, this is the gold standard, but the reality is that after 8 years of running a Bitcoin only exchange, I had to come to a conclusion that maybe we can get 5%, maybe 10, maybe even 20% of people to self custody, but 80 to 90% are never gonna get there. And the reasons are simple. One, for many people, it was just too technically complex. They did not feel comfortable with the technical sophistication needed to self custody.
For others, they just couldn't afford it especially in the global self. I'm a board member for B Trust and I understand that many people around the world do not would not be able to afford the cost for a hardware wallet or if they could, it was better given their total volume of Bitcoin to buy more Bitcoin than to buy a harder wallet. And 3rd, for a lot of people, they're just too afraid. They just did not feel comfortable with customing Bitcoin themselves and they preferred to trust someone else other than themselves. So in this arena, Feddy Mint appears, and Feddy Mint is a portmanteau, a mash up of the words Federated Chowmian Mint.
Now Feddy Mint contains 3 key innovations. 1 is philosophical, the second is structural, and the third are technical. The first, the philosophical is instead of using 3rd party stranger custody or first party do it all yourself custody, you use third second party community custody. Ie, you take a community of close friends, close family, close work colleagues, and they form a community wallet together. We've already seen this happening in Bitcoin Beach. I was there last year in Bitcoin Beach in in El Salvador. This idea is strange potentially to people in the west, but in the global south, this is very common for people to trust their friends and family.
The second is structural. The FEDIMENT protocol recognizes that not all people in a community have the same technical acumen. So just like in days of yore where tribes, the strongest in the tribe would look after the tribe, The technically strongest in a Federman community. Take do the heavy lifting of running the the the community wallets, the FEDI Mint community wallets on behalf of the tribe. Now, clearly in that scenario, the guardians, what I like to call guardians, have a level of influence on the Bitcoin that normal members don't have. And in order to sort of effectively create guardrails around that and limitations on that, 2 technologies are put into place.
The technologies that give FEDI Mints its name. The first is the use of federations, Now you can think about these simply as multi signature wallets so that no one guardian, and in large federations, several guardians can act together to be able to create a transaction to take money out of the wallet. So you avoid key man's single point of contact risk. The second is the use of Chaumet and Mints, and this is quite key because Chaumie Mints is a is a privacy protocol, and you'll hear more about this later, which means that guardians can work to manage the communal or community wallet, but they do not know the individual balances of community members.
Furthermore, if a deposit comes into the wallet or a request for withdrawal goes out of the wallet, the guardians don't know who the money bitcoin coming in is for or who offered the request to go out of the wallet. Now this provides a level of privacy which is not only better than third party custody where the exchange, the stranger, knows everything about your usage and all of their users, but it's actually better than first party custody as well. Because blockchain analytics companies or blockchain monitoring companies are not able to determine the difference between a federated Fedi Mint wallet and the normal first party wallet. So from their point of view, it's all one user.
They can know the total amount of balance, but they don't know which person within that community, including the guardians, are doing what. So taken together this means that FEDIMENT is global scale because we are able to get not only the most technically sophisticated out from a regulated regime, but also their close friends, and family, and work colleagues as well wherever they may be in the world. It's decentralized because you can envision a future where there are 10,000 to a 100,000 FEDIMENT communities around the world. Not the few dozen hyper large exchanges, regulated exchanges that we are quickly heading towards, and it is censorship resistant because if you are providing this service as a guardian and you are not choosing to make money from it, then in most jurisdictions around the world, most reasonable jurisdictions that is exempt from regulation because you are not carrying out the task by way of business, and therefore, you do not need to be regulated like hardware wallets.
Taken together, I believe, and when I heard about this a year ago, I believed that FEDIMENT has the potential to be the 3rd key pillar of the Bitcoin open source ecosystem. At the a global scale, decentralized, censorship resistant form of Bitcoin custody. Now what do you do next? You can't see the URL. Hopefully, you can. The first thing is please wait and listen to the next talk. This is about the future of Bitcoin privacy. I urge you also listen to it because it's a really interesting talk, but also you have El Sirian who's the inventor of the Fedimint protocol, and also the main contributor to the minimint reference implementation of the FEDI Mints protocol.
2. Where, and I'm sure he will go into more detail as to some aspects of FEDI Mints. 2. You should it doesn't appear clearly here, but you should go to FediMint dot org where you can find out more about FediMint an understanding of how it works, and the reasons behind it. And 3, and most important, if you are a Bitcoin open source engineer or developer, or if you are somebody who just wants to contribute to to open source technology, I urge you to go to GitHub and the Fannie Mae project on GitHub, and consider investing your time and contributing to the project.
If you choose to do so, you will be helping ensure that Bitcoin achieves its ultimate objective, which is a separation of money from state. Thank you very
[04:12:38] Unknown:
much.
[04:12:53] Unknown:
Hello. Hello, everyone. Welcome to this panel. Obi, thanks a lot. That was the best intro we could have hoped for. Obi, gave the general idea of what we're gonna be talking about on this panel, so that's Federated e cash. My name is Adolfo Wiedem. I work at Bitcoin Magazine. I'm joined by Casey Rotemore to the right to the left for you, of course, and Eric Serian. I'll let you guys introduce yeah. Sorry. I'll let you guys introduce yourself briefly, just explain who you are, Casey first? Sure. Yeah. My name is Casey Rodemore. I'm a long time
[04:13:32] Unknown:
sort of minor Bitcoin developer, you know, hanging out in the shadows doing random things. I have a bunch of preposterous ideas that I work on, but I'm very interested in Bitcoin privacy, and I got interested Charming and E cash on top of Lightning around the same time that Eric started to work on it. Yeah. That's why I'm here.
[04:13:53] Unknown:
Eric? Yeah. Hey. I'm Eric. I'm a crypto anarchist and aspiring cypherpunk, and have a background in, like, distributed systems, cryptography. I'm a Rust programmer. And, yeah, around the time, of last year, I think, we were talking, like, at the Miami conference actually Mhmm. About the new project of mine, Minimint. Yep. And that's how we got together, and, that's how the project, when the project got started. Yeah. So let's talk about
[04:14:23] Unknown:
a little bit of the history and we'll go back further than 1 year. Yep. So, Xiaomi in cash has a long history. Very long. Yes. Casey, where does it come from? Yeah. So the concept behind Charmian
[04:14:38] Unknown:
cache is it's Charmian cache okay. I did not get into what Charmian cache is yet, but it's based on something called blind signatures, which were invented by Chaum in 1982. And then in 1989, he actually started a company to try to commercialize that technology and provide a, a sort of private digital bank, a fully centralized private digital bank using blind signatures, and never really successfully commercialized it. But it's kind of an idea that's been there in the background for a long time. And one thing I recommend for people is look into the pre Bitcoin history of digital privacy and digital cash technologies.
There's many things like E cash in the past that are interesting ideas, weird takes, so it's definitely, like, fertile ground to explore further.
[04:15:29] Unknown:
Yeah. Well, Chaum so David Chaum who invented the he he was basically the first person ever to, consider, you know, if money is going digital, that could actually be very bad news if if if there's a central party that's tracking everyone's transactions. It's a nightmare, really. So he started to think about ways to make that private. So he he's the first person that started to think about digital cash really, so the first, predecessor to Bitcoin or the first you know he's sort of the founding how do you call it like the granddaddy of the whole the whole movement I would say.
Yes, his first paper was called the transaction systems to make Big Brother obsolete, so that sort of says it all. Yeah. So, let's get into then the technical explanation, so how does this work? Do you wanna take this, Eric? Yeah. Sure. Sure.
[04:16:23] Unknown:
Like, counting e cache is based on a super interesting, technique called blind signatures. And, what blind signatures allow you is, as a user, you can acquire a signature on a piece of data without showing a piece of data to the signer, which might sound a little bit weird in the beginning, but we'll get to it in a minute, why this is so important. Like, if you, if you still remember carbon copy paper, you can imagine it as as follows. You put your message, your note into an envelope made out of carbon copy paper. You close the envelope, give it to the signer, they sign on the envelope, it pushes through, they give back the envelope, and you can open it, taking out the message with the valid signature, but the signer never saw the message.
And how we construct e cache from that is by simply taking, like, a random message. You just choose it randomly, some big number,
[04:17:17] Unknown:
and also take a dollar, let's say, or a Bitcoin, or a Bitcoin conference. Well, I mean, so back in the days, Sean, you'd be, you know, using actual bank accounts back then, so that's why that example also makes sense. You take, like any amount of money.
[04:17:31] Unknown:
You also take, this random number, put it in the envelope, give both to the signer, to the bank, and they would, keep the money, sign the envelope, and give it back to you. And the signature would mean this is, worth, let's say, $1, or 1 Bitcoin, or 1 satoshi. And, later on you could go back to the bank, show to them that you have to sign a piece of data, and they would give you back the amount of money you deposited. And that's how you can also build a transaction system from that.
[04:18:00] Unknown:
Yeah. The the practical effect is you have a bank where you deposit, and later you can withdraw, and the deposit is totally unlinked from with from the with from the withdrawal is totally unlinked from the deposit. Customers show up, they have this message that proves that they deposited funds, but not who they are, when they deposit it, whatever. The bank can verify its own signature, give them the funds, and has no idea any details of of the customers. Yeah. They know they really minted the the cash, but they don't know,
[04:18:31] Unknown:
which note they're getting back. Right? Which criminal numbers are getting better. Exactly. And so the way it's, sent, you know, the the way you pay is you literally send the number to someone else. Right? And then that person will check immediately, essentially, with the bank in that case. That's right. If it's they'll essentially send the number to the bank
[04:18:50] Unknown:
and get it reissued, so then they get their own number,
[04:18:54] Unknown:
that the payer doesn't know. So now the funds are in in their control. Yeah. That that's how double spending back then was solved. You just check it immediately with with the bank that's issuing this. Now now we're applying this same trick essentially to Bitcoin. So, one way you can do that is you you basically have a Bitcoin bank. So you have someone that's cost of being the Bitcoin,
[04:19:19] Unknown:
and you get the federated or sorry, you get we'll get that to the federated part. Right. Yeah. Building up very, very simply. So the first thing you can do is you can just build a very simple Bitcoin bank with the system. You deposit Bitcoin and somebody you do this blind signature magic. You put the person who deposited it. You give them back a some sort of token, a blinded token, and, later, they can withdraw it. So this is a nice one improvement on a fully centralized, fully, like, non private system. Now you have a centralized system, but now it's it's private. People can deposit and withdraw Bitcoin without the service knowing anything about the customers.
[04:19:58] Unknown:
Right. So
[04:19:59] Unknown:
but we're not completely happy with this this custodial No. No. Right. Yeah. A lot of trust, and it's not it's not decentralized. Right? You, you have a lot of trust in, like, a single entity that's running it. Right? So we can do better with the magic of federation.
[04:20:15] Unknown:
Yeah. Exactly. Like, especially, you have to imagine, like, if you're running such a Bitcoin bank, you'd probably want to do this as a NIM today because, like, the regulations around banking are very unfavorable to privacy, so you probably couldn't run a federate an ecash bank in the open. So instead, you need to do is as a NIM, and then it's really easy to access SCAM. So to solve this problem, essentially, we can split the trust over multiple people. Like, there is this, technology called Federations. Like, you might have heard of it. There is the liquid federation, which creates a side chain, but you can also use, federations for other things, like, for example, to federate e cash. And the concept behind it is instead of holding all the Bitcoin in one wallet, that is centrally controlled by 1 party. You can hold it in a multisig wallet with, for example, there are 11 people, that you need 11 people out of 15 to actually move the funds. And that way it becomes much more secure.
Because now 11 out of 15 people have to, collude against you to steal your money. And you can do the same thing to the, to the blind assignment process, like, to the, blind signature algorithm. There are threshold blind signature algorithms for which you need 11, for example, 11 out of 15 members to collaborate, to create these blind signatures, and to sign your e cash tokens. And that way, we successfully split the trust over multiple people. And as Obi said, you probably have some people in your life that you kinda trust, maybe not fully. Maybe you wouldn't trust them with your life. But, if you have, like, sufficiently many of these then you could construct such a community bank.
[04:22:00] Unknown:
Yeah. And as Obi indeed mentioned it is happening already, the Bitcoin Beach World would be a good example of that where they have this distributed trust model. So there's a very good argument to be made I think for a system like this. If people are already doing this, if they're already custodying Bitcoin in this sense for convenience sake, well, it would great it would be great if we can add a privacy layer to that with a with a system like this. Right. And you could have all sorts of arrangements. Right? You could imagine this being friends and family. You could imagine in jurisdictions with favorable
[04:22:35] Unknown:
regulations where it's possible to do this, public public people doing this. You can imagine, you know, darknet markets or any wild people you want running this for profit or as, like, an adjunct to the existing services that you provide. And maybe you don't trust any one entity, but
[04:22:52] Unknown:
you trust them a little bit, and you add up a little bit of trust, and you get something that you feel comfortable putting some amount of funds into. Oh, maybe even better. Like, in the case of darknet markets, they might be, fierce competitors, and you just trust that they hate hate each other enough Right. To not collaborate. Right. And instead, like, that's like with Bitcoin. We essentially trust that the miners are in a fierce competition and don't collude against us, and then they're kept in check with some economic incentives. But, essentially, yeah, as long as they don't don't have incentives to collude, it works.
[04:23:23] Unknown:
Mhmm. Right. Yeah. So we had a discussion about this earlier, so I wanna see Eric, do you think that these banks need to be announced or not? Like, If you're using a federated system at least some form of identity kind of matters to make sure that they're not the same individual, right? Yeah. You need to. What what are your thoughts there? Is this something that's compatible with complete anonymity in that sense or
[04:23:53] Unknown:
It's definitely not compatible with complete anonymity, but, let's say you have Twitter memes that have a reputation that they built over years, and, like, it's it's hard to have, like, multiple nimes that have high engagement, let's say, and I pretty much trust that, Shinobi, like, he is pro that's probably his main nim. Like, he probably can't run multiple accounts shitposting that much. So I would totally trust him being a member of a federation, and then if there are multiple such people, then I could totally imagine, a federation of NIMs, and I really want to see this. Like, a Cypherpunk Federation, which is global, where you don't have, like, these second party trust relationships, but it's still good enough. Like, it gives you a lot of privacy and, hopefully, they won't exit scam.
But on the other hand, there is this need for community banking, which Obi described, and I think they have, federated e cache can also play an important role in local communities, because currently what, you're seeing with Bitcoin Beach Wallet, or, Galloy. It's super cool. I love it. But, ideally, if we want to deploy this at a scale, you don't want your neighbor to know what you're spending your money on, and that's also a problem Federated Ecache is solving.
[04:25:11] Unknown:
Okay. So did you wanna add something that, like, who who would be the ideal federation members or how do you envision this? Who's gonna adopt this in your view? Right. I the ideal
[04:25:22] Unknown:
federation members are just people who have something to lose if they collude against the federation, and that can be anybody. That can be Twitter names. That can be people who run businesses, people you know personally.
[04:25:33] Unknown:
Yeah. And I was just gonna say that, like, this isn't compatible with full anonymity, but it is compatible with pseudonymity. Do we agree by the way this is probably the most important trade off for systems like this? So we're getting great privacy, but regardless of your setup,
[04:25:51] Unknown:
there is some level of trust involved one way or another. Is this the main trade off in in your view? Definitely. Like, you're trading trust for privacy in that sense, and but you're not only trading it for privacy. You're always also trading it for convenience.
[04:26:05] Unknown:
Yeah. No. Yeah. That's the other thing is that, like, when you use somebody else's computer, you don't have to set it up yourself. So that's another trade off. Right? You're trusting people, but you also are trading off, like, technical difficulty versus trust.
[04:26:20] Unknown:
And, like, that's how I see it. We essentially Trojan horse privacy into Bitcoin that way. Like, if we can make this so convenient that everyone wants to use it, then we will automatically give people more privacy and, we'll also, like, make it the natural thing to do. Like, not only criminals use, the private, Bitcoin technology then because, currently, like, if you're using coin torrents, then you have the big problem. All exchanges will flag you and, will freeze your funds. But if everyone is using this other convenience, there's no reason to do this. Like, they can't. You have, like strengths and numbers.
[04:26:59] Unknown:
Eric is this system at least auditable? Okay, can you know for sure that there's not more e cash issue than the federation has Bitcoin in reserve?
[04:27:12] Unknown:
That's the one big problem I'd say. Like, you can't audit such a system because it, provides such great anonymity that, like, the federation never knows which tokens are already spent, which aren't. You have this all the tokens in your anonymity set, but it also means you cannot generate, a proof that you have a certain amount of funds for the issued e cash tokens because you could not, tell which ones to remove from the proof, if you were doing something, like, the exchanges do, or some exchanges do, like, proof of funds. Yeah. You fully trust the federation in that sense.
[04:27:46] Unknown:
Yeah, I know we can't peer into the future and we can't, you know, we can't figure out what people will figure out later. Yeah. But I'm still gonna ask you, is there any sort of plausible scenario that in the future it might be audible in one way or another or is this just completely off the table in your in your view?
[04:28:05] Unknown:
I mean, I thought about this for a long time, and, what I came up with in the end was really, close to the 0 coin design. Yeah. And, I think in any design where you have auditability, you require the users that want to spend money to sync some sort of blockchain or to sync some sort of, global state to hide, in, and, that makes it not as convenient. Like, with the current federated e cache system, you only need to care about your own e cache tokens which is, like, small pieces of data which fits onto any phone, but as soon as you add the auditability it becomes much more cumbersome to run a node, and then we probably can't Trojan horse privacy into Bitcoin because people won't run it.
[04:28:46] Unknown:
One topic we haven't, mentioned yet is the the vision for integrating these kinds of systems, the federated Xiaomi systems with lightning. Right? That's that's part of, your project. Right, Eric? Yeah. Or Casey wants? Well, just be eager to say something. Yeah. I just wanted to say, like, that's we touched on the privacy
[04:29:07] Unknown:
of the depositors have from the people running the federation. The people who run the federation don't know anything about the depositors. The nice thing is that when you pair the system with Lightning, when users are, depositing via Lightning and making payments and withdrawing via Lightning, you get very good privacy from outside observers. So to the to the point of view of an outside observer, somebody who's trying surveil the Lightning Network and surveil the chain, one of these Traumian Federated Mints, has a bunch of channels. Right? And maybe you can observe, like, through, like, you know, analysis. You can see, like, okay, how the balances are changing, maybe get some ideas of payments that are being made or whatever.
But because so many users are are using this one lightning node and essentially sharing all of these these channels, an outside observer gets very little information about the actual activities or identity of the cons customers. It's essentially like 1 big giant coin join, with this big shared lightning node that is very hard to surveil and draw any conclusions about. So that's an important part about where the system gets its sort of external privacy.
[04:30:17] Unknown:
It definitely say that's a part of it, but the original intent for integrating Lightning was actually to not make this, like, one federation to rule them all, because that would be enormously a centralizing force, because only people inside the federation can page other with e cash tokens. So So if you don't have the lightning integration, everyone would want to be in the same big one big, e cash federation, and, that would might become a systemic risk to Bitcoin. But if you can integrate lightning, and I'm currently working on this, and I already have the outgoing lightning integration, the incoming, is currently being worked on, then you suddenly just have a lightning wallet, like, a really private, federated lightning wallet, and can interact with any other lightning service, may it be another federated e cache mint, or, like, someone running their own Lightning nodes, or even, like, centralized services, like, Wallet of Satoshi. Like, you're fully interoperable with the whole ecosystem. Yeah. You can think of these, you know, federated mints as being sort of functionally equivalent to banks, and then Lightning being the settlement network, which makes it very easy to move between them very quickly. And instantly. Yeah.
[04:31:22] Unknown:
This does seem to bring for me this does seem to bring up like a bit of attention maybe. So you're basically suggesting that you would prefer these, feathery mints, to not be too large and, I I guess the main risk of that is the custodial risk again? Yeah. Yeah. Exactly. Yeah. Right. So then the trade off there is, I think for optimal privacy, you actually want very large,
[04:31:47] Unknown:
you know? That's right. To increase the size of the anonymity. Yeah. So there seems to be some kind of tension there Absolutely. Going on. Yep. Yep. Yeah. I mean, you just want like, everybody has some price at which they will defect. I don't know. Maybe not everybody. And you just don't wanna hit that price with, like, a single federation with, like, a giant, giant pot of gold. So, yeah, there's tension. But, yeah, the more people you have on the federation, the more transactions you have, the the better privacy you get. But, probably, you don't need to have that many users to have very good privacy. Right? Like, if it's reasonably popular, if it's making lots of transactions pretty much continuously,
[04:32:21] Unknown:
you're gonna get pretty good privacy, and there can probably be might require a lot of users. Right? Like, what do you do you have any ballpark? Like, at what point at what points does do do you have enough, big enough privacy pool? Sorry. What do you call it? An anonymity. Yeah. Yeah.
[04:32:37] Unknown:
I have no idea. I mean, you you kind of want there to be, like, constant transactions. Right? As long as there's, like, a constant transactions and you have a hard time doing any sort of timing attack. And I don't know how many users that is. If Lightning is broadly adopted, maybe you don't need that many users at all. Yeah. This ties into our next,
[04:32:55] Unknown:
subject, and maybe we're sort of skipping ahead. But so what yeah. Like, what are other weaknesses from a privacy perspective? So you mentioned timing attack. Maybe maybe there's someone in the room that doesn't know what it is. I doubt it in this room, but can very quickly explain what a timing Sure. A timing attack would be when you maybe you observe an on chain deposit,
[04:33:13] Unknown:
and then you're also surveilling the Lightning Network, and so you, through watching changing channel balances, you see an outgoing payment from the federation. Right? You see deposit on chain to the federation, then you see an outgoing deposit or an outgoing Lightning transaction from the federation. So then from that, you might surmise that the, deposit
[04:33:30] Unknown:
was the same person who made the the the outgoing payment. Right? Yeah. That's especially a problem if you want to use such a federation for tumbling because we didn't go into this yet. We mainly presented this as a way to make payments, but you can also use it to tumble Bitcoins and, for example, to recycle toxic change you got from coin joints. Right. There are so many possibilities to use this technology, and for that, you'd have to wait for, like, a reasonable period of time that the other operations happen, and it have some anonymity set. And, like, a second weakness, I'd say, is in the current implementation. It's not a theoretical weakness, more practical one.
To make the system efficient, we're using multiple amount denominations. Like, let's imagine we had only 1 satoshi tokens and wanted to send the whole bitcoin, then we'd have to sign, like, 100,000,000, random data strings, and that would take a long time, like, even on modern computers. So what we do instead is we introduce, like, tokens that are worth 1 satoshi, 10 satoshi, 100 satoshi, and so on. So that reduces our unlimited set per denomination, but in the end, I believe, if all the users of the federation have roughly the same amount of money, then it's still good enough. Like, the problem is if you are the rich dude in the federation and the only one owning, like, the 1 bitcoin tokens, that would be problematic.
But, you can see this. Like, you can create a federation and ask, hey, how many tokens did you issue of this denomination? If you see it, there's no one issuing 1 Bitcoin tokens, then you just take the, like, 0.01 Bitcoin tokens and issue 100 of them, and then you got your privacy back. Right.
[04:35:08] Unknown:
So Eric, your specific project is called Mini Mint. Yeah, exactly. What's what's the status of that? How far are you with that?
[04:35:16] Unknown:
I can it's currently a research project I tested on rec tests. Definitely wouldn't put any main chain funds on it yet, but I'm planning to have it ready for, like, early alpha release, in October for hackers congress poly polysem. I want to pay my coffee with it, and, I did this last year, but it was, kind of, kind of, a hack because I used direct test, Bitcoin in the federation to, trigger a payment from a lightning node, which was operating on mainnet. So that's kind of cheating. But this year, I want to have real Bitcoin in the end. I have to put my skin into the game, duck footers, and then it will become awesome.
[04:35:51] Unknown:
Has there been any interest, from other projects to integrate this or or not yet?
[04:35:58] Unknown:
I mean, not really yet. I mean, it's in the early stages. I got a lot of support, like, definitely, I got a lot of support from, the crypto behind it and, a lot of outreach, but, from, like, a more user facing point of view, not really yet because it doesn't make sense. Like, currently, I'm still working on the deep tech behind it and not on any user facing apps, but this time will definitely come. One one thing to mention is that it's written in Rust. So if you like Rust, you're looking for a Rust Bitcoin project to contribute to
[04:36:30] Unknown:
selling point. You know?
[04:36:32] Unknown:
I I was just gonna say, what do you need, at this point? Developers? Is that that's the main thing? Yeah. Definitely.
[04:36:37] Unknown:
Like, I need Rust developers to build the main thing, like, the server component and also the client library, and what I'm currently planning on is building, web assembly based client where I compile the client library for federated e cache into a rep assembly, and then, someone could build, like, a react interface to it, and, so it's easier to use. Just put it on your phone, like, scan QR code, that would be awesome. So if anyone, has any knowledge about this stuff, I don't. Like, I'm really a back end guy. I'm a Rust developer, but, I'd love to cooperate.
[04:37:12] Unknown:
We've hinted at it, at several points throughout this panel, but eCAS is of course not the only privacy tool for Bitcoin. People are working on different solutions to increase privacy. How what's the vision for how does Federated Decash fit into a broader picture for
[04:37:31] Unknown:
Yeah. I mean, so the the ideal world would be one where lots of people use, solutions like Federated Cash to do these private L2 payments, and then all of the on chain payments, all of the l one or a lot of the l one activity is just massive coin joins. Right? It's just, massive, like, gap. Like, the the federation needs to, like, get some coins and and send it to another federation or another, like, some needs to make an off chain or an on chain withdrawal, and they just all do it through giant coin joins and sort of, like, non settlement payments all happen through these private l two mechanisms. Maybe one thing to add there.
[04:38:10] Unknown:
Contourance, currently not great because you have all these different denominations, and if you want to pay a certain amount, then it's a really weird, with amount and this will stick out. But if we were doing all the commerce on layer 2, then we could have common denominations, or, like, on on the base layer, and that makes a coin join so much more efficient. And, I can imagine a future where every spend is a coin join. That's that's the future I'm I'm working for. Yeah. I want to see this.
[04:38:38] Unknown:
Alright. Well, guys, we're out of time. So thanks a lot for doing this with me. Oh, thank you. Thank you. For Coming. This is the last talk here. So this room, that was it. Thanks.
Introduction and overview of the event
Explanation of CoinJoin and CoinSwap
Discussion on the complementarity of CoinJoin and CoinSwap
Importance of protocol improvements and user-friendly applications
Destigmatizing Bitcoin privacy and encouraging tool usage
The need for funding and support for application development
Promoting education and resources for Bitcoin privacy
The importance of privacy and the need for individuals, developers, and companies to stand up for privacy rights
The benefits of using coinjoin and coin swap for privacy and the ease of using these tools
The need for more clients and wallets to implement privacy tools and the importance of developers building these tools
Introduction of the panelists and their organizations' focus on funding Bitcoin developers and supporting open source Bitcoin projects
The motivation behind supporting open source development and the importance of giving back to the open source ecosystem
The focus on university students in Bitcoin education and the importance of introducing them to Bitcoin and open source projects
The progression of projects in the open source Bitcoin ecosystem and the goal of creating self-sustaining projects
Different ways companies can contribute to the open source ecosystem, including financial support, recruitment, and education
The impact of Lightning Network on commerce, including near instant payments, micropayments, and the ability to split payments
The global reach of Lightning Network and its impact on gaming communities, emerging markets, and cross-border transactions
Introduction to Lightning Network and its potential impact
The future of Lightning Network and potential challenges
Accepting 0-conf transactions and managing risks
Channels and trust in Lightning
Security holes and social capital in Lightning
Future of the mempool
Privacy issues in Lightning
How balances and node connections create a connected graph for payments
The downside of using gossip for on-chain privacy
Rusty's proposal for fixing privacy issues in Lightning Network
The importance of using custodial wallets for Lightning Network payments
Different approaches to sidechains and their definitions
Introduction to Chaumian e-cash and its history
Explanation of federated Chaumian e-cash and its benefits
Trade-offs and weaknesses of federated Chaumian e-cash
Putting skin into the game and making it awesome
Project written in Rust
Need for Rust developers
Federated Decash in the broader picture
Future vision of every spend as a coin join