Kevin Rooke - 00:00:00:
Simon is the co-founder of Mempool.Space, or the Mempool Open Source Project, a platform for monitoring bitcoin transactions, Mempool congestion, network fees and more. In our conversation, we got into exactly why Simon decided to build this as an open source and self hosted project. We got into the constant debate around bitcoin's Mempool and transaction fee, sustainability ability over time. We also got into Liquid as a side chain on bitcoin, BISQ, as a peer to peer marketplace and much more. As always, this is a Lightning podcast. If you're enjoying this show, if you find it valuable, if you learn something new, the best way you can let me know is by sending in sats comments and questions over the Lightning Network. You can use any modern podcasting app to do that. Just a quick shout out before we get into the episode. Today's show is sponsored by Voltage. Voltage is the industry standard and next generation provider of Lightning Network infrastructure. And we will have more from Voltage later in the show in the Lightning round. Simon, welcome to the show. Thank you for joining me today. How about we start off with a discussion about why you decided to build Mempool.Space in the first place?
Simon - 00:01:20:
Sure. Thank you for letting me be on the show. Well, you have to go back in 2017, I guess when I decided to quit my job and start looking into bitcoin more full time. So it was just a goal there to, I realized that I have to be engaged in the bitcoin community somehow. And as I am an engineer and I like building like web apps and good user experiences like that, I I started building some stuff in the bitcoin space and the Mempool app was one of the first like side project apps I built. So I so it was in the, I think late ‘17, 2018 that I finished it. The first version, which was just an Explorer visualizer. It didn't it wasn't a block explorer at all. It was just like a good looking visualizer. And it was later, half year later, when Wiz joined the project, he saw the project, he liked it. He told me you should open source this. It wasn't open source or anything and we should start working. So with my development skills and his background in what hosting and stuff, we could make a good team to get this thing to scale.
Kevin Rooke - 00:03:00:
So let's get into why that's important that it's open source and self hosted. Can you explain to the audience exactly why those two features matter for this product?
Simon - 00:03:11:
Yeah, I think it's along the bitcoin ethos, like everything we build in the bitcoin space, we are building for it to last for 100 years. So to me, if you build something closed source, it's like a dead end. I don't know all the apps, it's like building Windows and charge a license fee and hope that it will win out in the end and compete with Linux, it won't happen, right? Linux is the most used operating system, just like Bitcoin is open source money, it will probably win out in the end. Same goes for all the tools that we're building. So you've seen all these tools. Like when people are running nodes, you install BTC server, they install the Mempool app and various stuff around the Lightning ecosystem, for example. Everything is open source, most of the tools are. And I think as a community we help each other out to build the best tools and come together to create something good and that will last out our.
Kevin Rooke - 00:04:21:
And then what about being self hosted as well? Because that's another level of like you have no trusted third parties in that sense, right?
Simon - 00:04:29:
Yeah, it's the same thing. It's a Bitcoin ethos again that you have your full note, right? And there shouldn't be any third party or dependency that can stop your transaction or censor you as long as you have a third party involved. They can censor you, they can track you, they can log you. But with Bitcoin, if you just run your node, everything, all the tools we build on top of your node, if you make those tools so that they connect straight to your node and nothing else, they can be totally self hosted. Self reliance. That's what I've been I had like from the start with this project that you should be able to run it with your own node.
Kevin Rooke - 00:05:17:
Where are people most? I guess that you have an Umbrel app, right? And so people can kind of use their nodes at home and connect to the Mempool platform. Have you seen significant adoption from this cohort of Umbrel or kind of like hobbyist node operators to date?
Simon - 00:05:39:
Yeah, we started out as an app on RaspiBlitz, but I think it was Umbrella that really started to take this stuff mainstream because it's so easy to just one click install the Mempool app. It takes just a few seconds and you got it up and running along with all of the other apps because it's like this dockerized environment. And the same for just the whole Umbrel solution. It's so easy, you buy the raspberry pi and you plug in the installation and it's up and running in a few minutes. So what have we seen the past few years is like an explosion of people running their own nodes at home and running their own Lightning nodes being node operators. And also in this way you can easily run the Mempool app and be your own explorer. So when you make Bitcoin transactions or using the Lightning Network to open closed channels, you can easily copy and paste transaction ID into the Mempool app and track your transaction, look up, explore the network, all in a fully self hosted private way, just using your local node.
Kevin Rooke - 00:06:47:
That's wild. Are there any apps in the Bitcoin space that you think should be self hosted and are not today?
Simon - 00:06:59:
Yeah, good question. I don't know. Really hard to get one in mind. The hard part is when you build an app, I think for most people and most apps, when they build a website or an app, it's really hard to just convert it into a self hosted app. So you really need to think about that from the day one. So let's say app like Blockchain.com, for example. It's a closed source, very popular Block Explorer. It's been in the past, but no way that's going to run on a Raspberry Pi or you'd have to throw things away and build it from scratch with the memory.
Kevin Rooke - 00:07:47:
What are the key constraints there? Because I'm not too familiar with the back end and development side of things in terms of how to take a closed source project that's running just as a normal web website and turn that into a self hosted project.
Simon - 00:08:05:
Yeah, the biggest constraint is the performance of a Raspberry Pi that we're trying to make it work on. So you have CPU limitations, you have memory limitations. A lot of these apps, they require you to index a lot of data, crunch the data stored into a database and index that there's so much data there to be processed. So you have to think of that in all the steps of the way there. How do you do that on a tiny device? But the Mempool app is like two versions. You can see we have one that we're running on the site that we're hosting, the Mempool space site, and then there's a version that is run on the Raspberry Pi devices and you can say it's like a light client. So certain tasks you do is a little bit slower because it's doing stuff on the fly, while on the main site it's all indexed like in 1 TB index in straight from Ram memory and stuff like that. It's not possible to do on a Raspberry Pi. But for a home user, if you just one user or a couple of users, you don't really notice that much performance disadvantage, but it works quite well.
Kevin Rooke - 00:09:22:
Do you think that's going to be a popular path forward for some bitcoin apps is that they'll have the full version that lives just on a normal website and then they'll try and build like a light version that can be used on an Umbrel or other kind of like home node devices?
Simon - 00:09:41:
Yeah, it sounds like a good idea. If it's a complex enough app that you can't have the full app experience, you might need to make a light version of it. But most of the apps I see in the Umbrel App Store, I think are the full app and seems to be like a trend now. You want to get your app into the Umbrel app store. There's a lot of online bitcoin apps that show block data or show various stuff and everyone wants to get into the Umbrel app store so you can run it self hosted. That's pretty cool.
Kevin Rooke - 00:10:18:
Yeah. I think at the end of last year, Umbrel said that they have about 15,000 nodes on their kind of like Umbrel operating system. Do you have a sense for how quickly that number might grow and what some of the interesting apps might be on Umbrel?
Simon - 00:10:41:
Hard to say. It's still targeted to some of the more technical people that are aware of all this run your own node and run your own block explorer thing. I guess I don't think everyone is going to do that in future. But everyone that are a little bit technical think this stuff is cool. Maybe they like to buy the latest iPhone or stuff in the future if they just can buy this in all in one solution very easily and just click everything. Just like we've seen. When the Umbrel has succeeded, doing it has a lot of potential to grow even further and not just stay at the gig for the geeks. I think it has a potential to grow a lot further there. And in terms of apps, not sure, but I guess it's going to be a lot of tools around wallets, managing your coins and also with the Lightning infrastructure like dashboards and tools that help you manage your channel liquidity. I would hope to see a lot of apps with maybe peer to peer trading so you can have your own self hosted app to do peer to peer trading, buy and sell Bitcoin, maybe even chatting. And you've seen the expansion into a lot of various areas like that video calling, chatting on the Lightning Network, stuff like that.
Kevin Rooke - 00:12:15:
Yeah, it's fascinating to see it unfold. Do you think that over time everything can be done? Maybe in the current form, an Umbrel device is too technical for a lot of people, as you mentioned. But maybe if we get to a stage where there is an all in one solution and that it is as seamless as an iPhone, can we move all the stuff that we've been doing on traditional web apps for the last 10, 15, 20 years onto something like a personal node and kind of run this from home or from everyone individually self hosting their own information. Is that even feasible if we get the hardware in the right form factor and get people on board?
Simon - 00:13:06:
I sure hope so because there's a lot of people, like I saw on the Miami conference, the company, what's it called? In Service or something, they build a browser that has all these peer to peer tools built in.
Kevin Rooke - 00:13:20:
Yeah, Impervious.
Simon - 00:13:21:
It looks like a trend that we're trying to take back everything into building the new Web 3.0, whatever you call it, where Lightning is a foundation. You use Lightning to communicate and you can chat and you establish the peer to peer. But just like Bitcoin, we're building a parallel economic system right. So we also need this parallel internet, so to speak, where you can do all these communications for the bitcoiners that want to maybe have a black market economy next to the real economy. So, yeah, that's what I see. It's all headed where you have the white side of the economy. It's getting more tougher with KYC, AML and all this stuff. It's getting tougher and tougher to, and you get more censorship, right, more surveillance. So it goes to the wrong way and then you have our side, the good guys who are building this new infrastructure and this new side of the internet that is free, built on all these new tools. And the devices like the home devices like Raspberry pi, and all these devices are getting much better and more performant. They can handle more stuff.
Kevin Rooke - 00:14:41:
It seems like there's a big divergence between the mindset of self hosted, we're going to run our own stuff, we're not going to deal with KYC and AML and then the other side of like censorship and we're going to watch everything and we're going to see every transaction you have. And it seems like that divergence has grown in the last five years. Exactly what do you think are some of the challenges or potential pushback that the open source, self hosted community might face if the other side kind of chooses to, I don't know how much if you're hosting everything yourself, I don't know how much someone can do to get in your way, but I think if someone is sufficiently motivated, as we've seen, there's attackers trying to bring down bitcoin every day and they haven't succeeded. But there's things that get in the way, whether it's regulations or new narratives that spin up and try and turn bitcoin into something that it's not. Do you think that also happens at the self hosting level, that people start to generate new narratives or put in new restrictions on self hosting apps?
Simon - 00:16:02:
You start to see these it's getting more clear by the day, this distinction, like you said, between the old system and the new before, people might not care that much about their buying KYC free. They're buying on Coinbase or whatever. They don't really care. They maybe store their coins there. But as the laws and all these KYC stuff, just what you saw in Europe, they want to ban like anonymous payments and stuff. And maybe it's going to go so bad that you barely can have an on and off ramp anymore. So it's getting more and more clear, the difference here where you might see, have a tipping point where if the infrastructure is ready, we will be able to onboard so many more users into this more parallel, more tricky, currently a bit more technical side of the bitcoin internet. And because it hasn't really been needed, I think bitcoin is. Most bitcoiners I talk to, they buy and sell their bitcoin and KYC exchanges, so they don't really seem need to. Why does it go through the hurdle, paying a premium for KYC free or on the black market or on the peer to peer exchanges? Which is more tricky? But in a few years it could come to a point that you have to you need to learn these tools.
Kevin Rooke - 00:17:31:
Also have to why do you think that will happen? What do you think the catalyst might be to push people towards self hosting?
Simon - 00:17:40:
Yeah, it's just like that. If you don't find any alternative, I think you used to just go for the simplest solution. It just has to be easy enough and you have to have enough reasons to pick this solution. If you're in Ukraine or somewhere and they just closed off the internet or they censored all the bitcoin exchanges or something, then you don't have any choice. Right? So then you have to go for the free choice. So if that one is available and everyone would just spam you or recommend you go to this one, use this one, this I don't know, service over tour or whatever. I think that is when you have the tipping point.
Kevin Rooke - 00:18:23:
So it could come from one of two sides. One side could just be it's getting so hard to use centralized exchanges or centralized services or you're being blocked from participating. And the other side could be it's getting so easy to use peer to peer services and self hosted platforms. Like if those two are kind of in flux, I guess. And as they change, you could see a flow of people into self hosted products, right?
Simon - 00:18:48:
Yeah, that's what I would suspect at least.
Kevin Rooke - 00:18:51:
Interesting.
Simon - 00:18:51:
Not sure.
Kevin Rooke - 00:18:53:
Okay, so let's get back into Mempool specific stuff. So the Mempool space product right now it shows on your site you're supported by community and corporate sponsors. Is there a business model that you think might develop around Mempool that will allow you to be sustainable in that regard that you wouldn't have to have sponsors to support the product? What are your thoughts on that?
Simon - 00:19:19:
Yeah, like you said, we've been lucky enough to get a lot of corporate sponsors and individual sponsors. So just as an open source project, you can just apply, send out what you want to build and these companies will just give you money and let you build that, which is awesome. Right? And this is currently enabling us to build out the site these past few years, I think. Yeah, the most expenses we have are like the server infrastructure for the site and for the development expenses and yeah, we're hoping that we will be eventually find some ethical way of being more self-sustainable because we have costs on running servers and stuff. So just that we have a tight policy like no ads, no tracking, all that stuff. So we just have to find some kind of ethical bitcoin way of finding some revenue stream. But the site is growing fast, it's becoming one of the leading explorers. We have a lot of thousands of daily active users and we are integrating so many apps now. So hopefully now when we have this critical mass, we might start to look into alternative ways of yeah.
Kevin Rooke - 00:20:53:
Maybe. Would that potentially look like a subscription or something for premium features or some like I guess if you're not doing ads or tracking or anything like that, it would probably just be pay for some feature or something, right?
Simon - 00:21:07:
Yeah. For example, let's say your transaction is stuck, right? You're tracking your transaction and then maybe you can pay to accelerate your transaction and you pay straight to the mining pool. So we are like an affiliate to the mining pool acceleration service, for example, and do that in a nice way that is like you pay for actual service, you get something good out of it.
Kevin Rooke - 00:21:33:
Very cool. I like that idea. One other thing I was thinking of is, this is specifically in the Lightning space. I'm starting to see a number of blogs and sites and just platforms in general and that's happening on podcasting too, supporting this like value for value movement. And one of the big kind of shining examples of this succeeding is the podcast index where they're similar to, I guess similar to you in the sense that they're like an explorer, an index of podcasts and they've also set their business up in a value for value way where that is actually paying for their server costs. I wonder if you think that something like that also makes sense or not.
Simon - 00:22:25:
Yeah, can you explain what you mean exactly that word, value for value? Yes.
Kevin Rooke - 00:22:30:
So the value for value model is basically, if you like right now on this podcast, there's people listening to it and anyone can listen to it for free. There's no requirement to pay for anything, but it's kind of an unwritten kind of code that I'm putting out this content for anyone to listen to for free. If you as a listener get value out of it, or if you as the site visitor get value out of it, you can then support, over Lightning. You can send in sats. People are going to be streaming sats in this show per minute. So every minute they listen, they stream in some sats or sometimes people will send a big boost and said, hey, this was a really good point, thanks for this discussion and I'll send in 1000 sats or something. And so that's kind of like the model that the podcast index. This was popularized by Adam Curry and the podcast index itself. The business I believe, is also operating on this value for value model where app developers, I don't think they have to pay for any of the access to the index, but they can send a portion of the revenue back to the podcast index. And so every 1% of all the sats that come into my podcast go to the Podcast Index. And I think on Breez, it's like 5%. Every app has a different percentage. You can send money directly to the site when you're on the Podcast Index site. And so I started to wrap my head around what some of those potential use cases could be for that model, where it's more or less like you're donating and showing your support, but there's no requirement to do that, and people can kind of choose the amount they wish to support.
Simon - 00:24:27:
Yeah, well, I'm not sure if our service is the same, like, listening to new content every day. It's a little bit different. Right, but you have the similar just like I said, we've been supported out of destinations so far. Maybe you download the app, you install it, you use it as fully open source, and it's like, wow, this app is great. Such a good work. And then you can pay right now a million sats, and you get your Face, your Twitter handle, and your Twitter image on the about page to show it seems like the majority, they want just to show the thing on the about page to show that they're actually sponsoring it.
Kevin Rooke - 00:25:10:
Yeah, it's like a badge to prove that you're like, a sponsor or prove. That you've helped out.
Kevin Rooke - 00:25:16:
Yeah, no, that's very cool. Another one of the projects that is kind of working in that space right now is Alby. I don't know if you've seen Alby. There, like, the browser extension. And so if you go to any site that has a Lightning integration, you can automatically tip from the extension and send funds to the site. But anyways okay, so let's get into some of the products you guys offer. Right. The main Mempool space site, primarily, I think people are probably using it for just tracking the bitcoin Mempool. But you also have this, like, multilayer Explorer available for Liquid and for BISQ. Maybe we can start off with Liquid, and maybe it'd be helpful to get a rundown of exactly what the Liquid platform is. I'm aware of it at a high level, but I haven't spent too much time studying it. So for listeners who aren't familiar, can you kind of explain what Liquid is and why this makes sense for Mempool to integrate an Explorer for it?
Simon - 00:26:19:
Yeah, so the vision we have for the project right now is to support the migration to a multilayered ecosystem on top of bitcoin. So you want to support the bitcoin base layer and all the relevant products that are built on top of bitcoin. So that includes, like, Liquid, lightning, and BISQ as well. So if you want to talk about Liquid, Liquid is a side chain, which means there's a peg between the bitcoin on chain and the Liquid sidechain where you can go in and out of your bitcoin. So when you turn your bitcoin into Liquid bitcoin, they're called LBTC, and then your bitcoin is on this separate chain, which is the blocks are empty. The transaction fees are 0.1. Satoshi provides there's confidential transactions as default but similar to Monero. And there are like native assets and tokens like the USD Tether which you can swap between. For example, you get like a side chain which has different features and all these benefits that you can use. And then you can just swap back into the main bitcoin chain when you're done.
Kevin Rooke - 00:27:38:
And do all bitcoin wallets support Liquid right now?
Simon - 00:27:42:
No, you have to have a separate Liquid wallet. Okay. I think it's a Blockstream that works on the Liquid wallet. So there's one called the green wallet. I think it's both for Android and iOS. When you started, you can either create a bitcoin wallet or a Liquid wallet. And then there's a wallet called Aqua which is just for iPhone. I think then that supports Liquid and assets.
Kevin Rooke - 00:28:11:
So right now I was just looking on your Liquid Explorer. Seems like there's about 3500 bitcoin, $36 million of tether and 156 Blockstream mining node tokens. What do you think the future of the Liquid sidechain looks like? Is this going to I see the bitcoin there and I get the idea of being able to confidential transactions, lower fees obviously tether so you can have stablecoin functionality. This BMN note, this block stream mining note, right? This is kind of a security token now built on Liquid. Do you see this platform, this Liquid sidechain morphing into a stock exchange over time or like a bond market where people can just, is that the primary use case for it, do you think?
Simon - 00:29:10:
Well, when Liquid was launched like a couple of years ago, it was marketed as this like interexchange settlement chain so that you could send because the block time is just 1 minute and it's definite, definite. It's every like every minute. Not like random like bitcoin. So like you could settle between exchanges and services like in 1 minute. It would be really good to transfer bitcoin that way. But exchanges has been slow to adopt it so it hasn't really gotten traction. And lately they are trying to focus more on like security tokens like the Blockstream mining nodes token. And hopefully we will see the volcano bond coming out this year as a security token on Liquid.
Kevin Rooke - 00:30:03:
Yeah. So that means anyone will be able to participate in this or is it still locked to accredited investors to participate in the Blockstream mining node and something like a volcano bond?
Simon - 00:30:16:
I don't know the specifics of that bond or that token. I just tried to support everything that's on the Liquid network and display it in a nice way. So hopefully when the token comes out we'll be able to audit it on the Liquid Explorer. How much is in circulation and stuff.
Kevin Rooke - 00:30:35:
Do you think are all assets going to be visible in this way or will there be assets that are kind of like confidential and hard to track from an explorer perspective?
Simon - 00:30:43:
Yeah. There are actually support for confidential assets if you want to. So there's a lot of options there.
Kevin Rooke - 00:30:50:
Interesting. Okay.
Simon - 00:30:55:
And also what's something that's happening with Liquid? What I've seen people are developing right now in Liquid, there's a lot of people that are trying to take the bitcoin defy to the next level inside the Liquid ecosystem. So for example, you have one app called let me see here there is one app called Bitmatrix where you can swap and it's like a clone of the Uniswap thing. You have an Ethereum where you have people that providing liquidity and then you can swap between tokens like between Bitcoin and tether or something. But on Liquid it's going to be always low fees and it's going to be confidential. So you don't have the issue of what is called Mining Extracted Value MEV, which is a huge problem on Ethereum, because when someone posts a transaction, all the bots can fully see your transaction very clear, so they can front run you. Right. But on Liquid you're going to be able to have the same thing, but without that issue. There is another app called Yacht.ex, where you can also swap between assets and stuff and they're working on other cool stuff.
Kevin Rooke - 00:32:19:
So did these markets live entirely on liquid in the same way that Uniswap is just a contract on Ethereum?
Simon - 00:32:27:
Yeah, exactly. There's a lot of Defi stuff being developed on Liquid, but if you look at the activity is quite low. The use of stable coins is not that high. So far Liquid hasn't managed to get that traction. But just like Bitcoin, if you compare like Bitcoin and the Liquid to the old coins and stuff, what I like about liquid is that there's no native shitcoin. If you buy the the Ethereum, you support the ETH Token. If you use the Solana, you support the Sol token, which is usually pre mined in a bit unethical way. But if you look at the Liquid side chain, you don't have a native token, you just have the BTC peg, which I find more ethical. Right. The only trade off you make with Liquid is that it's like a federation of a bunch of like block signers. It's like a trusted system, so you get the trade off there with the trust.
Kevin Rooke - 00:33:32:
But how big is that federation? Or what are the requirements to be a part of that federation? Do you know?
Simon - 00:33:40:
Yeah, there are like twelve secret members and I know they're working on something called Dyna Fed where people can dynamically join in and out of the federation so it will grow and become more decentralized and more hidden in the future. But yeah, that's how Liquid works. There's no mining instead of there are just these secret block producers, basically. And all block producers are usually people that are building on Liquid infrastructure or having some interest into the Liquid network. So they have no benefit of attacking the network. There's a lot of people that are attacking Liquid, calling it just a multisig wallet or something. A lot of people don't like Liquid because it's not decentralized like Bitcoin and secure Liquid, it's more trusted, right. It's more like traders and short term liquidity. So I think it's fine because if you want to have your store of value savings, maybe on bitcoin, it makes sense, right? But let's say you want to do trading Defi, that stuff, it could be fine to do it on a less trusted side chain and you remove all that float from the main chain bitcoin and you move it into off chain layers. Same in Lightning, right? Lightning you make fast, cheap transactions, but you have some attack vectors and some security issues that you have to think of, and that's the trade off you're making from doing it off chain.
Kevin Rooke - 00:35:09:
Yeah. Now see, I see on the side of Lightning that that is a great solution for payments. I guess what I'm trying to think about for Liquid is like, where does this fit in the mix, right? Because I don't think Liquid well, obviously if a block is a minute, it's not going to be that instant finality that you get on Lightning. If it's a side chain, it probably doesn't going to have the fee scalability that Bitcoin has or that Lightning has. But maybe do you think that it replaces the function of centralized exchanges over time? Does this replace the function of a BISQ over time? What role do you think Liquid will play if we look out five or ten years and think about what its potential is and where it really excels over other solutions?
Simon - 00:36:01:
Yeah, I think it excels where, when the bitcoin fees is, if the fees are going to constantly be high and you can't really use the bitcoin main chain for payments anymore, you need to start using Lightning for payments. Right. But there's still a lot of apps, a lot of decentralized stuff that you need like a distributed blockchain to use. So let's say the BISQ app, for example, you make trades there which is completely on chain and there's no central server. And maybe an app like BISQ will have to move to a side chain like Liquid in the future because now they're doing like multiple like a trade on BISQ requires multiple on chain transactions, which make them quite expensive when the fees are becoming high. So maybe an app like BISQ have to move to Liquid in the future to become more interesting. Yeah. And then you have all the people that want to use stable coins and maybe trade between bitcoin and stable coins traders, you will be able to leverage your bitcoin on top of Liquid. It's a lot of these use cases that might come to fruition and I'd like to see a lot of the uses of the shitcoins like Tron is being the number one chain used for stablecoin transfers right now, which is just making Justin Sun rich for no reason because it's just a centralized clone of Ethereum. Right. So why not just use Liquid to use your stablecoin transfers?
Kevin Rooke - 00:37:33:
Why are they not using Liquid today when they are using Tron? Is it just a function of exchanges not integrating it? If not, why?
Simon - 00:37:44:
Yeah, the change is doesn't really prioritize integrated because it's a new chain. And one big reason for that is that the chains like Tron that free mine and have a lot of money, they will pay these changes a million dollars to implement their chain and they will just pay all the exchanges with their free printed money. And then you have Liquid, which is more honest. There's no money in Liquid. There's no one sitting on a pot of marketing budget there you have Blockstream that are funding it and trying to market it in several ways, but they don't have the means to pay off exchanges like that. That's why it's taking a long time and you have to reach like a tipping point before it starts to get traction.
Kevin Rooke - 00:38:25:
Right.
Simon - 00:38:27:
I haven't seen Lightning on exchanges and I was like, when is Lightning going to be on exchanges? Because I know Lightning is a completely different peer to peer network with different security assumptions, like how you need a new team like on your exchange company. Right. Just to handle that, I was thinking like Binance, when are they going to add Lightning? Probably maybe in ten years or something when they get their shit together. But then after Miami, we saw all these companies starting to add Lightning. All of a sudden I was thinking like, wow, maybe we're closing into like a tipping point where you have to use Lightning so you have to reach that tipping point and you have to have the Bitcoiners with the ability to think in the future and see forward that Lightning is the only way we can go. That's what the future looks like. So we have to invest in Lightning and Liquid. Just have to reach that same. And I think in the background, not that many are really caring about Liquid, just like Lightning.
Kevin Rooke - 00:39:32:
Yeah, I think that's exactly what's happening right now. And it makes sense that there is no incentive, same with Lightning, that there is an incentive to add new tokens because they create fees for an exchange and obviously the tokens if the premium can pay exchanges. But you're right, I think Lightning did reach a tipping point this week and maybe it was set off by Kraken because Kraken was the Kraken integrated Lightning. I think a week or two before the conference and then in the lead up to the conference and during the conference, we saw BitPay announced an integration. BitGo is working on an integration Cash App enabled deposits and withdrawals on Lightning. I believe there was another one that I'm missing. There were like a handful of announcements and Robin Hood, Robin Hood is going to enable Lightning. So it's like all that happened in a span of a week. And now I think you're right, the ball is rolling and it's getting to a point now where there is a critical mass of users and activity on Lightning that it kind of can't be ignored. So maybe we get that same inflection point on Liquid in a year or two when there's just such a demand for whether it's security tokens or for some of these exchange apps you mentioned. Maybe that's when exchanges start to pile in one after another, once one big exchange integrates it.
Simon - 00:41:02:
Yeah, hopefully we hope that the more long term projects will win out in the end. Like I said, I'm not that interested in using an altcoin for transferring stable coins or security tokens because I don't like them that much. But in the end we can in the long term, if we notice that they are very centralized or they are free minded and people don't really like them, then we might see that Lightning and Liquid in these more honest chains will win out in the end. Hopefully they will be able the other chains will be able to have a short term gain because of the monetary muscles. But just like Linux, it's like building there in the background and it's just taking over slowly and slow and it's winning the end because it's the most sound one.
Kevin Rooke - 00:41:58:
Right? Okay, so let's get into your plans for Lightning because you mentioned you are considering and working on building something in Lightning. What might that explorer look like? Would it be similar to something that we see today from Amboss and from 1ML? Or would this be something different?
Simon - 00:42:19:
Yeah, from the start I've been wanting to build like a Lightning explorer. Makes sense. It's aligned with the vision I just mentioned that we want to support the full ecosystem and Lightning is like the most important app on being built on top of bitcoin. As we are explorer, it would make sense to add some kind of Lightning explorer. We haven't really thought out exactly what purpose it's going to fill, but I think if it's an open source explorer where you can look up nodes and channels and stuff just from your own self hosted node, just that first step would make it something that the other explorers don't have. Like Amboss space, for example. And also the 1ML site. Both are closed source and you can't host and self host them. So if you make an open source lining explorer, that when you install it on your Umbrel app, you connect to your lightning node there and you can explore the whole network and you can sort by nodes or find ways to find good nodes to connect to. When you are exploring doing that in a private way or something, that would be something unique.
Kevin Rooke - 00:43:31:
Yeah. I wonder if there's also a market for building a tool for people to supply liquidity into well connected nodes. I know there is a product called Pool by Lightning Labs today. I think on the core Lightning side there's liquidity adds. But I wonder if there's another kind of angle you could take if you're self hosted. If you can allow anyone through their self hosted node to contribute liquidity to the network and earn a fee on that. I wonder if that's central model, it's.
Simon - 00:44:14:
Probably a lot of opportunities there. I don't know. We'll see. I think you just have to start basic and take it from there. And I know there's a ton of services where you can buy liquidity, like you said. So that's definitely something you can look at.
Kevin Rooke - 00:44:32:
Yeah. Okay, so I want to chat a bit about the Bitcoin mempool today because I know people are going to have questions about this. And there's a conversation that seems to be always happening on Twitter about whether or not Bitcoin transaction fees are sustainable and whether or not, as the block subsidy gets halved every four years, whether or not the transaction fees alone will be able to support the miners in a meaningful way. Because right now, I think on average, it changes all the time. But I think on average, it's about 1% of the block reward today is from the transaction fees alone. What's your take on this argument here? The one side is like, it may scale. We have 100 plus years to worry about this. It's not an issue today. And the other side is there's no way it's going to scale. You know, blocks are empty or transaction fees are very, you know, there's very limited transaction fees today. You know, what, what do you make of that argument and where do you end up on that spectrum?
Simon - 00:45:48:
I think it's binary. Either Bitcoin is going to fail and the blocks are just going to be empty and the miners are not going to get anything, or Bitcoin will succeed. It's going to be a new form of money that's going to have a big role in the world. And if that happens, the blocks are going to be full because we only have right now two megabyte blocks, which means that it's only like 3000 transactions in one block, which gives you maybe like 15 transactions per second or something to cover the whole world. So given that all the people and all the services, all the exchanges, all the Lightning, wallets and everything that needs to compete about this block space, there's going to be a fee market. And that is why we are building Mempool the way we're doing, because we know there's going to be this fee market. It was there for this past bull market we saw between I think it lasted for like six months. The Mempool was like full transaction fees were rather high. And now we are in this like a semi bear period again, where there's not much interest in using bitcoin and the blocks are mostly empty again. But I think just in a few years or months, we're going to get it to a point where the blocks will always be full. And when the blocks are full, you're going to get this market of fees, like I said. So if bitcoin succeeds, we're going to find some level of, the market is going to determine what people are willing to pay for transactions. And it could be $10, it could be $100. If bitcoin is mostly going to be used, like, by Lightning providers, exchanges, like side chains, like Liquid and other stuff, they're going to consolidate just like Lightning. You make maybe thousands of transactions, and then you make a settlement transaction back to the bitcoin network. Then paying maybe $100 for that transaction isn't that much because maybe you settled thousands of transactions per user, didn't pay that much. Right. So I'm not that worried about there being a fee and income to the miners, but it could be that the security is getting much, much lower than it is today. But here I want to talk about the biggest myth I constantly see on Twitter, like what people are spewing all over and over and this thing that the security is going to get like one 10th or one fifth of what it is today. Bitcoin will be unsecured. It won't be secure enough. But what people don't know is that you can just wait a few more block confirmations, because for every block confirmation you wait for your transaction, it gets exponentially harder to reorg. So let's say the security is much lower all of a sudden than it is today. You just wait twelve confirmations instead of six, and it's like impossibly, it's almost impossible to do a rewind. So the whole security issue is a non issue.
Kevin Rooke - 00:48:59:
I see. Like, do you just add on extra block confirmations and it bumps up the security and then you just use lightning?
Simon - 00:49:05:
Because Lightning is going to be quick and instant anyway. Right. Just the settlement transactions that's going to take another hour to confirm.
Kevin Rooke - 00:49:14:
Yeah. So you think that in the short run, maybe there is a time where the amount of revenue that miners earn may very well drop, but in the long run, there's going to be this fee market develop, and you don't fear that that compromises the security of bitcoin at all, is that correct?
Simon - 00:49:34:
Yeah, something like that. Yeah.
Kevin Rooke - 00:49:37:
The way you described it there when you were talking about, you know, like, maxing out at whatever it is, 10-15 transactions per second and having that encompass the entire world. If bitcoin does become like, if we get this bitcoin standard across the world, part of me thinks that would actually radically increase the reward going to miners. Because if I'm thinking of, like, at any given moment around the world, what are the 15 most valuable transactions in the world happening? And who are the highest bidders willing to pay to get a transaction through? I think there will be people willing to pay a lot more money than what miners are earning for a block right now. What happens if we it the opposite of this concern where people are concerned now that fees are going to be too low. What happens if fees explode higher and they are more than able to compensate for the reduction of the block subsidy? Right? Like we go down from 6.25 Bitcoin to 3.125, four years. What happens if four years later, we just have so many institutions and large, maybe it's nations, maybe it's companies that are wanting to make big transactions and are more than happy to pay $10,000 to get a billion dollar transaction through.
Simon - 00:51:05:
Exactly. So I don't see how, on Bitcoin you can store something forever in the most secure ledger in the whole world. Doesn't that have any value? It has some value, right? Of course it's going to be demand for storing stuff.
Kevin Rooke - 00:51:22:
Right. Who do you think will be the biggest users of Mempool space over time?
Simon - 00:51:29:
Yeah, right now it's probably people that are most people that are doing Bitcoin transactions regularly. So I know that my friend Sergey at Bit Refill, he's like watching it all day long because he lives on the Mempool. They get tons of payments and stuff coming in and you have to be consolidated and you have to find the right time when the Mempool is low and all that stuff. And there's a lot of variables there. Maybe it's lower on the weekends, maybe there's a big backlog, maybe the difficulties currently, maybe some hash rate left the network, something like that. So you have to constantly monitor and see what's happening. I think that is the biggest users, the people that are running these bigger nodes, maybe a Lightning service provider or something, they need to check transactions.
Kevin Rooke - 00:52:20:
And do you think then when the Mempool clogs up and fees start to get higher and higher, does that push people then onto Lightning and to Liquid and to move their businesses kind of like off the Mempool? And is it possible to entirely get out of the mem pool and to entirely move to Lightning and maybe use exchanges as on and off ramps rather than to have to rebalance and stuff like that?
Simon - 00:52:46:
Yeah, it's very interesting to see what incentives it triggers because if the fees are constantly just low or zero, you know what's going to happen? People are just going to spam the network and do what the BSP guys are doing. Add the weather report data or whatever nonsense stuff you can put in. But as soon as the fees start trickling up, if you start to outcompete stuff like maybe small tiny payments because they're not worth any more transaction fees, $10, you don't want to make a transaction for $10 or less. So then you're going to start pushing people to Lightning when the fees are. You see a lot of players starting to adapt already. Like the past few years, you've seen all the exchanges suddenly starting to move to using batched withdrawals. They were doing like single withdrawals and when they noticed like, oh, maybe you can save a million dollars a year if we just invest a little bit in doing the batching. So I really like how the market there for fees work and I'm also a little bit surprised, like how the blockchain can be empty right now because back five years ago it started to get full and people like panicking, oh my God, it's full now, it's going to be full forever. But now, five years later and I believe we have like 10Xed the amount of actual bitcoin users in the world since five years ago, but yet we are like at the same blockchain users. And what is what happened there? Right? It's only optimizations. Exchanges are using the chain better. Maybe people that did payments, they stopped doing payments or maybe they do payments on Lightning instead. So the market is figuring out what is worth putting on chain, what is valuable.
Kevin Rooke - 00:54:36:
Do you think there is room for another 10X improvement in optimizing transactions on chain or have we mostly got all the low hanging fruit now and we're batching transactions and we're doing a lot of the best practices today.
Simon - 00:54:51:
Yeah, the biggest low hanging fruit is what is called cross chain cross input signature aggregation because with the Taproot software we got Schnorr's signatures. But when you make transactions today, you still have to include one signature per input and a lot of transactions have like two or three inputs and one output. Maybe you have to put a signature for each of them. And it's especially costly if you run a multisig wallet or if you are in exchange that has a lot of deposits. And then you need to consolidate that. A transaction like that could cost 100 KB on the main chain. But if we get this software in that can consolidate the input into one signature, we could get like a 30% optimization of all the on chain data. That is like the biggest low hanging fruit right now. But as you know, maybe with this adding software, it takes years of debating and.
Kevin Rooke - 00:55:54:
Taproot would enable this like 30% reduction in memory usage.
Simon - 00:56:00:
Yeah, it would be like a new transaction output that also has this feature. So like a Taproot version two, for example, and it would reduce all the data stored on the bitcoin blockchain and Mempool by about 30%.
Kevin Rooke - 00:56:19:
On the topic of taproot, I'd love to hear your thoughts on Taro the new protocol that Lightning Labs kind of announced. And that seems like it is very similar to what you described for Liquid where you can have any assets operating on there. Maybe it starts with Currencies, maybe it's security tokens. Maybe it's gift cards that can operate on Taro. What are some of the differences and similarities between the two?
Simon - 00:56:52:
I think they will fill different purposes. I think the Taro one will be more for payment, like paying, let's say in El Salvador, they want to be paying the dollars instead of Bitcoin. They want to have a stable currency. Then they can use stablecoins on Lightning, I think that's payment use case there. But on Liquid, you have more of maybe the more Defi swap features and leverage features, anonymous stuff. I think that's a little bit different. Use case.
Kevin Rooke - 00:57:24:
Oh, I see. So maybe not financial markets on Taro, but maybe on Liquid.
Simon - 00:57:29:
Yeah, because Liquid is a peer to peer, peer to peer system. Right. So it has some limitations there. But Liquid is the blockchain, so it has their own pros and cons, different use cases.
Kevin Rooke - 00:57:41:
I see. Interesting. Okay, I want to finish this off with hearing about the most interesting Bitcoin or Lightning application that you're using today.
Simon - 00:57:54:
That I'm using?
Kevin Rooke - 00:57:57:
Yeah. Is there anything maybe in the Umbrel app store or any of the Lightning apps that you've been playing around with that you think more people should know about?
Simon - 00:58:07:
That's a hard question. I'm mostly just sitting in the Mempool app all day. I don't have the time exploring too many alternative apps.
Kevin Rooke - 00:58:23:
I'm not sure what's the next integration? Next Mempool integration? You guys plan to roll out anything on the roadmap?
Simon - 00:58:30:
What do you mean? That's in featurewise.
Kevin Rooke - 00:58:32:
Yeah.
Simon - 00:58:34:
Well, we just released this new mining dashboard. If you go to Mempool.Space/Mining, you have this full new mining dashboard which shows the pool rankings and the hash rate and difficulty history. So that is the biggest thing we've been working on the past few months.
Kevin Rooke - 00:58:55:
Nice.
Simon - 00:58:57:
What's coming up?
Kevin Rooke - 00:59:01:
I'm excited to see what's up next for you guys. Where can people go to learn more about you and MemPool?
Simon - 00:59:09:
They can follow @mempool on Twitter. They can follow me. I'm @softsimon_ on Twitter. They should go to Mempool.Space for the main Mempool Space website. They can go to the Liquid network website for the Liquid Explorer. And we also run the BISQ market website for the Biscuit Explorer if they're using BISQ.
Kevin Rooke - 00:59:34:
Yeah. That's very cool. Thank you so much for taking the time. I learned so much and excited to watch all the latest Mempool developments.
Simon - 00:59:44:
Thank you.