John Carvalho - 00:00:00:
The addressable market is bitcoin Twitter. I'm not trying to be, like, insulting, but I'm trying to be realistic. The addressable market in the positive sense and the potential is, you know, the entire market. You know, it's everything that people use to buy stuff. It's hyper bitcoinization. You don't need liquidity. You need liquidity in the path of where you're trying to pay. If you're not actually trying to pay anybody in Lightning, you don't need Lightning. I don't think bitcoiners should put on blinders and say, fuck regulators and fuck the law. We're doing what we're doing that's ignorant and not going to work. And I also don't think that bitcoiners should be trying to work with regulators and trying to get, quote unquote, regulatory clarity. Credit is not a scam. Trust is useful. Trust will probably always be useful. And I'm more interested in digitizing trust and trying to give people better tools for choosing who to trust and what to trust them with. So I consider stability to be a service. When you say I want a stable client, you're saying, I want somebody to provide me the service of a stable monetary unit. It's like, sad a little bit. It's like, I don't want to increase the utility of dollars. I don't want to bring more users to dollars. I want more bitcoin users.
Kevin Rooke - 00:01:16:
John Carvalho is the CEO of Synonym, a company building a number of bitcoin and identity products and protocols, including their Bitkit wallet, their Blocktank LSP, their Slash Tags protocol, and pair credit, which they are building in collaboration with hole punch. In our conversation, we got into the business case for building an LSP, the unique features of their Bitkit wallet, the vision for pairCredit, and the identity landscape with overlapping protocols in Slash Tags, Web5, and Nostr. John has also asked to have his share of today's show splits sent to bitcoin smiles. Unfortunately, bitcoin smiles is not yet on the Lightning Network, so you're going to have to trust me on this one. I will send half of whatever you guys send in in the first week of publishing this show to bitcoin smiles. I will make an on chain payment, but you guys can continue to send sats over the Lightning Network. As always, you can use any podcasting 2.0 app, Fountain is my favorite, but there are dozens of them. Before we get into today's show, just a quick message from our sponsors. Today's show is sponsored by Voltage. Voltage is the premier provider of bitcoin and Lightning node infrastructure. Today's show is also sponsored by Stakwork. Stakwork is a Lightning powered transcription tool that takes the best of AIS and humans to create better, faster, and less expensive transcripts. We'll have more from Voltage and Stakwork later in the show. John, welcome back to the show. You are the first repeat guest of the show, original listeners. Everyone who was with me last year will recognize your episode, but many new listeners may not be familiar with your work. So real quick, just give new listeners a little bit of a background on what you're doing today at Synonym and some of the products you're working on.
John Carvalho - 00:03:12:
It's great to be back. I really liked doing the first episode. And just in general, for those who don't know anything about who I am or what we do. My name is John Carvalho. I am CEO at Synonym. And Synonym is basically trying to create a minimum ecosystem for post hyper bitcoinization. And so the idea is just having all of the minimum software services and products that you would need in a digital sense to be able to entirely opt out of the current system, opt out of big tech, big state, and big banks. Bitcoin handles a lot of that. Lightning handles some of it. And then we get into sort of this whole trend with what's going on with the decentralized web, or the next web as I have been calling it lately, and people have all kinds of names for it. So, yeah, we have a whole long term roadmap of many things we're trying to build and a kind of design for how they interoperate and how they work together to solve all the problems we think will probably need to be solved in such a situation. And we're just kind of shipping it one priority at a time. We're going to be close to three years into it in March, I think we'll be at three years, and we're making pretty good progress. Not as quickly as I thought we would, but we're making progress.
Kevin Rooke - 00:04:32:
Nice. I remember in our conversation last year, you talked about three products, two which had names. That was Blocktank or LSP. You talked about Slash Tags, and then you teased a wallet, which at the time had not been named, but has since been named, called Bitkit. And since then you've also released Pear Credit.
John Carvalho - 00:04:55:
Not released but announced, or you've announced it. Yes, correct.
Kevin Rooke - 00:04:59:
Can we walk through each of those products and talk about maybe we can start with Blocktank. What have you learned in the last year of operating a Lightning service provider? About the business of being a service provider?
John Carvalho - 00:05:14:
Yeah, last time I was here, like you said, we had a Blocktank. We released that maybe roughly around March, so almost a year ago. And we had announced flash tags and had some code out there. But really we didn't really release kind of what we would call the first version of it and the first use cases for it until Lugano as well, when we announced Bitkit and released Bitkit. So that took some time to mature too. But as far as Blocktank and learnings from LSPs, I guess the first thing that comes to mind is we saw some developments in the overall environment in general, where we had things like probably the most notable one was the zero fee routing phenomena that popped up and they grew very quickly and got a lot of channels. And we could debate about why this happened or whether this was a great node management or just a good marketing method to just the concept of free. And that being appealing. But in the end what we do definitely see is that Lightning is still very small when you compare it to the greater world outside of Bitcoin and that there's no finalized winners in anything in Lightning or Bitcoin. And I think that's an important thing for current Lightning companies to remember, especially the ones that are on top of their various domains, that it is still small and there is still plenty of competition that could come out of nowhere. And I would say maybe what zero fee routing showed was like the best way to serve. Maybe what we would call like Plebnet, at home routers trying to figure out ways to make extra money with their bitcoin by running routing nodes and this kind of Plebnet concept or hobbyist LSPs, I don't know what you would call them, but I think that he showed a great way to serve and dominate that market. But I think that there's a saturation there, right? Like he hit a certain amount of channels and then he ran into I don't know why he stopped doing it, but he ended up stopping doing that altogether. Hard to say whether that's because his model was not economically feasible or if it was just something personal, I have no idea.
Kevin Rooke - 00:07:34:
I think it was a family thing. I believe there was a Tweet a couple of months ago that he was starting a family. Could have also been some…
John Carvalho - 00:07:43:
Well you wouldn't be able to know if it were economically viable that were like scaled much larger and much longer term and this kind of thing. But I do think he did say that they made maybe enough to pay half a dev salary or something. In other words, it wasn't actually profitable. And I would say nothing in the LSP world is, unless you want to make a specific example, the only person maybe there's like two or three people profiting notably on Lightning and that's like Alex Bosworth being like a dominant expert in the domain and manually trying to achieve that and maybe a couple of others. But in general it's not proven that this is something anybody could just go out there and do and have as a career and that Lightning has so much inefficiency in it that you could just hop on and have a salary. And so our focus was more like we wanted to make sure that there was an LSP software stack out there that was open source, that really was a full service thing. And so including open sourcing the server and all of the little extra toys that we made to go with it. And we continue to do that. And then our kind of specialization is trying to see about actually providing this for our own wallet and demonstrating the optimal use case for LSP for our own wallet and then seeing if we can carry that over into business use cases, like providing LSP services to exchanges, other wallets that don't have Lightning expertise. Merchants, whatever it may be. And so we did add a business developer that's dedicated for Blocktank and kind of did a lot of outreach to talking to different stakeholders, exchanges, et cetera, learning about what their interests are, what their interests are, not what they can and can't do, and getting kind of familiar with that whole area. And that resulted in us coming up with the Blocktank instant product, which wasn't much of a part of the presentation in our recent announcement in Lugano at Plan B, but it was part of that was announcing that, which is basically just an API for the LSP to accept withdrawals and deposits for an Exchange. So the Exchange just has to use API. They don't have to actually run anything to do with Lightning. It's sort of like a soft version of payment processing, but it's dedicated for that use case. So if a user wants to deposit into the Exchange, they give us the bitcoin and then we owe the Exchange. And if they want to withdraw, we pay on behalf of the Exchange and the Exchange owes us and we would settle periodically. And so we're finalizing the API for that and the docs and everything and all the legal aspects related to it and trying to see if that's viable. And that seems to be one method that is probably going to work. As far as, like a Lightning business model, as far as the original business model, we had like the whole concept of a Blocktank hub or you running Lightning, adding Lightning to your platform, and then us providing only the routing or only the liquidity management, some interest. But I think that the people that are interested in actually adopting Lightning and running it themselves and having people on staff responsible for that, they end up wanting to mostly handle it themselves, but there are actually very few people that want to even do any of that. And so that's where the Blocktank instant kind of idea and service came into play. And I think that we'll see adoption of that in probably not too long from now. We do have many more interested parties in that than in Blocktank as an LSP in the traditional sense. And yeah, so another related thing to that is we started the Bitcoin and Lightning Layer Spec group effectively, or affectionately called Balls. And this is just basically we wanted to have a way to kind of not get into all the seriousness of Bolt specs and BIP specs and all of the kind of passive aggressive competition that goes on with that sort of stuff and just say, hey, we're just LSP guys trying to talk about what the problems we have for interoperability are and just have some sort of sensible spec for what you might use if you wanted to start to provide APIs for various aspects of LSPs. And the group also had a side we have kind of side groups, and one side group is focused on LSP stuff and another one is focused on Web stuff. And so we took the Web LN spec and expanded it to Web BTC. So it includes both Lightning and on chain bitcoin as a concept in the same way that Web Ln did. And we worked with the guys from Alby on that and the guys from Peak Shift and some others, and Synonym guys. So it's kind of like our way to have minor leagues of spec development. And if anything ever kind of graduates, maybe later we'll submit that as a spec for a BIP or a bolt or whatever is appropriate. But for now, it's just practical use and there's not an air of seriousness or authority, which is another thing I don't like about spec groups. Sorry, I'm ranting for a while. Feel free to interrupt me. But yeah. So we have the LSP spec group. We made LSP channel request spec. That's like the core spec. So we're hoping to have interoperability across LSP. So while it's going to make it easy to give their users options for different LSPs, and then we made the marketplace spec, and now we're working on a reputation spec. And so that's kind of everything going on related to Blocktank that I can think of in one rant.
Kevin Rooke - 00:13:21:
I see. So when it comes to liquidity on the network, let's just take an overarching view of all Lightning liquidity. Has the demand for that met or exceeded or fallen short of your expectations when you think about how many people actually need liquidity in whatever form?
John Carvalho - 00:13:44:
Well, I would say I had no expectations, so it's hard for that not to be met. But I think that's also indicative of my perspective of the state of Lightning, which is I feel it is small and it has grown slower than we expect. It is growing. And I think that it's nice to have people on Twitter cheerleading this and supporting Lightning as an effort and as a technology, but I don't like to see people overestimating it or resting on their laurels or bragging, because there's a lot wrong, there's a lot of stuff to fix in Lightning. There's a lot of really bad user experience that needs to be kind of fixed at the client level, at the app level. And that might be a segue to Bitkit as well, or at least a nod to it, which is an attempt to try to combine the LSP concept with rethinking the user experience to make Lightning easier to use. But, yeah, I would say I didn't really have expectations per se, but I guess the closest answer I can give you from the options you gave me was it would be disappointed. I think that I would like to see growing Lightning growing faster. Bitcoin itself, I'd like to see growing faster in general, at least for the use cases, I think that matter, which would be like commerce and people paying each other spending, bitcoin merchants accepting bitcoin, this kind of thing, even if it's just Lightning, even that growth has not been very strong. It's growing, but it's not like exponential growth or something for everybody to be magnetically attracted to bear market didn't help. That's always a factor. But we had a bull market, and things didn't grow that much during the bull market. They grew. But yeah, I think that having, you know, 100,000 people running Lightning nodes, whether they be through wallets or whatever, like, like Bitkit, that would have been nicer to see, and I don't think we really achieved that. I would want the million to be the next bull run, and then 10 million. We don't even seem to be on that pace, and that's a multi decade pace.
Kevin Rooke - 00:15:54:
That's fair. I've been looking at the metrics, the available metrics, at least for liquidity marketplaces, and seeing how much demand there is. And I check back every few weeks, and I post charts to Twitter sometimes about how much liquidity is being deployed through these marketplaces and the marketplaces that I have data from. So LN plus, Amboss, liquidity ads does not reveal their data on Core Lightning. There there's a couple others that, you know, maybe consider liquidity marketplaces. But overall, I've seen, like, the last couple of months, it's only been about 60 to 70 bitcoin of Lightning liquidity deployed across these marketplaces.
John Carvalho - 00:16:45:
Yeah, I'm not surprised at that at all.
Kevin Rooke - 00:16:47:
Yeah, I wonder what you think the addressable market is, whether it's for Blocktank or for any other Lightning service provider, how big do you need that market to be for this to be a profitable business?
John Carvalho - 00:17:05:
So I'll answer that two ways. One, your final question was the more important one, but the more candid perspective, I want to at least share in continuing some of the other things I said is, the addressable market is bitcoin Twitter. I'm not trying to be insulting, but I'm trying to be realistic. Conquering bitcoin Twitter is like the addressable market. It's saying, you are the most popular thing in bitcoin Twitter, because there is no actual, you know, circular economy in Lightning. It's not like there's a huge amount of people all using Lightning. It's very small. And so the demand for liquidity and then the demand for liquidity efficiencies, like, where there's more routing or more liquidity needed to kind of compensate for inefficiencies, it's really small. It's just incidental, most of the inefficiency is because the people using lightning right now are not even incentivized naturally. In other words, it's a hobbyist thing. It's friends connecting to friends, people demonstrating Lightning, and sending money in places that it doesn't normally need to go. And so we're trying to compensate for those inefficiencies. If this were a streamlined marketplace, you would see much more mature hub ecosystem, where everybody would just need to connect to one or two hubs at most, and they'd be connected to most people that they would want to pay, and most merchants they need to pay. It's still kind of true, but yeah, the addressable market in the current sense is tiny. It's just people that are enthusiasts of Lightning and bitcoin and then the miscellaneous merchants and exchanges that also support Lightning. The addressable market in the positive sense and the potential is the entire market. It's everything that people use to buy stuff. It's hyper bitcoinization. And so from the perspective that we're at, the way we see it is we need a Blocktank and we need LSP stuff to be matured and Lightning to be matured in general. Because of our use case of what we're trying to do with Bitkit, we want a good user experience, a self custodial user experience in our wallet, and our users owning all their own assets and data. And to do that, our design for doing that in a nice way, in a usable way, in a sleek way, requires an LSP. And so we're going to open source what we made for ourselves, and then we're going to explore what seems like sensible use cases for it in addition to Bitkit, just to kind of test the market. So we'll do business development. We'll see if there's demand, we'll try to facilitate the future that we're imagining as best we can, but we don't have an expectation that Synonym is going to become rich because we offer Blocktank. It's more of like, let's just see if this is viable. Let's make sure that we're doing our part in facilitating the Lightning Network and giving it a chance to become what we all hope for it to become. But I don't think we should make an assumption that everything I believe in inevitability of bitcoin, but inevitability of lightning is kind of something we need to be a little more careful about. We shouldn't assume that Lightning is going to be the savior of all bitcoin problems. We still need normal bitcoin to work well. We still may need other types of layers, et cetera.
Kevin Rooke - 00:20:24:
Now, when you think about the ways in which someone gets liquidity today, you have on one end of the spectrum, you have the hobbyists who will happily send telegram messages to each other. They'll manage to get their liquidity using various websites. They'll maybe pay a merchant, they'll figure it out on their own. Then you have marketplaces, and you have a free tier of that in LN plus you have a paid tier in Amboss, and then you have service providers that it's like a white glove service is like, we'll take care of it, don't worry. Where do you think that ecosystem do you think everything converges on service providers? Do you think that over time, regular people using the Lightning Network will just want it done for them? Or is there a place for like, I'm trying to figure out how what a marketplace might look like in in the future. Does it look a lot like a stock exchange where you have large participants or maybe like a bond market where there's just really large institutional participants swapping back and forth liquidity, but everyone else just goes with the service provider that takes care of it? Is a marketplace going to be is that going to be the avenue that everyone chooses to pursue to get liquidity? How do you see that ecosystem? Either consolidating or how does that unfold over time?
John Carvalho - 00:21:43:
I think it will unfold like an organism. In other words, you have the human body, and it has major organs, and it has major arteries, and it has capillaries down to the fingers. And I think that's how Lightning will evolve. In other words, it will evolve naturally because the flows that need to be in place actually need to be in place. And so the flows that need to be in place, that need to be the largest, will be the closest to the organs and go as far as they have to go. They'll be the highways, and then you'll have subsystems that branch out from there. Remember that there's no such thing as the Lightning Network, as your Lightning Network. It's your view and all the people you can reach that use and support Lightning. And there can be totally detached Lightning networks using the same exact spec and format and implementations and basically separate organisms or distant organisms or distant limbs, you know what I mean? Your toes versus your fingers. And you don't necessarily need to have them all. You don't need a vein connecting your finger to your toe, right? There's a different way to route that, and they don't even communicate with each other, right? And so there's a practicality that will evolve, in my opinion. And that would be the opposite of the first example you made, which is like going out to telegram and asking for somebody to open a channel to you. This is just not understanding Lightning. This is not understanding Lightning at all to behave that way. Similarly, at least in earlier versions of marketplaces, same thing, like just going to Pool and buying a channel. This is, like, totally ignorant. Nobody needs that. You don't need liquidity. You need liquidity in the path of where you're trying to pay if you're not actually trying to pay anybody on Lightning. You don't need Lightning. And so your thought process, your decision tree, should be coming down from how you're trying to use Lightning. You know what I mean? It shouldn't be how much money you need on Lightning. And that's where LSP has come in. Or like, for example, with Thor from Bit Refill, probably the original LSP, or I think maybe LNBig was before them, but LNBig was opening channels for free. So I'm not sure if you call that LSP or not, but since then you have many LSPs. And in the case of something like Bit Refill selling a channel, a Blocktank selling a channel, it's practical because Blocktank is like tightly connected to Bitfinex. Plenty of liquidity there. Bitfinex is tightly connected to any other exchange that supports Lightning. Blockchain opens channels to every major merchant. Bit Refill is the most major merchant on Lightning, and so they're a great organ to be connected to. And so I see that the topography being like a core network of hubs that are connected to each other and then subnetworks breaking out from those hubs as necessary. And so, yeah, I think Plebnet is great for enthusiasts and learning and experimenting, but it's a whole separate organism mutated on the side of the Lightning Network. It's not actually a way to get connected and be able to pay everybody or anything like that.
Kevin Rooke - 00:24:57:
That's interesting. I like that analogy of the human body. And I've heard other people talk about how there is not the Lightning Network, there are different regions or subsegments of a Lightning Network. And a lot of times that discussion happens in the context of KYC and people saying eventually we're going to get some split or some kind of two different groups of Lightning nodes connected to one another. Maybe there's overlap, maybe there's not, where on one side all of your merchants, all of your providers have KYC in place, and on the other side it's the Wild West. Do you see that unfolding? And does that idea of splitting the network or having some kind of overlap between KYC and non KYC nodes, does that fit neatly into this human body analogy?
John Carvalho - 00:25:56:
Sure, I wouldn't say you can split the network because again, my perspective is that there is no one network. It's your network, it's who you are connected to. And so whether or not you could be on both kind of sub networks, say, for example, say there's a black market network and a KYC network, a white and a black network, you could have one channel that gets you to one and one channel that gets you to the other, and you're on both, right? That might be how you handle it. But as far as whether that's evolving the concept of there being permission to areas of your network or permission to areas or permission to lightning networks, that you can only really get into those routes if you KYC, we aren't there yet. I am growing concerned that we will go there quickly. One example of why I'm concerned is stuff like one of the leaders in Lightning, Lightning Labs has become very focused on Taro and their token concept. And that's fine. Experiments are good. It's good to have options as we'll talk about later with Pear Credit. It's not necessarily how I would do tokens now that I've kind of been researching it for a while and landed on what we're doing with Pear Credit. But more specifically, my concern here isn't whether they're doing tokens. It's like the design where they have this concept of an edge node that is essentially an exchange and the likelihood that that will bring the concept of permissioning and KYC to the Lightning Network. Maybe it'll be an isolated context. In other words, you can't get a channel with an edge node unless you're KYC or unless you do it through your exchange account, which has been KYC or some sort of gating of it. But I am concerned that introducing that concept to Lightning could make other regulators look at, okay, if we're doing it here, why aren't we doing it there, and why aren't we doing it to LSPs, for example? And the reason why I'm worried about this accelerating is not specifically Taro edge nodes because Taro edge nodes are essentially exchanges. And so basically it's bringing exchanges to the Lightning Network. In the Lightning Network, my concern is more with the culture of regulations and kind of recommendations from nonelected bodies like OFAC and things like this. And their language is increasingly becoming broad enough to make lawyers wonder whether they're trying to include the Lightning Network or similar networks and lawyers and entities being scared to ask if that's the intention. But now some of these recommendations are being put into law. For example, some of these recommendations are being put into law in BVI, British Virgin Isles where our company is technically registered. And so now we have to be analyzing these things careful and thinking about what we do. And one consequence of that, for example, is we used to sell channels with a total size up to $9,999 to be under the $10,000 AML limit. But now the new regulations and recommendations that they put in, we don't know whether they apply to us for sure, but they're so broad that we're better off lowering it below the the new limit, which is $1,000. And so now this is affecting us, right? We don't know for sure whether we could get away with doing the higher amount and not doing KYC or AML to the degree that these new regs require. But to avoid it, we're just going to say, well, Lightning is still small and $1,000 channels are still pretty damn useful and good enough for now. But that's just showing that the overbearing that may be coming and so that the trends that might be coming. And there are very negative ways that we could look at the Lightning Network from a regulatory perspective. I won't get into them at the moment because I've noticed that when I've gotten to them in the past, it really rubs people the wrong way and they think I'm crazy and an asshole and I want to kill Lightning and. That's not what I'm talking about. I just enjoy the candid thought, I enjoy the thought experiment and being this adversarial thinking. But yeah, also geo blocking is another issue. Most businesses have to make sure that they don't do business in specific GeoIP jurisdictions. And so if your Lightning node is caught routing payments for a node that is shining out a North Korean IP address, you could literally get in trouble. And if you're not even checking for that, you don't even know you're doing that. It's not a good enough excuse. And so you're going to see more and more GeoIP watching going on by business nodes, particularly big companies. You'll see exchanges doing this, you'll see any major entity is going to have enough lawyers, they're going to be saying, hey, make sure you're checking who's opening nodes. If you see these IPs, make sure they're not from, I don't know, North Korea is the easiest example, but there are other sanctioned areas. Even another interesting one is some people were I forget which entity, where the instructions came from, but when the Ukraine war was starting to be starting to add new IPs related in Ukraine and then I was like, Shit. I hope that doesn't come down to our level because I would hate to be geoblocking Ukraine. Because you can't geo block with precision. And what was being regulated was these specific terrorist areas or claimed to be terrorist areas of Ukraine overlapping with Russia in this conflict. And they were saying don't send money with these areas. But if they wanted to, they could say that essentially means geoblock Ukraine. And so if Ukraine is a victim and now you're geoblocking Ukraine, it's like they're the ones being punished because of these regulations when really they're the ones who need help. You know, assuming all of this is true, and it gets really twisted. And that's actually the most important thing to remember about regulation, is it's always the people who are innocent that are paying the price and being regulated, and never the people that are trying to stop the criminals are always going to find a way to do what they need to do. And you're better off focusing on catching criminals than on trying to filter them out of legitimate systems.
Kevin Rooke - 00:32:52:
Yeah, it is scary. I mean, I think a lot about the regulatory landscape and how in the Lightning Network it still seems like things are too small to catch the regulator's attention. They seem to be preoccupied dealing with crypto frauds and stuff like that. And they seem to have not done anything really about the Lightning Network to date. But I see where you're coming from when you say you could enact these really broad sweeping regulations that are vague and just kind of like cover the whole industry and you can put that into place and all of a sudden cause problems for the entire industry overnight. And I wonder because I think there's two schools of thought here in the bitcoin space, and probably most bitcoiners lean towards the school of thought. That is, forget the regulations. We're trying to build a system that does not respect this fiat financial system and all the rules that come with it. We're trying to build bitcoin, we're trying to do our own way. We'll just not worry about that. And then there's the other school of thought that says we should really be pushing towards trying to get regulators on our side, helping them craft regulation that makes sense, that is useful. Do you think bitcoiners should be spending any or more of their time working with regulators on this, on crafting these rules? Or is it the right strategy to kind of try and build a system that they can't regulate and hope it works?
John Carvalho - 00:34:25:
No, I don't like any of what you said on either side. I'm trying to be personable as far as what you're suggesting. So on one hand, I don't think bitcoiners should put on blinders and say fuck regulators and fuck the law. We're doing what we're doing that's ignorant and not going to work. And I also don't think that bitcoin is should be trying to work with regulators and trying to get, quote unquote, regulatory clarity. And so my response and my recommendation on both those sides would be on the regulation side, if you want to do something, fight for bitcoin rights. Do not fight for regulatory clarity. The thing about regulation is it's always meant to restrict, it's always meant to reduce capability, it will reduce utility, it'll increase cost, it'll give you less options. That's the only thing that it's for. And so when you say you want to help regulators or guide them, you're just saying you want to affect how many or what wording and you want to educate them and you want them to be actively interested in limiting your freedoms. And I just don't think there's a path to that that is going to be in our best interest or our incentives. Regulators incentives are political, they're monetary, they're self sustaining, they're trying to grow their ability to regulate. And so the incentives are not in line with bitcoin or so working with them is nonsense. It's just saying, yes, we want to help you make more rules against us. And the hopes that you can somehow subvert these rules to be less than they would have been if you hadn't been involved. But you don't get to see two realities. You never get to know whether you made it a positive effect. All you're doing is helping, and I don't think you should help. And the incentives do not match ours. So there's no point trying to pretend that we can cooperate. Some people would say I'm ignorant, some people would say I'm wrong about that. I'm open to the idea I'm being wrong about that. I just think fundamentally it's unlikely that I'm wrong about that. On the side of putting on blinders and saying, fuck them, we're just going to do what I want. I would say that my advice on that perspective is we should make it as hard as possible for them to be able to regulate us. So when we're designing things and implementing things and creating products, we should be prioritizing and remembering that the most interesting ones, the most useful ones, are the ones that protect our censorship resistance, protect our privacy, protect our ability to not be censored. There's no other way to put it. It's really the most important thing about bitcoin. Yeah, the 21 million limit is important in having this kind of steady store of value. But really, the censorship resistance is the why, it's being able to be the black market in the abstract, not in the illegal sense, but just the free market, unregulated. And so going to regulators is antithetical to that, but you can prioritize that in your designs. So, for example, I can give you two examples, and I tweeted about this very recently. One is the culture of being curious and interested in cheerleading custodial products in bitcoin really needs to change. I don't want to be a shit talker, but just as examples, that would be very pertinent. People love Strike, and Strike is a custodial product and people want to cheerlead. And I think that what Jack Mallers did with facilitating El Salvador and the early days of making Lightning node easy to run with Zap. He deserves a place in history in that, you know what I mean? But I don't think that means that we need to cheerlead. What Strike is doing with custody and pretend that how they do things is somehow doing something for the Lightning Network or pumping our bags or any of that stuff. I would like to see strike be working on having a self custodial Lightning experience in there. I don't care about using Lightning as swift and these kinds of things. That's not something that's something Lightning does. It's something bitcoin does. It's not something that Strike does. And so that would be an example of the culture change or other interests in things like Chaumian mints and these things I'm not saying these are bad products or that these are not things that should be researched by someone, but they're not things that should be cheer led and held up as primary solutions for bitcoiners. I think it's great to have safer ways to do custody and that people will always have custodial use cases. But this is not like how we scale bitcoin. You can't scale bitcoin with custody and it avoids the actual problems of solving bitcoin, scaling problems and actual conversations to move that conversation forward that have to be had. And so that's one is just the culture of custodial support needs to go. And I feel like it's like a gaslight thing because look what happened with FTX and Celsius and all these things this should have really hammered home for people that anything that's custody is really dangerous. It's not because of the yield, it's because of the custody. The yield was just what got people to, you know, forget about the custody. But somehow there's a lot of Bitcoin is still forgetting about the custody. And the more specific other example I'll bring up is, for example, my current interest and is trying to lobby the Lightning community for finding a way to remove the dependency on IP addresses from Lightning, because I think that's a vector of attack for the state, for regulators. You know, it's already established that with the Internet, if you see an IP, you're supposed to geo block that IP for certain reasons and be aware of that IP in how you serve and perform businesses, et cetera. And so that regulation is established and now that is going to eventually get overlapped with how people can and can't use Lightning. And so I think if we can't know the IP and we don't depend on the IP, then that would be one way to improve Lightning. And I don't mean to do this as a hack experiment. I mean, like to change the bolt. Like Lightning should not use IP addresses and this would have trade offs as far as the best design for it. Well, I'm not a professional engineer to offer the best design, but from what I do know about how you would do it, you probably have some latency trade offs and complexity trade offs. But I think it's something I'd like to hear people talk about more. Because I see this as an attack vector, and I see it because of how regulations read and things we're having to worry about as an LSP and as a business.
Kevin Rooke - 00:41:25:
Yeah, that is very interesting. What has been the reception among Lightning developers in the community that you've spoken with about this idea of removing IP addresses from the protocol?
John Carvalho - 00:41:35:
I've only just kind of started planting the seed with some people. I think that I mentioned it yesterday in the LDK call. There's a bi weekly LDK call and we use LDK and Bitkit. I mentioned it in there and Matt Carollo seemed to not be allergic to the idea so much as he pointed out some legal considerations with IPS and that I told him my quick idea of how I might suggest doing it. And he said that would make sense and that if we ever want to talk about it more directly, that he'd be okay with looking it over or giving his thinking on it. I don't know that it's something he's actually worried about or we didn't talk about it deeply and nobody committed to anything. It's just kind of planting the seed of the idea. I've talked a little bit with Christian Decker about it as well in private conversations. I think that nobody has said I'm crazy, but nobody has said, yeah, we need to fix this. I can't really say what people think about it so much as it's a concern for me.
Kevin Rooke - 00:42:46:
Fair enough. This is great. This was one of the things that I remember from our last conversation. If listeners haven't checked it out, I think it's episode eight. I remember leaving that conversation thinking like, man, this guy is on a different he's thinking different ways from everyone else. It's not the stuff I see on bitcoin Twitter every day. He's bringing up new ideas, and I really appreciate that. So, unfortunately, I can't offer any feedback on your idea of removing IP addresses. I don't have that technical background.
John Carvalho - 00:43:16:
But I do appreciate that at least I appreciate that you respond positively to such behavior from me, because most of the time, I'm actually getting the opposite. Most of the time, people do not like the way I think or the ideas I propose. They think that when I say something that doesn't cheerlead bitcoin, that I'm attacking bitcoin, or that I'm promoting shit coins or something. But it's no, it's just like, I care about bitcoin a lot, and so I'm always trying to think about what is the most important thing that we should be worried about and working on and providing yeah.
Kevin Rooke - 00:43:46:
And patching the holes and fixing all the things that need to be fixed, because it's not going to be an easy battle to win. Right. Disrupting the entire world financial system. Okay, let's shift the topic of conversation to Bitkit. This is the next product in your lineup. I believe you revealed it at logano a couple of months ago. Can we give a quick rundown for listeners exactly how Bitkit works?
John Carvalho - 00:44:12:
Sure. So Bitkit is kind of like the home base to our ecosystem. Bitkit is supposed to be like your ultimate bitcoin toolkit. And so it's kind of the tool belt that you would have to be able to operate within our ecosystem. And so the minimum thing you're going to need if you're going to do bitcoin is a keychain, which is essentially what we call a wallet. And that keychain can be more than a bitcoin wallet. It can be for Lightning, and then eventually for pair credit, and it can be for your keys, for your accounts at websites, and your data, your profile, anything that you want to represent yourself digitally in a self sovereign way. And so Bitkit is our attempt to have a reference wallet. I don't mean that in the technical sense. Developers probably won't like me using the word reference, but in the abstract, it's a reference to how we think wallets should be done for the next paradigm, for the next web, for the next economy, et cetera. And we're very design oriented. So one theme about Bitkit and how it works is just rethinking the user experience in the UI and trying to think of it from what's practical. And if we were able to get this to mass market and still be self custodial. What would it look like and how could we make sure this has a chance? So it's speaking in user terms when you use terminology. We don't mention Lightning channels, even though it has a Lightning node inside. We don't mention Lightning liquidity or routing or these things. It's just connecting. You want to be able to spend instantly, then connect to connect to the Lightning Network. So we try to just speak in user terms and abstract things. Our goal as far as the Lightning aspect of it is what I would call the zero Lightning user experience. And I meant to mention this earlier with one of your other questions, which is, I don't think that users should know Lightning exists. That's the future of Lightning. I don't think they're supposed to know it exists in the first place, and they're supposed to care about routing and any of that stuff. I think it should just work. And that's what I'm going for.
Kevin Rooke - 00:46:31:
I hope you're enjoying the show so far. Just a quick message from our sponsor, Voltage. Voltage empowers engineers to integrate Bitcoin and Lightning Network payments into their business stack with an enterprise grade experience. The team at Voltage is building the complete tool set so that you can do more than simply spin up nodes, but also understand and interpret your node’s data. Their new product, Surge, gives engineers the capability to quickly solve problems and optimize operations. With node insights and visibility through time series data, you get dynamic and complex insights never available before. You can get complete control with insanely fast onboarding advanced client side encryption and zero management infrastructure, making backups, networking and upgrades simple. Get a free seven day trial today at Voltage.cloud. I think I had a conversation with Caitlin Long a couple of weeks ago and she used the term that this is back end payment technology. And I think that was really well put, that this is something that is not meant to be visible on the front end for everyday users. The term talking about Lightning related terms is something that probably only Bitcoin Twitter cares about, and everyone else is just kind of like, does it work?
John Carvalho - 00:47:44:
Yeah, it's tricky because Bitcoin Lightning technology is usually CTO engineer-driven stuff. The CEOs of one of these companies are hardcore programmers. Well, not this company. I'm not a programmer, I'm not an engineer. I do my best to throw my weight around in that arena despite not being one. And I think I do pretty good, all things considered. But I'm not. And so I'm a product guy, I'm a marketing guy, I'm a branding guy. And so that's the difference, you'll see, with Bitkit is that it's more oriented to our vision. And so the kind of pillars of Bitkit are it's got bitcoin in a Bitcoin wallet and all the ways we think the Bitcoin wallet user experience could and should be done it's got a Lightning node in it as well. So it's self custodial, I think the first, at least public implementation. I know that Blue Wallet had LDK in their first dev mode that you can unlock to try it, but they haven't converted to it yet. But by default, Bitkit uses LDK and has its own node. And then the third pillar is all the stuff it supports with Slash tags, which we can talk about after Bitkit. But this is what we think you need as a toolkit for the new digital economy. And so what we do with Lightning is we rely on the LSP, so that helps us give a good user experience. We still give the user a way to connect to, say, their own electrum node for Bitcoin, and eventually their own Lightning node for Bitcoin as well, or their own LSP at least. But a lot of it is work in progress. So Bitkit is still in beta, there's still bugs, we're still working some things out. There's a lot of stuff, even though it's a very simple wallet, when you use it, there's a lot of stuff going on in the background, there's a lot of complexity as far as getting it to be this simple and have all these features. And then, yes, finally, with the Slash Tags features, there's kind of a new set of features that have not been in wallets before. To kind of start to demonstrate what you can do if you use keys for the web and you use HyperCore and hyper swarm as an underlying dependency for your stack. What's possible and how you can start to do things. Like how we have contacts that are made out of keys. And so you have this concept that mixes what you'd think of as like your Twitter profile or a public profile with the concept of a contact, but it's data that you own. And so instead of adding your mom by typing in all of her data, you actually add your mom by scanning her key or adding her key as a contact, and she sends you her data. Her contact info is kept up to a date by her, not by you. And so it's like a self sovereign. You own your data, only you can write your data with your key. And this adds user experience that you can pay to contact using Bitkit, because we've added a payment protocol to Tags, which we just call Slash Pay informally, but this is a way to abstract all payments to your Slash Tag key. And so you can support Bitcoin, Lightning, anything you want, any payment method you could think of, you could have underneath that key and supported. And so we're doing work on improving that and fulfilling the vision of how we think a solution for overarching payment protocol and payment coordination could work. And that's what we're doing with Slash tags and Slash Pay. And then that means that for the user, that's like when you hit send, you can just choose someone your contacts tap on your mom's face to pay her. And you don't have to know if it's using Lightning, if she has enough liquidity, if it's on chain or off chain, if it's eventually a credit token on Pear Credit. You just have what you want to pay her and you send. And if there's a problem or an extra fee to accomplish what you're trying to do, you get shown that and the ability to approve changing that path and that's it. And the other part that Hashtag adds is this widget feed area. And so this is kind of an answer to what you might see in some older wallets as like an app store, but also an answer to like things like having using keys for your accounts kind of like LN-URL off but it's got like a whole slew. More features and improvements on those concepts, more, you know, harder to censor aspects to it, easier to use aspects to it. Like once you've created an account with the key, you can just tap to log in. Once you've created an account with the key, you can just open Bitkit to see your account data without visiting the website at all. So for example, we'll be adding and within the next month we'll be adding updates where, say if you make an account in LN Markets with Flash tags, you'll also be able to see your LN Markets account balance and your LN Markets PNL your profit and loss just by open seeing that in your Bitcoin wallet. And so then if you want to visit LN Markets to close your trade or something, you just tap on that widget and log in. And so you don't have to scan a QR code, you don't have to memorize a password, it's just all key managed. So yeah, we're just showing how you can do different types of widget feeds and so how you can build apps, entire apps out of these widgets, out of these data feeds that are coming from a DHT which is providing decentralized routing and this other layer of self sovereign, difficult to sensor web technology.
Kevin Rooke - 00:53:27:
I really like the idea of having a single place where I can manage my money, I can manage my Pay contacts, I can log into different apps. And one thing I want to clarify in that example of LN Markets you used that widget, can it also fund and withdraw your account for you or you have to go into LN Markets to do that.
John Carvalho - 00:53:48:
You have to go to LN Markets to do that. But that is a use case we are kind of working on probably for 2023. So one of the things we want to do I don't know, I shouldn't even be some of this is secret. We want to give people ways to do more with widgets that's interactive. Right now they're not interactive, they are more just data. It's a database that you can get from anywhere and anyone, and you can know that it's the data that you expect it to be because it's all coming from a key. And so you know that there's integrity to the data no matter where it comes from or who it comes from. But this is mostly use cases for data feeds, logs feeds. Oracles is another use case. We'll demonstrate very soon for smart contracts and stuff that's all cool, but it's only one way it comes from the source, right? We have some other data feeds as examples, as with Widgets. Like we have like one that data feeds we serve like the latest bitcoin block data or the latest bitcoin price, an array of random bitcoin facts every time you open the app. But these are data feeds that any app could own and any app could publish and any app could read in their app. So you can kind of have this true concept of adapt where all the data comes from wherever you want it to come from. But as far as interactive stuff, we are working on it and it's in the context of we also want to be able to give people a way to buy bitcoin in Bitkit. And so we're trying to think of the best way to integrate and take advantage of the technologies we have in place to do stuff like that.
Kevin Rooke - 00:55:30:
Very cool…
John Carvalho - 00:55:33:
But we want to avoid making a Bitkit into a mega app. In other words, if you wanted to use, say, Bitfinex API to have a Bitfinex app, which is how the Bitfinex mobile app is, it's an API that uses your API key from your normal Bitfinex account. Well, we don't want to make a whole Bitfinex app, right. Like that's not what Bitkit is, it's a wallet. And so we have to be careful with how we move forward with this. But in the end, yeah, this is the potential. You should be able to build an Exchange app out of an Exchange feed or using keys. You should be able to build a podcasting app for sure, since it's not even very interactive, these kinds of things, using this underlying technology as like web Legos, right?
Kevin Rooke - 00:56:25:
Yeah. I may be a bit of an outlier here because I play around with a lot of these different Lightning apps. I accrue small balances of sats in like a dozen different apps and then at the end of every month I consolidate everything. I try and make sure things line up and just to keep accounting records of it. I have the biggest nightmare ever of then going into twelve different apps. Everyone has different withdrawal processes and I have to use different wallets to receive funds too. If someone can solve that problem for me, that I think is the biggest thing right now. And I imagine over time there's going to be more people that start to earn Bitcoin in interesting creative ways across different applications. Maybe today most people are happy using one or two, but I imagine over time there's just going to be a proliferation of use cases and ways you can earn money on the Internet. And having that one hub that you can just manage your balance, you can log into all your apps, you can fund withdraw. That's incredible to me.
John Carvalho - 00:57:33:
Yeah. As far as funding, withdrawing it is more of a challenge, and that's why I mentioned some details and nuances around it. I think being able to see all your balances and see all your account data and then authenticate into any of those things from one place, that's definitely what we can provide now. But I have a feeling this will come up again later when we talk more about Slash Tags on the website. But Interoperability is like kind of a red herring and I'll probably say it again later, but in this context, for the moment, it's also true. And what Interoperability means, which you mentioned earlier, you saw in my Stacker News response, it just means everybody using the same thing. And so while we could provide technology that could make it so if people use this thing, you would be able to consolidate everything and automatically withdraw from all your accounts into your wallet and do all these all the things you would love to be able to do. It only works if everybody uses the same thing. And so now you have an adoption problem, a bootstrapping problem, a business development problem, of how do you convince all of your favorite websites that you make money on to use this format. And so you can do what you need to do, and that's much easier said than done. Well, it's hard to do and it's hard to create and it's hard to convince. And so it's a lot of challenges there, but that doesn't mean it's not worth creating the tech to make it possible.
Kevin Rooke - 00:59:00:
So when you separate, if you think about your day focused on Bitkit and the Bitkit team working on this project, how much of your time is then devoted to creating new features for the wallet? And how much of your time is talking with all the other apps and places you could potentially integrate Bitkit and trying to get the community to rally behind using this as a hub for your money?
John Carvalho - 00:59:24:
Well, it's, I guess at least three separate processes that you're defining there, which means it's at least three separate individuals or three separate teams and so on the bootstrapping and convincing people to use Slash Tags and integrate with it, there's a whole separate strategy and team for doing that. So there's a business developer that's dedicated to Slash Tags. We are developing what our strategies will be for 2023, for making sure that Slash Tags is easy and appealing to use for merchants, developers, any platform, so that we can continue to get. More people in addition to the current people that are already implementing it to keep that momentum going and making it easy for them and facilitating them. Then there's the team that maintains and optimizes and improves what we already have committed, the features already in Bitkit. Like I mentioned earlier, there's still bugs, there's still things that we have to get working. And so right now Bitkit is mostly on a feature freeze where we're just trying to get all of the things that we user experience that's in there to be stable and working to our satisfaction and user satisfaction. As far as new features, well, we have a road mapping process that we're in the middle of right now. We'll finish it sometime in February where we take all of the kind of options that we have, all the ideas, all of the permutations of possibilities of things that we could or should be doing based off of our learnings and what we have today. And we prioritize them and we prioritize them and lay them out over the team, over time, over our resources so we can figure out what we can actually accomplish and what we need to cut. Because in the end, a major learning in the past year is I thought I could do multiple products at once and I thought we could be when we first announced Synonym, we promised a publishing platform, we promised a social media platform and we haven't been able to even touch those yet as concepts. So we still think that our ecosystem is an optimal way to provide those things. But to create those products and have them be of the quality of what I would call a reference product for how to do this, it's a lot of work to do that with Bitkit. It takes a lot of people to do that and we're still trying to clean it up. And so to do that for two more major products, it's difficult to figure out how to fit that all in while progressing Slash Tags and all the features and all of the visions we have for the powers we want that to have while progressing the user experience and features we want to add to Bitkit. So we're trying to weigh all of these things, prioritize them and then deliver them.
Kevin Rooke - 01:02:21:
Makes sense. Okay, let's get into Pear Credit. That's the next product that we want to touch on. And you guys launched this in Lugano as well. And I just want to read off the Pear Credit Twitter page, just your bio there. It says pairCredit is an open, transparent, peer to peer accounting system that uses Lightning style channels to bring a credit system to life. So first, can we break down that sentence? I really want to learn more about specifically how the accounting system works, why Lightning style channels rather than Lightning channels, and then what kind of credit system you're imagining here.
John Carvalho - 01:02:59:
Sure. So for people that follow me. They know I've been talking about credit or tokens on Lightning, at least for a long time. I'm not a pioneer because I wasn't the one that doing any of the actual pioneering as far as technology goes, but I was an instigator in this whole realm and reviving it within the bitcoin world. Because at Bit Refill, I was very interested in this idea of having instant tokens and taking what's cool about Lightning and seeing if we can make that cool about tokens. And more specifically, not for ICOs or alternative monies or weird network inherent tokens or whatever, but because of credit. There's a lot of people going back all the way to 2013 requoting the gold is money, everything else is credit. From JP Morgan into bitcoin is money, everything else is credit. But they always use it in the negative, as in like, bitcoin is the only thing we should care about and everything else is a scam. But credit is not a scam. Trust is useful. Trust will probably always be useful. And I'm more interested in digitizing trust and trying to give people better tools for choosing who to trust and what to trust them with than I am, and pretending that trust is evil. Cooperate, trust is cooperation. Lack of trust is competition. You need a healthy balance of both. And simply one person can never compete with multiple people cooperating. So trust is always going to be useful. And so that's the kind of primitives of why I care about trust and why I care about credit. And I would like to see credit extended to things like gift cards. In other words, not just for representing dollars like Tether, but representing credit from the institutions and things you actually rely on in your day to day life. So rather than trusting a bank with your dollars, trusting your grocery store to have some liability to you for groceries because you prepaid something like this, I'd rather use my grocery store as my bank for my grocery expenses, you know what I mean? And so having the idea of gift cards or gift tokens having the idea of product tokens a thing denominated in a product or denominated in a service instead of denominated in a money these are interesting to me because I think you can create nice aftermarkets if these are bearer instruments and if you can have a digital aftermarket of all the things, you can have a highly automatic market, and you can really have everything competing and you can have supply and demand really expressing in like an ideal free market. This is where the roots and underlying interest for me in all this technology. And so I put a lot of research in and supported a lot of miscellaneous projects on the way from RGB. Trying to do tokens on bitcoin using single use seals and trying to get RGB working on Lightning to trying to revive Omni, which is the original place that Tether was born, and what made Tokens popular, really, at least in the modern sense. And Omnibolt, which was a way to make Lightning channels out of Omni transactions. We fully implemented that, at least in the state that it was in last March or so, and we dropped that too. And also being part of giving feedback on Taro when it was called CMYK before it was released, and giving feedback and considering that as an option. But by last March or April, I forget what it was. But looking at the whole environment, I started to become very uncomfortable with the idea that, well, if we're going to support OmniBolt and now Taro is going to say that OmniBolt is bad because it's like bitcoin blow and they're going to have a whole narrative war with OmniBolt. This means that Bootstrapping is going to be a real challenge because Bitcoiners is like cheering the current incumbent winner. They don't like cheering a risk, they're tribal. And so I know what's going to happen. People will go to exchanges and they'll say, well, we were thinking about getting rid of Omni, we don't want to depend on it more. And now add another Omnibolt on top of it. And then Wallets will say the same thing, like, why do I don't want to add all this? I'm having trouble enough adding Lightning and you want me to add another Lightning? And then they're going to say, oh, we'll just wait for Taro. Lightning Labs is the real deal, they're the thing. And then it's just going to be this whole narrative war and bootstrapping problem and stagnation and then looking at Taro was like, well, fuck. Like, I actually think the OmniBolt design kind of makes more sense in some ways. And so are we going to support both? What's the complexity of a user experience where you support multiple token networks in your app? And then I was thinking about the trade offs for all these things like Liquid. It's really difficult to convey to the user that the risks and trade offs and trusts related to a federation with Taro. It's like now you have the inefficiencies of having to exchange your value in order to be able to transmit it over Lightning. So now you have the complexity of Lightning plus the complexity of exchanging, plus any cost related to that. So it's definitely going to be more expensive to use that. And you have the limitation with Taro, where if you do rely on that design, that you're only going to have tokens that have already have an established order book, because if you have to exchange your token, there has to be liquidity for your token. So there's no way to bootstrap tokens with at least the initial Taro design. I think they say they're going to be able to do token native channels and not conversion, not rely on the edge nodes. But I don't know, I don't know where that is in their priorities or what their plans are. So there's just a lot of trade offs in all these decisions and I didn't like any of them and I didn't want to support all of them. And so I was having a conversation with Paolo about what my actual requirements were, what I was actually trying to accomplish, and why I cared about this. Kind of like I've just explained to you, but on a little bit more technical level. And I basically told him, all I really care about is that I can have my tokens as a bearer instrument where I can trade them peer to peer with other peers and not have to ask a centralized entity for permission. What Bitcoin and Blockchains bring to the table for tokens is making them into bearer instruments and making it so the issuer while the issuer can censor to some degree, in other words, they can go and they can delete your balance and they can blacklist you from redemption, from certain balances, this kind of thing. That's not a problem that Blockchain solved. It's not a problem. So thus it's not an assumption that that problem can or should be solved. The issuer is always at least one trusted entity in a credit situation. It's the issuer, right? And so that's an assumption that's a given. You have to just say, that's the way it is, and I want to make it so that's the only person I have to trust. And that's what Blockchain brings to the table. But the problem is blockchain brings all these other trade offs. It doesn't scale, it's expensive at scale. In other words, at saturation, these use cases might not become viable anymore. Like tokens on Bitcoin might not make sense if Bitcoin blocks are full all the time, but it might not work at scale. Just like how Lightning has these kind of risks if the blocks are full all the time. Now you run risks about closing your channel and your enforcement transaction justice transactions as weird attacks and stuff. And so I'm worried about putting things on top of Blockchains because they might break and they're expensive and they're complicated. And so I said, I'm starting to wonder if we could just do this with HyperCore and hyper swarm in the stack we already have. And what he said was he had actually played with some designs for doing a credit system in the past and that him and Matthias from Pear from Hole Punch had some ideas about this one or two years prior and that he thinks what I'm describing could be done. And so from there it turned into we had like a two or three hour conversation and about requirements and about whether this could be done. And once we established that it could be done, it immediately started becoming a project. And so the next day he's saying, okay,Hole Punch is working on this. We can have a proof of concept in some months. And yeah, we think it could be done, it's pretty sure. And so I dropped all worrying about Taro. We totally gutted out the implementation of Omnipoll we had in Bitkit at the time and removed all the token stuff. And that's why Bitkit was released without any kind of token tech in it. Because we are confident now at this point, say nine months later, since been working on Pear Credit that this is the way to properly do tokens. And so as far as what pair credit is, that's the history of it and why we're doing it and how it came to be and that kind of stuff as far as what it is, it's basically a way to have a fractal ledger system. And so the issuer can create a ledger that people can have accounts with, much like how you can make an account with Tether directly and you can deposit cash with them. And each issuer can have whatever requirements they want for having a direct account with them. But anyone that has a balance in any of these accounts can lock their balance and create their own ledger out of using their balance. And so this kind of fractal nature allows things like for example, say Binance has an account with Tether, and now because they want their users to be able to use Tether using Pear Credit, and now a Binance user has an account or an address with Binance and thus their tether is coming through finance. But this is all provable. In other words, it's all rooted to the core, it's all cryptographically provable who owns what. And now those users can lock their balances on Binance and they can make their own ledger and say, now I'm a user at Binance and I lock my balance and I want to send you Pear Credit. So now we have two options. You can either have an account in my ledger and I can allocate some amount of tether to you based off of whatever process we want. I can sell it to you, I can give it to you, whatever. Or let's say you're already in another area of the ledger. Let's say Bitfinex has an account with Tether and you have a Bitfinex account, and then your mom has a ledger and then you're in your mom's ledger, so you're somewhere else in this whole root system. Now, I have two options. I can route a transaction through the route up the center, through Tether back down to you. But this is not very practical and it's very sensible. And it's essentially the equivalent of asking tether for permission, right? Because if they don't like that I'm paying you, they can stop you. But instead what we do is we can actually open a Lightning channel across ledgers. And so I take my balance in my ledger or in Binance's ledger and I open a channel to you in some other ledger and we can now create an off database state. So instead of off chain, it's off ledger, you know what I mean? And the Lightning channel, it's not a bitcoin Lightning channel, it has nothing to do with bitcoin. It just works the same way that Lightning channels work for bitcoin. So in other words, there is a state. We do update the state by mutually signing updated states with transactions, and either of us can close that by presenting a state to the ledger now. And you also have the punishment mechanism. If you submit an old state and I prove a newer state, you can be punished however the issuer of that ledger prefers. So we're basically doing Lightning for ledgers or Lightning for data, instead of Lightning for bitcoin. And so you just think of the primitive instead of being the bitcoin blockchain, the actual blockchain is, quote unquote, it's an append only log HyperCore ledger.
Kevin Rooke - 01:16:01:
I see. So this is just a different way of approaching this idea of bringing tokens into the bitcoin ecosystem, right? Rather than having the way…
John Carvalho - 01:16:09:
Into the internet ecosystem. So it's not a bitcoin thing, it's just a way to establish credit. It's a way to say, okay, blockchain did bring something to the game when it comes to digital tokens. And there is something there with credit that is a utility and will probably always be a utility. But what is the best way, what is the most efficient way to achieve this goal? And so, by doing it this way, what we do is we don't have to worry about Lightning channel liquidity, we don't have to worry about routing, because channels are basically disposable. All I have to do is know who you are, what your key is in the Pear Credit system, and I just connect you directly if that channel, there's no settling the channel to the blockchain and having to wait and pay a fee in ten minutes. Everything is instant. Everything is just disposable. Like, if I want to keep the channel open, I can keep it open. If I want to close it, I can close it. I don't have to do routing, I don't have to worry about how much is in the channel, I just do it. And so it just basically is the inverse of Taro. So instead of doing these edge node transactions to use Lightning as rails, we don't use Lightning at all. And so there's no routing, there's none of the trade offs of lightning.
Kevin Rooke - 01:17:33:
I see. So someone could, in theory, as this gets built out, if I have a favorite shopify store I've never heard of bitcoin before in my life, I can get a gift card from that shopify store on my Bitkit wallet and send it someone else and have all that experience in my one wallet without ever interacting with bitcoin at all. Correct?
John Carvalho - 01:17:58:
Yeah, without interacting with a blockchain at all either. Because remember, most of the people using tokens right now are not using them on bitcoin, they're using them on Ethereum and Tron and these other things.
Kevin Rooke - 01:18:09:
Yeah. So when you think about the opportunity for tokens, you mentioned gift tokens and stable coins are clearly a thing already. What do you think of as the composition of this token market? How much of that market is going to be devoted to coins pegged to the dollar versus private issuer backed gift cards, things like that? How does that market evolve? When you think about the entire addressable.
John Carvalho - 01:18:39:
Opportunity for tokens, I think the addressable market potential is basically everything that people aren't using bitcoin for. And so if you believe in hyperbitcoinization, all I'm saying is there probably will always be credit. There probably will always be at least one alternative money. People like to have options and an alternative, so maybe hyperbitcoinization won't exist, but in other words, it won't be the only money because bitcoin doesn't actually scale. And I don't know if bitcoiners are willing to make the sacrifices required to scale it. In other words, have it be a little more sensible or centralized or having their printing more bitcoins or whatever. These are all inflationary, central, manage things that we want to avoid. Right. And so if people need to have hot money or trusted money or credit, this is just our answer and our solution for that, to say that the marketplace probably will use credit and probably will want to express credit in various ways. And so that's the market for this is everything that's bitcoin and Pear Credit. That's the market as far as money and money or say, digital value transfer goes.
Kevin Rooke - 01:19:53:
And there's a clear distinction between the two. Right? It's like, it's either trustless and trust.
John Carvalho - 01:20:00:
Yeah.
Kevin Rooke - 01:20:03:
And the system there then is you're already trusting your bank, you're already trusting your grocery store to honor the gift card. You already have those trust elements in place and you're just porting them onto the internet, basically. And then bitcoin is the trustless component to that. Right.
John Carvalho - 01:20:19:
Well, also another sub topic here is, like you mentioned, tether and sabled coins are a popular use case for tokens. Well, I love tether and I love that they fund us and make what we're doing possible, but I have no particular interest in dollar imperialism. I don't want to see dollars in every home. That's not why we're here. It's not why Bitcoiners are here, for sure. And so when I see bitcoiners getting excited about bringing dollars to the global south or bringing dollars to Argentina or South America, it's like sad a little bit. It's like, I don't want to increase the utility of dollars. I don't want to bring more users to dollars, I want more bitcoin users. And then they say, well, the reality is there are people that can't afford to save or there are people that can't afford to bear any volatility. I don't believe that's entirely true. Honestly. I think there's a bit of convenient arguing there. I think that humans in general can at any level, proportionately figure out a way to save. And that's what money kind of is in a way. It's like a micro saving, right? You're at least holding on to that money until you can spend it, which is at least going to be for a day or something, right? And so if you have some ability to accumulate savings more than a day, then it should be done in bitcoin when you can actually reach a long term to overcome temporary volatility to where you actually have a higher value to your bitcoin or at least a stable or same value. That's the risk with Bitcoin is the volatility. That's the excuse for dollar imperialism or supporting dollar imperialism by stablecoin lovers. I'm just saying let's introduce this concept of denominating these things in things other than dollars, like products and services and the concept of having these things be issued by people other than banks. Because banks I have no inherent trust in a bank, inherent love for a bank, inherent desire to support a bank's success. I don't want that, you know what I mean? I would rather support the things that actually affect my life positively, like the people I actually spend money with. If I could turn everything I pay for into a credit token, then I would rather hold instead of selling some bitcoin every month so I can pay my bills and having to hold dollars for even a month. I would rather sell my bitcoin every month for some credit and be able to have the flexibility and the liability of the people I rely on to redeem that credit. I don't want to trust a bank. They're huge central points of failure, right? Everybody FUDS a lot about Tether and is worried about Tether's systemic risk. But while I'm not concerned with that and I don't even use tether personally, the idea is sound. In other words, let's make sure that we don't have one Tether. Let's make sure we have many Tethers and let's make sure that if there is a failure or one of these like say USDC becomes corrupt, then they sell all their balances or they get locked up in some kind of 3 hours capital scheme or FTX scheme and they lose everybody's money. Let's make sure that that's isolated to only the people that were dumb enough and using poor judgment to trust that entity and not that they become a dependency on the entire economy. If you want to be dependent, be dependent on the people that actually affect your daily life, that you rely on. Grow. Help your coffee shop grow, don't help your bank grow.
Kevin Rooke - 01:24:03:
How does the product denominated token work? Is that like if I go to a grocery store and I like eating apples and I'm going to denominate my gift card in apples rather than dollars, right?
John Carvalho - 01:24:16:
And so it shifts the responsibility I consider stability to be a service. When you say I want a stablecoin, you're saying I want somebody to provide me the service of a stable monetary unit. And that means that there's a cost to a service. The cost of that service for dollars is inflation. For example, you get debased. And so you pay the cost inherently by being debased. And so you can have other ways of forming the cost. You can change the design. So the cost is related to say a hedging instrument. Like you have a stable sats or whatever and so they have a hedging instrument. You end up paying fees for managing the hedge and conversion and all this stuff. And so you pay the fees in a more explicit way instead of but then you also are paying debasement on top of that because you're hedging with dollars. And so stability is a service. And if you keep that in mind as a primitive, then you can think, okay, well, a credit token denominated in a product or denominated in a service like say a month of Netflix or an Apple, that means that who is going to provide the stability of that service then? Because now what keeps an apple changing in this counter payment is countercurrency. And apple's value in the market changes too, right? Like it might be more expensive to make an apple, to provide an apple, to redeem an apple. That cost can change. Granted, apple demand probably doesn't change severely, but you can have a bad harvest and this kind of stuff, right? And so it puts the liability of stability on the issuer. And so they say, okay, I have a liability of 20,000 apples and people on average ask for that amount within three months. And so my liability exposure is this and how do I manage that, how do I hedge that? It just becomes a business management aspect. And so, yeah, just like with the bank, they could issue more apples than they could ever redeem and they could scan people, they could fail as a business. But this is business, right? Like businesses fail, they fail in their liabilities. There's a system for how we handle these kinds of things and there are reputational consequences for these things. And this gets into another area for the future that we want to do with slashtags is webs of trust so people can express reputation, so we can do self regulation without violence. And so this is removing big state saying, okay, how do we self regulate? Well, we may there be consequences to your behavior and give people the ability to wait these behaviors so you can make decisions about who to trust. And if nobody trusts you, that means you're starting from zero again and you're a nobody and you're a non person. You have to build up from scratch. That's to me. My answer for how do you minimize government and minimize violence.
Kevin Rooke - 01:27:18:
I hope you're enjoying the show so far. Just a quick message from our sponsor Stakwork. Stakwork is a Lightning powered platform for generating high quality transcripts of all your audio or video content. They combine AI engines and hundreds of human workers all over the world who are paid over the Lightning Network to assemble these transcripts. And that's what let Stakwork create better, faster, and less expensive transcripts. To see the results for yourself, you can check out my personal website where I host transcripts for all my podcast episodes. If you want to learn more about Stakwork, visit stakwork.com. That is stakwork.com. Right? I remember this actually. We talked a little bit about Slash Tags in our last recording last year and that was one of the ideas that kind of blew my mind, this whole web of trust idea. I was like, wow, I hadn't heard anyone talk about that until you mentioned it. For listeners who are not familiar with Slash Tags, can you give a brief introduction of how you describe what it is? And is there a short phrase you can use to refer to? There's a bucket of internet identity protocols and there's Nostr, there's TBD, there's Slash Tags. What do you call those?
John Carvalho - 01:28:37:
Well, technically, as far as identity systems and the things you just named, Slash Tags would be the only one that would qualify. Web5 is not an identity identity system. Ion is an Ion is within the Web5 stack and Nostr is not an identity system. It is a way of sharing notes and other stuff as it's named and so it uses keys as its identity system. But there is no identity system or intentional management in place for expressing it as an identity system, it's just that it uses keys as a way to represent identities and that's it, there's no elaboration or further thought put into it. And this is true of all aspects of Nostr other than the event system. That's the only thing where it's elaborated and there's thought put into it. And so the rest is left for the clients to kind of deal with, essentially relays to have to deal with. So I don't like calling Slash Tags an identity system, despite it probably being one of the closer or shorter ways to describe it because it's just like how Nostr is like a system for sharing notes and other stuff. Slash tags is a way of attaching data to keys. And so it's a metadata system, it's an identity system. But the problem I have with calling identity system is most people don't think of identity as an abstract concept, they think of it as their passport, as their license, as a credential. And that's not accurate. That's why we called it slashtags instead of ID or something. Because it's not about credentials, it's not about authorities, and it's not about even only humans. It's about digital representation. It's about saying, how do I know what this thing is in this digital space? And how do I attach data to it so I remember what it is and so I know how to interact with it. And so like, for example in Bitkit you have your Slash Tag profile and so you are a key and you are a drive. And now I can be a key, you can be a key and I can have a drive about you and you can have a drive about me. And this is like a core primitive. It's just to say, okay, you can rebuild the whole web this way. And saying if you know where the data I have about you is and where the data I have about me is and vice versa, then we can reestablish the entire web this way as a primitive and any network and any market, any paradigm, because that's all you really need to work with. And so you have this profile and in this profile I put my name. At the moment you could put anything in there, it's just a drive. And put my name, I put my avatar, I put my bio and I put a link list and basically any other type of endpoint you might need about me. So it could be like where my website is or where my node is, so you can pay me and whatever you want. But you refer to that always and that data is always available through a DHT called Hyperswarm. And this handles any type of routing problems you might have for data and basically censorship resistance for data because the data is only provided by and governed by my keys. And so you know that if wherever you find that data, it's either a place that I have already told you is the correct place to find my data, in other words, I trust it, or it's actually a HyperCore that can only be written to by my key. And so you inherently know anything in that HyperCore is signed by me and comes from me regardless of who serves it. And so these primitives, Slash Tags using Hypersparm and HyperCore are what is now being called the Holepunch platform, the combination of all these things to be able to provide all of these kind of next web powers. So Slash Tags and the Holepunch platform, all this HyperCore stuff is kind of more an analog for say, Web5 than Slash Tags specifically. And Slash Tags is maybe more of an analog for ion. But we are trying to do things differently and in different ways. I would say Nostr is the most dissimilar to those things. Nostr isn't trying to be the entire web. It isn't trying to be it's just trying to be the simplest protocol for sending signed data. But there's a lot of design differences, there's a lot of different use cases and problems that are solved that do not overlap as far as Nostr is concerned. I see. Yeah, I'm ranting. Go ahead.
Kevin Rooke - 01:33:26:
Well, I just want to make clarification. So is Slash Tags built on top of hole punch in the same way Key is?
John Carvalho - 01:33:35:
Sort of so Key is wholly, ideally, peer to peer. In other words, there are no servers. And Key isn't concerned with the concept of, say, redundant cedars to improve availability. They're just trying to say you are the only one with your data and all of your peers also are the only ones with their data and you're all just trying to share the data and maybe share each other's data. Altruistically I forget the details on how he is currently doing it. I think that there is some altruistic data sharing there of each other's cores, but there's no incentive system for seeding. It's not like where they're trying to worry about bridging the use case of a web server. And Nostr is probably on the opposite end of that. It's more similar to a web server. There are aspects of it that are censorable, but there are aspects of it that keep it very simple. So the appeal and quick uptake for Nostr in the sense of people being able to very easily hack a client together with it, that's because it's simple and they prioritize that. But that means that you offload all the complexity now to the clients and to the relays and you leave a lot of problems unsolved. And so there's a trade off. Everything is trade offs. And so where Slash Tags sits is we're trying to say we're also in a way a platform for HyperCore, but we are trying to focus on it from the identity perspective in the abstract. And eventually you started this conversation webs of trust, but also in providing, seeing how we can provide scale within these systems in a, I guess, trust minimized way. So like for example in Bitkit, currently for free, and maybe forever for free, we seed copies of all of our users HyperCores to make them more available. Because on mobile, when you close your app, you're not on the network anymore. You can't have a server on your phone that is always available. And so if you want to find my profile and it's even though you don't need it to come from me, it can come from anybody because it's only written by me. And I don't need to sign every single update to that profile and every single piece of data. Like I might have to do with Nostr, like having to sign every single message because everything in the core is inherently signed because it's only written by me in a Merkleised tree. And so we think that the Synonym Slash Tag cedar is a way of showing that you can add some scale and some of data availability by using the same primitives that Keith uses. And so while there aren't a bunch of users feeding each other's cores and being strictly peer to peer and we are adding a server to the mix it is not a trusted server. It is just a dumb extra data source and you don't have to trust it because you know all the data in it, you can prove that it came from the source.
Kevin Rooke - 01:36:54:
I see. Okay. So maybe the Nostr, we leave that aside for now and let's talk about what TBD is building and what you're building. Both are kind of trying to rebuild the Internet. Is that roughly correct?
John Carvalho - 01:37:10:
The web? I would say the internet is a different layer, but yeah.
Kevin Rooke - 01:37:14:
Okay, so you're trying to rebuild the web here and you had written this post yesterday to there was a Stacker News post made, I think it was by Don. He said that he was talking about the interoperability between various identity protocols and internet protocols. And you came in and mentioned that right now a lot of it is a very competitive environment between some of these protocols. Why is that the case for this set of protocols? Whereas it's not necessarily it doesn't seem to be the case for things like Lightning implementations. They don't seem to be super competitive. Maybe they are, maybe not.
John Carvalho - 01:37:58:
That's right.
Kevin Rooke - 01:37:58:
But at least on the surface, you specifically mentioned that this is an abnormally competitive yeah.
John Carvalho - 01:38:08:
I would say the abnormally competitive part is maybe more related to the current trend. In other words, you have Jack who, Jack Dorsey that was saying that he thought that Web5 was his best contribution to internet freedom or something like this. A year ago. He was saying this when he was announcing TBD or when they were showing their first deck about their designs and intents and vision. That's what he was saying. And then a month ago or whatever, you have him saying similar stuff about Nostr and how it feels like the early days of Twitter. And then you have Elon Musk creating some Streisand effect by for some reason adding Nostr to a banned list. And it's not even a website right, it's a protocol. And so it's like all of a sudden there's this FOMO now because these are Dan with Ion and has been part of this area of technology research for like ten years or something. And so when he sees, you know, his money source and his, his daddy promoting a competitor, he's obviously not going to be very happy about that. And when we see a lot of Bitcoiners taking interest in, in a solution for a problem that we are working really hard to solve in a holistic way, we also, it gets our attention. And so being more competitive than other things is maybe temporary, but I think it will escalate, I think it will continue to escalate. I think that this is a hot area and I wouldn't be working on it if I didn't think that. And so I think this will become more like these challenges and these designs and these protocols will become more and more interesting, not less interesting and thus more competitive. As to why it's competitive, actually, I want to address what you mentioned about Lightning. I think I have witnessed that it's the same way. In other words, people have a misconception because they haven't actually been part of it, in my opinion, and because people tend to be really nice, the people that are part of it. But nice brings passive aggression. And my experience, my observation with watching Lightning, protocol development, bolt development, spec development, adding features, or advancing the technology of Lightning, same thing with bitcoin, bitcoin core FOSS technology in general, I think it's actually highly competitive. And people do have their whole own incentive systems for why they do it, whether they're getting paid to, whether they want to be seen as geniuses, whether they want to write papers and get academic notoriety or win a prize, a Nobel prize, whatever their reasons are, they have reasons. They aren't just sitting there trying to benevolently help people. They have personal interests and they are very competitive and defensive of these interests. And you can see this very often with Lightning Network. So I would say it is competitive. It's maybe just not as easy to see from the outside and not as hot because of the recent pumping by Jack and Elon, but it's the same in the end. And so as far as why it's competitive in the web area, it's a pretty good question. As crazy as it sounds, my personal interest is actually in helping the most amount of people, and particularly helping in a way that's complementary to bitcoin's success. So basically I want to make sure bitcoin is successful by making sure we can also have a web format that is appropriate to the same values, self sovereignty, owning your own data, owning your own assets, being uncensorable. So what's the root of my decision making with our designs and our stack? And I don't and what I see is like, I already got what I wanted as far as personal incentive, like, I'm not trying to win a prize or be seen as a savior or get academic anything or some kind of monetary thing. What I wanted was somebody willing to fund this effort and somebody willing to pay me to do it. And I already got that. So I have nothing else to win. As far as incentives, other than actually proving that I can deliver it, that I can ship it, you know what I mean, that I can realize the vision. My core requirement is helping the most amount of people, actually providing the tool that helps people in the way that they may need help one day, if not today. As far as why it gets competitive for others, I can't really say. I shouldn't speak for others, but I do think their incentives might be different. Like when I look at when I try to debate with people from different protocols, they get very competitive and argumentative and angry for certain reasons. I can speculate as to those reasons. I don't think they're exactly the same as my reasons. I would say maybe fiatjaf is similar, fiatjaf maybe with a little bit more priority to developers than just people. In other words, he wants Nostr to be very simple because he wants developers to have an easy time with it because he probably doesn't like how hard things are for him in the past and he wants to make sure it's easy and he thinks that's what's necessary to make this useful. And maybe he's right. And so far it's worked for them. The simplicity has worked. And now I said to the fiatjaf a while ago, I think you're designing Slash Tags backwards. And recently I've added to this thought that we're designing Nostr backwards. In other words, we're trying to think of the whole design first and then making sure that when we do make something for social media, that it has all of that in place, and then leverages that optimal way of being censorship resistant, self sovereign, et cetera, and lasting PeerToPeer, all this stuff. And so we have a lot of work to do to get all of the primitives and features in place to do it, what I would call properly or optimally. And they're doing the opposite. They're getting it out there into the wild, getting users, and now they're having to go back and see the costs of that trade off. Like, okay, what are we going to do about identity? Keys are almost disposable in us right now. You lose your key, you can get your key compromised because there's so many clients and maybe they're not all trustworthy. There's vulnerabilities and people's keys leak. So identity has not been addressed, and now they're figuring out that they probably will need to address it. And there's a whole realm of problems to solve just in that. Then there's a realm of problems to solve with relays and routing and all these problems. And so they're going to have to address the things that we are kind of starting with. And so maybe we'll meet in the middle and we'll end up in the same place. I don't know, but that's a bit of a rant in all this. And as far as Web5 goes, maybe people will not like me saying this, and I'm sure that Web5 won't like me saying this, but I do think there's a bit of ego there. I think you know you can't have a debate with Dan from from Ion or formerly from Ion and now from TBD without him credentialing himself and mentioning his veteran involvement and him insulting you and him trying to take you down on an ad hominem level and be wildly surprised when you don't see something his way or know something that he thinks everybody should know. That's a specific nuance of his tech. There's ego there, and that concerns me. I think it's hard to be altruistic and benevolent when ego is an incentive. But I'm also being very judgmental right now, so people will probably hold that against me.
Kevin Rooke - 01:46:04:
Is there a world in which multiple of these protocols succeed and succeed at a real scale? Can Nostr and Slash Tags both win big? Can TBD and Slash tags both win big?
John Carvalho - 01:46:20:
Yeah, I guess that gets back to answering your original question or at least addressing the post. That was the topic of the post was interoperability and multiple protocols and your specific question of whether two could exist. Well, do more than two exist now?
Kevin Rooke - 01:46:33:
No. Can two win?
John Carvalho - 01:46:37:
But in other words, I'm getting to the process of answering your question, which is, are there two successful protocols for social media, for decentralized web, for identity? Yeah, there's many, right? There's email, there's phones, SMS, two factor, there's keys that you can use for accounts. Granted, I wouldn't call that a winner or very popular. There's Matrix. There's Mastodon. So it really depends on how you measure success in one hand and what you want to compare. And so, yes is my answer. I think, of course, there can be multiple that succeed. And I think that how each defines success is probably different as well. I wouldn't define success as a million garage developers making a million clients. That's not success to me. That's not interesting for me. I don't think it's worthless, but it's very interesting for Nostr. Right? And so we may measure success differently. That's one aspect. But let's just assume, all of the nuance aside, that yes, now all of a sudden you have Ion and Slash tags are very popular. Do I think that's possible? Yeah, I do think it's possible. And I think that if I'm right, that it's a problem that will need to be addressed somehow. And I think that's what that Stacker News post was getting at is we've had a lot of questions even before the recent Nostr bump about interoperability. And even from our investor, one of our investors is like, how can we make sure this is as interoperable as possible? And I'm like, we have to talk about what interoperability means. What interoperability means doesn't mean that we use the same, even if we all use did as a format, even if we all use Lightning as a format, even the Lightning protocol can't figure out perfect interoperability. You can't just take your channels from one implementation and then reload them in another implementation. The interoperability is strictly limited to routing and a few other things. Like there's not this grand ideal of interoperability in Lightning protocol. You can't even reinstate a node from your own backup for your own implementation. It's still risky. Like the interoperability and just operability is something to really realize is not perfect, and probably we never will be. And even across implementations, you have competition that is affecting interoperability. So, for example, like, Lightning Labs isn't all that interested in supporting Bolt12, but now LDK is. And so the the rules that they've all made for themselves that if two people implement something that it can be a bolt. And so now Lightning Labs is starting to realize they have to capitulate. But they're saying things like, we'll at least support the minimal whatever. I don't know what that means, but my guess is they'll make sure that you can parse a Bolt12 invoice, but it might not necessarily support all of the features of Bolt12. And so your interoperability isn't going to be complete there either. And so interoperability for say, keys as accounts or keys as identities, keys as entities is tricky too, because now you have how am I, Slashtags uses a noise handshake to establish an encrypted connection and both keys prove themselves. LN-URL bakes your key into the domain to be able to have an account at a domain and the domain doesn't prove anything to you? Nostr, I don't know the details of what it does, but I'm assuming it just does a key signing similar to LN-URL. LN-URL off. That's one way to, I don't know, probably put data on the probably just signs data with it. I don't know. I don't know enough about the protocol. And then Web5 uses Ion, which has bitcoin as a dependency, which has all this decentralized web node and all this other stuff of the Web5 stack. And they use DIDs as a format. Slash Tags doesn't use DIDs as a format. Slash Tags puts the data and you find the data through the DHT on the hyperswarm. And that di data could be any form. It could be in a HyperCore, it could be on a server, it could be however you want. And so Slash tags is much more abstracted. So if anything, I would say up the best to be able to wrap other identity systems. But even that probably wouldn't be enough to say that it's interoperable. Interoperability. This idea of having to alias keys or convert resolve keys across systems is an interesting problem area to me. But like I said in my post, it's just a curiosity until it's an actual problem. I don't think anybody is going to prioritize solving that problem. And the incentive won't be interoperability. The incentive will probably be co opting the other network. In other words, they will be designed in such a way. In other words, if I was going to design Slash Tags to be interoperable, quote unquote, with Web5, it would be to make sure that it was easy for Web5 people to use Slash Tags, not to make it easy for Slashtags people to use Web5. And so interoperability is like, what do you actually mean when you say that? And I know what users mean. They mean, can I use the same key for everything? The answer is no, not really. You're going to have to make all this weird conversion and key management tech to make that possible. And there's going to be all kinds of trade offs if you do that. We use the ED 25519 elliptic curve for our cryptography, for our keys. And there are reasons that we do that. It's intentional. And there are reasons why we don't use NIP, but Nostr uses NIP. So right there you have an incompatibility. We're both using keys, but we're using different curves. So now somebody who wants to support both or have some credit conversion has to be able to interpret both curves and any nuances related to that. Then you have nuances on top of what languages you use, what actual formats you support. So, for example, with Flash tags, everything is in JavaScript, NodeJS, et cetera. So people who don't like those or use those languages now, is that interoperable? What if they want to in Rust? And now there's so much complexity and things you have to talk about when you're being realistic about interoperability that you realize, we go back to where I started, that interoperability is just a red herring and really just means everybody using the same thing.
Kevin Rooke - 01:53:26:
Yeah. It's such a fascinating topic, though, to think about how these protocols may be changing the Web. It's something that I think it has caught a lot of people's attention. It's on top of mind for a lot of people. I've noticed myself, I had a YouTube video that I did with William Casarin at Damus, and when the whole Jack Nostr thing took off, that video just got thousands of views overnight. And I was like, what's happening here? It's a fever frenzy for this new what is the new Internet going to look like? I think a lot of people are starting to ask that question. And I guess my question to you is, what does the opportunity look like for you, TBD and Nostr, when you think about how you could play a role in redefining the Web? What's the addressable market there? How much can you capture? A lot of value. Surely you can create value for users. Can you capture value in the same way that Facebook or Google have been able to capture value?
John Carvalho - 01:54:35:
Can we? Probably. Will we? I'm not sure. Will we try? Probably. Do I care? Is that a priority? No. I have absolutely no requirement or interest to make profit with Synonym. I have strategies for how to do it. And the reason isn't because I want to get rich or because our investors told us we had to. Those aren't the reasons. The reasons are that if you are going to claim to make an ecosystem where you are replacing big tech, big banks, and big state, that ecosystem certainly has to have incentives in place. It certainly has to be an economy, and people have to make money. So if we're going to provide reference applications for this minimum ecosystem, I also consider it an obligation to provide reference business models for this ecosystem and thus that makes sure we design the ecosystem properly, because somebody's got to get paid to do everything to make this possible, right? So the examples would be like, all right, if it's a bitcoin dependent system, people need a way to get bitcoin, right? Not just earn it, but they need a way to just buy it, they need a way to convert it. And so exchanges have to be somewhere in this equation. And so like you mentioned earlier, to buy bitcoin or to deposit on LN markets, these kinds of things are actual use cases. And so that could be a monetization model for us. Selling bitcoin to people, Blocktank, selling channels, selling liquidity to people, provide offloading services as another business model, managing liquidity, managing routing, connectivity, et cetera. And then finally, if we're doing the web well, what is the core primitive of making money in the web? It's providing both scale for compute and storage, right? So we need to make sure we demonstrate that there are ways to make money doing that. And we've already got the most simple primitive of that in place, which is we are seeding data for Bitkit users so they're more highly available than they would be if we didn't, and we do that for free. But that is a primitive that should be part of if the network becomes large, where anybody should be able to pay anybody and be paid by anybody in order to see their data. And eventually this could graduate into also worrying about compute, but this gets more into servers again. And so that's why we're not addressing at the moment it's the lowest priority and we're not even sure that it needs a specific design so much as Twitter at scale from the decentralized web might look a lot like Twitter looks right now, except you're not locked in. In other words, in order to be able to have a user experience, where you are able to quickly access millions of people's data feeds and render them quickly and have them all be current and interact with, it can probably only be done on a central server. But you can at least have the primitives be that it's made out of provable data structures, portable data structures, portable identities, portable contact lists, or portable followers to where you're never locked into that server. And so the incentives might shift to where you have to pay to have Twitter seed your feed, or you may have to view ads like you still do today to get that experience for free, but at least you're not locked in. And at least you only share data willingly. You know what I mean? You still own your data, you still decide who to share your data with from the root of when you create it locally. So it's a local first design. But yeah, I'm not trying to become a millionaire and exploit the market to capitalize on the addressable market. I'm just sincerely trying to figure out what is the most useful thing and the most lasting thing in the context of bitcoiners in this hyper-bitcoinized future that we imagine. What is the actual practical mental model and design for shipping that yeah, it's fascinating.
Kevin Rooke - 01:58:45:
There's so much happening in bitcoin’s ecosystem, in the web ecosystem, Lightning, it's really hard to grasp at all, but I appreciate you taking the time today to go through it with me. Before we finish, I want to do a quick run through some rapid fire questions. We got the Lightning round. I know we're running out of time. First question, is there any book that has meaningfully changed your view of the world?
John Carvalho - 01:59:11:
No, I'll give you a more, I don't read books anymore. I'm more likely to write one than to read one, let's put it that way. So, no, I probably answered this question last time or other podcasts. My answer would be, the only good bitcoin book is Crypto Economics.
Kevin Rooke - 01:59:28:
Fair enough. If you could only hold one asset for the next decade and it could not be bitcoin, what asset would it be.
John Carvalho - 01:59:42:
For the next decade? I guess maybe real estate.
Kevin Rooke - 01:59:49:
Yeah, that's fair. Have you changed your mind on anything as it pertains to bitcoin or Lightning in the last year?
John Carvalho - 01:59:58:
Yes. Maybe it took more than a year, but there was a transition to where when I first got into Lightning, Lightning Labs and the culture of Lightning developers, was it's still reckless? In other words, it's dangerous. It's early, be careful. And when I came onto the scene, I was like, no, be reckless. It's ready. Use it now. There's nothing to wait for. Just fucking make a Lightning wallet. Just fucking get a Lightning channel. Just fucking adopt Lightning at your merchant. Go. That was my attitude. That has inversed, now that I've been deep into implementing Lightning, having products with Lightning, interacting with Lightning stakeholders, I'm kind of where they started, and I'm just like, oh man, Lightning is complicated. Lightning sucks. Lightning is a mess. Lightning is so hard to deliver. It needs so much work. There's so many risks that we have to deal with and so much complexity. The culture of complexity got way out of hand until it feels like a science project. Sometimes bitcoiners think of it as like the savior, and we're putting all our eggs in a Lightning basket, and I just have much more concern and trying to measure. And similarly with bitcoin, I don't think I'm stupid, but I used to think Bitcoiners were smarter than other people and that we were culturally had some similarities that drew us to bitcoin, that made us different, and those similarities were optimal or better. This isn't a short answer, is it, for the Lightning app, that we were just smarter than other people or more aware or more woke in the good sense than other people and. Lately, I feel like we've fallen on that. Bitcoiners are kind of depressing me lately. They're very allergic to critical thought and especially when it's pointed at anything to do with bitcoin, and they're very incapable of nuance and they just become memes of themselves. And it just feels like the culture is starting to become what shitcoiners hate in the bad way. And at first it was like, yeah, I'm a toxic maximalist, and we're going to take the word back. Yes. None of us actually thought we were toxic and we were trying to make fun of it, but now it just feels like and I mean it's about maximalism. I just mean this about bitcoin culture. It's just become so I don't know, the hubris is just not where I would like to see it.
Kevin Rooke - 02:02:40:
Here's my next question for you. So here's my next question for you. If you could get up on stage in front of all these Bitcoiners and send one message to them, what would you say?
John Carvalho - 02:02:51:
I mean, I get on stage with bitcoiners regularly and so I guess you could just see what I did say. I don't know that I'd have one broad thing I would just say I'm not crazy. What if I'm right? And to think of that whenever you're reading something from me, at least I don't have all the answers for bitcoin. And what I would say on behalf of bitcoin to all the bitcoiners, just so much as I'm always trying to be useful and helpful and if for some reason what I'm saying is making you uncomfortable or you think I'm crazy or being retarded, you've got the wrong idea. That's not what's going on. And you should at least give me some benefit of the doubt. I've been here ten years. I'm not crazy.
Kevin Rooke - 02:03:36:
I like that. So maybe just keep your mind open.
John Carvalho - 02:03:41:
Have an open mind, but not necessarily about shitcoins. Have an open mind, be nuanced, get back to being good at critical thought, please.
Kevin Rooke - 02:03:50:
Cool. All right, last one. Who's one person in the bitcoin or Lightning ecosystem that you want to give a shout out to for doing great work?
John Carvalho - 02:04:02:
I have a note to myself to try to once in a while send positive messages. It's actually literally in my assignment task to be positive on Twitter, and I haven't been doing it lately, and so this is not top of mind, but I'm glad you asked. And it is something I need to try to do more because I don't want people to think all I think about is criticizing and judging because I'm not as angry as people think I am on Twitter at least. Shout out, I guess the first top of mind, just because I interacted with him yesterday, Matt Carollo, the guy is creative and he does work on interesting things. I think it's cool that they were able to kind of take and make a whole Lightning implementation in an interesting way and one that's been very useful to us. The whole team for LDK has been very responsive and helping us to get it working with Bitkit and having us in their calls. And so I would say he's pretty creative and even though some people may not agree with some of his political or cultural stuff, that's the kind of thing that Bitcoiners need to be good at is separating. When I ask Matt Carollo a Lightning question, he's going to give a useful answer. You want to ask him about some cultural thing or whatever, or shitcoins, I don't know. But Bitcoin is not experts at everything, nor should we be held to that standard. So I'll give a shout out to Matt Carollo and the spiral team working on LDK. I'm sure there's somebody else I should be mentioning, and I hope I'm not snubbing someone that I interacted with recently. You just caught me off guard now.
Kevin Rooke - 02:05:51:
I like it. That's a great answer. And thank you again for taking the time for this conversation. I thoroughly enjoyed it. Where can people go to learn more about you and Synonym?
John Carvalho - 02:06:01:
So we got a website for everything that ends in .to. So we have synonym.to, if you want the overview for the whole company, blocktank.to, if you want just all stuff about blocktank. slashtags.to if you want to learn all about Slash Tags. And there's also like a playground there where you can interact and test slash tags. And all of our code for everything is open source. And then bitkit.to, if you want to look at the features of the app, download the beta and test it with us. You can also find us on Discord. You can find us on Telegram. We don't invite people to our Slack typically, but those two chat channels are good. And of course you can reach us over email if you want to send us a CV. We are hiring for various roles and we'll post more throughout the year. I'm on Twitter, @@BitcoinErrorLog. And then of course you can find all the Twitters for all the different products as well in those websites.
Kevin Rooke - 02:06:56:
Awesome. Thank you for the time and hope we can do it again soon.
John Carvalho - 02:06:59:
Thanks for having me.
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