Paul Sztorc - 00:00:00:
Back in the day, like before 2015, everyone just thought all the anyone who worked on bitcoin would just all get arrested or something. This idea requires you to be open minded to the idea that someone would want to leave the bitcoin core software, but over time, people have been trained not to think of that as a good idea. You could make a whole career out of just being like, a critic and not actually making anything. Even though the correct side won the scaling war. The, I can't there's no way you can overstate how kind of traumatized the community was in general. And this is I think this is one of the worst things that has ever happened. The bigger thing, though, is just why have any rivals at all? Like, why tolerate having Ethereum as the number two alternative to bitcoin? The whole design is designed around the side chains being optional and not harming anyone who's not using them. It was a better idea before. As good of an idea it is today, it would have been better to do it back then.
Kevin Rooke - 00:00:55:
Paul Sztorc is the founder and CEO of Layer Two Labs, as well as the author of BIP 300-301 and a Drivechains advocate. In our conversation, we explored the history of Drivechains. We talked about the potential pros and cons of implementing them on bitcoin, and we discussed the work that Paul is doing at Layer Two Labs to help scale bitcoin. Paul has also been added to today's show splits. So if you enjoy this episode and if you learn something new, the best way you can show your support for the show is by sending in sats over the Lightning Network. You can use any Podcasting 2.0 app. There are dozens of them, but my favorite to use is Fountain. 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. Paul, welcome to the show. Thank you for taking the time. I have a lot of questions to ask you about Drivechains, about Layer Two Labs, all sorts of stuff I want to get into. But first, let's start with your background. Tell me a little bit about how you first discovered bitcoin.
Paul Sztorc - 00:02:21:
I first discovered it that someone wrote that article about Silk Road, I think in Wired. They wrote that article in 2011, but I didn't read it until later. I think 2012, actually. Believe it or not, I heard about bitcoin before, along with the Free State project, they're sending emails about it, and I was like, this is so stupid. I thought the idea was horrible, and I honestly thought, these libertarians are so dumb. I was going to unsubscribe from the mailing list because of this. And I was like, you can't just start your own currency. What about network effects? What about the instability? If someone starts the currency, then you have a copycat today. It later became like, live by the fork, die by the fork. And this all going so I was like, this idea is stupid. Never get any traction. And then I read the Silk Road article, and everything changed because I didn't understand why they could I was like, why don't they just use credit cards? And then it's like, oh, of course, because they have the real name and the billing address of all these people engaging in the illegal activity. But then it was like, we already have regular users who are drug addicts who are actually using the whole system. So I was like, oh, A, it's finished. B, there's no way to cheat the scheme because if someone's like a drug addict, they're going to do whatever they can to get extra drugs for free out of the whole cycle. And I was like, oh, I thought it was like I went from thinking it's a terrible idea to like, oh, I'm way too late. It's already being used by the layperson in the real world. So that was how I got into Bitcoin. I read that article and just immediately, I just thought, this will be used in every illegal transaction in the world, and nothing really stops it from being used in every legal transaction in the world as well. So it will just, system D was like, ten. It was the second largest economy in the world. It's like 10 trillion GDP of all the black, gray market activity was huge. So I knew that it was huge. I knew about Hong Kong Capital Control. I knew about all this stuff. I knew that there was a demand for this product. Like, a lot of stuff is illegal gambling. They had, like, Black Thursday, right? It only happened a couple of years before. They just close everything and just take everyone's money. That got me started on all that. That's how I got into it. And then start building the forum and stuff. And then you're like, oh, this is a real project. You test out the software, went to Gavin's faucet coins.
Kevin Rooke - 00:05:06:
Nice. So this was 2012. You're starting to learn about it, you discover it. And now fast forward to a decade later. You're starting later. Two labs talk to me about that ten year journey and the the transition from learning about it, thinking you're too late, to now building this company, trying to trying to further improve scalability and features on Bitcoin.
Paul Sztorc - 00:05:33:
Sure. So 2012, one thing that happened was the intrade collapsed. And the intrade was my favorite website on the internet, which is a prediction markets website. And I was very annoyed by this because it was basically closed down by the US. Government for no reason. And this is an institution that like, I have like, papers where there's like 15 or 16 nobel prize winners, the co-authors, and they are all in favor of this institution. I'm a huge believer in this institution. And this website closed down. And there was another website like bit Bet that was like a bitcoin type of a thing like that, but that also had to close. There was lots of failures of this thing. So I designed this prediction market concept, this blockchain prediction market concept, back in 2012, 2013. And so I was interested in that. It's kind of like a little pet project, like a little labor of love, because I wanted to have prediction markets in the world. But it was so bizarre that the project is so complicated that I knew there would be no real way to actually use it with bitcoin without some kind of, like, other new idea. But that around that time, the idea of the side chain was invented or pioneered by people. Lucas Jr. mentioned it in a bitcoin wizards IRC chat, and Greg Maxwell mentioned it. So they were talking about this side chain idea, and I thought, this idea is perfect. So I inadvertently became an expert on some things that would later be really important, which are, like, what could you use a blockchain for that is not bitcoin core? So there was Namecoin at the time, which was co invented by Satoshi, which is about the internet name system, but that was kind of languishing. But I kind of always knew about Namecoin, and it was always kind of confusing because namecoin had a separate coin. See, the separate coin is always a bad thing if you're in bitcoin. You never wanted to do that because they would create these rival, risk competing projects. So I got really into prediction markets, and this is a bizarre side effect of having done that, is I became an expert on things like the oracle problem or what you would use a blockchain for or not for. Then in 2015, we had the scaling war started to get big because Mike Hearn and Gavin Andresen were pushing bitcoin XT to the eight megabyte hard fork. This caused, let's say, discord in the community. And we organized the scaling bitcoin conferences. And so the first one was in September in 2015 in Montreal. And I had been writing in 2015. Like, in May I wrote a little, and in September I wrote a little, and then I presented some of what I was talking about at that conference. And that was when I first started to notice the problems, which were that people really hated each other and weren't even talking to each other. So there was no reasonable debate. Actually, in my view, everyone was just trying to say I'm right, and this is how to prove that I'm right. And they weren't actually interested in any kind of win-win situation. So I presented something. I presented, like we're now called fork futures. I said, we can make this thing where we can say because the problem is I saw it was how to get the community to decide what to do, how to do like a governance type of a thing. Whereas everyone else was just kind of trying to say, like, how can I get my own way and just everyone else is wrong and I will just get what I want. Which is obviously a very childish way to look at the world. But I presented we can have this way where we create this thing with technology and you have two tradable assets, or really four, or actually eight, believe it or not, but under the hood, it would look like two or four. And it would be like, it would let you know what the bitcoin price would be in the large block future versus the small block future. And I would say then we can let the users, the investors, they can take sides before we actually make a decision. And it will say whichever one increases the price the most is just what the community will want to do because they'll want to have bitcoin be the highest price it can possibly be. So I said, this will solve all of our problems. It'll let us know what people want. It'll communicate that to everyone, and it will communicate that to everyone. And then it also just passively paves the way for exactly coordinating everyone's response on the one most desirable thing.
Kevin Rooke - 00:10:25:
So this was like a pre-fork prediction market?
Paul Sztorc - 00:10:27:
Yeah, it was. And so everyone hated this idea. And that was when I got nervous because I was like, no matter how many times you get something right, it's only a matter of time. If you don't have a good error correcting mechanism, it's only a matter of time before you make a huge mistake. But it wasn't a big deal because the correct side was the small blocker side, and they ended up winning anyway. But that was 2015. I presented this idea. Everyone was like, how dare you even but if you go to either side, the small block side or the large block side, people would say, obviously we are the ones who are right. How dare you even side with them for a moment? Which suggested to me that everyone was really on the wrong path a lot. Because you see, it doesn't really matter if you're right in any particular disagreement. And of course, you know, as I predicted, it got nastier. The sides got nastier and nastier, and they started hating each other more. So Blockstream had done this paper in October 2014. This ten year story is going to be really long at this rate. But Blockstream, this paper in in 2014 about side chains, and I had finished, I had started working on the prediction markets project because actually Roger Ver, I was working at Yale University, and Roger verd me away in November of 20. We're going even further back now. In November of 2014, Blockstream emailed me about because I was working on this side chain project. And they like, oh, this is great. We should have like a partnership. We should do all this stuff. I have this emails with them. And then they were worried about prediction market regulation even though they were based out of Canada at the time, where that's more legal. Back in the day, like before 2015, everyone just thought anyone who worked on Bitcoin would just all get arrested or something. So something really weird happened later in 2016 that changed everyone's mind, but before everyone thought we're all doomed. So they were like doing some kind of internal review or something. Then I happened to meet Roger Ver the next month in December 2014, and he just hired me on the spot because he's like Monopoly champ, Mr. Money Bags. And he was like, he's not going to wait for blah, blah, blah. He would have actually liked it more if the US government hated it. So he would have been more into it. And so he so in through 2015. This period I was describing before, I made this software, which you can find now, bitcoinhivemind.com. We have a GUI, we have screenshots. So the Prediction Market software actually exists. And to this day, this is superior peer to peer Oracle, everyone else's Oracle technology is awful. And this is much better. It's much more complicated, but it stands a chance of actually working at scale. That's my opinion. So in 2015, by the end of 2015, I had finished this software. And then I was like, how do I get the side chain? I had to integrate it into Bitcoin side chain world. So I actually built all this software long before many of these other people who showed up today, we've got a lot of new people who showed up. I finished completely this software project. I finished all this presenting at scaling Bitcoin long before many of these people, like, have even shown up or whatever. But I had finished this software and I was like, how do I bolt it into bitcoin via side chain? So I had to read the paper for the first time because this Blockstream paper had been thrown around a lot, but not a lot of people had actually read it. And I read it in 2015, and I just kind of thought that I could actually do better. What they had described in Appendix B was this convoluted thing with multiple headers of the side chain would be like in the transaction. The transaction would be like 800 KB or something. It could be this huge transaction. It relied on statistical luck to shrink the transaction. They had this skip list thing, and I was like, this is not really conceived the right way. So that led me to develop Drivechain in November 2015. And I don't know if we can make the rest of the story shorter, but I wrote that post in November 2015 and then in 2016 there was like feedback about it. So I made these two huge presentations. One was called Side Chain Privatization and the other one was called Side Chain Risks or something like that. The other June 2016 and September 2016. And those ideas, the ideas in those presentations have never been understood by anyone else. So I guess even the presentations are really good. And one of them is like four and a half hours long, and the other one is like 5 hours long. It's like hundreds of slides. It's an enormous topic, but no one, they were a failure at convincing people because to this day, I get questions that were answered in those. To be honest with you, this is a super rambling answer now, but I think it's very interesting if people read the November 2015 Drivechain post. If you read that post, you can see that I anticipate on day one as publishing the idea, the questions that people will have. And people today still ask the questions. So it's just an idea that it's just apparently it's very obvious to me, but it's not obvious to other people. But I guessed what questions they would have and answered them in 2015 and you get the same questions today. That's a long build up. So maybe you want to interrupt me and say no, journey somewhere.
Kevin Rooke - 00:16:25:
Yeah. So you introduced this idea in 2015 of a Drivechain for listeners who aren't familiar. Actually, can we just define what that is? Just a high level…
Paul Sztorc - 00:16:35:
At the time, it was just the title of a blog post I wrote about a type of two way peg because this is the phrase for this idea that it was always known that you could have bitcoin Core. And then you could release a version where the coins went one way so you would have maybe new features there that you could opt in. And you say, oh, I have 13 bitcoin, I'm going to send them over. They're basically deleted forever on the first version. It's like a one way street deleted forever on the first version. But you have 13 of the new coin and now you have the new feature, and then you can hang out with all the people who have opted in to the new feature. But you see, the problem with that is since it's a one way street, everyone will be very reluctant to send money there. And de facto, it's going to basically be like, either you convince a critical mass supermajority to move over since it's a one way street, either it's going to be like everyone is going to eventually have moved over right in de facto, or no one will. And even if the coins trade against each other on the market, there's nothing stopping, in the One Way Peg world. Nothing stops the price from crashing 90% every day for an infinity number of days, because you can always fall 90% from where you are. So the one way peg carries with it a risk. You have to think about, will other people want this software? Will this have liquidity? Will other people want this feature, or will they regret coming here? And that loses the experimental quality of it. Whereas the Holy Grail or the core desire was, well, what if we can move the coins over but then move them back? Then you lose very little by moving them over, because if it goes wrong, you can try and move them back. Also, you're very indifferent as to which network you get paid on, because maybe you prefer it all to be on one net. You have, like, many of these networks, five or six. Maybe you prefer network number three. But if there's a two way Peg among all of them, you can get paid on whatever one you want and just switch it out for the one that you prefer. You can get paid on network four and you can end up with coins on three. So that was obviously much better of a situation that's very much like when you have $20 worth of cash and you put it into an ATM and you lose $20 worth of cash, but they give you $20 worth of a checking account. So the idea of exchanging at par.
Kevin Rooke - 00:19:13:
Right, and then you can go to another ATM and withdraw from your checking.
Paul Sztorc - 00:19:17:
Precisely. Or you can pay a bill online and now you lose the checking. So that's key. The entire modern banking system, this idea of par is like essential. The idea that you can break if you need to go to the Laundromat, they have the change machine. You put in $5 bill, you lose the $5 bill. But you get a bunch of quarters because the Laundromat machine only takes quarters. But it doesn't matter if you have quarters left over. You can go back into the bank, deposit them and get the checking account back. So you see, that's key, that's part of the secret sauce that makes it all work, right?
Kevin Rooke - 00:19:53:
And so you came up with this idea in 2015, and before this conversation, you shared a document with me that highlights a lot of the opinions of really prominent Bitcoiners on Drivechains, a lot of favorable opinions from folks like fiatJaf, Eric Wall, Adam Back, Nic Carter, Olaoluwa from Lightning Labs, Pete Rizzo. I can go on and on here. There's a lot of people who have spoken out about this topic you've been writing about and researching about for seven years. Why is the Bitcoin community hung up on this? Why hasn't this been implemented in the last seven years?
Paul Sztorc - 00:20:35:
Well, that's a good question. Part of it is some of it is fundamental, which is to say this idea requires you to be open minded to the idea that someone would want to leave the bitcoin core software. But over time people have been trained not to think of that as a good idea. And so this is because we've had all these scam altcoins. Like 99% of the non bitcoin projects are very disreputable. So what the side chain is basically saying is you can escape bitcoin core but if you're just a cheerleader for Bitcoin and you say bitcoin is great, bitcoin is the best, I heart Bitcoin, then this idea is kind of foreign to people. So I think that's what it is also is you need to have an idea of where else you would go and why. So for example, one of the things that I used to say back when the community was fighting is you could say you have large blocks or small blocks. So then this is an obvious answer to the large block people. That's what you would do with the side chain. But you see this as soon as we have the scaling war and they fight and lose. Now that sounds flaky because everyone learned that large blocks were bad. This ignores the night and day difference between large blocks on layer one as mandatory for everyone and large blocks on an optional layer two. This is a night and day difference. But most people don't understand that it is a difference at all. They just think they think large blocks equals bad. I'm not supposed to say that. They have a little list of things they're supposed to say. So that's the other thing you need a destination in mind with. The side chain says because the side chain view is very unusual, everyone is saying I'm in Bitcoin. Bitcoin is the coolest club, I love Bitcoin, blah blah blah. Whereas the side chain view says something like now we can finally break out of this prison. It's terrible here, we want to go somewhere else. We want like whatever, it looks like we really care about what Ethereum is doing or what these other things are doing. That's not really the point. The point is to just be able to do everything. And the point is to have competition among the people who develop the software. So we have enormous competition in mining where people rise and fall constantly and if someone uses leverage in mining, they're making a big bet. If they win, they'll out compete you, and if they lose, they plunge into bankruptcy. And as we've seen that, we've foreseen that play out competition is good for the customer, so we want competition. So that's what it's about. But most people are not creative, so they don't know. They think Bitcoin Core is absolutely perfect because we've been trained to think of that, because of the block size war and because of these terrible altcoins and because of many other scam projects that I agree that 99% of them are terrible, but 1% are actually either de facto excellence and we should just take what they have to offer for ourselves. Such as Zcash. We should just take that again. So then this is another thing like Zcash. The technology is very different than Zcash, the Coin or the Community or things that like Zuko paying himself the dev tax or other weird Zcash ideas completely. You have to separate the technology from the but I think that's part of why but the real reason has nothing to do with that. I think it's just a historical I don't know what's the word? Like a kind of bad luck. Because this idea involved hash rate. BIP 300 involves basically the miners, like, counting with a little counter, up to 13,000 in the Coin based transaction of nodes. So this idea came out in 2015. Like I said, November December. I presented at it at Scaling Too, but it was not like a big formal presentation. It was just kind of like one of these like you could go up and just talk. It wasn't like as pronounced of a talk in that thing, and it was not even recorded. So I don't think you can look it up because they were over lunch. And at Scaling Two, everyone agreed there was a big agreement on Segwit. And since it would also the implementation designed would also increase the block size. So it was a compromise. SegWit was the big thing after December. So I was like, November 2015. I have, like, a weird idea that's just text on a page, december big community attention and consensus around this thing that has like some a lot of technical research, some code. It's a big upgrade for Lightning. Lightning was getting big in 2015. So that was the the idea. I don't know if you remember this, but or I don't know what you call my time. Yeah. So there was this kind of agreement. There was like a situation where people said things and maybe stuff was taken a little too seriously. But basically after Scaling 2, there was this concept that segment would be ready by April 1 of the next year of 2016. But it wasn't, because software always takes longer than you think. So it wasn't even close. And there was a lot of disagreement in the community in 2016. This is the only reason that Ethereum ever got big at all. So if we had had side chains before, I don't think there would be any altcoins today. But now they had an opportunity to get big because 2016 people smelled blood. They said Bitcoin community doesn't have it all figured out. A lot of inviting in 2016 and then Scaling Three, the next conference, it wasn't until October, and SegWit wasn't shipped until after that. And believe it or not, the SegWit, the Scaling Three, itinerary the schedule had almost nothing in the program, was about scalability. And in fact, the whole first half of the first day was about privacy. And some of the people who came there to talk about scalability were actually annoyed, including many large blockers, including this one miner who left. They actually left the conference and went back to China to signal to use like 9% of the hash rate to signal for bitcoin unlimited. And this meant that SegWit would not activate as a soft fork with the normal way of BIP 9, 95 percent hash rate. So this led to this Segwit blockade. This led to Segwit2X. This led to UASF. So 20. The whole this whole thing was a huge distraction and it created this polarity. This is where I finally get to the point, which is it created this miners are evil versus good developers framework that everyone that only very recently people even kind of snapped out of only recently would like marty Bent, great American mining. That was like until then the miners were evil. And the fact that the large block side lost and the fact that USF one meant that they were untouchable. And so this was terrible for my idea since it involved people thinking of the miners as just reasonable people who want the price of bitcoin to go up and who want transaction fees to go up and who are aligned with bitcoin's success. Instead, this event made everyone think of minors as dangerous people who need to be controlled. And so that is what happened. And this whole thing was the whole scaling war with Segwit. No one was going to activate anything new while SegWit was on the table. And then SegWit finally activated by USF. This was tremendously disruptive because even though the correct side won the scaling war, there's no way you can overstate how kind of traumatized the community was in general. And this was I think this is one of the worst things that has ever happened to the bitcoin communities fighting the scaling war at all. It almost would have been better to I'm not sure it would have been better, but to have people split off and have the bitcoin cash people go out was terrible for a lot of reasons. But you see, this is not a thing that you'll hear a lot of people say because a lot of people say those people are losers, were better off without them, whatever. But it was much worse. There's no way to really explain how terrible things became. The community before was very fun and very open minded. And there was this meme like bitcoin user not affected and people were just having a great time. Then after the scaling war, there was like a list of allowed opinions you could have, you had to say this, you had to be friends with the right people, you couldn't associate with the bad people. And we had various other sociopathic people who used the, exploited this crisis to become more. Powerful and work their way up the ladder. So they were very good at making little memes and tweeting. And these people have no skill, and they're actually parasites, I think, on Bitcoin, but they became very popular because they were very skilled, like demagogues skilled rhetoric, and they warmed their way up into the upper echelon. And this created this whole community of just like, this created like there was toxicity before, but it made way more sense. But this is sort of the kind of malignant toxicity that is just like ignorant and meanspirited.
Kevin Rooke - 00:30:35:
If you were to go back in time, back to 2015, and if you had your way, would your preferable outcome have been that anyone who didn't like the direction that bitcoin was headed could opt into their own? Could create their own kind of side chain and have have users decide whether or not they want to opt in while leaving everyone else unaffected?
Paul Sztorc - 00:30:58:
Well, at the time I had designed the idea, but I had not produced any software because I just thought, well, this idea is so good that someone else will just make the software. So it wasn't until later, like, I think January 2017 or something around then, that was when I invented blind merge mining. So then that was a blank piece of paper until then. And so then it wasn't until then that I kind of seriously started to try to produce the software. And then after I produced the software, the BIP300 software, I was like, oh, there's no we don't have side chains. We need example side chains so that you have something to send. It's like inventing one radio. You need the second radio for people to understand what's going on, right? I was like, It's this radio. It's this really cool thing. It turns sound into electromagnetic waves, but no one knows what's going on, so you have the second radio, and then, okay, so it's like, okay, so then I started doing that, like, in 2020. And of course, I do lots of other things too. I haven't only been doing this, but this is the main thing that I think people should pay attention to, right? Usually mostly I do nothing or I write on my blog. I write commentary on my blog. I write these enormous blog posts. So that was what I was like, mostly a writer.
Kevin Rooke - 00:32:16:
Yeah.
Paul Sztorc - 00:32:16:
And just like a fun Bitcoin presenter. Like, I give lots of talks all around the world. Like, so, for example, in in QCon, in 2017, I gave a talk on the Oracle problem, which is, again, what I was mostly interested in at the beginning of the prediction marketing had nothing to do with any of this.
Kevin Rooke - 00:32:32:
So now, in the last few years, have you noticed opinions shifting and changing at all on the topic of side chains, Drivechains? What has that been like?
Paul Sztorc - 00:32:43:
Well, I've always had these predictions that the problem that Drivechain solves is this meta consensus problem. So it's like, we have the blockchain makes consensus, everyone's software agrees on what happened, but it doesn't make consensus about consensus. So that was the block size debate. Like, what should the blockchain be doing? Whatever it is, we can program it. So that's what the blockchain does, but it can't help us because people disagree. So, like, large blockers were small blockers. A perfect example. But also Vitalik, who wanted turn complete scripts, he wanted some kind of state machine with Ethereum. Vitalik was a writer. He was a founder of bitcoin magazine and a writer for bitcoin magazine. He was a big bitcoiner. All these people are huge bitcoiners. Of course, Roger Ver was a very popular bitcoiner. So almost all the people who left to do successful Zcash, that was like a Matthew green zero coin thing or whatever, that was like all that was bitcoin stuff was all bitcoin stuff. So everyone was 100% aligned in bitcoin. But then this topic came up of how what if we have a new feature and not everyone wants to upgrade? What do we do? And this was a vexing problem, and a lot of people decided Monero is a perfect example. The Monero people decided, listen, I'm not going to wait for bitcoin to do ring signatures. That turned out to be very smart, because now it's like, whatever, eight years later and we don't have them. But Monero exists, and now Monero has real users. 99% of the altcoins are scams, but some are created by people with a genuine creative spark, and they just want something. They just think something's better.
Kevin Rooke - 00:34:38:
And if it was available to them on bitcoin, they would have they would…
Paul Sztorc - 00:34:42:
Never have made the altcoin in the first place. So the real tragedy is that we didn't just do it like, a year or we didn't come to this concept like, a year earlier, or that if I could go back in time, I think I would go straight. To all the large blockers. And I would explain to them in detail what is about to happen and why they're about to lose over the next two or three years and why they can't possibly win, which is something that I kind of suspected always in real time. But now, since I'm a time traveler, I'll know exactly what happens on every date and stuff like that, but I'll be able to sketch this out and then they'll see that I'm more and more correct and my status over there would rise. And then I would always be telling them, this is what you should do. Instead, you have optional large blocks, and it won't affect those. People still have their small blocks, and you'll have your large blocks, and you'll have the only disadvantages. You'll be in SPV mode. Which is what they wanted anyway. They wanted everyone to have SPV mode. But I'll say this is perfect. You guys get large blocks in SPV mode. They get small blocks in full node mode. Everyone gets what they want. Don't do anything else. So then that would probably have helped. And if you had started early enough, then you could also have gotten ahead of the whole Ethereum thing. I think I would have ignored, part of it was I thought the community was also interested in this task of keeping everyone together and making the project, growing the tents forever. But again, part of the scaling war was people could make a whole career out of just being a jerk, being, like, a toxic person and kicking people while they're down and making fun of you could make a whole career out of just being, like, a critic and not actually making anything. You could make a whole career out of just like arguing a side well, that was like, what I noticed when I said in 2015 at Scaling One, I started to notice that. I was like, no one wants a win-win thing. They just want to do this thing. And then if you were blessed by the right people, you could raise money and you could get, like everyone wanted to buy a lot of bitcoin at that time, too. So if you could go to VCs and raise like, $5 million now, it's like you're buying tons of bitcoin. So this was, like, very attractive. No one wanted to cross any of the companies that had raised money, especially Blockstream was enormously prestigious. Gavin Andreessen tweeted I don't even know if you know who Gavin Andreessen is. Right, I do. Yeah. Seems like a big guy. So obviously, and he tweeted something like, if this amazing company offers you a job, take it or something. And they had all this money, they had all these prestigious people working there. So I kind of just thought it would all work itself out. The reality played out very weirdly. So, like, 2016, we had problems in the community, but that was the origin of blockchain, not bitcoin, which is this insane distraction that, IBM blockchain. And this also made people think this made people think like, anyone who uses a blockchain, who uses the word blockchain or is just talking about blockchain technology is a complete fool and is the dumbest person in the room. So this is also bad for side chains because this the 2016 nonsense in the industry that trains people to think, okay, bitcoin is the real thing, and all this blockchain stuff is just a bunch of complete nonsense. Which basically, again, like 99 in that case, like 99.99% of that was complete nonsense. But this trained people to just say, it's bitcoin, not blockchain. That was the origin of all that. So again, the toxicity had to ramp up to fight off all this invading junk. But it wasn't…
Kevin Rooke - 00:38:38:
Side chains got caught in the crossfire there.
Paul Sztorc - 00:38:39:
Right, exactly right. And then everyone hated the miners from the scaling war. So there was like kind of nothing to do. And after winning, this is a problem that we still have today. And this deepened, I think, only after winning the block size war. The small block size has become very complacent and overconfident. They just think, now this proves that all we have to do is nothing and all we have to do is fight off the bad invading ideas that we keep it pure. What it trains people to think is the good thing we did was we fought off the large block hard fork and that's why the price went up. And all we have to do is keep fighting away all change. We have to be xenophobic and anything that changes the protocol at all, we have to fight it off. And that's why the price went up. And as long as we keep doing that, it will just go up and then it will eventually be, whatever, $20 million a coin and hyper bitcoinization. So that's what people were trained to think as a result of the scaling war, which again, the only thing worse than winning would have been losing, I guess, I don't know, I have to come up with a clever phrase. But the fact that we had this scaling war was horrible and it trained people to think that bitcoin should not be changed. So people had to do kind of like a 1984 doublethink. Also, because the large block change was bad, we fought it off. But we did Segwit, which was a large block, it was a block size increase. So in 2017 we fought off Segwit2X, but we activated Segwit, which was a block. So there was this kind of like 1984 double thing where people started to get more tribal and careers were ruined and careers were made. Like I said, huge amounts of money were won and lost and bitcoin cash. All these people went over there? Yeah, first everyone's making money, then people are losing money. And then what happened? It was all a blur after that, but I can give you more details, but that's kind of what the setting the stage. This is probably like total information overload.
Kevin Rooke - 00:41:05:
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 nodes 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 just want to make sure I understand where you're coming from here. Is it that you think in that block size war, bitcoiners were so focused on attacking the other side that they've kind of shied away from working on new innovations and working on new features and functionalities to bitcoin. And rather they've taken the approach of just to feed everything else.
Paul Sztorc - 00:42:19:
Well, if I had to put on my little hat and just guess, I think the real problem was that the community was so full of libertarians and stuff, which is great. I identify as basically libertarian, most bitcoiners do, but people didn't believe in any kind of governance, compromise, leadership, because centralization was bad too. So no one had the authority. So there was kind of a power vacuum, kind of and why do I bring this up? It's because what happened was you had two groups of people and the community was growing. And then it was mostly this technical disagreement about the block size. And the small block size was correct. It was not worth the hard fork to get a measly 8X improvement. If you did the math and stuff, we needed to get like, we need like a 10,000X improvement, so that 8X isn't even going to cut it. But you had very different people. So, for example, one thing that I had never considered, I went to an event, it was like a private event, and we had some bitcoin core developers there, and we had some people there from other companies, like Coinbase CEO was there, CEO blockchain.info was there. People were there from BitPay. And we had these little breakout groups and had lunch. And someone said something that I had never really thought of before. And there's someone from BitPay said, when the blocks get full, our customer service, the calls to customer service go up by, they said something like 20 to 80 times as many as normal. And I just never viewed it through that lens because a lot of the technical people view it through the lens of just like, what can the system support? And it was kind of like obvious that this if you're technical, it's kind of obvious that the small blocker side was better. But in your head, you're kind of just thinking, like, why do these people care so much about increasing the block size? Quickly? You could plot on a graph the blocks getting filled up, and of course it was noisy graph, but they really wanted to move it up so that the blocks were never full. But some of the other people who are more abstract and more technical people, you're kind of thinking like, well, the blocks, like, could always be full all the time. Like, you know, that seems like a weird thing to try and to try and be impelled by this directive that they should never be full because you feel like someone can always cheaply fill them up. So then it kind of feels like I even made a post about this where I had a graph of the US debt ceiling. It's like every time we get near the ceiling, we raise the debt limit. So the debt limit doesn't really exist in practice. So I made a post comparing that to that, and I was like, so to most abstract people, that was a complete non-starter, but I never really understood that. I was like, what is the motivation behind this? And so it's like, yeah, if the blocks are full and people are trying to use BitPay or something and they think they're doing the right thing, they're like, okay, I'm part of the future. I joined the bitcoin community. I got my bitcoin. Now I'm going to spend it at a store. BitPay let you spend bitcoin at any store, and the merchant would get cash the next day. So it's like this amazing deal. It's way better for everyone. BitPay was a very famous company at the time, so everyone was like, people are doing the right thing. They're having a great time, but then the blocks are full, so the transaction just never goes through. And they're like, I don't understand. This doesn't happen when you use Venmo or when you use a credit card. It's not like it just doesn't go through. If it doesn't go through, that means it's broken. And then they call, and then the customer service gets overloaded. So I was trying to get an understanding of why do people care about this and that this is a really hard way of answering your question, but I'm trying to reiterate that the community had grown large and diverse, and people had become very different. They were on different paths in life. Like, many of the elite technical people were very resentful of people like Roger, because Roger was a nontechnical person who invested a lot of money in bitcoin, and he owned huge amounts of bitcoin, and the technical people didn't actually own that much bitcoin. But then Roger would go over and say, these people, sure, they say they know a lot, according to them, but I'm a stakeholder. I invested in all these companies. I invested in bitcoin. I put my life's work, I put my name behind bitcoin. So people had become very different. It was just, crossed Dunbar's number or something. And then some people, not most, but at first, you know how it is on the Internet. People started to take little snipes at each other. And that's why I say the lack of leadership, because there was no one to be the adult in the room and say, Stop doing that. Instead, it just got worse and worse and worse and worse.
Kevin Rooke - 00:47:47:
I see forever. So I think there's a large number of bitcoiners today that would say, and you kind of alluded to this, that we don't need anything else. Bitcoin is fine.
Paul Sztorc - 00:48:00:
It's a prevailing view.
Kevin Rooke - 00:48:01:
Forget everything else. And I think you're making the case that we can also accommodate other people's needs or wishes or anyone who wants to do anything else under the bitcoin umbrella but on a side chain. Can you talk to me about what the benefit to a bitcoin or may be of having a side chain that does incorporate, let's say, the privacy features of Zcash or the turing complete nature of Ethereum under the bitcoin umbrella and as a side chain rather than as a separate blockchain.
Paul Sztorc - 00:48:39:
Yes, that's the essential point that you've hit on, which is that this idea was designed, the idea of like, should we have this new feature or not? That's only rational if there's some kind of cost to use. So the whole point of side chains is to say if someone wants to do turing complete or whatever stuff somewhere else, then there won't be any cost. I'll never suffer as a user of Bitcoin Core as a result of someone using the side chain. So again, that's something. If you go to the 2015 post, you see the whole design is designed around the side chains being optional and not harming anyone who's not using them. And there's the whole talk in the June 2016, but you're asking about the benefits. The benefits are like Zcash has reusable, everyone gets one Z address that you can reuse as many times as you like. There's no privacy leak. If you shield the coins, then the sender, the receiver and the amount are all hidden. So you post one reusable address. This is a constant problem. So first of all, the privacy in Bitcoin leaves much to be desired. But it's really tough to get user-friendly privacy. That's what's really tough. But that's what Zcash has. Everyone gets this address. You get a static address, according to some of the research I've done on just the dark net markets, just for my own educational background research. But they have this issue where someone will do fishing and you tricked into going to a different site that mirrors the site and then they have a fake deposit address and you deposit to the dark net market but it actually goes to a scammer and then you message them and then they say you are on the wrong site or something. But in Zcash, the site, whatever, would be Silk Road 2.0, they just have one static address that everyone knows. So they just have to get that message across one time, then that problem will never happen again. And perfect privacy. So many of the dark net markets have gone Monero only. This is another thing that I was interested in researching because this was what led me to Bitcoin in the first place. And it would be if there was a beginning of the end, it would look something like this where Monero is, because the dark net markets have real users and real people solving a real problem. They've gone only Monero. But the ring signatures of Monero don't have as much privacy potential in steady state as Zcash does, because once you're in the pool, you're mixing with everyone in the pool, the shielded pool. And so there's this pool that just grows and grows and grows and it's more user friendly.
Kevin Rooke - 00:51:33:
I'm also thinking about the benefits, though, to bitcoiners who decide they don't want to participate in any of these new features. Is transaction fees accrued to miners, is that correct?
Paul Sztorc - 00:51:44:
Because of merge mining, the layer one, miners get the transaction fees from all the networks.
Kevin Rooke - 00:51:50:
Even by bundling everything under the bitcoin umbrella, you are effectively growing the pool of transaction fees that bitcoin miners get. Is that correct? Yes. Got it.
Paul Sztorc - 00:52:02:
I would say the primary benefit, though is that as a Bitcoiner you don't have to worry about people campaigning to change. If you want to keep change out, then the side chains are the best thing for you to actually do. What? You actually want to make this one last change, because then you can always fight people off and they say, we really want this. And you can say, okay, great. Do it on the side chain, and then you no longer have to worry about the hard fork, like a bitcoin cash, or you no longer have to worry about an altcoin like Ethereum.
Kevin Rooke - 00:52:31:
Right? And so in a way, is it correct that you view this as if we look at the total crypto market cap outside of bitcoin, we're looking at hundreds of billions of dollars? Do you view this as a hundreds of billions of dollars lesson that bitcoiners should be paying attention to that, hey, there's all this capital and interest and there's a whole group of people that many were once bitcoiners, some were not. But there's a group there that could have been under the bitcoin umbrella, could have been adding to the ecosystem and growing the pool of transaction fees for miners, but are now out and we now have to fight them because they're in a totally different ecosystem. Whereas we could have just let them do their own thing, not harm us on the bitcoin main chain, but let them be kind of an affiliated side chain that is entirely opt-in and doesn't touch or doesn't interfere with the main chain's censorship resistance.
Paul Sztorc - 00:53:41:
Yes, I think it's unfortunate. So you can look at lots of different things, so you can look at the market cap is one thing, the transaction fees is another thing. Transaction fees paid, those are like real customers who lose money when they pay the transaction fees. And this is some objective indicator of whether or not there's real customers there because the transaction fees, they could be fake, but they probably aren't. And you can look at a graph of the Ethereum transaction fees priced as a dollar, total dollars versus bitcoin total dollars. And if you graph this on a log scale, you'll see that the Ethereum fees used to be one 1000 of BTC fees, but it has gone up on a straight line on this log scale, where they're now over 100 times, 10 or 100 times spending of the day on average, has grown way past being equal and now much higher. So they actually have more customers per se. You can argue about there's lots of qualifiers to that, but you look at the trend and you just see that all of those transaction fees would have been on Bitcoin, and all those are real users. It's an indication that there's real users. It's harder and harder to just dismiss. The bigger thing, though, is just why have any rivals at all? Like, why tolerate having Ethereum as a number two alternative to Bitcoin? Why allow any story out there that might persuade people to say, oh, Bitcoin is like this, but Ethereum has smart contracts, it's all open source software, so why even allow why not? And it's more of that. It indicates something about bitcoin. With Bitcoin, you have to now it's no longer win-win with Bitcoin, you have to choose to give up the Turing complete Smart Contracts or whatever. You give up Rich Statefulness, and in exchange you get something really conservative and reliable. But again, in the side chain world, you could have something that's even more reliable. And in fact, I think you could even shrink the logical thing. And I presented at Scaling three. You can shrink the layer one block size with side chains because you have an infinity of block space on the layer twos. So you can actually have something more conservative because more sustainably conservative, because into the future, you know that it would be less vulnerable to modification because there'd be no one who wants to change the software that will be directed into the side chain. So you have something that's more conservative and you can also have the Ethereum. And this used to be a mainstream view. Like when RSK started in like, 2015, everyone thought they thought that was just a Bitcoin answer to Ethereum and they just won't be an Ethereum. But then all this stuff happened with the block size in 2016. And there's a couple of other things as well. I can give you like a giant story about that if you want.
Kevin Rooke - 00:56:54:
I'm interested to hear more about RSK and its development. Why do you think that did not become this Ethereum replacement or this will take care of all of the Ethereum use cases? Why did that not happen?
Paul Sztorc - 00:57:07:
To be honest with you, my guess is that Ethereum got big. So Ethereum started and it was very small and it was terrible when it started. It was like very kind of like fraudulently marketed. And in 2015 it was like Vaporware and they were like, taking money from people. It was very probably like, I don't know, illegal, who knows, you know, in terms of like, secretly being like a kind of security under the hood, as people have argued today. But, like, it didn't exist at all. People were taking money. People were working for free in exchange for, like, getting some Ethereum when it launched. And there was, like, kind of weird stuff like that going on, whereas Satoshi just released it as a finished project, and then, like, three days later, he was, like, transacting with Hal Finney and it worked perfectly and stuff. So that was a very big difference. But when Ethereum was just a suggestion, then the community was like, oh, how can we take this idea for ourselves when it was new? But then in 2016, Ethereum started to get really big, and this led to everyone having the sour grapes. This is like I was saying, the community became miserable. The community used the bitcoin. Community used to be just very fun, and there was no thought police. Now they're everywhere. But now you get canceled. Now you can get like, you can get bitcoin me too’ed, or something. After 2016, it was like, we're in this miserable we're trying to figure things out with Scaling. We thought everything was going to go great, but now we have these two communities that hate each other, and they each assumed that they would get their way for years. And they built businesses, they built personal brand, they have VC funding, millions of dollars all aligned with it, going one of the two ways, small block, large block, and there's no agreement. So in 2016, it was like, agreement is hard. Everyone was worried about, like, doing the wrong thing. So and then Ethereum shows up. And then I think what really happened was people were like, well, it just became really common for people to say, Ethereum is a scam, Ethereum is stupid, or whatever. We don't want that anyway. And then as the theorem got bigger and bigger, it became more there's a cognitive dissonance. It became more and more difficult for people to just do the most obviously correct thing, which is to just steal. We should steal every idea, good, bad, or fringe or rock solid. We should just take all the ideas as long as we have a way of trying them that doesn't hurt anyone else. If you've got a user who wants to use something, you have a miner who wants to mine the transaction developer who wants to make the software, someone who wants to pay the fee, someone wants to invest. If you have all those people who want something, it's going to be really hard to stop them from getting it.
Kevin Rooke - 00:59:58:
But yeah, I think you make a really good point that you make about as long as it doesn't hurt anyone else, or as long as it doesn't interfere with anyone else with what they want out of bitcoin. And I want to hear, because everything you've said to this point makes sense about why Drivechains and why opt-in side chains. Can be useful to bitcoin without interfering with the base layer. What is the best argument that you've heard for why these should not be on bitcoin? Why Drivechains should not exist?
Paul Sztorc - 01:00:31:
Well, I think the best argument is very obscure. No one actually says it. Instead, the arguments that are popular are the terrible arguments, which are misconceptions
Kevin Rooke - 01:00:43:
Just that blockchains are bad.
Paul Sztorc - 01:00:46:
People think one thing is that people don't like they don't like what's SPV mode, which is the so called miners can steal critique. But it requires 100% of the miners to spend three months consecutively on saying that one hash equals some other hash. So again, what's concerning to me is the whole idea was designed around certain goals in mind. So the Drivechain idea was designed so that full node would never need to care about what the side chain was doing, because that's the only way you get this feature, that the ZK snark stuff doesn't negatively affect someone's bitcoin full node. So it was designed not to look at those things. And it was designed so the SPV validation or the SPV proof or BIP 300 or whatever you want to call it, that has the flaw that if you do enough work, you can argue anything. So you can say, if I do enough work, then I'm saying I own all the coins on the side chain, so pay them out to me on layer one to this address. You can then steal the coins if you do enough work. But because of that is why I designed BIP 300 the way I did, which is why it takes this enormous amount of time. It's all focused on one hash. There's only like four hashes per year. It's very easy to see if they don't match. It's very easy to introduce a new one to error correct the erroneous hash. It's very easy for lots of hashes to compete without there being any kind of like denial of service. It's very easy for a skeptical observer to wait. They can only advance the hash, like one unit at a time. So it's like someone walking from Los Angeles to New York City. They have to slowly walk. And you can decide. You can wait in Kansas City, Missouri, in the center of the country, and you can just say, I'm on vacation. And then if someone calls you in Utah and they say someone's coming, then you have plenty of time to finish your vacation. Come back to Kansas City. You'll be waiting for them when they arrive in Kansas City. And then you can shoot them down or you can do something about it. So the whole thing is designed the miners can steal critique. The whole design is designed to address that. The most important issue with miners can steal is also that the individual user is opting into the side chain so they get the new feature. They also have this new risk, but it only accrues to them. It does not hurt anyone else. But so people keep repeating this idea because you're right, the only thing is if it harms someone on layer one. This is another issue, though, is that people have retreated then to the second big critique is that it affects minor incentives. But you see, they just keep it so vague that this is unmeetable criteria, because literally everything might affect mining incentives if you broadcast the transaction today versus not if someone invents the natural gas flaring, they do the permits they can get the tax rebate for, that affects mining and everything. And again, that is why in 2015 I designed it this way, because when I sat down to design it, I thought, well, on the mining world, there's enormous turn. Everything is constantly turning over, over there. You go from CPUs to ASICs going to the hydroelectric dam. This idea that you could get power that was free, that was an innovation that the dam is only using 60%, and you can buy the 40% and relocate mining there. And the idea that you could actually get energy for less than zero with all these complicated demand management schemes where they have the you may have may be familiar with some of this, where they have a situation where the power company builds at scale. They build to hit a certain optimum production of electricity an amount, but the intraday variation is very high and electricity is not. Yet, our battery technology is very inefficient as humans. Only in the last like 20 years has it even thanks to like, cellphones and like, whatever, maybe Elon Musk or something, who knows? But, you know, like, has it gotten okay? But it's usually like a huge percentage of the electricity is lost when you charge a battery and then discharge it. So because of that, they have to build it so that they have the peak and they have to make sure that it's always available, a certain amount is always available for whatever hospitals and things. So they have these schemes where they'll pay the miners to use the electricity in a very controlled way, because that way they have it smoothed out and then they can build at scale. There's some size of the power plant that is like the lowest cost per kilowatt hour or something. Yeah, so that's my point is, I always knew in 2015 it was obvious that mining is a creative world. This is another issue. I think this is a misunderstanding even in the expert technical Bitcoin community, which is that people always thought of mining as being a part of Bitcoin, but really miners are outside of, miners are customers of Bitcoin. They run a full node to figure out if they're being paid and to figure out how to add the transactions into blocks. But they run a full node in the same way that they get power, in the same way they have staff. It's actually upside down. The miners are customers of Bitcoin. They are not part of Bitcoin. And this is again, part of this was the scaling war and the paranoia about miners can block Segwit activation. Miners can do things that we don't like, so we have to regard miners with paranoia and suspicion. So those are the critiques that I normally get. And again, it is disturbing because on day zero I designed it with exactly those in mind. So in one sense it just means that everything's going to be fine because what other people are worried about is what I designed it to. But it also means that there was a disconnect or I think what it really means is just that people are so paranoid that they don't have an open mind to that. It's built up from the ground up with exactly those things in mind. To be honest with you, I think there really is no good reason not to do it. I've waited for a long time because you asked the question like what's the best argument for not doing it? But I don't think there is one relative to the risk of not doing it. Because the risk of not doing it is, I think, existential it would mean that it's possible for something else to just get big somehow. And then if something else becomes the global internet money, then Bitcoin will go to zero and will have failed. And I think that's even though that's very unlikely, I don't understand why there is no real reason, as far as I'm concerned, not to at least try it. Another thing that people don't seem to understand is you activate this by a soft fork and if something goes wrong, you can just do a second soft fork later very easily. That just says it's a soft fork. That says the following: the protocol was whatever the protocol was on Monday, it is on Tuesday, but we will never allow any BIP 300 messages into a block ever again. And now all that just basically just shuts it off. So you add it, you add BIP 300 and then you shut it off. And the only cost is that you can never again send a message that is BIP 300 formatted, but that is de minimis, that's nothing. So we could try the idea and then shut it off if something bad happens. But again, the people who think something bad has happened, none of them have read the November 2015 post. If they did, they would see that I anticipated what they would say already and they certainly didn't watch those giant presentations that I made in 2016, which again, some of those go way beyond what even I think anyone today understands. So the one in June 2016 I described why it's actually a good thing to have the miners be able to steal because it's possible to design side chains that actually attack other chains, or even that they will pay if a certain chain reorgs or something. So it's possible to have unfriendly side chains that disturb each other. But if the side chains are somehow unblockable perfect code, which is what some people seem to want, which is also not possible. But this is like a ZK snark roll up type thing where people want the unblockable magic side chain. First of all, it's not possible because the miners can always just stop. They can get you on what's called the data availability problem, which they can censor all the messages from that chain, or they can censor the ZK snark proof. So first of all, it's not possible. The miners always decide what's in the blockchain or not. So the magic uncensorable chain is not possible. But even if it were, this would be a terrible thing, because you would then have to try to get into the business of going, like, transaction by transaction to see if they were causing chaos in this. Whereas in the Drivechain model, you have this thing that I called categorical control, which is like, you'd have, like, the Zcash side chain, and the miners would add it. And then since the miners can destroy a side chain, which, again, is very difficult, it takes six months or something. But since they can then steal from it, you push all the problems to the upper level, which is exactly where they belong. Because now the side chain developer, they're the ones who have to convince the user that your funds will be safe here. Because this software is well designed. And the miners are going to want, they're going to want to keep this around because this software will be increasing transaction fees. It will be increasing the price of bitcoin, will be increasing the utility of bitcoin. It'll be helping bitcoin. It'd be essential to bitcoin's mission, in fact, to have the Zcash side chain. And so it pushes it all. You give them a blank canvas to paint on, but then you say, listen, this had better be good because you are under the gun. It's actually good to have this threat there and say the miners can just take an attack, the SPV proof or whatever. And again, that only affects people who opted in. So again, it's all lined up perfectly. That's by design. It only affects the people who opted in. That is what means that you have to induce people to opt in. They look over and they say, well, maybe I'll put $10 in there today, and we'll see how it works. And then that's how you get evolution.
Kevin Rooke - 01:12:06:
Okay, that makes a lot more sense to me. I think I have a much clearer picture of where this Drivechain idea is headed. I hope listeners do as well. I want to shift the conversation a little bit to the work you're doing on layer two labs. And I just want to highlight, I was reading through some of your material I saw on your Twitter page. I want to read through some of the roadmap and some of the things you've outlined and get your perspective on where this company is headed next. First, I'm just going to read something from your Twitter. It says, first, we're going to focus on the BIP 300 sidechain. We have six side chain designs and development already, including two which are exact clones of Ethereum and Zcash, but bitcoin only. These allow for immediate global scale, easy to use, impenetrable privacy, and total protocol flexibility. You go on to say, second, we plan to improve bitcoin's UX. It must be easy to use bitcoin the right way with one's own node and keys. This will require a revolution in UX and education. A revolution we aim to bring about. Nodes will be useful and easy to understand. And then you say, third, we are working on a few high risk, high reward problems. These include prediction markets and a resurrected Namecoin. These services, if they are successful, will revolutionize media and telecommunications just as bitcoin revolutionized banking. Now, there's a lot of interesting ideas there. Maybe we can take those one by one, those three elements. I want to first hear about why you've decided to build these six side chain designs. Why six to start and and what's the, what's the roadmap for rolling these out?
Paul Sztorc - 01:13:48:
Well, I'll give you the timeline is that, remember there I did the BIP 300 software and then there was no second radio. So we build one that was just basically we have Bitcoin Core with BIP 300. And then I had Bitcoin Core as a side chain with just like nothing happening. So that was the first and then one with a larger block size. It's easy to make. And then I was like, for people to really understand what's going on here, we needed the Zcash side chain. Because Zcash was first of all, it was a code fork of bitcoin back in the day. Fork like off of bitcoin version twelve or something. So that was kind of interesting, it shared some code, so it's a little easier. But I was like, you really need a new feature, something that people would actually use. And Zcash has this privacy feature as the impenetrable privacy and it built in. I don't know how many other people have realized this yet, but if you have the shielded pool thing, you also have a perfect mixer. And that's something I called Melt Cast and I wrote a post about that and I had a video about that. So I was like, we need the ZCast side chain. So in 2020, I did a little contest about why I paid some money. I think it was like five bitcoin to whoever had the best Zcash side chain and someone won the contest. And that was great. We got that one and then we hired that person. And then something interesting happened. I don't know exactly how I want to explain all this in different, but in parallel. We had this idea of Cloning altcoins where you want to copy the latest version of the altcoin, make a couple of minimal changes, and then it becomes a side chain. So you just take the latest you start with the latest version of the altcoin code. You go to like, whatever, Ethereum's GitHub. And then in parallel, we had this side chain template that I made that was like bitcoin core. And it was like it has all the logic for deposits and withdrawals, the coins going back and forth. And then we start with that, that thing. Someone made a joke version called train chain, which is just bitcoin core with all the photos replaced with pictures of trains or pictures of me, because I did this one video where I had a train metaphor for the deposits and the withdrawals, like the train going from LA to New York City. So someone just made one that was a complete joke. We had a large block one, like I already mentioned, and then we did make an NFT one because this was, again, not too difficult. And actually, I think this is underappreciated because we made a chain where you can issue your own assets. So this is very much like counterparty, this whole I call it NFT chain, but that's only because I tried that concepts got big and I needed a way of explaining it. It's really called Bit assets. And this idea is a good idea. And it was a bitcoin idea long before it was an Ethereum idea. We had colored coins, we had Mastercoin. Master coin was a Bitcoin thing. And it sort of later became Tether, became Omni, and then it became Tether. But Tether was big. Tether still is big. So this is a bitcoin idea. And the Bit asset side chain is much better than the theorem, all the Ethereum, ICO, NFT, et cetera stuff, because we have the UTXO model and if you make a new asset, you can put it in a multi SIG output or you can put it in a Lightning channel or something and send it back and forth. So it's kind of like some people made like versions off of the template. And then once we got better at cloning things, we updated the clone to the latest clone of Zcash and then we redid the cloning technology to clone the theorem. Because Ethereum is the number two competitor to bitcoin. It's more of just I think people misunderstand the like, my goal with this, the goal is to just guarantee that no one is turned away. We don't want to have users turned away. And I think instead again, like I was saying, people have been trained to think of Ethereum as a scam, mostly because they I think it's mostly sour grapes. They just think we can't have that, so it must suck. But that's not reasonable. What we want to say is we can have everything. And there you go. So it's just a better way of doing things right.
Kevin Rooke - 01:18:28:
And so now what are the technical challenges associated with implementing these side chains and getting this live in production for people to use?
Paul Sztorc - 01:18:38:
Well, I think right now you can already download it and test it out for yourself, but we're going to try to make that easier and easier and easier because that's the key. And we have like, a nice little graphical user interface that kind of tries to explain what's happening. So it's much easier for people to understand what BIP 300 is doing on each piece of software. If they run the software, it's always the best way.
Kevin Rooke - 01:19:07:
And then does BIP 300 needs to be activated as well?
Paul Sztorc - 01:19:09:
Yes, it is a soft fork. When I proposed this in 2015, this was not a big deal because in 2015 we had done like, I think, three soft forks in the fourth quarter alone at the same time that I wrote it. So the bitcoin community used to do many soft forks. We used to do like two a year for the first seven years of bitcoin's history. Then with Segwit. Segwit and Taproot are the only two that have been in the last seven years. And SegWit took a long, like something like 26 months and something like that. And Taproot took something like 46 months from when it was 1st January 2018 was like the proposal and then has to be coded and activated until November 2021. Right. So it's been getting slower. The soft work has been more and more arduous task. But I think that's all the more reason to get this one in, because this one lets you escape to other pieces of software which can then rapidly develop. You would have one version that takes huge risks and adds all kinds of complicated whatever you want to put there. You can have Jeremy Rubin's thing. You could have even two competing versions. So you'd have like, layer one, and then you could have like, new bitcoin core liberal, new bitcoin core conservative or something. And they would this is the key thing is that if you want if you really want to have competition because competition is always the best for the user. That's the difference between capitalism and communism and like tyranny and like first past the post democracy or something is that the only one who can compete with to catch a thief you need like another thief or whatever, you know what I mean? The only people who can realistically replace the Democratic administration in the United States is the Republican administration. And that's too bad that the competition is only that far, but that's better than just having a tyranny of one, one permanent king or something like that. So the reason why I bring that up is because if you want to have competition in the bitcoin software world, you have to have the two way peg, because you want there to be as little a cost as you want to only have people compete on the code itself, the features, and not on other things. Like who else is in the coalition, who else is in the UTXO set. And that is very key. It's all about helping the user. And part of the reason why it's misunderstood is, I think, because it actually does harm certain people in the Bitcoin community, such as people who they just tweet for a living and they don't actually do anything, or if they are very prestigious, if they have a high rank in the software hierarchy, then I'm reducing that to perfect competition. So it's always better to be in a monopolist guild than to have to compete. Like the Uber drivers, they have to compete. They have to get their five star rating every single time. What they do is the same as what other people do. Users have options. They can get a different driver. They can use Lyft instead of Uber. So the leverage is very low, and everyone prefers to be a monopolist where the customer can't leave and they have to put up with the software. No matter how people think it's too slow or too fast or too liberal or too conservative or the blocks are too big or too small, the user just has to sit there and take it. And that is the problem that sidechain solved. So that's why it's so important. And but that's I think that's also why there may be they may be unpopular among certain people because those people are doing the wrong thing.
Kevin Rooke - 01:23:15:
Yeah. And now it may also be that if I was building a protocol off of Bitcoin, and now the side chain comes up and everyone starts to use it, and people are asking this protocol to move migrate over to the side chain instead, as an independent blockchain operator, I'd say, I don't want to do that because I have this monopoly, right? As you mentioned, it's easier, it's safer to be in this monopoly. So do you think that inhibits the adoption of side chains? If all these other projects already exist? You mentioned Zcash, Ethereum, all these things, what's their incentive then to port over to the side chain where all of a sudden now they have to compete directly on the merits of their code. They don't have any property that's theirs, that they own and they control anymore.
Paul Sztorc - 01:24:13:
Yeah, you're absolutely right. It was a much better idea in 2015 when I had it before all these things had a bigger foothold. So it was actually a better idea. And even though it's still, I think, probably the most important idea in bitcoin, that today is getting worse as those other places build out, like a competitive moat or like a resistance. And in particular, you've highlighted a very important point that the side chain coalition is losing people often. So, like, people join, they show up, and they say, okay, I love bitcoin, I love side chains. Side chains are great. BIP 300. They have a BIP 300 flag. But then after a while they may get impatient because they may say, I want BIP 300 because I want whatever it is. Like David Bork did that, see a project there's like a bit hard drive thing, which is a very interesting project. So you say, okay, side chains are great, but then you look around and you see, I wanted the Prediction markets thing. So I could have said, instead of focusing on side chains, I could have just launched the Prediction markets project as an altcoin, so I could have done that. Now, as soon as you do that now, you're out of the side chain coalition. Now, the last thing you want is after everyone, like thumbs down your idea or waited on it or whatever, they stalled it out. Now you went and you actually did your idea and you built your community from scratch. The kind of the last thing you want is to be stolen and taken back and you probably own a lot of the coin, you own a lot of whatever, you own a lot of Zcash. You built this thing after the bitcoin community failed to take an interest in your idea. Then you prove that the idea would have been popular with some customers, right? And now the last thing you want is for the side chain. So sometimes people don't see it that way. Sometimes people do. I think probably David Bork actually would see it, that he would be excited to have the project come back as a bitcoin side chain, for example. But like the Ethereum people, it's pretty clear that it's not the case, right? They want Ethereum to just win and do the flippening over bitcoin. So it would have been much better to try and do this stuff earlier before those things would get a foothold. And if we did, we would live in a completely different world and all those people would still be bitcoiners. And you'd have even whoever is like a very toxic person, say you have a super toxic person presenting it at bitcoin Miami or something, they would have a different speech. They would say something like all these projects, first of all, the target of their ire, their hatred would be like something like HEX or something. Or they would say, or Ripple or something, some other thing that was they would say, these projects are scams, they're terrible. And then they would say, anyone who's serious does their project as a bitcoin side chain. Just look at this boy genius, Vitalik Buterin who made the Turing complete side chain, which is now one of our biggest side chains. And there's no reason to have these people who are today the toxic people, they would be the same type of person, but they'd have a different script. And the script would include thinking of all these people, Roger Ver, they would all just still be bitcoiners they would never have left. So it would have been a better idea. It was a better idea before. As good of an idea as today, it would have been better to do it back then.
Kevin Rooke - 01:27:48:
I hope you're enjoying the show so far. Just a quick message from our sponsor, Stackwork. 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. Okay, I want to get into the second point that you made here for layer two labs. It says, second you plan to improve bitcoin's UX, it's kind of terrible, isn't it? It's okay, but it's not the worst. So I want to hear more about what you mean by making nodes useful and easy to understand.
Paul Sztorc - 01:28:50:
You can already download our sorry, you can already download our software and check some of that out. So I put like one thing that's annoying is the node doesn't explain itself. One thing. We put a Block Explorer in the node, first of all. So that's kind of a neat thing, where now you can check right now if you want to check, if you just want to see the blockchain. As a human, you have to go on the Internet. And now when you do that, they know if you go to whatever it is, the Block Explorer, blockchain.info, whatever, I don't know. I bring them up because they're so old, but they're actually the Blockstream. Block explorer is very nice. And my favorite one I got to show my favorite one is this one, yoga.IO. It explains what every single bite is doing in every transaction and every block. It like, highlights them with colors. Great, we got to get that into our Block Explore. This color thing is really cool. So check that out if you can.
Kevin Rooke - 01:29:51:
Right?
Paul Sztorc - 01:29:52:
And so you have to go there now. You contact their server, they know your IP address, they know which transactions you're looking at. You're going over the Internet, you're going out in the open. So this is not a big deal, but we put the Block Explorer in the software so you can see the blockchain and blockchain. That Info used to have this thing that they got rid of, and then later they tried to put it back in. But that I called in my head. This is my nickname for it. I called the transaction fireplace. But it's this cool thing. It used to go on their site and. As transactions came in, it would scroll them through it say you could just watch, you could just have it open and you're a thing, and you could just watch people transacting on the Bitcoin network and then a new block would come in and it would do that. So we put that in the note. We put that back in because it's cool to see you have the note and you can see this is how much Bitcoin people are sending and this is the fee they're paying. And you have this little thing and you can just see things. Another thing we did is the idea of the hash calculator. If you're a technical person, you have to take these hashes. Now of course, if you're a real programmer, you're programming in the command line and you have databases and things, but that is a little too much work. That's like taking out the heavy artillery. Sometimes you just want to see what is the hash of what if I type in a word like Apple, what is the hash? Or if I paste something, I paste the raw transaction. The Bitcoin software says you're told all this stuff is happening. Like you're told that Bitcoin has blocks that are made of a vector of transactions and that if you hash the transactions a certain way, you get this hash Merkle root, which is in the block. You're told all this stuff. But a normal person has no way of understanding what any of it means, if anything. So let's say you have the transaction, you have the raw hex, you have the transaction and you put it on your clipboard. You'd want to just take the, what is the hash of that to see that it matches the transaction ID. You can see for yourself that it does. You can kind of learn about Bitcoin and the privacy of your own computer. So we have this hash calculator, which I really like, and I am a big fan of this, and this is nothing, I'm not going to win the Nobel Prize for this. But it's just this thing. You open it up and if you type, it gives you all the hashes. And every single time you type a keystroke, it changes the hash for you. So you can now see exactly what a hash is and you can view it different ways, binaries. Most people struggle with this idea, but if you just play with the hash calculator for 7 seconds, you'll learn exactly what a hash is and you'll never forget. And you understand why the different hashing algorithms are different. And we do all the ones for you. We do like double shot 256D, we do one shot. We have different little settings. So these are things that we already have, that you can already download. And this is only the beginning. I plan on doing lots more stuff. We have something called Coin News. This is a weird idea. This is how I think the community has gone in the wrong direction. But Coin News is this fully cosmetic thing that there's no change to the protocol, there's no change to the blockchain. It's just a user interface thing and it displays part of the blockchain in a certain way. But I think this has the potential to be revolutionary. And so what it does is, if you like, you can broadcast this Coin News and then you pay a transaction fee. And what it does is Coin News will scan the entire bitcoin blockchain for anything that's formatted a certain way, the Coin News style. And then they have little like a prefix which is like categories. So you can have like we have US Weekly and we have Japan Weekly because people who speak different languages, they don't want to collide with each other. So this is for everyone's mutual convenience. And then once it sorts that out and then the weekly ones last seven days, and then you could have something else that lasts one day or less a month. You can have, that's configurable. And once it sorts all these out, it displays the op return text in the human readable ASCII and it sorts them by the transaction fee paid. That's the key. So if you want to get the news out there, you just outbid whoever is on the top and then you get this thing and then every bitcoin or who's running the node can see the news and then everyone knows that everyone else saw it as well. So this is enormous. This is a game theoretic implication that it's what they call common knowledge, which is a technical term in the game theory world. It doesn't mean it means that you know something and you know that everyone else knows it as well. And this is enormous significance versus what's called mutual knowledge, which is like, you know that you're a spy and they know. Or it's like, you know that whatever, your wife is cheating on you and she knows, but you don't know that each other knows yet. So this is like a dramatic situation. But common knowledge is when everyone knows that everyone knows. So often, like a dictatorship, everyone will secretly hate the dictator, but they don't know how much support there is, so they just stay home. But then there's an inflection point. Something big will happen, like that one in Iran, that one girl dying. And everyone knows that this has crossed some kind of line. This is so outrageous that they know that it upsets them and they know it's very likely to have upset a huge majority of people. And then this is enormous. This is called Coin News as a simple thing. It doesn't change anything. If you don't like it, then you won't even see it if you don't run our software. But we have like, people like the op return graffiti. They like to put stuff in there. So these are some examples of things that we've already done. But I plan to go even further than that. We want to have it so that you can easily make a wallet. Because right now you just click a button and it gives you a wallet. But we know that from the Snowden leaks that many adversaries have compromised like random number generation and things like that. So it's going to be very easy to just generate. You shuffle a deck of cards or something and just type in 20 or 30. You just fill out the cards. You just type in 20 or 30 cards. And again, it'll be a situation. We already have a version of this in our software where every keystroke recalculates the wallet. So you can also audit it, you can call up a friend or you can have two computers next to each other. You can type something in, you type in Apple or fish one, two, three, space and you can see that they behave the same way. So now you know that it's working. You know, they stand the connection between the seed entropy that you type in and the wallet that comes out. And of course it'll give you the twelve words so that you don't need to memorize the cards. It gives you the twelve words to restore the same wallet. And the other thing is, we have BIP 47. I can give you a huge list of like the Canadian truckers I mentioned in the post. And that was a big wakeup call because that's like pure bitcoin, that's like the direct center of bitcoin's raison d’etre or whatever reason for existing. So why did we screw that up so badly that none of those people got their money basically, and the Canadian government confiscated the funds and people didn't know how to send them money. It should be very easy for people to post because they confiscated the addresses. So BIP 47 was this idea of people would just have these codes and you would just message them. The first transaction of them would have a little message that would link the two of you and then you'd have an infinite number of disposable addresses that under the hood, the software would take care of everything and they would get the money and it would be a new address and no one would know. The only problem is it makes the first transaction like 20% larger. And some people in the bitcoin community were like, this is spamming the blockchain with non transaction data and we have to filter all this out. But I don't have that view at all. I think we want blockspace demand to go up and we want everyone to be using it for everything and especially for something that makes it easy to privately send, to do banking, basically, which is what the whole point is. We dropped the ball and all that. Those are just some lists, and a lot of that stuff. You can download our software and you can see for yourself. You can see for yourself what I'm kind of aiming for. And then you can decide, like, is this one thing that I hate to keep rambling on in here, but as you can tell, I'm kind of passionate about this issue, which is like, bitcoin core is going to change the QT GUI because it's not very good and there's nothing wrong with it per se, but the transactions tab is, like, terrible. So when I was making the BIP 300 software just for my own use, I would start changing things and deleting things and moving things around. And then I just like it's a lot better. Like one thing that I came up with, it's just, again, I'm not going to win the Nobel Prize for this. But the sats, it's eight digits. So I put a comma, it's four digits, decimal, 4 digits and then a comma and then four digits. And that was great. And then people would notice that, and then they'd be like, this is amazing. And I was just like, well, okay. I was kind of two minds about should I keep putting time into this? But I honestly think that right now people are impelled. I double use that word, but people are persuaded to use a full node out of a kind of guilt and shame. That is our current strategy. It's like, do you run a full node? And if you don't, then people make fun of you. But I think that's, the node should be people should use the node because they think the node is really cool and they like to see the blockchain. They like to see that their transactions are confirmed. They like to see what other people are seeing. So that's my big answer for that. I think we've got a long way to go, even though we've already done a lot. And I think a lot of that will eventually be accepted as best practices, right? For example, that wallet generation thing right now, you just click a button and they say it's random. And when you generate a wallet, you have no way of knowing at all.
Kevin Rooke - 01:40:48:
I see. Now, I want to get into the third component. There some of the high risk, high reward problems you guys are working on at layer two labs. And you talk a bit about prediction markets, resurrecting Namecoin, and you mentioned that if these are successful, they'll revolutionize media and telecommunications just as Bitcoin revolutionized banking. Now, this is a very big statement. There is, talk to me about how.
Paul Sztorc - 01:41:14:
Well, you know, how these projects are working. I've already loaded up the prediction market thing because I'd already done all this work. So that one's easier for me to if you go to BitcoinHivemind.com, you can see all the stuff that I put. I have papers. I have a cool 20 minutes presentation where I explain the potential and the potential is that with prediction markets, the prediction markets are a way of getting everyone to getting all society's knowledge in one place and then broadcasting it out to everyone. So if you think that something is so for example, you can go to electionbettingOdds.com right now and see who's likely to win the Super Bowl and people bet and there's a certain percentage. And you can also see this is a very enlightening task because on the various prediction market sites you can see who's likely to win the presidency or the nomination. And if you look at this betting data, you'll see that these decisions are being made long before they reach the public. Which is it makes sense if you think about it. Like there's no way that you really just decide like two weeks before election day or something within the primaries. I mean, it must be a long career in the party but it's kind of just something it's not clear to you, like how early they start vetting the list of who is seriously plausibly could win or something like that. But the potential with prediction markets is these conditional prediction markets where you can say, if this person is elected, what is the unemployment rate going to be? What will the GDP be? What will the value of all the land in the world be over within the country? Such and such. How much tax revenue will be collected? How much whatever. So if you have that, then you can compare the two people. This is exactly like the fork futures idea. You can compare the two candidates or really in the case of United States, the two parties. This is a better way of doing it. You just say you have the Republican Party versus the Democratic Party and you can just say, look, here's what you're going to get if the Democratic candidate, the government is going to spend this much, the GDP is going to be this, the unemployment rate is going to be this. Whatever you care about, you just make markets about it. And then you have two columns basically before election day on what will happen over the next four years if you pick one or the other. And so this is huge because usually the margin of victory is very small. The races are close, huge numbers of people don't vote. And then when you ask them why they don't vote, they say that because they don't know how to tell which candidate would be better. So you only need a very small number of people to. And again, over time the prediction markets will establish there because the way they work is if you think any of the prices are wrong, you can make money by doing the trade where it'll be right. Over time they'll continue to correctly predict who will win the Super Bowl and who will win the Academy Awards and things like that. So over time it will gain some credibility. I have a million thoughts about prediction markets. So just like an infinite amount of stuff over there.
Kevin Rooke - 01:44:23:
Save that for another episode, right?
Paul Sztorc - 01:44:25:
I think NameCoin was always a great idea. I think people don't even realize how good it could be. I mean, one thing is when you buy an airline ticket, that's when I really wish that I had NameCoin. Because you got to remember like sometimes you have to remember your frequent flier miles number or something. They can't store that for some reason. And then you have to remember if you have TSA Pre or Global Entry, you got to have that one memorized, your passport number, you need all this stuff, you got to type it in. Then you got to type in the credit card, blah blah blah. The world with the namecoin side chain. It would be something like you would just go and there's no more logging in either with a username and password because everything would log in through the namecoin side chain. In my dream world, which is the only thing stopping it is that the viewers like you are getting psyched about it because you go to any site and you just type in. You own a name like whatever. Like I own Paul.bit or something. They don't have to end in Bit, but they started that satoshi started that convention and I think it's good enough. I have PaulSztorc.bit or whatever, and I go to whatever it is. Delta Airlines. And you never log in anywhere. You just type in PaulSztorc.bit. It sends a little notification to your phone or whatever, has the private key. It gives you a little Pin number, like 64512 or whatever. So you never have to remember any password ever again. You just need your twelve words for your name coin ID, which could be like the same crypto ID for everything. And then you type in the Pin and you log in, you buy the ticket. When you go to the airport, you can look up everything from your name. They can go to Global Entry and look you up over there. You don't need to remember anything.
Kevin Rooke - 01:46:23:
And it sounds very similar to the ideas of TBD and slash tags when you talk about the identity being tied to keys.
Paul Sztorc - 01:46:32:
I think that a lot of people have glimpse to this idea over the again, it's not like if this idea is old, it's from 2010. Like authentication is something that people talk about a lot. So I don't think that again, I have any particular monopoly on this idea. In fact, I'm sure people have some better kind of version of it, but lots of people have done it like the Microsoft did type of a thing, but those aren't human readable. As far as I remember, Ethereum has like an ENS theorem system or something. Bitcoin SV did something like this. So the key thing to focus on with that is the fact that so many independent people give it their attention or try it. That's what proves it such a great idea. People really want it. It's a good idea, people are interested in it, so we should do it and it's great. Another feature is you have this login, which again, it's very different than login through Facebook or something because you own the key. You actually own it forever. Yeah, you have a situation where you have this screen name on Reddit, but then Instagram comes out or then TikTok comes out. Well, now you have to kind of go over there and make sure that you reserve it in the current system. But in the namecoin system you always have your one identity is your digital identity and you don't even need to do anything. As soon as you go over there, they know how to query, they hit the namecoin blockchain and they send the ping out to your device and you decode the Pin or whoever you want to log in.
Kevin Rooke - 01:48:13:
So it migrates across platforms and then you get full control as the key owner of who you give the data to.
Paul Sztorc - 01:48:19:
And you have the same name. So a funny example I give sometimes is this guy does a chest YouTube and in the bottom he has to list all of his screen names and they're mostly the same, but sometimes they're not. His Facebook one is a little different and then it's kind of like the fact that you have to list them all at all. That's the problem. And then to let alone we can talk about like deplatforming, which is not possible now because you can always message someone on the name coin blockchain. So that's expensive. So again, this is where people get confused because they say, like, we're going to put social media on the blockchain. That's a terrible idea because it's a completely different scale. But as long as you have the ability as a last resort to use social media like features in the blockchain context, where everyone has the same view, everyone has validated nodes that process the same blocks. As long as you have that threat, they can't really deplatform you easily because if they kick you off of all these things, you can message everyone and say, listen, my new Twitter account is this, or like whatever, or I have moved to whatever. And then they can even have their software just automatically like refollow you or something because they always know it's you because you have the same name, you have the same public key, the same private key, so that the software will always know that you're talking to the real Jordan Peterson or whatever. So the potential is enormous. Actually. It is enormous. And you can see how this is a revolution because it means that you could even have people who they are Internet activists, and no one knows their real identity, and they have a reach, and they have the ability to log into Twitter, and they have the ability to make TikTok videos, and no one actually knows who they are, even. And they can get out messages. Spam is a big issue, but spam was one of the original use cases for bitcoin, where if you want an introduction to someone, you send $50 or whatever their software asks for, and then they get the message in the special paid message zone. Now that's a revolution all by itself, because sometimes if someone really needs to reach you, you want them to be able to reach you, but you have to deal with spam. So how do we deal with spam right now is we just give it all to Google. Google does everything Google is reading through all of your email. Every single username and password thing has to forget your password link. That just lets your email reset the password. So there's a second way in which Google just can impersonate you or anyone who gets your email. And then how do they counter that? Now, when you log into your email, they are tracking you for your own protection. If I'm traveling and I'm on my desktop computer at home. And then I take my laptop and I go to the airport, and then I fly to a different country. And then I haven't been using the laptop in a while. I open the laptop, I connect to the WiFi and whatever, Singapore. And then I try to log into my email. Google will not allow me to log in because they think and then they send me a message to say someone has your password and someone is me. And then if I type in the password, the secondary password, like the backup email, I've had times when I'll do all the steps and they'll be like, identify this, blah, blah, blah, text. They text my phone. I had a phone at the time made by Google. I would do all the steps and they would say, we're not letting into your email. Which is like, in one way that's impressive. How? I'm sure it must be very difficult for adversaries to break into my email. That's nice in one way, but when you're trying to read your email, it kind of sucks, because now your email is off, right?
Kevin Rooke - 01:52:18:
And you're relying on Google rather than cryptographic keys that you own to maintain your identity.
Paul Sztorc - 01:52:24:
And you could set your own paranoia level. If you had more control, you could say you had more. So this is why it would be a revolution if we could get stuff like that through. I mean, the prediction marketing alone, people have a concern over what's persuadable. So that's why people are focused on like, what does Fox News say, what does CNN say? But if the disputes over who to elect were resolved in this market based way, then we would be free to use television for entertainment only, and it would be healthier for everyone. But that's why I say these are big, long shot type things.
Kevin Rooke - 01:53:05:
Yeah. I want to finish off with one discussion real quick around Lightning, because this is a Lightning podcast, and one of the people actually in the document you had sent me about Drivechains and the favorable opinions of them was Olaoluwa at Lightning Labs, the CTO who said that smart contracts and Lightning are complementary to one another. I want to hear a little bit about how these side chains and Lightning are complementary to each other, and I want to hear more about how these two technologies can work together. To we've talked a lot about adding features to bitcoin. How can they help scaling bitcoin throughput?
Paul Sztorc - 01:53:47:
Well, they're very different, and so that's what helps them work together. I think in particular to onboard someone to the proper Lightning Network, they need to open a channel on layer one, which is a multi signature output on layer one. So you must broadcast messages on layer one in order to join the Lightning Network. And that means the bottleneck for the Lightning Network will always be the onboarding. And every time you need to change it, add, remove, alter a channel, you need to broadcast the layer one. So there's actually a kind of a tight relationship. The channel construction and the layer one block size is a very tight relationship. Although once you have the channels, of course you have unlimited freedom to send amongst the whole network of channels. But I think so this is like a theoretical but I think that so one interesting idea is that the Lightning Network can span different blockchains easily. So if you have Alice and Bob and they are connected on Lightning Network on layer one, and they're also connected on side chain number three or something, you also have Alice and Bob. Since it's the same Alice or in the same Bob, you really only need one. So you have Carol and you have this big the payment can go through, it can go across the chains. Actually, this is the same person. Alice loses $5 here as long as she gets $5-10 there. But I think the big area is onboarding because with the side chains, you have an unlimited layer two block space. And that means you can easily open the channels, as many channels as you want there, which means you can onboard people to the Lightning Network. The chief advantage of the Lightning Network, as I see them, are like the immediate speed of the confirmation and the privacy of being off chain. Side chain is really the reverse of that. A side chain transaction is probably slower because best case scenario, really, you have the merge mining 100% of the time and it's a ten minute block. Times are the same, such as slower, and it has unlimited onboarding capacity. Slightly new network is faster and has limited onboarding capacity. So I think that's probably a good synergy. But I think a second thing that you'd want to point out is that the new features, like any prevail input stuff like that, if you want L2, these other new things that you might want to do, the side chain could just do them quickly, and you could try them there. And you either experiment with them there and use them there, or experiment with them there as a demonstration of how to bring them safely to layer one more quickly. I think really the bigger thing is both Lightning and side chains. We want to get people to actually use the technology for something, and it's just better if something is a one size fits all. It's better if something is useful in many contexts. So, for example, a funny example I give is like Ross Albright is hypothetically, he's running Silk Road from his apartment as super strategic bitcoin guy, but then he's going to go down the street and buy coffee. There are very different bitcoin transactions. Like, one, the privacy is really important, the other is not so important. And so the way I see it is it's much better if you have a tool that can take many shapes. So you say, maybe I use Lightning today. Maybe I'll only use the large block side chain today. Maybe I use Lightning on the large block side chain Wednesday. Because the transactions are actually all very different. Transactions are really different. I think people don't appreciate that. Like if you send money, like, let's say you buy something online, when you buy something on Amazon, they're shipping you a physical product so they can do zero comf. There doesn't have to be Lightning per se, right? Because if you cancel the transaction or it doesn't go through, or you double spend them or you replace by fee them, they're just interpreted as the order being canceled, and they just won't ship you as a thing. But that's different than in the coffee situation. When you buy coffee, you're going to walk out with it. People have different arguments about, okay, you're on the security cameras at Starbucks, so they'll call the police and arrest you. But this is my point. It's all a very different spectrum. Yeah, that's what I'm trying to paint this picture of. The transactions are actually very different. If you buy something on the darknet market, none of the people trust each other. So it's a very different type of a thing. But it may not need to be instant. That's the Zcash side chain, maybe. But my point is it's better for each technology. It's better to have a wide suite of complementary technologies because we want people to just be in the bitcoin umbrella. But yeah, to give a concrete answer to your questions, I think the onboarding is the big Achilles heel of Lightning, but side chains could address it. I don't know if that will be what people like, I think, but we'll see.
Kevin Rooke - 01:59:35:
All right, i. Want to finish this off with a segment I do at the end of every show. It's called The Lightning Round, and I got a few rapid fire questions for you just to finish this off.
Paul Sztorc - 01:59:44:
Okay, cool.
Kevin Rooke - 01:59:45:
First one, is there any book that has changed your view of the world?
Paul Sztorc - 01:59:50:
Yes. The Beginning of Infinity by David Deutsch, which is the greatest nonfiction book ever written, followed closely by The Elephant in the Brain by Robin Hanson, which is the second greatest. I was a fan of Robin Hanson from a very young age, like twelve. I was reading his blog and everything. So his book Elephant in the Brain is just like he put, stapled together a bunch of his thoughts. But it's a fantastic book. Interesting, similar, but the beginning of, everyone should read The Beginning of Infinity by David Deutsch.
Kevin Rooke - 02:00:21:
I will check it out. Next question. If you could only hold one asset for the next decade and it could not be bitcoin, what asset would it be?
Paul Sztorc - 02:00:31:
It's a good question. It can't be bitcoin magically. And I have to own something for how long? Ten years?
Kevin Rooke - 02:00:38:
The next decade? Yeah.
Paul Sztorc - 02:00:41:
I think then you just go with the basics. You just go with the S&P 500 because it's also inflation proof. It will be damaged by inflation, but it's repriced, so fair enough. Classic.
Kevin Rooke - 02:00:56:
What's one thing that you've changed your mind on about bitcoin in the last year?
Paul Sztorc - 02:01:02:
The last year? That's a good question. Let me think. Because there's a lot of bitcoin, and it's also hard to tell when did the last year or recently.
Kevin Rooke - 02:01:16:
Maybe it's a better way to put it. What's something you've just changed your mind on?
Paul Sztorc - 02:01:23:
Well, one thing is, I wrote this post I wrote this post about Lightning in which I researched something. It's not great news, but I was researching the channel factories and I found a way to attack them for free. So then I had a slightly more skeptical view of the channel factories. That does count, but I wish that's not very good news. Maybe something else.
Kevin Rooke - 02:01:51:
I appreciate the honesty, though.
Paul Sztorc - 02:01:53:
And then finally, I already formed so many positive opinions about bitcoin much more than a year ago.
Kevin Rooke - 02:01:59:
Yeah, I like asking that question because it's always nice to hear the opposing views and things that are not necessarily the status quo or things that people the narratives that people like to put out into the world.
Paul Sztorc - 02:02:13:
Good question.
Kevin Rooke - 02:02:14:
Finally, one more question is who's one person in the bitcoin or Lightning ecosystem that you'd like to give a shout out to for doing great work?
Paul Sztorc - 02:02:27:
Let's see. This is good because I don't want to because I want to give it to someone who really deserves it or something, and I don't want to give it to someone who doesn't need it. So there's a lot of people who are doing great, but they don't really need the shout out I would have done. Maybe if you would have done fiatjaf or Thaddeus Dryja. But I think they're already getting a lot. I feel like I don't understand why people don't like Utreexo. People just don't seem to be paying a lot of attention to it. It's perfectly a good idea. Full node on a mobile phone, that's pretty cool. That's worth looking at. Yeah, those are good choices. Who's good? Maybe like a Michael Tidwell. I don't know. We need more humor. We need people not taking themselves so seriously.
Kevin Rooke - 02:03:22:
Yeah, fair enough.
Paul Sztorc - 02:03:24:
Michael Tidwell runs tab.com, but again, I don't know. I want to give the shout out to someone who could really use it.
Kevin Rooke - 02:03:31:
Yeah, well, you've mentioned some good names there.
Paul Sztorc - 02:03:33:
I shouted out 100 people there. I cheated. There you go.
Kevin Rooke - 02:03:36:
No, I appreciate it. Thank you so much for taking the time today. This has been an insightful conversation. Where can people go to learn more about you and the work you're doing at layer two labs?
Paul Sztorc - 02:03:47:
Well, we have layertwolabs.com, and I'm @Truthcoin on Twitter. Truthcoin T-R-U-T-H. Twitter is a pretty good place. I think drivechain.info is really good for information about Drivechain BIP 300, 301. Those are great. And Drivechain.info links to the blog Truthcoin.info, and it links to Bitcoinhivemind.com, the prediction markets site.
Kevin Rooke - 02:04:15:
Perfect.
Paul Sztorc - 02:04:16:
So they all link to each other.
Kevin Rooke - 02:04:18:
All right, well, thank you again for taking the time, and I hope we can do it again soon.
Paul Sztorc - 02:04:23:
Yeah. Hey, thanks for having me.
.png)
.png)