Dhruv Bansal - 00:00:00:
What was bitcoin's lesson? And I think the lesson was you solve the problem with a market, not with a blockchain. You must create an economic incentive that causes individuals without coordination to show up and provide the service. We've had, for example, the ability to build mesh networks for a very long time, but we haven't had is the economic incentives to drive people to take risk, to participate in mesh networking. I don't think it's, for example, Nostr jobs to optimize the delivery of bytes across a telecommunications network and to incentivize that properly. That's the Lightning Network concern. The Lightning Network is, as we said, a kind of a private, monetized Internet. The market that Satoshi built that defines the way bitcoin operates at layer one had to connect to these concepts of energy and solve problems around timekeeping just to make the money. Bitcoin is going to have to change. It's going to have to change over time. It's not done yet. Whether the changes that were made were the right changes or not, I don't know. We can't just go out and replicate Twitter today on top of bitcoin. We first have to go build all those layers, and inevitably, if you think about those more complex layers, you actually just back into, well, really what we just need is the ability to send each other bytes on the Internet, like force acts.
Kevin Rooke - 00:01:06:
Dhruv Bansal is a Physicist, Entrepreneur, and the Co-founder of Unchained Capital. In our conversation, we discussed the idea of scaling bitcoin in layers, the importance of distributed markets on bitcoin, Lightning, and beyond, and we even touched on things like Nostr, Tor, Ordinals and Frameworks for Better Understanding bitcoin. Dhruv has also asked to have his share of today's show splits forwarded to Jose from the Talking in Bits Podcast. So if you enjoy this show and if you learn something new, the best way to show your support for this show and for Talking in Bits 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, and 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. Dhruv, welcome to the show. I'm so excited to chat with you because you were actually one of the one of the few people who got me initially interested in the Lightning Network. This is I haven't talked about this on the show before, but early in 2021, when the Bitcoin 2021 Conference happened, I believe it was Jack Mallers did the El Salvador speech, and you and Ryan Gentry did a talk about the bitcoin stack.
Dhruv Bansal - 00:02:46:
That's right.
Kevin Rooke - 00:02:46:
And, both those events kind of it started something in my brain. It wasn't immediately obvious to me then, but only a few months later, I really started digging into Lightning. I started this Lightning podcast, really started realizing what this second layer could become. So thank you for introducing or reintroducing the idea to me. I think I had heard about Lightning back when it launched and just didn't follow along with it. But I want to get into this speech you had at bitcoin 2021 and start we can do like a little bit of a reflection on it because I think it was a very important speech that listeners should go back to and listen to. I'll put it in the show notes, but I thought we could spend a chunk of time today going through that, reflecting on it, and assessing the state of the bitcoin stack today. But before we get into that, why don't we just give a quick background for listeners who aren't familiar with your work? Tell listeners about how you first discovered bitcoin and what you set out to solve when building unchained.
Dhruv Bansal - 00:03:54:
Sure. Yeah. So for everyone listening, my name is Dhruv Bansal. Thank you so much, Kevin, for having me on the show. It's an appropriate time for me. I'm thinking a lot about Lightning these days, both professionally and sort of in my free time. It's an endlessly fascinating ecosystem for me. I think I know very little about it, but I think a lot of it and I expect a lot of it, and I'm excited to talk about that stuff. History wise, prior to bitcoin, I was a physicist originally. That's kind of where I grew up. That still colors my thinking to a great degree, I think even within bitcoin. I'm sort of well known for some writings about bitcoin in space and all sorts of crazy futuristic stuff, but most of my time isn't nearly so esoteric. I mostly just focused on unchained a business that I started with Joe Kelly back in 2016. The origin behind that is really just had started his life as a physicist, but then got into big data and cloud computing and distributed systems. Started business with Joe, actually, and another co-founder in 2008, actually, around that area. It was a great time to be getting into big data and DevOps and cloud computing. It was also awesome because it gave me a great background to understand distributed systems just in general and the challenges that distributed systems have now. I would probably say with time foremost. It's a blunt way of putting some of those challenges, but I think it's accurate. And I kind of viewed bitcoin when I first heard about it in 2011 when I was in the middle of that journey with that prior business as kind of a new, interesting take on how to do a database in a distributed way. I was very computer science in my reaction to it, and I just thought it was totally cool. But pointless, right? I didn't understand anything about money. I had no money. I wasn't curious about money. And I remember just thinking, what a cool project that will probably go nowhere because it doesn't seem like it's solving any real problems for anyone. And then a few years later, 2013 or so, I think I'd sold my business. I had some money for the first time ever. I heard bitcoin was like 100 times more valuable than in 2011 when I first heard about it. And I thought, like, one, I've missed the boat, right? Clearly that's what everyone thinks when they start to get into bitcoin. And two, it made me conjecture that maybe there is some utility to this thing after all. There's a sort of bizarre way in which bitcoin were successful, then it would be successful. I just sort of never doubted that it would ever get to $1 or $10 and had clearly done so. That really helped. That forced me to re-evaluate my priors and what I thought was happening, and maybe it's a good idea to get them just in case, right? To quote Hal Finney on this. So I did that. Of course. I wish I bought more. Didn't think about it much for a few years. But as Joe and I were kind of contemplating the next business we wanted to start, we thought a lot about data and distributed systems and databases. That was kind of where we grew up in our first business. But our hearts were really in bitcoin. We had sort of already fallen into the rabbit hole. This is around 2015 or so, and I remember a conversation over a weekend where we were both supposed to have done a bunch of research on the food industry and the construction industry and a bunch of places that we felt data expertise like ours could be helpful. But instead we both just read about bitcoin all weekend, Monday morning. Their realization was, maybe we should just do what we want to do and not hold ourselves back. Because for us at that time, 2015 or so, it just felt crazy, a little bit to start a bitcoin company. But that's what we wanted to do. So we did it. And again, it turned out to be a really good timing. Unchained for listeners that don't know, we got our start in collateralized lending. So bitcoin backed loans, we're probably most famous for our collaborative custody vault products. We really focus on security and what banking could look like in a bitcoin world, right? So holding your own keys, but still getting banking services, having to deal with, unfortunately, things like KYC AML, banking laws, regulations, taxes, but getting the benefits of regulated financial products like credit advisory, all sorts of other things. So unchained has been an awesome experience and a great success in a lot of ways. We're still building. We're not where we want to be yet. There's a lot of growth and a lot of Bitcoiners and a lot of self custody folks to Ment yet. But it's been an awesome journey in particular because it's really exposed me to so many amazing people in bitcoin. That's a theme I'm sure a lot of people will probably talk about on your show, but bitcoin is just full of fascinating, interdisciplinary, original thinkers banging their heads against some really hard problems and doing it with passion. And it's been a privilege to feel like I'm part of that community to some degree and get to speak at events like bitcoin 2021 and conjecture a little bit about where the future might go. So really excited to be on the show and getting to do that with you for much longer than the 20 minutes, unfortunately, that Ryan and I had back in 2021 to kind of talk about some of our ideas.
Kevin Rooke - 00:08:36:
Yeah, we're going to have a good time double clicking on some of these concepts. Maybe first we can start off with the introduction of the Bitcoin Stack and this discussion. Both of you kind of got up on stage and you explained that, yes, you could do all these interesting things and useful things with bitcoin, and no, you did not need an altcoin to do it. And I think at the time there may have been people that agreed with you at the time, but my sense is that it was still a bit of a controversial idea. And this was in this all the altcoins at the time were raging in price, that everything had blown up with COVID Everyone kind of bought into this narrative that these things were valuable because price had gone up. And here's this chart and they all occupy one space on the chart, so they must all be useful if they're all on the same chart. But now, it seems now if we fast forward two years here, my view of it has changed completely. I now have a lot more conviction in all the things that can be built with purely bitcoin or no bitcoin at all, as we're seeing with things like Nostr, do you start to see the tides changing a little bit? I'd love to hear your thoughts on how the sentiment around you has evolved in terms of what can and cannot be built on bitcoin since you made that speech two years ago.
Dhruv Bansal - 00:10:06:
Yeah, maybe I'll try to get there with, like, a roundabout answer, see if I can walk my way through this without getting lost. There's a wonderful novel that I really like by Neal Stephenson, who I think is an author. If you're a Bitcoin person and you aren't, and you like science fiction, definitely. Check out Neal Stephenson, who basically almost invented Bitcoin in the 90s with Cryptonomicon and Whatnot. But he's got a great novel called I think it's Anathem, or I'm not sure how to pronounce it. But the central conceit of this novel, without giving too much away, is that there's these weird nerdish monks that live in these, you know, tower like constructs and they just have these layers. And the monks on the outside are like more normal and they're kind of like, approachable by the village people and whatnot. And the monks closer and closer in the middle are just crazier and crazier and have been there for longer and longer and are just way more steeped in the traditions and mythos of whatever strange things were happening in this place. Very compelling and cool novel. I think about bitcoin like that sometimes where it takes so much effort to get to the middle of bitcoin, which is to say, to be thinking about the kinds of issues that Bitcoin OGs and developers and core contributors. And entrepreneurs and wallet builders and folks who've been here for a really long time, who have been thinking about bitcoin issues for a long time, who've fallen for a lot of the bullshit before and then gotten cleverer and walked away from it. It's hard to go find those people. I think a lot of times they're not as loud as people who just got to bitcoin and really want to talk to you about nutrition and politics instead of bitcoin and tech or money. It's easy to get distracted, I think, and lose the vision. And we're not even talking about Altcoins here. I'm talking about already the bitcoin community. It's already sort of within a bunch of layers of nonsense that you have to get through if you're just a person on the outside trying to break in and understand what is real here. So with that said, I would say that the kinds of things that Ryan and I talked about in our bitcoin stack presentation from a couple of years ago and most of probably what I'll be talking about today, I don't know. That is super original to me. I think these are thoughts that if you were to be able to bend the ear of certain OG developers and folks who've been in bitcoin for a long time, they would probably agree and they'd say, yeah, that that stuff makes sense. We had conversations like that on bitcoin talk in 2010. I thought that was all ironed out. And this is a phenomenon I've noticed a lot. Like, I see this in my own business to a degree. Folks like myself, some of my lead engineers and architects and some of the early folks who've been at unchained for four or five, six years, in some cases, they've got all this context. There's just all this stuff that they know, institutional knowledge, notions of where unchained wants to be, where we are. Folks who come in more recently, they don't have that benefit. And sometimes they have ideas that are really well spirited and they want to contribute, but they don't have the context. They'll say, hey, we should build this little tool, let's use this service, let's add this thing. What about that feature? HTML, emails, this thing, this other thing, whatever the details are. I think part of running an effective business is helping them get that institutional knowledge that some people have out to everyone, so everyone can more quickly understand, okay, well, that might be a good idea at first glance, and that's why you're having it, because this is your first glance. But if you spend enough years here, you'll see that there's a deep reasons why that's not going to work out. We actually have this totally other plan. Yeah, it's probably going to take years to get there, but it's ultimately a better route. And that's how we think about that issue. Sometimes. You might imagine it started up, things are moving fast, people are busy. It's hard to get that information, that context out. Sometimes it comes out over a happy hour, right? It's not part of any official document somewhere. It's just part of the wisdom of the business. Bitcoin is like that too. When you get into bitcoin and you say, like, I just got here, I'm here to fix this thing. Have you guys thought about this issue? What about the environment? What about this thing? What about true incompleteness? I want to be able to do this calculation of bitcoin. I get it, I get it. I know why you think that. I thought that too. I'm not even trying to paint myself as MOG, but I have been in bitcoin for a while and I thought those things. It took time for me to understand why that's not really the concern. It took time for me to try to find my own signal. Like if bitcoin has a plan, has no leader, but if it has a plan, it's going to unfold over decades. It's going to take time for bitcoin to do a lot of things that you might want it to do right here and now that you're excited about. And I think if you talk to some of the OGs, they'll agree. They'll say, yeah, eventually stuff like that can happen in a bitcoin world. It's probably not happening on the blockchain, it's probably happening through layers. And there are systems and markets that are deeply embedded in that, just like in the real world of Fiat. Bitcoin is a revolution, but it doesn't fundamentally change the nature of reality, I think, in the way that some people might hope it does. We're going to be replicating a lot of the same kinds of market based layered structures that already operate aid in the human economy, where you can be doing it in a more efficient, more transparent, more directly, economically incentivized way, which I think would just make it more efficient. So in that sense, this is a long rant to try and say I don't think anything that we said was really new, but I do think it's not widely known. And if I have any goal at all is to try to channel to the best of my ability the things that I think are more or less like. If you were to get a core developer who's been working on bitcoin, like for years. And you were to ask them, like, how do you envision the internet works in a 50 or 100 years? They'd probably tell you a story like what I'm going to if you could get their time and focus on it. Maybe they haven't thought about it in a while. They're focused on PSPT parsing or something, I don't know. But these ideas are out there. They're pregnant, they've always been there. A lot of these crazy things got talked about within the first couple of years of bitcoin, like on forums by people that aren't on bitcoin Twitter right now that we've forgotten. And so to a degree, Ryan and I both are just trying to channel some of that knowledge and maybe try to because there is no plan, because there is no leader, there is no foundation to make like a document that says here's bitcoin's product roadmap. Right? It doesn't really have one. But at the same time I think there is a collective understanding amongst folks that really get bitcoin about how things might develop on it. That doesn't mean there's agreement. There's often disagreement, as we find, with things like Nostr and Ordinals and other stuff that is in the spirit of what we're probably going to talk about today. But yeah, it's not new, but it's not widely known. And I think opportunities like this are great because people who assume that because bitcoiners aren't talking about this thing and therefore is undesirable or impossible, it might just be we're not ready for it yet. We have a decade or two of core adoption before that makes sense. I'll toss out one more analogy on this. This is something often bitcoin often gets compared to the internet. And I think that's a broken analogy in a lot of ways, but I'll do it just this one time. There's a great line about like Amazon, when they got started, they pick the exact right thing to sell on the internet. Like they pick books because books are fungible. They don't go bad when you store them in a warehouse. You don't need to see the individual book itself before you make a purchasing decision. You can just buy the instance of that book because it's the book, the abstract concept of the ideas in the book that matters. You can get a preview into the book. Great thing to sell on the internet. When people are first beginning to do e commerce on the internet. In the same era that Amazon is launching though, you have services like Cosmo in New York launching, which is basically Uber Eats and just in time tasks, human task stuff like TaskRabbit. You have furniture.com and pets.com and all sorts of stuff. Launching which is like, totally makes sense today and our real businesses today, but in that era were impossible. Smartphones didn't exist. You didn't have the logistical last mile stuff to make a delivery online thing actually work. You didn't have trust from consumers and you didn't have the changes that happened to the transportation and shipping industry as a result of massive online retailers like Amazon, like the warehouses. You didn't have all that stuff. So you couldn't do furniture and big things as easily. It was more challenging. It wasn't wrong to say that those businesses make sense in the internet age. It was right, but it was wrong to launch in the 1997. And so to a degree, that's often my attitude when I hear about stuff that AltCoiners are excited about. Like, does it make sense that identity is related to if not the blockchain, then at least the concept of programmable money? Yeah, I think so. Are we going to have distributed property titles? Yes. Bitcoin is a distributed property registry. We're going to have versions of that for other asset classes, whether they're NFTs or traditional equities or stocks or all sorts of new things like, yeah, they're going to exist, but they're unlikely to be built today in their final form. And then if we build them today, we're going to be making trade offs and we should expect to hit walls and scaling problems. It doesn't mean it's not worth it to work on those things, but it does kind of mean you got to be a little conservative and principled in how you allocate your time. So if someone like me who's in Bitcoin, you're like, well, okay, even if you see the whole future or whatever it is, what does it make sense? Does it really make sense to work on Bitcoin mesh networking today for the Bitcoin powered internet? Like, I wouldn't work on that, but I'm conservative now and I'm older. If you're 20, maybe that is the thing to work on because by the time it's going to matter, you're going to be there and you're going to have figured it out. Today still feels like l one is not there. Like adoption at the basic level is not there. Key ownership is not rampant. It's going to take a lot of time for that to get to the point where higher layers like Lightning and stuff become even more valuable. That drives demand pull for layer one. That starts to become a ground for layer three applications. And it's not all going to happen at once. It's not even going to happen in order. It's going to be chaotic again because there is no leader and there is no roadmap. But I think just trying to communicate to folks that there's some likely way this all plays out over the next few decades and that it's not a foundation launching a near private coin on proof of stake, a sort of programmable AWS with more steps like, I don't. It's compelling now because it gives us the illusion of something working and we get to feel like we've made progress. But the systems are brittle. They can be shut down. There's too much centralized trust. They're toy models for much more sustainable things we would build in the future. And in that sense, I kind of support them. If people thought of Ethereum as some kind of, like, playground for when we really have the ability to host distributed applications at scale, what might we build? How might they look? What problems would we run into? That's a great attitude towards Ethereum. To think of it as a fundamental replacement for what bitcoin is and a solution to anything in the short-term, I think, is it's supporting your bag, it's putting the carpet for the horse. It's misunderstanding the complexity of the problem.
Kevin Rooke - 00:20:30:
Right. So while some of these is it fair to say that while some of these altcoin aspirations may have been good in nature and well-intentioned, the shortcuts they've taken to try and accomplish those render the projects really brittle and unable to achieve their actual mission.
Dhruv Bansal - 00:20:50:
Yeah. So it's like, if you want to spend part of your career working in this area, just know that, like, okay, that's not for me. I'd rather be just working on bitcoin and thinking about those cool things and maybe at some point on-chain becomes successful enough where we can start to meaningfully participate in those higher layers. We're starting to do that with Lightning now because I think Lightning is finally getting to the point of maturity where we need to engage with it not as an intellectual exercise or as an aspirational what bitcoin might be one day, but literally as part of our business. And that's exciting for me. That's progress for bitcoin.
Kevin Rooke - 00:21:21:
Yeah, I agree. I want to touch kind of related to the idea of bitcoin or is building for a long road ahead and all coiners, sometimes taking shortcuts to build things that aren't quite ready. I want to talk about another thing you mentioned in the bitcoin stack discussion was marketing and how there's, like, a discrepancy in the ways that we communicate between these different communities. Even, like, bitcoin is often viewed as this, like, intangible thing you said, and it's a bit of an academic thing. It's very fringe. It's not the sexy, shiny object that everyone's everyone's always excited about that stuff. That vision tends to be brought forth by altcoins, and it's the tangible and sexy problems. But really what you said in that discussion was that these are actually the same problem. They're just kind of, like, marketed differently. And I want to get a better sense for why you think that is. Is there some fundamental reason why bitcoin needs to be this kind of like, you know, closed off, like the example of the monks? Like, you've kind of closed off. You're not as loud. You're you're a little more quiet and reserved. Is there a reason why bitcoin is that way by nature? And can it or should it ever be loud and exciting and grabbing people's attention in the way that you see the Web3 or. Com or any of these, like, manias have captured consumers attention?
Dhruv Bansal - 00:22:57:
Yeah, I'm certainly no marketer, and so it's hard for me to talk about what captures people's attention. But the thing that I do notice is let's talk about those problems that Ryan and I highlighted in the talk, and there's different ways you could talk about the nature of this problem. That the two that we picked, which I think are most on point for, let's say, bitcoin and Ethereum or something, or at least maybe or a theory of a story appeal is always changing for me. But it's the notion of when the money is controlled by a central party, like, it breaks the money and that breaks everything that depends on money, which is everything. That's a really powerful argument. Again, it's one that I was not completely not able to hear when I was younger and hadn't thought about money enough, hadn't been exposed to bitcoin. Some of the writing, some of the thoughts, I was a technologist, I was a tech person, exactly the kind of person that you would expect to get into Ethereum. If I had heard about ethereum first, I would have been more into Ethereum. I'm certain of that going back. And the reason is because the problem that money is bad or whatever is a very indirect, intangible problem. I don't mean that bitcoin itself is an intangible solution. I mean that the problem that it's trying to solve is pernicious because it's invisible to a lot of people. It's hard to see that problem unless you look for it, unless you try to understand what an alternative kind of money might look and feel like, how it would change incentives, how it would change behaviors at small and huge scales. Frankly, that's a hard problem to see. Conversely, the problem that Ethereum for a big part of its history and I think to a degree still now tries to solve is this notion of, like, a world computer or rebuilding the internet or engaging with technology in a way that seems fairer and more transparent and more human-centered and blah, blah, blah, blah, blah, blah. I claim that that's just a more accessible problem for most people, like the fact that spam exists or Twitter spam exists or the internet is predatory. We know these things. We know in our bones that when we like Amazon Alexa is listening to us, right? It says it's not, but I fucking is. Maybe that's just a paranoia statement, but the idea that we've become products of these massive centralized companies that take in information from us for extending a certain degree of value to us Twitter and Facebook and social media and all the other platforms like we. Get value out of those, but we don't pay for them with money. So the incentives get all screwed up. We pay for them in information, which then has to be monetized by those companies in the form of advertising, which is designed to manipulate and corral us. And it's an awkward bargain that we're inside of, but we perceive that, I think all of us perceive that so much more directly than we perceive the issues that are plaguing money. And so I would say that when you go to the public and you say, hey, I'm going to solve that problem that you're familiar with, oh, by the way, you can get rich off it, that's very compelling. When you say, hey, there's this problem that you don't even know about that a bunch of Austrian nerds care about that really causes you to have to rethink a lot of the way the world works. That's a very hard sell in comparison to the Internet is broken. Let's fix the Internet. And so I'm just making the claim that and Ryan and I used the TV show Silicon Valley on HBO is kind of a popular gauge of this attitude. Silicon Valley is like a super smart show. It's like very on point with a lot of technology, with a lot of business humor and characters. And certainly I think we all remember some of our favorite characters. Like, Russ Hanneman is an incredible three comma of a character. And I love the scenes in which he's in because he is a hilarious character, but also because it's so clear that the authors of that show that the writers really do understand their audience. Like having Gilfoyle, I'm kind of getting into Silicon Valley rant here, but having this is part of the talk. You all can see a longer version of it. There were screenshots. But having Gilfoyle talk about freedom and money and property rights doesn't resonate with the audience nearly as well as having Richard talk about the Internet sucks and don't, you know, I don't want to fix that. And I think that was a really perceptive choice by the writers. It's also, whether intentional or not, a perceptive choice by those who are marketing Altcoins because it is a more accessible problem. And when you make claims like, hey, we're rebuilding the Internet over here. We've got file coin and distributed apps and anybody can write any software and it's just a bunch of software all talking to each other, people can sort of convince themselves that that solves the problem. It's harder to do the reasoning required to realize that really it's the economic incentives that solve the problem and creating really strong, well thought out economic incentives build robust markets which then efficiently solve resource allocation problems. And a huge part of the Internet is resource allocation. It's the allocation of bandwidth packets, domain names, IP addresses, et cetera, et cetera. It's namespace and resource allocation. Those are great things. For markets to solve and not the way that we currently do it, which is this large centralized tech and media companies essentially solve those problems and we don't pay for those solutions directly. We kind of get bought and sold on those networks. Reprogramming that is not a technology problem. Like we have technology to do these things. We've had, for example, the ability to build mesh networks for a very long time, but we haven't had is the economic incentives to drive people to take risks, to participate in mesh networking. In that sense, bitcoin creates the economic incentive. Even just the notion that bitcoin mining as an industry has grown so large that it becomes, I think, for for important reasons, potentially a concern for people, right. Without knowing more much about let's go, that's really, that's awesome, right? This thing showed up and got people to use to get got people so fired up about it that became one of the world's most energy intensive industries within ten or 15 years. That's incredible. If we could incentivize human beings to solve other collective resource allocation problems like telecommunications, we don't need monopolies of a T and T or cable vision. We don't need central points for the NSA to monitor traffic. We obviate a lot of the endemic problems of centrally managed networks with those strong economic incentives. That's just a much more complex idea to swallow than the idea that hey, these nerds have invented a new kind of code that lets us fix the internet or you can buy some. It's very compelling, very compelling. And I'm unsurprised that that narrative took off. And I think the only solution that bitcoiners is can offer is not to change bitcoin and go after that problem. I don't care about that problem because, or rather I deeply care about that problem, but I don't want to subvert the implementation by trying to cater to its solution today. I want to communicate again, this is the notion of making these ideas more well known. I want to communicate to the large audience of crypto investors that whatever you think is cool about that altcoin is going to get built. Like whatever the good part about it, it's going to get built on bitcoin in some way. Not on the bitcoin blockchain, but through economic incentives that are anchored in the ability to earn bitcoin somehow. And that's what you should hope to that's the sustainable solution. It's probably not coming for a while, but if you at least get on the train now and start buying bitcoin and being part of the growth of that, you will participate in all the growth that happens towards that vision or any other vision that you hold here. I think that's the hard part is getting people off of superficially profitable affinity schemes, ultimately.
Kevin Rooke - 00:30:26:
Yeah. And so maybe then to get to the point where everyone is aware and using bitcoin, understands what it's meant for and can reason about it better. Do you think that's something that has to come over time and maybe it's something that is built on a bitcoin layer above the base blockchain that eventually gets people and captures their attention over time?
Dhruv Bansal - 00:30:50:
I wouldn't be super surprised by that, even for a long time from now. I suspect the idea that you should buy Bitcoin because of its monetary qualities is for the average person, it's hard to get there. I think you should buy bitcoin because it's useful. You can use it for these cool things. Like, for example, this is, I don't know, 5-10 years out. If you have bitcoin and you get the software, you can just watch anything you want. Like IP is broken and all movies and TVs. It's like the glory days of your dorm in 1998 or whatever. If you're me, I'm clearly advocating piracy here, basically. But I'm more advocating the notion that piracy will become so inevitable and that the token of pirates will be bitcoin and that will motivate people to create massively effective piracy schemes that will break DRM and put us back into this interesting climate where IP is really not as valuable because distribution has been itself distributed. So if it's impossible to defend distribution pathways for IP, then IP itself withers and dies. And I don't think that's a bad thing. I think it means that people have access to more stuff at a lower cost. And that's actually a good thing for most people. It's maybe a bad thing for creators who are used to getting paid a lot for their creations. But actually I think that's a tiny minority of creators, not everybody's Beyonce, most people are artists who are getting taken advantage of by distribution and not the other way around. And so I think while the very top end of those who make money from IP will probably suffer here, the average person can probably benefit. Because if the model for profit for content creators is no longer like getting locked in with the distribution channel and charging for that IP, then the model must revert to historically what it was before, which is patronage and being directly paid for performance for creations and other things. And I just think that's in many ways, such a healthier model for compelling art, the creation of really good art in a lot of fields. We're starting to get into controversial territory, perhaps here, because I'm basically advocating piracy and the dissolution of intellectual property and all sorts of crazy ideas. But at the same time, I view these as part of what has to happen if you really want to live in that world computer and you don't get to just build it today and pretend that it's working, like deep changes like this will happen first before those follow on changes can really occur.
Kevin Rooke - 00:33:16:
Right? And maybe another example along the same lines of like a new system that introduces bitcoin to people because the system is clearly better for them. Maybe that's something like Nostr where you're seeing people migrate to Nostr who don't even know what Bitcoin is, maybe and they just kind of like Bitcoin kind of sneaks in there and says, hey, by the way, this is the currency that we're using to send Zaps back and forth. And that's kind of how this network works. And if you want this censorship free platform, then.
Dhruv Bansal - 00:33:51:
I like that. My claim is that almost no Altcoin project at all actually achieved that stage. There is almost nothing that has been built that people were using for the reason it was built if that purpose wasn't itself speculation and financial like arbitrage. So whatever messaging platforms or mesh networking things or real estate property registries or whatever got built in every altcoin that's been launched in the last ten years, none of them actually got used for the thing that they were supposed to do and it was all financialized like speculation. I love the idea that someone could use Nostr not because they're trying to make any money, because they just want to use the platform. That's very compelling. There are criticisms I would have for Nostr, which is that ultimately in order for something to get to the point where people just want to use it because it works better, it has to work better. And for applications such as Nostr that have no centralized coordinate like Nostr is not successful. If tomorrow someone launches a Nostr company and starts hosting Nostr messages, that's not success, that's failure. For Nostr to be successful, some of the market has to coordinate that kind of behavior that people have to get paid for hosting, indexing, doing searches on messages like organize the work that a Twitter like company does. Someone's got to get paid to do that work. And if they get paid to do that work, and if the economic incentives are correctly designed, then the system will become so robust that it will be a better Twitter than Twitter can ever hope to be. And then people, to your point, will just use it. And just to use it, they'll need Bitcoin, so they'll get some Bitcoin. And maybe this helps bring them to the perspective that Bitcoin is useful to hold just as money. But the argument that use Bitcoin is just useful, period, for things in the world, we're almost there, we're not quite there yet. I would say maybe in some areas like Bitcoin as a way to move money is definitely useful. I know that cross border payments and things like that, bitcoin is definitely the superior technology in a lot of ways already, so it does solve that problem. That's a very close to the money kind of problem. Like what I love about the Nostr use cases, it's very far from money. It's about telecom and it's about data and social media and messaging and human connections. It's ostensibly nothing at all to do with money. Yet it's being birthed from the Bitcoin community, more or less, and it's we who are driving it. And ultimately, I think for it to be successful, it's going to have to integrate even better with Bitcoin, with things like Lightning and so on, to incentivize all these additional behaviors that close the gap between Nostr and a real platform like a Twitter. But that's just an awesome thing to happen, right, but that's going to take years because Nostr isn't a company. It's a bunch of people doing a thing that no one's in charge of. So first, to figure out all the patterns that create these efficient economic incentives will require all sorts of discovery and experimentation and mistakes, which is great. Like, let's do it.
Kevin Rooke - 00:36:35:
Yeah. One of the next parts of your talk was building in layers, and you kind of talked about you had a slide that highlighted the different layers of Bitcoin and the different layers of the Internet and things like that. And the way you set it out was like blockchains layer one, lightnings, layer two, distributive markets layer three. And I think there was an Orbit? and a question mark for layer four. And you talk about distributive markets on Nostr as well, and being able to have a set of distributive participants that can guide consensus and make decisions, not just one company. Can you elaborate on and I think one other point you made in that discussion was that Bitcoin at the base layer has a set of distributive markets to govern the blockchain. There's, like, distributed the Mempool and the fees and the miners, they're all distributed reasonably well, and you had kind of urged people to like, let's try and export this to other layers.
Dhruv Bansal - 00:37:38:
Yeah, I would say that's the main kind of idea, right, is that what makes Bitcoin compelling at layer one is the idea that it isn't centralized in any way, that every aspect of it is distributed. In particular, it's distributed through market forces. The reason Miner is mine is because they're incentivized to earn Bitcoin. The reason Hodlers hold is because Bitcoin is worth more in buying power in real terms every year, more or less. And this is what's compelling about Bitcoin. We're not being forced to use it, we're opting in to use it. And it's growing in value and it's creating a really strong, robust industry around it because that economic incentive is so powerful, because it's very good money. What I think is interesting is that the market that Satoshi created around blocks, or I think in the talk right now, describe it as kind of an auction or bidding process, that there's proof of work attempts by minors or attempts as bids or auction tickets to try to win the block. It's very much a market driven order creation and settlement process. I think what's interesting is that in order to build the market, whose goal ostensibly was to be able to support Bitcoin, the currency satoshi had to solve, had to reach for interesting adjacent concept areas and solve other kinds of problems. So in particular, to build this digital money, satoshi had to use real world energy that there was no solution that they could come up with that could solve the need to pick a random person or entity to produce the block, which is required for security. You shouldn't be able to predict who's going to create a block and for it also to be unreplicable easily, but easily verifiable. All those things were met by proof of work. And it turns out that bitcoin having deep connections to energy, I think is super important for bitcoin's long term success. Even in my crazy space speculations I've written about, the fact that bitcoin is so deeply connected to energy can actually be a societal lever that pushes us upwards up through the kadasha scales. There's some crazy heady ideas in there, but I think it's interesting that I don't know that satoshi set out to connect to energy markets in a deep way, but it's compelling to me that in trying to build money, they have to solve that problem. Similarly, they have to solve a timekeeping problem that bitcoin is often talked about like it's time. Geeky's. Awesome article. Bitcoin is time. The difficulty rebalancing. These are distributed timekeeping algorithms. Why do they work? They work because bitcoin is valuable. The testnet does not maintain, like, ten minute blocks. The reason it doesn't maintain ten minute blocks is because the economic incentives on the bitcoin testnet aren't real. And so blocks will occasionally hugely oscillate in rate of production from coming many, many per second. When someone puts on a whole bunch of testnet hash rates to test something and then difficulty readjustment triggers, and then they take it off a few hours later, and now it takes hours between blocks, suddenly. So is testnet a functional blockchain? No, because the economic incentives break the exact same rules, exact same crystallography, but it breaks down because the social consensus around the value of the tokens is nil, and so the incentives aren't real and it doesn't work. And I think it's interesting that the market that Satoshi built that defines the way bitcoin operates at layer one had to connect to these concepts of energy and solve problems around timekeeping just to make the money. That's super interesting to me. That pattern reoccurs at higher layers, Lightning is ostensibly trying to solve a financial problem of how do we get rapid payments to occur on the bitcoin network because they don't work very rapidly. It's not ergonomic or convenient to do that at layer one. So can we build a second layer that has that property? I find it super interesting that in order to solve that problem, what did Lightning have to do? It has to build a peer to peer telecommunications network between all the actors in the Lightning Network. They have to be connected. Of course, that's happening on the Internet. Like they're doing that communication through the Internet today. But Lightning had to figure out its own internal routing technology. It uses onion routing, but it's a mini Internet. Effectively. That's what Lightning Network had to build. So you wanted to solve a payments problem, but you wound up building a telecommunications network. That's totally fascinating. And to me, these are not conditional things. Like there was a different way to build Bitcoin that didn't require energy and thinking about timekeeping. There was a different way to build Lightning Network that didn't have us solving problems around networking and routing. I think they had to be there. These were the proximate problems. I think this is start touching on space ideas. But if aliens were in Bitcoin or some similar tool to figure out how to do digital resource allocation and transfer, like in an adversarial context, like they have a society like ours, they would find that energy and timekeeping are parts of the solution. And I think if they then went on to be like this fucking slow, like we need to figure out how to make this faster, they would find that they're compelled to build some kind of internal network. And that's exactly what we are doing. Where Lightning is solving problems of telecommunications and networking in an attempt to solve a payment liquidity problem. I think that's cool. And then what will happen at higher layers? Like we're trying to solve a given problem, but we will encounter these other problems that are important for us to solve. And we didn't maybe even realize that those problems were part of it until we attempted to build that layer. But once you see that and you realize Lightning has to solve networking problems, you sort of realize that, okay, it's not just a payment system. It really is the beginnings of a metered, economically incentivized telecommunications network. It's the kind of thing that if we build the right incentives, if we as developers like launch companies and projects to grow different parts of this, we can collectively make money by rebuilding the Internet as a society. And that will be successful and robust. Because we don't have to regulate people to fix the internet. We don't have to do GDPR and things like this to force good behavior. We don't have to have a whole rant about computer security and how Bitcoin Internet fixes that. But ultimately, we ourselves, just by our selfishness and desire to make money, get motivated to build a better Internet. And that's very cool. I don't think at the outset the marketed goal of a Lightning Network, but I guarantee that people who are actually building the Lightning Network were thinking about that. They could see that there's a reason that things like Sphinx Chat are able to be built so quickly after the Lightning network starts to get some traction. Because they're just plugging into the expectations that as designers and developers, people who built a Lightning Network knew would likely occur, it would become itself a basis for the settlement of other things, even though it is itself a layer that is settling back to Bitcoin. That's something that sort of, again, was known but not widely understood. And now things like Sphinx Chat show up, and you're kind of doing semantic data transfer through Lightning payments. And I don't think Master is quite there, but a lot of people see those connections as inevitable. Like, not surprising to me because of course you would choose to use if your goal is to create economic incentives for better social networking applications, of course you would use an inherently monetized form of telecommunications, one that doesn't suffer from all the problems of trying to deploy a social app to the traditional Internet.
Kevin Rooke - 00:45:02:
I hope you're enjoying the show so far. Just a quick message from our sponsor, Voltage. Voltage empowers engineers to integrate Bitcoin and Lightning Network payments into their business stack with an enterprise grade experience. The team at Voltage is building the complete tool set so that you can do more than simply spin up nodes, but also understand and interpret your node's data. Their new product, Surge, gives engineers the capability to quickly solve problems and optimize operations. With node insights and visibility through time series data, you get dynamic and complex insights never available before. You can get complete control with insanely fast onboarding advanced client side encryption and zero management infrastructure, making backups networking and upgrades simple. Get a free seven day trial today @ voltage.cloud. Now, given that Lightning is a layer two, it's on top of the blockchain, how important is the distributed part of the distributed markets? Is it okay that there is some centralization on the Lightning Network? I'd actually love to hear your views on the state of centralization in the Lightning Network. And is there a point at which too much centralization can jeopardize either the success of the Lightning Network or the success of Bitcoin?
Dhruv Bansal - 00:46:21:
Yeah, 100%. Let's start at the end of that last question. Yes, I agree. If Bitcoin becomes one company doing all the mining or one nation state doing it, yeah, we've already failed. It's captured. If Lightning becomes one giant hub that everyone else in the world connects to. We just built Visa. That's all we did. It's important that we distribute both physical as well as incentive structure and architecture of that network. But I think what's cool about economic incentives is they sort of create that distribution. A lot of times, these centralized monopolies exist because ultimately of inefficiencies in markets, right? Like the fact that regulations create blockades for new entrants or that the economies of scale allow large companies to inhibit innovation or curtail it by purchasing it and then squashing it in some ways, right. Cost of entry in these markets become so high. That's another key important aspect of Bitcoin and why it succeeded. It wasn't just that it was a market. It was a very open and easy to enter market, one that you literally can't keep people out of. All you need is an Internet connection and a computer. And you can make money from Bitcoin these days, you need an ASIC, whatever. But like with Lightning, you don't even need an ASIC in theory. You just need a computer and an Internet connection. But you do need Bitcoin liquidity, right? So there's another resource now that you have to bring to bear, but Bitcoin is something that anybody can get access to. So again, it's a very open market. It's very hard to prevent somebody from competing with you on the Lightning Network. And I think, frankly, one of the cool things about Bitcoin is even if you get a certain degree of centralization around, let's say, white label or white market usages, you're going to have black market usage that's going to drive other parts of the network. That's true in bitcoin. Like, you have exchanges that are mostly white label that are going to issue tax forms that are plugged in with your real world identity. And you had recently you had things like local Bitcoins and you continue to have things like this and other forms of peer to peer exchange. I think similarly, at the Lightning Network level, even if there is, let's say, one hub or many major hubs that collectively like are what most things are connected to, right? So when you go down the street and you buy something at the pharmacy and you do it with a Lightning, like, they're probably using a very similar hub to the one that you use at home or whatever else it is. But just because of the fact that that all becomes one large connected component in a Lightning Network, and folks would have worries around, let's say, whether it's criminal activity, whether they're just privacy conscious or whatever else it is, there should exist, like settlement paths in the Lightning Network that are higher cost but offer different aspects. You don't have to authenticate. They'll move your money without knowing who you are, et cetera. Maybe you're paying more for that because that is a more valuable service, maybe in ways, but because you can't prevent someone from building that thing, it'll get built, I think. Also importantly, remember, you and I, Kevin, can just build a Lightning channel between us independent of whatever else is happening in the world, and that is completely distributed, disconnected from everything else in the network private channel, just between us. No one knows how many of those channels exist. We can kind of measure it from L1 data, but there could be a lot of those out there that people are using, and that is a form of distribution. Pairwise distribution is still distribution and settlement, I would say.
Kevin Rooke - 00:49:38:
Fair enough. And then as we proceed higher up in layers, does that relationship change between the amount of distribution you need in a market to call it a success. Does layer three and layer four have to be as distributed as layer one and two?
Dhruv Bansal - 00:49:54:
I don't know. I mean, these are like super interesting, compelling questions today in my head. Layer three and four have something to do with serving data, like on top of the Lightning Network, as well as application code and running application code. They're essentially an attempt at the world computer, right? Giving developers an ability to literally take code and just deploy it into the world somehow. And it just runs, doesn't run magically. You're still paying for it in that sense. It's the cloud computing model, but you're not paying a centralized provider like Amazon with one of 40 data centers globally where this workload will run. You're paying some market that has shared protocols and and strong economic incentives behind it. The shared protocol part is sort of easy because, like, that's been the history of infrastructure online for the last 20 years. It's getting to ever more elegant shared protocols. I won't say kubernetes is elegant, but increasingly things like Containerization are bringing us to a point where it's easy to transfer workloads between different providers, but those providers are still usually centralized players. There have been attempts, again in altcoin land, things like file coin storage, a few other projects of like, trying to do file storage and computing, and other things like that, just like through smart contracts on layer one in the Ethereum blockchain. And that alone is why stuff like that will not scale in that given implementation, but the need behind it. The notion that, like, hey, why can't I just plug in a bunch of my machines and start serving files to my neighborhood and getting paid for it. I think that's completely realistic. People, I think, tend to assume that mesh networks are really bad in terms of performance, and to a degree they are, but only if you expect them to run the same kind of workloads that centrally-managed networks run. For example, I watch a TV show and how do I get that TV show? That data files are delivered to me from some CDN content delivery network, right? That delivery network has a bunch of nodes around the world that they push data to the edge of their network. How do you get your data into that network? You're paying them. So Netflix or whomever the content provider is, is paying these delivery networks to take this data and replicate it in a bunch of places to the edge of the network. They're doing that all before they know anyone's going to watch the show. All of that has to be set up in advance and ready to go so that when you connect immediately, you get the bytes over it and it's instant. And then when your neighbor connects, even if the bytes were just sent to you or being sent to you right now, and your neighbor in the unit above you, like. Watches the exact same show at the exact same time because The Last of US just came out on Sunday night or whatever it is. The bytes are still coming from the scene. Yet it's in many ways inefficient, right. The right structure for mesh networking, for data like this is something closer to you wanted to see those bytes. So somehow you put out requests, bidding for I'll pay up to X for these bytes, here's my time and sat preferences, et cetera, et cetera. And someone is delivering you those bytes at whatever thing. And if your neighbor decides to start watching The Last of US, like a minute later, maybe it's a little cheaper for them because at this point you will just sell them those bytes. They're already at your house. Now they just have to go upstairs. How do you build hyper efficient edge systems like that? You use market incentives. You make it so that humans are motivated to engage in those kinds of microtransactions at the edge through meshing with their peers. Systems like Uber are ultimately that, but for human transport, right? And again, they're always coordinated by bringing all the data from the edge back to the center, doing order matching there and then pushing everything back out to the edge. A mesh network can be more efficient if all those transactions are actually executed at the edge instead of having to come back to the middle all the time. The only way we build things like that is through technology that distributes the economic incentives so that the request can be fulfilled right at the edge because someone was motivated to do that. And I think ultimately this will lead to an interesting behavior where it's like if you're in a remote area, you may not have those bytes at the same cost at the same availability. And that's just the market. And if you would like to fix that, you can start buying hardware and infrastructure and putting it in your mountain cabin and trying to make sats from being a local cash node for whatever data market transactions, the local zip code in your mountain neighborhood, whatever wants to watch or consume. I think that's a really powerful, cool way to get economically a sense of arbitrage, right. That infrastructure will be built where it's profitable to build it and we will converge towards more or less like a reasonable curve in terms of people's willingness to spend and the infrastructure that's actually deployed where they're at.
Kevin Rooke - 00:54:31:
Right. And then it can just inherit bitcoin and Lightning payments as needed to fulfill those economic incentives that you outline.
Dhruv Bansal - 00:54:39:
Yeah, exactly, right. And the point is, you don't have to think about it very much as the person deploying this stuff in much the same way that at least with mining at this point, I don't want to trivialize mining, you're doing a lot of logistical managing, but you're not thinking about the actual mining process. The software just doing the thing for you. Right? And I think with a Lightning network similarly, like, we're at the point where to be a Lightning Node operator today, you're doing a lot of work, you're doing a lot of channel maintenance, and you're figuring out what to do. But we're not too far away from software, which just figures that out for you and delivers a pretty reasonable managed node experience and taking the decision-making out of that. So it's much easier for anybody who wants to make money from just being a Lightning Node to do that. And that's required, right? Because we have to lower the bar to entry into the marketplace in order to create distribution. And the fact that you can make money is what drives growth in the first place. And so we've got to achieve both things. I think today the network overall growth is less than it could be because it's still very challenging to run a Lightning Node. As that becomes easier, the network will grow more quickly because it'll be a reasonable way for you to earn sats.
Kevin Rooke - 00:55:47:
Yeah, I see. So your view on Lightning then, is that an automated system for routing could lower maybe the routing fees that nodes earn. Also making it easier though, for anyone to spin up a routing node, because now they don't have to do all this channel maintenance. And ideally that comes in the form of some shared protocol is that what you mean?
Dhruv Bansal - 00:56:10:
Which hasn’t been developed or figured out yet. And that's part of what's ahead of us as a community to get on top of. But yeah, routing in particular is super interesting. I think routing it's underappreciated how valuable a Lightning route is. A known route between two nodes in the Lightning Network with sufficient liquidity to actually route payments, and knowing the full set of such routes between all nodes, that's a very valuable data set today. We're kind of like in the early days of the Internet, where you could just scrape the whole Internet and have a global view of what the network looks like and be able to do order matching in the real version of the Lightning Network when it's orders of magnitude larger than today. I don't think any entity will ever have the full network picture for many of the reasons we're talking about previously. There will be disconnected components, there will be private channels, but just for reasons of scale, it'll be hard for one entity to have a full picture of the whole network. And that point routes become actually something that's valuable. You don't share your routes with other people, you use trampoline payments and other things like that. So you can service someone's economic need to route payments or data without having to tell them the route, because that is your operational advantage. That your software or your business, your Lightning Node stack, whatever you sell or operate, is really good at discovering routes and leveraging routes to create the cheapest payment options for users of the network. I think today we're still in this fun, friendly world where everyone just shares routes with each other and it's fine, it's no big deal. There's not that much money being made right now. As the network grows in absolute terms larger, that data will become more valuable and we won't share it as much. To a degree, this is kind of like in the early days of Bitcoin. Bitcoin transactions could be sent with zero fees and they would still confirm there wasn't enough usage for people to be very adversarial and greedy as usage increases. No one confirms zero fee transactions today. That just won't happen. You have to participate economically in order to do this. And I think similarly we'll see that in the Lightning Network that today. We're in this era where I'll just share my routing table with you, more or less like to use more networking terms. I don't think that's how it works in the future. I think we start to guard that data because knowing all the routes is how you make money.
Kevin Rooke - 00:58:22:
So now if we combine all these effects of lowering the cost of running a routing node, automating channel management, having more nodes on the network, not necessarily all sharing their information, having more liquidity, what does that lead to if you kind of squint out into the future? How does the fee ecosystem evolve on Lightning on average? Are we talking about more large hubs? We have, I think today about 46% of public capacity is tied to exchange nodes on the Lightning Network. Is that number go up? Do exchanges start to actually earn meaningful revenue from routing payments?
Dhruv Bansal - 00:59:05:
I think yes. To the second question, in terms of the overall degree of distribution versus centralization, I don't know how that plays. I don't know what it's healthy. I don't know that we know how to measure that. It doesn't have to be that every single human has to run a Lightning node in order for the network to be healthy. And I think there's a fantasy among some bitcoiners that we're all going to run our own nodes, we're all going to run everything. I just don't think that's necessary nor required. Kind of, yeah, like someone has to provide the service at a sufficiently good level for everybody in the network to benefit, and that's what we need. Importantly, it has to be at the same time, as we discussed earlier, it can't just be a really excellent central node operator who provides Lightning payments for the whole world because we've just made Visa now, so there has to be some intermediate place. I don't know what is healthy. I don't know that 40% of all Lightning payments going through one Hub or one set of hubs operated by similar kinds of businesses is necessarily bad today or even in the future. I think it just depends on the overall scale of the network and what's easy versus what's hard to a degree. I think if that works and supports everything else that has been built on top of lightning, well then it probably works. If it fails to support the kinds of things that people want to build on Lightning, like these crazy data marketplace ideas we were just talking about, well then it will fail and then people will build different structures because they are trying to achieve those outcomes. So I think this is part of the inherent competition here. Personally, of course, I'd like to see more distribution, I would like to see lots of small businesses and other places. I think there's a trend like you might imagine, like a small business puts up some solar panels and then it's selling some energy back to the grid kind of thing. Like that's increasingly common today, even though grids inevitably pay you a pittance for the energy you sell back to them and whatever. I don't think that's a crazy idea that if you have any kind of modest footprint, maybe you have the ability to make energy, you have the ability to do a little bit of bitcoin mining to produce heat, nothing else to heat the space. Maybe you're also whatever bitcoin you have that you're using Lightning when you are recycling it in some kind of liquidity thing. Maybe you're hosting some data files and all this doesn't have to be like the thing you think a lot about. You might just have a room in your house that does this shit. You don't go in there very often, like a utility plaza that has your breaker panel or something like that. It's deeply important that it works correctly for you to feel comfortable in your home and for everything to just work normally. But most homeowners don't know much about how that stuff works, it just kind of works and it involves money, energy, telecommunication, all those things are still happening, right, and they just work a particular way. I'm just arguing that they could work in a totally different way. It doesn't require most human beings to suddenly become experts on Lightning, liquidity or telecommunications mesh networking. It just means that products have been built to allow people to plug in and make or not make or spend less or spend more in some scheme.
Kevin Rooke - 01:01:52:
Right. And then the example of the energy. Like, if I have a solar panel and I'm selling that, instead of selling it back to the grid, I may be selling it for bitcoin to a neighbor, and if I don't have to transmit it as far, all of a sudden my energy can get through. And you kind of reshape the it's.
Dhruv Bansal - 01:02:10:
The same mesh number making example. Except the challenge there, right, is because energy is so physical, like there are lots of regulations in place to prevent me from just running a pipe of a conduit with some wire from my house to my neighbor's house or whatever. The systems are not built for that to be the peering model of how energy moves around. What's cool about applying. And that's why, as much as Bitcoin is changing energy markets meaningfully, that's not the change that's happening. The change is more on the production side. At the moment with Bitcoin is more like an economic battery. But it's easier to make those sorts of peer-to-peer wiring choices on the Internet, because on the internet, like, if I want to connect to my neighbor, it's way easier to make that pipe and connect that pipe than it is to physically move electrons, like in high power conduit. So the notion that distributed technologies like Bitcoin, like the Lightning Network, the economic incentives that they create, can create stronger peering relationships within communities and just amongst people. I think it starts with the digital sphere, but maybe interestingly, like the physical sphere can then after coming decades, like, mirror some of that. If we're kind of used to the idea that, dude, I sold my neighborhood, I don't even know liquidity and bytes and bandwidth all the time. Why can't I just route some energy over there? I just installed a cool hydro generator or whatever it is that will become an easier and more normal conversation than I think it is today.
Kevin Rooke - 01:03:31:
I see. So, yeah, once it's become consensus in one domain in the Internet world, all of a sudden the pitch to rethink how physical infrastructure is set up becomes so much easier. And it wouldn't be immediately obvious today, right? You couldn't do it today. You can't shortcut that step, right? Is that what you're saying?
Dhruv Bansal - 01:03:50:
And everything kind of goes together too, right? It's not just that we do something digitally and so now we know how to do it physically. It's that energy technology also has to change. Like, just the notion that Bitcoin drives sustainable energy technology in a deep way also helps here. Right? Because if solar panels become cheaper and technology for green energy becomes cheaper, then it becomes easier to do this kind of peering model. To a degree, I think this stuff is all time-based. Things like 3D printing and are a big part of this as well, right? Like the notion that we could change the centralization model of manufacturing so that resources are shipped from one place to a manufacturing location made and then again shipped back to us. Can resources just from our area, like atoms, I'm talking about, can we just use those atoms to make things right here and skip the whole sending it three times around the globe like aspect? That's a very Bitcoin idea in some ways. Like, it's got elements of self sufficiency, it's got elements of marketplaces and local autonomy and all those ideas, but it's unrealistic without the core technologies. And so Bitcoin as a pattern for how peer to peer marketplaces and distributed economic incentives can work, I think is one leg of this, but it connects to other legs of the overall story of human distribution over the coming decades, right? It's connected 3D printing, it's connected to energy technology, it's connected to mesh networking and other kinds of notions to agree. I think this is like almost like a philosophical just pendulum. Like there's like this pendulum that swings in history between distribution and centralization. And I think it swung real hard over the 20th century, certainly towards centralization, like superpowers, world wars, global corporations. I'm not trying to be conspiratorial about it. I think to a degree those things were necessary. I don't know that we have semiconductors without the combination of those kinds of things. And we need semiconductors in order to be able to build a bitcoin and build A6 and do all this kind of stuff, but maybe it's just a transition we're going through as a species. We swung really hard towards centralization. We got all these technologies in place and now we're having, I think, in many places, severe reactions toward central control. And you're seeing that in bitcoin, in politics, in technology. In a lot of ways, bitcoin is as much part of the world, I think, as it is an agent of change in the world. And sometimes, as bitcoiners, we want to pretend that we're like the be all, end all of what change means and everything, you know, comes out of bitcoin and that nothing else matters in the world. But I just don't think that's true. I think energy technology and mesh networking and 3D printing and even space exploration, all these things connect. Like we're in an age of increasing distribution and bitcoin is a core part of that story. Totally agree. It's arguably maybe even the fabric that connects it, all right, because it's where the economic incentives that drive those distributed structures are programmed. But I don't know, it's a bigger story.
Kevin Rooke - 01:06:43:
That's fascinating. I like that idea of a pendulum swinging back and forth between centralization and decentralization because I think there is a school of thought on Twitter and a lot of bitcoiners will say they're pro decentralization, they're in favor of decentralization. And there's kind of this idea that once we get decentralization, we're done and we win and game over. But you're suggesting no, this is like all part of we're going to continually move back and forth along this pendulum, right?
Dhruv Bansal - 01:07:12:
I think in the longest time spans, I think so maybe there's part of it is just like because, like bitcoin itself, no one's really in charge of the human project, right? We're all just monkeys running around over here. So we don't have if there's a theoretical place for this pendulum to balance, very hard to get it to balance, there the more likely Modus of history, it feels like to me is constant overcorrection and then having to go back, building empires and then turning into a series of squabbling city states for 500 years. And then empire shows up again. I think this is just part of, I don't know, entropy, structure, creation, formation. Like, nothing lifts wherever things grow and dissolve. I think this is just part of the world and we are exiting a period, I think, of extreme centralization and the pendulum is swinging back towards decentralization. I think it'll swing right back here at some point because, I don't know, 500 years from now, people will say, good old days of empire or whatever, something will happen. I don't know. It just feels like I don't view human history as teleological, as perhaps some people do. It's not like always towards progress. It changes constant. But I think there's just a lot of back and forth in the presence of continuously changing technology, environments and so on. So I just think this is we're part of a big trend here driving it as well, but like part of it as well.
Kevin Rooke - 01:08:40:
Yeah. Do you see then? Do you see, like, the last 500 years, it seems like we've had a lot of progress and maybe now we're saying to ourselves we've gone too far in the direction of centralization. But if we look at this like last era of human history, we did a lot of stuff.
Dhruv Bansal - 01:08:59:
Yeah. No, it was great.
Kevin Rooke - 01:09:00:
Now, when we swing back, do you see the progress changing? Do you think humanity will have a similar level of progress in a different way? Will we see more progress? Will we see reversion? Will we see less progress?
Dhruv Bansal - 01:09:15:
Progress is to me, we're starting to get really philosophical here, which is totally fine. I think progress to me is really charged because, like, what does it mean? Like, does progress for some justify a lack of progress or moving backwards for others? Is progress in some domains of our lives? Like the notion that a poor person, a relatively poor person today in modern society can have a cell phone or smartphone that is connected to the world's. Information in that sense is fantastically richer than any historical king or ruler or something like that. But yet even a wealthy person today might feel like they just have no control over their time and no control over their life. Like, have we made progress? I think the answer has to be yes. There's extreme progress that we've made in terms of things like, I would say broadly human rights and healthcare, knowledge. Maybe there are ways that we haven't made as much progress as we'd like. And I think when you ask about as this pendulum swings back towards decentralization or distribution, what will progress look like? Again, I don't know. My hope is that we continue to feel like we're making progress on the Human Project. The life is getting better on average for all people. Most people, most of the time. But at the same time, change is unpredictable. I don't want to have, like, rose colored glasses on and pretend that the dissolution of the dollar as a global currency and its replacement by bitcoin is not going to have some losers in it, it's not going to have some pain that it causes, and it's not going to have some violence that it engenders. I think change always comes with ugly pieces, and I don't think it's unidirectional. I think bitcoin, for example, is fantastically more concentrated in its ownership than dollars are. Like, dollars are very unequally distributed, but bitcoin is more unequally distributed today. As bitcoin grows in value, will it retain that greater degree of inequality? Will it become more equitably distributed? Will we have to go through a period where there are, like, bitcoin robber barons and we're in some new Gilded Age? I can't predict like that. I know everything is just going to be better. Bitcoin fixes everything. I don't believe that. Or at least a bitcoin fixes everything. It does it on a sufficiently long time scale, where there's a lot of pain and difficulty on the way towards that solution.
Kevin Rooke - 01:11:35:
Yeah, I think that's a healthy perspective, and I appreciate that, because, again, going back to Twitter, I think a lot of the themes that bitcoiners like to talk about is how we're all going to live in this bitcoin citadel. We're going to have castles on the hill and we're going to be the kings, and, you know, they just kind of forget about everyone else. But really, there's a lot of variables at play here, and there will be winners and losers, and maybe the ones who think they're winners at the earliest stage actually end up being losers and vice versa. And I think it's a very healthy thing to think about. But I agree, there's so many variables, it's very hard.
Dhruv Bansal - 01:12:12:
I understand that attitude, though, from bitcoiners sometimes it's like if you feel like you've been maligned or not taken seriously and you start to feel like you're having some success, that Bitcoiners up meaningfully as compared to, like, many years ago. It can be really, what's the right word? It can be tempting to sort of fall into this like, fuck you, I was right, I'm going to get mine. You all can eat it. Like I won. I get that, but it's not how I choose to be. I think there's a lot of bitcoiners that aren't that way. There's a lot of them who are like, well, if I've had fortune and if I saw this earlier and I've booked some gains and my life is better, I got to do something with this. I got to tell more people about bitcoin. I got to get a podcast, I got to talk to my neighbor, I got to start a company, I got to start investing. It doesn't even have to be in bitcoiner. I got to make the world better because of good fortune that I've received. I think that's just as common attitude amongst bitcoiners, and that's the attitude I prefer. And it makes me really happy to see a group of people who can take well thinking good fortune and try to multiply it as compared to try to just hang on to it.
Kevin Rooke - 01:13:21:
Yeah, I agree. Well said. I want to jump back into Lightning specific discussion. I really enjoyed that segment. But I have a question for you about Tor, because this was a topic you brought up in the Bitcoin Stack discussion.
Dhruv Bansal - 01:13:36:
That's right.
Kevin Rooke - 01:13:37:
And, you know, you you also have talked about how Lightning is a layer for data transmission and not just for payments. It can be for payments, too. But and I see this, like, issue unfolding with Tor, where I think over the last six or eight months, it's constantly had DDoS issues. It's been very unreliable. Lightning node operators prefer to not even interact with Tor nodes. And it seems like there's a space for Lightning payments to come in and fix this.
Dhruv Bansal - 01:14:13:
It's the incentive problem. Right? It's the incentive problem that we talked about. It's like no one gets paid to run Tor node, which is, I think, a point that we made in the talk. If you got paid to run a Tor node, there would be a lot more Tor nodes. And I think that's the argument that Lightning has in favor of it. I think what Ryan and I tried to outline was a little bit like Tor is an older technology than Bitcoin, but it has fewer users, has slightly more, maybe fewer at this point users than Lightning, which is in lightening, is a minority technology even in Bitcoin. So the notion that, like, Tor is a successful project yeah, Tor is a successful project. It's got millions of users and it's very old and very developed. It's also unsuccessful. Right. The notion of exit node compromise or various ways in which the network can be monitored by central players who can, simply because of its non-monetary nature, require sufficient number of Tor exit nodes to be able to denounce traffic. These kinds of concerns shouldn't apply in a network that can grow as fast as the Lightning Network can grow, because no centralized party can keep up with that kind of growth. It's kind of like saying, well, what if someone were to acquire 51% of the hash rate? Well, who's going to acquire that? What nation state at this point is going to put that much money into doing and then use that power to not just mine Bitcoin. Right. Having made that investment. So a little bit, I think about it that way.
Kevin Rooke - 01:15:31:
Yeah. I wonder if there's a place for something like Nostr to be an intermediary here and say people start to run paid Nostr relays. That's becoming a thing now, maybe that is like a stepping stone in the direction of it is we're going to have a browser.
Dhruv Bansal - 01:15:49:
I think it has to be. And I like seeing that because one of my worries, a worry that I would have about the Nostr ecosystem developing is that it doesn't sufficiently plug into economic incentives and then dies or gets compromised to someone building, as I said earlier, Nostr.io, right? Like, sign up for your Nostr account here. We'll keep the keys for you. Awesome messaging app. We added emojis. And you've just recapitulated now and built this the same all central social media tools. And you might say that this is better because look, it's an open protocol behind the scenes. Okay, cool. But the fact that Nostr is an open protocol, I don't think is what's so compelling about it. It's the idea that it's adjacent through community, through design, through individuals, to bitcoin and to the Lightning network, and it's not sufficiently well connected yet, but it's only through a deeper connection to real economic incentives that we can solve those problems. Like making Nostr scale to a billion concurrent users. That's just a challenging technology problem. You need a lot of servers to be able to do that. I don't know if you've heard of the c10k problem, but it's like a rule of thumb for web servers. At least it used to be. I'm showing my age here. But you want to support 10,000 users, you're going to need at least one web server. Like, you want 20,000 users, you're going to need two now. So there's a certain degree of just like, as the more number of active users and the platform increases, you just need more endpoints to talk to them, to serve them data. How do we make sure the Nostr network continues to scale with potential demand without scaling? Using the tried and true method of getting VC dollars to go buy Amazon resources and expose them to end users. Right, that will work, but it will also fail long term. So how do we get Nostr to scale without that? Like, to scale through just direct market action? Like, people got to get paid to run Nostr relays. They got to get paid to index Nostr messages and to serve queries against those indices. They got to get paid to create reputational systems within Nostr so you can find the right people. They got to create directories so you can browse Nostr public and private keys. And none of these should be happening in a centralized way. Somehow even the assembling of the directory has to be something that's distributive. And this, to me, is an important issue in the Laryn problem because it's really the issue of software design and boundaries. Right? There's a famous story of, like, when bitcoin was first created, the bitcoin client, it had this putative marketplace, and in theory, you could list stuff for sale directly through bitcoin, and all that was shut down because god bless satoshi. That wasn't good software engineering, I don't think. Satoshi was a software engineer, and that's okay. They were a brilliant original thinker. It took a lot of software engineers to come into bitcoin subsequently and shut down bad ideas like that. And I think if Nostr grows with bad boundaries and people start to put the wrong things into it and it's going to fail if, conversely, it finds the right API connections to layers below it and adjacent to it, it may succeed. Maybe examples there are I don't think it's, for example, Nostr's job to optimize the delivery of bytes across a telecommunications network and to incentivize that properly. That's the Lightning Network concern. The Lightning Network is, as we said, a kind of a private monetized Internet. Nostr shouldn't have to solve routing issues. It might wind up this is often what happens, I think, when you're synthesizing systems. Someone from the Nostr team working on Nostr might make significant contributions to routing and Lightning because they were trying to make Nostr better. So in this sense, things at higher layers create demand pull for things at lower layers. I think Bitcoin became better because people wanted to build a Lightning network. I think that's where Segwit comes from. It's a great solution to transaction malleability as well as an upgrade for a layer one in meaningful ways. And we wouldn't have Segwit in the way that we had it if we hadn't been thinking about the Lightning Network at some level at the same time, because Lightning Network doesn't work with that Segwit. Transaction malleability is a killer. Similarly, here, like, if we want to build Nostr, we need Lightning to do things for us. And so the existence of Nostr as an ambition, or the notion that we would have applications that work like Nostr doesn't have to be Nostr, obviously. It could be anything like that. The notion that there's an application set of concerns and that they want to push things like routing and connectivity and bandwidth and stuff into a Lightning layer and they want to handle things like, well, I know, you tell me how to get to data, I'll tell you what data I want. I want this master message with this ID or whatever it is that is the concern of the application layer. Again, this may bleed a little bit in the short-term as people try to solve problems just in their own project as compared to trying to do it through a layered model. But that's just growing pains. Eventually it has to look like something that's become separated in meaningfully, distinct layers that solve different kinds of problems. Bitcoin's only problem that it has to solve is keeping the money safe and working. Lightning's problem is liquidity routing, bandwidth, telecom. Nostr's problem is discoverability, searching, like feed generation. In some sense, these are sub components of what a thing like Twitter does. And I think that's part of what we will expect to see as these layers develop is you take a company like a Twitter or an Uber or something that does a very complex service and instead of just building Uber as a smart contract or building Twitter as a smart contract, which would sort of be the east approach to this. I think, to a degree, it's like you break it up into all the sub-markets. There should be a market for just moving data on the internet. That's Lightning. There should be a market for posting a file that you want to be able to retrieve later and being able to have guarantees that it will be around later for you to retrieve it. That's content delivery, that's CDN, that's a requirement to be able to publish software on the internet. Those things are separate and those have to be separate layers that solve and tackle those problems. Building something that sort of massage all this junk together and tries to just build Twitter as like a project using Bitcoin I think fails. You need to first build all those subsequent layers and then what's cool about that is those services. It's like inside out almost, right? Like right now, if you go to Twitter, Facebook, Reddit, whatever, go to a bunch of social media networks. They all have their own internal tools for like creating search indices and serving search requests, creating feeds and curating what goes into your feed. There isn't, for example, a cross social media search indexing service that just all social media posts go into and then you serve search requests out of that. It doesn't make sense. Who would build that? Who's going to make money from that? The individual company has to build a siloed version of that thing to a degree. There are cross functional search things that are designed for ad tech and whatever else, but it's not surface to the end user in a marketplace driven version of this. Like the way you build an app is you plug into a search indexing service, you plug into a CDN service, you plug into a different kind of thing and together they sort of implement your app. It's sort of an inside out approach to software engineering. Instead of a company and project having internal versions of all these common functions, those functions are just marketplace functions and that your app or protocol is just leveraging existing marketplaces for searching for search indexing and querying, for data retrieval, for running compute cycles. Something like a feed, for example. This is a great example of what is a feed actually, it's an algorithm, right? You take a point in the network and you look at who they follow and who follows them and all the content that they created, and you have an algorithm that sorts and filters and then says, here's 100 next tweets. We're going to show you that kind of a curation algorithm is a generic thing. You might want to apply to other kinds of content. And the idea that Twitter and Facebook and all these companies separately create these feeds, which by the way, are designed to make them money, not to give you the content you really want. I just love the idea of inverting that and we pay someone to just build feeds for us. And that's not the same entity that's responsible for hosting the Tweets or whatever. It's not the same marketplace that's responsible for search and indexing. It's just a special thing that we pay for. It's the same kind of code, it's the same math and the same algorithms that are being run in order to create feeds, but we're just more in direct control of them because we're not purchasing them from a company in a non-monetized way, we're just directly purchasing them from a market that does feed Generation. But something like Feed Generation is so hard because Feed Generation requires looking up data, running code, like munching a bunch of stuff together and then representing it. This is an application. So to run an application like that on a cloud that's run by no one requires all sorts of underlying services. I've got to be able to publish assets into this cloud and retrieve them. I've got to be able to specify an algorithm, test it, and then know that it'll run at scale, and my users plug into requesting that algorithm be run for them on their data. None of those things exist yet. So we can't just go out and replicate Twitter today on top of bitcoin. We first have to go build all those layers, and inevitably, if you think about those more complex layers, you actually just back into, well, really what we just need is the ability to send each other bytes on the Internet, like four sats. And now you're back into the Lightning Network and you can't really even do that because you can't really even send sats efficiently at the scale that we would need. And so it really just comes back down to the core capability of a Lightning Network, as a payments routing infrastructure has to get orders of magnitude better before the next layer really makes sense. But that doesn't mean we're not going to start working on the next layer we already have, and understanding the constraints that we would be operating under in that next layer actually helps us shape how we feel a Lightning Network should evolve and grow today.
Kevin Rooke - 01:25:34:
I hope you're enjoying the show so far. Just a quick message from our sponsor, Stakwork. Stakwork is a Lightning powered platform for generating high quality transcripts of all your audio or video content. They combine AI engines and hundreds of human workers all over the world who are paid over the Lightning Network to assemble these transcripts. And that's what let Stakwork create better, faster, and less expensive transcripts. To see the results for yourself, you can check out my personal website, where I host transcripts for all my podcast episodes. If you want to learn more about Stakwork, visit stakwork.com. That is stakwork.com, right? So Lightning developers can kind of look at Nostr, hey, here's a cool new use case. What do they need? How can we build in the appropriate way to serve that need and recognize that there may be other needs that develop as well like it. Now, I have a question for you about because all the layering here we're talking about is layers of protocols and.
Dhruv Bansal - 01:26:36:
I've heard and markets.
Kevin Rooke - 01:26:38:
I would say markets, but not companies, not individual companies. Siloing all this stuff together.
Dhruv Bansal - 01:26:44:
I'd say that's fair.
Kevin Rooke - 01:26:45:
I hear a lot about with in Bitcoin and I've heard all sorts of things people describe as layer 3456. I've heard Cash App as layer three. I've heard all sorts of things. It seems like we're still stuck in the mentality of like companies are going to be represented on these layers or maybe sets of companies. But I want to get your perspective on the role of a company in a world where we do have this layered protocol and market system and we have all these healthy layers built up distributed markets. What is the role of a company at that stage? How does that structure change the way in which companies earn money, the size of the companies? Anything else?
Dhruv Bansal - 01:27:34:
I think there's a few ways you could think about this, like so trivially companies are still required in the human economy. Like, yes, agree, not everything is digital, right? Like there's still a physical world, like there are still human beings. Like the notion of a private enterprise still exists. Not everything is completely distributed at all times. With that said, I think there are some areas where it's really hard to make companies in a model like this. So for example, you might imagine a future version of a social networking phenomenon. Someone comes up with a really cool app. A company comes up with a really cool app. Now they're able to used these kinds of distributed marketplaces to deploy their app. So really their app is just a somehow private thing. Like private things still exist. I want to be clear about that. You still have cryptography, so you can still have private code and private applications. I talked about IP being dead, but that's a slightly different idea here. You could still have private code deployment, so a company could still exist. They could build some software, that's private software, deploy it, you could run it more or less. But my claim is if something like Twitter was invented in this feature era and we're like, hey, this is really cool, people seem to like this thing. What immediately would happen is that marketplaces would arise to just do that thing. People like this, they made up a thing called a tweet that has these properties. You know what, I'll just start storing all their tweets and you want their tweets, you don't have to pay them and their server. Just pay me, I'll give you the same tweets. To a degree, it will be hard to defend the notion of we're a company and our value as a company is we have a network of users that is like trapped here, right? Trapping users becomes harder. And so companies that operate on that as their fundamental business model, I think will struggle. Conversely, no matter how distributed the thing gets, there's going to be this need of like, hey, I have an issue with this thing. I need expertise, I need help. And maybe the answer there is, okay, it's just AI or whatever. Okay, so everything is automated. I don't know, but I don't believe that. I believe that the notion of click supporting things will still require human beings. And companies can make a lot of money supporting people's market activities. That's already true today. Like in any market, there's a company that says, hey, we'll help you do marketing in your market so you can be more effective. Even if you are providing this market service, you are still in some sense a company. Whether you're a sole proprietor who's just running an ASIC miner in your garage, or whether you're a small private company that is running a megawatt of ASIC, you're still a company. You're providing this market service as a company to other players in the ecosystem. I think it just becomes the notion that, like, a company that grows so large that its chief source of revenue is a monopoly on the thing that it built, that becomes harder to sustain. And actually I think that's okay, I don't see anything wrong with that.
Kevin Rooke - 01:30:25:
Right? And so maybe some of these companies give up some of their functions to this network or layered system of distributed markets and they focus on one particular thing, have less examples, users, and have to compete more on the merits of that one thing that they can provide. That the networks and protocols.
Dhruv Bansal - 01:30:48:
And there's some simple examples of this even today. Like Twitter is a company, but there are other companies who make products that just interface with Twitter. So that's the thing. I have a private Twitter client. It's much better than the other Twitter clients. And here you can use it this way and it works this way. Again, if the only thing your thing does is use other competing resources, someone will just replicate your thing and then just sell it directly and undercut you. But that also happens today in software. So I just feel like the notion of private enterprise will still exist, but the kinds of things that we expect companies to do and to own and defend will be different because it'll just be easier for markets to replicate certain activities that companies engage in.
Kevin Rooke – 01:31:27:
Interesting.
Dhruv Bansal – 01:31:28:
In some sense, right, like a company is just like a way of putting a bunch of economic incentives in front of individuals and coordinating their behavior. So if you can provide a bunch of individuals coordination to do some outcome without there being a company to do it and that works, that will work. That won't work in every case, but in a lot of cases, I think.
Kevin Rooke - 01:31:48:
It will right, I want to talk about one last topic here. This was something we spoke about prior to recording. You had mentioned Einstein and bitcoin and changing bitcoin and all sorts of we talked about all sorts of ideas, really, and understanding bitcoin before changing it. I'd love to get your perspective on what I've seen in the last couple of weeks as a renewed interest in doing different things on bitcoin. And I spoke with Paul Stork, who's working on DriveChain, and he's been talking about that for a while. That seemed to ignite some conversation on Twitter about whether it's a good thing or a bad thing, whether it should happen on the base layer or another layer. And we're seeing ordinals as well, and inscriptions, people getting mad and people excited about Jpegs on bitcoin. I'd love to hear your thoughts on just your view on changing bitcoin and whether or not this is something that bitcoin or should be pursuing these changes or whether or not the protocol should ossify at the base layer and permanently cease to, you know, change.
Dhruv Bansal - 01:33:03:
Maybe I'll try to organize my thoughts here. Three physics things that I think kind of connect to this idea. The first physics thing is just the notion. It's a saying from quantum mechanics, I think sometimes you may have heard, like, that which is not forbidden. There's a bunch of phrases to start this way. The quantum mechanics version is that which is not forbidden is compulsory, which is an interesting statement in the sense like in quantum mechanics, everything happens all at once, all the time. There's like there's a movie by that title. It's a very quantum idea. So everything that's not forbidden is compulsory. I like that notion. And to me, when I think about things like Ordinals and other things like that, I almost think it's like part of that where it's like someone was going to try this. I read the ordinals. This doesn't make any fucking sense. These sats are better than these sets. What are you talking about? But the idea that it's not forbidden, you can do it. It doesn't break any of the consensus rules of bitcoin. You're paying fee rates, according to the market to do this stupid thing that you like, whatever is not forbidden is compulsory. Someone was going to do this strange thing. I'm glad it's happening now. We get to talk about it. We get to react to it. I don't view it as an attack or anything like that. I view it as a kind of experimentation. And since it's not breaking any of the rules, I tend to support this kind of stuff. I'm not particularly excited or interested in it. I think it's an absurd idea. But those who believe that this is a cool thing, like cool, you get to do it on bitcoin. Good for you.
Kevin Rooke - 01:34:33:
Does it change, though? Does it change? Change your views on whether or not changes to bitcoin are because I think this was like an unintended consequence. I think people looked at that and said, we didn't know that was really possible. Now that it is, we kind of don't like it, and I kind of wish we could go back.
Dhruv Bansal - 01:34:51:
I think that's a fun idea, too, which is the notion of ossification. So the second physics thing I'll say here is bitcoin is going to have to change. It's going to have to change over time. It's not done yet. Whether the changes that were made were the right changes or not, I don't know. I don't feel I'm truly enough of an expert to really say I think that's what's so hard about changing bitcoin is because no one really can predict what will happen when we make certain changes that seem innocuous but actually have deep consequences and maybe some unfortunate teeth to them. I think there's a famous story of TheBlueMatt, right? Matt Corallo is like, put in a bug that was active in bitcoin for a long time, forget the details of it, but it also, I think, was handled and pulled out again, but just goes to someone as talented, as engaging in such a high bar process as bitcoin development like things can solicit through. This is part of the reason I support ossification. I support in general, and I support the notion that bitcoin should never be touring complete, because the one thing that we can use to protect ourselves is the notion that bitcoin isn't an arbitrary computer environment, that it has constraints around it. So that helps us a lot to create defense. But with that said, from physics like quantum computing, this is a thing I don't think is sufficiently. A lot of Bitcoiners don't worry about this. I think, because they don't want to worry about it. Quantum computing is coming, and when it comes, it is going to affect bitcoin. It's going to affect everything else. But honestly, Bitcoiners are going to care about it more, because if you had a machine to break encryption, whose encryption are you going to break? You're going to break ours? We're the best thing to steal bitcoiners the best thing. You're going to break into government secrets and steal the plants for a helicopter? What are you going to do with that? You're going to have to sell it to somebody. It's a whole process. Much easier to just deal with bitcoin directly. So I think bitcoiners are going to be the first thing attacked by real quantum computers held by adversarial agents. And as a result, it is our community that is most incentivized to create post quantum cryptography at scale. And to be clear, post quantum cryptography exists. It already exists. Like fully homomorphic post-quantum cryptography exists. It's just not efficient. And it's at the cutting edge of what's possible. And there's not a deep reason to use it in most cases, because the stuff we do today mostly works. And as you know, people are not incentivized to improve computer security just for the reasons of improving computer security. That's not the way the world works, because most things that are guarded by computers are trivial and aren't worth protecting. As much as we think our private photo albums are really precious, no one really wants to get at those at the end of the day. And so the fact that they're not very well protected doesn't hurt us. The thing that must be well protected is bitcoin, because bitcoin is the one thing everybody wants to steal and have and possess, because it's fungible, you can use it, blah, blah. We're going to get attacked first. And so we're going to need to make some changes to bitcoin in meaningful ways to allow for post quantum cryptography to exist. So I will make that claim. I'll just put that out there. We're certainly not done changing bitcoin until that happens. I don't know what the solution is to that. In fact, I would argue one of my concerns about existing bitcoin changes like Taproot have been the lack of focus on quantum concerns, like the notion that I'm going to get the details wrong, but Taproot exposes P2PK type paths a little bit more forwardly than we were doing previously. I think that's a little bit of a mistake. So, yes, bitcoin is going to have to change. It's only because of physics reasons like that. I think ultimately, though, the notion of change in bitcoin is really contentious because we don't have a methodology for managing change as a community.
Kevin Rooke - 01:38:25:
Right. There's no framework.
Dhruv Bansal - 01:38:27:
And every time someone brings up the fact that a change is required, it just freaks people the fuck out because it forces us to confront that idea. So a friend of mine, Jeremy Rubin, is quite famous or infamous online for promoting his own changes that he wants to make to bitcoin. And some people view what he's doing as an attack on bitcoin. It's not an attack. Jeremy is a bitcoiner who wants bitcoin to succeed, and he thinks his project will help. But what he does do is he raises people's hackles because he again points at the fact that we don't have a process for this. It's ultimately every change is just going to be a giant fight with politics and disagreement. Maybe that's actually the best model for governments. I don't know. I'm not proposing that we need to institutionalize some sort of change process. It's only because I don't feel like there should be that much change overall in the coming decades. But some more change will have to happen, if only because of quantum computing and other concerns like that. So we got to figure that out. It's my overall attitude towards change. But I think with that said, though, I want to maybe conclude with like, a final physics idea. And this one's a little bit like a little wordier, and I don't like, some of the names that are used here, but we're kind of stuck with them. And this has to do with the notion of change versus understanding, because I think the changes everyone will say this the changes that I am advocating for are really required. But I think sometimes when people, especially those who ultimately wind up in altcoin land, the changes that they ask for are actually changes that reflect a lack of understanding of bitcoin. So, hey, I want to change bitcoin, add my cool feature that lets me do this powerful computation right in the base layer. Well, yeah, that's not what bitcoin is for. It's a misunderstanding of bitcoin to ask for that kind of a change. And I think what's cool is that this connects to physics in a way that I really like. It's a line of thinking that came down ultimately from Einstein through one of his students, John Wheeler, who was at the University of Texas at Austin for a long time. Actually, another Austin connection. There are two philosophies that Wheeler described operating in physics, and I think they both operate in bitcoin as well. And he gave them names, and I think they're really cool names. I think they're really terrible names, but they're really cool ideas. He described, like, there's, like, a core problem in physics, like gravity and the other forces and grand unified theories. Maybe you or your audience have heard of some of these decades long issues in the world of theoretical physics. Very esoteric stuff. But Wheeler identified sort of two approaches that physicists were taking historically to kind of unify gravity and quantum mechanics or whatever else was their big challenge. He described the first approach, the one he doesn't like, as conservative radicalism, which is an interesting phrase, and it's the notion that you can make radical changes to the theory or the system, but you make those radical changes in a very conservative, small way. So you'll take, like, the theory of gravity and you'll say, well, what if we added one more dimension? That's a radical change, but we won't change anything else. We'll just make this one little change here, and we'll just see what happens. Maybe that's enough to solve the problem. Or we'll add this particle, and we'll hope that that solves the problem. Or we'll go from particles to strings, and the details here don't really matter. It's the spirit of this approach, which is incremental, right? But incremental in sort of a blunder headed way of, like, I don't really understand what's happening here. Let me just change this one thing and see what happens. Wheeler talked about this as a very ineffective way to make meaningful progress in the long term, make it's effective for incremental progress, but to make big paradigmatic shifts in our understanding of the world. This does not work. Instead, he advocated what he called was the opposite, which, again, the names here are confusing. The first thing was conservative radicalism. He calls the second thing the approach that he advocates, radical conservatism, which in today's political climate, radical conservatism is maybe not the label you want to tar your chosen philosophy with or unless you do. But for him, radical conservatism means actually there was some essential lesson in the system, in gravity, right? Einstein's theory of general relativity or whatever it was. And of course I'm not apply all this to bitcoin, but there was some essential lesson in this thing and you have to like, learn the lesson really well and you have to then be really conservative in the sense that don't go outside the bounds of whatever truth was exposed in this lesson. Like in gravity would be something like mass and energy change, space time, or that all different observers viewpoints are equally valid. It could be some essential truth or learning like that. So what you do is you enshrine that as holy and then you take that idea and you run with it as far as you can. So you are conservative in your unwillingness to change the underlying rules of the system. You think it's right, like you have to absorb the lesson. Having absorbed the lesson, you are now radical in your application of that lesson. You take it as far as you possibly can. And for Wheeler, this meant you don't just change things randomly, you understand them deeply and then you follow their consequences as far as you possibly can. Now, bringing all of this back to bitcoin, bitcoin isn't the final solution for the distribution of the world as we've been talking about, right? There are layers, there are all these things that bitcoin can't do and there's a desire that people have, like, I want bitcoin to do this thing, I want to fix this thing. And the thing that Wheeler didn't like, right, the radical sorry, getting it backwards, which is why I hate these names. But taking the conservative radical approach to bitcoin and saying, well, bitcoin doesn't solve my problems, I'm going to change one little thing about it. I'm going to make the script interpreter Turing complete. Done. Now, I have Ethereum that's going to fix all my problems. This is not a Wheeler approved solution. This is a form of incremental tinkering that ignores the core lessons of the system and hopes that by making one radical change, I can somehow cause bitcoin to scale, I can solve every other problem. And the reason this doesn't work is inevitably what winds up happening. And this happened in the world of theoretical physics, but also happens in Ethereum. You make this radical change, you've actually broken the system. It stops working in meaningful ways, and you then have to add another radical change to prop up this thing that you broke. And then you add up another one over here. And before you know it in the land of physics, you're talking about the multiverse with infinite number of. Universes with arbitrary laws and you can't make any predictions anymore, and who even knows what's happened? And I kind of see a similar trend in Ethereum. And you make this radical change that fundamentally, I think, breaks bitcoin by making it turn complete. Now you have to invent gas because you don't know that in bitcoin. You always know the script will complete with finite resources and infinite time. You do not know this in Ethereum because you injected turn completeness and you broke it. So now you have to add more complications. You have to invent the concept of gas just to make sure that nodes can process and not crank when someone injects an infinite loop into a smart contract. So by making one radical change and completely misunderstanding the point of the system, you are now forced to make other radical changes and you wind up with this house of cards. Like the Wheeler approach here would be. Like the radical conservative approach would be, what was the system teaching you? What was bitcoin's lesson? And I think the lesson was you solve the problem with a market, not with a blockchain. You must create an economic incentive that causes individuals without coordination to show up and provide the service. That's the lesson of bitcoin. And the radical conservative approach would be to take that core insight, the notion that markets are the best way to coordinate resource and service allocation and delivery and run with it as far as you possibly can. And that means you don't just change the blockchain in some dumb way and then hope that that solves the problem. You deeply think about, how can I get market influence forces to build a transaction network in the form of Lightning for me? Well, you pay them with sats. You put a price on liquidity. You have a Lightning Network reference rate. You use market forces to create the service you want, which is payments, and it turns out networking. Okay, cool, now you have networking. So how do you build the world, Computer? You don't just throw all the data in the blockchain again, right? You create markets that provide specific core functions like data delivery, CDNs search and indexing, like we were talking about before and again this whole time we're trying to apply Wheeler's insights of like when you confront it with some crazy new thing, you don't just ignore the lesson. You embrace the lesson and you take it as far as you can. And I think that's what in a nutshell almost, I'm trying to get bitcoiners to talk about more, which is like, look, we get it. We radically believe that bitcoin is the correct solution to engineering distributed economic incentives. Let's embrace that solution by focusing on how to use the existing currency. We built the strongest money in history, bitcoin, and use that as a basis to create economic incentives for other systems we want to engineer. That's the Wheeler approach here, and it's something I'm trying to do. And I think anybody who's thinking about bitcoin's development in terms of where's is thinking that way because they're realizing that it's not the blockchain that was revolutionary here. It was the notion of a market with no centralized point of control. How do we replicate that to other areas?
Kevin Rooke - 01:47:37:
Well said. I think that's a great note to end this segment. I do want to jump into one final rapidfire round I do at the end of every show. It's called the Lightning round. Few rapid fire questions for you. First one is there written any book that has meaningfully changed your view of the world?
Dhruv Bansal - 01:47:55:
Many, yes, many books. I'll toss one out that I think is really good for bitcoiners to read, and it's called The Dispossessed by Ursula K. Le Guin. It's a book about anarchy and space because I'm a space nerd. But I think what's really compelling about the book, it's got a cool narrative structure. But that's an aside where it's cool for bitcoiners is I wouldn't say I'm an anarchist, by the way, by any means, but this book is really interesting introduction to what a functioning anarchic system as well as a dysfunctional one might look like. I think the main lesson of the book is that anarchy is ultimately it's not a place you reach, it's a process you engage in. And then if you're a true anarchist, you're always questioning the systems that you're a part of and you're always trying to create greater freedom and greater individuality. I think that, again, fits into the way that I think about bitcoin, that if we want to be like the protagonist of The Dispossessed, bitcoin is not a thing we achieve. And like, hey, I'm on bitcoin now, I'm done. It's a process. And we're constantly having to question as bitcoiners how much we're falling into tribalism, how much we're falling into groupthink, how much we're falling into authoritarianism. I've loved seeing ordinals to return to that trigger latent authoritarianism in so many bitcoiners online. It's been a wonderful thing to see and it just reminds me that no one is the end point of their bitcoin journey. That like the character in this book. It's always a process of constant questioning and reinvention if we really want to succeed and get to the promised land of what in Ursula's book, like what NRP could mean for human freedom, but in this case, what bitcoin could mean for human flourishing.
Kevin Rooke - 01:49:30:
Nice. If you weren't working in bitcoin, what would you be doing?
Dhruv Bansal - 01:49:36:
If I weren't working in bitcoin, it's so much easier to answer if I weren't working at unchained in particular, because I would be doing something else in bitcoin. I'm sure. If I weren't working in bitcoin, I would be making computer video games. I'm pretty sure I recently two years, a year and a half ago, I think, during a quiet period of work, I cracked open like a video game, Engine Unity. Like, I never really played with it before. And I started, like, making some visualizations and games and it was some of the most exciting and fun programming I had done in a number of years. Like, programming for those who do it and those that don't is very satisfying because you're getting to build a little machine and you hit go and it does stuff, and the feedback is very quick and very fast. So I've always liked that about programming. This was programming with so many more visual things attached, like shapes and characters and motion and geometry and physics, and I was having to talk about Quaternions to talk about rotations, and I love Quaternions as a math nerd. And suddenly I was like, oh, God, I got to put this away, because this is, like, everything I like, in one box, and I have a business to run. So I think that's part of my answer. If I were in a bitcoin, I'd be making video games.
Kevin Rooke - 01:50:40:
Fair enough. Who is one person that you'd like to give a shout out to for doing great work in the bitcoin or Lightning ecosystem?
Dhruv Bansal - 01:50:48:
Wow, that's a really good question. I wish I had thought of an answer in advance. Let's go with Nostrin, the creative Nostr for creating so much, like, interesting behavior both in bitcoin outside of bitcoin, creating just, like, such an exciting conversation around what layers and stuff could be. I think part of the reason we're even talking is because Nostr has bloomed in the last few months, and it felt like this was a good time for us to connect. So I'll pick I don't know the guy's name. I'm so sorry. Yeah.
Kevin Rooke - 01:51:20:
Fiatjaf, who created Nostr.
Dhruv Bansal - 01:51:22:
There we go. That's the person I'll pick for now.
Kevin Rooke - 01:51:25:
Great choice. All right, finally, before we go, where can listeners go to learn more about you and your work?
Dhruv Bansal - 01:51:34:
So I typically blog on unchained blogs. If you go to unchained.com/blog you'll find some articles there. Hopefully a lot of the stuff that we're talking about will ultimately be published there. I do tweet less these days, I think, like a lot of people @dhruvbansal, so you can find me there as well. I am not on Nostr yet, believe it or not. I will get there.
Kevin Rooke - 01:51:57:
All right, well, thank you again for taking the time. This was an incredible conversation. I enjoyed it a lot, and I hope listeners do, too.
Dhruv Bansal - 01:52:04:
Thanks for having me. Kevin, this was awesome.