Bitcoin's 2024 Revolution: L2s & Beyond | Eric Wall

✨ DEBRIEF | Ryan & David unpacking the episode: https://www.bankless.com/debrief-the-eric-wall-interview ------ What’s the Endgame for Bitcoin Scaling? That’s what we asked bitcoin builder and researcher Eric Wall. We start by exploring the evolution of Bitcoin and the genesis of scaling solutions on top of it. We then get into the intricacies of the BitVM, what exactly is a Bitcoin L2 and what’s coming next. Eric is the perfect guest to explore this frontier of Bitcoin Rollups, he tells it like it is and he understands both Ethereum and Bitcoin. ------ 📣 SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24 https://bankless.cc/spotify-premium ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2 🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo ⚖️ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 🏠 CASA | SECURE YOUR GENERATIONAL WEALTH https://bankless.cc/Casa 🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/toku 🌐 CARTESI | APPLY FOR A GRANT https://bankless.cc/CartesiGovernance ------ TIMESTAMPS 0:00 Intro 5:47 Eric Wall 9:48 The Evolution of Bitcoin 21:31 The Genesis of Bitcoin L2s 36:40 Runes 46:22 BitVM 1:04:45 Why Bitcoin L2s are Inevitable 1:09:07 Stacks 1:11:37 Bitcoin L2 Endgame 1:17:39 Scams 1:23:13 Bitcoin’s Direction 1:27:25 Closing & Disclaimers ------ RESOURCES Eric Wall https://twitter.com/ercwl Taproot Wizards https://taprootwizards.com/ ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures ⁠

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  I mean, what we ultimately need for Bitcoin is we don't, I actually, I'm not that convinced that we need to take, you know, everything that Ethereum has done and put it on to Bitcoin. Like, we don't need all of the Ethereum stuff to exist on Bitcoin. I don't think so. But what I do know that we do need, we just need a way for me to be able to send Bitcoin to you in a scalable and private fashion, just so that Bitcoin as a currency works.

• 0:32Ryan Sean Adams?

  Welcome to Bankless, where today we explore the frontier of Bitcoin Layer 2s. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. The big question, can Bitcoin scale through Layer 2s the way Ethereum has? I think it's the most important question that Bitcoin builders are facing today, and it's hard. There's a lot of noise out there. We've got to find out what's real, what's narrative, what's a scam, what the future actually looks like for Bitcoin. That's why we're having this episode today with Eric Wall. He's on today, and he's got the most thorough take that David and I have heard on this subject. He's the perfect guest for this because not only does Eric tell it like it is, he also understands both Ethereum and Bitcoin. So a few topics we get into in the episode.

• 1:14Ryan Sean Adams?

  Number one, the ordinals and runes awakening, why that is upon us and what effect it's had. Number two, why Lightning failed. Number three, the state of Bitcoin Layer 2s, where are they today? Number four, we talk about BitVM and the fatal flaw it might have. Number five, we talk about the answer, the solution, the cat op code. You'll have to hear Eric talk about that and evangelize for it. Number six, Eric's message to us, be extremely cautious when you hear the words Bitcoin Layer 2, and why he says that. And number seven, why Eric is optimistic about Bitcoin's future and the building that is going on today.

• 1:50David Hoffman?

  The progress of what you can do on Bitcoin, the evolution of Bitcoin, I think it actually runs in parallel to the story of Eric Wall himself. Early Bitcoiner who like self-described as becoming an outcast out of Bitcoin because the laser-eyed monetary maximalists decided that you don't put any sort of ZK magic on Bitcoin. That's not what it's for. And then entered the Bitcoin Dark Ages where Eric Wall was forced to look elsewhere for scaling solutions. And that's where he found the Layer 2 space outside of Bitcoin, but still had like his first love. These are all his words that I think he used to describe his own arc when we did our first episode with him. Eric Wall comes back and kind of gives us an arc of the Bitcoin Renaissance, how it started, where it's gone and what the current frontier is.

• 2:35David Hoffman?

  The current limitations too of the Bitcoin Layer 2 space and what might be next steps for the actual technical evolution of the Bitcoin protocol. So just really a masterclass in Bitcoin, I would say, along with just like the current issues, current events of the time. So let's go ahead and get right into that conversation with Eric Wall. But first a moment to talk about some of these fantastic sponsors that make this show possible, especially Kraken, our preferred place to buy crypto in 2024. If you do not have an account with Kraken, consider clicking the links in the show notes to getting started with Kraken today. If you want a crypto trading experience backed by world-class security and award-winning support teams, then head over to Kraken, one of the longest-standing and most secure crypto platforms in the world. Kraken is on a journey to build a more accessible, inclusive and fair financial system, making it simple and secure for everyone, everywhere to trade crypto.

• 3:20David Hoffman?

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• 4:03David Hoffman?

  And with Opera Mini Pay as one of the fastest growing Web3 wallets, Cello is seeing a meteoric rise with over 300 million transactions and 1.5 million monthly active addresses. And now Cello is looking to come home to Ethereum as a Layer 2. Optimism, Polygon, Matter Labs, and Arbitrum have all thrown their hats in the ring for the Cello Layer 2 to build upon their stacks. Why the competition? The Cello Layer 2 will bring huge advantages, like a decentralized sequencer, off-chain data availability secured by Ethereum validators, and one-block finality. What does that all mean for you? With Cello Layer 2, gas fees will stay low, and you can even pay for gas natively using ERC20 tokens, sending crypto to phone numbers across wallets using social connect. But Cello is a community-governed protocol. This means that Cello needs you to weigh in and make your voice heard.

• 4:47David Hoffman?

  Join the conversation in the Cello forums. Follow Cello on Twitter and visit cello.org to shape the future of Ethereum. Arbitrum is the leading Ethereum scaling solution that is home to hundreds of decentralized applications. Arbitrum's technology allows you to interact with Ethereum at scale with low fees and faster transactions. Arbitrum has the leading DeFi ecosystem, strong infrastructure options, flourishing NFTs, and is quickly becoming the Web3 gaming hub. Explore the ecosystem at portal.arbitrum.io. Are you looking to permissionlessly launch your own Arbitrum Orbit chain? Arbitrum Orbit allows anyone to utilize Arbitrum's secure scaling technology to build your own Orbit chain, giving you access to interoperable, customizable permissions with dedicated throughput. Whether you're a developer, an enterprise, or a user,

• 5:30David Hoffman?

  Arbitrum Orbit lets you take your project to new heights. All of these technologies leverage the security and decentralization of Ethereum. Experience Web3 development the way it was always meant to be: secure, fast, cheap, and friction-free. Visit arbitrum.io and get your journey started in one of the largest Ethereum communities. Bankless Nation, Eric Wall is a crypto OG, first enamored by Bitcoin and the many irreplaceable properties that Bitcoin has, and then later also by many of the technical research breakthroughs in the Ethereum ecosystem. Eric now finds himself straddling many different universes, but all with strong cryptography and trust assurances underpinning what Eric finds interesting and pays attention to. Eric also recently shaved his head because the ETH-BTC ratio broke below a certain level that he said that it wouldn't, even though no one really asked him to do that.

• 6:15David Hoffman?

  Eric, welcome back to Bankless.

• 6:17Speaker 00

  We're happy he did, though.

• 6:20Speaker 00

  Well, there are some people that insist that Eric doesn't just lose a bet like that. So they think that the reason that I shaved my head was because I was camouflaging a hair transplant. So that I lost the bet in order to get a hair transplant without anyone noticing. And I'm fine with either of those theories. I'm happy either way. Wait, but like-

• 6:41David Hoffman?

  Either or, maybe both.

• 6:43Ryan Sean Adams?

  What was the real reason? So, wait, did you shave it in solidarity with Ethereum? Or in solidarity with Bitcoin? Or like, what was the... I'm not familiar with the whole story. Just David showed up one week to me and he was like, "Yo, Eric shaved his head."

• 6:58Speaker 00

  There's multiple reasons. You could say I shaved it in solidarity with the fragmentation issues of Ethereum.

• 7:05Ryan Sean Adams?

  Thank you.

• 7:07Speaker 00

  Or you could say that it was... There was this guy who kept haggling me over a prediction that I made that we had already reached the low for the year for the ETH-BTC ratio. And so I kind of bundled all those together and just shaved my head. And I think I was kind of done with the man bun anyway. I think the man bun had lived its life, so I think this is for the better.

• 7:28Ryan Sean Adams?

  Are you ready to make another prediction on the show today about the ETH-Bitcoin ratio? Have we... Now can you call a low? And what will you do publicly? I want you... What will you do if you're wrong about that?

• 7:40Speaker 00

  Yeah. I think we've reached low for the year. I don't know which parts of my body I'm left to shave.

• 7:48Ryan Sean Adams?

  Doesn't have to be a shave. It could be like a tattoo.

• 7:51David Hoffman?

  Yeah, we can do a tattoo.

• 7:52Ryan Sean Adams?

  You could fight David. People are doing that in the Bitcoin community.

• 7:55David Hoffman?

  Wait, one at a time, one at a time. Everyone didn't lie.

• 7:58Speaker 00

  I'm happy fighting David if I get to join the ring with Nick. I think me and Nick together stands a chance against David.

• 8:04Ryan Sean Adams?

  Oh my god.

• 8:04David Hoffman?

  Well, actually, the first time I ever met Eric Wall in real life, I think I was immediately put into a pretty aggressive headlock.

• 8:13Speaker 00

  That's true. That is, that's one of the reasons that I, I fear for Nick because you were kinda like, I don't know how, if I could have gotten you down, like you're kinda, you know.

• 8:22Ryan Sean Adams?

  Resistant.

• 8:22David Hoffman?

  Well, okay, since we're going into the story, like, this was at ECC right after COVID. So this was the first time I was meeting basically everyone I had been talking to online for the last like three years. And I'm in line at some party for, I think like the bar or something. And I get put in a headlock. I'm like, oh, okay. Somebody, somebody who I know is putting me in a headlock and a friendly headlock. Uh, and they're gonna let go and I'm gonna turn around and realize who this is. Except then like the being let go never really happened. The headlock just got more and more intense over time.

• 8:52Ryan Sean Adams?

  Dude, it's a Bitcoiner headlock. We're not dabbling with an Ethereum headlock here.

• 8:57Speaker 00

  I think, I think, I think my main gripe was that you guys in the Ethereum world have started to call Ethereum clients that just sync the Ethereum state rather than executing every single transaction. You call those full nodes, whereas in Bitcoin, we have to validate every single transaction. So it's like, there's David, I'm gonna, I'm gonna punish him for this. Diluting the term of what a full node actually means, uh, coming up with new terminology and shit. And I guess that's what we're gonna talk about a little bit today. Uh, what's the definition of an L2? And there's also been like a degradation of that term, which you guys have also played a little smart. I have too. Like we are, we're all guilty of, uh, degradating what it means to be an L2. Yeah.

• 9:39Ryan Sean Adams?

  Oh, yeah. I love when Eric Wall comes on an episode because I know we're gonna bring back the purity of decentralization and why we're here.

• 9:46David Hoffman?

  And trust this.

• 9:47Ryan Sean Adams?

  We should get into it then.

• 9:48David Hoffman?

  Let's, let's set the landscape a little bit. Um, Eric, uh, almost two years ago, November of 2022, you and I did an episode discussing the technical potential of ZK layer twos on Bitcoin. Uh, this was like, it was only 18 ish months ago, but still super early, like ordinals weren't a thing. Runes weren't a thing. Everything was completely theoretical. Uh, and now not only do we have both tokens and NFTs on Bitcoin, but now there's this emerging class of layer twos on Bitcoin. How would you like explain or characterize the arc of what Bitcoin was back then? I'll call that like 2022, 2021 Bitcoin dark ages. Maybe you agree or don't agree.

• 10:27David Hoffman?

  Uh, but like characterize the arc of Bitcoin technological progress, uh, since then. Like, what do you think about the current direction of Bitcoin?

• 10:34Speaker 00

  If I recall correctly, I think the origin of that episode was that the Human Rights Foundation, together with a grant from Starkware and CMS Holdings,

• 10:48Speaker 00

  assigned a research paper to be written about what are the potential scalability benefits of putting a ZK rollup on Bitcoin within the block size constraints of Bitcoin. Like, if you just use the full four-megabyte block that Bitcoin has, how far can we get with the ZK rollup in, like, ideal circumstances? And John Light was the person that wrote that. I was the person, the at Human Rights Foundation, that sort of selected the person to write the paper, and I selected John Light, because I think it's... What I liked about him was that he was actually sort of anti-ZK rollups before writing the paper. But I know that he's a neutral guy and is going to stick to what the research assess. And the results that he came to were pretty interesting.

• 11:32Speaker 00

  Like, we could be looking at a 40x, 50x scalability improvement on Bitcoin if we had a ZK verifier and a covenants op code on Bitcoin. So that was like, I think, back then, what we were excited about was that, well, if we actually had ZK rollups on Bitcoin, not only would the scalability improve significantly, but we would also be able to tap into the full expressiveness that ZK rollups give. And that could also lead to privacy enhancements, because if you have, you know, zero-knowledge proof, you can embed any type of virtual machine, private or non-private, into that as well.

• 12:16Speaker 00

  So ZK rollups suddenly came back to the scene as this is like a real... This has a real potential to improve Bitcoin on all the facets that we could think of. So I think we were just trying to bring back ZK rollups back into the discussion of what should the next soft fork in Bitcoin be? And there were some people at that time that were thinking that, you know, a ZKP verifier op code is maybe not impossible to get into Bitcoin, so maybe we should look more into that. But to sort of describe the overall arc of what has been happening since then is that, I mean, this was still, like, ZKP verifies in Bitcoin were still...

• 12:59Speaker 00

  You know, there's a lot of people that needs convincing and it's not only the people that need convincing, it's also which type of ZKP verifier do we do we put into Bitcoin? Because it's not like in Ethereum where like you have a roll up and you can just upgrade the roll up to use. Uh, you know, we, we, we usually have like admin keys that with a delayed function can upgrade. They're all up to use some type of new circuit if you find a new one. But in Bitcoin, we really have like one soft fork and then we have one, uh, one zero knowledge proof system, one proving system. And that now maybe has to be the zero knowledge proof way that we, you know, verify things in Bitcoin for, I don't know, five years, 10 years.

• 13:42Ryan Sean Adams?

  Right. You gotta get it right the first time.

• 13:45Speaker 00

  Yeah, we gotta get it right the first time. Uh, that led to some discussions of like, let's maybe put something more generalized like a, uh, a ZK Wasm verifier and then we can put other types of, uh, ZK circuits inside that. So that the ZK Wasm sort of verifies the STARKs and the SNARKs and the Groth 16s of the world. Um, but what has happened sort of recently over the last year as I've, as I've, uh, you know, gone around and spoken to different researchers. The most significant one I think was in Palo Alto last year where we got together a bunch of, you know, CK interested people in Bitcoin, which aren't a lot of people, by the way, there's, uh, uh, uh,

• 14:27Speaker 00

  within the research community of Bitcoin, I'd say there's, there's a small fraction of people that are knowledgeable enough to have a real conversation about zero knowledge proof and Bitcoin. And but the, the, the sort of crew that we could amass, that we could gather, uh, we gather in Palo Alto. And going out of that meeting, I actually felt we were further away from getting, uh, zero knowledge proofs into Bitcoin than I felt before getting into that meeting. So I don't, I, I'm, I'm sort of less, uh, optimistic that we're gonna get a CK, uh, ZKP verifier op code in Bitcoin in the next, you know, say two or three years. I don't, I'm not sure that that's.

• 15:06Ryan Sean Adams?

  Why, why pessimistic on that? Is it just so hard to get any kind of op code into Bitcoin, you know, much less a ZK, uh, proof like op code? That you just think that's like politically insurmountable? Or I don't even know if politically is, is kind of the right word for that.

• 15:20Speaker 00

  Yeah, so choosing the right one and not being able to upgrade that is maybe the hardest challenge to tackle, but there are other... So if you wanted them to do what I described, that you wanted to have like a WASM, a ZK WASM that you put other verifiers into, then the problem is that if you want, for example, STARKS, which I think are like the least, they use the least exotic cryptographic primitives, if that's what you want, then you sort of lose those benefits if you verify them in a sort of a WASM environment. Because if you have, you need, if you have a different layered ZK verifiers on top of

• 16:00Speaker 00

  each other, you sort of lose the characteristics of one if they sort of all have to go through a funnel of multiple ZK verifiers, and the complexity increases too. And I think another thing that has shown, that has made me more pessimistic is that, you know, we're fighting right now to just get this OP-CAT op code into Bitcoin, and we're making very good strides, but OP-CAT is basically an op code, but the only thing that it does, it concatenates two elements on the stack. Also Bitcoin is like a stack-based scripting language, so you have like a bunch of elements that are on a stack, and you can multiply them, you can use addition, you can use subtraction,

• 16:45Speaker 00

  but you can't really do anything like super advanced. For example, you can't even concatenate, which is a pretty regular thing that you do in programming, like you concatenate two strings. So if I have A B and C D and I concatenate them, I have A B C D. Or if I have a two and a two and I concatenate them, I have 22. So that sounds like, so the most like, if you had a calculator and there was a concatenate button, that's like one of the simplest, like it's more simple than cosine or sine or something like that. And even that is like a massively technical conversation in Bitcoin, like, and the conversation is really about, does this destroy Bitcoin and in effect the world? Like, does this destroy humankind is sort of the conversation.

• 17:30Speaker 00

  The stakes are high. Yeah, concatenating numbers is like a really dangerous things. Make sure you can't divide by zero on that. Right. However, like one interesting thing about concatenating number, concatenating strings is that Merkle tree, how you get a Merkle tree, actually it just comes from concatenating hashes. To have, let's say, have sixteen hashes at the base layer of a pyramid and you concatenate those until you have eight and then you have four and then you have two and then you have one. That is actually how a Merkle tree is constructed and if you can then verify the hash of the the root node in that Merkle tree, now you can verify Merkle roots and

• 18:13Speaker 00

  blockchains in general, like how both Ethereum and Bitcoin, Merkle verification is like the, one of the primitives that we use the most. So like optimistic rollups, Merkle tree verification, syncing the Ethereum state root, Merkle tree verification, SPV proofs in Bitcoin, Merkle tree verification or Merkle root verification. And it turns out that with just that small op code alone, I think we should, maybe we should get into this a bit later in the episode, but just through concatenation, we can get Merkle verification, but we can also get a form of covenants. I don't know how familiar you guys are with covenants, but that's like covenants is the ability to create, let's call them finite state machines.

• 18:55Speaker 00

  You know Bitcoin is stateless, doesn't have a way to update variables and carry over state from one transaction to the other. Covenants is a way to do that. It's a way to sort of restrict where coins can go in specific paths in sort of like a state machine. You can sort of program that state machine to decide like how the different paths in the state machines can can look like and what you do in those different paths. So apparently concatenation alone through some weird cryptography that comes from Schnorr's signatures, you can actually do this with ECDA signatures too. You can actually get covenants with just this one, with this one concatenation op code alone.

• 19:35Speaker 00

  And you can even, there's some people at Starkware that think that they can even actually program a Stark verifier with just this one, this one simple op code that's cat. So you could, you could actually verify like Starkware Starks. And if you can have, if you have covenants and starks, we could, so what we talked about in that previous episode that you realized, you need a ZKP verifier and you need recursive covenants in order to create ZK rollups on Bitcoin.

• 20:07Speaker 00

  So i- if the, if the stark verifier works with CAT, which we're still unsure about, then we can actually get, you know, ZK rollups on Bitcoin. At our, at my company Taproot Wizards, we, since we don't know for sure yet that we're going to be able to do ZK starks with just CAT alone, we have an alternative approach, which does optimistic verification of arbitrary computation. It uses something called MAT, which again uses Merkel trees to a very large extent. So that you, you know how in, in, in optimistic rollups that you have a, a state root and then you update that state root with another one.

• 20:50Speaker 00

  And then in order to find if there was like fraud between those state roots that didn't follow a specific state transition function, you can do, you can do bisection games and identify, okay, this is where, this is the part where you lied about what the computation was. We can do that in Bitcoin if we have Merkel, if we have Merkel root verification. So that is basically the idea of MAT. So if you bundle MAT with recursive covenants, then you can get a, and actually a, a real version of optimistic, some, some, it, it, it actually becomes more like plasma, but some, some hybrid between plasma and optimistic rollups with just CAT alone, even if we can't do starks. So that was a mouthful.

• 21:31David Hoffman?

  And I think that does a really good job kind of illustrating some of the aspirations that technical people have for the future of Bitcoin rollups and also the technical hurdles that need to be overcome in order to actually make true valid layer twos spawn from Bitcoin. But Eric, also at the same time, we're seeing many, many Bitcoin layer twos spawning to this day that are skipping over basically everything that you just laid out. Because as maybe listeners kind of got the gist of, it's really hard and complicated and not technically there yet. Yet nonetheless.

• 22:03Ryan Sean Adams?

  Get an op code in specifically, right?

• 22:05David Hoffman?

  Exactly. But like nonetheless, there are Bitcoin Layer 2s are like a whole thing. Like VCs are funding them, users are starting to use them. One of them just went mainnet this week. So how do you like square these two things? How do you feel about that dislocation, that discrepancy between? Well, you don't have OP Cat in, yet nonetheless Bitcoin Layer 2s as a narrative are, is here. How do you, how do you, how do you feel about this?

• 22:28Speaker 00

  Yeah, so this is difficult. But I think what, what, what basically happened was that Casey Ruttermore invented the ordinals protocol. And I think maybe a bigger invention than sort of the ordinals protocol itself was this thing which are called envelopes, which is how you packet very large blobs of arbitrary data into Bitcoin.

• 22:53David Hoffman?

  And basically. Is Bitcoin finding data availability?

• 22:56Speaker 00

  Yeah, it's like, it's like, oh, apparently we had access to call data in Bitcoin. A part of the block space that, that we don't execute. That's just a dumb data blob. Apparently we have that and you needed to come up with a, a, a, a small script, which it basically creates an if statement and then that whole if statement is false. So you never, you never actually check what is underneath that if statement. Because you just know that this, this part of the script is false. And then what you can do with the rest of the script is you can just put arbitrary data in there. So that, that is what is called an envelope in, in Casey Ruttermore's ordinal theory.

• 23:37Speaker 00

  And that ability that, I mean, we, we've actually had the ability to packet large amounts of arbitrary data in Bitcoin before. It was just way more clunky, like you could divide all these data blobs into different transaction outputs. And it was just like, you needed to be a, you know, somewhat savvy programmer, writing a arbitrary data scheme in Bitcoin that like looked in different parts of transactions, transactions and carved out this part from here, this part from here, this part from here. But basically with this sort of envelope trick, it became very easy in a block explorer to see, oh, there's all my data. Like I can see in the block explorer, there's all that data. And I don't have to like tie together with that transaction input and that transaction input.

• 24:20Speaker 00

  So uh what this means is that what this meant was that, okay, now we can put 400 kilobyte uh data blobs in single transaction inputs in Bitcoin and they will propagate in the Bitcoin network. That's usually one of the one of the issues, like when you create non-standard transactions in Bitcoin, while they're valid in the blockchain, uh nodes will not propagate them. And miners running that that same uh software will not actually put them into blocks. But if another miner does, it will still be a valid block and they'll accept it as valid. But what we had since SegWit and Taproot was that we have this 400 kilobyte arbitrary data blobs that propagated freely over the network and miners included them into into

• 25:03Speaker 00

  the blockchain. So now, all of a sudden, we have like this huge part of the block, which is like a place where, you know, it's a free-for-all. You can do whatever. You can you could even you can even write an entire EVM inside of inside of that uh arbitrary uh like as as a sovereign rollup, you could embed a whole blockchain into the Bitcoin blockchain that way. And that was actually what I um so we we started using this for JPGs, right? So uh Taproot Wizards and yeah, so the the first That is shameful. I can't I can't believe you did that, by the way.

• 25:35Speaker 00

  Yeah, so the first the first uh I mean, the first uh ordinal inscription number one is just a dickbutt. Of course. Dickbutts. Let's go. Let's go. Yeah, and that's and that that's actually that was actually inspired by our uh CTO at the he joined later as the CTO of Taproot Wizards. And he's actually the same he's actually the same guy that has now implemented this way of how you use the cat op code to create like recursive covenants. He's actually a super smart guy. But the first thing that he did when he sort of discovered the Ordnance Protocol, inscription number one, just put a dickbutt in there. Uh the thought that I had was that, okay, well, we have this arbitrary data data space in Bitcoin. Uh now we can build meta protocols inside of Bitcoin that

• 26:18Speaker 00

  are like we don't have to work with the same confines as previous uh meta protocols as Bitcoin had to, you know. Confine themselves to. So like writing meta protocols inside of Bitcoin is actually not something that is super new. Uh, you know, you know that USDT used to exist on Bitcoin and then Ethereum sort of took over all that USD, all that USDT. Uh, that meta protocol was called the Omni Layer. So that was a, a fungible token standard that lived inside of Bitcoin. Uh, and, and there's been other protocols, like a counterparty was also a protocol like that. But however, they had to sort of work with restrictions on how much data they could put on there.

• 27:02Speaker 00

  So you couldn't have like an Ethereum style sequencer that, you know, takes all transactional data and Zeki proves and bungles them into each block of Bitcoin. That was like not really, uh, practical, uh, before. But since we had Ordnance, that now became practical. Anyway, so what happened was after the Dicbot Taproot Wizards, we made a, a four megabyte block that was just a JPEG of a wizard. And then people realized, okay, so the entire Bitcoin block is just up for grabs. You can put any amount of, we had to go, we had to like contact a miner and be like, can you like modify your node and like put it into the blockchain? Uh, nowadays there's a, there's a, there are specific services that are popping up that are doing this like as a service.

• 27:47Speaker 00

  So Marathon, the Marathon mining pool has one called a Slipstream. So now like this is not something that you have to, you have to do anything weird. You just have to connect to the Marathon API and just send them, uh, whatever data you want to pack it in there. Anyway, so I mean, I, I guess as everyone knows and you, you as Ethereum people know that, you know, Ethereum NFTs has sort of been struggling a little bit price wise. Like, I don't know, Board Ape is like 12 ETH these days. I don't know how the others are doing Moonbirds, like all, all, a lot of these blue chip NFT collections have sort of collapsed. And I guess that some people felt that, well, we, uh, we need a new, we need a new narrative here and the.

• 28:29Speaker 00

  The narrative was that, well, what if instead, like, we had links to JPG? Like, what if instead of putting, what if, what if instead of us putting IPFS links to pictures on the Ethereum blockchain chain, we inscribe the whole JPG into the Bitcoin blockchain, so it stays there forever? So we're working with a scarce Bitcoin block space, you know, all the nodes download all of the blockchain, it's gonna get replicated over a whole network of tens of thousands of nodes. Those are like real pristine, like fine art, uh, fine art NFTs. So that became like, that took its own life and now we have marketplaces for that. So, and now we have communities, we have DGEN communities for that.

• 29:09Speaker 00

  So, so like contrasting to what the Bitcoin Layer Two space has been looking like in the past, because it's not the first time that we had like Layer Twos, let us call them sites, so sidechains, so the liquid sidechain, the root stock sidechain. That's not new at all, we've had those for a very long time. Now, uh, that there's like large amounts of money that are floating around, trading NFTs on Bitcoin. Now there's a, a, a, a sort of season two in, in the Bitcoin space where we have our own native DGENs, uh, that are trading NFTs with Bitcoin. And actually, the way that we trade those NFTs is actually kind of interesting as well, because most of the trading for Bitcoin NFTs,

• 29:54Speaker 00

  uh, are actually on-chain using something called pre-signed Bitcoin transactions. And those are atomic swaps, like you atomically swap the Bitcoin NFT, which is actually a, a, a specific Satoshi, well, a specific UTXO, or the first Satoshis of a specific UTXO. You swap them, uh, with Bitcoin in one transaction atomically, there's no, uh, there's no, uh, doesn't go through a centralized exchange, it's actually on-chain atomic swaps. That's how NFTs on Bitcoin are traded, so it's like.

• 30:27David Hoffman?

  You're, you're basically like writing an open check, saying, hey, whoever wants to fulfill this check, here's a check for like this amount of money, uh, for this JPG, if you want to take the other, if you also want to sign here, you can send me this amount of money and then you can have the JPG.

• 30:41Speaker 00

  Yeah, exactly. So this is the start of the Bitcoin season two starting to drum up, right? And then, so one of the things that I was sort of trying to make popular was that, well, we can use this arbitrary block space to create sovereign rollups on Bitcoin. So that means like you take something like, let's say, let's say, for example, you take ZK Sync, and you look at what is it that they're putting into call data on Ethereum, well, I should say, in the blob space of Ethereum, you just take that and you put it into Bitcoin, in the Bitcoin blob space. Now, you're not going to get like Ethereum nodes that are

• 31:23Speaker 00

  verifying those serial knowledge proofs and making sure that that computation was done successfully. But you can have other nodes, like external nodes, that read the data out of the Bitcoin blockchain, and you will get the ordering from Bitcoin, and you'll get the data availability data availability from Bitcoin and the persistence of data from Bitcoin. So that's what sovereign rollups are. Many of those sort of Celestia sovereign rollups work the same way. They become sort of their own layer ones, but they get so much of the properties of Bitcoin that this is now actually an interesting way to make, I'm not, I wouldn't, I wouldn't necessarily call it a layer two.

• 32:05Speaker 00

  It's a layer two if it aggregates transaction in some like compactful way. So there are some people that are saying that if you use serial knowledge proofs with state diffs, now that's a layer two because you don't have all of the transactional data. But in reality, like how state diffs work, it's, state diffs only really compress like the transactional data that you have to put on-chain if it's sort of the same state that is getting updated multiple times in the same block. And a lot of times in, you know, blockchains, you know, you're sending money to Charlie, Charlie's sending money to Eva, Eva's interacting with a compound contract, like there's a bunch of things that is happening.

• 32:49Speaker 00

  Not always can you just like compress all of that because like there's different states that needs to get updated. But anyway, you get some, you get some compression benefits when you have state diffs. So I guess you could call some of those sovereign rollups like actual layer twos. Uh, anyway, so started with ordinals and then some people are starting to build sovereign rollups. Uh, Alpin Labs and Chainway are some of the teams that are working on, Bison Labs is another one. And uh, I'm an investor in Chainway and in Alpin Labs and I was sort of advising them to, well, you can't build your ZK rollup right now on Bitcoin because we don't have this uh, ZTP verifier opcodes.

• 33:31Speaker 00

  But you can build a sovereign rollup and then, and you know, make a vibrant ecosystem. And then by the time that we actually do have a way to verify serial knowledge proofs on Bitcoin, you can transition. So that was, that, that's like mid uh, 2023 and now, now there's like, okay, we have ordinals and we have sovereign rollups. There's like a, a full uh, Ethereum virtual machines running inside of Bitcoin that are serial knowledge proven. This is what is getting like investors to get excited. So even then, like mid, in the middle of 2023, people are getting excited about Bitcoin innovation in a new way because, and if you also think about it, like all that, what, what, what, what was the reason for like,

• 34:15Speaker 00

  okay, so you have root stock and you have liquid on, on uh, connected to Bitcoin through sidechains. But what is the user base? Like who, who's gonna use that? There's traditionally been almost like no material usage on those chains. But if you see that super like, if you see that very vibrant uh, ordinal activity and you imagine that, well, they're gonna hit scalability limits and also uh, the way that they're doing uh, and I don't know, so you, you know, it started with NFTs on Bitcoin, but then that later gave rise to another thing, which is, which were called BRC 20 tokens. I, I think you're, you guys are familiar with those, right?

• 34:52David Hoffman?

  Yeah.

• 34:52Speaker 00

  Uh, but the BRC 20 tokens suck. Like, I don't know, I, I don't know if you have tried actually to transact or sell a BRC 20 token. It is the worst trading experience that existed in any, in any protocol that has existed under the son of blockchain since the, since the dawn of mankind. It is so awful. No, it is so awful because you have to sell. First of all, like if I want to purchase on BRC 20 token, uh, there's going to be listings like offers for sale. Uh, and I can buy 10,000 from that guy and 60,000 from that guy and 100,000 from that guy of these tokens. And then I have these, these, uh, uh, like clumps of like piles of tokens.

• 35:36Speaker 00

  And then if I want to sell like five of those, then I have to make like a new transaction that slices up five from my existing pile. And then I can sell that, uh, pile of five, but then the buyer who now wants to buy, let's see why he wants to buy. Three, he can't buy 3,000. He has to buy my, either my whole 5,000 pile or none of it. So it's like the, the tokens are fungible, but you have to sort of manually slice them up as pizza slices. And then they're like non-fungible.

• 36:07Ryan Sean Adams?

  True force fungibility.

• 36:08Speaker 00

  So that was, that's how BRC 20 token, uh, trading works and still works this day on Bitcoin. So everyone's sort of realizing that, okay, there's, there's, there's, there's a lot of money here. But there, they cannot like, we, when we don't, we don't have automated market makers either. So we, we don't have like liquidity pools or anything. So, so the whole, the whole, uh, trading is like completely one-sided where there are, there are offers, but there are no bids. So there's just one-sided, uh, liquidity marketplaces. There is no liquidity pools or anything.

• 36:40Ryan Sean Adams?

  Really quick in the BRC, uh, 20 thing, that, that was kind of like old tech, right? We had, we had Casey, uh, the creator of, uh, Ordnance and Runes on, on the podcast not too long ago. And so like very excited about the launch of runes, which like the TLDR from him was basically like runes is a, a better version of a, you know, a Bitcoin fungible token. It's an upgrade from the BRC 20. Is that, are you also considering runes when you're talking about BRC 20 or is that sort of like, is the new tech a lot better?

• 37:07Speaker 00

  So runes are better in the sense that they integrate with like traditional Bitcoin wallets better. So runes are just UTXOs. BRC20s are not. BRC20s are like, you have to go into the arbitrary data space of an inscription and then read a JSON and then you understand, okay, this person owns that many of that BRC20. In runes, it's a UTXO base. So if you own this UTXO, in the up return of that UTXO, it'll say how many of those runes that you own. So you can build like regular Bitcoin wallets that are only used to working with UTXOs. They can like own these runes as pure UTXOs.

• 37:50Speaker 00

  So it becomes a lot more easier to build, to integrate that with sort of traditional Bitcoin wallet software. However, the trading experience is exactly as shit as BRC20. Oh, no. Yes, yes, yes. I didn't realize that. So yes, so when you, so right now Unisat is like the biggest marketplace for BRC20s and runes. Actually, I think OKX eclipsed it for a while. I think it might be back to Unisat marketplace at the moment. But as a user, as a technical person, you understand, well, runes have benefits. But as just like the retail user that's trying to interact with these tokens, it looks exactly the same.

• 38:30Speaker 00

  Like you still have to like, okay, I have to buy either like 1.5 million of this token or I have to buy 20,000 of this token and then I have to slice them up. So like the trading experience is the same. So it's actually, it's the exact same shit. It's just more, it just works better for people that want to integrate this with Bitcoin wallets. So runes are great, they're better, like we love them. And the main reason that we love them is because BRC20s bloated the UTXO set of Bitcoin.

• 39:07Speaker 00

  So if you had, if you're, if you're buying BRC 20 tokens, every time that you're splitting them up or sending them to someone else, the UTXO set just keeps growing. And that's basically like the stake, so this, you know, you have like problems with state bloat in Ethereum, like the state just keeps getting bigger. In Bitcoin, yeah, or UTXO gets bigger also. But sometimes you want to take all your unspent transaction outputs and you want to send them to one person. And then it actually collapses. So the UTXO set tends to grow and shrink depending on people, like when people are sort of consolidating their, their transactions. But BRC 20 tokens had no consolidation mechanism. So it was just like, and if you look at these charts.

• 39:48Speaker 00

  Up only, and that means harder RAM requirements on Bitcoin nodes. So it's actually kind of like an attack on the Bitcoin system. Uh, runes avoid that because they are UTXO based. They can collapse and combine them the same way that UTXOs do. So they don't have that up on the UTXO problem. So, uh, but they didn't, they didn't, they didn't solve the user experience.

• 40:18Speaker 00

  Yeah, they didn't solve the UX problem sadly. They just solved, okay, now people are more happy with the growth rate of the UTXO set. So we still, so the, the, the situation that we're in, that we have been in is that, well, now there's actually a need for layer twos on Bitcoin that can offload some of this UTXO bloat and runes trading. And you have, you have, you have seen the fees gone, gone crazy on Bitcoin, right? There was a, I, I think there was a, a day that it was, of course, it was right, yeah, right after halving. It was 78 million dollars in fees.

• 40:53Ryan Sean Adams?

  80 million dollar day. And that was a day where like Ethereum, just to give context, was like $5 million or something. So like actually like crushed Ethereum that day in fee revenue.

• 41:04David Hoffman?

  A, a single typical Bitcoin transfer was 170 dollars or something for a short period of time.

• 41:10Speaker 00

  Yeah, so I mean, doing this DGEN token and F T trading, uh, right now is still small. So like sometimes the fees are low, but ob- obviously this is not going to scale for, for, for the long term. So that is why VCs are seeing that there's going to be a need for second layers on Bitcoin. So they're very interested in these sovereign, uh, sovereign rollups. Like, okay, how can they aggregate transactions with ZK? And they're even interested now in more fanciful versions of, um, uh, federated, uh, multi-sigs. So if, if you're, if you're not just like, so Liquid is an 11 out of 15 multi-sig on Bitcoin.

• 41:51Speaker 00

  That's the, you know, predominant, you know, famous, uh, sidechain on, on Bitcoin. But if you start doing something that's like a little bit more exotic than that, uh, than, uh, Bitcoin, uh, VCs are now, okay. Like, maybe this is interesting. And I think like the analogy that I bring is that, that I'd say is that, okay, so Polygon started out as a sidechain to Ethereum. And they were Ethereum-aligned. And then I think that they, I think Ethereum, the Polygon proof of stake chain launched before rollups really even existed as a thing.

• 42:25David Hoffman?

  That's true.

• 42:26Speaker 00

  Yeah. And then by the time that there were, uh, you know, ZK and rollup technology existed, they started to pivot to that. So I think that's maybe how the VC thinks that, okay, some of these things are sidechains. Uh, as long as they can get traction and momentum, they're going to be able to adopt any type of new technology for layer twos on Bitcoin that, that will emerge.

• 42:49David Hoffman?

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• 43:34David Hoffman?

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• 44:19David Hoffman?

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• 45:03David Hoffman?

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• 45:46David Hoffman?

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• 46:22Speaker 00

  And here's where the important part, the savior from the sky, which was this white paper called the BitVM.

• 46:32David Hoffman?

  BitVM, we've heard so much about it.

• 46:35Speaker 00

  Yes, so BitVM posited that you could actually do arbitrary computation on Bitcoin. Sort of what I was talking about previously where, okay, well, you have basically a Merkleized state. And if you transition to another state, you can sort of do these bisection games and identify, this is the part where some computation went wrong. So like a fraud, an optimistic way of doing computation for Bitcoin emerged through this white paper. Well, it emerged as an idea through this white paper, and that is what people have been hacking on since October 2023.

• 47:20Speaker 00

  And what people imagined was that we could use this mechanism of BitVM to, if it has the ability to do arbitrary computation on Bitcoin and sort of optimistically verify that, then we should be able to build something like. Optimistic rollups has been sort of the what people have been talking about with the caveat. So what people have considered is technically possible today with BitVM. Is you know how Arbitrum has whitelisted

• 47:52Speaker 00

  whitelisted

• 47:54Ryan Sean Adams?

  Fraud

• 47:54Speaker 00

  Entities that are yeah. Whitelisted fraud provers, like whitelisted verifiers. So that is the that is the technical states that you that people thought that you could get with BitVM. So it's not it's not perfect. It's not like a permissionless optimistic rollup where anyone who can post a security bond can can challenge an invalid state root update. So that's what Arbitrum promises. Once they remove this whitelist.

• 48:25Ryan Sean Adams?

  That's what BitVM or that's what Arbitrum and BitVM would promise is like.

• 48:32Speaker 00

  No, no. So Arbitrum promises that they're going to

• 48:34Ryan Sean Adams?

  Oh, I see. But but for BitVM, it's a hard constraint. You can't.

• 48:38Speaker 00

  It's a hard constraint. It's a hard constraint. That is not the only hard constraint of BitVM, though, unfortunately, as sort of we've discovered. Another so BitVM.

• 48:52Speaker 00

  So the Bitcoin scripting language is just the same today as it was, you know, years ago. There's nothing new, like we don't have covenants. We don't. We cannot do finite state machines. We could maybe inside sort of a state channel resolve arbitrary computation optimistically through a complicated verifier challenger

• 49:20Speaker 00

  game. However, so one of the constraints is that like when you do this on Ethereum, you have sort of a like in optimism, for example, you have sort of a chess lock, a chess clock dynamic where, okay, I'm gonna assess that the fraud was happened here. So this is the part of the transaction that I'm disputing. Now, the the sequencer then in optimism has to prove, no, this is this is how I did the. So you sort of bisect down to the part with the computation when was done incorrectly. But they have sort of a chess clock mechanism where here's my proof. Now it's your turn to to give. You're a proof back to me. In Bitcoin, we don't have like chess clocks. So you have like these like long uh time

• 50:06Speaker 00

  windows where you can either within that time window uh post your uh the the the second round in your multi-round fraud proof or not, which means that this uh dispute resolution mechanism in in BitVM could like the first versions we saw this would take six months. There's been some people that are now arguing that they can compress that down to four weeks. So where where you guys are working with like seven Seven days, yeah. Seven day settlement windows. We're working with either six months and maybe we can compress it down to uh four week uh uh four weeks. So we're we're we're struggling with like harder constraints on that side. The other thing that we're struggling with is that

• 50:50Speaker 00

  in order for this to work at all, you need to do uh you need to you need to uh set up sort of a state channel between all the participants in the between all the challengers and verifiers. Uh or actually, let's call them operators and and and verifiers. Uh so that requires them to share uh pre-signed transactions that describes every single sort of state transition in the BitVM virtual machine. And they have to share all all those tr- uh transactions with it with each other. Uh so that's like a a uh a large amount of data that has been that has to be shared between the participants of this game.

• 51:34Speaker 00

  And it makes it very difficult for other channel participants to join sort of the the BitVM. Uh the BitVM uh dispute resolution game. So it has it has clunkiness on the sort of the setup side. It has clunkiness on the challenge response side, but the primary clunkiness that was discovered it to me quite recently because I was actually I was actually kind of bullish on BitVM. I've been writing, I've been writing, you know, tweets that are trying to describe like this is how we can do something that looks quite similar to um. You know, some real flavor of optimistic roll up on Bitcoin. But there was a part of like when we actually got to the implementation stage.

• 52:15Speaker 00

  And when I say we, I mean, more the teams that are that that that have jumped up. And so, so the number of teams that are building on BitVM these days are Alpin Labs. There's Chainway. Actually, Rootstock is doing that. Even Stacks is doing this. And let's see, what am I forgetting? Well, basically, your whole, the whole, the only exception is like Liquid is the only one that's not trying to do like the BitVM direction. Bison, that Bitlayer is another one. So if you see any fancy Bitcoin L2 these days, 80% probability is that they're building on BitVM.

• 52:54Ryan Sean Adams?

  Or intending to, they like explicitly say, hey, BitVM is not ready yet, but at some point we'll just move to BitVM. The one thing I want to add for listeners too is BitVM, correct me if I'm wrong, Eric, does not require an op code change, importantly.

• 53:09Speaker 00

  Yeah, that's the, yeah, that's the whole, the whole.

• 53:11Ryan Sean Adams?

  That's the whole thing?

• 53:12Speaker 00

  Yeah, that's the whole thing.

• 53:13Ryan Sean Adams?

  Okay.

• 53:14Speaker 00

  You can do it natively on Bitcoin without, without anything. However, now we get to sort of the, the big problem, which I think might be an unsurmountable problem. The problem with BitVM is that, so when, when you, when you deposit funds to optimism, you send in, here's my $10,000 of worth of Ether. I send it in. And then when you want to withdraw, when you withdraw your funds, that's when you can do this fraud, like that's when the, the, if the sequencer picks up the transaction and puts it into the state root. Now there's an invalid transaction there. That's what you can do the fraud mechanism on. That's where you do the dispute resolution. It's on the withdrawal.

• 54:00Speaker 00

  In BitVM, it doesn't work like that. In BitVM, what, how it, how it works is that the operator, so the sequencer. Uh can send, uh has to send uh the funds to the people that are owed these monies. So if you say, uh, I wanna withdraw, give me my ten thousand dollars worth of ether. Then the sequencer will oblige and say, okay, here's your ten thousand dollars worth of ether. And then he can reimburse himself with the ether that you previously posted. And it's the reimbursement that you can now do the fraud, uh, uh, fraud, uh, dispute resolution game on.

• 54:38Ryan Sean Adams?

  Right.

• 54:38Speaker 00

  What that means is, what that means is that the, he cannot use the money that you deposited, deposited to pay you out. He has to front the money, the, the, the, that capital for you, for your withdrawal. And then he can reimburse himself later. When the first time that I read that, that this, I thought like, okay, um. He, he does a withdrawal and then he, he reimburses himself with the money and then he processes the next withdrawal. Uh, but that's not how it works. There, it's a whole window of withdrawal that can be like, let's say a week. All those withdrawals, he has to front. And then after a week's time, he can now reimburse himself.

• 55:21Speaker 00

  And so that got us a little bit, cause I mean, at Tapper Wizards, we also wanna, we also wanna play around with L2s. Like, we also wanna improve the current situations of the BRC, uh, twenty tokens, the rune trading. We wanna upgrade that and put it into, uh, environments where we can actually improve Bitcoin. And we have, we have like longer term, like, like the vision that we at Tapper Wizards is not, okay. Let's enable a bunch of degen trading on, on, on, like meme coin trading on, on Bitcoin. That's actually not what we wanna do. We wanna provide like a more scalable environment for Bitcoin, the Bitcoin asset itself. And potentially add some type of zero knowledge, zero knowledge type cryptography to give privacy to Bitcoin, which we desperately need.

• 56:03Speaker 00

  Anyway, so we studied, okay, so how large, uh, what, what could the net outflows of a big rollup look like? So we did some analysis, we actually, uh, worked together with data always on this. I don't know if you're familiar with that researcher, but she, he or he does great research.

• 56:20Ryan Sean Adams?

  They're great.

• 56:20Speaker 00

  And found out that, uh, in two thousand twenty one, Arbitrum, within one week span, had a billion dollar, uh, net outflow.

• 56:32Speaker 00

  And I think that was, do you remember like in the early days of Arbitrum, there was like a Neon Cat Ponzi?

• 56:39David Hoffman?

  Yeah, it was like the, right after the Arbitrum mainnet, like the Neon Cat Ponzi was like the first, like, reason why so many people pushed money into Arbitrum, because this Ponzi was going on.

• 56:50Speaker 00

  But, but then it, then it ran out, like the, the, the game ran out because the token went to zero, because there was like, the, the APY that you were earning just inflated the, the token, so the token went to zero. Uh, so people were farming and selling the token and token went to zero and now there was no longer any money to earn there. So all that billion of capital that had bridged into Arbitrum, they were like, okay, what's the next game that I can play? What other food token can I play? So this is not even like a malicious attack. This is just like, uh, we, um, wanna go somewhere else and have fun somewhere else. Okay, so imagine now that you're the Arbitrum, uh, operator.

• 57:30Speaker 00

  I gotta find a billion dollars to, to, just to, to, and, and so, and what happens that if you don't, if you cannot fulfill that, uh, if you cannot fulfill that liquidity requirement, requirement in that week. What's basically, so what, what you can do, like, so there are people that are now in the BitVM. After we sort of brought this up as a big problem, this, they said, well, you can just, uh, the, the, the role of the operator, you can just push that role to another operator and give him a chance to fulfill the liquidity requirements and you, you can just kick the can down the road. But if this is like too big of a, a, a liquidity crunch that, that no one is gonna be able to solve. I don't know how it actually helps, like, okay, we can't do it, we push it over to the next guy.

• 58:12Speaker 00

  What are the odds that he's just go, okay, I just happen to have like a billion dollars, I, I can resolve this.

• 58:17David Hoffman?

  So one, one of the main pro, like, features of a layer two is that it allows many, many, many people to be aggregated all at once. And I think what you're saying is there's a fundamental problem here when there are many, many, many users of a layer two, but there's a single operator who's responsible for that withdrawal. And so that one single operator, if that, if this layer two gets successful enough, they're, no matter how Size their sizes, they will still be overwhelmed by an eventual success scenario, which is that layer two has so much capital in it that eventually there's going to be a moment in which a lot of capital would like to outflow and that one single operator can't be a sufficiently

• 58:58David Hoffman?

  large market maker to satisfy the outflows out of that layer two. Is that kind of the problem statement? It's like a liquidity crisis, right?

• 59:04Speaker 00

  It's liquidity crisis. And so what can happen in that situation? Like if you, if you do what the current like BitVM implementers say, well, you just push the can down the road and you give the rule to someone else. At the end, if no one can fulfill this liquidity crunch requirement, what happens in the best case is that you put it all, all the funds into a multi-sig and now the multi-sig can distribute the funds to the participants without, like they, they actually just receive all the money from the rollup and now they can, if they're honest, they can now send the funds to whoever owns them. But it actually just puts the hand in the full control of the multi-sig.

• 59:46Speaker 00

  And I mean, so you could argue like, okay, Ethereum has these kind of issues too, like with the security councils. But I mean, at least in Ethereum, we can move away from that. And the security councils can have time delays before they can take the funds. So it's, this is, this is like the final, this is, this is the best that we can do. We can have an operator that has these upfront liquidity requirements. And if we can't fulfill them, it devolves into a multi-sig. And you cannot, you can, you can argue here that, okay, why did we do all this complexity with all the challenge response games and all the liquidity? If it all devolves into a multi-sig in the worst case and sort of we, we are sort of, we have to build these systems with the worst case as the

• 1:00:28Speaker 00

  assumption. Because if you're a George Soros type attacker, you can just force this to happen. You can, you can force it to happen too. So then multi-sig is ultimately the underlying security model.

• 1:00:42David Hoffman?

  It seems like a pretty anticlimactic conclusion for a ton of technical research to make the BitVM happen.

• 1:00:48Speaker 00

  It gets worse. It gets worse. It gets worse because even, even if there's not a liquidity crunch, like even if it's Happy Days and yeah, I can satisfy, you know, $50 million worth of withdrawals, like I'm capitalized, I have VC funding and I'm using, but. Imagine how capital inefficient that operator is that he needs to have fifty million dollars of capital that he's rotating.

• 1:01:14Ryan Sean Adams?

  Nonproductive capital.

• 1:01:16Speaker 00

  Nonproductive capital that he cannot like some, he ultimately needs to charge higher fees from his customers in order to make it work, like in order to pay the interest that he has on that capital that he's probably borrowed, then he has to make sure that he earns enough in his role as operator to make his business, you know, work.

• 1:01:39Ryan Sean Adams?

  Or you could be like fractional reserve, I guess, and just like face a possible run, run, run on the, run on the chain, basically. And then if there's a run on the chain, then everything goes into like, I'll call it bankruptcy court, which is like this kind of multi sig for, for redemptions.

• 1:01:53Speaker 00

  Yeah, no, I, I am talking about, I am talking about the fractional reserve situation, but even that fraction that he has to keep on hand is gonna be.

• 1:02:02Ryan Sean Adams?

  Yeah, a lot, ten percent at least, you know?

• 1:02:05Speaker 00

  Yeah, yeah, it's gonna be a lot of money. Like, how, how much, how much capital is in Arbitrum these days? Like, we're talking about billions.

• 1:02:12Ryan Sean Adams?

  Fifteen billion.

• 1:02:13Speaker 00

  Yeah, so are you, are you gonna wanna keep one point five billion at hand?

• 1:02:19Ryan Sean Adams?

  Again, nonproductively, yeah.

• 1:02:20Speaker 00

  Anyway, so, so my, when I'm, and, and, and the liquidity crunch issue is not the only problem that I'm thinking about. I'm also thinking about, well, you have this constraint of who can be a participant, like who can be a verifier. It's like, it's, it's more like a stage channel than like an open system where anyone can sort of participate in. There's been a new paper called BitVM version two, which I've heard from the people that work on it. It's still kind of impractical. And then you have these setup phases and you have these very long drawn out challenge response games that take four to six weeks. And if you're running by the model where you're delegating this liquidity crunch problem over to someone else, to someone else, to someone else. Let's say you have a hundred different operators that can, that.

• 1:03:05Speaker 00

  Stand in line to take over this responsibility and they all have a week on them. Now, we're talking about like a hundred weeks before it even devolves to a multi-sig. So I would rather have a multi-sig that just always works within minutes' notice than potentially having a system that runs into liquidity crunch, keeps my capital away from me for a hundred weeks and then devolves into a

• 1:03:26David Hoffman?

  A multi-sig that always works is called a sidechain though, right? And we already have those?

• 1:03:30Speaker 00

  Yes, so, so I generally think like the people that went into BitVM, they did this with the best intentions. They're just trying to be, they're, they're honest, good builders, who's just trying to make the, the best that they can with this actually pretty brilliant, pretty awesome, uh, new type of, uh, way of, uh, you know, resolving arbitrary computation on Bitcoin. But as we get closer and as we start to understand these restrictions, it's starting to look like something that maybe isn't, it sucks to say, like, maybe isn't that much better than, like, may- maybe, maybe just build a really, really good multi-sig with like loads of signers and like you can have a large,

• 1:04:10Speaker 00

  uh, uh, validator set and then you can do, uh, uh, like subcommittees that sign things, uh, around, like randomly assigned committees to sign things quickly so that it functions, uh, like, for example, that's what, I think what Botanics does, that is what, uh, the guys that you mentioned, that the guys are just spinning up their system, I think that's what the, uh, Mezzo, uh, like, uh, TBTC, uh, people are doing with these very large, uh, multi, multi-sig sets. Yeah, so the, so the Bitcoin L2 space, like, where are we with all, with all of this?

• 1:04:45David Hoffman?

  Yeah, because, because like, it seems to be that the Bitcoin Layer 2 space is going to be built no matter what. Like, technical constraints aside, like, that ball is rolling. Like, there are already committed builders here, there's already, like, VC interest in there, so like, the Bitcoin Layer 2 landscape is going to happen, it's just a matter of just like, what does it look like on the end of it?

• 1:05:04Ryan Sean Adams?

  Why, why, why do you say that, David? Why do you think it's gonna happen? Is it sort of the, the case that now all of these, like, rollups are, are, uh, being developed and Layer 2s are getting invested in? And it's like, even if BitVM proves to be sort of a dead end, right? Like, kind of the worst comes true here. Then they'll still force, like, political change and the op codes that Eric was talking about at the beginning of this episode to be pushed through? Or why do you think it's inevitable?

• 1:05:27David Hoffman?

  Not necessarily. I just think that, like, there is enough, like, Eric's, like, going through the arc of Bitcoin history with ordinals and runes, and then, like, the constraints of the supply of blocks based on the Bitcoin Layer 1. All of that was to, like, in my mind, was to express the need for Bitcoin Layer 2s, right? Like, Bitcoin needs Layer 2. We've got, we've got ordinals, we've got runes. We've, are seeing up-only interest in building on the Layer 1, which therefore creates the need for Bitcoin Layer 2s. And now also, there has been just like an ecosystem of many, many, many Bitcoin Layer 2s across a broad spectrum of quality, like some, like, thinking about how to do this on the most technically advanced frontier possible, the high-quality ones.

• 1:06:09David Hoffman?

  And then, like, some on the opposite end of that spectrum, some vaporware kind of stuff, and like, everything in between. So like this, but this whole ecosystem is now a category. There's like been venture investment in these teams. There's committed builders to building a product that they are calling a Bitcoin Layer 2, to do Bitcoin things that settle on Bitcoin. And so like, it's, I think the ball has just rolled at this point.

• 1:06:30Ryan Sean Adams?

  It's rolled, but-

• 1:06:31David Hoffman?

  We're going to get some set of products on the other side of things that look and feel like Bitcoin Layer 2s. And it sounds like, according to Eric Wall's constraints of the Bitcoin, the BitVM, that there will be needing to be some shortcuts being taken. And now it's a matter of just like, what, so what does the market feel is like satisfactory shortcuts? And what can they get out of that?

• 1:06:50Ryan Sean Adams?

  Yeah, I hear what you're saying here. And like, obviously, Eric can kind of answer this, but I guess to all you're saying, David, it feels like a narrative is here, and building is happening. But from what I'm hearing is, there's like this technical brick wall, which means all of the Layer 2s will, like, hit that brick wall, and they can't have, like, a full Layer 2. Yes, they could have a sovereign rollup. Yes, they could do a sidechain with a super-secure multi-sig. But like, you can't be an Ethereum Layer 2-style rollup with fraud proofs, et cetera, on chain, yes?

• 1:07:25David Hoffman?

  Yeah, but also, at the same time, we don't even have Ethereum-style rollups in the Ethereum ecosystem.

• 1:07:29Ryan Sean Adams?

  Sure, sure, sure.

• 1:07:30David Hoffman?

  Perfect on, fine, fine.

• 1:07:30Ryan Sean Adams?

  Sure, okay.

• 1:07:31Speaker 00

  Thank you for making my point, David.

• 1:07:35Ryan Sean Adams?

  Sorry for that sidebar, Eric.

• 1:07:37Speaker 00

  I think David, you've gotten smarter over the years or something. I swear to God, I've always been this smart.

• 1:07:44Ryan Sean Adams?

  Yeah, it was ever since your headlock.

• 1:07:49Speaker 00

  No, but I think David is completely right in that, you know, ordinals, runes, the man for L2s, the ball is rolling, there are teams that are raised, there's this fantasy of BitVM coming in and like creating actually permissionless and trustless L2s on Bitcoin. Like the man is here and there's VC funding and so like the and the VCs like I don't know. So I don't know how much these VCs care. Like they could, the VCs can say, well, I don't actually care like how much your BitVM bridge sucks and how much you patch it up with multi-sigs that you hide. Because if we say, Ducktape looks great, guys.

• 1:08:33Speaker 00

  Yeah. If we say that this is a Bitcoin L2 that uses secret proofs somewhere and, you know, uses secret proofs for aggregation in some part of the stack and, you know, uses some BitVM things, something over again. Even if it also takes stacks, for example, stacks is like billion dollar, a billion dollar like multi, like I think it's like market cap is like four, six billion dollars. Stacks is like, you know, do you know what happens? I don't know how much time we have left on this episode, but I can go into like a small like detour into.

• 1:09:07Ryan Sean Adams?

  I want to know like if stacks a real layer two and Eric Wall definition of like what we described layer two or not, and does it have a path to become one?

• 1:09:15Speaker 00

  Yeah, so it's kind of funny. So the short answer is no, absolutely not.

• 1:09:23Speaker 00

  So what happened with stacks was that stacks had this consensus algorithm called proof of transfer. And how it works, how it worked was that people who owned stacks token could stack them and then other people would send the Bitcoin to those people and win the right to create a stacks block and earn the stacks block reward. So they were basically bidding for stacks, for the stacks block subsidy and also for the right to make a stacks block. However, since this is happening inside a Bitcoin block. Uh, it's completely possible for the miner to just censor all the bids for the

• 1:10:04Speaker 00

  Stacks block reward and just send their own like one Satoshi bid and win the entire uh Stacks block for for nothing. And this was actually happening. So F2 Pool were completely fucking Stacks over and just picking out the Stacks block reward and you know, didn't give a shit about Stacks. So Stacks has needed to fix that problem by completely revamping how sort of finality works in the Stacks uh blockchain. And they're calling that Stacks Nakamoto. They're they're using um like signers to uh basically checkpoint which blocks are the valid ones. They're using both like mining and Stacks. It's a little bit complicated, but basically

• 1:10:46Speaker 00

  they're trying to like fix this problem of, okay, our our shit was completely vulnerable to to minor uh manipulation. Uh they've so they're rebranding Stacks into something that's called Stacks Nakamoto now. And because they have had to hotfix this problem in what I would describe in kind of an ugly way, they're calling now Stacks an L2. Like that, we we we fixed this finality problem with with our blockchain and now it's an L2, even though like even if you if you read the whitep if you read the whitepaper itself, uh they outline like these are the requirements for a real two on Bitcoin to exist. It requires the ability, and maybe I should have said this sooner, what is the what is the definition of an L2? In my opinion, it's

• 1:11:29Speaker 00

  the ability for a user that has deposited funds into the L2 to have the the unilateral right to pull those funds out whenever they want to. That's an L2.

• 1:11:37Ryan Sean Adams?

  Agreed. And I will say that's the Ethereum definition of an L2 as well. And sometimes that gets abused in the Ethereum world.

• 1:11:44Speaker 00

  I'm glad that you said that, Ryan, because I've seen people all over the Ethereum space that are like, oh, well, the L2s are...

• 1:11:49Ryan Sean Adams?

  L2, L2, L2, L2.

• 1:11:51Speaker 00

  Yeah, but I agree. That that should be the that should be the like how we define L2s. And we can call those other things other things. But uh yeah, that's my definition of an L2. And if you read the Stacks Nakamoto uh paper, then they do admit that they have made no strides and no progress towards like enabling uh the ability for you to unilaterally withdraw your funds back to the uh to do to the Bitcoin chain. Uh so no, Stacks is not an L2. Uh the BitVM things like, I don't know if there are L2s, but they have this liquidity crunch constraint that... Pushes them to multi-sig in in in worst cases. So like to answer your question, like we don't kind of have L twos on Bitcoin.

• 1:12:33Speaker 00

  And as you say, there's sort of a technical brick wall here. And the thing that we need, and actually what the Bitcoin industry is working towards is we need covenants. We need covenants because covenants allow us to create finite state machines. And if we if if the covenants that we chose within the Bitcoin community was cat, cat is a covenants op code. Then we could do these Merkle tree verifications as a side bonus. That actually allows us to build actual layer twos on Bitcoin. So, uh, no, Bitcoin doesn't really have practical or functional L twos at the moment. Uh, we need, uh, covenants, recursive covenants, and we need Merkle tree verification.

• 1:13:15Speaker 00

  Cats is one of those op codes that's give us gives us both. And that is why, like, that's, you know, I used to be, um. Arbitrum delegate, I'm a board member of the Starknet Foundation, I'm an optimism delegate. I'm actually one of the largest Arbitrum delegates.

• 1:13:30David Hoffman?

  Yeah, no idea.

• 1:13:31Speaker 00

  I I've I've been dedicating, you know, I've because I. I came from, uh, from the Bitcoin space and I wanted to build better layer twos than what Lightning Network could provide. Because I think in a in a in a layer two, how it should work is that you give me your address and I'll send you funds. That's that's that's how that's how the dynamic should work. That's not how it works in Lightning and I think that Lightning is not gonna be very successful. If you tell me that, well, you can't send me funds yet. I'll have to go and borrow funds from David so that I have enough inbound liquidity to receive those funds. You know, crypto has UX challenges enough as it is, like, you know, for people to manage private keys and all that.

• 1:14:13Speaker 00

  You can't add, the second layers cannot add more UX challenges and think that they're gonna be more successful than their layer ones. Or they have to reduce the technical, uh, challenges that people face. And Lightning unfortunately added a bunch of, um. You know, technical constraints. When I was young, when I was naive, I thought that would make it work because decentralization is so important. Now I feel like uh if your system is so decentralized that the UX sucks. So that everyone uses custodial solutions instead, you have actually done a worse job at creating decentralization. Because there's so few people that actually use it. So that's sort of the adult take that that uh that we've come to.

• 1:14:58Speaker 00

  So anyway, I rollups, I think, are the types of um. Even though I have my, my, you know, reservations with how the fragmentation, I know you guys had an episode with Justin Drake not long ago. About how we're gonna solve fragmentation issues with shared sequencers. I pray to God that that works and it doesn't take like three years and then we figure out that it's like sharding. And uh, you know, my, my hope is out there that we're, we're gonna solve that. Uh, but just one single rollup alone is still a much better uh layer two solution than what Lightning is. And um, I, that's the, the direction that I've been wanting us to go towards. So like, no one.

• 1:15:40Speaker 00

  You know, I've wanted this as badly. I, I really want layer two solu- solutions to work on Bitcoin. Like, I, I, I'm not here to try to. If we could do them, like, if, if Tapperd Wizards could just spin up a BitVM rollup and it's gonna work awesomely, we would be doing that right now. But uh, there is no shortcuts here. We need covenants and probably we're gonna need a way to do uh CTP verification also. If all the people that are like genuine about wanting to build a proper L2s on Bitcoin. If we like sort of band together and get this CAT op code through, then I think we're actually in the clear. Uh, then we don't have that much to worry about. Um, so that is what, that is what we're fighting for at the moment.

• 1:16:25Speaker 00

  And uh, I, I don't, I don't think that, you know, so this BitVM stuff that people are working on. There's not a finished implementation for that. Like, that is, I would classify BitVM as sort of a, like a school experiment or something like that. It's gonna take years to really flesh that out into like a production grade system that uh people can work with. Uh, the path to activating CAT uh.

• 1:16:53Speaker 00

  It might be a shorter way than that. So if you are a L2 builder in the Bitcoin space, the fastest way for you to actually get a proper permissionless bridge, a proper two-way peg without any liquidity constraints, and that doesn't have these weird setup phases or weird like channel-based constraints where there's a limit on who can do like fraud proofs, uh, then getting cat activated is is probably what what you should be focused on. So that's sort of the message that we're we're we're trying to. If we can get all L2 builders on this go together, then we're good.

• 1:17:28Speaker 00

  Otherwise, I'm I'm not sure so sure. We might have, we might be in a situation with like Polygon POS is the sidechain to Bitcoin uh for I don't know how many years. Uh, I, there, there was one other thing I wanted to say also, which is, I think that the people who are building on BitVM now, I would classify them as earnest, genuine, talented. Some of them are extremely smart, extremely capable, and and you know, just good, honest people that are trying to make this work. Uh, we haven't touched at all on like the whole scam side of Bitcoin L2s. Because the, ever since the BitVM uh paper came out,

• 1:18:08Speaker 00

  there's been, the Bitcoin space has been awash with complete scam projects. Not sure if I shouldn't name their names specifically, because I'm gonna have them up my ass for the next couple of months if I if I do, but there are um, one, okay, one obvious one is like the one which was called Satoshi VM. They just said like, we're, we're a BitVM. They had some white paper that described something about BitVM. The the white paper made no sense. The token launched on Ethereum, and it actually trades now. You can search for it. It's SAVM is is the ticker. And it's just like a complete scam ticker. It has nothing to do with Bitcoin whatsoever.

• 1:18:48Speaker 00

  Another one is called Merlin Chain, uh, that actually like copied a lot of the um, uh, you know how the sort of brand of Tappert Wizards is, let's make Bitcoin magical again? And it's about wizards. So they just created Merlin Chain. It has like a wizard symbol and uh, their their tagline is, let's make Bitcoin fun again. And um.

• 1:19:13Speaker 00

  If you go to their technical docs, try to figure out like, what is this? Uh, it says that it's a polygon ZK EVM Bitcoin Layer 2 that uses Celestia as a data availability layer. But if it's a polygon ZK EVM that uses Celestia as the data availability layer, how is it using Bitcoin again? And then in some, like, if you'd read further into the docs, it says, you'll find like cropped out screenshots from Bit, from Robin Linus, uh, BitVM paper somewhere where they just, "Oh, you can use NAND gates to do arbitrary computation. This is like future research."

• 1:19:52Speaker 00

  Uh, but in terms of what actually exists on Bitcoin is just, it's just an address that you, it's just like a wallet. You just send Bitcoin to someone's wallet and they call that like, they, they actually do call it like a Bitcoin ZK rollup, which doesn't like technically e- exist at all. And there's a bunch of them. There's a BEVM, BBM. And if you go to these Twitter profiles, uh, to the Twitter profiles of these accounts, you'll see that they have like 250,000 followers and 10 million transactions and 1.5 million uh, daily users and 700,000 active wallets. And

• 1:20:30Speaker 00

  you know, these numbers don't make sense at all, uh, for a, a, a wide category of, of these so-called Bitcoin L2s. So unfortunately, like the ordinals hype and the BitVM paper just gave, uh, scammers the, um, uh, they understood that, okay, there's demand for, everyone's looking for what's, what's the new Bitcoin Layer 2 going to be? And the whole, you know, the whole Bitcoin space is unfortunately awash with these scams at the moment where people are just pretending to be like fully fledged, uh, BitVM. Uh, L twos, but they haven't done, they don't, like I said, BitVM doesn't even exist yet.

• 1:21:09Speaker 00

  There's no, there is no uh canonical, uh, there's a few projects that are trying to implement the stuff that Robin Linus has talked about. Robin Linus himself is trying to build a reference implementation. It is not finished yet, so no one really knows how any of this is supposed to work. Uh, but there are a bunch of projects that have started to scam uh and saying that that technology is already complete. And they have tokens that are trading on Ethereum that are trading at uh everything from like seventy to two hundred fifty million dollar valuation. So uh that that's like one of the negative sides of this uh excitement that has also happened. So my point was basically to say that, yeah, there are some BitVM builders that are struggling right now.

• 1:21:52Speaker 00

  But like, it sort of feels unfair to like criticize them when there's a larger group of just pure scammers that are, that are uh, you know, grifting this space at the same time. So it is a difficult, like what I want to want to say to like people that are listening to this. Be extremely cautious to anyone that says that they're a Bitcoin L two. Try to understand what it is that they have implemented, what exists in open source code that you can look at. I know that most people don't do this research, but uh if there's any in any space that you need to be very cautious is it it it is currently the Bitcoin L two space. It is a complete mess.

• 1:22:28David Hoffman?

  Scammers and fraudsters are actually a byproduct of an actual growing and real ecosystem. So there's actually like some symptom of success here. Uh, I know Eric, you've been with Bitcoin since like the early days. Uh, back before the Bitcoin Dark Ages, I'll call it, back before like the monetary maximalist, like laser eye maxies really gained control. Uh, and I think this is where our very first episode with you kind of talked about that uh change in Bitcoin culture. Uh, but now, now we're seeing it kind of shift back to, I think, a more familiar territory. And despite some of the challenges that I think you've illustrated here on the episode today. The fact that there are challenges in Bitcoin that people are working to overcome is like extremely refreshing and very optimistic.

• 1:23:13David Hoffman?

  Uh, so overall, just like, how would you rate the health of the Bitcoin ecosystem and your perception of its direction?

• 1:23:21Speaker 00

  Yeah, as much as these Bitcoin L2s have problems, I am so thrilled that we have Bitcoin L2s with problems, rather than just having Lightning that everyone says is amazing and is going to solve everything. If I had to choose between either of those two things, I would much prefer the reality where there's tons of teams, smart people, that are aggressively trying to bring better Layer 2s into existence. So, I mean, what we ultimately need for Bitcoin is, we don't, I actually, I'm not that convinced that we need to take, you know, everything that Ethereum has done and put it onto Bitcoin. Like, why? You can, you can go and do that on Ethereum if you definitely, if you, you know,

• 1:24:06Speaker 00

  if you really, really need to do like decentralized lending and decentralized trading and all that, just, just go do that on Ethereum, get a reasonably secure pegged-in Bitcoin, pegged-in version of Bitcoin and do those activities on. We don't need all of the Ethereum stuff to exist on Bitcoin. I don't think so. But what I do know that we do need, we just need a way for me to be able to send Bitcoin to you in a, in a scalable and private fashion, just so that Bitcoin as a currency works. And everyone has believed that that would be Lightning, that Lightning would solve those problems.

• 1:24:47Speaker 00

  And the same way, you know, the same way that I was bullish on BitVM initially, I was bullish on Lightning initially too, but, you know, Lightning developers are also coming to the conclusion that these channels that we're trying to scale Bitcoin through have constraints with inbound liquidity, the user experience, as much as we're trying to patch it up, some problem appears somewhere else in the system. It's like a balloon that you're trying to squeeze out the water of and it just pops up somewhere else. That's sort of how it works when you're, when you're struggling with, with the Lightning design space. I think that Lightning developers are at the stage now where they're, where they would happily say, "We want our next upgrade of Lightning to not use channels at all."

• 1:25:30Speaker 00

  So if that gave them like a convenient out of not saying, okay, Lightning Network didn't work. Like, we have a new version of Lightning that doesn't use channels. It uses the state root updates and either ZK proofs to make sure that those state root updates are correct, or some type of optimistic challenge response. So basically rollups, but let's call it Lightning. So, but yeah, I think the Bitcoin ecosystem has woken up to the idea that Lightning is not going to work. So that's why everyone is trying, you know, so a lot of the hardcore, the hardcore Bitcoiners, there was a white paper that came out for something that was called ARC.

• 1:26:10Speaker 00

  And I don't know, you guys maybe didn't pay attention to this, but there was a massive interest in ARC. And i- i- if the reality of the situation was that everyone in Bitcoin was happy with Lightning, why would everyone throw themselves to this new protocol called ARC, which claimed to have solved some of the inbound liquidity issues of Lightning, or some of the other issues of interactiveness of Lightning? Obviously, there is this big pent-up realization now that maybe getting Lightning to work in a decentralized way is not where we're going to end up. We're going to end up, we're seeing, like, you just have to look at the data, like custodial wallets rule the day. Ninety, ninety percent of Lightning users use custodial wallets because it's just so much more convenient.

• 1:26:55Speaker 00

  And that is such a sad outcome. So we know that Bitcoiners, as much as they don't want to admit that sometimes that Lightning has been a failure, we see themselves throwing in themselves at things like ARC, like anything that is different or that is better. So, yeah, the overton window has changed to we need better second layer solutions on Bitcoin. And I think that With enough people with grit and will and desire, we're gonna get there.

• 1:27:25David Hoffman?

  Well, Eric, it's always fascinating having you on and both your commitment to technical assurances offered by cryptography and the way that they are just leveraged across the space is always just a fascinating learning lesson and also just a good reminder of like some of the history of this space. So, thank you for coming on and kind of updating us on the progress of Bitcoin. And as Bankless listeners might have been able to tell, like, we've been doing more Bitcoin content lately, and that's because of some of the technical unlocks that Eric has been talking about here on the show today and much more like optimistic and bullish frontier than we've seen in the Bitcoin world than we've ever seen before. So, Eric, thank you for coming on the show today.

• 1:28:01Speaker 00

  Thank you. And David, which, is it the 30th of May that you're gonna be in the ring?

• 1:28:07David Hoffman?

  30th of May, that's right. Yeah. Are you gonna be at consensus?

• 1:28:10Speaker 00

  I'm gonna be in the audience. I'm gonna be, I'm not gonna be rooting for you. You know, Nick is my, one of my best friends, but I will.

• 1:28:16Ryan Sean Adams?

  You have a side, Eric. Wow. Wow. Okay. This is, we're talking about the 30th of May.

• 1:28:22Speaker 00

  We are friends and I, I hope you guys have a great fight and you both get to like, show your muscles and I hope you fail in a non-embarrassing way and.

• 1:28:33David Hoffman?

  Do you have money on the other side of my poly market?

• 1:28:35Speaker 00

  I cannot, I'm not, I'm not gonna.

• 1:28:38Ryan Sean Adams?

  He doesn't want to tell the markets.

• 1:28:39David Hoffman?

  Oh, that's right, you do. You do. Oh, I forgot about that.

• 1:28:43Speaker 00

  No, no, no, no. I, I, I love Nick and I'm rooting for him. I think you have a decent shot though.

• 1:28:48Ryan Sean Adams?

  Eric, let me ask you though, you're a betting man. I know you. Okay. So if David wins, will you shave your head again?

• 1:29:01Speaker 00

  No, no comment.

• 1:29:03Ryan Sean Adams?

  All right. We'll take it to Twitter.

• 1:29:05David Hoffman?

  All right, Bankless Station, you guys know the deal. Crypto is risky, DeFi is risky, layer twos are risky, no matter what layer one they settle to. But we are headed west. This is frontier. It's not for everyone, but we are glad you are with us on the Bankless journey. Thanks a lot.