#471 Diego Gutierrez Zaldivar on Decentralized Infrastructure for Bitcoin

Diego Gutierrez Zaldivar is the CEO of IOVLabs, which is focused on leveraging RSK to build decentralized infrastructure for the Bitcoin ecosystem. In this conversation, we discuss Bitcoin, decentralized infrastructure, Ethereum, DeFi, and current trends in the developing world. This podcast audio was recorded from livestream on my Youtube Channel on 1-13-21. ======================= Exodus is an absolute game changer in the crypto wallet space, and we’ve teamed up to offer an exclusive discount for you, as listeners of the podcast. Sign up for Exodus today using my promo code Exodus.io/. This is a no brainer for both newcomers and crypto heavyweights - go sign up today. ======================= Diginex is the first company with a cryptocurrency exchange to be listed in the US. Their ticker is Nasdaq: EQOS, and they are the first crypto company that you can buy stock in. They also have a crypto exchange called EQUOS, which has been built to institutional standards, but is available to everyone. You can trade Bitcoin and Ethereum spot, as well as Bitcoin perpetuals, and get a 5% discount on all fees, by signing up using http://www.equos.com/pomp ======================= Sovryn is a decentralised Bitcoin trading and lending platform and one of the first Bitcoin-native DeFi platforms. Earn interest on your Bitcoin and get paid for lending assets, with up to 5x leverage on long and short trades using USDT, BTC and bitcoin-backed stablecoins. All with no KYC. Click the link below to get your first month’s trading fees for free. Be one of the first 100 and claim a $100 bonus! sovryn.app/pomp.html

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

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano, most of you know me as Pomp, you're listening to the Pomp Podcast, simply the best podcast out there, let's kick this thing off. Diego Gutierrez Zaldavar is the CEO of IOV Labs, which is focused on leveraging RSK to build decentralized infrastructure for the Bitcoin ecosystem. In this conversation, we discuss Bitcoin, decentralized infrastructure, Ethereum, DeFi, and current trends in the developing world. I really enjoyed this conversation with Diego, and I hope you do as well. Before we get into this episode though, I want to quickly talk about our sponsors. First up is Exodus. Exodus.io is one of the most popular cryptocurrency wallets, and has been around since 2015.

• 0:46Anthony Pompliano?

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• 1:32Anthony Pompliano?

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• 2:20Anthony Pompliano?

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• 3:04Anthony Pompliano?

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• 3:29Speaker 01

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 4:00Anthony Pompliano?

  Diego, thank you so much for doing this. I think we're gonna have a lot of fun today. Let's just get started first with who you are and kind of your story before you started to build this decentralized infrastructure for Bitcoin.

• 4:14Speaker 02

  Well, I mean, my, my story with technology goes back to the web days. My story with social activism goes back to when I was very young. I started doing social activism with my, my mother in the slums of Buenos Aires when I was nine. And I was always trying to, there's two things that are commonplace in my, in my life. It's like trying to transform society and then using technology to do that. And when I was 20, I, I created a website for the main newspaper in Argentina. Back then it had a million subscribers and it was one of the top websites for Latin America for many years.

• 4:52Speaker 02

  So I, in 1995, I started with that and I leave the whole web, the dot com, you know, boom. And, and what was the foundations of the web that we live today. So that's how I started with technology. And I, and my view or my objective was exactly that, seeing how we could, could use technology to create a more egalitarian or, you know, society, empower individuals. And, and then when I got in touch with Bitcoin in 2012, for me, it was evident this was the second wave of that disruption that started with the web. And Bitcoin was taking that disruption from information, communications into a financial system.

• 5:37Speaker 02

  So I started building communities in Latin America, first in Argentina, and then helping build communities in, in all Latin America.

• 5:47Speaker 02

  And in that process, at the end of 2013, I, I started doing some experiments, early 2014, bringing this technology, bringing Bitcoin into the slums and, and doing experiments in the meet apps and everything. And then I realized, in order to, to fulfill the, the full vision of like Bitcoin becoming the infrastructure of the future, we needed to extend Bitcoin with other protocols to, to become that. And, and then we got together with the, with the, the original founders of, of RSK at the end of 2015 and, and we started doing that, extending Bitcoin to become the financial system of the future.

• 6:30Anthony Pompliano?

  Got it. So let's talk a little bit about when you first came across Bitcoin. It was very early for most people. What was kind of your reaction to it? And why did you gravitate so much towards, hey, this is going to be something that I want to spend a lot of my time working on?

• 6:44Speaker 02

  Well, you know, the first contact I had with Bitcoin was in 2011, but I didn't get it. So it took me like another year and a call from Wences Casares, one of my good friends from the web days, to really reconnect with Bitcoin. And what happened to me is that back then we had capital controls in Argentina. We have capital controls again now, but it was almost impossible to get money in and out of Argentina. And I had a web development company back then and it took me like a month to get the money from my customers abroad, from Europe and the US into Argentina. And I was losing 10% of the money in that process. And Wences, he was in the Silicon Valley.

• 7:28Speaker 02

  He told me, "Gehito opened an account in Blockchain Info ID." And he sent me like 5,000 Bitcoins. Back then it was like maybe 50K USD. And I sent them back, minus one. He left me one to play around with it, which I lost in Satoshi Dice. So, you know, and then the whole thing happened within an hour. And we didn't have to ask permission to anybody for doing that. So then I realized, okay, this is how a truly open and inclusive financial system should look like. It's like, this is like truly where the finance, the financial system should go.

• 8:07Speaker 02

  And then that was like, after that, I was like 15 days reading about Bitcoin, not sleeping much. And the first thing I was like reading about was more about the monetary systems. I read the history of money, how the monetary systems of the world work, how the financial system work. And at the end of that, I realized Bitcoin was a solution for something I was looking for many, many years, for more than a decade. That was a way of creating self-organized societies and peer-to-peer organizations. So then I went to my partners in the software factory and told them, "I'm sorry, but..."

• 8:49Speaker 02

  I'm going to do all my life to this and the rest is history. That's when I started doing everything there was to it, you know, like mining with a GPU computer, meeting in cafes in Buenos Aires to buy and sell Bitcoins, starting doing meet apps, the early meet apps in Argentina and then in other countries in Latin America. So that was my early connection with Bitcoin.

• 9:13Anthony Pompliano?

  It's an absolutely incredible kind of journey you've been on. Let's talk a little bit about IOV Labs and kind of what you're doing today. So what was the genesis of the idea to start the business and then we'll get to RSK in a minute?

• 9:26Speaker 02

  Yes, I mean, IOV Labs started as RSK, you know, so we first started with this idea of, at the end of 2015, of extending Bitcoin to have a second layer as a settlement using the Bitcoin infrastructure and the Bitcoin currency to power an agreement settlement layer, what usually people call smart contracts. So we started with that idea, but then over the process, we realized that, you know, we needed other layers on top to scale payments, to solve user interactions like having name services or aliases, have secure ways of storing data.

• 10:11Speaker 02

  That's when we came out with the idea of the RSK infrastructure framework on top of RSK. And that's when, you know, we changed the name from RSK to IOV Labs, which comes from Internet of Value Labs, because we think what we are doing is creating multiple layers on top of Bitcoin to create the Internet of Value. So that's exactly what we are doing at IOV Labs, making this Internet of Value a reality and building, you know, everything with Bitcoin as the foundations of that Internet of Value.

• 10:44Anthony Pompliano?

  Let's talk a little bit about, um, kind of, there's two worlds that seem to be being built right now, right? There's the Bitcoin world where Bitcoin is at the center. You're obviously building a lot of decentralized infrastructure, um, and, and kind of trying to take Bitcoin from just a single currency, uh, kind of store value medium of exchange, and really building an entire financial system around Bitcoin. And then there's another world, which is the kind of Ethereum type world, where people are building decentralized finance and there's a lot of experimentation and innovation. I think that you and I see pretty eye to eye in terms of both of those worlds have a importance and they serve different purposes.

• 11:23Anthony Pompliano?

  So maybe talk, let's start with the Ethereum world and kind of what many people are now calling decentralized finance. But this is everything from decentralized exchanges, the lending protocols, and kind of all the things that are happening in that Ethereum world. How do you view that, uh, kind of ecosystem and, and its importance for, uh, the overall development of this industry?

• 11:44Speaker 02

  Well, I think it's, uh, you know, when, when we started with RSK, actually, we were aware of the, of the Ethereum project. It was not live yet, but, you know, I was in the North American Bitcoin Conference in January 2014 and, and I saw the Vitalik beach when he presented smart contracts and everything. But in my mind, um, I mean, the idea was great, but I thought that pulling up a new network, a new infrastructure network, and more importantly, creating the level of liquidity and the network effects that Bitcoin had achieved in a completely new network would take many, many years. And so for me, the shortest and safest path in the, in the long term

• 12:28Speaker 02

  was to build all those things on top of, of the Bitcoin infrastructure and the Bitcoin currency. And, and to be honest, I think Ethereum did an amazing job. They, they, they like got to a point of maturity, although now they have these big bottlenecks in terms of scalability and, and some congestion due to the success they have, no? But they, they push it to a level that I wouldn't imagine when we Started, I thought it was going to take them much, much more time. And so I think Ethereum did a great contribution in terms of experimentation of protocols and things. But also, it is the victim of its own success.

• 13:10Speaker 02

  Because now the bottlenecks they have will will leave them to have to change the core elements of of their platform. And and more important, the economic incentive model and the actor. So so they are in a in a crossroads where they need to, you know, leave behind people who was the early supporters of the crypto economy of Ethereum and move into a system that can scale properly. So so I I see some uncertainty, but definitely the developers' community, they build, all the technology they build is amazing and and we leverage on that. Indeed, we took the EVM from Ethereum and and RSK is using that EVM. Then the consensus protocol is not exactly the same.

• 13:55Speaker 02

  It's all the the consensus protocol from RSK is one called DecoPlus that solves some of the consensus problems, consensus protocol problems of Ethereum, which is ghost. So we did innovation where we thought innovation was needed. But we also capture all the value from the Ethereum community. And I think the going to the point of DeFi, I think DeFi, you know, decentralized finance is actually the the ultimate goal. I I think the first decentralized finance protocol is Bitcoin. And and the ultimate goal is to provide all the financial services that today exist in centralized models, to provide them in a peer-to-peer decentralized fashion.

• 14:38Speaker 02

  So I'm, you know, fully in line with the objectives of Ethereum. Maybe the main difference is I think the bot the the bottom layer should be Bitcoin. Because you need a store of value that is as sensorship resistant as neutral as possible. And I and I think Bitcoin is that, you know, that scarcity, that digital gold model is what makes Bitcoin the best store of value you can have. So so foundations are very important for. For this new financial system that we are building.

• 15:11Anthony Pompliano?

  So is it fair to say that what you're building is decentralized finance? The way that you're pursuing that is to use Bitcoin as the core unit of account? And then infrastructure around Bitcoin is decentralized in nature? And the Ethereum community is saying, we're going to build decentralized finance. They're choosing to build decentralized infrastructure as well, but they're building it around ETH as kind of their core unit of account. And really, the two differences in that argument that you're making, and I tend to agree with you. This is what you're saying is, one, Bitcoin is digital application of sound money. ETH is not. And then also, there is a difference between the security, the decentralization,

• 15:56Anthony Pompliano?

  and kind of the, you know, really, the testing of the censorship or non-censorship of the Bitcoin layer versus the Ethereum layer? Is that fair to say that that's the two differences that you see? But ultimately, the kind of the finish line or the goal of both of these communities is the same?

• 16:13Speaker 02

  Yeah, I think you're completely right. I mean, our goals are exactly the same. Our strategies or tactics are different, but conceptually, we want... And we have made some contributions that Ethereum is taking. Sergio has pointed out, Sergio is our chief scientist, co-founder of RSK. He has pointed out some, you know, he has participated in some of Ethereum debates and contributed things. So we think that from a technology perspective, we are contributing to the same things. There's one subtle thing that I think is a very important thing in the long term is that by securing RSK via merge mining, that means that the same Bitcoin miners with the same infrastructure they have,

• 16:58Speaker 02

  they don't have to change anything of the infrastructure. By securing both networks, RSK and Bitcoin with the same miners and creating incentives in the same token. RSK becomes part of the crypto economy of Bitcoin. So there is no conflict between RSK and Bitcoin because we are contributing, both networks are contributing to the same infrastructure,

• 17:25Speaker 02

  you know, the security infrastructure and also contributing to the same base currency. And that's essential because if you were to use, you know, Bitcoin, wrap Bitcoins on Ethereum, then you have a conflict because basically you are helping Bitcoin adoption. But on the underlying layer, you are also, you know, with all that economic activity, you are incentivizing a competing network. So maybe in this moment is not important, but in the long term, those conflicts, having two conflicting security infrastructures will create tension. And that might be like, so I think that's the other, that's why I think although in the short term, we are in equal terms

• 18:10Speaker 02

  and we are aiming for the same things, in the long term, RSK is an important protection layer for the Bitcoin economy.

• 18:19Anthony Pompliano?

  Got it.

• 18:19Speaker 02

  Infrastructure.

• 18:21Anthony Pompliano?

  Absolutely. Before we move on, everyone who is watching live right now, please make sure that you smash the like button so that more people on YouTube will see this. Feel free to share the link on Twitter, Reddit or wherever else. Let's get more people paying attention to this. Diego, let's talk a little bit about kind of where you see this going. So if we zoom out and we look ahead 10 or 20 years, is this a world where Bitcoin is the core unit of account? It kind of ascends to global reserve status and all of the infrastructure is completely decentralized and it's built around Bitcoin? Like what is your vision for a decade or two out in the future?

• 18:59Speaker 02

  I think maybe a decade is too short for the process we are leaving. I think, you know, if you look at the web, it started in late 80s, early 90s and it took the web at least 20 years to become like commonplace and, you know, what we know today. I think Bitcoin, yeah, maybe you're right, is one decade more from here.

• 19:28Speaker 02

  Conceptually, I think diversity is important for anti-fragility. So I don't think there will be like a single network to to rule them all. I think we will have multiple networks with different security models. And that's what we have today. It's like, you know, Bitcoin is maximized for security. And there's trade offs in terms of scalability and functionality because of that. Then, you know, RSK is choosing to share the security infrastructure. But there's also trade off. I mean, it's adding more functionality. Ethereum has a separate infrastructure. What I will, what I do see is I think for each security model, there will be a winner.

• 20:08Speaker 02

  So let's say that Bitcoin is proof of work based on SHA256. Ethereum is based on KICAC. So it's different. You know, you will have ASIC or specialized hardware for each one of the protocols. Maybe Litecoin and Dogecoin are like another infrastructure model of security. Then you have all the POS models. So I think there will be a winning, you know, network in each one of these security models. And they will all evolve. I don't see one like overriding the whole thing. I think one will be, and you can see that in Bitcoin today. You know, one will be the big dominant. We will have kind of a pareto scene.

• 20:52Speaker 02

  So you have one dominating 80% of the of the value transactions and everything. I think that's Bitcoin. And then you will have 20% that will be distributed among the long tail of different security models that will be suitable for other use cases. Because POS, it very likely is very good if you are only are handling, I know, economies with 50,000 people and a few tens, tens of millions of dollars. But it's not good if you want to have the reserve of value of the world. So I don't think we will have like one dominant network. That's why I talk about the Internet of Value. It's a network of networks with different, you know, delegation of responsibilities, different security models that are suitable for different use cases.

• 21:34Speaker 02

  But if you talk about reserve of value, then it's Bitcoin. There's nothing else.

• 21:39Anthony Pompliano?

  Got it. And so when you think about kind of the steps needed to go from where we are today to that vision that you're describing, what are you building right now in terms of the actual products? And then what are the other things that need to be built to get us there?

• 21:54Speaker 02

  Well, we are mostly focused on infrastructure. So there are other, the pioneers of RSK are building the products on top of, and the solutions on top of the infrastructure we build. So our focus is mostly on, I would say, three elements. Interoperability, because this is like, we need to have trustless transfer of value between these different networks. And again, I think that's important for anti-fragility of the ecosystem as a whole. If you have one network to attack, then, you know, it's easier to shut down the whole movement. But if you have multiple networks with different security models, different actors, properly interconnected, seamlessly interconnected, attacking and killing one network doesn't

• 22:38Speaker 02

  kill the whole phenomenon. So anti-fragility, interconnectivity and trust minimize interconnectivity between blockchains and networks is key for the long-term success of the movement, of the decentralization movement. So that's one thing, and we have already created the safest two-way bridge between two blockchains, that is the one between Bitcoin and RSK. And we also have a two-way peg bridge with Ethereum. So we have interconnected the two main cryptocurrencies. So that's one thing. The other thing is scalability, and it's leveraging, it's not only our research.

• 23:18Speaker 02

  We are leveraging on the research that, you know, Lightning has done on payment channels. Now we are working on enveloping that is an abstraction protocol that enables users to use a single token and pay the network fees in the same token, although the miners always, in the case of RSK, get Bitcoin. But, you know, abstracting the users from the complexities of the economic models of the underlying networks, and also other things that are important for mass adoption that has to do with the user-friendliness of the interactions. And what I would say is in 2021, all the protocols needed for the crypto systems to work exactly as a fintech, exactly as a

• 24:04Speaker 02

  The traditional banking solutions, but in a decentralized environment are here. So 2021 is the year where all these technologies, that was you were asking what I think needs to happen. That's like the first thing was that we needed to be able to offer users the same level of experience as of a bank or a fintech. And finally, we are there. All the protocols, the technology to scale, to give user-friendly experiences are there. So now it's a it's a matter of making all those components converge. The following step is how I see this is like we are building this new infrastructure that will be the infrastructure of the future, the financial infrastructure of the future. But the money lives on the traditional financial infrastructure that is based on on legal contracts.

• 24:49Speaker 02

  We are based on on protocols, programming, you know, agreeing programable agreements. The traditional model is based on legal agreements. And and basically, what what we what needs to happen is we need to interconnect both the new, the future infrastructure, the legacy infrastructure, and start transposing the the value from one to the other. And that's what's happening now. So the other challenge we have is how we create these flows between the traditional financial system into this new financial system. And and then how we retain those flows, how we prove this new financial system is is better, is more efficient,

• 25:31Speaker 02

  is more open, is more respectful of your privacy, of your of of the individuals. And in between that, what we will have, and I think it's part of what's coming, because we are we are entering the mass adoption moment of crypto. In between, what will happen is regulators will come with all their full force. Because basically, they are losing control. I mean, we are moving from nation-state designed financial systems into globe into a truly global financial system. And that's a direct attack to the to the power of the nation state. I mean, it's breaking up state and money, you know. So so I think that's what's happening.

• 26:13Anthony Pompliano?

  Let me ask you this question. So when you're talking about kind of the legacy financial system and building those bridges to have a kind of transition or a flow of funds from the traditional system into this kind of decentralized digital, what many would consider alternative financial system today, what is the biggest obstacle there? Is it that the technology is not built yet? Is it an education thing? Is it just a familiarity? Like, what is the biggest obstacle in the moment to go from legacy world into the new decentralized digital financial system?

• 26:49Speaker 02

  I think for a long time, I think there was a missing link and the missing link was stable coins, what is now called stable coins, no? Because I think you are asking people to, many people, you're asking them to do one leap of faith and come into a new financial infrastructure. And at the same time that you are asking them to do that, you're asking them to start using a new asset that is not familiar for them. So if you want stable coins are the gateway drug to the crypto world. So now you can, what is happening is now

• 27:33Speaker 02

  we have that asset that people can relate to. You have a dollar or a euro, digital euro. So it's different infrastructure, same assets that you already know. And then you start questioning yourself and saying, okay, but then we have Bitcoin and we have, you know, well, of course, the Bitcoin price going up is a good adoption driver because then people start thinking about it. And then, you know, you fall into the rabbit hole because that's what happens to everybody that gets into it. The first thing is you come for the price rise or appreciation and then you stay for the, all the educational process that implies questioning how the financial system of the world works. So I

• 28:18Speaker 02

  think all the things are in place. We just need those things to mature. The biggest friction we will have is regulators like, you know, creating more and more friction in the coming years on the frontier between the the local financial systems and this global financial system. And that that it happens with any innovation wave. Skype was without regulation for ten, twelve years and disrupted every regulation existing in telecommunications, in global international telecommunications. And what is happening now is the same, but in the financial world. So that I think is what's happening. I don't think there's any any missing piece now. I think the pieces are there,

• 29:03Speaker 02

  but we will see more and more resistance from the status quo to this movement, because this will change who are the incumbents and the people in power.

• 29:12Anthony Pompliano?

  Do you feel like when the regulators kind of turn and say, hey, this is, you know, not something that we enjoy or like, is it something where fifty percent of regulators will try to embrace it and fifty percent will try to fight it? Is it something where majority are going to try to fight it, but they don't really have an ability to fight it because it's decentralized and and kind of there's nothing they can do? Like, how do you see that playing out with regulators in terms of who embraces, who fights it, and then how effective the people who fight it can actually be?

• 29:44Speaker 02

  I think it's a matter of opportunity. If you are a small jurisdiction and and given the the situation of the global financial system, you have more to win than to lose. Now we are seeing, for example, in the Caribbean, the banks are unbanking middle class people just because they want to do the risking. So that that's the place where you have the opportunities, where you say, you know, um, well, I I I mean, for me, as a small jurisdiction, this is the opportunity to join a global economy, to start doing agreements with other countries and and and have a unified front and, you know, and have access to things that the global finance, the traditional global financial system is not offering me.

• 30:29Speaker 02

  I'm not s- sitting on the table of the global conversation. For big economies that are the ones dominating the the global economy, this is a threat. So I think it's more about the opportunities and and threats than than about. Percentages. I would say all the big economies, dominant economies in the world will pose the biggest resistance and the smallest will, the smallest will join faster because they, they see an opportunity of joining this innovation and, and becoming relevant in what's the, the future of, of finance.

• 31:08Anthony Pompliano?

  Got it. And do you feel like it's fair to say that out of the incumbent financial firms, some will get disrupted by a lot of this and some will kind of adapt and end up actually embracing it and we'll see, you know, Goldman Sachs or JP Morgan or whoever end up actually just interacting with the protocols, just like the challengers or startups are today. How do you see the incumbents responding to the rise and adoption of, you know, kind of a decentralized infrastructure around Bitcoin?

• 31:42Speaker 02

  I think it's a matter of how vested you are in something. I, I've seen people that, that started with what for them were small investments that became like a very relevant part of their portfolio. And, and some of them decided to support core developers, you know, start because if you are smart, then, and you have a lot of your assets on, on, you know, vested on, on a particular platform, you know that having your own eyes into the platform development and, and keeping the, the platform honest, you know, makes sense. So I think it's, at the end, it's about more, it's like the moment Goldman Sachs

• 32:27Speaker 02

  starts like having a substantial part of their assets or not a substantial, but important enough part of their assets in the networks, they will become part of the infrastructure. That's how it works. It's like, you know, it happens with the, with the exchanges. If you are an exchange in Bitcoin, you're not going to, to run your, your Bitcoin node on a cloud server or hire a third-party service because that's like a weakness. In your infrastructure, you're putting your money at risk. But also, there's like a process of understanding this. It's like there's an educational element to it. Because you need to understand that you're playing a different game. You know, in a decentralized network than in traditional.

• 33:11Speaker 02

  You know, because again, the engagement model and the security models of traditional of centralized systems is based on insurance, legal contracts. So it's a different mindset. Here is you, the famous don't trust, verify. Motto is what drives everything. So I think there will be some clashes there in terms of understanding these new models.

• 33:34Anthony Pompliano?

  Absolutely. Before we get into Q and A, I've got one more question for you. But if you're watching the live stream right now, make sure that you smash the thumbs up, the like button so more people on YouTube can see this. Take the URL, go share it on Twitter, Reddit or wherever else. And then if you have questions for Diego, drop them in the chat here. I'm looking at it and I will try to, over the next 30 minutes or so, ask him as many of them as possible. And if you stump him, then good for you, but probably not. One last question before we get into the Q and A is, tell us more about the actual like R I F infrastructure that you have and kind of the R S K and I O V products in terms of

• 34:17Anthony Pompliano?

  when you spend your day building, what are you guys building? And for those that don't know anything about the business, kind of give us just a layman term overview of the business.

• 34:28Speaker 02

  Well, you know, that's the thing. I O E Labs is the sponsor of an ecosystem. It's like the first mover of an ecosystem. We build the protocols, but the people building the solutions are entrepreneurs that are building, you know, solutions on top of the infrastructure we build. So from an infrastructure perspective, you know, we first created the R S K blockchain that's open source, is into the hands of the community. And indeed, we don't have a control on the network anymore. It's like, you know, we, like anything, it starts like centralized. Bitcoin started with Satoshi, then Halfini joined and.

• 35:05Speaker 02

  And then, you know, you you started moving from centralized to decentralized. And RSK now is fairly decentralized. We have no control on the network behavior. We only keep developing the protocol and proposing things, improvements to the protocol. And and more and more, the other participants in the network are the ones taking over new improvements. And so that's one thing. On on top of the RSK blockchain, what you have is all the DeFi for Bitcoin movement that is starting. So you have MoneyonChain that created the first stable asset, a dollar on chain, um, token, uh, a asset backed by Bitcoin, which is great because it's, it doesn't depend on intermediaries. You you you have dollar on chains.

• 35:47Speaker 02

  You can go to the protocol and and get, uh, whatever amount of Bitcoin that dollar is worth at that moment. So so you have kind of going to the, back to the gold standard, but being Bitcoin the the gold, the reserve asset. So I think that's that's great. It's a truly peer-to-peer monetary system. And on top of that, you have a team that created RSK Swap. There is the equivalent of Uniswap where you can, you know, you have a decentralized exchange and an automated market making protocol. Uh, then you have Solrion that is bringing lending, uh, and and margin trading. Uh, other protocols from Ethereum are coming, like, uh, Abi.

• 36:29Speaker 02

  Even the DAI protocol is bringing DAI into RSK. So you have all these open finance ecosystem where we have the pioneers already there. Um, you have wallet providers, DeFi and Big So, all all the ones. Then you have people connecting with the real economy. You have the X Freight, for example, that is connecting like the logistics business into this financial system is creating, you know, um, uh, for example, factoring for truck drivers in the US. So so you have like that connection with the real economy and optimizing the logistic industry. Then you have coin banks that is like connecting, uh, you know, the banks i- and financial institutions of Latin America and using this open financial.

• 37:15Speaker 02

  Networks, a network as a backbone to interconnect countries that don't connect well among them. Then you have Grupo Saura helping the gas and oil industry and working with governments to implement this whole system. So it's, you know, it's an ecosystem. So our purpose and our success is that these people building these solutions is successful and we help them. That's our business, if you want. We are a non, you know, a purpose-driven organization. What we want is to create a financial system that will be inclusive by design and will be able to serve any human being on the planet regardless of their current financial condition.

• 37:56Speaker 02

  And on the Riff part, as I said, what we do is we supplement this smart contract layer and the Bitcoin store of value with peer-to-peer protocols. Then now with the, you know, the platform, the platforming that we are seeing in Twitter, in many places, this is becoming more and more relevant. So what we did is we built protocols for secure peer-to-peer communications, protocols for decentralized storage, naming services, decentralized naming services. So we can, we can build truly peer-to-peer applications secure by, you know, decentralized smart contract platforms and a decentralized economy.

• 38:37Speaker 02

  So the Riff Marketplace is that, is a truly open sharing economy engine where all these protocols, where anybody can be a consumer of these protocols or a provider of these protocols. So that's what we are doing, like, you know, taking decentralization all the way up from Bitcoin to business logic into the internet peer-to-peer protocols. So that's a little bit of, well, not a little bit, a lot of.

• 39:05Anthony Pompliano?

  I'm going to cheat and say one more question, but I have one more before we go to the Q and A. Is, you're outside the United States and you're in South America. Help people understand if they live in the United States, what is the current kind of sentiment and maybe the benefits of Bitcoin to, you know, countries abroad versus maybe in the United States where the dollar and the financial system works really well?

• 39:28Speaker 02

  That's, that's very interesting, a very good question because, you know, I've been roaming around the world for four years before the pandemic, visiting Asia, Europe, the US, Latin America, and.

• 39:42Speaker 02

  And what you see is that in emerging, in the emerging world, you don't have to explain why Bitcoin is relevant, because our economies, the economies in Latin America, has such instability and, and, and, well, you have capital controls, hyperinflation, uh, you know, corruption. So you, everything around you is unstable. You, you don't have any place to, to protect your value and people is hedging against the, the measures of the government all the time. So for, for, in that context, even for people who is like thinking short term, if you have 50% inflation per year, or in cases like Venezuela, you are talking about

• 40:26Speaker 02

  thousands of percentage of inflation per year, then, then Bitcoin is a, is a store of value and is, is a hardware, you know, a safe hardware for, for your value. And, and it's a safe hardware that has global connectivity, that, that you can like with your value connect with anybody in the world. So you can pay anybody in the world, you can get paid from anywhere in the world. And that's what happened in Venezuela, for example, where a lot of freelancers are working and getting paid in Bitcoin. We have people in Argentina sending money back using dollar on chain to their families in Venezuela, using the, these networks, because the traditional system, you know, gets a 10% cut, uh, you know, and, and so,

• 41:10Speaker 02

  so in the emerging world, in, in most of the economies in the world, I would say, you know, Bitcoin is a necessity, it's not an option. Then you have, of course, the top percent of the population, which we are part of, that can save money for two, three years, like that have a longer horizon, financial horizon. And then we see Bitcoin also as a store of value, a mid to long-term store of value. But it's interesting to understand the other side of Bitcoin, that is not only, only for mid to long-term store of value.

• 41:43Anthony Pompliano?

  Yeah. There's a bunch of questions that we got. So we're going to go through these. I'm going to just yell them out and you give me the answers as, as you get them and we'll go until we're tired of answering questions. Uh, let's start with, uh, are you going to add more wallets in the future?

• 42:00Speaker 02

  Yeah, absolutely. We we we help, you know, wallets. I I think we have been working with Edge Wallet, which is a very nice Bitcoin wallet, and and we have been adding some in Asia, like Math Wallet. So we keep helping wallet providers integrate the technology. And we have a reference wallet that is the R Wallet, that is an open source wallet that we use as a as a codebase. So we we help others build solutions using the open open source base that is for Android and and and also for iOS. So so yeah, definitely.

• 42:39Speaker 02

  And if you know a wallet of preference, please share it, and then we we will try to contact them and help them integrate.

• 42:47Anthony Pompliano?

  Your thoughts on adoption of crypto in India? The Supreme Court there has lifted the ban on crypto in 2020. Any thoughts on India specifically?

• 42:56Speaker 02

  Yes, absolutely. You know, I I'm very good friend with Sani Ray, and then he was at the at the center of that dispute. They they actually won, Unokoin, won the the the trial with the RBI, the the Central Bank of India, where they tried to, you know, by force, shut down the crypto activities, and they won. And and I think they they did a great service to the crypto community. And I think India is, although I'm not an expert, we we should bring Sani for that, but but Sani Ray. And you know, India has a long tradition of, you know, protecting value in with gold.

• 43:41Speaker 02

  And and, you know, the government has been trying to to break that, you know, forbidding, you know, gold store store of value. And so I think India is a very interesting place because culturally, they have been already hedging for, I would say, thousands of years in in in hard money, in long term money, as I like to call it. So for them, for them Bitcoin is, and also the the technology. You know, um, adoption is huge, so mobile adoption is huge. So I think they are ripe for disruption there. So I think I have big hopes in India. And also it's becoming, India already has the same size of, as population as China.

• 44:26Speaker 02

  And it's becoming the production center, it's replacing China as the production center. So for, for the world in many aspects. So I think, you know, yeah, India will be a very, very interesting environment.

• 44:40Anthony Pompliano?

  Uh, what can I do in the Bitcoin space besides coding? And there's a bunch of people asking about where they should look for jobs and all that kind of stuff. But, but how do you think about what people can do besides coding in the Bitcoin space?

• 44:53Speaker 02

  Well, I think education is a great place to be. There's a lot of people willing to be educated from very, you know, every time we have these new waves of price increase and adoption, because they come hand in hand. A lot of people ask for help, you know, installing the wallets, accessing an exchange, using crypto. So I think, you know, that's something that, you know, if you devote, you know, a few days, maybe a couple of weeks of your time, you can become proficient enough to help others in the process. And I think this is an industry that is like, you know, if you look at the people that is knowledgeable,

• 45:33Speaker 02

  at the people that are in the programming side, of course, you know, you, you have maybe 10,000, uh, you know, proficient programmers in the space, so for, for an industry that it's already worth a trillion dollars. So I think education is a great place to start. And also while, while you get educated, you know, and you help others to get into this, uh, you can make a profit and find other venues where you want to apply. So that's a very good one. Um, and, and then I think. You know, to be part of crypto, you don't need to be specialized in crypto. I mean, you can take whatever you do. I, I, that's what we promoted in the early days where there were no many places where you could use crypto.

• 46:15Speaker 02

  And we were telling people, okay, you can translate all money, dollars into Bitcoin. But something better you can do is like offer your services, offer your products in Bitcoin and be part of the Bitcoin economy. And, and that's the best way of being part of this and, and, you know, educating yourself and having skin in the game and starting learning about it.

• 46:36Anthony Pompliano?

  Yeah, that's a great answer. What KPIs do you think are great to assess whether or not Bitcoin is successful? It's Coach Daniel Salmerun, I think he pronounces it.

• 46:47Speaker 02

  I, I think, you know, when you look at the Bitcoin ecosystem, um, you know, and people is fixated on transactions per day or something like that. And, and Bitcoin by definition has a hard limit of maybe 700,000 transactions per second. And the protocol will evolve very, very small, very slow in that sense. Um, but what you have to check is, is the amount of volume transacted. Because, you know, Bitcoin is like the core, the, the core, you know, settlement hub. But then you have the exchanges on top, you have payment processors. So you have this layer two, you know, when we talk about layer two, usually we talk about decentralized protocols.

• 47:29Speaker 02

  But also the, the centralized service providers are layer two to Bitcoin. So what is happening is like, if you see the amount per transaction and the volume traded, it keeps growing in Bitcoin. So even the transaction, the amount of transactions or the quantity of transactions stay the same. The volume move through the network keeps growing and growing and growing. And I think that's the best indicator of, of the, of the network growth and, and the, the Bitcoin success.

• 48:01Anthony Pompliano?

  Yeah, you just published our login as open source and you'll be bringing it to Taringa, I think is how you say it, the largest Latin American social media site with 30 million users. Talk a little bit about our login and kind of what the impact could be if that's adopted by more and more companies.

• 48:21Speaker 02

  Well, yeah, at the end of 2019, we acquired Taringa, this social network that is the biggest Spanish-speaking social network. And with the aim of integrating all the peer-to-peer protocols, all the RIF protocols into it, to turn the social network into a fully peer-to-peer sharing economy. But the interesting thing is like, when we say this, is like, we not only want the social aspects of the community be managed by the users, by the community, but also the economic aspects be managed by the community using the open finance and the peer-to-peer protocols we are building, and also the infrastructure.

• 49:04Speaker 02

  So in the future, the idea is that if I'm a Taringa user, I will run the application on my mobile phone and I will be hosting data for other users. So the full infrastructure, economical, you know, social and infrastructural elements of Taringa will be run by the community. So, and again, I think this is more current than ever with what we are seeing around censorship in centralized social networks, because this is the answer to having a truly decentralized social network. And our login is a key component, because, you know, we have been using social logins for a while.

• 49:45Speaker 02

  So we use the Google login or we use the Facebook login to log into other applications. And then we rely on them to revoke access. And so we are giving away the control to our assets, our digital assets, to third parties. So the idea of our login is a login where you are logging in and controlling the certificate, the credentials to access to any website. From your crypto wallet and we are integrating that into Taringa. So, but this is only the beginning to showcase how you can have. So when you login into Taringa, you're not relying, you won't be relying anymore on Taringa servers.

• 50:27Speaker 02

  The credentials will be on your wallet, the sign, the, the access will be signed by your wallet. So you will be in full control of your access. And, and then, you know, shutting down, shutting down access to things will be fully in your control. So it's like removing intermediation in that point, which is one of the many points we want to remove intermediation.

• 50:47Anthony Pompliano?

  Yeah, that's really cool. Uh, next question comes from, uh, Div X-Man. Uh, if Ethereum use case as a decentralized cloud computing grows, does the fact that 25% of the Ethereum network being hosted by AWS pose a risk to the ecosystem?

• 51:04Speaker 02

  Okay, yeah, absolutely.

• 51:06Anthony Pompliano?

  Maybe not so much just Ethereum and AWS, but just, uh, as decentralized cloud computing grows. If a lot of, uh, the network is hosted on these cloud computing centralized entities, is that appropriate?

• 51:20Speaker 02

  You know, this is all already happening. There are corporations that are not using, for example, like AWS or that decided to mount their own cloud infrastructure because they were seeing espionage from other companies like stealing projects and things. So I think that's a clear, uh, you know, point of control. I mean, the, the cloud infrastructure has been becoming more and more centralized. So definitely, I think that's a, that's, that can be a choke point for, for decentralized, decentralized networks as well. And there are many ways, I think, one point that Ethereum, uh, and, and it was manifested recently, but was something we were very worried about is that all the access to the blockchain,

• 52:05Speaker 02

  given the amount of resources that you need to run a node for Ethereum, are centralized through systems like Infura. And those systems are not only working on cloud servers, but also are handled by a single organization that is Consensus. So, so indeed, I think decentralization, and I will say this, you, we speak about decentralization as a, as a, you know, discrete thing, as a Boolean thing. And it's not, it's like, you have many, many points, many elements that need to be decentralized to ensure that, you know, we stay sovereign and the networks stay sovereign. So, so I think in that sense,

• 52:45Speaker 02

  um, yeah, I, I think that's a, that's a big problem. We have some solutions in our SK coming, like, like clients, so people can, can, you know, validate or interact with the, with the blockchain, without intermediation of, of third-party services. Um, there's a lot of things you can do. Also, the peer-to-peer protocols for data sharing and secure communications. We, we have something equivalent to an incentivized store network in the works. All those things will create like a, I wouldn't say every system can be attacked, no, and then with enough, but what we are doing is like creating an imbalance where the little guy defending from the big guy

• 53:28Speaker 02

  has an edge that, that will make the big guy, you know, work to attack harder. That's about cryptography, asymmetric cryptography is about that, no?

• 53:39Anthony Pompliano?

  Absolutely. Uh, next question is from, uh, Mira, I think, Duran. Uh, do you think Africa will make a big player for crypto in the future? And is RIF, RSK doing something specific for the African market?

• 53:55Speaker 02

  Uh, the answer is yes. I think, you know, we are, uh, trying to, or working on, on making a successful model in Latin America first, because that's where we have, uh, the strongest network, uh, you know, and, and connections. And we understand the culture deeper, but definitely, I think, you know, Africa, India, Southeast Asia are the places where these technologies will, will, uh, have its, the, the, the, the first mass, mass adoption. And the reason is very simple. It's like, you know, it's like what happened in Africa with the, they never had landlines.

• 54:36Speaker 02

  They went directly to the mobile phone. So, so when innovation comes, uh, sometimes and you are way behind, you just leapfrog to the following stage. You don't, you don't go through all the stages. And I think this is about that. It's like, we are in, in facing, we are in front of the financial system of the future. And those regions that are lagging behind on financial infrastructure are not going through the best of breed of the legacy systems. They will just jump into this. So I think Africa is, is a great, and, and we are doing some, uh, some approaches in Kenya, in some places,

• 55:15Speaker 02

  but very mild for now because, you know, what we are trying to pull together in terms of technology and adoption is already challenging. So we, we have the resources to go, you know, for the next 10 years and go the full process, but, but we think we need to keep focused, be successful in one region and then translate that into the different, you know, into other regions because each region has its particularities, cultural differences. So you cannot just copycat models and, and that adaptation also takes time.

• 55:48Anthony Pompliano?

  Uh, I'm gonna cheat and I'm gonna ask my own question because nobody's asked this shit. I thought they would. Talk a little bit about Lightning Network and kind of how you see that, uh, being built out and kind of the importance of it and all of that.

• 56:00Speaker 02

  I, I think Lightning is, is, is a great extension to be going for micro payments. And, you know, and the more, and the more it evolves, uh, you know, the, the, the, I mean, the better it works. Because it's about the, the liquidity put into, into the payment channels that enables the payment channels to, to work more fluidly. I, I think, uh, we need to supplement.

• 56:28Speaker 02

  Things like Lightning, there are payment channels, because payment channels are good to establish or to rebalance payments between halves that don't have trust among them. But you have a lot of scenarios where other models like RollApps or what it's called Commit Chains, that is the consolidation of multiple payments in one proof on the blockchain, can have more efficiency. So I think where we are in terms of payment, of chain payment infrastructure is a hybrid model where we will see on one side, things like payment channels in Lightning, we have the same in Reef, we have Reef Luminol, that is the equivalent of Lightning on RSK.

• 57:11Speaker 02

  And we are seeing that these payment halves or commit chains also provide good infrastructure solutions that, together with payment channels and together with another protocol that we are implementing in some wallets in the ecosystem called Enveloping, that enables to abstract the user from paying the fees of the network. So the user has experience that is closer to a fintech experience or a neo-bank experience. All those three protocols are the solutions to scale blockchains to be able to process tens of thousands of transactions per second in a sustainable way. Because I think Lightning is not only about scaling, having faster payments, it's also

• 57:55Speaker 02

  about avoiding bloating the blockchain, which is key. Because it's like, when people say, "Oh, I can do 10,000 transactions per second on chain," that implies that you are adding like, I don't know, maybe 20 terabytes of data per year to that blockchain. So that instantly equates to a centralized network. Because how many people will have 20 terabytes of hardware, of added hard drives every year to support the decentralized network? So I think, you know, scaling is not only about capability, it's also about keeping the core ethos of decentralization. That is that any human being with a regular computer, a home computer, is able to download

• 58:39Speaker 02

  a node and validate the state of the network without trusting third parties. This connects also what I was mentioning before on Inferno.

• 58:48Anthony Pompliano?

  Absolutely. Before we go to wrap up, I will leave a link in the comments here in a second for people to go to the website. But maybe let's just kind of wrap up with you giving a pitch for, you know, why is RSK important? Why is I O V important? And really less about maybe like the specific work you're doing, but the vision that you shared at the beginning of this, which is decentralized infrastructure around Bitcoin, you know, why is that important and how do we get there?

• 59:23Speaker 02

  Well, I think, you know,

• 59:26Speaker 02

  I O E Labs, it's just as I said, we should be less and less important and what is happening on the network should be more and more important. We are just a mentor, a sponsor of this ecosystem. I think the real heroes are the pioneers that are building the solutions on top of our technology. Why RSK and Reef and all the protocols we are building are important is like for the Bitcoin ecosystem, because we are making sure that, you know, all the activity in these decentralized networks will contribute to sustain the core infrastructure of Bitcoin. So for Bitcoin is important on two sides. On one side, because it secures the sustainability of Bitcoin

• 1:00:11Speaker 02

  as the subsidy for Bitcoin emission of new coins, you know, is reduced. This creates new revenue streams for the Bitcoin miners, for the security infrastructure. So it's important to preserve the long sustainability of the Bitcoin ecosystem. Also, it's important because it provides Bitcoin with all the components needed to have a fully decentralized and peer-to-peer experience for a Bitcoiner. So, you know, if you are a Bitcoiner, you not only want to store value in a decentralized platform and protect your value, your wealth in a decentralized platform,

• 1:00:50Speaker 02

  you want to live in a truly decentralized environment. And that's what RSK and Reef are bringing and all the pioneers. In ecosystem are bringing a truly peer-to-peer environment to do everything you want to do, like from financial aspects to social aspects, to protecting your data. So it's full sovereignty. That's why it's important and for humanity, because you know, we are doing this on Bitcoin for, for, for the reasons I mentioned before, but our purpose is, you know, connected to, to, to any human being and for humanity, because I think we are entering into a phase where we will have to fight for our privacy and our sovereignty.

• 1:01:33Speaker 02

  Because more and more totalitarian models are, are emerging and, and being used to control how people think, what they do, and, and how they interact with each other. And I think this fight for sovereignty and independence is key. And also because these technologies have the potential of including the health of the population that today is completely excluded from the financial system. And therefore, you know, it's doomed to be poor forever because they don't have the means to, to progress and, and grow. And so that's why I think this is so relevant and that's why we're doing what we do.

• 1:02:15Anthony Pompliano?

  I am a, I'm a big fan. I think that early as Bitcoin, probably one of the most important inventions in the past 20, 30 years, but obviously it is going to be crucial that there is this element of non-censorship and security and privacy. And so decentralized infrastructure is kind of a no-brainer and you guys have been doing some fantastic work. So listen, I think I speak for everyone who's, who's watching this. Thank you so much for, for joining us. If you are watching live right now, make sure that you smash the like button as we end so that more people on YouTube will see this. Make sure you are subscribed to the channel. And then if you want to learn more about IOV labs and RSK, you can go to rsk.co slash open finance. But thank you guys so much for joining.

• 1:03:00Anthony Pompliano?

  Diego, you are an absolute legend and I appreciate all the hard work you guys have been doing. And we will have to do this again in the future, my friend.

• 1:03:08Speaker 02

  Thank you, Anthony. It will be my pleasure and, and also thank you for all the work you do, spreading the word, very important.

• 1:03:16Anthony Pompliano?

  All right. Bye, guys.