{ "episodeId": "SLP300", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "adam_back": { "name": "Adam Back", "role": "guest", "tag": "ADAM" } }, "segments": [ { "speaker": "stephan", "time": "00:09", "start": 9.05, "text": "Hi and welcome to Stephan Livera podcast, a show about Bitcoin. Today for episode three hundred, I've got a special one. It's Adam Back, the CEO of Blockstream. He is a cryptographer and privacy advocate, and famously, he is the inventor of Hashcash, and he is cited in the Bitcoin whitepaper. So Adam re-joins me on the show today, and we talk about a bunch of things. We talk about the regulatory environment for Bitcoin and attitudes to- Engaging in the political and lobbying process versus building. We talk about crypto wars in the nineties and the parallels, as well as Bitcoin privacy. I know this is something a lot of people are interested in, and so we talk about confidential transactions, both in liquid and what it would actually look like on Bitcoin if we were to get it, and what are the trade-offs involved. And we of course get into some aspects around using Bitcoin in a more censorship-resistant way. We talk about Blockstream satellite base station and using Bitcoin in cheaper and more accessible ways. This show is brought to you by Swan. Bitcoin, and as you might know, I've recently joined the team as managing director of Swan Bitcoin International. Swan is the best way to accumulate Bitcoin with automatic recurring buys and instant buys. There's a specialized focus on education and community, because at Swan we see it like the more you know, the more you buy, and Swan is Bitcoin only, there's no confusion with altcoins. Swan also offers a service called Swan Private. This one is available for high net worth individuals, corporates, businesses, trusts, other entities who want to buy Bitcoin. With Swan Private, you get direct access to the Swan Private Team, you have a dedicated Bitcoin account expert who is available for one on one calls. So if you're interested to sign up with Swan Private, go to swanbitcoin dot com slash private. Are you interested in Bitcoin DeFi? Lend at HodlHodl is a peer to peer Bitcoin backed lending platform. You can lend out stablecoins or borrow against your Bitcoin globally and anonymously. There's no KYC involved. So if you have stablecoins, you can lend them out. There's an average of twenty five percent APR available. Also, you no longer need to sell your Bitcoin to get" }, { "speaker": "stephan", "time": "02:00", "start": 120.06, "text": "And so you still hold one key in that two of three multi-signature, HodlHodl doesn't hold your funds. Lend at HodlHodl allows peer-to-peer lending and borrowing directly between users, so with this platform, you set your terms, you put up the offers depending on how long you want to borrow or lend and the interest rate. Go to lend dot hodlholdl dot com. Have you been watching on the sidelines or wanting to get involved with Bitcoin mining? Well, Compos mining can help you out here. Compos mining make it easy for everyone to mine because Have that sent there, then you can select a mining pool and start mining Bitcoin, and you will receive the bitcoins, and you just pay the hosting costs. Also, there are special deals available. One is called the mini bundle. The bund- the bundle pricing is twenty-seven thousand dollars deposit at plus three thousand dollars a month for six months, plus the hosting cost, and for this, you get six Antminer S19J100 tera hash machines. So go to compassmining dot io and start mining Bitcoin today. Now, on to the show with Adam Back. Adam, it's a" }, { "speaker": "stephan", "time": "03:00", "start": 180.36, "text": "Yeah, it has. there's been a lot going on, I think there is the very pressing topic right now of this whole infrastructure bill. And I, I guess put it into context, right? America's population is, I don't know, three hundred and thirty, three hundred and fifty million out of a population of eight billion, but it does still, impact what happens on the rest of the world, given obviously America's place in the world, wealth and all of these things. and I also noticed there is this interesting parallel with what was going on back" }, { "speaker": "adam_back", "time": "03:30", "start": 210.44, "text": "Yeah, I mean, I guess, America is a, a big market, and I can't pretend to understand, you know, American or Australian politics, the, you know- Hard enough to understand local politics at times, it seems like a messy process. I think mostly what, what we'd like them to do is to, you know, not mess it up, not, not create silly, illogical rules that create a mess. So of course, everybody has opinions on it, you know, so some people have a view that, well, just, just focus on the technology, it doesn't matter what they do and stuff like that. So I think it's, you know, the, the fundamentals, that's true, but at the same time, you don't want them It will be, you know, time consuming for people to deal with or create a funny environment where some countries or some provinces within some countries are no go zones where nobody wants to provide business services, and that happened to New York with the bit license, so it'd be a shame if they did something like that or create something disorganized that doesn't really make sense. And that presumably has to get worked out later in less tidy ways. So I think that's why," }, { "speaker": "stephan", "time": "04:41", "start": 281.13, "text": "yeah," }, { "speaker": "adam_back", "time": "04:42", "start": 281.99, "text": "you know, what Coin Center has been saying makes sense. I like, I like the fact that one senator put forward a, a bill, which is what I was saying, like, \"Why do you even need this? Can't you just delete it?\" And he put forward an amendment to do that. So I was like, \"Good, that's, that's the right answer.\" But, the, The experts in US political lobbying at Coin Center, think that won't work, like that, that won't, won't pass. it, it doesn't, it doesn't make a lot of sense to me, the whole thing really, to be honest." }, { "speaker": "stephan", "time": "05:13", "start": 313.27, "text": "Yeah, of course, yeah. And just context for listeners, so there is a current infrastructure bill draft, and it has, wording in the tax code defining brokers to include, quote unquote, any person who, for consideration, is responsible for regularly providing any service effectuating transfers of digital assets on behalf- Half of another person, end quote. Now, that could be seen as overly broad and maybe it captures in people who aren't actually brokers. And so I think one of the pushbacks we're seeing, or at least some of the commentary we're seeing is, \"Oh, see you Bitcoin people, you don't wanna pay your taxes and whatever,\" but really it's not just, even if you set aside the tax part, it's, it's capturing people as brokers when really they aren't brokers. And so that's what some of this amendment is about and really w-trying to For people to still operate, in the Bitcoin world, whether that means they are running a Lightning node, whether they are a Bitcoin developer, whether they are, let's say, operating a multi-signature service like Unchained Capital or even like Blockstream Green, right. So, and, you know, I think, y- I think you have commented in the past that maybe your view is a little more like, let's try to keep innovating the technology, and not focus as much on the politics, but I guess that's also, seen reflected in" }, { "speaker": "stephan", "time": "06:30", "start": 390.14, "text": "feel about self-sensei, self, you know, sovereignty anyway, right? so how do you sort of balance that?" }, { "speaker": "adam_back", "time": "06:36", "start": 396.05, "text": "Well, I mean, I'm, I'm on the, write code, not laws, don't vote, encourages them kind of end of the spectrum, but I am practical, so I'm pleased that there are competent people lobbying for common sense in their circles, and they do have some, some influence. Of course, it's all a bit chaotic and random what actually happens, so that's a bit disappointing for Something of value to an economy that, you know, what actually comes through is down to, you know, sort of random last minute haggling by some politicians who- You know, there, there are some politicians who actually do understand and own Bitcoin, which is nice to see, but, you know, there are many who don't, who are lobbying, who, who don't even understand what they're lobbying for And that, that is not a good recipe in general." }, { "speaker": "stephan", "time": "07:28", "start": 447.98, "text": "Of course. And if we, if we were to see, you know, the worst of it happen, that this amendment passes through, sorry, that the, this bill passes through without some kind of amendment to give a carve out for certain Bitcoin companies, what's your view on where companies might go? Would they restructure or would they perhaps go offshore to some other countries in the world to set up their services?" }, { "speaker": "adam_back", "time": "07:50", "start": 469.81, "text": "they might. I mean, it's certainly, you know, the US is a more complicated zone. To provide services and, I mean, Blockstream is a Canadian company, with, you know, operations in other countries as well, and So, many of the market operational entities like exchanges and derivatives platforms and so on aren't in the US and And many of them won't provide service to US residents, for example. So this is already, already a factor. So, and the number of, some of the more advanced market services like, leveraged options and leveraged trading Some of the crypto lending markets are, are hard for US residents to get to, you know, for this reason. So they're, they're sort of disadvantaged, and I guess ultimately that sort of impacts the American economy a little." }, { "speaker": "stephan", "time": "08:48", "start": 528.34, "text": "Yeah. And another angle is also the mining aspect. So I believe even the, quote-unquote bad amendment here does have a carve-out for proof-of-work mining, but- That I have seen some of the commentary from some of the politicians saying, \"Oh, look how much energy proof of work is using.\" Obviously, I know you'll have something to say about that also. So, do you have any views on what that impact might be, or could we potentially see, an ESG style attack and say, \"Oh, look, see, we should use proof of stake because it doesn't use as much, quote, again, quote, it doesn't use, it doesn't waste as much energy as the, quote-unquote, wasteful proof" }, { "speaker": "adam_back", "time": "09:28", "start": 567.95, "text": "And any complicated nuanced topic don't typically mix very well, and so there, there is certainly, you know, some potential to create, to create some, logistical problems to clear up. But, I mean, actually, in terms of energy use, you know, there are lots of, arguments to be had. I think that, for example, we have, we have an operation in, in the US and an operation in Canada in a Quebec province Province of Canada. The Quebec Province of Canada has the, the, electrical grid is, you know, ninety-nine percent renewable. It's like ninety-five percent hydro, four percent wind, and one percent, you know, I guess other sources that are able to s- to be spun up and down very quickly, which is, probably gas or something like that. So it's like as green as it comes, effectively, and it's fifty percent unused, and it's very hard to get access to it. And that- That was down to politics, down to election year. a lot of things got confused. There was a moratorium on power for mining. You know, that, that province of Canada has enough, has more than enough unused hydropower to power the entire Bitcoin network today, even today, years later, right? So, you know, to say the government's, politicians have concerns about ESG, while there's a solution right there, stop, you know, blocking access to green power, and it's not costless because, you know, if you, if you don't use- You use power from a hydro dam, you just open the sluice gates and pour the water downstream and it heats up the environment at the bottom of the dam and, you know, no, it's a zero, zero difference to the environment and it, it basically, you know, foregoes billions of dollars of net revenue to this, power grid owner, which is a government owned corporation, and so it, you know, it loses money for the province, and of course, business flows around restrictions, right? It's like the internet routes around damage. Bitcoin mining is extremely- Survivable and will go wherever it needs to go. And so, you know, we certainly started expanding more in the US in reaction to that, but there are many other countries. So actually, I mean, China is another one. So some people, sort of speciously commented that while the Chinese government, reduced the You know, carbon footprint of Bitcoin mining by, you know, pushing a number of miners, making it difficult for mine-miners to operate in China, and so they, they relocated or are somewhat in the process of relocating, hash rate still down, but actually, how-- China is a, is a good example of a country with enormous amounts of unused hydro, so particularly it depends on the season, like rainy season versus not, they also have coal in other places, so there's some, some truth to that, but there's certainly a lot of, a lot more unused hydro capacity in China That, you know, that, that's a, a mixed result, I would say. And is, you know, people say that, that's good for decentralization, but I think you want, you know, actually a balance of Mining in lots of different countries, so some mining in China is actually good, 'cause it balances out the biases of other countries. So you don't have to agree with a particular country's policies, you just want lots of countries that may or may not agree, so there's a diversity." }, { "speaker": "stephan", "time": "12:47", "start": 767.05, "text": "Right. And I think the other angle that could come in the future is even hypothetically, now of course, I, I believe we can make that argument, say, \"Hey, look, look how much people are using renewable,\" like, you can make that argument. But I wonder, in the future, there We should use proof of, stake or some other mechanism. And of course, I guess the Bitcoiner answer to that would be something like, \"Look, proof of work is actually how we achieve a decentralized consensus and make this an actual money that isn't politically controlled. So that's the whole point.\" So how would you come back to that sort of argument?" }, { "speaker": "adam_back", "time": "13:23", "start": 802.87, "text": "I mean, I think that's true, and I'm very skeptical that proof of stake actually works at the end of the day. Even if it does work, it's, you know, even if it somehow- Magically was made to work, it's, I'd say it's undesirable, like because it has, you know, the same factors that go into political money, government money, which is, you know, there are people that have printed the money, who are then gonna hand it out, and you have the Kondratieff effect, and people who are, you know, have close ties with the committees that are in control of these things, get cheaper money or get free money or get money for being promoters, you know, then, then you get kind of special interests that can get favors Like if they lose money, they can undo it. If other lose people who are less influential or that have less contacts, they can't. And so that this basically like fiat, but instead of being run by, you know, world-class monetary economists, run by some JavaScript developers basically with no prior economic training, and I'm not sure that's better actually at the end of the day. So, so I think Proof of Stake is basically, you know, a disguised, centralized federation, almost Worse than a federation because you can buy seats, right? You, you buy, you buy stake and you can get influence, so it's kind of prone to takeover. And you, and like all of these things have been observed in the wild, I think altcoins are kind of great for brute forcing all possible failure modes, oft-often with warnings of, \"Ooh, don't do that, it will fail,\" and then they do it and it fails. But, you know, they've certainly proven empirically many things actually do fail in the way that people predict they will. So I think Another, another argument about, you know, that with, with proof of work, I think it's kind of like gold mining, right? So there's a, there's a quite old Tushy quote from Bitcoin Talk or somewhere that the world is, a better place for having gold as a dependable apolitical money Than without the expenditure to, to, you know, to mine it. And, ano-another thing is that in, in particular cases of Bitcoin, it's Teaches people about saving and long term thinking and about money, about Austrian economics, and so many people who would have previously been prone to spend all of their disposable income On gadgets and stuff, become avid savers because they realize that if you can, you know, if you can save your money in something that has, you know, more than doubled every year for ten years That could be very economically interesting if it were to continue, and so they will stop spending. And, and so people think about money in a wrong way. They think that, you know, it comes from nowhere, but there's always a foregone alternative in any expenditure, right? So the people that bought Bitcoin or mined Bitcoin, they gave up some other form of economic activity to do that. So they didn't, you know, given the average Western person's Spending pow- spending habits, which includes very little saving, I must say, inc- involves a lot of, you know, credit card debt and consumer goods So many of the consumer goods are like basically made of plastic, they end up in a landfill within a few years. And that's the alternative, right? So you're saying, \"Oh, Bitcoin mining?\" Well, Bitcoin mining is significantly done with renewable energy because it's the cheapest. And even if it weren't, it's still probably a net benefit for the environment because all those, you know, those file listings that end up in landfills as a result of Bitcoin Savers that would have been buying these things, so I think that's interesting, and I think, you know, the long-term thinking is generally a good thing for, for, for many reasons, but including, you know, kind of valuing The state of the planet for future generations. I mean, people are saving, they start to think about what happens, what, what happens to their money, what happens to their descendants, things like that, which people who are trapped in a kind of consumer rat race, they're focused on, you know, next week or next month, right? Or what they can spend next." }, { "speaker": "stephan", "time": "17:42", "start": 1062.19, "text": "Absolutely. And there's so many social and cultural impacts of fiat money, and as you rightly point out, we have to compare money, monetary standards overall. So what is the cost of a gold standard? versus a fiat standard versus a Bitcoin standard, and we have to look at that holistically, and I think people who only look narrowly at, \"Oh, the energy,\" they don't understand. And so that's why I think we could argue even if Bitcoin was a hundred percent fossil fuel mined, it would still be well, well worth it, and that's probably part of how we have to, explain it to some people, but for others, of course, we can explain to them, \"Oh, look, lots of renewable energy is being used.\"" }, { "speaker": "adam_back", "time": "18:19", "start": 1099.48, "text": "Right. I mean, I So, so I have my doubts whether proof of stake actually works, like functionally, typically they degrade into kind of very inefficient, complicated proof of work, but and the other disadvantages we talked about, but Paul Stoltz, is a kind of, has a background in academic game theory has, has some interesting comments about it, which is that if you have a way to obtain money, logically people will be prepared to expend up to the value of the money to obtain it. So, you know, if a Bitcoin is worth forty thousand dollars, ultimately, including all of their costs and their projections They'll be willing to spend up to forty thousand dollars per coin mining it. Now today, cost of mining coins is probably below five thousand, it's very profitable for various reasons in this, in this period, but, you know, that's generally true for commodity economics, right? And so that being the case A proof of stake system doesn't save any money, it just means that that energy, you know, that, incentive flows elsewhere. So in, in, in the same way that political monies or the petrodollar does, right? So it, it leads to wars, it leads to lobbying, it leads to bribery, it leads to favoritism, accounting costs for, you know, reconciliation, legal disputes. So, so basically the same amount of money is spent Because you're chasing, it's, it's chasing the same incentive, right? And it will, it's just spent in like untidy, inefficient ways, which wastes human, you know Resources essentially. So I think that's another reason, like Bitcoin is extremely clean and tidy and provides a kind of mathematical avenue for people to expend their demand in. So that, that has a very predictable and, tidy market, whether the, whether the other market is, you know, all full of, you know, insider advantage and lobbying and fraud of different kinds and so on, so it's, that's not a good backdrop for economic growth. I think for economic growth you want You know, clean, dependable markets, and Bitcoin does a much better job of, giving that. So I think that, you know, of course, the, Bitcoin standard is a, is a much more lofty thing than Bitcoin competing with, physical gold, for example, or gold ETFs, but You know, it, it does make a lot of sense to see the world migrate back to the digital gold standard, resuming the gold standard. As opposed to this, you know, on this, on the archaeology, very short term experiment with, easy credit and money, you know, fiat money printing." }, { "speaker": "stephan", "time": "21:12", "start": 1272.01, "text": "Well said. and so when we're talking about Bitcoin mining, and as you said, this idea of predictability and, you know, if mining flows out of the USA, even, I mean, it's weird because it seems like a lot of the mining is coming into the USA, but, you know, let's say if there's also other areas where people are going to mine, or even El Salvador, right? The, the idea of volcano mining or geothermal mining, do you have any thoughts on that whole idea, geothermal mining? Do you see that that might become more prominent, or you-- do you think it's, it's gonna be more like the hydro is gonna be the way?" }, { "speaker": "adam_back", "time": "21:45", "start": 1305.43, "text": "I mean, there is significant geothermal mining, and actually, you know, I-- Iceland is another country that has volcanoes, so volcano mining, if you like, it's a fantastic meme, so of course, it, it really took on, but- There is, you know, there's significant amounts of that going on in Iceland, and I think the trade-off with geothermal is the infrastructure is, is relatively costly per megawatt to set up, but, you know, with the right cost base and expertise and, you know, funding, like a government infrastructure bond, something like that could be possible. So, you know, we're certainly interested to explore that, something that we're, we're working on in the background." }, { "speaker": "stephan", "time": "22:24", "start": 1344.27, "text": "Great. and while we're on the- This topic of mining, I think another angle, and as we're hearkening back to this idea of the crypto wars and potential censorship in the future, so of course, this isn't a thing right now, but I wonder, is that a potential in the future where, let's say, a lot of the big miners are publicly listed entities, they are regulated by the government, and potentially at that point, could the government try to levy some kind of whitelisting or blacklisting approach to censor where the transactions go? And then at that point, then it's going to be, well, there's In the ecosystem, one of those could be the use of privacy techniques so that the miners don't know which party is who, because it's a pseudonymous ledger, you don't know who is who. but I guess it, it kind of, it depends on how many people are coming in through, say, the KYC on, on ramp, versus people who are, let's say, earning or mining or buying non-KYC, just as an example. but do you see that as a possibility or do you see that like it's just not going to be feasible," }, { "speaker": "adam_back", "time": "23:27", "start": 1406.9, "text": "against that issue, and, you know, there, there was one corporate miner that was talking in these terms but they have, s-since had new management and dropped that idea, so that's, that's good to see. I think you need, you need sufficient decentralization I think another thing that helps is, you know, 'cause there are, there are different sort of vectors for centralization. One is the mining pools, and the other one is the physical mining, you know, the miners and a mining farm. And so there's actually more centralization in mining pools than in mining farms. I mean, of course, the total hash rate is quite big, so, you know, decentralization might be Tens of megawatts in a warehouse or something, right? But nevertheless, they're in different countries, and mining itself is, in principle, anonymous, right? So unlike transactions, there's no history to a mined coin, and, there's no, you know, and it, it's, it's necessarily that way so that miners can join and leave the network and so the network's survivable. So, but I mean, I do think that Bitcoin's privacy and fungibility could be-- would, it'd be great to- To see that be improved, and so I think that helps. I mean, for mining in particular, it's probably the most, private part of Bitcoin protocol because there's no coin history. So in a sense, if you, you know, if you have reasonable cost of power and you can mine some bitcoins, you know, in a garage or a, a small warehouse or something, those are actually very private coins in a way, right? But the other parts of Bitcoin where you have, transaction history, I think it, it would be great to see Technology become deployable into Bitcoin, so, you know, I've, I've been, very interested in that area and we deployed a few things related to that in, in Liquid, you know, Bitcoin sidechain. So particularly confidential transactions, I think is, is an interesting kind of hybrid which, you know, provides some aspects of privacy but is very compatible with the existing model and people tend to like incremental changes and, you know, there, there are probably some things You can build on top of it, once you have it, but it definitely helps a bit in this way." }, { "speaker": "stephan", "time": "25:45", "start": 1545.24, "text": "Yeah, yeah. And so you were touching there on the idea of home miners or garage band, sorry, garage band miners, and this idea that maybe they're not necessarily doing it wholly for commercial reasons, but partly for ideological support the network reasons, or also because they wanna earn non-KYC Sats, as all of us would like to earn more Sats, of course. And so it seems like over the industry, in the earlier years, it was, well, maybe I'm colored by When I came in, but everyone was saying, \"Oh, don't mind it, you gotta be putting in lots of money.\" And now it seems like there's a bit of a resurgence in the idea of home mining, even if you are potentially not fully profitable, on that, but you're just paying a little bit of a premium to get non-KYC. And I think even right now, many miners are profitable even on their home rates. Right. So I wonder, do you see that being an angle that more and more people, we see lots and lots of home miners or more, let That kind of thing." }, { "speaker": "adam_back", "time": "26:41", "start": 1601.0, "text": "Yeah, I mean, it-- because of the economic situation with mining profitability right now, it's, you know, you, you can technically make money at some ridiculously high energy rates. Now, that, that may not persist for too many years, but at the moment there's a bit of a shortage of miners, and I guess, you know, eventually there may be next a shortage of power infrastructure because people don't-- they build just in time, and there's only so much, you know, there's, there's lots of, reasonable- Lost hydro power in, in a Quebec province as we're just saying, but it's difficult to get, you know? I, I mean, you, you could certainly do a modest scale in a home environment or something, but if you try to, do it as a, as a business, that, that's difficult in that province, but certainly other places that would, that would work. So it's, it's a good time. I mean, of course, the, the miners are a bit hard to get, but there are-- there's more availability since the China" }, { "speaker": "adam_back", "time": "27:38", "start": 1657.88, "text": "ban," }, { "speaker": "adam_back", "time": "27:41", "start": 1660.9, "text": "So people came a bit of a running joke and they never really banned it, but finally they have actually done something with, to discourage mining in China. So, yeah, that, that freed up some capacity for certainly used miners if you wanna take that risk or new miners, became less oversubscribed." }, { "speaker": "stephan", "time": "28:00", "start": 1680.39, "text": "Yeah, yeah, and as more people might do it ideologically, then that might also help the censorship resistance aspect because let's say all the regulated- Miners have to, in pot- potentially in the future, this is a hypothetical, they might say, \"Oh, you need to whitelist or blacklist addresses.\" Well, then the transactors who wanna be more self-sovereign and private might be attaching a little higher fee to their transactions, and then the ideological garage band miners might be the ones who are picking those transactions up and ensuring they still get mined into a block." }, { "speaker": "adam_back", "time": "28:32", "start": 1712.47, "text": "Yeah. I mean, actually, I proposed, another protocol, this is back in two thousand and thirteen, to sup- Actually solve this problem, which is that you, you basically, when you mine, you don't see the, the addresses that are being transacted. They become visible later, you know, maybe a day later, but they can actually persist in that state for a long time. It's called committed transactions or encrypted transactions. And so the idea is that you, you sort of process the tr- like a hash of the transaction, and, at a later point, you reveal the keys, and, and at that point, it's difficult for the miners to undo it, 'cause they'd And do their own, like they'd have to redo and compete against their own previous work. So it, it changes the, the economics of, applying policy to, to mine transactions. And you, you don't want like policy coming in, but it doesn't, it doesn't necessarily mean that it loses the transparency after they're processed. It just kind of prevents addresses being used as a policy during the mining process, effectively. So that, that's something that could be worked on, could be interesting. Interesting as well. I was gonna say the other, the other thing that can help is with, as I said, there's a lot like more centralization with mining pools, and there are some new pool protocols which Enabled the miner. So today a miner is just asking a pool, \"Give me a, a string to, to mine on,\" so they don't even know what transactions are in it, right? So the pools are the only people that really see the transactions till the blocks are produced. And so with these new protocols, it's possible for the, for the miner, even a small miner, to, construct their own block and still benefit from a pool, reduction in variance. And so, you know, those, those protocols have been worked on by, a number of different people. we, we did some of the early work on it under, under the name OpenHash, and it's been talked about as BetterHash and Stratum v2. It's all the same kind of basic idea. So- I think that's a good direction too, because as a miner, you want, you know, not just to mine, but you wanna have control of, which transactions are mined so that you can apply, whichever one's a more profitable policy to that, right?" }, { "speaker": "stephan", "time": "30:51", "start": 1851.11, "text": "Yeah. So hopefully, with Stratum v2, that might help in some ways there around the relation between a pool and the miner. and yeah, so you're also touching on this idea of confidential transactions, and so that seems like, at least my understanding of it is that the Bitcoin community at large, Bitcoin users, at, at this stage, it doesn't look like they would support this in Bitcoin today, but I'm curious your thoughts on the hopes for it to someday come to Bitcoin." }, { "speaker": "adam_back", "time": "31:20", "start": 1880.11, "text": "Yeah, I mean, to my perspective, it needs to be-- I mean, there, there are two versions of it, one has perfect privacy But in the, you know, very distant future, like a quantum supercomputer or something, you know, if you've got the perfect privacy variant, then you have a risk of coin inflation, and of course, in a Bitcoin context, people really hate that because, you know, the twenty-one million cap is, is what it's all about, right? And they don't want, you know, a risk, even a very remote future risk, to be considered. So we use that perfect privacy variant in Liquid, but Liquid is more- For kind of short term transacting and trading, so we think that's a reasonable trade off there. But there's another version which would, I think, be better, better for, for Bitcoin, which is it doesn't have that risk, like there's, it's mathematically, It won't work, you know, to-- if somebody attacks it in the future, they'll strip the privacy, but they won't be able to create coins. And so that's probably a failure mode that is more attractive to Bitcoin. So it just falls back to the status quo if that technology erodes over time. And, and I think that technology is good for decades, to be clear. So it, it's really a kind of remote, far future hypothetical kind of issue. And those, those transactions are also not that compact. So that's- That's another concern, right? So I, I think that you would want that kind of, the one without inflation, like mathematically provably no inflation, and to find a way to make them more compact. So the, the techniques to make confidential transactions smaller happen not to work for that type, they work for the type that has inflation risk. And so we've used some of those things in Liquid, like, we're, we're looking to move to bullet proofs, but bullet proofs lose that property." }, { "speaker": "stephan", "time": "33:13", "start": 1992.96, "text": "I say, yeah. So just summarizing, from my understanding, correct me if I'm getting this wrong. So the method that would help us have privacy, but with some inflation risk, that's using Pedersen commitments, and then the technique that can be used to make those transactions smaller is Bulletproofs, and so that's what we're looking to use in Liquid, as you're saying, but potentially not the right trade-off for Bitcoin. And then the other side is the, we definitely know 100% there's not gonna be any inflation beyond twenty-one million, but Will be higher, and so therefore scalability could be more of an issue, and that's using, I believe, Elgamal commitments, right?" }, { "speaker": "adam_back", "time": "33:49", "start": 2028.8, "text": "That's correct. Yeah. Right. So that's the trade-off. So, but I mean, there, there remains hope, at least, at least I think it's theoretically possible that one could find a more compact way to do Elgamal commitments. So, like a breakthrough in that Could, could move this, kind of project forward. And of course, it's an area of like very active research, you know, like there's a lot of interest in bulletproof and bulletproof-like things. So it's quite plausible that some more breakthroughs can happen." }, { "speaker": "stephan", "time": "34:17", "start": 2056.79, "text": "Back to the show in a moment. Now, Unchained Capital are providing multi-signature services to help you secure your Bitcoin for the long term. I think there is an urgency to really think about this here, because a lot of people are just stock-leving their coins on the exchange with some custodian or potentially Wallet where they may not be as secure, where if you actually take the time to remove single points of failure, well, in an unchained setup, you've got two of three keys. So you hold two, unchained holds the other. And so if you're not sure about how to do this, they've got a concierge service, you can sign up, they will do a call with you, they'll ship the hardware wallets to you and get you set up. And in doing so, you're actually gonna have a lot more peace of mind, in my view, because you won't context, you'll have a lot more security and safety there. So go to unchained dash capital dot com slash concierge and use the code livera to get fifty dollars off. Coinguide dot com are the creators of my favorite Bitcoin hardware wallet, the Coldcard. So the Coldcard is a specialized device, it looks just like a little calculator, and when you set it up, it gives you twenty four words, and you back those words up, and you can actually use a micro SD card to ferry that information back and forward between the device and your computer, and so you can use the Coldcard" }, { "speaker": "stephan", "time": "35:33", "start": 2133.02, "text": "Or a blue wallet as well. And so the cold card is a really advanced piece of technology. They often support a lot of the latest things in Bitcoin, like P2P T and various other techniques, and it can be used as part of a single signature setup or as part of a multi-signature setup. So go to coinguide dot com and use the code Livera to get a discount on yours. Have you got a metal seed backup product? The CipherGrid by CipherSafe dot io is the best value in the industry to backup your bitcoins. You get everything you need for fifty nine dollars. It's two stainless steel plates for all twenty four seed words, not just one plate of twelve words. You get privacy by default, the two plates are facing each other, and you can lock this with a padlock. You get a tamper evidence seal provided, so you know if it's been tampered with, and you get an automatic center punch so you can punch in those, words. Just like all It's fireproof, rustproof, and waterproof, so don't just use that piece of paper. Make sure you or your loved ones can access your bitcoins. Go to cyphersafe dot io and use the code livera to order yours. Back to the show. Yeah, so potentially then if we were to do this El Gamal way, that doesn't have any inflation risk, I guess there, there might, maybe there'd be some people in the community who might still be concerned that, okay, maybe there is some implementation risk, and therefore there could be some problem there. Right. so maybe that could also be an issue for them in their minds of why they wouldn't, you know?" }, { "speaker": "adam_back", "time": "36:52", "start": 2212.08, "text": "I mean, I think that sort of- Fear of the unfamiliar, in a sense that, you know, because the result is sort of counterintuitive and amazing, right? Well, you can, you know, you can hide the amounts and you can mathematically prove that they add up, like how is that even possible, right? Zero knowledge proofs are kind of novel things, and this is a novel, use of them. But, you know, if you, if you get down into how it works, and, Waxwing has a, a PDF explainer where he, he basically, you know, taught himself it, he went read the papers and reconstructed it and wrote some Python code and gave some examples and explained how it all works. It's basically the same technology as the ECDSA signatures or the Schnorr signatures particularly, and it's just basically a ring signature saying this bit of the number is a zero or a one. I don't know which, and then it just applies that multiple times plus a bunch of optimizations. So ultimately, if you dig into it a bit further, it's, it's not that hard to understand. It's using, the same technology that Bitcoin already relies on, and it's very old technology, you know, it's been around for decades, so it's, it doesn't have the kind of bleeding edge risk that comes with some of the other snark type things where, you know, things actually have gone wrong in the field or it's, or those things can be so complicated that I think one of the things that went wrong was, you know, the implementation was correct, but the paper was wrong, and nobody noticed, and, you know, it's an academic paper. So these, these, these-- there is a reason to be scared of complexity, but actually, ElGamal commitments are-- I mean, of course, not everybody understands them, but not everybody understands You know, ECDSA and how that worked, how and why that works either way. So there has to be some kind of, you know, if we restrict ourselves too much, we give up some opportunity, and maybe, maybe irrationally so, and I'd argue this is the case. Now, of course, that's a discussion that Would be a fun discussion to have. It's a, it's a much more interesting discussion than a block size discussion, right? That of course. Do we, do we want some more fungibility? o-obviously another, another area people would argue about is like, oh, you know, it's, it's more private and maybe that reduces- The chances of an ETF or, you know, so something like that, right? Like maybe regulators won't like it and so on. But actually, you know, when we first introduced confidential transactions into Liquid, it seemed like everybody liked it, including people from a banking background because they thought that the full transparency was too much, you know, it wasn't good for commercial activity. And, you know, you still got the audit. Plus, I think the other thing is incremental, so it doesn't actually erase the transaction. History, you can still see the inputs and the outputs, you just don't know how much was transacted. So I think that's an argument, that is a convenient argument, that it's actually fairly incremental on how things work today, right? It's still, you know, there's still inputs and outputs. You can see which coins went from which addresses to which addresses, you just can't see how many coins were involved. And, you know, it's, it's a reasonable thing to say that, well, why should you know how many coins are involved? That's bad for safety and security, and you can't see that with somebody's bank accounts, or why should you see it with Bitcoin?" }, { "speaker": "stephan", "time": "40:09", "start": 2409.31, "text": "Of course, yeah. And so from a scalability point of view, I'm not sure if you've, you know, looked at the numbers recently, but what kind of impact would it have in terms of," }, { "speaker": "stephan", "time": "40:20", "start": 2420.34, "text": "So let's say right now a Bitcoin block might have two thousand, three thousand transactions in it, like on average, what kind of numbers would we be talking about if we were to move into an ElGamal con- confidential transactions world?" }, { "speaker": "adam_back", "time": "40:32", "start": 2431.63, "text": "I mean, I'd say they are, I don't know, maybe about five times bigger. So the, I mean, actually physically, you know, twenty times bigger, approximately, fifteen, twenty times bigger, but the, and liqu-liquid is organized like Bitcoin, so it has SegWit and the confidential transac- Transactions range proofs go in the, in the witness, so they get the discount. So in terms of the weight of a transaction, it might be four times bigger in terms of the size, it might be closer to, sorry, five times bigger in terms of the size, it might be closer to twenty times, fifteen to twenty times. So, so something like that, maybe five times. And, you know, so hopefully that could be optimized and, and that kind of, you know, so there's less overhead. I think in, in terms of the, the argument for why that might be a good Even if you couldn't optimize it as much as you'd like, is that it's, it's a more powerful transaction, so it could replace multiple non-confidential transactions for some uses. And you, and you see this, right? So, you know, when people doing coinjoins, they split their coins up into Units like point o one or point o o one. With confidential transactions, you don't need to do that, right? You can just join anything with anything, and it doesn't matter 'cause nobody knows what the values are anyway. You just need to know that you got out as much as you put in. I've certainly seen people, you know, company level or individual level, storing coins in chunks, you know, so they'll, they'll make a wallet and they'll, they'll split it, you know, they'll, they'll take how much money they have and they'll split it into Outputs maybe too obscure how much, you know, how, how big their wallet is if they spend from it or something like that." }, { "speaker": "stephan", "time": "42:14", "start": 2534.34, "text": "Yeah." }, { "speaker": "adam_back", "time": "42:15", "start": 2534.62, "text": "I think it's generally a good idea to not put all your eggs in one basket, 'cause if something very low probability happens, that'll be bad. So, you know, people sometimes do, you know, a small test transaction first. I think that's, a reasonable thing to do. I think you do want some outputs, but you do get some back 'cause they're more powerful transactions, so that's the argument." }, { "speaker": "stephan", "time": "42:31", "start": 2551.41, "text": "So in that world, The standard and then others would be El Gamal style or would, or do you think it would be like an all or nothing thing here?" }, { "speaker": "adam_back", "time": "42:43", "start": 2563.04, "text": "Well, they are compatible, so Liquid, the confidential and non-confidential can interoperate and basically the math works out so you can say, \"Well, here's--\" 'Cause, 'cause what you want is, is the rule in the Bitcoin world is that the, the inputs have to add up to the outputs plus the fees, and it's still true with confidential transactions, the inputs, you don't know what they are, have to add up The outputs plus the fee, and you see the fee, but you can mix in some confidential and non-confidential and it still works out. So they, they can interoperate. Now of course, privacy rights companies say it's better if, more people use it, and, you know, one argument, I mean, Greg Maxwell and I were talking about this because he, he was the person who did, you know, sort of the optimization and improvement of confidential transactions when it actually came to being implemented. And he made the argument that maybe in a Bitcoin setting, you'd wanna have the same fees for confidential and non-confidential so that people aren't deterred from using it on a cost basis." }, { "speaker": "stephan", "time": "43:48", "start": 2627.95, "text": "I see." }, { "speaker": "adam_back", "time": "43:49", "start": 2628.75, "text": "You know, I, I mean- You'd have to work out the details of how to do that, but, you know, let's say there's a, a bigger discount for the range proofs, than, than, signatures, and that fee is the same whether you use it or not, hypothetically, right? And that, so then that could take away the economic argument. It's only liquid basically everything is confidential because it's kind of default in the wallets. I mean, some of the wallets won't even send to a non-confidential transaction, to a non-confidential- Address and others will, so it, it, it's, it's a good default to say confidential everywhere." }, { "speaker": "stephan", "time": "44:26", "start": 2666.12, "text": "Yeah, I see. And it, there's nothing stopping us from also combing that and having, using El Gamal, you know, El Gamal, confidential transactions and combing that with Lightning, say, so we still can, you know, transact" }, { "speaker": "adam_back", "time": "44:41", "start": 2680.62, "text": "Yeah, I mean, actually, so with, so Blockstream has a, is one of the, multiple implementations of Lightning. So we have, C-Lightning, and that is able to, make Lightning channels using, Liquid Bitcoin. So Lightning, Lightning, I mean, a lot of people don't know it, but Lightning is actually a kind of caching layer that can work above Bitcoin and sidechains of Bitcoin. so it can, you can have different channels with different assets. It's Liquid Bitcoin being approximately Bitcoin, but you could also have a channel which is, let's say, Tether on a Liquid network, which might be interesting to some people. And so we have, we've had that working for a couple of years now. there are still some things to do, so the, we don't yet have, confidential amount support, so the Lightning channels have to be non-confidential, so we wanna fix that obviously. And, you know, we, we see how to do it, like it's, it's something that can be done, it just In Lightning today, you, you can ask how much capacity's in the channel, and you can check, check that. So it probably needs to make a range proof in response to say, \"Well, you don't need to know, but I can prove that there's at least this much, so you can send that.\"" }, { "speaker": "stephan", "time": "45:55", "start": 2755.45, "text": "Yeah, right. Because the probing and so on. Because there might-- Yeah. As an example, a Lightning wallet might want to probe the pathways to sort of see, \"Is there enough liquidity in the channels for me to be able to make this payment successfully or not?\" And therefore" }, { "speaker": "adam_back", "time": "46:10", "start": 2770.32, "text": "Too simplistically, probably somebody could move the confidentiality by just proving all the tr- all the capacity everywhere, at least for the publicly reachable channels, and then the CT is, you have CT, but it's not really meaningful 'cause anybody that wants to can figure out what the capacities are. So you can, you can, you could prove, you could lie, you could say, \"Well, I have...\" A tenth of a Bitcoin, really you have two tenths. That's enough 'cause you can prove that, and that sort of obscures, the actual capacity of it." }, { "speaker": "stephan", "time": "46:41", "start": 2801.12, "text": "Yeah, yeah. And, I guess another practical implication if we were to have confidential transactions in Bitcoin, it helps break, so from a chain analysis and chain surveillance perspective, listeners, you can check out the recent episode with Ergo, where we talk about some of that, but essentially it would break the round number heuristic, and it would help stop, perhaps some change detection by an outside analyst, right? Inputs and the outputs, and they're trying to figure out which one's the payment, which one's the change. And so in a confidential transactions world, that's a lot harder. So it's not that CoinJoin would disappear, it's that we might do it a different way, or we might have one global kind of CoinJoin liquidity pool as opposed to having like different pools for different sizes. Yeah. or maybe we'd have some kind of batch spent, some kind of blinded batch spend mechanism that way we can all transact privately, in that model. Is that how you're" }, { "speaker": "adam_back", "time": "47:29", "start": 2849.25, "text": "seeing So as you said, you don't have to, you can, join any value, so you get kind of perfect join out of any value without matching sizes, so you get a bet, a bet, anonymity set, a bigger anonymity set. So that's good. It's simpler, 'cause you, you don't have to make the logic, and it's harder to analyze because you can't guess what is change from the amount. There's some other things like, when we released confidential transactions, something that came out Out of that is the, MimbleWimble protocol. So, you know, it w- it wasn't us, or at least I don't think it was anybody at Blockstream, but it was a, some kind of pseudonymous author, right, that wrote the original paper, and it uses the, the range proof, you-- it's basically confidential transactions. Coincidentally, before that, I had noticed, in discussing with Greg when we were-- when he was implementing it, that you could, you know, when, when you're sending a- A transaction, you've got to prove two things with confidential transaction. One is you've got to sign with the address that controls it, and the other one is you've got to prove that it adds up. And so there's a key that you use to prove that adds up that only you know, a blinding factor. So I said to Greg, \"You know, you could probably make it anyone can spend, like drop the, you know, drop the address and just prove ownership because you're the only person that can prove how many coins that is without disclosing it. The fact that you can prove it Kind of thing. So, you know, if he'd, if he had, he, he was like, \"Well, that's true, but let's just keep it orthogonal, tidy, and the same as, as Bitcoin.\" But if, if he'd have gone down that path, I think he would have, you know, found at least part of the mempool wimpole, approach. So mempool wimpole just does that and, but of course, it, it removes I mean, everything becomes standardized, so you lose scripting with a mempool, so that's, that's not as cool. Scripting is, is nice. so, but in, in Liquid, we made some changes to account for it, so that there's a possibility for somebody to make a kind of mempool-like wallet doesn't have addresses, like everything's anyone can spend and, and the range proofs. Are done, and so you could potentially remove history as a result of that. Now, I'm not, I'm not convinced personally that mempool is that great for privacy because, you know, anybody who's trying to analyze it will record the history as it, as it flows past, and so the fact that you don't need the history to catch up doesn't really give you privacy versus somebody that's recording transactions as they're sent and processed, right? But anyway, I just thought I'd mention it because it's, it's related to, to the privacy aspect. And another thing you can do is But in a more scalable way or Bitcoin, I think was what came first, with their ring signature. So instead of a ring signature, you can, wh-which results in ever-growing UTxO set basically. So with confidential transactions, you can just basically send people dust. So, you know, I can collect some addresses from somewhere or some wallets, can have a peer-to-peer protocol to, you know, advertise addresses they would accept money on preemptively, and, you know, I can just send you, send, send dozens millions of people as Satoshi and they can choose to claim it, and from the outside you, you don't know was that a real payment or was that dust, and it, it doesn't result in UTXO growth because you spend them. Like you have an ins- in, in Bitcoin, dust is actually used, you know, abused for tracing, right? If you, if you look through an old wallet, you'll see these like specific odd, like, I guess, their minimum, fee rate Dust, and they're just trying to tag, they tag a bunch of coins and see which ones get spent at the same time, and they say, \"Aha, that's, that's the same person.\" and so with CC, that actually becomes a feature, which is you can just send people dust, and they can just say, \"Thank you,\" and spend it, right? and that gives you, privacy actually, unlike in a Bitcoin case." }, { "speaker": "stephan", "time": "51:32", "start": 3092.47, "text": "I see. Yeah. Yeah, that's an interesting aspect, because then the outside observer is gonna really struggle to understand How these companies do it now is that they're really trying to assess what are the flows on the, on the chain, as it were, on the transaction graph, as it were. but this idea of confidential transaction dust might really gum up the works there and stop their ability to do that. Yeah. but I wonder then, it might also become like, it also comes into the scalability conversation because obviously if it costs a lot more in terms of bytes, or it costs a lot more in terms of fees, then it might be a difficult part there. But I, I future technological growth comes or something comes that makes it a little bit more, amenable or palatable for the broader Bitcoin audience." }, { "speaker": "adam_back", "time": "52:19", "start": 3139.38, "text": "Right. I mean, there, there might be, I mean, that'll be, it'll be a different controversial discussion, but there might be an argument to say, you know, maybe there's consensus for a block size increase if you can get confidential transactions at the same time. And I think technically, you know, the range proofs aren't as critical to keep forever because You know, in Bitcoin, you, you don't verify signatures beyond a certain depth. I mean, you can, you can opt to override it, but by default, you don't check them more than from" }, { "speaker": "stephan", "time": "52:51", "start": 3170.99, "text": "block one a year or something" }, { "speaker": "adam_back", "time": "52:53", "start": 3172.79, "text": "right back. And the same could be said for the range proofs because people wouldn't Miners and full nodes wouldn't have followed the chain this far if there was, you know, if the range proofs were broken or if the signatures were invalid. And so beyond a certain amount of work, people just assume, or the, the clients just assume, well, that, that must be correct or it wouldn't have got here. But there remains a possibility to, to verify it back to the beginning, so that, that could be applied to the range proofs as well." }, { "speaker": "stephan", "time": "53:21", "start": 3200.79, "text": "Yeah. So I, I guess it also comes into how accessible Bitcoin is, because the typical conversation is, \"Oh, it People should be able to run it on community hardware, that kind of conversation, and yeah, yeah, how much hard drive space, yeah." }, { "speaker": "adam_back", "time": "53:35", "start": 3215.28, "text": "Definitely a concern, and you, you see it with Liquid, like, you know, it's got a different balance because each range proof is like dozens, equivalent of dozens of signatures, and so, you know, the Liquid blockchain isn't full 'cause it's, you know, it's still growing and seeing adoption of different new wallets and swap services and market, you know, liquidity pool market makers and things coming into it, but it does make your CPA CPU run hot, so I think it has potential to be at capacity to be maybe ten or fifteen times bigger history per day and require a bigger CPU, right? So, if they get some use of- Full capacity use under it, you might be talking about a good, a good DSL connection, not an average one, and a desktop Class CPU, not a Raspberry Pi 4, for example. And for Liquid, that's an okay trade-off because it's an opt-in sidechain for a use case And, you know, it's, it's not as good. I mean, Liquid has got trade-offs, it's not as good for ultimate censorship resistance and things like that, right? So, you know, I think it's okay for them to make a different trade-off, but to do that on the main chain on Bitcoin, that, that's, more difficult discussion. So really, I mean, of course, computers get faster over time and bandwidth increases, but not, not that much, and history, history is growing too, so it's still a, a tricky, tricky- So ideally, there's some more, optimization, I think, is the, is the best answer." }, { "speaker": "stephan", "time": "55:14", "start": 3313.76, "text": "Yeah. And, it also, some of what we've been talking about plays into this idea of Bitcoin as censorship-resistant money, and I know you guys at Blockstream are doing a lot to help with that, even with, BlockSat, satellite, so people can, download the blockchain over a satellite from a dish. and I know you've got a new product out, it's called, was it Base, right?" }, { "speaker": "adam_back", "time": "55:34", "start": 3333.74, "text": "Yeah, the, I mean, actually with that, we introduced, we didn't used to have full history, we used to only have like a couple of weeks of, kind of rotating history. So We increased the bandwidth, we did a lot of custom compression, so I make everything smaller, and then we were able to get a full history sync in a week or two. So in some areas, there are two satellites that you can reach, and they're, they're broadcasting different error correction streams. So if you've got two dishes pointed at two satellites, you, you can sync twice as fast basically. So that gets you down to one week, otherwise it's two weeks. So we're- We're pretty excited about that tech and the, the, the base station is a newer kind of satellite dish technology. So the, the elliptical dishes are, analog. These, these new dishes are kind of phased array, they're rectangular, and there's more digi-- there's digital, tech in, in a dish. You know, there, there's a Ethernet, it's, it's powered by power over Ethernet, not coax. It's, it's a phased array, so it's a little bit less sensitive to pointing errors, and it's a bit more compact and elegant, and it has hardware accelerated, decoding actually in a dish. So we have hardware accelerated decoding for the elliptical dishes, but it's a separate kind of, you know, looks like a, a DSL modem, some kind of box you plug in, and it has to be in the house with the analog, so you'll plug, you know, the coax into it, and you'll plug an Ethernet into it or a WiFi. And then you can broadcast Bitcoin transactions via local network or over Wi-Fi, but with the-- there's just less moving parts and easier to assemble with the base station because you basically, you know, you point it, connect it out, outside, it's all powered over a single cable which is power over Ethernet, and then you've got the power and the data coming in over one line. And there's, you know, less things to plug together, less things to plug into the wall, less cabling, less configuration, so it's more, more plug-and-play, so people are pretty excited about that And, yeah, it's cool, and that, that gives you, you know, potentially full history as well if you want it. So that's nice because, you know, a, a, at the one end of the spectrum, we have people arguing that, you know, computers are fast, networks are fast, we should go to gigablocks, like back in two thousand and fifteen, right? And at the other end of the spectrum, you've got whole, whole countries and continents with like very few nodes, and when you dig into why, it was because it's too expensive, what I think Nigeria has like very few nodes, for example, and like one of the guys with the nodes, we know who it is, right? It's like a Bitcoin contributor. Yeah. And so, you know, a, a very high speed internet connection there is like, you know, probably more than most people's salary or something, right? So it's, it's just a different economic situation, and there are parts of the world where that's the case. So There's one of the interests for the satellite project is to reduce the cost of, directly participating in the network, and, at the same time we, we added The full sync, we recently added Lightning gossip data too. So the Lightning node, if you, if you connect a Lightning node to a Lightning network, the biggest data consumption is catching up with the state of the network. So it's source routed, so each node needs to know a full map of reachable nodes, and then it gets updates over time. So we made a protocol to, basically broadcast it over the satellite, and that means You know, if you've got a fixed dish that's receiving Bitcoin data, running a Bitcoin full node, receiving the Lightning gossip data, running a Lightning node, now your external bandwidth usage drops another order of magnitude on the Lightning side as well. So, you know, you, you can do, you can do your own routing without relying on a third party. And your kind of, internet bill and bandwidth used to go down a lot, so you can run it on, I don't know, like a two G or two point five G smartphone tether or something without running up a big bill in a, in a market where data is expensive relative to the cost of doing." }, { "speaker": "stephan", "time": "59:54", "start": 3593.8, "text": "Yeah, that's very clever. So essentially, instead of that person having to download, call it, four hundred gigs of Bitcoin blockchain plus, you know, maybe another gig or so of gossip Lightning data, then now they can download all that through the sadder- Lightning and then they would still need an outgoing internet connection, but as you're saying, they would need a lot less in terms of external bandwidth. And that in doing so, it's making it more accessible for people who wanna be able to be the, as we say, the fully sovereign Bitcoin and Lightning user, doing it in their, with their own keys and their own Bitcoin node and all of that, all those good things that we like, people to do. yeah. So I think that's, that's an interesting aspect there around censorship and how, Bitcoin helps people. participate even where they haven't been, and, you know, for some people that's just using a simple mobile wallet, but for others it's actually going the full way and using your own Bitcoin node. And of course, you know, we encourage people to be able to do that, but we understand that not everyone can. I'm also curious your view on development in the ecosystem. So we've seen that come a long way in the recent years. We've seen multiple development organizations, we're seeing Bitcoin exchanges and companies support Bitcoin development, and of course, I know Blockstream, you Bitcoin and Lightning developers, what's your view on the current state of Bitcoin development funding, and is there anything you'd like to see in the future there?" }, { "speaker": "adam_back", "time": "01:01:14", "start": 3674.74, "text": "Yeah, I mean, I think that, the kind of maintenance aspect, if you like, is covered. So in a sense that, you know, I think the Bitcoin project is quite big in the kind of list of open source projects, the number of contributors, how active the project is, you know, if you stack ranks GitHub things, it's pretty high Up there. And so I think the, the area which is maybe more interesting to me is to see, you know, features that reach users, right? So, you know, if somebody's refactoring part of Bitcoin to make it more scalable or elegant or something, that's good and it needs to happen, but there's a group of people who are funded to do that now. But what is a little more tricky is, you know, there's a new feature that comes into Bitcoin and it has implications and you-- and people wanna use it. They need, so they need wallet support or they need, you know, application support or web integration. And so historically, mostly the way those things happen is, is a startup, you know, tackles a problem But I think there'd be room for, you know, open source funding to build use cases, you know, like so one, one thing we tried to, help, help seed was, More peer-to-peer coinjoin. Basically, you know, some, some of the coinjoin protocols involve a server, and that's a policy risk potentially. So conceptually, you would like that to happen in a wallet purely in like a peer-to-peer wallet, so the wallets are somehow coordinating, and that's it. It's peer-to-peer, then there's no server to shut down, and it's more resilient, and more people can use it. So we organized, a kind of hackathon For people to come to a location or dial in and discuss, brainstorm about how to do that, and that was the, pay join protocol, also called, pay to endpoint. And so it's not a full join, but it's a kind of opportunistic join. So it, it proved to be relatively challenging, but, but this incremental bit of tech seemed, seemed promising, which is that you, you basically join with the merchant or the person you're paying, so they get to defragment their wallet a bit. And save a bit of money 'cause, you know, reorganizing a wallet costs fees too. With you, and it, and it breaks some of the heuristics because the changes, you know, it, it looks like the person you're paying put one of the inputs into it, and so you don't really know what the amount was, and you can't tell it was a Pay-to-Endpoint or, or- Payjoin. So, so I think things like that, you know, so a few, a few wallets implemented that, it's in a BTC Pay server, integrated wallet, but it, it could use being available in more wallets. And so, I think projects like that could, could use funding where there's actually a, an end user reachable result and hopefully interoperability is another issue, right? So, so I think it'd be nice to see more interoperability and things like that and also some Bigger, more ambitious projects, you know, 'cause the sort of maintenance and new BIPs is one side of work, but I mean, apart from Taproot You know, and, and some other Lightning developments, there are some bolder things that could be done, but, you know, perhaps not the teams of specialized people to, to push them forward. So, I think that could be interesting." }, { "speaker": "stephan", "time": "01:04:42", "start": 3882.2, "text": "So what kind of bolder things are you referring to? Like a new--" }, { "speaker": "adam_back", "time": "01:04:45", "start": 3885.32, "text": "Well, I mean, like new Layer Twos focused on privacy or confidential transactions in Bitcoin. Let's, you know, let's-- Because I mean, quite often people have an idea, but if nobody, you know, the, the- Innovations come by trying, so if you just try to do it, I mean, not, not deploy it, but try to build it and see what it's like in a wallet and how it works, sometimes the act of doing that results in an interesting discovery or optimization. So I think, you know, let's try and do some of these things. I mean, of course, it's, it's very curious because If you ask Bitcoin holders and investors what they care about, they mostly care about security and dependability, you know? They'll say, \"Well, I mean, you know, sadly some of them don't really care about Lightning that much either, right? They're just saying, \"Well, don't break it, just don't break Bitcoin, you know, cold storage security, and I'm happy.\" So they, they would actually be happy if it was like largely ossified, in fact. But I think that, you know, that loses some, potential, so I think, I think The ossification, I mean, because, you know, there's another Satoshi quote about how he, rushed the Bitcoin script so that it would be sort of self-extensible, so people could build other things with it without needing to change it, with the idea that it would be hard to change, Bitcoin. So I think it's a very interesting observation 'cause I'm not sure it would have been obvious to most, most of us that it would be hard to change Bitcoin at the beginning when it had no users, but evidently he saw that the- Would be the case and so they tried to make it extensible, but the Bitcoin script isn't that expressive. So, a-and some of it got disabled because of bugs, right? so I think something like Simplicity, it's another project we're working on at Blockstream that dates back to kind of early- Bitcoin IRC is, next generation scripting for Bitcoin. So, you know, obviously that's also something that's a few years away, but it for, for the Bitcoin, but it's coming to liquid much more inherently. We just did another update and hope to have that in liquids. Later this year. So if people get experience using that in Liquid, maybe that could come to Bitcoin and provide the, extensibility, but, you know, obviously that, that requires a lot of, interoperability work and wallet work over time." }, { "speaker": "stephan", "time": "01:07:11", "start": 4031.17, "text": "Yeah, I see. Yeah, so, there's lots of different angles and ways, the, that, that things could go. I'm curious then in your mind, which is more important, is the hard money digital savings technology aspect or- Or is it the ability to use Bitcoin privately, or perhaps even like the, the smart, scripting aspects, which, which are, like for you, what would you, how would you preference order those?" }, { "speaker": "adam_back", "time": "01:07:36", "start": 4056.35, "text": "Well, I, I can, it's, it's a very interesting question because you see some contention on this front already, right? So people who are, you know, focused on the digital gold aspect, you know, some of them aren't too concerned about over-regulation, let's say, and so there, there is a few- A Bitcoin future which sees Bitcoin as digital gold, maybe with too much of it in ETFs, and I think that's like potentially a policy risk for the permissionlessness. And so if you had to choose, I would actually choose, the electronic cash, you know, better electronic cash case, and but I think they're like interlinked. So if you push it too far and Bitcoin becomes, you know, most of it is in ETF and ETF-like products, like we have, there's a lot of ETF-like products today, right? Where there's a custodian And your own units and something. So if that percentage gets too high, I think it, it, it runs into policy risks and it could erode the value. So, you know, maybe, maybe it has value as a digital gold that mostly is a safety tech, as savings technology, but I think that loses the potential. And, you know, the reason many of us get excited about Bitcoin, which is the sort of permissionlessness of it all, right? That you've got an internet, global internet money that people can innovate on. And use without permission. So, yeah, that's, that's the discussion there. Yeah. So, if so, hopefully it can be both, right? But I think we have to be a bit careful about not having too much stuff in central custody." }, { "speaker": "stephan", "time": "01:09:08", "start": 4148.65, "text": "I see. Yeah. So if you had a, a message for people out there who are, maybe they are lawmakers and legislators on Bitcoin, what would you say to them about the aspects and the need for the censorship-resistant elements of Bitcoin?" }, { "speaker": "adam_back", "time": "01:09:23", "start": 4163.64, "text": "Well, I think it's, you know, It's a useful analogy to look at the internet because it took governments a while to adapt to the concept that it was, you know, that people could communicate and there wasn't much they could do about it, and that wasn't a bad thing, that was a good thing, right? It improved freedoms in the world, overthrew some corrupt governments ultimately, or was a part in that, right? People's ability to organize, and it just changed the balance of power, and that, that became the new norm. So But, you know, that, that is largely down, I think, to the open network, permissionless nature of it that people could innovate, where with previous network technologies, you would have to-- you'd have to be a telecom company or, you know, near of the Sort of kind of overlapping period like a mobile phone operator when those were very locked down and it was hard to get third party apps. So, you know, that, that world is a much less innovative world. It doesn't, it doesn't evolve and improve. So I think the messages like open networks win, so don't, don't over-regulate or Try to take the permissionless nature out of it, or you'll-- it will be bad for the golden goose and the, you know, it's a global world, so the business will move elsewhere, and, you know? The fortunes of empires change over time, right? There were periods where different parts of the world were the center of the economic world, and there's room for that to change again. So take it easy on squeezing innovation out of your geography. The currency which is the world reserve currency only lasts historically like a hundred years or so. So, you know, you can lose world reserve currency status, that'll be bad. You can- Lose, the nexus of blockchain innovation, that will also be bad as, as that becomes a bigger part of the global future. So politicians ultimately just are public servants, they work for the public and the public, the, progress of humanity is what matters, right? So I think regulators just have to be careful to not get in the way of that." }, { "speaker": "stephan", "time": "01:11:28", "start": 4288.77, "text": "Excellent. Well, that's probably a good point to finish up here. So listeners, make sure you follow Adam, Adam3US on Twitter and, blockstream dot com. Anywhere else you would like to- I'd like to point listeners to. No, that's" }, { "speaker": "adam_back", "time": "01:11:39", "start": 4299.6, "text": "good." }, { "speaker": "stephan", "time": "01:11:40", "start": 4300.22, "text": "Excellent. Well, thank you very much, Adam. It's been a pleasure chatting with you." }, { "speaker": "adam_back", "time": "01:11:42", "start": 4302.86, "text": "Likewise. Great catching up." }, { "speaker": "stephan", "time": "01:11:45", "start": 4305.14, "text": "So, I'm curious what everyone is thinking. Would you like to someday see confidential transactions on Bitcoin, or are you not comfortable with the trade-offs that we spoke about today? let me know your thoughts, and of course, make sure you share the show with your family and friends so they can learn about Bitcoin from some of the best people in the Bitcoin industry. Find my show at stephanalivera Thanks, and I'll see you in the citadels." } ] }