{ "episodeId": "SLP346", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "nicolas_burtey": { "name": "Nicolas Burtey", "role": "guest", "tag": "NICOLAS" } }, "segments": [ { "speaker": "stephan", "time": "00:09", "start": 8.57, "text": "Hi and welcome to Stephan Livera podcast, a show about Bitcoin and Austrian economics. Today for episode three hundred and forty-six, my guest is Nicholas Burtey of Galloy Money, and he rejoins me on the show, and we're talking about this idea of US dollar and should that be in a Bitcoin wallet, and we talk about his work on this idea of creating synthetic USD. As a way, a means of building this into the Bitcoin Beach wallet as an example. So we talk about the various ways of achieving this, why is it necessary, how to fund it, and what are some of the risks around it. This show is brought to you by Swan Bitcoin. 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They've got all sorts of content on their website, such as the newsletter and podcast material. Material which you can use to get up to speed and stay up to speed on Bitcoin mining. That website is compassmining dot io. Onto the show with Nicholas. Nicholas, welcome to the show. So, there's lots been, going on since, we last spoke on the show. Of course, we had a chance to catch up in El Salvador, so that was great with, adopting Bitcoin. and, do you wanna just give us a bit of an update, where you are at and what are you working on these days?" }, { "speaker": "nicolas_burtey", "time": "02:57", "start": 176.68, "text": "Yeah, sure" }, { "speaker": "nicolas_burtey", "time": "03:00", "start": 180.04, "text": "For the first time in person at adopting Bitcoin. So we, continuing to focus on our wallet in El Salvador called the Bitcoin Beach Wallet, which is, very exciting to see how Bitcoin adoption is, is rolling out in El Salvador. We are also generally working on, so, Galore as a company, we're working on, open-source software, the goal is to develop an open-source framework to have banking on Bitcoin. One of the key features that we have been working for the last couple of months is the integration of, USD into the wallet, which I think is something we want to discuss more" }, { "speaker": "stephan", "time": "03:41", "start": 221.29, "text": "Right. And I think the other point that's worthwhile talking about is when you're in Central America, South America, it seems that there is a stronger demand for stablecoins and USD value or representing USD value. So if you could just explain from your perspective that you've seen being on the ground, what, why is that and why is there, why, why is that so important?" }, { "speaker": "nicolas_burtey", "time": "04:05", "start": 245.41, "text": "Yeah. So if you, I mean, if you live in, in the US, you know, you have USD as- Your, you know, checking account and of course, getting exposure to Bitcoin is great because then you can have a tool that can, beat inflation. But if you're living in a country that isn't on the US standard First, you know, getting access to USD is already a huge improvement compared to, to your local currency, because this local currency has probably much higher inflation than USD, and therefore, like, if you can get USD, it's great, you know, then your, your inflation is much lower than maybe the inflation in your country or to your local currency. One of the advantage of USD is overall low volatility. Compared to, to Bitcoin, e-especially in the short term, right? So if you're like a, a merchant or if you're someone that have, that need to s- th-that have USD obligation in, you know, tomorrow or next week or next month, it's good to have this If you need to pay a hundred dollar in a month, it's good to have a hundred dollar in your checking account so that you can, you know, you can, you can pay it in amount, right? a-and so the, f-for me, the idea is that you can think of USD can be your checking account and maybe BTC can be your saving account, right? And so if you have money you know you don't need, you don't have obligation in the short term, you know, then it makes a lot of sense to convert it to BTC and save it for the long run But, yeah, for a lot of people, for instance, in, in El Salvador, like merchants, you know, that, that doesn't have a lot of saving, right? I, I think USD for them makes sense because they know that, they have the assurance that, you know, even if Bitcoin were to do minus fifty percent over two months, which happen, they can still pay their bill, right? And this is key. So it, it's basically the first step, if you're in developing countries, to make sure that you have- enough money to pay your recurring bill, and when you get to this stage and you have extra savings, then you can convert it to, to Bitcoin. And one of the, I guess, challenging point is to move from your Local currency to Bitcoin directly, right? It's, it's like you make two step at a time. And so having the option to get some form of USD in, in your wallet is, is a great addition to have a, a BTC wallet." }, { "speaker": "stephan", "time": "06:38", "start": 397.72, "text": "And I can understand that there might be some difficulty operating in, if you're trying to operate in an open source world, but then also still interacting and interfacing with the fiat banking system. So do you have any thoughts on, Ideas to share on how to achieve that, or at least how you're thinking about that?" }, { "speaker": "nicolas_burtey", "time": "06:57", "start": 416.87, "text": "Yeah, it's, it's actually challenging, right? Because if you think as a Bitcoin environment, Bitcoin, the, the, the real advantage of Bitcoin is it is permissionless, right? So, like, if you can buy Bitcoin somewhere, you can take possession of it, you are the bearer assets of this Bitcoin. It, it also makes it straightforward to launch like a Bitcoin bank, like in Azonte, in, in El Salvador, like we do. eighteen months ago as a, an experimental project, a-and we see that now this experiment is being replicated in other places, like, like in, in Costa Rica with Bitcoin juga, and basically you don't need permission right to start a Bitcoin bank, or, or just, you know, get Bitcoin in your non-Costarican wallet, but as soon as you want to get USD, then you need to think about how will you be sourcing this, USD, right? Probably the most, common option in the, I would say broader crypto sphere is to get stablecoin. And so, you know, you can, you can send, Bitcoin to some exchange and maybe you get, you buy USDT with it. But then you have a, an issue with this USDT, Like you, okay, I, I have maybe USD here on my Bitfinex account now, but what should I do with it, right? I can give it on the exchange, but if I want to take possession of it, I need to- We throw it to some wallet. And USDT is great because it's compatible with many network, but it's also a downside that it's compatible with many network, right? And so, do you want to throw it on Liquid? Do you want to throw it on Bitcoin Layer One, you know, the Omni Layer, or to some other protocol like Ethereum or Toran? And, and because it's compatible with so many protocols, like it's not very, like maybe if you have, I have used it on Li- on Liquid, you have used, and you show me a QR code which is like for Ethereum, right? And I can add some money to you, right? So like it's, it's not very compatible, Between wallets, it seems to be on the same protocol. And so stablecoin have, have downside. one of the other downside of stablecoin is that you, you also trusting the issuer, right? And so now you-- So stablecoin are great because there are like, there are a bridge between maybe permissionless money, as Bitcoin is, and fully permission USD, as you know, the USD in the fiat system is. You can still get some, some stablecoin in a semi-permission way. I mean, you- You still trust there is an issuer, maybe Tether, and you trust that, you know, they really have the money somewhere, so there is some trust involved, but it's, it's still less permission than having USD in a bank account. So there, there is some great for, for stablecoin. But one of the biggest, yeah, drawback is This interoperability issue and also the fact that on many protocols there will be high fee, right? So if you have, your asset and it's on your Ethereum wallet and the gas fee are high and you need to pay ten dollar to send it to another wallet, then the use case that we are targeting on our side, which is really using Bitcoin as money, is that you need to be able to buy your coffee with, with it, right? If you're in a café and you have, you know, five dollar bill, you should be able to, to pay for it. If Like it doesn't work, so, you know, there'll be some limitation with stablecoin." }, { "speaker": "stephan", "time": "10:16", "start": 616.05, "text": "Yeah, so just to summarize then, there are different, technological approaches, and I guess as you were just saying, there are stablecoins like Tether, and they can operate on different networks, but then there might be issues around interoperability, and so I guess this also comes back to the way you're building things with Galloy, you are developing banking software, and you're trying to make it Bitcoin friendly, Bitcoin native, and be open source. And so could you- Could you tell us a little bit about that choice and why you, you, you know, you're, you're going that way?" }, { "speaker": "nicolas_burtey", "time": "10:46", "start": 645.81, "text": "Yeah, so we're building open source software, right? on, on open source money, and we think there is a-- I said there is a limit in the compatibility with liquidity because it's on so many protocol, but if you think about, you know, is there a, a shilling point where maybe a lot of the industry is going that will create this like compatibility layer? And for me the answer is Lightning, because Lightning Is which is a layer two on top of Bitcoin, the, the layer one, bring, instant settlement. So now I can send money from me to you, it's, it's like almost instant, and there is also no counterparty risk with, with Lightning. Which is, which is the key. So like, if I'm able to somehow convert my, my, my USD, whether it's like, in a bank account or in some other way or, or in a stablecoin, but when I send a payment, if I can send it to Lightning, then, you know, you as a recipient, you can have any wallet as long as it's compatible on Lightning, you, you can receive the money, right? And, and maybe your wallet is just like a, a Lightning wallet, and in that case, you know, I will send you" }, { "speaker": "nicolas_burtey", "time": "11:57", "start": 717.22, "text": "Source of USD, I send you that and you receive that, and maybe your wallet will convert it to you, or maybe your wallet will convert it to another, another currency after it's been received. But the way to send the money is really using Bitcoin, the Bitcoin's network, not Bitcoin's store value, but really Bitcoin's, the payment system, so Lightning. And yeah," }, { "speaker": "stephan", "time": "12:18", "start": 738.23, "text": "this works because we have Lightning. Right. And so if you could just give a bit of an overview of, the, the Galloy software that's out there in the wild Just so people get an idea, so obviously he started with the Bitcoin Beach wallet in El Salvador." }, { "speaker": "nicolas_burtey", "time": "12:32", "start": 751.59, "text": "Yeah, yeah. So we start, working on the software stack, eighteen months, close to two, two years ago now. So, so what we have is really like, an open-source different repository that's allow anyone to launch their own wallet, using Bitcoin and Lightning, and also ways to connect to fiat Environment. So we have a, a set of repositories, we have a, a backend, we have a web wallet, we have a mobile wallet, we have a, a tipping services. We're also working on, on a deal which is about to trade between fiat and, and, and Bitcoin. And so anyone can just fork our repository and launch their own wallet. A company that, a project that did that, last month that is getting traction is called Bitcoin Jungle, for instance, and they, they have launched a wallet in, in Costa Rica, and now they have, Some thousand of users, you know, using their wallet to get Bitcoin and, and, and this team in, in Costa Rica is now trying to replicate the success of Bitcoin Beach in Azonte to get the adoption in Costa Rica. And the fact that, you know, or Stack is open source, now it's all anyone to run their own, their own wallet effectively." }, { "speaker": "stephan", "time": "13:46", "start": 826.21, "text": "Right, it's really cool that, anyone out there in the world can just take it and try to replicate it. And I suppose I'm curious as well in your mind while we're here, how essential was it that- In the case of El Zonte, there was a donor who sort of seeded the town or the project. Do you think that's an important aspect of it, or do you think it can sort of build up off its own steam?" }, { "speaker": "nicolas_burtey", "time": "14:08", "start": 848.29, "text": "I think it's really helpful to have someone that seeds a project, you know? a donor is a, is a good way to do it. There is also the fact that the team in El Zonte also was very good At Spooqing Attention about El Salvador, you know, Spooqing Bitcoiner in in La Santé, Mike Peterson have done a, a tremendous job, you know, like bringing awareness of the Of the Bitcoin community, right? About in Salvador, this is how I, I learned about it, and why I, I was like, okay, it's, it's really a good project, I want to, you know, be part of it. so it's, it's a set of, you know, contacts. But if, if you look at, Bitcoin Jaguar, for instance, There is three people that are starting this project, right? they have an entrepreneurial mindset, you know, it's not like there is a donor per se, but there is like a, a small team driving this with, technical expertise and also like economic, you know, understanding of how, you know- are, are they going to, to, how they're going to make this work? And, and they're doing it, you know, not i-i-i-i-it's, it's not for a profit, way, but, you know, they, they think about, okay, you know, there will be costs associated to running a wallet and They are thinking about, having ATMs so that they can also do this bridge between physical fiat and, and Bitcoin. And there is, you know, expenses related to that, so they want to cover their expenses, which is great because if- They can show to also the Bitcoin community at large that, hey, you can launch this wallet and you can, you know, it, it is safe, sustainable, you can make some money out of it, it's a great way for all around the world, I think this Bitcoin beach like project popping up, and this is how we can, you know, see it in every country and show to maybe s-s-some of the local government or, you know, At the state level, that hey, you know, there is this initiative that is going on, and look, it's very good for, tourism, it's very good for economic prosperity in this area, so maybe we should look more into this." }, { "speaker": "stephan", "time": "16:07", "start": 966.6, "text": "Yeah, and so the idea then is that if there's news and tourists come and so on, it builds opportunities in the space, and of course, it's a big learning, opportunity for a lot of people because for them, it's their first time using Bitcoin, and so I think that's potentially what we were bringing, we were getting use of US dollar value in some of the wallets that are there for the beginners who are new to bit-- new to Bitcoin, and so what does it look like for those people when they're learning about using Bitcoin and starting with Lightning, but then also wanting a US dollar representation of that value as opposed to, let's say, the orange-billed person who's already thinking in sats and values their net worth in sats?" }, { "speaker": "nicolas_burtey", "time": "16:51", "start": 1010.98, "text": "Yeah, so the one of the first learn- learnings that we got, initially was So initially the wallet wasn't sat, right? Like, you, you would only see sat and maybe there was a few screen where you had like US dollar equivalent. But the, the first thing was like, no, we, we really need to show, you know, center in the wallet that, you know, this is amount of dollar you're sending, this is amount of dollar you're receiving, even if there is a sat equivalent, it's true, because people think in sat, right? sorry, people, think in, in dollar. You want to help them understand what it's at, you know, whether they should understand or, or, because the value change between, you know, sat and dollar, thing like that. But really, you, you, your bill in, in El Salvador, if you go to McDonald or go to restaurant Intense, it is, you know, it's a dollar bill, but at the end of the day, the, the price are still in dollar. And so you want to make sure in the wallet that there, there is a notion of dollar, but the wallet currently is really wallets that In the wallet, therefore it's at the price of BTC to USD, you know, the USD value in your wallet is changing. and so this is obviously great if, you know, you're in a, a, a bull market, it's, not that great if the price of Bitcoin is, is, is going down. And so people are looking to get USD in their Lightning wallet, right? And so that, like, now they can transact with this broader ecosystem. So if they go to a restaurant in a Salvador... That have a Lightning wallet, you know, they would want to send money to this wallet, but they want to keep maybe a hundred dollar in their wallet. They don't necessarily want to have like hundred thousand sets, and so this is a problem we have been looking at and we, we are trying to resolve. And so when you think about how to do that from the wallet of, from, from the perspective of like, a custodial or shared custodial like we do, is that okay? There can be maybe, you know, a thousand user in The wallet and they each have ten dollars, so maybe in aggregate you have ten thousand dollars. And so you need, you need a way to store these ten thousand dollars, right? So one of the first thing you can think of is, okay, I can get a bank account in, in a bank, and I can put these ten thousand dollars, and then I'm, I'm good, right? i-it's probably the safest way to, to go So because if you have a money in the bank, you know, assuming you have a banking license, and I mean, the risk is, you still have a risk that the bank will fail, there is some counterparty risk, but this risk is, is not Necessary extreme. And the challenge, the challenge here is that you need to have a bank that accept to give you what we call an omnibus account, which is like a bank where, you know, there is a multiple people that have money in this account, right? And you as a wallet provider, you know, you need to maintain the ledger and, and so there is a, there is a very high bar for, a, a Bitcoin company to get, access to an omnibus account. So this is a, a great option, but it's also very hard. And this Come back to the idea of like permissionless money versus permission money. Here you're only going forward the very permission side of, of the money because you need, you need the bank to agree on what you, you, you are doing. Right. A, another way to look into it is you could say, okay, maybe I will use a stablecoin in the backend, right? So, so now you, you don't expose stablecoin to the end user. But if the user is sending you some money over Lightning and say, \"Okay, I want to store this money in USD,\" what you can do is that, as a, I would say, as a, the maintainer of the wallet, you can say, \"Okay, you know, I receive some sat, five dollar, in, in equal amount of, for five dollar, and I, I will basically send those sats to a, a, an exchange, and I will buy USD with it, and then you keep your, the five dollar that this user sent you in, This is easier to do from a regulatory standpoint because now you don't have to convince the central bank, you know, you have to open a po- an account at an exchange. This is easier to, to, to do. There is a third option which is to use derivative markets, and this is the one we have been developing for, for some time now. The idea is that if you want to get a net amount of five dollar in- In your wallet, and you don't want the value in shilling dollar. If you get some SATs in your Lightning wallet, you can go to a derivative exchange and sell a position on- On this derivative exchange, so that for every five dollars you have in Bitcoin, you have like minus five dollars in the derivative exchange, so that like as the price of Bitcoin changes, all the gain you will have or all the loss you will have in, in the, in the physical Bitcoin, you will have an opposite side of trade in the derivative, on the derivative market. And so at the end of the day, you know, the Bitcoin of, the value of Bitcoin can change, you know, you still have the same amount of dollar overall. So this is the third option, and the last option that is Probably will be here in the future, it's, it's, still a bit early. Is the idea to use a DLT contract where you find a counterparty and say, \"Hey, you know, I, I, I just want five dollar, and we are trusting, an oracle that, you know, like, okay, maybe in a month from now, you know, like...\" The value of our, the number of sets will change depending on how the price of, Bitcoin has been changing. the use of DSC contract is something that I'm, I'm very bullish on, but it's also, I think far away, so it might still take a few years before we have this, like, DSC contract. The reason I'm really bullish about DSC contract is because then we'll be able to have USD- Onic amount you have in, in the wallet, with very minimal trust, to any counterparty, which is great." }, { "speaker": "stephan", "time": "22:37", "start": 1357.36, "text": "I see, yeah. So let me just summarize those for, just for listeners, so everyone's following along. So you outlined a few options there. So one is just straight, literally dollars in the bank account, and it's just managed centrally, and that's, I think, everyone kind of understands basically how that would work. And then secondly, you were saying it would be like this idea of, well, doing something similar to that, but just stablecoins and using Exchange and maybe somebody who's managing that, let's say in this example, Bitcoin Beach, somebody who's managing that wallet has to go to the exchange and sort of do that role of moving stablecoins into USD and back and forth. And then, I guess the third option you're saying is somebody centralized, so somebody at centralized is doing like a derivative market action to have a net opposing position to the amount of USD value that the users of the entire, the aggregated users of all those accounts at that Wallet, so let's say it's ten thousand dollars, they would need to have that opposing position of a derivative of that. And then the fourth option, as you're saying, is the future, hope-- hopefully if we get this idea of a DLC stablecoin or some kind of contract for difference option, then that would enable a similar kind of functionality where people who want to have some USD value can represent that inside their balance on the-- their account balance in the overall wallet. If I, if I got you right there?" }, { "speaker": "nicolas_burtey", "time": "24:01", "start": 1441.3, "text": "Yes, that's right. Yeah." }, { "speaker": "stephan", "time": "24:03", "start": 1442.76, "text": "Yeah. And so, I guess probably the first few questions people might have would just be, \"What happens in like times of big market movements? Like, are there opportunities or risks there that, let's say, especially in the case of the derivatives options, so probably options number three, where if, let's say, there, you know, like as an example, in ETAs there's this thing called tracking error, where if the-- You're trying to track an index, but actually they weren't able to, Exactly track that index. So would a similar kind of thing happen here where maybe you couldn't track exactly the derivative position against what a lot of people were doing? And I, I mean, as an example, let's say the price is really, you know, dumping hard really quickly, and so people are trying to get over to USD value, but let's say the derivatives, you know, people couldn't get over to that in time. Is that something you'll, you'll have seen? I, I know, I guess you, you would have seen obviously big price moves in the last few months." }, { "speaker": "nicolas_burtey", "time": "25:00", "start": 1500.14, "text": "Now, the, the main reason for why Devoative is interesting is because of the, something called the cash and carry trade. So what is cash and carry trade? It's already that in general The price in future market is higher than the price of the spot market. Why is that the case? It is the case because there's a lot of people that are very bullish on Bitcoin. They understand that, you know, over time the price of Bitcoin tend to go up, and therefore it's good to be long Bitcoin, and if you want to be very long Bitcoin, you'll leverage long Bitcoin. If you want to be leverage long Bitcoin, going to the derivative market is one of the easy way to do it. and this start to push the price in the derivative market, you know, up higher than in the spot market. And the idea of, of the cash and carry trade is to say that, okay, because the price in the derivative is higher, I can short the derivative, I can buy the spot, and I take this arbitrage of the difference between those two markets. And, you know, I can do this trade, over and over again. And if we look at, for instance, the exchange that we are using for our, our bots, we use OKX, which is a derivative platform that have Lightning enabled. We, on average over the last year, the yield on- This arbitrage is eighteen percent, which is not negligible, right? It means if you have a thousand dollar in your wallet, a year after you have a thousand hundred eighty dollar in your wallet, right? So, so there is some, some, yield to be, generated from this, trade. Now, as you point out, this- This trade is not without risk, because the risk is that if the market moves very quickly, because you have a leveraged position, right, you can get liquidated, right? And you, you don't want to get liquidated. So in our implementation, what we're doing is we-- So, so the first thing to understand is that because we're using the-- The reason why we get this yield is, is really because we take the opposite side of the trade versus what most traders are doing. So most traders are leveraged long, here Because we use a derivative protocol to hedge, we actually take the opposite side of the trade and we're short. And because we are short, you know, we get to get this yield, but also we can think of what is the highest risk point of liquidation, is it when we're typically long or is it when we're short? The typically a lot of the liquidation might happen where you're You're long more than you're short, because so for instance, if you get a leverage of three X, for instance, the price will need to move more than thirty-three percent, right, before you get liquidated. And if you look at when is there like a price, you know, Bitcoin move more than thirty-three percent over a very short time, like let's say over, you know, less than an hour, if this happens, this will happen typically when Bitcoin go down versus when Bitcoin go up, right? of course If you have a bot that is very, you know, reactive, you will not get liquidated if you can just change your position, right? And, and you can, if, if you need more collateral because suddenly, in our case, the price will go up quickly, then we will sell Bitcoin to the exchange and make sure like we have always, you know, margin of collateral that is sufficient to ensure that given some backtest, you know, we, we never get liquidity basically." }, { "speaker": "stephan", "time": "28:22", "start": 1702.38, "text": "Back to the show in a moment. Have you thought about your Bitcoin security setup and single point of failure? 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You The micro SD card to move the transaction information back and forth between the cold card and your computer, and you can use it easily with wallets like Specter, Sparrow, Electrum, and others. And there's a new Mark IV version coming out, so you check out my recent episode with NVK to hear more about that, but it's got all sorts of new features, most notably NFC, which might make your Bitcoin transaction experience a lot smoother. So that website is CoinKite dot com. Use the code Livera to get a discount. And finally, Brains. Brains are a Bitcoin- Mining company through and through, and they do BrainzOS Plus. This is firmware for your ASIC machine, so you can install this and use the auto-tuning feature to optimize your performance and get more hash rate for your electricity bill. And they are the operators of Slush Pool, the OG Bitcoin mining pool. Jack Dorsey uses them for his mining machine, which he mentioned. So go and check out Slush Pool, and if you're using BrainzOS Plus and you point your hash rate to Slush Pool, you actually get zero percent pool fees and You're also supporting Stratum v2, the next generation pooled mining protocol, so go to brains dot com, that's brains with two i's. And now back to the show. I see. Yeah, so essentially it becomes around how much Bitcoin you are storing at the exchange, As your, margin so that you don't get liquidated while that's, while these movements are occurring. And so I guess how much manual management does it take for that?" }, { "speaker": "nicolas_burtey", "time": "30:50", "start": 1850.29, "text": "no, this, you know, it's really a risk, it's a risk parameter because if you're taking a short position, you could actually get just a short position of one X or like minus one X, and in that case, you know, you won't get liquidated. But if you just use no leverage, basically you just get, this short position of minus X, then you are Increasing your exposure of, an exchange risk, right? Because then if the exchange got their money taken away, then basically you will lose hundred percent of the dollar value that you have in, in the exchange. But If you just use a leverage of 3x, then you basically you trade two thirds of, you know, the exchange risk, because now, like, if the exchange have an issue and, you know, you can't redeem your, your Bitcoin, then you will lose this money. But but now because you use some leverage, like you have some liquidation exposure, right? So it's, it's really about risk management. You can, you can get to a stage where you have no liquidation risk, but you have full, exchange risk or If you sell lower, you, you have less exchange risk, right? but then you have some, liquidation risk that you have to, to manage with, with the, your trading bot." }, { "speaker": "stephan", "time": "32:02", "start": 1921.67, "text": "So is the idea that the trading bot is just operating at one X or is it actually operating at, at multiple level of leverage?" }, { "speaker": "nicolas_burtey", "time": "32:09", "start": 1928.91, "text": "Yeah, and so we have, you know, so in our GitHub repository, Gather Money, we have, A repository called Dealer, where we have implemented this strategy, and currently the default settings is to use a three x leverage, but it's something that you, you can configure depending on your, your risk appetite. I" }, { "speaker": "stephan", "time": "32:27", "start": 1947.28, "text": "see. Yeah, yeah. And then who's doing the management of that? Is it the community? Who are like certain, I guess semi-trusted or community leaders, or who, who's doing that actual management of that aspect of it?" }, { "speaker": "nicolas_burtey", "time": "32:41", "start": 1960.53, "text": "So, so this, the, the idea of having USD as- Part of the Gala stack is still working development, so currently we are running like some tests in, in, with, with, exchanges, but it's not being rolled out to the general public quite. So currently there is no-- I see." }, { "speaker": "stephan", "time": "32:59", "start": 1978.73, "text": "Still in testing and development." }, { "speaker": "nicolas_burtey", "time": "33:01", "start": 1981.03, "text": "The, the idea is to bring this to the market in the upcoming- It, it should be ready on the backend in the coming few weeks and in mobile wallet in the coming few" }, { "speaker": "stephan", "time": "33:10", "start": 1989.88, "text": "months. Cool. And so what kind of costs are involved? Because as you mentioned, there is the cash and carry trade, so depending on the, generally speaking, Bitcoin, I guess it's generally true that it's been in that contango position where the future price is higher than the current price, and therefore you, y-y-if you're going the other way, that you're getting paid that premium. So is that the general idea then that the community, or let's hypothetically say, this The feature that's getting rolled out, is the community then going to get paid some funds or is there going to be a fee to pay in order to have that USD value, valuation there available for the users of the wallet?" }, { "speaker": "nicolas_burtey", "time": "33:47", "start": 2027.26, "text": "Yeah, it's, it's a, it's a good question. How will this be rolled out? it's depending of the, so a-at least on the Galois side, we, we, this tool will be available to people that deploy, Wallet with our software, how they want to offer these services to their end user will be, you know, depending on them, right? I, I expect initially to typically the, the cash and carry trade can be used by the people doing the wallet to just fund their operation, right? It's, and this is exactly how banks work today. If you think about banks, you know, what typically they get is deposit, typically free deposit from the user, and they, they use this deposit to give loan to People so they can, do, do things with the loan and hopefully they get paid back, you know, with some interest, and they see how one-on-one banks, you know, works. A-and so here in the wallet, you can think it's very similar, right? You get this deposit and you can get some yield, and, you know, similarly to banks, like, you know, banks may offer to give the yield back to the user, some part of it or all of it or depending on their, on their business model. a- another fee that you There might be some spread to convert from USD to BTC, and, you know, how much spread you want to charge is like, i-is a parameter that you can set, right? But the idea is like, do you want to charge, you know, twenty basis point? Do you want to charge one percent? Do you want to charge zero? Charging zero is risky because then, you know, people can try to maybe gamify your, your conversion rate, and if they see some, some mismatch in price, they can try to exploit it. So it's, it's typically a good practice to charge" }, { "speaker": "nicolas_burtey", "time": "35:29", "start": 2129.06, "text": "To, I believe if we really want to get, Bitcoin as money, but still have the option to use USD where you kind of, you know, your, your checking account, right? Y-y-your spread to convert from this USD to Lightning should be as much close to zero as possible, because i-if you charge one or two percent, you know, like, then there is a lot of friction and, you know, you, you might say, okay, like Sure, maybe I'll, I'll do it one time to buy my Bitcoin and then I stay. But if you want to buy coffee with it, like, you know, it should be really, you know, cents or even, you know, subcents why to do this, This payment. but yeah, trading fees is another way as basically a wallet owner to also get some, some, some revenue. These trading fees should also pass, I mean, the, the exchange also to get this hedging position, the exchange, you also have to pay trading fees, right? So you also incentivize as a wallet to like just make sure that you don't lose money and whatever the exchange where you're hedging your position is charging you, you want probably to pass those fees, to the end user." }, { "speaker": "stephan", "time": "36:32", "start": 2191.62, "text": "Right. So as an ex- For example, let's say you're operating one of these wallets, you've got, a bunch of users, and the idea is that if every time they're flipping between Bitcoin and USD, that you're charging them a trading fee because in turn, when you go to your exchange and you're doing your operations there, you're getting charged a trading fee. So the idea is you're sort of passing through the costs, or maybe there's a little bit of a extra profit there that you're using for some other kind of day-to-day management of the overall system and to help cover the running costs. sorry, did you have something to add there?" }, { "speaker": "nicolas_burtey", "time": "37:04", "start": 2224.34, "text": "Yeah, one interesting aspect here is the, you can, so I, I'm really striving for like, if I want to use, you know, Bitcoin flowing, you know, seamlessly from a US account to this This fee should be very, very minimal. And one way you, that is possible to also reduce those fees is that if you look at, at the flow of the wallet and you see that overall, maybe during a day, like, you know, there is as much USD that got out as there's that USD that got in, right? So like, let's say we have this, you know, a thousand users that each have ten dollars, so there is ten thousand dollars be kept in, in USD, and you, you know, there is like ten users that have a hundred dollars, so there is The same day that we stand other users that get funded are in. So basically, you start at ten thousand dollars at the beginning of the day, you know, maybe it fluctuates a little bit, but you end up at ten thousand dollars at the end of the day. Maybe you don't need to, you know, hedge your position further like on this day, and therefore you don't have this trading fee on the exchanges, right? Because you, you just settled everything, you know, into a" }, { "speaker": "stephan", "time": "38:08", "start": 2288.05, "text": "ledger like within the," }, { "speaker": "nicolas_burtey", "time": "38:10", "start": 2290.03, "text": "within your own wallet, basically." }, { "speaker": "stephan", "time": "38:12", "start": 2291.59, "text": "Yeah. So you kind of do all that netting inside. So I guess walking that through as an example, let's say you have a thousand users in the, in this overall wallet, each with an account within that wallet, let's say, and each of those users might have a Bitcoin balance and a USD balance. And what we're saying here in this example is, let's say they each have ten dollars in their USD balance. And so, of course, they might have been flipping back and forth between Bitcoin and USD, but just for the sake of this example, one thousand users, each with ten That the, that the management team having to deal with at the exchange, but as you're saying, if over the course of the day, some people had to take some money in and some people had to send some money out, you could net that all internally such that you minimize the amount of actual trading that has to go on at the exchange, or at least changing the position size at the exchange. And so in aggregate, that wallet, the thousand users of that overall wallet have a thousand dollars, oh, sorry, ten thousand dollars USD that needs some kind of reflection out there in- In one of those four options, as we said, right, either at the bank account, either using stablecoins or using the derivatives or using the DLC stablecoins potentially in the future. So is that an accurate summary there?" }, { "speaker": "nicolas_burtey", "time": "39:22", "start": 2362.18, "text": "Yes." }, { "speaker": "stephan", "time": "39:23", "start": 2362.94, "text": "Yeah, gotcha. And so then I guess it just comes down to what kind of risks the community would be comfortable with, but also what are the benefits to them, right? Because the benefits for them are that people who are relatively new to Bitcoin can get eased into the process of being exposed to- Bitcoin and maybe over time, more and more users just say, \"No, I'm just going full Bitcoin. I don't need to do all this back and forth.\" But for people who are newer and need to be able to make payments in USD, well, then they're the ones who might need to sort of have a balance of both sides, like some Bitcoin and some USD balance. so is that the main-- That's kind of the main benefit and risk there that you're, that you're getting. Yeah, exactly, exactly. And, and" }, { "speaker": "nicolas_burtey", "time": "40:05", "start": 2405.43, "text": "if you think about, yeah, your journey Bitcoin to, you know, mature ways in Bitcoin, there's like many steps. So I just that in developing country, I see so much reason for why people might want to be plugged to Lightning, right? Because if you want notice to receive money from another country and you have a Lightning-enabled wallet, then you can send money instantly from any other place on Earth and only Lightning enables this, right? A, a, and for zero fee or very low fee. a-at the beginning of your journey whether, you know, what you s-- the stats you receive, whether they settle in, in, in, in Bitcoin or whether they settle in USD or maybe euro or maybe some other currency, is-- it doesn't really matter. What matter is that there should be as much people, you know, plugging to this network as possible, right? Because the, the Lightning Network is a network and the network will really- Go to the like square of the number of user, right? So go, I don't know. We, we want, we want to plug as much people as possible to this network, right? Is, is a step one probably if, if you think about, Bitcoin adoption in developing countries country. And then after they can get used to the square code and understand how, you know, this new payment system works, then they can obviously learn about the other aspects that are key to Bitcoin, the fact that it's, it's, it's permissionless, they can use it with a non-custodial wallet, it's, It can't be censored and, you know, they, they, it's like a protection against inflation, they can learn about this a-after why, why they use the wallet. Something that we learned from Elonti is really that what's key is for people to start using the wallet. I, it's, it's much better than, you know, trying to think about what is money and why, like Bitcoin is superior form of money. You, you really want to approach it from a practical standpoint, right? Just, you know, install this app, try it, send money to your friend go to a shop and buy something with it, and then, you know, it will generate question from you, and, and starting with a perspective where the way that you start using, US balance, you know, makes the hurdle to get started lower" }, { "speaker": "stephan", "time": "42:12", "start": 2532.18, "text": "Yeah. And so the other advantage I can see with this is you're getting at this idea of permissionlessness, because that means the user can have that USD representation without having to go and set up a bank account or you- and- all the same problems that are associated with having to, or being able to set up your bank account because people get their accounts shut down or maybe they don't have the right KYC documentation required, maybe they don't have the physical address or, or these other requirements, so this is allowing them to have some sense of the best of both worlds, that they can have Bitcoin exposure, but also have some USD or retain some USD exposure if that's really what they want, if their bills and their outgoings are denominated in- In USD. So I guess that is relevant for lots of people, even, even if you're in El Salvador and you can pay it in Bitcoin, because you might still have an outgoing, let's say you have to pay your rent or you have to pay your staff, and that, that contract or that agreement is denominated in USD, not in Bitcoin. So even if you can pay it in Bitcoin, if Bitcoin has just come down from sixty thousand down to thirty-seven thousand, like it is roughly right now, then you still have to find a way to come up with that shortfall, which is- Is if you were doing it all directly natively in Bitcoin, well then that's something you'd have to think about. So I, I guess it also does turn a little bit on how many users of that wallet are flipping between Bitcoin and USD in the course of that day, because there might be people during the day who are now saying, \"Oh, I need to switch over, to USD right now.\" And I guess this is something that, as an example, Chivo, I believe you can do this with" }, { "speaker": "nicolas_burtey", "time": "43:52", "start": 2631.8, "text": "Chivo, right? Yeah. Yeah. Yeah. So, so to, to Talking about USD as your checking account, BTC as your saving account is the best framework, at least that I have, so that like, yeah, your extra amount, you know, you should keep it in the denomination, the currency denomination of your obligation, so typically USD and I don't know, but then the extra money that you have, you know, yes, You know, buy USD with it, buy BTC with it. to, to your point about, a-about Chivo, yes, Chivo you can, go from, back and forth from USD to, to, to BTC. What we have seen, at least on Twitter over the last couple of months, is that they initially were saying, \"Hey, you know, you can move from BTC to USDT seamlessly, and there was no fee initially,\" but because there was no fee, it- Basically, it seems there were people that tried to do some form of scalping where like basically you could say, \"You, you, I think you had one or two minutes to say, 'Hey, yes, I, I confirm my trade between BTC and USD.'\" So you could try to gamify it, like, okay, I want to sell my Bitcoin, but now I, I look at, you know, is the price going up or down? I will only sell my Bitcoin if The price is going down after I have my quote, right? And, and I, I think now they are changing their strategy because I see that, yeah, I mean, o-offering absol- absolutely free conversion to the user is can be, can, can be dangerous for" }, { "speaker": "stephan", "time": "45:17", "start": 2717.0, "text": "Because they can," }, { "speaker": "nicolas_burtey", "time": "45:18", "start": 2717.81, "text": "you know, people can abuse this trade basically." }, { "speaker": "stephan", "time": "45:20", "start": 2719.91, "text": "Yeah, yeah. So that's, that's something in general when you're, offering a quote and you're saying this quote is valid for this amount of time, well, then people can try to play with your system there and it's a," }, { "speaker": "nicolas_burtey", "time": "45:31", "start": 2731.0, "text": "you know, it's a, it's a free option for them." }, { "speaker": "stephan", "time": "45:34", "start": 2734.1, "text": "That's right. But I guess, the idea is you're, you're making enough money overall as a business to make up for these kinds of things. But yeah, certainly this is, and I mean, in the case then, let's say with the Galois stack, would it-- Do you know how, like, how are you thinking about that? Would that be offering them a free option or would it just be like, you know, exchange Bitcoin to USD, but you're just paying a trading fee?" }, { "speaker": "nicolas_burtey", "time": "45:56", "start": 2756.32, "text": "Yeah, there will be some trading fee, you know? We, we want to strive to be very low, you know, it's, it's maybe in the, you know, ten, twenty, thirty, forty, forty by this point, I'm not sure yet. And, and the, the thing is, it might change depending on the market condition, I think it is a key part. So if basically the price isn't moving much, You can have a, you know, a, a very tight spread. Now, if the market is moving rapidly because it's, you know, there's, it's in the middle of a liquidation cascade, you know, whether it's a short squeeze or a short long, you know, this is a scenario where, you know, you need to protect yourself by having a, a larger, spread. So it's also very dependent of market condition." }, { "speaker": "stephan", "time": "46:40", "start": 2799.61, "text": "I see. And so the idea then is that this could be an option there for people to provide a USD- Value for the users out there and maybe longer term, maybe the DLC stablecoin thing comes to fruition. I guess is that how you're, you're seeing this, that they might move to people, or even your wallet might move to that kind of solution in the future potentially?" }, { "speaker": "nicolas_burtey", "time": "47:02", "start": 2821.59, "text": "Yeah. So, so the way we are building, on the software side, on the side, like there is really the- What we call the dealer part, so the current implementation that we have for the dealer is using derivative contract, but this could be moved eventually so there is an interface, and You could build another dealer that could be for using fiat on a bank account or using stablecoin or in the future using DLT. So like the, it, it will only be basically the how do you get USD that will change, you know, like in, in the backend. And this is a, a, you could swap or you can even combine them. You can say, okay, I want to have, you know, fifty percent in stablecoin and maybe fifty percent in- In, like in derivative, right? So that like you limit your risk, yeah, in the future like a-any option should be, sh-should be double-edged. On our side, we just have, I would say, one example which is using derivative as of yet. Everything that is related to the, I guess, the wallet side, you know, the, the visible part for the user, like this will not change. Y-you could get, stablecoin, or you could get, yeah, using Debit in the backend or, or, you know, USD in a bank account, like this shouldn't change anything for your, your day-to-day user using your wallet, right? And so this piece should, there, there shouldn't be any change," }, { "speaker": "stephan", "time": "48:19", "start": 2898.59, "text": "Right, and the cool part is that this is functional today. So was it, was it OKCoin you mentioned you're, you're doing this with?" }, { "speaker": "nicolas_burtey", "time": "48:26", "start": 2905.66, "text": "Yeah, yeah, the, the deal I'm using is, is OKCoin, so we look at the different, derivative, derivative, exchanges. We start with OKCoin because, OKX actually, OK, OKCoin, because they are plugged to the Lightning system, you know, they have, they have large volume. So, so adding the feature is to make it more, you know, robust by having more- More option. We also currently use, Perp, but we could add also Future so that like, because the risk profile between Perp and Future are a bit different, but, we use Perp to To get started. But the idea is really to have this interface where like you could, yeah, plug whatever dealer you want, and if you want to offer to your, our user, like some, US in a bank account, you know, it, it, it would be possible also." }, { "speaker": "stephan", "time": "49:14", "start": 2953.74, "text": "Yeah, so this could really open it up in terms of who could, o-uh, onboard into using Bitcoin even in a incremental fashion, right? Without having to be fully committed to the Bitcoin vision from day one. So I guess that's probably the advantage that I could see, and that, this could be replicated in many different communities all around the world. So that's probably the, the, the hope, right?" }, { "speaker": "nicolas_burtey", "time": "49:36", "start": 2976.13, "text": "Yeah, yeah. Right. I, I, I think already, is that it's today take a lot of engineering effort to come up with this type of solution, but by making it open source, right, anyone could, could start their own with, like, so, I, I, I'll come back to this, Bitcoin Jungle, Maybe one last time. So the, the reason I, I, I like, you know, this project is because it's the first time, you know, someone has been using our code in, without our involvement, and they launched their own wallet on the Apple Store, on the Play Store in two weeks from like not, knowing the, our code to have like a wallet functional, in, in a matter of only two weeks with two people on the team working on the engineering side, right? So it's like one month's engineering to get from nothing To like a wallet working, which is just awesome, right? Because you think about the, the Bitcoin company, you know, like, I don't know, the, the Rivar or Strike, like they, they have a lot of engineer, right? or Swan, right? A lot of engineer around their team to build this, this software And, and for me, Bitcoin reached a stage that this market is big enough that it, it's, it makes sense to have, you know, open source solution that exists that people can just adopt on their own. And I think it can really help to have, yeah, a lot more solution in, in many, many countries, all around the world." }, { "speaker": "stephan", "time": "51:00", "start": 3060.41, "text": "Fantastic. So what are some of the steps that you see being required to make this, to make more people, you know, take this idea on? Do, do you think it's more about getting, say, lots of news and stories showing this thing to give people that idea, or do you think it needs to be like shown as a, as a success, you know, in more and more countries or more and more examples outside? Out of, say, El Zonte to show, oh, look, it didn't, it wasn't just one place, it's multiple places it's working in. I mean," }, { "speaker": "nicolas_burtey", "time": "51:30", "start": 3089.53, "text": "I, I think for getting more Bitcoin, adoption around the world, especially in developing country, these projects are really helpful, And I think we saw what Elzont did, right? o-on, on our side from, you know, the gallery said the current limitation is the engineering, right? We, we need still to do a lot of work to make it easy for anyone to, to deploy their wallet. Luckily, the, if, if you know Kubernetes, you know we are native. So there's different, stack on our tool that if you know them, you know, you, you can get Very quickly to having your, your app on, on the app store. But if you don't know them, it's still like a, a many months process to, to get there. And so we, we are working out to, you know, like giving all the tool to make it very easy to, you know, to deploy your own wallet. But there is still a lot of engineering effort to make it, Like rot, rotisserie, etcetera." }, { "speaker": "stephan", "time": "52:25", "start": 3144.77, "text": "And one other thing, when it comes to developing countries, is just the generally low level of income or wealth that makes it difficult to save, because people are living so close to hand-to-mouth, or they're living very close to their level of, ability to feed themselves and do all, do all the normal essentials. So I guess that's one just general difficulty with getting Bitcoin adoption in these kinds of scenarios, isn't it? But, but, but at the same time, I guess the flip side is for some people- People, it is a way for them to start saving that's more accessible than, say, buying a property or buying stocks." }, { "speaker": "nicolas_burtey", "time": "52:58", "start": 3177.64, "text": "Yeah, and, and if you think about Ecuador, seventy percent of the population pre Bitcoin no, I don't know how to think about this statistic today, but seventy percent pre Bitcoin no didn't have a bank account. And so it's, it's not even that, you know, you cannot, it's like you cannot save, you can't get started, right? If you don't have a bank account, it's, I mean, property is not even on your mind, it's like you have to deal with physical cash all the time, you don't have another option. And even sending money to, you know, if you want to pay your electricity bill, basically you either need to take a bus and, you know, pay the bill directly to, to the, you know, water provider, or you need Lightning to this population, you go from people who have no financial, no, no bank account, not any financial access to like they have one of the best, if not the best, financial access, you know, to the world. and from here, you know, yes, they can start saving, even if it's dollars, that's great because previously they wouldn't think about saving. And in a sense, yeah, like the, you start introducing right the notion of saving to, to the language, right? because when you don't have a bank account A bank account is, you, you, you don't even know how to get started with that," }, { "speaker": "stephan", "time": "54:13", "start": 3253.47, "text": "right? The other question I have is also, what kind of other infrastructure is required? So just as an example, ATMs, being able to go from a Bitcoin ATM to get some cash out, or being able to, let's say, have a peer-to-peer market, or let's say, being able to redeem in, say, a stablecoin, how essential do you think these things are for developing countries who are looking to have communities take Bitcoin? How important is that broader infrastructure?" }, { "speaker": "nicolas_burtey", "time": "54:39", "start": 3279.47, "text": "I think ATM is key because it's, it's, it's really a psychological reason that I see where you being exposed to, you know, this Bitcoin thing and you have no idea what it is and this, you know, it feels very digital You know, because it is. But if you're used to, if you don't have a bank account and you're used to have physical bill to, to pay for things, money is very physical, right? It's, it's not digital, even though dollars, dollars are already digital, but, for people living in developing countries, they, they don't have access to bank account, money is physical. An ATM is a bridge between this like new form of money and the cash that they know, like the money that they already know, and, and it help, you know, see them I can put Bitcoin to this machine, I get cash, right? So like maybe this is money because I can, I can change it whenever I want, like it's, available, it's easily convertible. And so for this reason, I think ATM is key. al-also the local market is something that has developed a bit naturally because you have all these merchants that receive this Bitcoin, so- You can go to see a merchant and say, \"Hey, you know, can I buy a hundred dollars worth of Bitcoin from you?\" And the, the merchant will typically say yes, right? And maybe they will have a spread on this, they will charge, you know, a hundred and one dollars or something like that. But the peer-to-peer market is something that we saw also develop naturally." }, { "speaker": "stephan", "time": "56:02", "start": 3361.84, "text": "Fantastic. All right, well, I think that's probably all we've got time for. So anything you wanted to finish off with for listeners and, you know, what, what should they be doing" }, { "speaker": "stephan", "time": "56:14", "start": 3374.21, "text": "involved in some way or use the technology in some way." }, { "speaker": "nicolas_burtey", "time": "56:17", "start": 3376.97, "text": "So the best is to jump on our Slack channel. So if you go to our GitHub repository, it's galy money, G A L O Y money, and there is a link to our Slack. So join our Slack channel and, yeah, I mean, we need more eyes to review code, so like if you're a developer, we'd be happy to, you know, to have you as part of our community." }, { "speaker": "stephan", "time": "56:39", "start": 3399.1, "text": "Yeah. Fantastic. Well, thank you, Nicholas. I'll include that, GitHub link in the show notes for people. Thanks for joining me. And good to get the show notes and the transcript over at stephanlivera dot com. Thanks for listening, and I'll see you in the citadels." } ] }