{ "episodeId": "SLP512", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "stephan_livera": { "name": "Stephan Livera", "role": "guest", "tag": "STEPHAN" } }, "segments": [ { "speaker": "stephan", "time": "00:08", "start": 8.49, "text": "Hi, you're listening to Stephan Livera podcast, show about Bitcoin and Austrian economics brought to you by Swann dot com. So today my guest is Shinobi, who is rejoining us today. He is recently the new technical editor of Bitcoin Magazine. Now, he has actually been on the show before, but it was probably four or five years ago. For those of you interested, you of course can go back and check out that old- Old episode, but today we're talking about his view on drivechains and his critiques of it. So first we walk through what it is for those of you to keep it accessible for you, and then we talk about the critiques of drivechains, and we also go into some more broader thoughts about Bitcoin, soft forks, scaling, privacy, and some other aspects of expanding the system and looking at ideas such as APOCTV Vault and others. So I hope you find this episode informative and help- Here's my chat with Shinobi. Shinobi, welcome back to the show, it's been a while, and of course, congratulations on your new role as technical editor of Bitcoin Magazine." }, { "speaker": "stephan_livera", "time": "01:10", "start": 69.83, "text": "Oh, thanks a lot, Stefan. It's, good to be here. Obviously, apologies for being the uncatchable rascal for the last month or two." }, { "speaker": "stephan", "time": "01:19", "start": 79.47, "text": "It's all good, it's all good. I, I think, I've been meaning to chat with you for a while. Obviously, there has been a lot of arguments going back and forth about drive chains. I know Critiquers of that idea, particularly around the MEV centralization angle, and of course, you have a lot of interesting ideas around, the future of Bitcoin and some of these other ideas. So, you know, let's get into some of these ideas. do you have any kind of opening, I guess, context setting that you wanna do around this whole drive chain argument? I mean, it's, you know, drive chains, the idea was from maybe twenty fifteen or twenty sixteen, and in fact, in our first episode, maybe four or five years ago, we spoke But it seems to have come up recently, and perhaps the reason for that is, the recent VC round or raising, by the company behind it, Layer Two Labs. but yeah, do you have any context setting that you wanna do around Drivechain?" }, { "speaker": "stephan_livera", "time": "02:14", "start": 133.92, "text": "I mean, just Like these, you know, criticisms of the proposal aren't something new, you know, like, like you said, this is a proposal from twenty fifteen. And a lot of us went through all of this back as early as twenty sixteen, twenty seventeen. And just, I, I wouldn't say this is framing, just more like my feelings and attitude about dealing with this. It, our Kind of at, at this point, just like, \"Jesus Christ, guys, like, are we seriously gonna do this again for the third, the fourth, or the fifth time?\" You know, I, I get why sidechains are something a lot of people want and support. It's literally one of the oldest proposals For scaling or adding new features to Bitcoin besides let's just make blocks bigger. But there's a reason that that hasn't come to fruition outside of things like Liquid or RSK, which are just federated systems, and it's the complexity of- How do you make a pegging mechanism that lets you move between these blockchains that's safe, that doesn't add risks to miner incentives, and, you know, despite the claims by Drivechain proponents, that hasn't been accomplished yet?" }, { "speaker": "stephan", "time": "03:45", "start": 225.36, "text": "Yeah. Okay. So can we just start with explaining what Drivechain is, just in very simple terms for people who are, let's say, new to the space, or maybe just are only learning about what this is now? So just a very high level- Well, what is Drivechain?" }, { "speaker": "stephan_livera", "time": "04:00", "start": 240.29, "text": "Well, there's two pieces to it. There's the BIP300, which is the hash rate escrow or the pegging mechanism, so how you actually lock coins on the main chain and transfer them back and forth between other blockchains. That's essentially just Giving control of coins to miners. And when it comes to getting them back out, it's essentially a vote. So when somebody wants to pull their coins out of a side chain, they propose the transaction that does that, and it gets put up to a vote on the main chain by miners for roughly three months. And within that three month period, seventy five percent of the hash- hash rate on the network has to essentially vote yes before that withdrawal transaction can actually finally confirm on chain. So that, that's part one, like how you actually lock the coins up and unlock them to transfer them to these other side chains." }, { "speaker": "stephan", "time": "05:07", "start": 307.41, "text": "One clarification there, what we're talking about here is mining pools at this point, not just individual miners, yeah?" }, { "speaker": "stephan_livera", "time": "05:14", "start": 313.96, "text": "well, technically pools are going to be the ones coordinating that, at the end of the day, but it, you still need the actual miners to provide work and get the blocks that pools put together mined that vote yes or no on these withdrawal transactions. So there is a heavy involvement from pools, but they still absolutely cannot do this without the actual miners." }, { "speaker": "stephan", "time": "05:41", "start": 341.03, "text": "Gotcha. Correct. Okay. and if you could just- Go on then to, the three o one component, the BIP three o one component." }, { "speaker": "stephan_livera", "time": "05:48", "start": 347.72, "text": "that's the blind merge mining proposal. So how blocks would actually be, you know, kind of minted and confirmed for these side chains. and the proposal there is essentially to try to create a bidding market where any person who isn't a miner can kind of put a side chain block together, and what they do is then take, the hash of that block in the header, and then put that into a main chain Bitcoin transaction and attach fees to the miners for it. And so the idea is that anybody, even if they don't mine- mine can kind of come along, put a block together for the side chain, and then bid to pay actual miners to confirm those blocks in a kind of open bidding market. And the idea is that person takes their coins on the main chain, they pay the miners, and if the miners, pick their block, then they lose those main chain coins, the miners collect them, but they're able to claim rewards on the side chain to make up for what they paid to miners. that's kind of the, the very basic high level. And the, the important thing there though is that the way the bip is constructed requires Tiers in the same block that a miner claims that fee from somebody, that there be a matching, output in their Coinbase transaction that corresponds to that transaction that the other user bid with. So there is no way for a miner to collect a fee, from somebody who made a sidechain block without actually approving that sidechain block atomically in their Coinbase. So they can't Not get that money unless they actually approve your side chain block." }, { "speaker": "stephan", "time": "07:46", "start": 466.42, "text": "Okay. And as I understand, so just very high level, the idea with side chains is that you can peg in and then peg back out, that's sort of the generalized idea with side chains, but in this case, because it's a hash rate escrow, it's almost like the miners are the ones who you need to peg out, right? And that's distinguished from, let's say, Liquid Federation, where, you know, eleven of fifteen functionaries have to let you peg out, right?" }, { "speaker": "stephan_livera", "time": "08:10", "start": 489.91, "text": "Yeah. but Romantically though, I would say the only difference between the two things there would be who is the federation. I mean, like conceptually. I would still call Drivechain a federated system. It's just instead of explicitly defined members holding keys, it's anybody who comes along, that has hash rate. So it's, it's more open in terms of membership Now, the thing I wanna say there though is while a lot of people might see positives there, there's also negatives. So while honest members can join this federation, air quotes, without permission from anybody, so can dishonest members. Whereas with a traditional federation, new honest members need existing participants' permission to join, but so do malicious members. So I still think Very much that this is still a federated custodial thing, so to say. It's just the nature of that federation is different, and that's kind of the argument from proponents about why this is superior." }, { "speaker": "stephan", "time": "09:23", "start": 562.67, "text": "Okay, gotcha. And so just to, I guess, spell out what, what Drivechain proponents see as the positives. Now, I, I guess, separately for listeners, I have also agreed to host a debate, Peter Todd and Paul Stoltz, when the time is right, they, they're gonna come on and have a debate on the show as well. But in terms of, I had to try to summarize at least a steel man, the Drivechain proponents see it like, okay, there's gonna be two hundred and fifty-six drive coins or drive chain side chains, and the idea is that theoretically Bitcoin can replicate the functionality of altcoins or add in other features that aren't yet on Bitcoin's main chain, and they view this like, using this Drivechain proposal, people can test out other functionality. Now, now I don't really agree, but their argument is, oh, it's gonna end or- Reduce some of the politics in terms of soft fork politics, because people can just spin things up on a drive chain sidecoin, whether that's they want some kind of Z coin or Zcash functionality or Monero functionality or Ethereum functionality or some other thing or even Bitcoin soft forks. That's, that's how I'm understanding, at least the steel man of what they, they want. Do you see it differently or how are you, how are you seeing that before we don't get into criticisms?" }, { "speaker": "stephan_livera", "time": "10:34", "start": 634.24, "text": "I'd say that's an accurate way to frame their perception of things. Yeah." }, { "speaker": "stephan", "time": "10:39", "start": 638.78, "text": "Yeah. Okay. So let's go into some criticisms then. So in your mind, what are the top, you know, few criticisms of Drivechain that you would have?" }, { "speaker": "stephan_livera", "time": "10:48", "start": 647.89, "text": "Well, I'd say the most important ones have to do with mining incentives and mining centralization. You know, to put as succinctly as possible, the design goal of blind merge mining was to To ensure that miners can collect fees from all these side chains without having to actually care about them, I think the incentives for that are broken and that they will naturally kind of domino and cascade to the point that miners will in fact wind up doing all of this themselves, and that over time it will even become economically necessary for miners to do these things themselves. And once you get to that point, you know, the claim about what blind merge mining accomplishes, it just falls apart. Like the, the entire point is that miners can collect this revenue without actually doing this work, and I don't think that the proposal will actually accomplish that. So it will create centralization pressures, incentive issues that are something that main chain users who don't use any of These side chains will have to, to deal with and consider." }, { "speaker": "stephan", "time": "12:05", "start": 724.61, "text": "I see. So let me summarize that then as part of the whole reason we care so much about Bitcoin's being decentralized is that it's easy to validate. So then what we got into, I guess what we're sort of going into here is with Drivechain, the, the idea is that the miners, both the miner, the individual miners and the mining pools, if they don't want to, they don't have to run all of the side chain full nodes or do all the validation required, right? Of doing Doing Ethereum validation of Monero, of Zcash, of whatever other side coins. And so the way the Drivechain people are trying to get around this is they're trying to say, \"Well, we've got this blind merge mining idea where if the side chain miners don't want to validate, they don't have to, they can just take the highest transaction fee.\" And so I guess what you're saying is the argument counter to that is, and I've, I believe Alex B, Alex Burgess also made a similar kind of argument, which is that the-- in a very, you know, cutthroat competitive market, these miners and particularly mining pools will have an incentive to vertically integrate And they will then actually take on that role of validation, because in some instances, so for example, in Ethereum, this is literally a thing, it's called MEV, Miner Extracted Value, and it relates to specific opportunities that are available to people who are doing that extra validation. And so that's part of this argument here that miners will get, there'll be a centralization vector here because you'll need to do it to be competitive. Would you say that's a fair summary or how do you wanna expand there?" }, { "speaker": "stephan_livera", "time": "13:42", "start": 821.75, "text": "Yeah, you know, I think just the, the first level of what's wrong with the thinking here," }, { "speaker": "stephan_livera", "time": "13:51", "start": 831.17, "text": "Is just the basic economics, you know, like to put some numbers to this. the whole idea is that non-miners working on these side chain, nodes to construct blocks, you know, pay the miners, and their argument is that this will get so competitive that ninety-nine percent of all the money being earned on these side chains will just get paid to main chain miners without them having to do anything. And the other people will just keep one percent. But let's put some numbers to that. Say that every sidechain block on one sidechain generates point one Bitcoin. Well, with the withdrawal time taking three months, that means for that three month period, collectively between everybody constructing these blocks You need to lock up twelve hundred Bitcoin in these side chains. Like you effectively have to take twelve hundred Bitcoin that you already have, give it to miners in exchange for that amount plus the one percent on the side chain. For a chance at collecting twelve Bitcoin in reward. So, you know, let's say there's ten people doing that, each one of those people have to put a hundred and twenty Bitcoin At risk for the chance to earn one point two Bitcoin. Do you think an economically rational person is going to take that much in Bitcoin capital that they already have and risk it for that small of a return? I, I don't think they will. I think the reality is that people doing that will try to keep much more than just that one percent. And when you start looking at that in percentage terms, that's extra revenue that these mining pools could capture for themselves and miners who mine with them by just cutting all of these people out and running these nodes themselves, because unlike these other people I don't have to pay myself to put my own side chain block commitments in the blocks that I'm mining. I, I don't have to have that hundred and twenty Bitcoin to do that. I just put the hash in my block and I can claim a hundred percent of everything on the side chain. So I don't have, as a miner, that capital requirement to be able to compete over these rewards. I already have that in the form of the pool, the hash rate I, I don't have to reinvest that again in order to claim these rewards. And so just at the basic level, without looking at MEV or other issues I think the reality is that there is going to be enough of a margin that these other people are trying to keep to themselves, that that alone is enough of an incentive for miners and mining pools to just do this all themselves." }, { "speaker": "stephan", "time": "17:02", "start": 1021.51, "text": "Okay, interesting. So let me just walk that through. So just, so as you're saying, it's without even going into the MEV, you're actually saying there's a mining centralization vector just at the pool level, because people will have an incentive to sort of cut other people out? And try to take the reward for themselves. Is that what you're saying?" }, { "speaker": "stephan_livera", "time": "17:20", "start": 1039.56, "text": "Yeah." }, { "speaker": "stephan", "time": "17:20", "start": 1039.92, "text": "Gotcha. And so in terms of those numbers, could you just walk us through that example? I didn't quite follow everything. You were saying point one BTC in the side chain, and you were saying twelve hundred BTC, is that just because that's how many blocks for three months or what?" }, { "speaker": "stephan_livera", "time": "17:35", "start": 1054.53, "text": "Like if you look at point one BTC every single block in a side chain, and it's gonna be the same block interval as the main chain, then for three months that adds up to a Than twelve hundred Bitcoin, and so one percent of that would be twelve Bitcoin. You know, just, just to put like concrete numbers in people's heads to think about instead of abstract percentages." }, { "speaker": "stephan", "time": "17:59", "start": 1079.15, "text": "I see. And so this is just like at the first level, and then you can take it even further, right? Like with the MEV angle and with other angles, right? So what would you say is the next, I guess, biggest critique you'd have?" }, { "speaker": "stephan_livera", "time": "18:10", "start": 1089.72, "text": "Well, the, the next issue is kind of how reorgs work on a side chain. Let's say you are the, the person who's not a miner, you're just competing for these side chain rewards. Well, let's say you are the miner, Stephan. Well, I pay you, point one Bitcoin to be able to claim a little more than that on this side chain. Well, reorgs happen independent of the main chain on a side chain, so we can have main chain block one hundred commit to side chain block one hundred, but then main chain block one hundred and one can commit to an alternative version of side chain block one hundred." }, { "speaker": "stephan", "time": "18:54", "start": 1134.25, "text": "And then" }, { "speaker": "stephan_livera", "time": "18:55", "start": 1135.25, "text": "main chain block one o two, you know, whatever like side chain block that one builds on, whichever version of side chain one o one, will decide which one, is like confirmed in terms of the longest tip on the side chain, while you can take my money For my version of sidechain block one hundred, and then your next mainchain block, you can just reorg my sidechain block out. So you are in a position where you can not only take my point one Bitcoin on the main chain, but then you can reorg my sidechain block and take that from me as well, and you, you get double rewarded. And there's nothing I can do about it except sink more money into things and hope some other miner will build that. On my side chain block instead of yours. But the thing is there, bigger pools are going to have a bigger percentage chance at also mining the block after that, where they can lock their side chain block in and, you know, guarantee that I wind up losing not only what I paid, but what I could have earned as well. So there is a, a big asymmetry here in terms of risk when a miner mines their own side chain Block, they're also open to, you know, the side chain block being reorg'd while the main chain keeps going forward, but they only lose revenue they could have earned. They don't lose money they already had like I would as a non-miner." }, { "speaker": "stephan", "time": "20:33", "start": 1232.96, "text": "I see, because they're still getting the BMM revenue, right?" }, { "speaker": "stephan_livera", "time": "20:36", "start": 1236.22, "text": "Well, I mean, they, they would get, nothing if their side chain block was reorg, so they would lose the potential revenue they could have claimed, but they didn't have to pay for the chance of that. So while they do lose out on the opportunity cost of that, I not only lose out on the opportunity cost, I lose out on the money I already had that I paid and relinquished control out of. So I, I lose way more than a miner would. And so this is kind of an asymmetry where the risk for me as a non-miner is higher than for somebody who is actually a main chain miner. So that's just an, a second disincentive for outside participants to, to take a, a role in this, because I have more at risk than somebody who's already a miner in terms of, you know, moving the side chain forward." }, { "speaker": "stephan", "time": "21:31", "start": 1290.91, "text": "And so the corollary, the lesson here in, in this sense is It would raise the bar to be a profitable miner or idea, a mining pool is where the most centralization would be happening, correct?" }, { "speaker": "stephan_livera", "time": "21:44", "start": 1304.01, "text": "Yeah. And, you know, the, the incentive there is also kind of ma-mining pools who capture more of this value are also going to attract more actual miners to that pool because it's gonna be more profitable" }, { "speaker": "stephan", "time": "21:59", "start": 1318.72, "text": "to point your hash rate to the big pool, yeah. Yeah. And so now one of the arguments I guess the counter argument that I have seen from the Drivechain proponent camp, of course, I don't agree with this, but this is their argument I've heard, is they say that it's sort of like an ancillary services, right? As an example, if Brainzpool has a merchandise shop that sells, you know, brains t-shirts, you know, they make this argument, another similar kind of related, argument is they say, well, miners have to go and do all kinds of things to get better power or, you know, to get hash rate, Where they, you know, might go and, you know, need to negotiate power deals or other things, you know, in terms of innovating on the ASIC machine. another argument I've heard is this argument that, well, it's similar to if, you know, the Texas, some Texas miners are doing curtailment and they're receiving, sort of reward in a way or getting paid, for turning off, and that's like an incentive outside the system. And so this is, you know, no different to that. Why should you care about, you know Kicking off such a stink about, drive chains when there's all these other factors that miners have to do today. What would you say to that?" }, { "speaker": "stephan_livera", "time": "23:13", "start": 1392.7, "text": "Well, to address the t-shirt merchandise example, 'Cause that's, it's not the same industry. Like when it comes to mining side chains, you are reusing your existing capital investment. I don't have to go out and buy more miners to mine a side chain. I already bought those miners. I can reuse my existing capital investment, like for mining pools to spin these nodes up. They don't have to go buy new data centers and new server equipment. They already- Have that. They are reusing their existing capital investments, whereas something like the t-shirt shop, you, you can't just use your data center to make t-shirts. Like you actually have to go out and make new capital investments and new infrastructure, new production capacity in a whole new industry to compete on even footing there. So that's very different in, in terms of the economics of that. Like, yes, anybody can go start any business, but you can't go start any other business with your existing capital like you can integrating sidechains like this. And, you know, that very important distinction aside, I still think, like, okay, so there are outside, influences or incentives to the mining ecosystem that may present some damaging risk, That's not an argument for why we should add more of those things. That's an argument for why we should do the exact opposite and not add more of those outside incentives, because we need to see how the existing ones actually play out and how much damage or negative externalities the existing ones create before we even consider rushing to add more outside influences like that." }, { "speaker": "stephan", "time": "25:16", "start": 1516.07, "text": "Back to the show in a moment. When it comes to securing our coins, we need hardware devices, and CoinKite dot com make the Coldcard, my favorite Bitcoin hardware signing device or hardware wallet. Now, the reason we need hardware devices is because we don't wanna just use hot, online connected devices to store our major stack of coins. That's why having an offline signing device like a Coldcard is a fantastic idea. It can more easily secure our coins, and we can even keep that Coldcard Cold card offline by using a micro SD card to move transactions and information back and forth between the cold card and the computer or the other, software that you are using to interact with your Bitcoin. The cold card is an ultra secure device, it's very versatile and it's very reliable. I've been using cold cards as part of my various setups for years. It's really a very versatile performer. You can use it in single signature or in multi signature. They are just such an essential device. So to get yours Go to coinkite dot com and use code Livera for a discount on your cold cards. Are you still using a plain old block explorer? Bitcoin has grown beyond a single layer, it's a fully fledged multi-layer ecosystem, and like I chat about in this episode with Shinobi We're going to need more complicated scripting protocols, and MemPool.Space is perfectly poised to help you explore this ecosystem. Whether you need to search transactions, whether you need to look up blocks, you-- whether you are looking to target the fee for your transactions, MemPool.Space is an invaluable tool. I use it all the time before I send an on-chain transaction, I go and check MemPool.Space. MemPool.Space also offers things like a Lightning explorer, it shows you a view of the mining dashboard And if you are with an enterprise, mempool.space offers custom mempool instances with your company's branding, increased API limits, and more. They are also looking to, to launch a mempool accelerator, so keep an eye out for that. You can find all of this over at mempool.space. And now back to the show with Shinobi. Okay, so yeah, so I guess summarizing some of the key arguments so far, it's that, you know, there is generally a s-mining centralization vector because the sidechain miners may integrate and take some of the reward for themselves. We've mentioned, also an, an impact around reorgs on the sidechain, which could also create issues. We've mentioned, let's say, the T-shirt example. I think, I, I, I presume your counter argument in terms of the curtailment sort of example is like you were saying that maybe that is a bad thing and Encourage that or exacerbate that further, that the incentives of the Bitcoin mining system should be kind of self-contained in terms of Bitcoin block reward, as opposed to having rewards that can kind of come from the fiat system or from outside of Bitcoin." }, { "speaker": "stephan_livera", "time": "28:04", "start": 1683.58, "text": "Yeah. You know, like if you live in a shitty neighborhood in the city, you know, where gangbangers are hanging out outside all day, and that presents a risk to you every time you go outside, are you-- is your- Attitude gonna be, well, fuck it, there's already gangbangers outside, let's just invite a whole bunch more to the block. Like, you, you, you have a risk to you, so fuck it, let's just make that risk work. Like, that is completely irrational, that that's not a logical argument for why to do something." }, { "speaker": "stephan", "time": "28:37", "start": 1717.35, "text": "I see. and so do you have any other kind of key arguments that you really wanna hit, in terms of the drive chain, because there's, I've got a few other points, but, I'm curious to hear your views first." }, { "speaker": "stephan_livera", "time": "28:48", "start": 1727.93, "text": "Well, it's- Just say like the MEV issues. You know, th-this is a massive, similarity or comparison with what's going on in the Ethereum ecosystem right now. And, you know, it's kind of a similar thing to the t-shirt shop argument. you know, Ethereum has been trying to separate these roles of who is actually on a consensus level confirming and finalizing mining blocks and who is actually filling the contents of those blocks and putting them together ex-exactly to try to deal with the issue of MEV on Ethereum, to make that MEV risk something competitive and decentralized. But the reality is that even though they have tried to separate those roles, they are still vertically integrating. You still have the stakers and the staking pools instead of Of leaving the MEV extraction outsourced, they are vertically integrating those operations into their own staking operations. And so like this, this entire argument that you can just make this an open competitive thing to try to mitigate the damage? this isn't just a hypothetical we're playing with ideas, like we can literally see this play out in Ethereum right now, and it's not working Like everything they are trying to do to mitigate these issues and stop them from being centralization pressures, it is failing, and those dynamics are causing centralization anyway. So that is something, and, and you know, just to be clear, drive chains aren't at all the only way that MEV can come to Bitcoin, but that- That issue specifically is something we should be extremely cautious about with everything that we activate in Bitcoin, because we can see the other ecosystem in Ethereum where they weren't cautious about introducing those things from day one in terms of how the engineering and the architecture of the system was designed. And they're becoming very serious problems in that ecosystem." }, { "speaker": "stephan", "time": "31:12", "start": 1871.5, "text": "Yeah. So like," }, { "speaker": "stephan_livera", "time": "31:12", "start": 1872.36, "text": "that isn't something we should just dismiss or hand wave away as we'll figure it out, because they're trying to, and they're not figuring it out." }, { "speaker": "stephan", "time": "31:22", "start": 1881.79, "text": "Okay. And so just to make sure everyone can follow along, do you mind just giving like a, a very simple explanation of what, what MEV is and why it has certain centralizing pressures or why it's an issue?" }, { "speaker": "stephan_livera", "time": "31:35", "start": 1894.84, "text": "Well, in abstract, it's any type of value that can be extracted from the activity on a blockchain, where the consensus makers, so the miners or the stakers or whoever is actually moving your blockchain forward, are in a, a unique position where they can extract that value, whereas others can't. you know, the simplest way to think about it in the vast majority of cases is just they are in a position where they can front run you. So like let's say there is a decentralized exchange on some blockchain with lots of profitable trades, and people just interact with whatever contract is operating that DEX, you know, to trade and make profit. Every time you do that, and it goes into a mempool, a miner can look at that and go, \"Oh, that guy made money, \"and drop someone else's transaction and just recreate a version of themselves doing that. And they can take that profit themselves. And, you know, that it's-- in, in practice, can get a lot more nuanced than that, but just at the basic abstract level, it's the miners, because they control what goes into the block, are in a special position to front-run any type of transaction that is open for people to participate in that can generate profit. And so that's- You know, that, that's a very closed type of, revenue stream that not everybody can take advantage of. Like, miners or stakers or whoever's working your blockchain are like the unique decider of whether or not things like that happen, and they're in control of it." }, { "speaker": "stephan", "time": "33:26", "start": 2006.08, "text": "And my understanding of why that's a bad thing also is that it is a very highly specialized- Industry, if you will, or there's very few people who really deeply understand these nuances, and so then it's hard to get the talent who can actually exploit that MEV. And so there's very, I guess it, it sort of privileges the people who really-- those pools or those stakers in the Ethereum world who h-have access to that kind of talent. so then I guess to bring that to Bitcoin, that would be an issue then, because it would be the same kind of centralizing pressure towards the big pools Who can afford this kind of MEV exploiting talent, right?" }, { "speaker": "stephan_livera", "time": "34:07", "start": 2047.03, "text": "Yeah, and, you know, even, even if that talent is elsewhere and doesn't want to come to those pools, there is still a huge incentive for those pools to develop that talent in-house, and you, you can see this objectively in what's happening in Ethereum. You can even see, like, that objectively starting to happen in Bitcoin, you know, just searching for external or new sources Sources of revenue, Luxor, bought Ordinals Hub, and they are actually as a mining pool exploring the Ordinals ecosystem as a new stream of revenue. F2Pool, is actually front running Stephan- X miners, like a, a kind of para chain on top of Bitcoin, and they are just ignoring, the open competition from other people trying to progress the stacks chain forward and just doing it themselves to capture that value. So you can already see that right now today, mining pools are investing time, capital, and resources into looking at new streams of revenue like this. And so if you see See other forms of MEV start appearing on Bitcoin or becoming possible on Bitcoin, like miners will explore that, like that is a new stream of revenue for them, and their entire incentive is to maximize profit." }, { "speaker": "stephan", "time": "35:35", "start": 2134.84, "text": "Right. And similarly, kind of similar to the, the gangbanger example earlier, there is this argument, oh, MEV will exist on Bitcoin anyway, so therefore, you know, drive chains and, just accept it, sort of argu- argument, and, but I presume it would be the same kind of gangbanger example where you would say, \"Well, the fact that this bad thing exists isn't a reason why we should encourage it or exacerbate that issue.\" Is that how you would combat that issue?" }, { "speaker": "stephan_livera", "time": "36:00", "start": 2160.44, "text": "Yeah. I mean, like MEV isn't just a black and white thing. it's a very nuanced thing More along the lines of a spectrum. Like if you want to get, like, artistically technical, like just picking fee or transactions with the highest fees is a form of MEV. It is a value that only miners are in a unique position to extract and they want to maximize that. And so you, the more complex That the route for extracting value becomes the more centralizing it's going to be, because the more specialization it will take, the more resource intensive it is. So we should absolutely be trying to keep the complexity of any type of MEV like that that appears on Bitcoin as low as possible, because when you have low complexity, that's when it's easy for everybody to participate in. That's where you're not not going to have like a massive disproportionate benefit for the really large miners or the really large pools. And we shouldn't just be looking at some very basic, not complex form of MEV and use that as an argument to go, \"Fuck it, like just let everything happen.\"" }, { "speaker": "stephan", "time": "37:23", "start": 2243.12, "text": "Gotcha. And so another point to add here is that there is currently a project in Bitcoin circles known as Stratum v2, obviously I'm sure you're aware of this, but for listeners, the idea is that there are a range of benefits that, it can take away man-in-the-middle attacks by adding encryption, but crucially, one important factor is that it could make it so that miners can create their own block template, i.e. individual miners can select which transactions go into their blocks and instead of taking that away from the, at the pool level. Now there is progress on this, there's Stratum reference implementation which should be coming out soon-ish, soon-tom, maybe a few months. in your view, Shinobi, do you view Drivechains as cutting against any progress being made there in terms of advancing Bitcoin mining pool decentralization?" }, { "speaker": "stephan_livera", "time": "38:10", "start": 2290.25, "text": "yes, I do. I think it adds a lot of cost because you, you have no idea what the validation cost of any drive chain is going to be. Like, once you allow people to start activating drive chains, it is impossible to constrain them. Like, you cannot dictate how complex the validation cost is going to be, what the block size is, things like that. So you're effectively making the potential cost of running all of these to maximize all of the revenue you're generating infinite, like at the most extreme case. And that completely undermines, like, the entire goal of something like Stratum v2 or, like, to take it like all the way, something like Braidpool, which is accomplishing the same thing as Stratum v2 but also making the payout to the individual miners non-custodial and trustless. And it undermines, you know, the goal of moving in that direction, because no matter what you do, it's more complex. Like it's, it's either more expensive for an individual miner to construct all of these block templates themselves, or, sorry, or it's way more complex For, you know, all of these drive chains to have to interact in some way with miners who are running Stratum for the base layer, i-it's adding cost, it's adding complexity. If you try to mitigate that cost, i-i-it's just fundamentally throwing a wrench In the possibility of improving that aspect of mining." }, { "speaker": "stephan", "time": "39:56", "start": 2395.66, "text": "Right. And I think another example I've heard of is, P2Pool, is it PeterPool, where the idea is that kind of similar sort of idea where, you know, maybe the pool has less control over what's going into the block, but in a, in a drivechain context, it's cutting against that as well, right?" }, { "speaker": "stephan_livera", "time": "40:12", "start": 2411.97, "text": "Yeah, P-P2Pool is kind of like the ancestor of something like Brainpool. It's a decentralized, mining pool protocol and Miners participating in it kind of have their own blockchain in between the actual blocks and the real blockchain with lower difficulty, just to keep track of who's doing how much work. but the problem with P2Pool is that every individual miner has to have a specific output paying them their cut in the Coinbase transaction, which makes those Coinbase's huge and it fra- Segments all of the miner's income into tiny UTXOs and it just hit massive scaling problems. Braid pool is, is kind of an improvement on that design, looking at a, a lightning hub or hub and spoke design to kind of cache all of those individual payments off chain, atomically. Like you, you have the Coinbase go to a hub, that hub atomically links the payout individually per block through payment channels to the individual hasher, and then periodically miners can close those channels, have them reopened, and sign over complete control to the hub of the actual Coinbase output, and just like massively improve the on-chain footprint of doing this in a decentralized way." }, { "speaker": "stephan", "time": "41:44", "start": 2504.36, "text": "I see. And my understanding with Braidpool is that one would actually require a soft fork, whereas Strato V2 doesn't, right?" }, { "speaker": "stephan_livera", "time": "41:50", "start": 2510.5, "text": "No, there, there's no soft fork needed for- For, brave pool, you would just need, kind of customized, lightning software because the script structure used to connect the lightning payout to the Coinbase is kind of non-standard, in how it's constructed a little bit. So you, you would just need like some custom lightning software for the hub operator and miners, and, other than that, no fork is necessary." }, { "speaker": "stephan", "time": "42:22", "start": 2541.9, "text": "Okay, great. One other big argument that is, you know, here with drivechains is this concept as of miners can steal, right? So that's kind of another big criticism that people are leveling against drivechains. so I guess there's a few different ins and outs here. One argument here is that there would be politics even on which particular sidechains get activated, and a, another argument is also that it may raise a lot of main chain politics in terms of UASF arguments, if miners- There's word to try and steal. So do you wanna just give a bit, a bit of an overview of this particular argument and maybe spell out your views on that also?" }, { "speaker": "stephan_livera", "time": "43:01", "start": 2580.95, "text": "Well, so the whole risk of- You know, the custody aspect there is, like I said earlier, when you put coins into a drive chain, you are effectively giving full custody of those coins on the main chain to Bitcoin miners. And whatever seventy five percent of miners want to do with those coins, they can do. So they, they can just, in theory, just take every coin locked into every side chain. And the consensus rules explicitly allow them to do that as long as seventy-five percent of the miners agree. And an important thing to remember here is In practice, if miners were really set on doing this, it doesn't take fif- seventy-five percent, it just takes fifty-one percent, because any miner who doesn't, you know, upvote theft transactions to approve them, at the end of the day, if you have a fifty-one plus majority, they can just orphan those blocks. I see. I, I do wanna kinda couch this with, though, that is If, if we're at a point where miners are doing that, then we likely have bigger problems than these side chains are getting looted. now I, I, I will also say You know, most of Bitcoiners' concerns with fifty-one percent attacks like that are around an explicit cartel of miners, like deciding we are going to organize together and do malicious things. I can see situations where miners could form a majority to mess with drive chains like that without an explicit, like, malicious cartel like that. Like there could be situations where it's just the incentives are aligned for a majority of miners to do something regarding a drive chain, and it's not like some explicit conspiracy. Like these miners haven't sat down and gone, \"We are going to conspire to- together and everything, like there is just an incentive alignment for them to cooperate to do this one thing. but that's still a pretty bad situation we would be in. personally I'm not so concerned about those risks in the short to medium term if drive chains were activated. I'm more concerned about those types of risks, like twenty, thirty, forty years down the road, like if drive chains were activated and we do wind up in a world where everything is running on Bitcoin. Like those types of minor dynamics are now geopolitics. It's not just us sitting here discussing businesses in a niche ecosystem anymore. You are talking blocs of nations, superpowers, that level of thing. And I think in that type of environment If drive chains are widely adopted, then the issue of theft could become kind of serious. Like imagine, say, some pariah state like North Korea has a drive chain And all of the other countries and nations come together and go, \"Well, we're just gonna take all of their money.\" Like that's where, that's the level where I think the issue of theft starts becoming a plausible risk and something to worry about. But, you know, if, if we're just talking like right now, Bitcoin is still a relatively niche thing, I don't think that's too big of a concern at that scale." }, { "speaker": "stephan", "time": "46:52", "start": 2811.57, "text": "I see. and just sharing something I've seen. Now, shout out to, a Chim Warner, I'll put the link in the show notes, but he has a blog post where he talks about a few examples of some of these, you know, where there could be politics brought in to this. And so just as an example, I mean, hypothetically, there could be like some kind of assassination market chain or something like this, or, you know, something where, you know, people would just be making all kinds of crazy side chains, and then there may be others, other miners who are trying to shut that down or stop that chain. So there could be sort of Another angle for, for which there could be politics between, and even between nations, right? So if it's kind of like something focused on the leader of one nation hates the leader of another nation, you know, there's another angle for more politics there, don't you think?" }, { "speaker": "stephan_livera", "time": "47:39", "start": 2858.57, "text": "Yeah. You know, that, that's- That's kind of the thing, it's if, if Bitcoin really does become a global currency, like, do we really want those types of incentive dynamics where it is possible for coins to just outright be stolen by miners? Like, we, we have no idea how this is going to play out in the long term if we get to that type of scale. you know? I, I know Bitcoiners don't like to hear shit like this, but hello, I'm Shinobi and this is Planet Earth. And when things become critical to the global economy, to diplomatic relationships, nation states generally get together and they make treaties about things. So, like, we really shouldn't be looking at introducing new dynamics like this, just assuming we know what the mining landscape is going to look like, that we know what the politics, what the regulations of the mining ecosystem is going to look like twenty, thirty years from now, because we don't. Like, that is just something we are going to watch evolve. And have to deal with problems as they pop up as it evolves. And, you know, something like Drivechains opening the door to theft, to miners explicitly custodying these coins, is introducing a- Completely new variable i-into that situation in terms of how things could evolve over the next few decades." }, { "speaker": "stephan", "time": "49:19", "start": 2958.77, "text": "Right. And so I think another point that you, you were touching on earlier, it's this idea that a lot of miners have very low profit margins, and so if there are miners with an incentive outside the traditional ones, they may be able to push out the traditional miners. And so in that context, or to say twenty or thirty years down the line, it could be that Some nation state is sort of having an incentive external to earning Bitcoin, where they wanna try to influence, what happens in the chain. So I think that's maybe an example of what you're getting at there. Alright." }, { "speaker": "stephan_livera", "time": "49:53", "start": 2992.99, "text": "But yeah, it's, it's just that it's, it's adding a whole lot of variables when we're not even sure how things are going to play out with the existing variables. And I think it's just, it's incredibly impatient, short-sighted, and the general rationalization for it is the air quotes security budget, which is again something people just keep making Bold assumptions on when we really have no idea how that's gonna play out. Like, none of us are clairvoyants, we don't see the future, like, we don't even know whether that is or isn't actually going to be a problem for this system. Like, people are just assuming it will. So, like, we shouldn't be trying to fix problems before we're even sure that is a problem." }, { "speaker": "stephan", "time": "50:46", "start": 3046.38, "text": "Back to the show in a moment. The leading sponsor of this show is Swann dot com, and the team at Swann dot com are organizing Pacific Bitcoin Festival. This isn't just a conference, this is a celebration of the incredible world of Bitcoin, the ultimate lifestyle, and a thriving community that is working together to forge an awe-inspiring, bright orange future. There is an awesome lineup of top-notch speakers, people like Max Keiser, Stacey Herbert, Vijay Boyapati, Preston Pish, Pierre Rochard, Alex Gladstein, Corey Klipstein, Lynn Alden, Jimmy Song And so many more. The dates are October fifth and sixth in LA at the Barker Hangar. I'm really looking forward to being there myself. I'll see a, a bunch of you out there. There is a general admission ticket for those of you who just wanna get access to the main stage, as well as the Swan Dome for deep dive sessions, as well as the various side events, which you can find on the website. So make sure you check it out, it's pacificbitcoin dot com, October fifth and sixth in LA. Make sure you check your diary and your calendar, look up the Tickets at PacificBitcoin dot com, use code Livera, and I'll see you there. And now back to the show. Okay, and so one other angle that I see, and I'm curious to get your views on this, there is this argument that, well, if the miners try to steal in drivechains, there could be a main chain UASF to block that theft. Now, I see that as a potential to create just a lot of soft fork politics and cacophony, because there'll be two hundred and fifty-six slots, and if you- Users on any one of those slots are getting rugged by the miners, they will try to have a UASF to say, \"Hey, main chain Bitcoin users, save us from getting rugged.\" What do you think of that risk?" }, { "speaker": "stephan_livera", "time": "52:29", "start": 3148.56, "text": "I, I think I feel similar to just the, the risk of theft in general. I think in the short to medium term, that wouldn't really be much. It would be a small group of people crying to change Bitcoin because the consequences of their actions are coming home to bite them in the ass, and everyone else would just laugh and say, \"I told you so.\" But if you're talking nation states looting from other nation states, that's A very different scenario, like that could potentially do something like cause a permanent chain split that will never resolve, and every time that happens, that could just further and further fragment Bitcoin's network effect. Like, if some nation had a drive chain that was being used to facilitate commerce, let's say that's You know, ten, twenty percent of a country's GDP in there and it gets stolen? Well, they're forking and they, they don't care, you know, whether everyone comes along with them or not, or whether they wind up on their own fork chain because, hey, it's that or we have nothing. And, you know, again, it's like once you start looking at a truly global scale, like some of those problems with drive chains that wouldn't be problems right now could present very serious problems." }, { "speaker": "stephan", "time": "53:56", "start": 3236.24, "text": "Yeah. So I think we've covered a lot of different angles in terms of your critiques of Drivechain. So let me just summarize a few of them. Mainly, you've made the case that there would be miner centralization because they can just take some of those rewards for themselves. There may be reorgs on the side chain. we've spoken about the T-shirt example and why, you know, the T-shirt analogy, perhaps isn't relevant. The MEV issues, as well as miners can steal and soft fork politics. So with all of that said, do you In terms of your thoughts on drive chains?" }, { "speaker": "stephan_livera", "time": "54:29", "start": 3269.13, "text": "I mean, personally, I am kind of at the opinion today That any type of sidechain that tries to involve miners is just something that introduces very bad incentives. I'm kind of at the point where I don't think it's possible to involve miners without doing that. But that said I kind of really just don't understand the obsession with drive chains and hash rate escrows, given all of the progress being made in the last couple years with efficiency gains and security, proofs regarding zero knowledge proof systems. Like if people really want side chains, if they are dead set on that is a valuable solution for them I really don't get why they're so obsessed with this convoluted, complicated design that's almost a decade old at this point, when so much progress is being made with zero-knowledge proofs. Something that gives you a basis to actually have a trustless peg, instead of just trusting the miners, to be honest. Like something where I can actually generate a proof to show that I own these coins on this side chain, I can withdraw them right now, and that proof is actually validated on the main chain. I'm not just trusting miners, to be honest. I can put a proof in the main chain that is Can or succinct and cheap for everybody to verify without unduly burdening main chain users to prove that I am honestly withdrawing my coins. I, I really don't understand the obsession with drive chains instead of, you know, looking forward and trying to improve upon the side chain concept." }, { "speaker": "stephan", "time": "56:35", "start": 3394.99, "text": "I see. So just to get some of your thoughts about broader ideas and soft forks that people are talking about. I think I see a lot of discussion, a lot of debate about various ideas, check template verify, any prevout, APO, TX hash plus checksum stack, op vault. There, there are various ideas, and then things that these things enable, whether that's ARC, payment pools, you know, things like non-interactive channels and things like that. But I also see a camp of people who are saying It's not compelling enough, right? It needs to be more than just interesting, it needs to really be-- like, it needs to really meet a very high bar before people are in favor of that. so looking at some of those soft forks that people are talking about now, where do you-- do you have any broad comments about some of those ideas?" }, { "speaker": "stephan_livera", "time": "57:21", "start": 3440.86, "text": "Well, personally, I would like to see more discussion and consideration specifically around CTV, APO, and OpVault. they are incredibly simple proposals, the most basic covenants that you could make And there is a, a litany of new second layers that can be built using those or improvements to existing ones. you know, ARC obviously is probably one of the best known ones. I have a few ideas myself. Moonsettler, if anybody's familiar with him, has proposed, you know, a few layers of his own. Polyd has published two papers now, I think, on his concept called the Enigma Network, which is a way to vastly improve the on-chain efficiency and security of second layers like Lightning or other new proposals. they're very simple, safe primitives that open up a lot of new design space for second layers that actually anchor and are enforced Just like enforced, you're not just trusting miners by the base layer. And I think that is the direction we should be looking in terms of scaling solutions. Like, we, we don't need permission to build custodial things. We don't need new features to build custodial things. People can just do that. Like, you don't need permission, you don't need to change Bitcoin to do that. We need new features, we need changes for new or improved non-custodial solutions. And, you know, to be clear, drive chains are custodial. The miners are the custodians, and miners are a dyna-- a dynamic group, but it is still custodial. And I, I really think that priorities, especially regarding consideration, discussion, like learning about things, should focus on non-custodial things. And in terms of people kind of not even on board with that, there are a good amount of people out there who are just very cautious, they don't fully understand the implications of those proposals and what they mean, and that's a completely rational place to be or view to take. that's why I think it's so important to continue having these conversations so that people can better understand these proposals, better- understand what they enable, what the potential downsides are or trade-offs. But on the other side, there are quite a lot of people who have just obstinately decided, \"No, no change, period.\" Who not only don't understand these proposals being put forward, but are actively arguing that there are downsides or risks that just factually don't exist. There, there are a lot of very confused people People arguing, that harm could be done or negative consequences created that just aren't. And frankly, me personally, I am starting to get to a point where we should just ignore those people. you know, and this kind of comes to the very core of how development on Bitcoin has worked and should continue to work, the idea of rough consensus. Like, everything here isn't a vote. we don't need unanimous consensus to soft fork things. We just need a very high level of support, and the entire notion of rough consensus is, this isn't voting, this is give me your criticism I will address your criticism. If your criticism has been addressed, if problems you have or concerns you have have been dealt with, if a proposal has been changed to mitigate them, if it has been shown that that concern is not valid Then that concern is, is done. Like you can't just keep coming back with the same concern that's been addressed over and over and over and use that as an argument to say there is no consensus, because the consensus is have the concerns been addressed. Not does everybody support this, but have problems actually been addressed? Have they been fixed? Have they been shown not to be problems? And, yeah, if there is going to be a group of Bitcoiners who is going-- who, they're just gonna be that guy who keeps bringing up the same false concern or the same concern that's been addressed over and over and over and-- Well, I'm just gonna ignore you, because you aren't participating in this conversation, you aren't having a dialogue, you aren't informing yourself, you are just obstinately trying to be a brick in the road for zero logical reason" }, { "speaker": "stephan", "time": "01:02:28", "start": 3748.97, "text": "Okay. So do you have any examples of this in terms of like some of those proposals we were talking about?" }, { "speaker": "stephan_livera", "time": "01:02:35", "start": 3755.86, "text": "well, the concern that, say, check template verify, can enable government whitelisting, so that you can only spend your coins where the government says. Gotcha, yeah," }, { "speaker": "stephan", "time": "01:02:46", "start": 3766.94, "text": "yeah. Yeah. Yeah. Obviously that's been, I think that's been fairly addressed, yeah." }, { "speaker": "stephan_livera", "time": "01:02:50", "start": 3770.17, "text": "Yeah, but, you know, you can do that now with multisig, and that's, that's not how check template verify works. It, it lets you commit to Ahead of time, a predefined path to spend coins, but it has to end eventually and just relinquish control of those coins. You can't predefine something into infinity forever because you, you don't know where things are going to go forever in the future. Like eventually there has to be a defined point where this restriction ends and these coins can now be spent wherever, whoever has them wants to spend Spend them. And, you know, that, that type of criticism, I'm, I'm ignoring you because it's just factually wrong. And, you know, we shouldn't have to just deal with that type of shit to try to build consensus amongst people who actually are having that dialogue, who actually are trying to inform themselves. It's a denial of service attack, it's a waste of time, and it accomplishes nothing." }, { "speaker": "stephan", "time": "01:03:55", "start": 3835.35, "text": "So what would you say your view is, longer- term, if not everybody can self-custody, right? I think most people accept this idea or at least understand this idea that today, with technology we have today, it's not possible for all, you know, eight billion people on earth to self-custody. You know, maybe today, and I'm curious to get your view, maybe that number today is something like we could have millions, maybe tens of millions, of, you know, kind of Bitcoin banks, like being your own bank or Lightning banks, but beyond that, maybe there's further improvements in technology that so what do you think about that idea?" }, { "speaker": "stephan_livera", "time": "01:04:31", "start": 3871.66, "text": "I think that is the most important problem to address, regarding Bitcoin, period. if, if we wind up in a world where ninety-nine percent of people are all just using custodians Are like literally incapable of self-custodying their own coins. Bitcoin may be extremely valuable in that world, you know, it might make us rich, it might help us financially, but what use is censorship resistance? A, a, and a neutral platform if ninety-nine percent of the people in the world can't actually use that or benefit from it. Like that's not What I want out of this, that's not why I've spent the last eight years in this space, as a public figure, like having these discussions, trying to, like, address these issues and just help people understand them. Like, if, if that's the end goal, then- You know, buy. I, I'm not selling my coins. we'll see how that goes, but if that's what everybody wants for the future, then I'm just wasting my time here and I'm gonna go do something more enjoyable or productive with my life." }, { "speaker": "stephan", "time": "01:05:49", "start": 3949.0, "text": "Gotcha. And so I think, you know, that's where maybe some people will disagree. There'll be some who say, \"Well, if you could have tens of millions of lightning banks, maybe that's, you know, enough, but, I, I think that's, that, that's definitely where people will probably disagree, and I think there'll be others who are saying, \"Well, we could actually get more for less,\" and maybe some of these ideas like any prevout or check template verify might be a part of actually achieving that. So, do you wanna just spell out in your view how some of these ideas might help more people be non-custodial?" }, { "speaker": "stephan_livera", "time": "01:06:26", "start": 3986.11, "text": "Well, not APO specifically because you could, do this with CTV and CheckSig from Stack or, some other combinations of things that work like CTV and CheckSig from Stack, but L2, the proposal to change how Lightning channel states are managed. that is absolutely necessary if you want to have a proper coin pool or channel factory with more than two people in it. Because without L2, there is no real workable way to trustlessly enforce the current state of things off chain with more than two people, unless you are going to involve federations or escrow type functionality that means this isn't completely trustless, because there's no way to work the current penalty mechanism for more than two people Because it's as simple as this key allows you to confiscate a hundred percent of the money if somebody pushes an old state to chain. There is no way to work that with more than two people. Who cheated? Like, how do you guarantee that when the money from a cheater is taken in an old state, that it's assigned properly amongst everyone else? Like, that they all get the appropriate amount of money back and then divvy up, you know, the, the thief's money proportionately between them? There is no real way to do that. Like, that, that's just not possible in an informational theoretical sense. And that's a big part of why L2 was proposed because instead of the penalty mechanism, you just replace the old thing with the most recent thing, and that's what confirms. So you correct instead of punish. That is absolutely necessary." }, { "speaker": "stephan", "time": "01:08:29", "start": 4109.73, "text": "Right. And one argument I have heard, now, I think, from what I've read and from when I've talk-spoken to people, I think APO and LN symmetry would be good. I'm, I'm, I think I'm, I'm in favor of them. But one argument I have heard against it is this idea that some people who like the idea of LN penalty or having some kind of penalty mechanism, or they see it like maybe in a multi-party channel world, there may be a lot of griefing because people can try to, try to grief You by shutting down that channel, and let's say it's a ten-person channel or a twenty-person channel, now, you know, the other nineteen people in that channel, in that group channel, have to go or be offline in the sense that the channel is offline. do you have any thoughts on that idea?" }, { "speaker": "stephan_livera", "time": "01:09:11", "start": 4151.64, "text": "Well, as far as just LN symmetry in terms of improving two-person channels, you can do penalties with L2, there is a proposal for that called Derek," }, { "speaker": "stephan", "time": "01:09:24", "start": 4164.09, "text": "yep," }, { "speaker": "stephan_livera", "time": "01:09:24", "start": 4164.41, "text": "that actually builds off of another proposal called symmetric lightning channels. so you can do that. There is no need to throw penalties away if we move lightning as it exists now to L2. but in terms of multi-party channels and griefing, that's its own issue to solve, I would say. it, it definitely is an issue, but when somebody does something like that, like the one guy in a twenty party, channel refuses to cooperate, it doesn't stop the whole channel from working. Like that stops you from updating the, the base level, like on the main chain, that real UTXO, it stops you from updating that, but all the other things built on top, like the different tree paths that lead to other channels between, like subsets of members of that channel, all of those can continue functioning, can continue updating. And while that one person is being irres- or like unresponsive, so like that's still something I think very important to explore. You know, like Lightning itself has griefing issues, that exist, that do have to be addressed. I don't think, you know, griefing issues getting worse with multi-party channels means we, we just give up. I still think that is a very important area to explore, and there's also a lot of nuance in In terms of trust models that you could inject into those systems to attempt to address that. you can even go so far as to look at new primitives, to address that at the base layer, like things like OP EVICT or, Tapleaf Update Verify, actually are opcodes at the base layer that would enable those nineteen people to just as efficiently as possible on chain effectively- Kick out the one guy who's not cooperating." }, { "speaker": "stephan", "time": "01:11:31", "start": 4291.26, "text": "Gotcha. So it's a way to deal with griefing." }, { "speaker": "stephan_livera", "time": "01:11:33", "start": 4293.54, "text": "Yeah. So like that's, you know, that, that is a problem, but there are many ways that we could go about addressing that." }, { "speaker": "stephan", "time": "01:11:40", "start": 4300.3, "text": "Yeah. And in fairness, as you said, channel jamming is currently a risk, but there are, of course, lightning researchers who are working on solutions to channel jamming today. So, you know, I'm confident on that. I'm also curious your view on the idea that, you know, if there's an Right, because if a lot of people try to all hit the chain at once, you know, today that's quite difficult. Are there any ideas that would, that exist today or are hypothesised that would help with that kind of thing if, if, you know, lots of these channels were to be shutting down at once?" }, { "speaker": "stephan_livera", "time": "01:12:13", "start": 4333.05, "text": "Well, things like CTV or other basic covenants, could to some degree mitigate or help that, just, you know, by allowing a single thing to confirm, guaranteeing that all of these other things can kind of take their time and settle out as block space becomes available. But also, that is an issue that exists with Lightning as it is now. if you have like a giant- Like super mega hub that everybody has channels open to, and something goes wrong with that hub, all of those users are likely going to stampede to the main chain. And so, you know, the issue there, the mitigation there is simply don't do things like that, like do not have or use the giant mega hubs, like use smaller ones, like try to incentivize more hubs like that to exist, and then when something- thing goes wrong with one, it's not big enough to cause such a huge stampede that it, it just mucks up the whole network." }, { "speaker": "stephan", "time": "01:13:20", "start": 4400.66, "text": "One other view I've seen, and I'm curious to get your, your take on this, there's a view that before soft-forking, talking about all these soft-forks, why don't we first get as much-- why don't we squeeze as much as we can out of Taproot, because we're seeing, for example, BitGo recently implemented Music 2, you know, there's people working on Frost, there's all these things that Idea that, you know, we should try to first get as much out of Taproot before even exploring soft forks." }, { "speaker": "stephan_livera", "time": "01:13:49", "start": 4429.0, "text": "Well, I can definitely understand that point of view, but I think that's a dangerous way to think about this. Like A lot of people throw the word ossification around like it's some intentional thing or a choice. that's not how I see that, that's not how I've ever seen that. Ossification to me has always been when we grow to such a large point that it's just not socially possible to coordinate consensus on activating a new feature. So the way I look at things is, we, we don't have infinite time. Like, I, I kind of think that Bitcoiners who sit around like, \"We can just take ten years to get to the next thing,\" like, they're incredibly naive. I think if we wait ten years for the next thing, that next thing is probably never going to happen after we've seen ten years of growth, ten years of businesses starting, users coming on board who don't have the level of un- Understanding we have here now, and it's just not going to happen. So I think, like, we should be moving faster. Like, we, we shouldn't be rushing and just recklessly trying to add all the things or not care about the consequences. Like, we should be very cautious, we should scrutinize changes, but there are changes that we know we need now, like things to enable multi-party channels. We know what the scaling limitations of a- Blockchain are. We know the limitations of trying to put everybody in two-person channels. We know we're going to hit those limits, so we know that's a problem. It's not an imaginary problem. We know that here are a bunch of potential solutions to that problem. So even if people are going to take a while to build things out, we should be looking at adding features necessary to solve those problems, because we don't have all the time in the world to- Just sit around. We are eventually going to get to the point where it's just, \"This isn't ever gonna happen, \"because there are too many people to convince, there are too many people to, to educate, to get involved with things, and it's just intractable." }, { "speaker": "stephan", "time": "01:16:11", "start": 4571.82, "text": "Okay. And so, I guess the other angle that we're starting to see some people discuss, maybe they're not necessarily pushing for this now, and I guess it's controversial as well, or I know it's controversial, not just I guess. Given what happened with twenty sixteen, twenty seventeen, et cetera, with the block size wars, but people, some people are having this view of, \"Oh, well, would a block size increase be another way of scaling? You know, but maybe not today, but maybe they would argue that should be like telegraphed, you know, five or ten years out in advance.\" Do you think that would be a feasible thing if other advancements come, such as UTXO or do you-- Are you more focused on the idea of CTV and, things in that camp, let" }, { "speaker": "stephan_livera", "time": "01:16:53", "start": 4613.69, "text": "no, I, I will personally never support another block size increase ever. I think the instant we start doing that, it becomes a slippery slope. It removes the incentives to actually make script more flexible to enable more efficient off-chain systems, and it just inevitably keeps raising the cost to actually validate the system and like directly be a peer on this network that you are going to be using. Using second layers or systems built on top of, like to me personally, that is a non-starter, I will never support that. We need to be looking at making Second layer is more efficient, more secure. Like the, the ship sailed with the block size increase five years ago." }, { "speaker": "stephan", "time": "01:17:44", "start": 4664.2, "text": "Yeah, and, I mean, to be clear, I, I'm probably closer to you in that camp. I wouldn't support a block size increase. I am more personally in favor of looking at things like CTV and APO or things that do that function, but, just wanted to get your views anyway. okay, so I guess let's wrap up here, Do you have any, I guess, closing thoughts for us here on where you think the future of Bitcoin is going? I mean, you've been mentioning some of this, but what, what do you think are the next steps that the ecosystem and, listeners should be thinking about?" }, { "speaker": "stephan_livera", "time": "01:18:17", "start": 4697.64, "text": "I think everybody should be looking at the covenant proposals out there and really trying to understand them, understand what they do, what they enable people to build on second layers, and what risks or externalities, if any, they create. Because looking at the path forward of anchoring second layers to the main chain in a way that users can actually enforce the conditions of those layers on the main chain We need covenants, like we need some forms of very basic covenants to accomplish that. And, you know, at least me discussing a lot of this stuff the last year or so, I see a lot of people who kind of understand the general direction all of that is going, but they feel very uncertain about how things actually work or their ability to themselves, you know, weigh the pros and And cons in making a decision. So I think it is very important that we continue having those conversations, and, you know, in an actually impartial way. Like, I, like, to use Drivechain as an example, I have had issues with this proposal. For seven or eight years now, I have, you know, spoken about them for seven or eight years. I've been very, very vocal in that. But my criticisms are the proposals itself. Yeah, I, I think it's, it's very silly and counterproductive some of the conspiracy theories I've been seeing around why Paul is pushing for drive chains, like, \"Oh, it's secret big block money,\" or \"He's a spook,\" or \"What?\" However the hell, like that's, that's ridiculous. Like I think Paul is completely wrong and I think that this proposal is dangerous and broken, but Paul obviously doesn't. Like that's why Paul is pushing for this proposal, because he thinks it does work, he thinks it is a good idea, and he thinks it will help Bitcoin. I completely disagree with him on that, but- That's why he's doing this. It's not some conspiracy or the fact that he's a government agent or something. And, you know, those types of accusations right off the bat, immediate reaction to things, like that doesn't help. That doesn't move things towards a productive discussion or dialogue. It just, you know, exacerbates things." }, { "speaker": "stephan", "time": "01:20:51", "start": 4851.47, "text": "Okay, well, I think let's finish up there. I think there's a lot to take in from this episode, so, hopefully, listen I guess enjoyed it. lastly, where can people find you online? We'll, we'll put all the links in the show notes. I, I guess, you're, you're, you're gonna be a technical editor at Bitcoin Magazine, so people can check that out and of course, follow you on social media. W-what's the, you know, what's the main place for people to find you online?" }, { "speaker": "stephan_livera", "time": "01:21:13", "start": 4873.48, "text": "Brian underscore trolls with a Z at Twitter. And, I guess one last comment, sure. Anybody who does have questions or opinions on technical topics, you know, that you would like to push into the discussion, feel free to reach out. I will publish them at Bitcoin Magazine. my, my entire goal here at that role is to try to push a lot of the conversation around these issues in a more productive direction because things are just kind of getting a little silly and ridiculous these days." }, { "speaker": "stephan", "time": "01:21:50", "start": 4910.76, "text": "Okay, well, I think that's a great spot to finish up. Thank you for joining me, Shinobi." }, { "speaker": "stephan_livera", "time": "01:21:54", "start": 4914.41, "text": "thanks for having me, Stefan." }, { "speaker": "stephan", "time": "01:21:56", "start": 4916.85, "text": "So I hope you found that an informative discussion, and let me know what you think the direction of Bitcoin should be. Make sure you share the show out there so other people can learn about Bitcoin, and you can find the show notes at stephanlivera.com/512 for this episode. Thanks for listening, and I'll see you in the Citadel!" } ] }