{ "episodeId": "SLP667", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "matt_corallo": { "name": "Matt Corallo", "role": "guest", "tag": "MATT" }, "guest_2": { "name": "Guest 2", "role": "guest", "tag": "GUEST" } }, "segments": [ { "speaker": "stephan", "time": "00:11", "start": 11.11, "text": "Hi everyone, and welcome back to Stephan Livera podcast, brought to you by Bold. Rejoining me on the show today is Matt Corallo. Matt is working at Spiral, nowadays, I guess, mostly on Lightning and Lightning development stuff, but previously was, you know, quite actively involved in Bitcoin Core, and still obviously commenting on broader Bitcoin issues as well. So Welcome back to the show, Matt." }, { "speaker": "matt_corallo", "time": "00:32", "start": 31.5, "text": "Yeah, thanks for having me." }, { "speaker": "stephan", "time": "00:34", "start": 33.54, "text": "So, Matt, I know you were keen to talk about, saveourwallet dot org or the, the Save Our Wallets campaign, let's say. so give us a bit of the background on this. What is this campaign?" }, { "speaker": "matt_corallo", "time": "00:44", "start": 44.31, "text": "Yeah, I mean, so it starts with apps, obviously. But so as many Bitcoin" }, { "speaker": "stephan", "time": "00:49", "start": 49.02, "text": "campaigns do, go on." }, { "speaker": "matt_corallo", "time": "00:50", "start": 50.12, "text": "Right, right. as all good Bitcoin campaigns do. so it, it starts really with the Samurai case, so I think most of your viewers probably are familiar with Samurai Wallet. It was this, CoinJoin wallet. That got charged in the United States with a few charges, but most importantly including operating an unlicensed money services business. So the US government alleged that Under Biden, under the previous administration, alleged that Samurai Wallet, despite being non-custodial, despite the only thing they operated was a server that just kinda helped people find CoinJoin peers, they had to, according to the US government, they needed to register as a money services business, just like any other financial institution, they needed to do AML/KYC, they needed to do, you know, yearly audits of their AML and KYC programs to make sure that they're up to some bar that they couldn't meet, they're a non-custodial wallet, like they can't- Can't do any of these things. This makes no sense. But the argument that the US government made was super broad. They said that anyone doing anything related to Bitcoin or cryptocurrency wasn't money service business, basically. and this was frightening, right? So this caused Phoenix to leave the United States, this caused a lot of developers to second-guess what they were building because fundamentally the argument that they were advancing applied to every second layer, so everything from Lightning to ARC to rollups, It was caught up in this argument that basically if you're running some ancillary service, you have some server involved that is powering a non-custodial wallet that's just like doing anything, you know, enabling a non-custodial wallet. You now have to do some kind of AML KYC program that you can't possibly do because it's non-custodial, you can't control what people do with their money, it's non-custodial, that's the whole point of non-custodial. So this was obviously very frightening, this drove Phoenix out of the US, this, really opened the question of like, can we do decent non-custodial wallets in the United States? Obviously, I think to, to have a good user experience on a non-custodial wallet, you need to use some kind of L2 Bitcoin, and so fast forward a little bit, the Trump administration has walked back some of the charges, not all of the charges. They're still charging Samurai with one count of operating an un- unlicensed money services business, not three anymore, which is better, but they're still charging them with the same thing. and so, but even if they weren't, what happens in the next administration? You know, when we get President AOC next or whatever, someone who's maybe super anti- Bitcoin, they're gonna wanna come after us, and here's this thing on the shelf, this idea of how to come after everything that makes Bitcoin usable in a non-custodial form, where you can drive, where you can shut down all the good non-custodial wallets, you can drive people to custodial wallets, and then you can do whatever you want to those entities. and so I think there's, there's real risk In three years or in three and a half years of what things look like under the next administration if we don't get the law fixed, so that this is just simply not an option." }, { "speaker": "stephan", "time": "04:11", "start": 250.56, "text": "Yeah. yeah, I think it's a good point to make here that a lot of developers were proceeding under this-- now, I'm not an Amer-- I'm an Australian, but nevertheless, you know, we have, we kind of have to follow what's going on in the US, and my understanding is that a lot of developers were proceeding under this twenty nineteen FinCEN guidance. And that was sort of the kind of the guiding line of saying, hey, if you're non-custodial, s-some of these regulations don't apply to you, and therefore you have a certain level of legal protection or some level of, you're not gonna get in trouble for making this software. Yeah. And I think that is what most people were proceeding under, right?" }, { "speaker": "matt_corallo", "time": "04:48", "start": 287.8, "text": "Yeah. So that's, that's, that's a great point. the twenty nineteen guidance from FinCEN was pretty good. So I mentioned, you know, one of the aspects of running a, a licensed So they're responsible for really interpreting this law, and they said, \"Look, if you're not custodial and you're like a decentralized thing, we don't need you to register. This doesn't make sense for you to...\" This, this logic doesn't make sense to try to apply to you. So instead, we want, you know, regulat-- you know, custodial entities to be regulated, but if you're not, you can't register. But here comes the DOJ and says, \"No, no, no, we're gonna come after you with criminal charges. We're gonna put you in prison for not registering with an entity that said you don't need to register.\" It just makes the charges all the more absurd. But irrespective of that, you know, again, the next administration can replace who's at FinCEN, they can change that guidance. That guidance is just guidance. It's just FinCEN's read of the rules. It's not formal, you can't, you know, it's not, it's a defense you can raise in court, but it's not like a get out of jail free card. You can't say, like, \"Look, FinCEN said I don't have to register, thus I don't have to.\" It was just their read of the rules. It wasn't even their rules. It was just their read of the rules. so that can change too, that can change pretty easily too under the next administration, and yeah, I mean, people were proceeding under that guidance Saying, \"Okay, fine, whatever. but, you know, if, if the administration wants to come after people, they can do that.\" And yeah, to your point, the US government has a lot of levers they can pull in going after people all over the world if you're servicing American customers." }, { "speaker": "stephan", "time": "06:38", "start": 397.72, "text": "Right. And I guess, you know, famously in the case of BitMEX and famously in the case of Binance, like this is, this has been one of the ways that they have gone after people, and, you know, Arthur Hayes and a few other BitMEX Because of this, CZ got in trouble because similar things. Now, the, you were touching on this, I think, there's this bombshell, kind of which I'm sure you're familiar with, that the DOJ, as I understand, went and actually asked FinCEN about this before even filing charges against the Samurai Wallet guys and said they didn't even believe they were, you know, they had to go and register an M, as an MSB, but nevertheless, now they were getting prosecuted as though they needed to be an MSB in all of this. What do you make" }, { "speaker": "matt_corallo", "time": "07:21", "start": 440.63, "text": "Yeah, I mean, look, the DOJ wanted to come after Samurai. The DOJ has had a longstanding principle of coming after any kind of privacy services in the cryptocurrency world, that's been high on their priority list. they wanna stop privacy services so that people don't have privacy so that they can trace all of the Bitcoin transactions and, and, enforce whatever laws they want to, which is good in some sense, but also everyone has a right to privacy and shutting down non-custodial- Services on what I would say are, are very, very, very tenuous legal claims is obviously not acceptable. so, yeah, they came after, they asked Vincent, Vincent said no, and the DOJ said, \"Look, we, we want this to happen. We wanna come after these guys 'cause we think what they're doing is bad, they're preventing us from doing our, our work elsewhere. privacy is bad, screw you.\" And so they came up with whatever charges they had. And I, and I think the, the real worry is that they apply that to Lightning, they apply that to rollups. Look, a lot of rollups are, are looking at privacy enhancing technologies with, Jonas, Nick, and, Shielda, Shielda, thank you. Shielda, thank you. with Shielda, Lightning obviously has privacy, but the reality is if we add scaling, you generally by default get additional privacy because the whole way we scale is by putting less information on the chain, and if we put less information on the chain, there's less information on the chain for you to go after to break people's privacy. It's just they come hand in hand, whether we want it or not. And so there's real risk that the next administration either says, \"Look, Lightning, Shield, and CSV, whatever, these are, these are privacy technologies and not just scalability technologies, and so we're gonna go after them based on that.\" But there's also risk that they just say, \"Look, we don't like Bitcoin and cryptocurrency, you know, it's Trump-associated now, it's now a right-wing thing in the United States, and the next, you know, the pendulum always swings, the next administration will be...\" Not as right wing as, as Donald Trump, will they be far left or somewhere in the middle? I don't know, but there's a real chance that there's some Elizabeth Warren Democrat, and their view is we need to put people at DOJ who are going to shut down cryptocurrency via any avenues possible." }, { "speaker": "stephan", "time": "09:50", "start": 590.31, "text": "And I don't wanna end up and we've seen that they, they tried that in terms of the mining level, they were trying to sort of dox the, the sites and the energy deals that they had, you know, there are all kinds of things. And similarly, not even layer two's, even just things like, Payjoin, right? Payjoin v2 has like, as I understand, they're using like servers to coordinate the Payjoin. Now again, it's a scalability win, but it is also a privacy win. So the same kind of argument could be lever so let's, let's get to the, you know, what you guys are trying to push for, what are you trying to do on wallet freedom?" }, { "speaker": "matt_corallo", "time": "10:27", "start": 626.94, "text": "Yeah, so we really need to get the law changed. if, if the law is changed, then there's not much they can do. getting the law changed again, going back to Congress and, and changing it again is, is a very high bar. and so if we get the law changed now to say explicitly, look, if you're not custodial, you're not an MSB, this just doesn You, you know, there's, there's plenty of other regulations, you still have to enforce sanctions, you still can't peer with someone in Russia or North Korea or Iran, but being an MSP just doesn't make sense. so, yeah, our goal is to get the law changed. And a few weeks ago, the, two Congress people, Tom Emmer, who's the House Majority Whip, for the non-Americans, that is the number two position on the Republican side of the House As well as, Congressman, Richie Torres, who's, from New York, a Democrat in the Bronx, whose bipartisan bill, introduced the Blockchain Regulatory Certainty Act, which was super simple two pager. If you're not a custodian, if you're not, if you're not custodial, you don't control the funds, you're not an MSB, you're not regulated as such. Plain and simple. Now, that was a great bill, we were big fans of it, we were pushing it. The reality is getting a vote, getting floor time on the Senate, getting a vote to just have a very small bill like that passed on its own is really hard. The Senate's busy, the House is busy, you don't generally get time to do those kinds of small, excuse me, small bills on their own. So it's now been included in what's called the Market Structure Bill. So this was the bill that the Trump administration has asked Congress for that was all about, Securities laws, token issuers, a bunch of crap we don't care about as Bitcoiners. The law didn't really affect Bitcoin, we didn't care about it, whatever. But it's a priority for the administration, it's a priority for this Congress And so it has a, a decent chance of passing. There's always politics, you never know what's gonna happen, but it has a decent chance. And we've now gotten the language from the Blockchain Regulatory Certainty Act, slightly modified, not quite as good, but still very good protection for non-custodial wallets included in the Market Structure Act. So it's now, Section one ten of the Clarity Act. on the House side, and our goal is to, a, make sure that Section 110 stays there because as things go through Congress, bills get amended, things change before they pass, and then number two, make sure it passes. Again, all the security stuff, it's pretty good public policy. I mean, it's not anything Bitcoiners care about. It's not really super helping tokens. They were already gonna do whatever, but It's still fairly, it's fair regulation, I would say, of token issuances. And so we want that to pass, but most importantly, we need it to pass to make sure that non-custodial wallets stay good in Bitcoin, that we have access to good non-custodial wallets as Bitcoiners in the next administration." }, { "speaker": "stephan", "time": "13:45", "start": 824.57, "text": "Yeah, I see. And so what's the ask? What are you, what are you hoping people do?" }, { "speaker": "matt_corallo", "time": "13:49", "start": 829.27, "text": "Yeah, I mean, we need to put the pressure on. right now it has passed, committee on the House side. It's now gonna go up for a vote on the whole House floor, on the House side. Now we only need fifty percent or fifty percent plus one House members to vote to pass it. But if we don't see a showing of Democrats there, the Senate might not take it up, they might not care. the Senate, of course, you need sixty percent in the Senate to pass a filibuster in the United States. So So you can't just pass it on party lines, you can't just have Republicans pass it in the Senate side. You know, we need Democrats on the Senate side, and if we don't have a showing of Democrats on the House side, they might just not think it's worth trying to take the vote. So we really need people to stand up and call their congressperson. I know it, it's annoying, it takes five minutes, it's super easy. you just pick up the phone, you say, \"Look, hi, I'm a constituent.\" When I go to vote for you or not vote for you in, November of next year or the two years after that or two years after that, I will be considering what you do right now. if you vote against this or if you try to remove Section 110 or, you do any other games here, I'm not gonna vote for you. And they do care. ultimately picking up the phone and calling is, is proof of work for them. they- Don't have great information generally about what their constituents actually care about. They do regular public polling, but, yeah, you know, there's only so much you can get out of public polling, especially on kind of niche issues like this that most people aren't aware of, most people aren't paying attention to. And so when you pick up the phone and you call and you speak to someone there or you leave a voicemail sometimes, but often you can speak to someone one of their staff members. They make a note of it and they keep track of it, and if they get five or ten calls in a week, they're gonna think about it a little bit, a little bit. If they get, you know Twenty, thirty, forty, fifty calls in a week, suddenly it's gonna shift their vote, very materially. So we need people to pick up the phone. we built a nice little website, saveourwallets dot org. You can go there, you can type in your zip code, it'll give you the phone numbers to call. you've got two senators and a House member. Right now, maybe just call your House member, in a few weeks, call your senators. Pick up the phone. It's super easy, it takes five minutes. You're gonna sit here and listen Because if we don't, if we don't get this, I think there's a really good chance that either in the next administration or the administration after, non-custodial wallets start really getting hammered in the US, and that's gonna keep developers from building 'em. It's gonna keep everyone from offering those services. No LSPs are gonna serve the US. Lightning nodes in the US are gonna be a questionable endeavor, and people just aren't willing to risk going to prison. You know, it's not, it's not worth it for me as a developer. You know, maybe I'll write the code, but you won't be able to use it 'cause there won't be any LSPs. I'm not gonna run an LSP. Phoenix isn't gonna take the risk. You know, they already showed they weren't gonna take the risk. Nobody's gonna sit down and say I'm willing to risk going to prison so that you can have a non-custodial wallet. It's not gonna happen." }, { "speaker": "stephan", "time": "17:08", "start": 1028.02, "text": "This episode is brought to you by CoinKite, the makers of my favorite Bitcoin hardware wallet, the Coldcard Q. Now, some people think self-custody is too hard, but it's really about taking responsibility for your Bitcoin wealth and understanding that self-custody gives you a true feeling of liberty. The Coldcard Q has a full keyboard and big screen, it's got two secure elements and a true air gap, allowing you to go fully air-gapped using QR codes You can power the device using three triple-A batteries, so you don't even have to plug it into the wall for power. You can easily use it with Sparrow Wallet for PC or Nunchok on mobile, and you can dial it into the right level of security and complexity that you choose. If you want a simple setup, just use twelve words and single signature. If you want passphrases, easy. If you want to add multi-sig or co-signing features, you've got those too. So go to coinkite dot com, use code livera to get ten percent off on your This episode is brought to you by Galloy, builders of banking software for the Bitcoin age. After years of risk and uncertainty, Bitcoin and banking are colliding. The regulatory environment is rapidly shifting in favor of Bitcoin and digital assets. Fintechs and crypto-native companies can become chartered banks, and traditional banks and credit unions will launch Bitcoin products. But the legacy core banking software that many financial institutions run on wasn't built for Bitcoin. The Galloy banking infrastructure stack delivers all the key elements of a modern core banking platform. With cloud native infrastructure, event based architecture, and robust APIs coming together to meet the security, scalability, and reliability needs of banks of the future. Whether you are launching a modern financial institution from the ground up or you are adding Bitcoin backed lending or payments to your product offering, talk to the team at Galloy, visit galloy dot io, or reach out to the team at b i z at g a l o y dot io. Gotcha. Yeah. So, yeah, I will remind listeners, of course, links will be in the show notes. So it's save our wallets dot Just a reminder for American, listeners, check that out, give it a go. you know, sometimes these things are frustrating, but there are times where you've gotta advocate for our interests. This is our industry, we're Bitcoiners, we want, you know, freedom for developers and builders in the US to continue building because there are already a lot of- Builders already there, there's a lot of developers and entrepreneurs and investors, and not just that, there are companies outside the US who serve inside the US. So I guess it's all of those things that are, you know, kind of at stake here, maybe not right now, but in the future. so i-it's something that, we wanna, you know, get done as an industry. I can probably think it's kind of like a parallel with, I think it was like a broker DeFi rule for miners. That was like something a couple years ago that, that Something got passed there to make it so that miners weren't gonna be captured inside this broker defi rule or whatever. So it's a similar kind of thing where we sort of-- we need to get this done to give our industry the best chance for survival. Right. So, yeah, so I guess we'll, we'll leave that there. But I guess broader in the US politics conversation, I'm curious, do you have any reflections on other priorities, other things going on, whether that's, you know, SBR at the federal level or at the state level? do you have any thought" }, { "speaker": "matt_corallo", "time": "20:23", "start": 1222.74, "text": "Yeah, I mean, I think by far the most important is the now Clarity Act or Section 110 of the Clarity Act, because I, you know, I-- Bitcoin is for people, right? Bitcoin is, is hopefully the best money, you know, we certainly that's, that's our goal at Sparrow is to make Bitcoin the best money, out there and to get people to be able to use the best money, and that means non-custodial wallets. Yeah, there's a lot of people who want to invest in Bitcoin, it's cool, you know, Bitcoin should be a part of a well balanced portfolio, whether, you know, I, I don't happen to think it should be a hundred percent of your well balanced portfolio, but certainly it, it should exist in your well balanced portfolio. States which have a strategic reserve should probably include Bitcoin as a part of that. States which, which don't? I mean, I guess they could start building one by buying Bitcoin, fine. But, you know, is this like the most exciting thing? Is it just getting the government to pump our bags? Like, that's not Really the point. The point is to build something that really allows you to transact without trusting any third parties, where you can, you can hold your money, you don't have to trust anyone, you can pay somebody, no one else is involved in that payment, it's just between you and them. And It's just the best money, right? Like that's the goal. And so, okay, from that point of view, yeah, I mean, I think the only thing happening that matters is save our wallets and, and Section 110 of the Clarity Act." }, { "speaker": "stephan", "time": "21:53", "start": 1312.52, "text": "Yeah. Any thoughts on, cap gains exemption or diminished cap gains, that kind of thing? Yeah," }, { "speaker": "matt_corallo", "time": "21:58", "start": 1317.93, "text": "that's what I was gonna mention. You, you could also say that that's helpful. certainly there are Some people, I would imagine, not very many, who are cautious about spending Bitcoin because they have to pay cap gains every time they spend it. certainly that's something we should get fixed. Do I think it's preventing lots of people from spending Bitcoin? I don't really think so. I, you know, in practice, I think there's probably a lot of people who simply don't pay their tax when they spend five dollars in Bitcoin. Is the IRS gonna come after them? No. Is it, you know, are they, are they substantially defrauding the US government of the two dollars in tax revenue when they buy a five dollar something with Bitcoin? No. You know, it's, it's just not, it's not material, right? And so that's part of why- It should have a diminutive exemption, yes. it's not a material amount of money. I think it recently got scored by the CBO at, at a few billion or something. It, it was not a large sum. so I know Loomis is trying to push it. That's also important, certainly. But if there aren't good non-custodial wallets, then who cares? Like, why? You can't transact with Bitcoin without a wallet. Yeah, the censorship resistant" }, { "speaker": "stephan", "time": "23:12", "start": 1391.77, "text": "aspect of it is the important part for you there. Yeah. And, yeah, I mean one other point that might be interesting, I'm curious to get your view, some of this kinda touches even outside of Bitcoin world or even outside of, quote unquote, crypto world, but, you know, this FATF and AML stuff, right? So, FATF, Financial Action Task Force, and then they're like this project out of the OECD, but they're kind of, you know, are funded by many nation states, and then they kind of come up with these guidelines, and then all these individual nation states implement those, and then as a result of that, there's regulations have to comply with. This does create risk for people, like the recent example Coinbase, there were a lot of customers who had their information doxxed. y-y-you know, there was the recent French, kidnapping cases, maybe some of that data it leaks and then, you know, there are people, their lives are at risk. So do you think there's any chance of pushing back on FATF and AML and, and just this broad, you know, AML overregulation that the world is facing?" }, { "speaker": "matt_corallo", "time": "24:19", "start": 1458.58, "text": "It would be nice. I mean, I, I think" }, { "speaker": "matt_corallo", "time": "24:23", "start": 1463.13, "text": "the best way we push back on that is by making non-custodial wallets good and readily available for everyone, by having, you know, everyone just wanna use a non-custodial wallet 'cause the user experience is competitive with custodial wallets and it's the best way to use Bitcoin. I think that's the way we push back on it. Of course, that doesn't help onboarding and offboarding. people will still be caught up in the, the AML tra- And the KYC trap. I wish I were confident that we could, you know, start to, to move that, push that back a little bit. I'm not" }, { "speaker": "matt_corallo", "time": "25:03", "start": 1502.86, "text": "I'm happy that it's now part of the Overton window, like there's been work being done to push that into the Overton window to say, \"Really, like, look,\" The, this stuff isn't succeeding, it isn't accomplishing its goal, and it is actively harmful to consumers, and it's more harmful to consumers on net than the amount of illicit funds that AML and KYC captures on net either, right? So, I'm happy those kinds of conversations are happening, and maybe over the next decade, that's something we can, we can start to whittle away at, and we can start to make, make progress on But I'm not confident in it in the short term." }, { "speaker": "stephan", "time": "25:48", "start": 1548.29, "text": "Yeah, yeah, I mean, I agree with you. I think it's gonna be a long, kind of long-term project, but there are examples, right, where it's very real for people, right? Whether it's the Canadian trucker protest, those guys getting their bank accounts shut down, whether it's Nigel Farage getting debanked in the UK, whether it's the Trump family getting debanked in the US, you know, we're gonna see more and more of these examples of how AML laws are kind of are being weaponized against the everyday people, and so I think it would be nice to see kind of more pushback there. Maybe as NGU happens, you know, Bitcoiners get richer and they start pushing back against these things, but I mean, for now, maybe our chances aren't so great. Yeah." }, { "speaker": "matt_corallo", "time": "26:25", "start": 1585.49, "text": "I, I mean, I think that in all likelihood Regulation around debanking will probably just be more regulation for banks rather than less regulation for banks, sadly. So I, I, I think in practice, that's not really gonna move the needle there as much as it should. I think the way we move the needle there is by making Bitcoin the best it can be, so that it is an alternative, so that, you know, if, if you don't want KYC, you don't want to deal with all this stuff, and you just wanna transact between you and the person you're- You're transacting with, you use Bitcoin and you use non-custodial Bitcoin, and the user experience is as good or better than your Venmo, your PayPal, your bank, whatever. I think we can get there, and I think we'll, we'll, we'll get there soon, in fact." }, { "speaker": "stephan", "time": "27:16", "start": 1636.0, "text": "Of course, and I think, you know, you and I, probably most listeners, where most of us are in this kind of \"not your keys, not your coins\" camp, we wanna encourage self-custody, all that. But, you know, there are times where we kinda have to look at the reality of the world today, and right now today, you know, as I look at mempool dot space right now, so today where it's the fourteenth of June, and You know, it's one sat per vbyte to get into the next block on mempool dot space. Yeah. You know, so we can, we can say, \"Not your keys, not your coins,\" until the cows come home, but there's a lot of people who must be coming into this not doing that. Why is that, in your view? Part" }, { "speaker": "matt_corallo", "time": "27:52", "start": 1671.71, "text": "of it, part of it too, is, is bad user experience, right? Today, using Bitcoin non-custodially In general, is a terrible user experience. There's no wallets are slow, I mean, just transacting on chain is a terrible user experience. I mean, it's cool that we have this magic internet money thing and you can transact on chain and there's no intermediary and yada, yada, yada, but the user experience is terrible. You hit send, your money disappears into the ether, you don't know where it is, and then at some point the other side, maybe in ten minutes, maybe in an hour, maybe in ten seconds, you don't really know No is gonna accept your money. That's an unusably bad user experience. and so this is why you see people love custodial Lightning wallets. you know, I think Miles on stage at the Bitcoin Conference in Vegas said that something like twenty-five percent of cash apps withdraw-- by count are now Lightning. Lightning fixes that user experience, but non-custodial Lightning has historically not been a good user experience either. is really suffered. I think that's gonna change over the next year. Now, of course, the future will be here, but it won't be evenly distributed." }, { "speaker": "stephan", "time": "29:11", "start": 1750.66, "text": "right." }, { "speaker": "matt_corallo", "time": "29:12", "start": 1751.56, "text": "You know, we're, we're rapidly closing the gap on a lot of the engineering challenges that have made Lightning difficult to use. Random force closures, issues where the protocol just wasn't-- it, it was ninety-nine percent stable, but it wasn't a hundred and ten percent stable, and that bubbles up into the user experience, and suddenly you're like, \"Why is my money locked for six months? I have no idea what's going on.\" That's unacceptable, right? So We're, we're rapidly closing a lot of those gaps over the next six months to a year, I think we're gonna have closed those gaps to the point where you can really build a credibly awesome user experience on top of non-custodial lightning. Now, not all wallets will-- there will be a lot of bad wallets out there, but There will be some that will be super competitive, and you know, Phoenix is, is mostly there. The fees are a little high, sadly, because of the investment that requi-is required to build something like Phoenix. it's not like they're rolling in the, the dough just because their fees are a little high, it's, it's to cover costs. but we're rapidly driving down that investment cost. Fees are gonna get lower, and I think on top of that, the existence of credible custodial or at least fully trusted solutions Will bridge the gap between a wallet that receives its first sat and a wallet that has ten thousand or a hundred thousand sats. a lot of people like to install wallets Link their noster, get a twenty-one sat zap, and then have a wallet with twenty-one sat so that they can send back out. You can't do that with non-custodial, not just non-custodial lightning, you can't do that with non-custodial, period. Doesn't matter what the technology is, that isn't non-custodial. And so having good custodial or, trusted technologies, you know, eCash, Cashu, Fedimint, Liquid, and, Spark now are really compelling options for wallets to bridge that gap and then move users into non-custodial balances. As they have more and more money in their wallet. So I think these types of wallets, the several people building this kind of graduated wallet thing, there's been a number of attempts at it. Mutiny tried it years ago, Lightning wasn't ready for it, Fedi Mint wasn't ready for it. These technologies are finally getting to the point where they are ready for it, and so now it makes sense to start investing in those kinds of wallets. And I think we're gonna see a lot of those over the next six months to a year, and they're gonna look really good. They're First, like user experience, they're gonna be as good as custodial, and I think that's what moves the needle. You know, you, you pointed out that people use custodians today, people don't wanna use non-custodial wallets, and I think it's just because the UX sucks. And I think we're gonna fix the UX, and there will be a lot of shitty non-custodial wallets next year, and the year after that, and the year after that, but there will also be good non-custodial wallets this year." }, { "speaker": "stephan", "time": "32:17", "start": 1936.74, "text": "Interesting. Yeah. And so as I'm reading from you there, it's that L2s have developed both Lightning and other things like ARC and, other ideas and, and Spark, what you were saying as well, which, as I understand, is like a, it's like a state chain kind of idea coming out of the Lightspark, you know, company. And there, there are, you know, there's-- there seems to have been a lot of developer excitement around that also, and so I guess the general idea that you're getting to is this idea of the Wallet that it can maybe start with like Cashu for that, you know, twenty-one sats level, and then it can graduate up to something like Liquid or Ark or Spark, and over time then graduate maybe to a Lightning full-blown channel or on-chain for larger amounts. so I, I guess what you're-- I guess the point you're trying to make there is that the graduated wallets are gonna get better over the next few years." }, { "speaker": "matt_corallo", "time": "33:11", "start": 1990.78, "text": "Yeah, I mean, I think the graduated wallets are gonna exist. I think, you know, the, right now Zeus doesn't- It, but it's not automated, so I don't think the user experience is really good yet. but no one else really does it. Mutiny tried, but it wasn't ready." }, { "speaker": "stephan", "time": "33:26", "start": 2005.92, "text": "Yeah. What is it? Blitz. Is it Blitz Wallet? Another one that I think they're trying something like this." }, { "speaker": "matt_corallo", "time": "33:30", "start": 2010.44, "text": "I, there are a lot of wallets who are Starting to try stuff in this direction. I, not many of them have gotten very far yet. It's only started fairly recently, this trend, I think. and I think it's gonna look really good, and I don't think it needs to be as complicated as you were making it out. I think it's really just you start with something trusted, eCash, Liquid, Spark, and then you move to something not trusted, which means Lightning or Lightning on top of ARC, once ARC ships. really all, all you do. I, I don't think you go on chain like Have enough money that they know they need a better security model. Just being on chain on the phone isn't really a better security model, it needs to be some kind of multi-sig setup, like hardware wallet," }, { "speaker": "stephan", "time": "34:13", "start": 2052.95, "text": "multi-sig, etcetera, yeah," }, { "speaker": "matt_corallo", "time": "34:15", "start": 2054.51, "text": "you know, air-gapped computer, something like that, And users understand that, they have a conception of like, \"Oh, this is, you know, ten million dollars, why is this on my phone? I shouldn't have this on my phone.\" Like users understand that concept, so we don't have to hold their hand and do it for them or anything. but yeah, so I, I think even just the simple, like, start trusted, move to non-custodial as, as you get higher balance, will really do that, and I think it's, it's gonna be really good once the kinks get ironed out And over the next, I think six months as, as we start to ship it, as, as Lightning rounds the corner, et cetera." }, { "speaker": "stephan", "time": "34:57", "start": 2096.91, "text": "Yeah, gotcha. And, I guess Related, in terms of UX, the whole BIP three fifty three human readable thing that you, you came out with, I noticed now that that is in Phoenix and it's also in Misty Breeze. so that's an example where it's just like, it's an app, you can download it, install it, you don't have to run a server, and now you have this persistent, you know, I have Livera, Livera at Breeze dot fun as an example, like, people can just, you know, you can just pay to that and you don't have to Having a contact list style, experience when you pay or receive." }, { "speaker": "matt_corallo", "time": "35:34", "start": 2134.08, "text": "Yeah, I, I think contact lists are gonna be a thing too. you know, I, I think our, our mission at Spiral is to enable more people to build wallets and to explore what different user experiences in Bitcoin look like. You know, we just wanna provide technology so that it's super easy to build a wallet. I think our goal really is that in the next year, year and a half, you should be able to take all of our products, and go to an LLM and say, \"Hey, build me a wallet,\" and it will one shot a pretty good non-custodial Bitcoin wallet that's super stable, works a hundred percent, maybe just has a bad user, maybe has a bad UI that you wanna clean up, but, but it's super stable and works a hundred percent, and you can trust so that's our, our goal, and I think that really enables more competition and more exploration of what good Bitcoin custodial user experience looks like, and from there, we'll learn a lot more as a community as what, what things look like. But to your point about three fifty-three, yeah, I think contact lists are huge. You know, the thing that really gets me excited about three fifty-three is hardware wallets, the ability to have You know, today most people use hardware wallets and deposit to their exchange, and they don't do any meaningful verification, right? They go to their exchange website on their computer, which has some malware on it. They hit deposit, it shows an address, the malware changes that address, and then they copy and paste it into their wallet, they hit send, and then they hold up their hardware wallet to their computer and they make sure that the address on the hardware wallet matches the address on their screen, which has been changed by malware. This is- accomplish nothing, right? many exchanges do allow you to pick up the phone and call them and say, \"Hey, is this an address that's mine?\" I know some people do that, but I would guess that it's something like point one percent, right? It's, it's fairly rare that people would actually- Right. It needs to" }, { "speaker": "stephan", "time": "37:26", "start": 2245.76, "text": "be automated in the background, that kind of thing." }, { "speaker": "matt_corallo", "time": "37:28", "start": 2247.99, "text": "Right. And so 353 actually enables this, right? 353 lets the exchange use their existing domain name that they, that you already are trusting as part of" }, { "speaker": "matt_corallo", "time": "37:42", "start": 2261.6, "text": "Use the DNS, so the thing that actually controls their domain name, and sign the addresses that they're allowing you to deposit. So you could say, \"Hey, I'm depositing to my account at River or my account at Cash App, and my cash tag is...\" I don't actually know what my cash tag is. I think it's like BlueMat or something. so my, you know, BlueMat at Cash dot App or Cash tag or whatever, and then I can go on my hardware wallet and it'll say, \"Do you wanna pay to BlueMat at Cash dot App?\" And I can know, look, Cash dot App is where I'm paying, and that's my username, and I can verify it myself, I can read it. it's human readable. Yeah. And so that's-- So" }, { "speaker": "stephan", "time": "38:22", "start": 2302.28, "text": "then I guess what you need is the hardware wallet has to have the support for Bit-- three fifty three. Do, do hardware wallets have that support yet, or you're, you're hoping that they, they do implement that?" }, { "speaker": "matt_corallo", "time": "38:31", "start": 2311.32, "text": "Yeah, it's more of-- it's, it's been a chicken and egg problem, honestly. I think the user experience there is gonna be killer, but you need the exch-- you need the recipient to support it, so you need exchanges to support it. I think that'll Slowly, you need the wallet, the software wallet, to support it, so the software wallet has to do the resolution, and then it has to include the proof in the PSBT. And it's all standardized, it's pretty easy, there's code for it, you just have to i-integrate the code. And then the hardware wallet needs to know how to read that proof out of the PSBT, verify it, and display it. And again, there's code for it, you just use it, but It's a triple chicken and egg, there's three entities that all have to support it before it becomes available, and so it has been admittedly pretty slow going. I'm hopeful we start to see one or two, and I think it's one of those, it's, the user experience is, you know, fifteen times better, and so once that gets deployed anywhere, I think people are gonna be clamoring for it real quick." }, { "speaker": "stephan", "time": "39:30", "start": 2370.47, "text": "Yeah, or maybe it'll take a really expensive address replacement attack before then people would be like, \"Oh, wait a sec, we've just been like yollowing funds based on the website for years.\" There have" }, { "speaker": "matt_corallo", "time": "39:42", "start": 2381.63, "text": "just been so many of those." }, { "speaker": "stephan", "time": "39:44", "start": 2383.95, "text": "Right. There's actually a lot of" }, { "speaker": "matt_corallo", "time": "39:46", "start": 2386.05, "text": "malware out there that will replace any Bitcoin address in your clipboard. And there's a decent chunk of malware that will replace any Bitcoin address displayed in the website. It's a thing, that malware exists. and quite a bit of it exists. So, I, I, as far as I am aware, the, the malware authors for that malware have made a decent chunk of money just based on looking at the chain. So-" }, { "speaker": "stephan", "time": "40:08", "start": 2408.39, "text": "Damn. That sucks, yeah. Yeah. Yeah, 'cause I, I mean, I knew it was out there, I just, I didn't know how prevalent it was basically. So, yeah, that kinda sucks. But," }, { "speaker": "matt_corallo", "time": "40:20", "start": 2419.8, "text": "I have malware on them, right? But I think most computers that have malware probably have an address switcher. Certainly in the key-- in the clipboard. not all of them will switch the address displayed on a website, but some of them will." }, { "speaker": "stephan", "time": "40:33", "start": 2433.18, "text": "Yeah. Okay. Alright, fair enough. let's talk a little bit about MeV, I know this is another topic you've been, you know, you've been talking about it, even, you know, past shows we've spoken about it, but, It seems as, let me put it this way, it seems as a little bit more advanced conversation on this idea now that, you know, I guess as an example with the whole cat, op cat conversation, there were, there was a lot of discussion about, \"Oh, okay, is that gonna, is that gonna create all this m evil? Does, does, you know, do Bitcoin developers and protocol developers have to go do research to figure out exactly where are the forms of m evil?\" but then I'm hearing other responses from people saying things like, \"Well, hang on.\" Bitcoin has ten minute block times and it has a UTXO model, not an account model, so therefore it's less of a concern, but there's still some forms of evil. Where does this all kind of shake out for you? What's, what's your current thinking on this?" }, { "speaker": "matt_corallo", "time": "41:28", "start": 2488.27, "text": "Yeah, I think most of the arguments that Bitcoin can't possibly have any evil concerns, that people won't or can't build things on Bitcoin that can have evil are A stretch," }, { "speaker": "matt_corallo", "time": "41:46", "start": 2505.93, "text": "but at the same time, we don't know what people will use. The, the problem with evaluating evil risks is that it really gets into kind of third order effects, right? So there's, okay, what capabilities does the blockchain have? And then there's what will people build with those capabilities, not just what could they build, but what will they build? And then there's, okay, but if that does get built, what will people actually use? You know, will people have any interest in it? Will people use it? You know, there are things in Bitcoin today that could cause really substantial evil risks. There's rootstock, there's other merged mine sidechains, that- Where the miners could, in, you know, you could have this crazy big AMM on rootstock, not to pick on them, there's a few examples where there's tons of trading volume And the miners get to pick what goes into those blocks in Bitcoin, and they could do all of the same EV games that you have in Ethereum, and they certainly would if there were any money to be had there, but the reality is nobody uses rootstock. So the You, you end up with these like third order effects that ultimately make the difference, and so it's not a, you know, it's a hard conversation to have, and it's also an even harder thing to reason about because you have no idea what, you know, there's these third order effects, who knows, right? Like nobody has any idea. So, you know, there, there have been some attempts, you know, you highlighted a few of the arguments, to say that we can't possibly have MeV in Bitcoin. one is that we have the UTXO model, which of course is nonsense because rollups break the UTXO model, right? If we have rollups, you paper over the UTXO model with potentially EVM and the account model, so it doesn't really matter what the underlying chain supports if you're, you're doing a rollup, or, or based rollup specifically. there's also the argument that, well, the block time is 10 minutes, some of the MEV complexity in Ethereum comes from the fact that blocks are rigid, so you have literal high-frequency trading games where you have to be in the right data center so you can submit your block, you know, 10 milliseconds later than the last guy because the block window, the block is gonna get mined at this time, and you wanna get your bid in as close to that time as possible, but not past the time. that's true, the same games don't apply in Bitcoin, but different games, because the block time is stochastic, you don't know when the block is gonna come, different games apply. So now instead, you need the ability to time out transactions because you need a miner to constantly be updating what transaction they would mine, based on the fluctuating Bitcoin price. So as the price changes on a centralized exchange, they need to change which transaction they would mine to claim To, to arbitrage, for example, a, a decentralized exchange, an AMM on chain, they need to do that arbitrage, but the price that they're going to do that arbitrage at has to change as the Bitcoin price changes. So they need to be constantly updating their block template, which isn't something you can do in the public mempool. It's not something that you can do without very careful design. And in fact, it's not even something that all hardware supports, all ASICs support. So, there, there's a lot of MEV and MEV that would Buy that instead. So I think a lot of these arguments kind of fall flat. However, that's not to say that evil is necessarily a given, that, that there-- people will build things which then will expose evil that then people will actually use. We don't know. the rollups are obviously one of the biggest concerns, but will all of the rollups have some centralized sequencer that operates it, as is the case on, I believe, almost all of the rollups in Ethereum, certainly all of the major ones that anyone uses, where the centralized sequencer captures all the MEV and no MEV flows up to miners to become evil? it's possible, maybe that will be the way everything works. Maybe we won't manage to get the law changed and no one will want, want to run a centralized sequencer because it puts you at risk of being a money services business, and as a result, people will switch to base sequencers and then we'll have tons of mVOL. We don't know, right? Any of these things are possible. It's very hard to predict what the future looks like here. so it's a risk and it's something we need to be very cognizant of as Bitcoiners. You know, we saw where Ethereum went. They tried to address the risk, but didn't come up with any great solutions, and as a result, censorship resistance in Ethereum got wrecked. And more importantly, you know, while the censorship resistance in Ethereum is bad because of MEV and MEV complexity and MEVOL, it would be even worse in Bitcoin. You can be a staker In a proof of stake system and make ten percent, fifty percent less revenue than the next stake are over. It sucks, but like, you can do it. There's no, you're not gonna go out of business as a result. In a proof of work system, you go out of business. You know, your cost of electricity is somewhat comparable, you know, your actual operational costs are somewhat comparable to all other miners. Cost of electricity has a floor, right? sometimes it's cheap. super cheap unused electricity in some parts of the world, but you still have the same, ASIC costs, you still have the same operational costs and operational overhead. If you make ten percent less revenue than the next miner, you're going out of business. And so Meevio is in fact substantially worse in a proof of work system than a proof of stake system, is substantially worse for the system, and worse for censorship resistance in the system. And if, if we lose censorship resistance in Bitcoin in a kind of long term, unfixable way You know, I don't, I don't really know what the point of Bitcoin is if, if we lose that. So all that to say, we need to have a better answer than Ethereum does, and than Ethereum did. And I think that needs more research. I think, you know, so, Jay from Localhost Research and I put out a paper, a write up, of a technology we called MevPool, which tries to be a slightly better response to the existence of MeV than what Ethereum does today with their proposal builder separation tech. we think it's pretty good, we don't think it's great. It might be the best we can do, and if it is, we should build it. Someone should build it. I, I don't have time to build it, but someone should build it, and certainly we should, we should probably could find money for them to do that. But also we need more research, we need more people thinking about this to say like, \"Is this actually the best we can do? Does this really solve the problem? And can we come up with something better?\" And as we do that research, I think we can hopefully de-risk the costs of Meevio in Bitcoin. which is Fairly likely, you know, with, with, Tether coming to Taproot assets, with people prob- presumably doing more stablecoin trading, even just the existence of stablecoins and the ability to swap them On chain will almost certainly create non-trivial amounts of evil just because people are gonna be doing that with, see, cash single transactions, transactions where miners can do arbitrage games, we'll see," }, { "speaker": "guest_2", "time": "49:42", "start": 2981.8, "text": "maybe we'll develop. I don't know that it's necessarily guaranteed," }, { "speaker": "matt_corallo", "time": "49:47", "start": 2987.0, "text": "but it's certainly very, very likely. And so we need to be prepared in a useful way," }, { "speaker": "guest_2", "time": "49:53", "start": 2993.15, "text": "I would say. And I think as we prepare It doesn't necessarily, it's not necessarily the case" }, { "speaker": "matt_corallo", "time": "50:03", "start": 3002.92, "text": "that we need to let this dictate what we can do in terms of consensus rules." }, { "speaker": "guest_2", "time": "50:11", "start": 3010.63, "text": "I, I think that's" }, { "speaker": "matt_corallo", "time": "50:12", "start": 3012.05, "text": "something that a lot of people have misunderstood about my opinion. maybe I, I haven't made it clear, but. You know, it's one thing to say, \"We need to figure this out, this is a major risk, and maybe we should slow walk something like OP_CAT until we've at least invested some amount.\" to research the risks of these things. it's something very different to say that we shouldn't" }, { "speaker": "guest_2", "time": "50:43", "start": 3042.69, "text": "new" }, { "speaker": "matt_corallo", "time": "50:43", "start": 3042.87, "text": "features to Bitcoin, we shouldn't have the ability to do To, for people to hold their coins in whatever clever and inventive systems they come up with, because of these risks, especially when these risks could happen On their own, right? These risks could, could develop because people might start using rootstock. Nothing needs to change in Bitcoin, people might start using rootstock, suddenly there's a lot of ARB flow there, and there's a" }, { "speaker": "guest_2", "time": "51:10", "start": 3070.01, "text": "lot of people. Could happen. I don't think it's likely, but it could happen. so my view is that like we should invest, you know, consensus changes are slow." }, { "speaker": "matt_corallo", "time": "51:21", "start": 3081.47, "text": "there's no world in which we're gonna- Activate some consensus change super" }, { "speaker": "guest_2", "time": "51:28", "start": 3087.9, "text": "quickly" }, { "speaker": "matt_corallo", "time": "51:29", "start": 3088.84, "text": "in" }, { "speaker": "guest_2", "time": "51:29", "start": 3088.88, "text": "the next six months, for example." }, { "speaker": "guest_2", "time": "51:34", "start": 3094.35, "text": "and so-" }, { "speaker": "guest_2", "time": "51:38", "start": 3097.68, "text": "My view would be that" }, { "speaker": "matt_corallo", "time": "51:40", "start": 3099.96, "text": "it would be very nice if some of the advocates, especially some of the well-funded advocates for Consensus changes in Bitcoin and, and for, who are building technologies with or without consensus changes, that might enable, that might expose Bitcoin to MeV risks, would also fund some research on MeV responses, whether that's engaging with the mempool paper, extending it, analyzing it, or coming up with new ideas. It would be very nice, in my view, for, for some of the funding of things that create these risks to, to go towards that. And I think if it did, it doesn't need all that much, hopefully. Hopefully we can come up with compelling answers, without too much work. It doesn't need all that much funding, it doesn't need all that much work, and then after we get there, after we, we put in the work, we, we get some funding, we get some research, then we can move forward with consensus changes, That do whatever we want, and I imagine that it wouldn't delay those consensus changes at all. you know, if people started investing in a serious way today in that research By the time consensus changes or, or you know, have some kind of broad consensus, we'll have compelling answers. Not necessarily answers we're excited about, but at least answers to what we want to do about evil risks in Bitcoin. And" }, { "speaker": "guest_2", "time": "53:14", "start": 3193.81, "text": "maybe we won't" }, { "speaker": "matt_corallo", "time": "53:14", "start": 3194.33, "text": "have necessarily spent the time to build them, but You know, we have an answer, we're like, we're okay with this, not necessarily happy, but we're okay with this, and we're gonna start building it now as we, you know, deploy this soft fork and, and whatever. I don't think it would necessarily delay a soft fork, I think that's Something a lot of people assume, and there's, my frustration has been that like my desire for people to fund this research has been interpreted as we must only do consensus changes that are weirdly hobbled in order to try to reduce the meval risk of an individual change And like," }, { "speaker": "matt_corallo", "time": "54:04", "start": 3244.04, "text": "why are we, you know, why don't we just invest in coming up with answers to MeVOL rather than Do weird hobbled consensus changes because we don't want to do the investment. Like, we could just invest in this, you know? We, we, we could do that, and then we don't have to have weird hobbled consensus changes. As I'm" }, { "speaker": "stephan", "time": "54:27", "start": 3267.44, "text": "understanding it, there's, there's different views on this anyway, that some people's view seems to be, you know, MVR is inevitable, that, you know, you can't, you can't stop this thing, and then others are maybe, maybe their view is more like, oh, if we- maybe the idea would be, oh, if we, I don't know, if I talk to like a reardon code, his, his idea might be like, oh, what's the minimum effective dose? What's the minimum thing that we could get that gets us, I don't know, LN hands or, or gets us, you know, LN symmetry or something like that. So I guess there's, maybe there's just different views on what exactly This stuff is, right?" }, { "speaker": "matt_corallo", "time": "55:01", "start": 3300.98, "text": "I mean, I think if, if your view is that, that Meeple is, gonna happen and it's totally inevitable and like you should definitely be investing in, in-" }, { "speaker": "stephan", "time": "55:12", "start": 3311.83, "text": "Yeah, of course. I mean, that's, that's kind of one end. Yeah." }, { "speaker": "matt_corallo", "time": "55:14", "start": 3314.37, "text": "If your view is that like- Well, you know, Mev is, is this hairy-- and I, I get it, you know, I think a lot of people view Mev risk as this like hairy, complicated subject, and it is, where maybe they're not necessarily experts in all of the things that happen in Ethereum. You kind of, in order to really do effective research there, you, you need to be, more of an expert in Ethereum than Bitcoin, and so there's a lot of Bitcoiners who are like, \"Wow, I'd...\" I don't feel," }, { "speaker": "matt_corallo", "time": "55:50", "start": 3350.09, "text": "not capable, but like I don't feel like I have the experience required to do that kind of research, so I'm just gonna try to sidestep it and say, like, okay, well, maybe we can get these features in Bitcoin and then they don't really enable any additional evil risk. And, and I, and I guess I, I just get frustrated by that. And, and I, I, I get where people are coming from there. I totally, I, I can't really argue with it. I, I understand why that's people's view. But it, it does frustrate me because, you know, I, I think" }, { "speaker": "matt_corallo", "time": "56:28", "start": 3387.81, "text": "these things can, A, these things can progress in parallel. Right? Like we can have research going on what the actual software we want is, not just like weird restricted things, but what, what do we actually want? What are we building towards? not necessarily what we're, what we're building now, but like what are we building towards? And then we can work backwards to find what we should build now." }, { "speaker": "matt_corallo", "time": "56:53", "start": 3412.68, "text": "While at the same time, people can be doing research on the MeV track, on the MeV track." }, { "speaker": "stephan", "time": "57:02", "start": 3422.23, "text": "but I guess one other view I might throw at you is I've heard this view that, \"Oh, it's an app layer thing. The app layer should be attentive to MeV, they must mitigate the risks for their users.\" That's the other argument I've heard. Yeah. So what do you, what's your reaction to that? I," }, { "speaker": "matt_corallo", "time": "57:14", "start": 3434.34, "text": "I think that in part comes from the- Ethereum MEV definition, which is different than Weevil. the Ethereum MEV definition includes the cost to users, and so, you know, when, when Ethereum people talk about MEV, it's one huge bucket, it's like the, the centralizing effect, the, the PBS, whatever, and then also it includes, well, you know, they're doing arbitrage and the users are getting worse price execution on their DEX trades. Because of this arbitrage. And so, you know, Ethereum MEV is, is a thing that is in part needs to be addressed at the app layer because The app was designed in a way that gets users worse price execution, gets, gives the users a worse product, than They would otherwise get. And so I think that has bled over a little bit, and I think it's, it's really a terminology thing. It's like Meevio is all, is, is just the centralizing effects of it and not the cost to users. And you can say, \"Well, the app should be built in a way where there's no Meev, there's no cost to users, and thus there's also no Meevio.\" That's fair, but not all apps are gonna be built that way, and the reality we have to contend with is that, you know, and if A, it's very, very, very hard to build apps that don't have MEV. it takes Way more research, and it's not clear that it is universally possible. And it might not even" }, { "speaker": "stephan", "time": "58:54", "start": 3534.26, "text": "be incentive, like it might not be, yeah, as you said, it might not be possible, or it might be the kind of thing where they are selfishly playing this game that impacts the rest of, you know, everybody else. Right. Right. Like whether it's, yeah." }, { "speaker": "matt_corallo", "time": "59:07", "start": 3547.05, "text": "Yeah, so I don't buy that that's a, a solution, quote-unquote, to the, to the Mevo risk. Certainly applications should consider it, but not all of them will," }, { "speaker": "stephan", "time": "59:20", "start": 3560.12, "text": "Yeah, I see. Another kind of line of thinking, and I believe, I think I was watching a panel and I think the argument was, okay, really the problem is things like private order flow, i.e. private-- or in our context, it might be like private mempools, right? Like a Mara Slipstream kind of thing, or this idea of if it's so technically difficult that only PhD specialists can do it, because then it's now not accessible to the, you know, the everyday miner. how, how are you seeing that?" }, { "speaker": "matt_corallo", "time": "59:52", "start": 3592.22, "text": "I mean, certainly both. in Ethereum, we've seen, you know, it started as, as it, it, it's complicated and it's complicated enough that only one or two companies have the real talent and expertise to, to build a super competitive block template in every block." }, { "speaker": "matt_corallo", "time": "01:00:10", "start": 3610.56, "text": "And that developed into private order flow, right? Because now users are getting worse price fills, you know, they're getting, their arbitrage is worse, and as a result of that, because they're getting arbitrage, because the, the dex is getting arbitrage, they're getting worse price fills against the dex than they would have, and What the response has been is that users instead submit their transactions directly to the memextraction companies, and they, they have a handshake deal, and they say, \"Look,\" You know, I'm gonna send my transa-transaction directly to you. You are going to get the right to do some arbitrage against it and get any fees associated with it, whatever, that goes exclusively to you. I'm not sending it to anyone else, but in exchange, you give me half the, half that cost back or half the value back or something like that. You know, you can arb against it, but, you know, give me half. and in exchange, I won't send it. It feels like" }, { "speaker": "stephan", "time": "01:01:09", "start": 3669.6, "text": "a bit of like a mafia kind of, \"Here's a deal, you can't afford to say no to it, whatever, here's a deal you can't refuse.\"" }, { "speaker": "matt_corallo", "time": "01:01:14", "start": 3674.72, "text": "So it's, it's nuts. a-and because mine-block building was already so centralized It's just gotten even more centralized. You only give it to the top block builder because why would you go to the number two block builder? You just give it to the top one. maybe you give it to both number one and number two, but even that's complexity you didn't need. so so yeah, I think it can be really dangerous, really quick. Yeah, yeah." }, { "speaker": "stephan", "time": "01:01:39", "start": 3699.26, "text": "'Cause like, if we bring it back to Bitcoin, I, I guess now we're kind of maybe coming to more like the, the filters and the spam debate a little bit because this kind of comes Here's how I, here's how I'm understanding it. You tell me where I'm getting something wrong or whatever, but as I read a lot of the, you know, most of-- and now, to be clear, Bitcoin Core isn't a monolith, there's a lot of, you know, different views, but- If I looked, as I tried to read some of the arguments back and forth, it seemed like most of the people either with Core today or previously with Core, their concern was really around mining centralization and this idea of private mempools or what's known as direct to miner submission. whereas, let's say the, the filter guys, their kind of view is like, \"Oh, we should like, we should do everything we can to fight the spammers,\" and their, in their view, the filter view I guess I could characterize that as saying Bitcoin Core isn't doing enough, I'm doing quotes here, Bitcoin Core isn't doing enough to fight the spam, right? That's, that's probably their view, or they're sort of saying it like, \"Oh, see, Bitcoin Core, you're just bending over for the spammers, and we should fight them harder.\" Whereas the core, I'm, I'm kind of- Generalizing a little bit here, but most of them seem to be of this view that the risk being prevented here is if there's economic incentive to put this spam into the blocks You are, and you try to relay filter it out, you're creating this risk that everybody goes to the Mara Slipstreams of the world and then we lose the public mempool. Is that fair or how do you see it?" }, { "speaker": "matt_corallo", "time": "01:03:08", "start": 3788.99, "text": "I think that's a big part of the, the debate, yeah. I, I think You know, yeah, yeah, I, I think you're totally right that like the, the, the view is that, the view from, from many of the folks who want more filtering is that this thing has, these things, these use cases have tail risks to Bitcoin, to Bitcoin the currency, to Bitcoin the system. And they're right about that. There are, there are certainly tail risks to these use cases of Bitcoin. And that they wanna see Bitcoin Core fight it as much as they can, as much as they can, they wanna see, you know, even if it's fairly marginal, they wanna see it be a little more work to get these things included in a block." }, { "speaker": "matt_corallo", "time": "01:03:48", "start": 3828.52, "text": "And yeah, I think the, the, the risk of private mempools is a big part of the reason why folks don't view that, don't share that view, that, that People will route around the public network, and the more you encourage people to route around the public network, the more people do crazy stuff with that. We already see several private mempool startups, is two or three? at least two, maybe three startups doing memextraction on Bitcoin, like explicitly, like we're gonna build a private mempool, that relays only to the largest pools or only to pools we sign contracts with. And people are gonna submit their transactions directly to us, and, if you mine at one of the larger pools, you're gonna make more money as a result. luckily they don't have a huge transaction flow, but they exist, and in their view, these things are going to continue to develop, and I think that to the extent that- We take actions which encourage people to utilize these technologies more and more, the worse it is for mining centralization, you know, I, in my, I, over the last however many years, you know, my view has been that There are two big challenges in Bitcoin that will determine whether Bitcoin is successful, in my view, really, you know, whether it's, it's accomplishing the goal of, of being good money, and that's mining centralization and whether we can get people using non-custodial wallets, 'cause we can build good, good user experience around non-custodial wallets that provide good privacy. And if we can meaningfully, meaningfully address those two risks, then I think we've massively de-risked Bitcoin. Bitcoin is, is going to provide real material social value, societal value for a long time But if we don't, there's real risks that we, we don't accomplish that, right? If, if people use only custodial wallets, well, everything ends at KYC and, and AML, and, and what was the point? You could just use dollars, right? if mining remains as centralized as it is Eventually, our government's gonna step in and say, \"You know what? We just want you to start censoring transactions. Those transactions from North Korean money, don't let them through.\" And of course, it starts that way, it ends up with those transactions from my political opponent, don't let them through. Now, if we freeze North Korea's money, maybe it's not the worst thing in the world, but once you start down" }, { "speaker": "guest_2", "time": "01:06:29", "start": 3989.98, "text": "that slope, there's, there's no coming back. And all that to say, the way we" }, { "speaker": "matt_corallo", "time": "01:06:39", "start": 3999.11, "text": "have to fix mining centralization is we need to decentralize block template creation again. Whether that's try to be two, and the data, braid pool, P2Pool v2, whatever it is, there's a lot of work going on in this space that, that I'm really excited about. If we can't drive adoption of those technologies over the next decade, I think there's real risk that Bitcoin fails to provide material societal value in the decade after that And if, and, and I think we're, we're at a, a crossroads here where we're starting to see shoots of green, we're starting to see adoption, We're starting to see big players in the mining ecosystem say they care. massive announcement in Vegas that everyone totally missed, totally flew under the radar, Bitmain. Bitmain and Pool announced that they were gonna start enabling their miners to select their own templates." }, { "speaker": "stephan", "time": "01:07:40", "start": 4060.8, "text": "Huge. Oh, as in, like, have SV2 support in the miner?" }, { "speaker": "matt_corallo", "time": "01:07:44", "start": 4064.03, "text": "Unclear which protocol they were talking about, but they were talking about on the pool level for Antpool, that Antpool was gonna allow SV2 or some protocol like it. For their mine. I didn't," }, { "speaker": "stephan", "time": "01:07:55", "start": 4075.97, "text": "I didn't even catch that. Massive announcement. Okay, cool. Literally no one saw" }, { "speaker": "matt_corallo", "time": "01:07:58", "start": 4078.51, "text": "it. We need to, you know, it, it's Bitmain, so take it with a grain of salt, but like the fact that they even felt compelled to do it is huge. Yeah." }, { "speaker": "stephan", "time": "01:08:08", "start": 4088.16, "text": "Yeah. And I'm sure you saw this recent one, I'm sure w- it'd be good to mention this as well on the podcast so people know, but I think the SRR, I think it was the SRR guys, they put out like a study showing" }, { "speaker": "stephan", "time": "01:08:24", "start": 4104.37, "text": "Hash Labs did a comparison study of like a miner using SV1 versus SV2, and they found that the SV2, I think it earned something like seven percent more, which is massive for a miner, right?" }, { "speaker": "matt_corallo", "time": "01:08:34", "start": 4114.12, "text": "Yeah, yeah. I mean, they, they made all kinds of assumptions going into that. I think the assumptions are perfectly reasonable, but they're gonna vary substantially across different mining farms. but it's a great report. Pe-miners should totally read it. Miners should totally consider it, and miners should get on the horn with their pool and say like, \"Hey, why aren So we're starting to see real shoots of green here. We're starting to see a lot of promise that we're gonna start to materially address the mining centralization issue in Bitcoin. But If we end up with minimal or strong transaction selection pr- centralization pressures in the short term, all that's gonna die real quick. Right? Because no miner is gonna say, \"Oh, I could run my own node and select the transactions that go in the block, and it's good for Bitcoin if I do that.\" And there's some relay advantages and some security advantages to doing that, so, you know, maybe it increases my profitability a little bit. But, oh, if I go mine at the pool, they have all this private transaction order flow, this private transaction relay, private mempool, they have complicated mem extraction, and- And they're gonna pay me ten percent more because they can, because they're actually making that much more. No miner is gonna switch. They're gonna go to the large centralized pools that we have today, and we're gonna be stuck. We're gonna be locked into the level of mining centralization we have today, which I think is totally unacceptable. You know, again, if, if, if things don't change over the next decade Bitcoin is gonna be censored and we're not gonna be, there, there will be no Bitcoin the way we view it today in, you know, fifteen years. So we gotta get this fixed, and it really concerns me when there are risks that might completely kill the progress we're starting to make. that that, you know, we're s-we've, we've put all this work in, you know, I've put some work in, but certainly the SRI folks and many others have put a lot of work in to move the needle here And if we get cut off right now, it's gonna be really frustrating because I don't think we get a real another shot at this." }, { "speaker": "stephan", "time": "01:10:58", "start": 4258.88, "text": "The lead sponsor of this show is Bold, the best place to buy, sell, and save Bitcoin. 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Interesting, yeah. more, I guess, on the whole mempool and blocks aspect of things. I'm curious to get your view as well. there's a, it, it seems to be this broad direction that we're kind of going in, and I, and I wanna get your thoughts on this kind of parallel with the way full RBF went down, right? Like full RBF, it just sort of, I mean- My understanding of it, you, you again, you correct me if I'm getting anything wrong, but it's sort of like, for years and years there were big haters, right? Like Roger Ver and all the B-cashers, they hated RBF, right? And eventually it sort of became this behavior of like, look, most Bitcoiners understand that if it's not confirmed, you don't have anything. So eventually it sort of came to this level of, well, should RBF be the default? And sort of in the, I think, you get, I think it's like twenty, two thousand twenty-two, twenty-three era, there was only maybe two or three sort of main opponents of that, you know, at that time. It was kind of like Sergey from Bitrefill and maybe John Cavallo were kind of the main opponents of that. But eventually, because this is a relay policy, it just became sort of the de facto, the network just kind of operated this way. Are we gonna see a similar thing with kind of some of these filters and spam stuff? Do you think it's gonna eventually go that way, you know, with things like op return limits and other things?" }, { "speaker": "matt_corallo", "time": "01:13:16", "start": 4396.13, "text": "Yeah, we'll see. I mean, I think the, the, yeah, the story of full IBF was basically that RBF Has a lot of value for wallets, it can make for a much better user experience. as a result, it was ultimately enabled but only optional, so transactors could opt in or out of it, to, to give people the option to say, \"Look, if you strongly hate RBF, great. If you strongly love RBF, also great.\" then Some wallets, for whatever reason, were creating transaction flows that, fairly rarely, but they did exist, where transactions were being RBF'd that were not opting into RBF originally, and so Bitcoin Core was rejecting them. and it turned out, so, you know, Bitcoin Core added the option for it, you could, you could do full RBF. The, there were a few transactions that used it, but there were enough, and miners always turned it on. And so it turned out when people went to look a number of months after the option was added, that something like eighty or ninety percent of hash rate had turned it on. And it doesn't make sense for Bitcoin Core's relay policy to do one thing and then have eighty or ninety percent of hash rate do something different. you get into all these things that we're talking about, you know, you get into this question of, are, is a small miner who doesn't run a big node, who doesn't have a lot of peers, gonna get worse transaction flow, gonna, gonna make less money, and so Bitcoin Core just said like, no, no, no, clearly we need to match the relay policy to what's actually happening. We, we can't make sense, that encourage bad behavior, that cause additional bandwidth usage, it has all kinds of problems, and so they, they flipped the default and just said like, \"This, this" }, { "speaker": "guest_2", "time": "01:15:02", "start": 4502.1, "text": "needs to be true.\"" }, { "speaker": "matt_corallo", "time": "01:15:04", "start": 4504.82, "text": "and, you know, I, I think the op-return debate is a little different in the sense that it's a little more, a, a, it's a much more rare thing. RBF is a really material change to the user experience of wallets, the ability to increase the transaction fee on your transactions is a big deal versus larger op-returns, like no one really uses op-returns, they're used here and there by various meta protocols, But they're very expensive to do, by comparison to like inscriptions. You, you don't, you're not gonna put big data, large amounts of data in an op-return 'cause it's just expensive. I mean, people do it now for the lulz just because there's been big drama about it, but if there were no drama, no one would do it." }, { "speaker": "matt_corallo", "time": "01:15:51", "start": 4551.4, "text": "And here, yeah, I mean, i-it, it was done more anticipatory, you know, I think another way to look at relay policy. Which somewhat aligns with, with some of the filter view, filter people's view, you know, folks who are, who are pro additional filters, is that, you know, relay policy is a nudge, right? That historically, and it's not- Used as much that way anymore, but historically it was, is a way to nudge people to do transaction types that were considered better for the network. there were a bunch of other reasons to do relay policy, but ultimately, you know, relay policy nudges people away from using stuff in transactions that we want to reserve for future soft forks. There's no reason for you to use it, you could use it, but it doesn't do anything, and so we want to discourage you from using that and encourage so that we can use it. Later soft forks more easily. Like, it's not a huge deal, but it's a nudge, and no one really has a strong reason to do it, so we're nudging them in the right direction, and no one's gonna, gonna do it. It's great, it works great. it's a weak nudge. If there's economically, you know, really strong economic reason to do something, then the, the nudging someone isn't gonna work. and in this case, someone was Citrix specifically, but with all of the meta protocol work going on, you can imagine that someone else will do in the future as well Someone wanted to embed, they needed to embed data in the outputs of transactions because of the way their contracts worked, because of the way their, their specific bit three M setup worked, it had to be in the outputs, it couldn't be in witness data, it had to be in the actual transaction. And so they were like, \"Well, we need to put a bunch of data there. We're gonna do some really terrible scheme, in a fake pub keys, kind of spending the UTXO set, whatever it is, really hurting the UTXO set.\" And so another way to look At increasing the opportunity limit is to nudge people away from doing that, right? To nudge people and say, \"Look, no, here we're gonna provide you a better way to do this. You're gonna do it anyway, so we're gonna provide you a better way to do it so that it is better for the overall Bitcoin system and the Bitcoin system is healthier as a result.\"" }, { "speaker": "matt_corallo", "time": "01:18:18", "start": 4698.95, "text": "I, I, you know, I think that, that nudging view is great, i-is a great way to, to address policy. And I totally forgot how I ended up on this subject, and I was gonna tie it back to what we were talking about. Yeah. Well, I mean, I was asking like," }, { "speaker": "stephan", "time": "01:18:33", "start": 4713.06, "text": "do you see parallels between kind of how full RBF went down and how, oh, yeah. You know, this whole op return and spam sort of consideration? Yeah. I think" }, { "speaker": "matt_corallo", "time": "01:18:39", "start": 4719.8, "text": "RBF is just a little different because it's such a huge difference in wallet user experience and Of things you can do on Bitcoin versus, returns. Like it's only really useful for this really weird niche bid VM setup that Citriya was talking about doing. And there's probably some related setups that might need it, but, you know, hopefully we do like TX hash or something, and then they don't need it anymore. But" }, { "speaker": "stephan", "time": "01:19:07", "start": 4747.87, "text": "Right. Right. So yeah, and as I understand, like That op-returned specific PR is kind of relatively nothing burger in terms of how many people are actually gonna do that, but it kind of reignited the whole spam kind of debate and I, I, and people were sort of, I guess, relitigating or kind of bringing that up again. well, I've got you, I'm curious to get your view on this because You know, Luke Dasher and kind of the knots and the filter guys, they sort of keep talking about this twenty twenty-three PR, which was, you know, the data carrier size one, I'm pretty sure you're, you're probably familiar with it. As, I'm curious to get your view on that. Like, is your view that even if that were merged, the spammers would still be spamming anyway? Like, they would just use, you know, alternate relay networks or do you think, like, 'cause I guess one view, as I'm trying to understand it, is, hey, the horse had already bolted, right? Like, all these people were already spamming the chain and, you know, changing the latest version of core wouldn't have realistic, realistically done much, right? Now, to be fair, maybe the filter guys A social signal, and we wanna stop kind of VCs funding these spamming startups. Therefore, if Core had made this change in twenty twenty-three, maybe the UTXO set wouldn't have blown out so much. Where do you sit on this? What do you think?" }, { "speaker": "matt_corallo", "time": "01:20:30", "start": 4830.41, "text": "Yeah, I mean, I, you know, obviously the, the op returns don't end up in the UTXO set, which is nice, but yeah, I mean, I, you know," }, { "speaker": "matt_corallo", "time": "01:20:42", "start": 4842.92, "text": "the op return, op return was standardized as a scheme to include some amount of data In, in a similar situation, right? Someone said, \"Look, I'm doing this thing, I'm doing it, whether you want me to or not. I've already written the code, I'm gonna use it. it, it's gonna embed the data in, in fake pub keys or whatever, you know, in a, in a really hostile way.\" And the response was, \"Well, no, we're gonna try to encourage you to do something better. We're gonna nudge you in the other direction, by making it easier for you to, to embed data in a way that- Does less damage to Bitcoin. And, you know, on one hand, I agree, it'd be nice if, if people didn't spam the chain, if we had a way to prevent that, And miners still got paid. We still made sure miners got paid at the end of the day. you know, if, if we had a way to prevent that, we would do it. And I think, you know, to your, to your earlier description, I think that's really a big part of- The discussion here and the disagreement is, is this philosophical underpinning of like, should Bitcoin Core do The thing that's going to result in the best outcome for the Bitcoin, in, in, is going to result in terms of the best You know, technological outcome for the Bitcoin network, it's going to, you know, encourage people to do things that, that do less damage to Bitcoin, but, but, you know, they're going to do things that maybe are bad for Bitcoin, whether they are or not depends on your view, what you like data on chain or, or not." }, { "speaker": "matt_corallo", "time": "01:22:31", "start": 4951.04, "text": "Or should Bitcoin Core do the, should Bitcoin Core just fight it as much as they can to, to make a statement, to discourage it, to, you know, it might still happen, but discourage it where it all possible? And I think," }, { "speaker": "matt_corallo", "time": "01:22:53", "start": 4973.73, "text": "I guess I don't view it as Bitcoin Core's job to decide what-- they're not, so, I mean, to be clear, Bitcoin Core is not able to decide what goes in the network, and I think that's, that's part of the, the view of most of the engineers working on Bitcoin. It's, it's very much an engineering mindset, right, to say like, \"Well, look, here, here's the set of things we can do, and so we should pick the most optimal thing out of the set of things we can do. Now, we can't stop people from doing the spam, so we're going to make sure that it is the least costly for the network that we're, you know, helping As possible." }, { "speaker": "stephan", "time": "01:23:36", "start": 5016.1, "text": "Yeah, gotcha. Sorry, one, one thing, just, I just wanna make sure we're kind of getting the right-- Yeah. Sorry, just one thing, I wanna, I guess, clarify the question a little bit because one thing, and to be fair to Antoine Ponsot, he was trying to say, look, people are kind of conflating these different debates around opt-out versus kind of the broader spam wars, let's say, because, as an example, that Dada Karysai's PR from like twenty twenty-three, I think that related more to Whereas the up return thing is, you know, up returns. So I guess in the, in the filter camp view, and I'm not from the filter camp myself, so I'm, I'm trying to understand their view, but I think their view is more like if you had The latest version of Bitcoin Core at that time had tried to, let's say, close the bug of Taproot inscription envelope, that even though the spammers could have, you know, found a new way to do a Taproot, you know, Taproot inscription That it would have discouraged this kind of behavior and therefore the UTXO set wouldn't have blown out from four gigs to twelve gigs or whatever, like eighty million UTXOs to like, I don't know, two hundred million UTXOs at the peak, something like that. So just to, I guess, separate the op-return part from the broader kind of spam and BLC20 aspect." }, { "speaker": "matt_corallo", "time": "01:24:52", "start": 5092.5, "text": "I mean, I, I think there is obviously some level of truth to the concept that if it's harder, there's some, it is somewhat less likely for something to happen because it's harder. But at the same time, you know, there's a, there's a classic fallacy here, is the, the, the \"no smart cow\" or \"one smart cow\" fallacy. it's, it's often used in the context, context of private, piracy, digital media piracy. Where the claim is that, well, there, there are, there is no, there exists no smart cow, there is no one who can figure out how to break the DRM, and thus it's, it's illegal to break DRM. But the problem is there usually is one smart cow. There's one guy who can figure out how to break your DRM on your Media, and all they have to do is tell people how to do it, and now everyone can do it because they just write some open source code and, and now everyone can do it, and now all the cows leave the yard because one cow figured out how to open the gate. and I think the same applies here, where you're really assuming that here's this thing that has value, economic value for someone, you know, maybe- I, I don't particularly value NFTs, but other people do, clearly, other people are willing to pay for them. And you're saying that there's no- No one is gonna build it on Bitcoin because it's a little harder. And I'll tell you, you know, I, I, I know Casey, Casey Wotemor, who, who made the, the Inscriptions and runes, designs. The guy's a smart fucking cookie. Like," }, { "speaker": "matt_corallo", "time": "01:26:44", "start": 5204.43, "text": "whether it was- Easy or not, he would have figured it out, assuming he wanted to. And so you really now have to argue that, like, okay, well, Casey wouldn't have wanted to build it if- It wasn't easy to just embed the stuff in, in witness data, but like," }, { "speaker": "guest_2", "time": "01:27:08", "start": 5228.31, "text": "I don't" }, { "speaker": "matt_corallo", "time": "01:27:08", "start": 5228.81, "text": "buy it. I, I mean, okay, maybe you, you could've limited the, the total size of it, but, you know, people have legitimate use for, for fairly large witnesses, you know, whether it's a, a large multisig or whatever. It is not weird to have a fairly large witness, and so okay, we could limit it to not a hundred k, but I don't know, you know, fifty k or something, but that's still, I mean, you still get an image in there, you still get an NFT in there," }, { "speaker": "matt_corallo", "time": "01:27:41", "start": 5261.03, "text": "Or you start banning people who want to do large multisigs, like, \"Are you banned Liquid? You can't do that.\" And so I think still here, just in practice." }, { "speaker": "guest_2", "time": "01:27:52", "start": 5272.72, "text": "You can't stop these things, you know, NFTs on Bitcoin, there's people" }, { "speaker": "matt_corallo", "time": "01:28:01", "start": 5281.1, "text": "who want them, And there was certainly, an economic argument made by a number of, NFT people, that Bitcoin, NFTs on Bitcoin are, are somehow more valuable, because they're on Bitcoin and Bitcoin's great, and we all think Bitcoin's great. And okay, And so, yeah, in practice, I just don't, I don't really buy it because there always exists one smart cow somewhere who's gonna figure it out. And even, and, and again, I think within the set of things that is really truly possible, you know, as long as we want to allow, for example, Liquids' fairly large multisig, You can't prevent people from embedding a fairly large amount of data. I mean, it's not a whole four megabyte transactions or whatever, but certainly enough to get A monkey JPEG or a, Pepe JPEG or whatever into a transaction that just doesn't need very many bytes to fit Pepe. Sadly." }, { "speaker": "stephan", "time": "01:29:09", "start": 5349.67, "text": "Yeah, yeah, it's unfortunate. And, yeah, and I think this is one of those things where, I, I think I've seen a lot of people in the community get really kind of upset about this issue because they see it like, it's a, you know, in their mind, maybe it's like a dereliction of the duty of Bitcoin core developers that they should have done more to fight the spam, in their view. I, I just, I see it more, a bit more, I'm probably a little more in your camp on this, like I think I don't think we could, I don't think there was much that could have been done to stop it. Again, I, I don't, I don't count myself as like a guru or a technical protocol expert, I'm just trying to read the different arguments back and forth, and I, I think most of the core developers, I think they had the better argument here, but I think it's" }, { "speaker": "matt_corallo", "time": "01:29:50", "start": 5390.74, "text": "just a philosophical difference. I mean, it's not, i-it's not something where you can really apply logic and say like, \"Well, this is clearly better.\" It's just, you know A statement basically, and one group wanted to, it was more of the engineering mindset that there's just like, there's some set of possible things, and here's the best outcome for Bitcoin, and it's maybe not this, it's, it's not a statement, it's maybe the inverse of a statement that people wanted. so I, I, I think I can't say that, you know, one is like strictly right and one is strictly wrong. It's a, a philosophical difference, and I'm obviously, I'm, I'm an engineer, I think," }, { "speaker": "matt_corallo", "time": "01:30:34", "start": 5434.85, "text": "Do taking action which would result in bloating the UTXO set more, or even worse, you know, I think like, okay, well, let's say blow the UTXO set a little more It's not the end of the world, but it's not good, and certainly, i-it's my view that it's not Bitcoin Core's job to, to make statements like that as a project. Certainly, many Bitcoin Core contributors did themselves say, \"Not a fan of this stuff.\" People shouldn't do this stuff, but I also can't stop them. So, I mean, there's your statement, I guess." }, { "speaker": "stephan", "time": "01:31:08", "start": 5468.64, "text": "Yeah. Yeah. And, do you, do you have any thoughts on whether Core, so, you know, we've seen a lot more not adoption, I guess, recently. I see, I think the number of people are throwing around nowadays, at least as we speak, is around eleven percent. do you have any thoughts on that? Like, will Core remain the dominant implementation? i-is it You know, i-is it just a small minority or but a loud minority, or is it, is-- Do you think, do you actually believe that it's gonna keep going up if people are upset that Core didn't make the statement that we were talking about?" }, { "speaker": "matt_corallo", "time": "01:31:42", "start": 5502.78, "text": "Yeah, yeah, I mean, I, I, yeah, I- As we learned many, many, many times repeatedly throughout the block size wars, people running nodes doesn't Do anything all that much. It's good that we have more nodes, to be clear, that's good. but they don't accomplish anything unless the node in question is really, you know, protecting someone's money, is being used to transact, to evaluate what the blockchain is." }, { "speaker": "stephan", "time": "01:32:10", "start": 5530.9, "text": "Right. It's the question of, is it an economic node or not?" }, { "speaker": "matt_corallo", "time": "01:32:13", "start": 5533.91, "text": "yeah, and, and is it a material economic node? If, if it's your personal wallet where you do one transaction every now and again, it's not really a huge deal. And I think for, for the vast majority of these, they're people who maybe have Bitcoin, maybe, you know, you have Bitcoin on their phone or, or are big Bitcoiners, but they weren't necessarily using the Bitcoin core wallet to begin with and running, spinning up a new node or switching their node that didn't have any money in it to begin with isn't accomplishing anything, doesn't change anything, and I don't think the, you know, Nazis is a, a one-person project, it is, one guy who Decides whether to merge various patches, and if you're a serious custodian or if you are, you know, seriously holding a lot of money, transacting a lot of money through a node, you're not gonna use that. It's just not an option. Now, you know, maybe Knots will be able to grow its developer team or something, but I- Frankly, I don't think it's super likely. The, the reality is smart people wanna work with lots of other smart people, and there are a lot of smart people working on Bitcoin Core. And so a new developer coming in and saying, \"I wanna work on full node software.\" Yeah, there's some who wanna work on Nats, but the vast majority of smart people want to go to the place that has most of the smart people already at it. And not as a one man project, so that it just," }, { "speaker": "guest_2", "time": "01:33:45", "start": 5625.02, "text": "it's not that." }, { "speaker": "stephan", "time": "01:33:47", "start": 5627.22, "text": "Gotcha, okay. so I guess one other area to chat about, like L2s more broadly, like, now we've kind of touched on a few things like Lightning and Ark and, you know, these zk rollups. I'm curious if you have a thought around I think some of this debate, or some of this kind of recent argument, I think people have been, let's say, they, they see this as like, \"Oh, you know, you're opening the door for these zk rollups.\" And I guess depending on the view, some people see that as spam, right? They see that as like, that's spam, even though, I don't know, you could argue either way because is that, is that monetary related, right? Like maybe, like maybe we've got to distinguish between, okay, JPEGs, I think that's spam, BRC20, yeah, that's, that's spam, but if something's attempting to do monetary scaling, is that spam? And then maybe the question, if some people are challenging, like, how much scaling is it gonna be?" }, { "speaker": "matt_corallo", "time": "01:34:38", "start": 5678.86, "text": "Go" }, { "speaker": "matt_corallo", "time": "01:34:43", "start": 5683.66, "text": "The line gets real fuzzy and gets kind of absurd sometimes." }, { "speaker": "stephan", "time": "01:34:48", "start": 5688.49, "text": "Yeah. So I guess just comparing different L2s, like obviously you're working on Lightning, so obviously you're bullish on Lightning, but things like ARK, state chains, ZKP, how are you sort of like, do you see this as like, Lightning is the one that's gonna be the most Like gonna do the most volume? or do you think maybe ZKP's have a lot of potential? Like, how are you seeing other L2s?" }, { "speaker": "matt_corallo", "time": "01:35:13", "start": 5713.46, "text": "so yeah, I think we, we to categorize L2s, we have to first split them into trusted and untrusted, so ones that are either custodial or, you know, really heavily trusting some system. So on the custodial end, there's obviously like liquid, liquid, eCash. you know, federated and Cashu, it also Spark, it's not custodial, you know, a state chain, there's no custodian who has a key who can take your money, but it's fully trusted. if they switch their software and start running some software that does something different from what they claim they're doing, they can, with some effort, take all of your money. so, so it's still fully trusted, right? And it can be federated, it can be, you know, multisig, but it, on the untrusted end, on the non-custodial end, there's some threshold of how much money do you need for it to be non-custodial? How much money do you need to have a wallet here that's really, truly non-custodial? And there it's a question of, you know, how much money does it cost to go on chain and claim your money on chain, like punish your counterparty in Lightning for a close? there's an equivalent- Logic, whether it's a rollup or," }, { "speaker": "guest_2", "time": "01:36:25", "start": 5785.82, "text": "ARC or what have you." }, { "speaker": "guest_2", "time": "01:36:29", "start": 5789.62, "text": "plus the cost of onboarding, so what's the cost to actually create a new wallet? And I view all of the non-custodial," }, { "speaker": "matt_corallo", "time": "01:36:41", "start": 5801.63, "text": "technology, scaling technologies as ways through that lens. So what's the onboarding cost and what's the forced closure cost, what's the, the unilateral exit cost? Today, I think Lightning is still one of the most compelling options. Certainly, it's, it's the most compelling practically. you know, all of the bitVM based rollups have a lot of complexity, but also have a, a, an N of N trust model or one of N trust model. You have, you know, N parties, and you have to trust that at least one is, is online and honest. it's not completely trustless, it's pretty good, you can't do unilateral exit, so, you know, it's, it's has some risks, but it is good, it's pretty great, pretty great idea. But importantly, what a lot of these things end up being is multiplicative scaling on top of Lightning. So if we wanna build the best scalability thing we can, probably that's gonna be something with Lightning on top. So a lot of the ARC designs now are talking about putting payment channels on top of ARC, because ARC gives you these VTXOs, they can kind of operate like a UTXO, and you can put a payment channel on top, and you can say, okay, well, actually, if I have a payment channel on top, it addresses a lot of the com- the, the issues that ARC has. A substantial liquidity cost, slow transactions if you try to remove some of the liquidity cost. and so lightning on top or payment channels on top fix a lot of problems. If you have a rollup, well, rollups are great, but you're still putting some amount of data per transaction in every block. You don't wanna do that, right? You wanna have, and Lightning, Lightning scales in the other direction, right? So there's almost like a, a, a roll-up scale in one direction. Yeah, people said Lightning" }, { "speaker": "stephan", "time": "01:38:28", "start": 5908.82, "text": "scales payments, not users. Right. Right." }, { "speaker": "matt_corallo", "time": "01:38:31", "start": 5911.12, "text": "Roll-up scale users, right? That scales, that reduces the onboarding costs in the- Well, the unilateral exit cost to the rollup, not necessarily out of the rollup, but it least scales users, and then Lightning scales the payments, right? So you can say, \"Well, now we can do infinite number of payments without hitting this rollup or hitting the chain.\" So at the end of the day, you know, I think In the limit, we're gonna end up with some combination of these technologies to build really good non-custodial scaling, but at the same time, these are one set per day and so Lightning, once we've addressed a lot of the more immediate engineering challenges, I think the user experience of a Lightning wallet is, is really compelling, and especially when we're talking about a graduated wallet, because, okay, you have this, this trusted segment over here, you have this untrusted segment over here If fees are super high right now or whatever, we can increase the threshold where we move to the non-custodial segment. So we can say, okay, well, actually, you're only gonna be non-custodial when you have a hundred thousand sat or a hundred and fifty thousand, two hundred thousand sat because fees are a little high right now, and then the fees come down and then we can reduce the threshold, right? We can adjust that threshold dynamically based on What current fee rates are, what user experience you wanna have, you know, how much, how much fee are you willing to tolerate as a percentage of your balance? And then as these other technologies mature, as we can start talking about doing timeout trees or payment channels on ARC or rollups or whatever, then we can put Lightning on top and then we can reduce that balance, that threshold even further, right? So the user experience, I think, with a graduated wallet, we can have that really great user experience today and then And as these other scaling technologies come out, we can improve the trust model of it so we can reduce the balance threshold at which you become non-custodial, but it won't change the user experience materially because we'll already have You know, super slick wallet that you just pay and receive money and all the transactions are instant and you don't really ask any questions." }, { "speaker": "matt_corallo", "time": "01:40:45", "start": 6045.74, "text": "and the only difference is now it's a little more non-custodial." }, { "speaker": "stephan", "time": "01:40:49", "start": 6049.98, "text": "Yeah, interesting. So in a way, it's like these L2s aren't in, aren't in as much of a direct competition. You're sort of seeing it more like it's kind of a collaborative thing in a way that Lightning, you know, the way, let's say Roy from Breeze talks about it, Lightning is like the, you know, it's the, what's the word? It's like the common language, between these different layers, and they're gonna, they're just gonna interact in different ways, and like you said, I think, VTXO, this virtual chain concept, and they've mentioned like this idea of Spillman channels, so I guess that's what you were getting at with this idea of like having lightning channels in, in an arc, VTXO, let's say, as opposed to On Bitcoin's chain per se, directly. yeah, interesting. So, yeah, I mean, look, I've, I've kept you for some time, so I guess we should wrap up. Any closing thoughts? And of course, where can people find, the campaign on Save Your Wallets or Save Our Wallets rather?" }, { "speaker": "matt_corallo", "time": "01:41:46", "start": 6106.82, "text": "Yeah, no, just, if you're an American, definitely go to saveourwallets dot org. It's on the hat. You can pause, pause now and, and pull up the website." }, { "speaker": "matt_corallo", "time": "01:41:57", "start": 6117.61, "text": "if you're 'cause again, it's important, you know, we talked about all these really great, our wallets are gonna be really great over the next year or two, and how they're gonna be super slick, but we can't build any of that if we don't have regulatory protection for developers and for people operating ancillary services for non-custodial wallets. So definitely, definitely make that call, make your voice heard, tell your American friends to make their voice heard, whatever it takes." }, { "speaker": "stephan", "time": "01:42:28", "start": 6148.83, "text": "Excellent. Yeah, and I just wanna reiterate, and I wanna encourage any listeners in America, please do take this on board. Obviously, we're bullish on Bitcoin, but we wanna make sure our, our builders and developers can, not go to jail for it and actually keep on building. So links will be in the show notes, it's saveourwallets dot org. So Matt, thank you again for joining me today." }, { "speaker": "matt_corallo", "time": "01:42:50", "start": 6170.13, "text": "Yeah, thanks for having me." } ] }