{
  "episodeId": "SLP697",
  "speakers": {
    "stephan": {
      "name": "Stephan Livera",
      "role": "host",
      "tag": "STEPHAN"
    },
    "philip_walton": {
      "name": "Philip Walton",
      "role": "guest",
      "tag": "PHILIP"
    },
    "guest_2": {
      "name": "Guest 2",
      "role": "guest",
      "tag": "GUEST"
    },
    "guest_3": {
      "name": "Guest 3",
      "role": "guest",
      "tag": "GUEST"
    }
  },
  "segments": [
    {
      "speaker": "stephan",
      "time": "00:00",
      "start": 0.22,
      "text": "So what I'm trying to say is that Bitcoin, the Bitcoin mindset isn't payments. It's not about Bitcoin payments. It's about our ability to transfer value exactly like we would transfer value using cash. So Bitcoin is the reimagining of cash in a digital world. Because when you make a Bitcoin transaction, it's not an instruction, you're actually sending the value, and you're not relying on any third party to facilitate the value transfer. transfer, and it can transfer from anyone, anywhere at any time, and that's, completely different than payments and the value proposition of Bitcoin, what I feel, lies on the use cases that value transfer can unlock. So imagine we have a native currency to the internet that can facilitate value transfer anywhere, anytime, by anyhow, anyone, how many use cases that can unlock? First, indeed,"
    },
    {
      "speaker": "philip_walton",
      "time": "00:58",
      "start": 58.24,
      "text": "is Bitcoin lending. I think the ability to- To use Bitcoin that is appreciating thirty, forty percent per year to actually get liquidity without selling it, I think it's a very crucial use case, and right now either you go custodial to get good rates or need to bridge to another chain to use like so-called lending pool, DeFi, somewhere else, but again, yeah, you're degrading your security of your Bitcoin, right? So, and even more importantly, it's not only the security of Bitcoin, but your own UTXO. You wanna know where the UTXO history is coming because maybe you took so, so local So it's very important to have that you take sole ownership and having this is very important. The second use case I'm very interested is the concept of non-interactive swaps."
    },
    {
      "speaker": "guest_2",
      "time": "01:40",
      "start": 99.57,
      "text": "And so then you think about the amazing renewable resources on the continent, which produces very cheap electricity. It means that we can mine Bitcoin in Africa at a fraction of the cost of anybody else in the world. So not only can we drive more Bitcoin mining in a more decentralized fashion, but we can do it better. Economics and anybody else in the world."
    },
    {
      "speaker": "guest_3",
      "time": "02:03",
      "start": 122.9,
      "text": "Hello everyone, and welcome to the Plan B podcast. I'm your guest host, Stephan Livera, and, I'll be, chatting with my guest today. My guest today is Philip Walton. Philip is the CTO and co-founder of Gridless, a really interesting company, and, you know, interested to get into this and, hear a little bit about Philip's perspective on building in Africa and Bitcoin mining and all the rest of it. So, I guess just, just give us kind of a quick You know, quick, kind of summary, kind of your bio. What, what, what, what have you done before you came, came to, Gridless and Bitcoin mining?"
    },
    {
      "speaker": "guest_2",
      "time": "02:38",
      "start": 157.95,
      "text": "Yeah, sure. So, my, my co-founders and I have been, building tech businesses in East Africa for twenty years, so a variety of different sectors, and, we started Gridless back in '22, and we're specifically looking at this challenge in Africa where there's a tremendous amount of energy that has no buyer. So So the energy is being produced, the community can't afford to buy it, and, so we started thinking about like, how could we monetize that energy? And, very obviously, Bitcoin mining is a, is a great use case. we had the background in building, you know, complex infrastructure in remote parts of Africa, and so that was really the genesis of Gridless. And, you know, for the, for the first few years, we focused on existing energy sites. And sorry,"
    },
    {
      "speaker": "guest_3",
      "time": "03:29",
      "start": 209.0,
      "text": "by the way, what year did you start? 22, 22, okay, that doesn't go."
    },
    {
      "speaker": "guest_2",
      "time": "03:33",
      "start": 212.7,
      "text": "Yeah, so we started focusing on ex-existing energy sites, you know, some of these sites were 15 years old and had never sold more than 30% of their electricity. So their economics were in the toilet, like they couldn't survive. and the fact that we can show up with a container of Bitcoin mining hardware and instantly monetize every- electron of electricity that nobody else will buy revolutionizes their economic outlook. so we're currently in six sites in three countries, so Kenya, Malawi, and Zambia, and we're currently on a massive expansion across, across the continent"
    },
    {
      "speaker": "guest_3",
      "time": "04:13",
      "start": 253.34,
      "text": "Now, my first, I guess, topic that I, I think I'm curious about, and probably listeners will be curious about, is the \"why Africa?\" question, right? Because a lot of people might have seen the Bitcoin mining world and thought, \"Oh, but there's already like very established areas, like what about Texas or, you know, other, or China, right? What about these other kind of areas where it's kind of a very well-established business as opposed to Africa?\""
    },
    {
      "speaker": "guest_2",
      "time": "04:34",
      "start": 273.75,
      "text": "Yeah, so I think there's, there's two facets to that. One is why did we do"
    },
    {
      "speaker": "guest_2",
      "time": "04:43",
      "start": 283.08,
      "text": "and, and so, so are my co-founders. And so for us, you know, we're always looking for problems we can solve at home. and, and so like f-for us, it was more about what problems can we solve in Africa than necessarily, \"Here's what we wanna do, let's go to Africa.\" But I, I think the other side of that coin is, you know, Africa's-- This is a horrible stat. I, like it actually makes me sad every time I say it. The International Energy Agency did an- assessment fifteen years ago, and there were one point two billion people in the world without access to electricity, six hundred million were in Africa. Fast forward to twenty twenty four, there are eight hundred million people in the world without access to electricity, six hundred million of them are in Africa. So we have this massive challenge on the continent that there is half of our population that doesn't have access to electricity, and, and so then you think about the amazing- renewable resources on the continent, which produces very cheap electricity, it means that we can mine Bitcoin in Africa at a fraction of the cost of anybody else in the world. So not only can we drive more Bitcoin mining in a more decentralized fashion, but we can do it better unit economics than anybody else in the world."
    },
    {
      "speaker": "guest_3",
      "time": "06:03",
      "start": 363.49,
      "text": "That's fascinating. And so, I guess in order to understand this, part of that is understanding there's a difference between, let's say, energy generation and then the transmission component of that, because, you know, in, let's say, most of the Western world and the developed, like, highly developed world People just sort of, you know, switch the light and, oh, the light turns on, right? Can you just maybe articulate the difference there for people to understand why this business model works?"
    },
    {
      "speaker": "guest_2",
      "time": "06:29",
      "start": 388.75,
      "text": "Yeah, so it's, it's, I'd actually explain it a little bit different. In, in the Western world, there is always a buyer for any unit of electricity produced. So, most of the Western world has real time energy markets. So if I'm a producer of electricity, if there's a lot of demand, I get paid a high price, but if there's low demand Low price, but I always can sell my electricity. Shift that over to Africa, and like one of our sites is in northwestern Zambia If the community's not buying that electricity, there is no other buyer, zero. So there's no market for that electricity. and so that creates this, you know, massive black hole of economic opportunity because that electricity, you know, Janet, my co-founder of Gridless, says the river doesn't sleep at night. So the community's asleep, they're not using electricity, but the river's still flowing. And so all of that electricity, in essence, is wasted. And, and so it creates this very unique opportunity that we can, because of the geographic agnosticism of Bitcoin mining, we can put Bitcoin mining wherever the energy is being produced, and, and then anything the community doesn't want, so we always give to the community first, but anything that they don't want, we can instantly monetize with Bitcoin"
    },
    {
      "speaker": "guest_3",
      "time": "07:55",
      "start": 474.63,
      "text": "So we've touched on this idea of mining Bitcoin, but also advancing energy access. So could you elaborate a little bit on that? How does that process work?"
    },
    {
      "speaker": "guest_2",
      "time": "08:03",
      "start": 483.46,
      "text": "Yeah. So, today, if y-you see an opportunity, let's say you find a community, that doesn't have electricity and you find an energy source, so it could be hydro, it could be solar, it could be wind, it could be geothermal, That requires millions of dollars investment to build that energy. That community can't repay you those million dollars of investment, like there's not an econo- enough economic turnover in those communities to repay that investment. And so what ends up happening is, you know, people with good intention, usually with concessionary funding, will go in and build these energy sites 'cause they're trying to serve the needs of energy access But ultimately, there's, there's not enough revenue to repay that investment, and they economically fail. I mean, the failure rate of mini grids in Africa is approaching a hundred percent. It's, it's a shocking statistic. Like there's just not enough- demand from the community. So think about this, if I, if I were to come to Lugano and build a new energy site, there are, you know, a variety of industries and factories and consumer demand, but if I build new energy in a rural African community, people are gonna do two things. They're gonna charge their mobile phone and they're gonna run an LED light. It's just not a massive consumption of electricity. Now over time, they will use that electricity, but, you know, this-- w-w-in Bitcoin world, we talk about low time preference, you know? And so as an energy developer, if I'm expecting that community to repay my investment, I have a high time preference. Whereas if I go and build that energy based on knowing that Bitcoin will buy everything that nobody else in the community wants, I now have a low time preference for that community to take up the utilization of that energy. And so I, I'm not pushing them to buy more, I'm not raising the cost of electricity to try and recoup my investment. I simply can go in there, build the energy, let Bitcoin be the buyer first resort, and as soon as the community wants a little bit or A lot, then I sell it to them instead of selling it to the Bitcoin network."
    },
    {
      "speaker": "guest_3",
      "time": "10:15",
      "start": 615.15,
      "text": "Yeah, it's interesting how, the economics of this, change, change the game in a, in a certain way. And so, I guess, do you have any examples or stories you can share of, let's say, people- Or communities that have been, changed by this kind of model."
    },
    {
      "speaker": "guest_2",
      "time": "10:32",
      "start": 631.59,
      "text": "Yeah. Listen, it's, i-it's an amazing statistic, but, as I said, we're at six sites in three countries. In the last two and a half years, thirty thousand people have gotten access to electricity because of Bitcoin mining. Now, that's a cool stat. That's a great stat, and that's real impact. The reason isn't because we enabled the energy to be developed, the energy was already there. The reason is because we- We made that energy economically viable, which meant they could afford to pay their salaries, they could afford to run more distribution lines, they could afford to buy more meters to connect more households. and so it really is one of these things that there's, there's almost like this economic roadblock that exists if you get concessionary financing, like from a DFI, to build a power plant. Sorry, what's DFI? direct foreign investment. So like, like- CDC or CEDA or, the old USAID. So they'd get funding from one of those organizations, they'd build a power plant, and then the community wouldn't buy enough, then they don't have cash flow, they can't pay the salaries, they can't maintain their distribution lines, and, and there's, you know, a decline in the quality of service, whereas as soon as, and When I say as soon as, the, the site that we did in Zambia, so they were fifteen years old, we took our, we built mining containers in Nairobi, we took a mining container from Nairobi, drove it two thousand kilometers through the African bush, deployed it installed the miners, the next morning, the energy company got paid. That's an, like, for them, that was an amazing, step change in their economic future, because now they have real cash flow that enables them to then focus on the things that actually impact the community. More lines, more meters, more resources. and so that's really the, the-- to me, that's the power of Bitcoin mining Mining, as an enabler for energy access."
    },
    {
      "speaker": "guest_3",
      "time": "12:43",
      "start": 763.3,
      "text": "Now, my next question is around technical and logistical challenges. You touched on this, in your recent answer where you were saying you had to, you know, move this equipment, like there are, you, you've got to have mining equipment, you need technical expertise, there's operational, you know, challenges. Can you elaborate a bit on that in the African environment? Yeah,"
    },
    {
      "speaker": "guest_2",
      "time": "13:02",
      "start": 782.35,
      "text": "it's hard. Like, you know, we, we often have this conversation, people are like, \"Well, why don't you have competition?\" It's like, 'cause it's hard. Like, it's not easy to go, to go deploy technical infrastructure into a very remote rural location. we're super fortunate that, you know, in, in previous businesses that we've built, we've done this. Like, we know how to build, you know, sophisticated infrastructure that's remotely managed, that's deployed in remote locations. and so, you know, we've been able to take advantage of that experience to be able to do this. but- But in general, you know, when we deploy a mining container, it is lights out. So the mining container runs completely automated with no human interaction. we use a combination of Starlink and local LTE service, to provide the connectivity. but then the administration of that site, like managing the site, monitoring the site, all of that's actually done from our office in Nairobi. and then we tend to send resources on site maybe once a quarter, To go do maintenance to the machines, you know, resolve, resolve any issues that have, have cropped up. but I think it's one of the things that if we hadn't been able to solve that, there's no way we could do what we're doing."
    },
    {
      "speaker": "guest_3",
      "time": "14:21",
      "start": 861.32,
      "text": "Right. So I guess the answer is it takes technical operational expertise to handle the challenges. Now, I guess the other point people might be thinking about when it comes to this is things like, well Bitcoin mining machines have a useful life, and eventually they, you know, because of the increase in the price, the rise in Bitcoin hash rate, difficulty adjustment, et cetera, et cetera, the rigs kind of run out of, useful life. So what's the plan in that context? Like, how do you-- Does that mean in the five or six years? Well, I guess can you explain the useful live concept? Yeah, no, no, no, no, I mean, I think--"
    },
    {
      "speaker": "guest_2",
      "time": "14:56",
      "start": 895.55,
      "text": "No, it's, it's, it's a super important point, and it's, it's something that I think that we-- Like if you, if you look at the Bitcoin mining space, Gridless has a very different view on, on this than the traditional, you know, industrial Bitcoin miners. most industrial Bitcoin miners are paying a fixed price for electricity. So if you're paying five and a half cents for electricity, there, there Your economics don't work. Or maybe said another way, the price of Bitcoin"
    },
    {
      "speaker": "guest_3",
      "time": "15:25",
      "start": 924.93,
      "text": "needs to be above this level. So, so this is"
    },
    {
      "speaker": "guest_2",
      "time": "15:28",
      "start": 927.63,
      "text": "actually interesting. if, if you look at the economics of Bitcoin mining, it is largely decoupled from the price of Bitcoin. and it really comes back to the cost, the cost of energy. So, Bitcoin mining is really an energy arbitrage. and yes, when there's a spike in the price of Bitcoin, the revenue for Bitcoin mining will go up, but it quickly adjusts back down To a range because of difficulty adjustment. Exactly. And, and then conversely, if there's a drop in the price of Bitcoin, it adjusts back up. So I, I did this comprehensive analysis over the last eight years, and the range-- so if you just think in energy terms, so let's not, don't care about the price of Bitcoin. Bitcoin mining pays between seven and eleven cents per kilowatt hour, adjusted to kind of the current average efficiency of machine. and the peak of that histogram is nine cents. So when you start thinking about it that way, all of a sudden I can take an older machine, so like right now we're running, you know, kind of some last generation machines, they're generating, seven cents a kilowatt hour revenue But here's the catch, I'm not paying for electricity. So we do a revenue share with the energy company, so even if that, that price per re- kilowatt hour was to go down dramatically, I can still mine profitably. Whereas, you know, to a Western miner that's paying five and a half cents, if that, you know, if their revenue drops to six cents, they have to turn off their machines. They can't afford to run them. and so that gives us a huge advantage You know, from a global competitive standpoint, that we can run older mining machines longer in Africa because of the economic structure and the cost of our energy."
    },
    {
      "speaker": "guest_3",
      "time": "17:21",
      "start": 1041.36,
      "text": "Yeah, it's a fascinating model. And so, can you maybe outline a bit, and I guess you're, you're touching on it in your answer there Because I guess a lot of people talk about in terms of the operational costs, but there's also kind of an upfront capital cost if you're buying a lot of mining rigs. But to your point, you're buying the oldest stuff, it's cheaper. Hundred percent."
    },
    {
      "speaker": "guest_2",
      "time": "17:38",
      "start": 1058.45,
      "text": "No, so th-this is actually funny. So I, I actually maintain a, a spreadsheet that looks at, the cost per tera hash versus my gross margin per tera hash. and the truth is that buying an older, you know, let's say thirty joules per tera hash machine at two dollars a tera hash is better for me economically than, than paying twelve dollars per tera hash for, you know, an eighteen, you know, or sixteen joules per tera hash machine. So the truth is that we actually get, again, a, a huge competitive advantage that we can buy By less expensive older machines, so therefore we're putting less CapEx into that site, but if you look at my gross margin per kilowatt hour, it's as high or higher than the guys running the latest machines in the US. So you know, I love Adam Smith, I love the labor theory of, of value. I think about it as the energy theory of value. Like ultimately, this is a globally competitive marketplace, and whoever has the best arbitrage, that's, that's your competitive advantage. And so, it means as Bitcoin miners in Africa, that we can globally compete with everybody else in the world doing Bitcoin mining, and we can have an economic advantage. that allows us to be the, the cheapest producer, in that globally competi-competitive marketplace."
    },
    {
      "speaker": "guest_3",
      "time": "19:10",
      "start": 1150.07,
      "text": "Yeah, I find that fascinating because it's like you're, you know, yeah, you're sort of flipping certain models on their head in a way. You're sort of saying, \"Well, we don't need to actually have, the latest and greatest mining machines. We can actually work with some of the older ones because the cost- efficiency of it works out better for us, theoretically, yeah, or in practice, sorry. No, in practice. and I guess then the other question people might be thinking is, is it just like a question of scalability, like it's hard to go out and make new, lots of new sites, and that's kind of the challenge for you? A hundred"
    },
    {
      "speaker": "guest_2",
      "time": "19:41",
      "start": 1180.99,
      "text": "percent. And, like you hit the nail on the head. So the challenge for us is, the existing energy sites are finite. in terms of like an operator that's already running that has and so we recognized about a year ago that we needed to vertically integrate mining and energy generation. And so we're currently in a phase of growth where we are buying existing energy sites, integrating Bitcoin mining, and then we're starting to develop new energy sites. So we're building new energy sites from scratch based upon this Bitcoin economic model, and that, you know, as entrepreneurs, that gives us the control, right? So we- It's now all within our control to, accelerate that expansion, and we're not dependent upon somebody else that's like found themselves in a tough spot, and needs our help. And the truth is, if, you know, like Africa has a- Africa is insanely rich in energy resources. Like it is shocking that the poorest energy country on the planet is the richest in energy resources, particularly renewable energy resources. So if you look at just hydro alone, there's four hundred gigawatts of untapped hydro on the African continent. And if you were to bring in solar and wind and geothermal, it's probably ten times that. So the truth is that there is an abundance of cheap energy resources on the continent, but there's never been an economic model to go develop those at scale until now."
    },
    {
      "speaker": "guest_3",
      "time": "21:23",
      "start": 1283.04,
      "text": "And so you touched on, this idea of creating energy grids or mini grids. How does that balance with, I guess, the cost of getting Bitcoin mining? I guess you, you, you just kinda have to factor it all together of like, okay, here's my plan for this site, this is how much it's gonna be for the grid and this is the, for the mini grid part of it, and this is how much it's gonna be for the Bitcoin mining part of it. Is that how you say"
    },
    {
      "speaker": "guest_2",
      "time": "21:43",
      "start": 1302.92,
      "text": "it? Yeah, no, it's, it's interesting. So we actually think So if, if Bitcoin is paying me seven cents per kilowatt hour and the community will pay me eight cents, I'm gonna sell to the community. And if you look historically at mini grids in Africa The price for electricity is often close to a dollar per kilowatt hour. So I can go in and say, \"Look, Bitcoin is my market maker. So Bitcoin's paying me seven cents, I'll sell to you for eight cents, and that's gonna be the cheapest electricity that anybody in that country has access to.\" So we really get this unique opportunity that it is, it is both good for the community and it's in our financial best interest to sell as much as The community wants, as long as it is just marginally more than what Bitcoin's paying, but then we can always fall back on Bitcoin buying whatever the community doesn't want. It's kind of like a fallback option. Yeah, it's, it's perfect."
    },
    {
      "speaker": "guest_3",
      "time": "22:51",
      "start": 1370.98,
      "text": "I forgot the other question I had, but, alright. So, alright. when it comes to like, regulatory risk, like, do you see,"
    },
    {
      "speaker": "guest_3",
      "time": "23:04",
      "start": 1384.44,
      "text": "Do you see that, like, you know, the state, the nation state or the regulators of, you know, these re-areas, whether it's an energy regulator or elsewa- or otherwise? What view do they have on what you're doing?"
    },
    {
      "speaker": "guest_2",
      "time": "23:15",
      "start": 1395.07,
      "text": "You know, it's really funny, so one, in, in terms of Bitcoin mining, so far most countries, there's, there's one exception in Africa, but most countries, even if they're violently opposed to Bitcoin, the monetary technology, are fine with Bitcoin mining because it represents hard capital coming into their country. So the great example is Ethiopia. you can come listen to our panel tomorrow. Nemo, from, QRB Labs in Ethiopia will be on the panel with me. And, you know, Ethiopia as a country doesn't allow Bitcoin But they are now the largest Bitcoin miner on the African continent, because they embrace that as a distinct technology from, the monetary system itself. But if you think about like how the energy regulator views us, if, a-and we've seen this in, you know, Kenya, Malawi, Zambia, Rwanda, Guinea, Uganda, if, if we go to the energy regulator and we say, \"Look, we'd like to come in In and build new energy, and we don't want you to give us anything in exchange. We're not asking for anything from you. They always say yes, because typically if an energy developer comes, they want the government to promise them something, promise to buy my electricity, promise to pay me a certain amount. And so, you know, when we're going in there and saying, \"Look, I don't need anything from you. I'm, I'm bringing my marketplace,\" kind of just a win-win for everyone. So I, I mean, in, in Malawi, we, we asked the government for a license to build a site, we got it in an afternoon. Like it's, it's such an easy conversation compared to kind of the traditional mode of energy development."
    },
    {
      "speaker": "guest_3",
      "time": "25:05",
      "start": 1504.99,
      "text": "I guess zooming out a little, are there any kind of global macro trends that impact you at Gridless?"
    },
    {
      "speaker": "guest_2",
      "time": "25:10",
      "start": 1510.44,
      "text": "Well, yeah. So, when I saw that question, I was thinking about it. Like, I think one of the things that impacts us the most right now is, the push for AI. and the reason is-- Are you gonna pivot to HVC? Well, so yes, but in the future. you know, when you look at, when you look at the demand in the Western context, particularly North America, for energy to, to dedicate to AI and HPC, the energy that's being used for Bitcoin mining is, is grossly underperforming from an economic standpoint than if that same energy was put to HPC. So you're seeing the Bitcoin miners start to shift to, they, they can make a lot more off their energy contract selling to HPC than they can to Bitcoin. And what that means is there's a lot of equipment that no longer has a home, And so there's a lot of that, so there's like a lot of the conversations we're having right now is how do we re-re-locate assets from North American operations to African operations because we can keep those assets productive, in, in fact, making more money than they were making in the US, and then that energy can go to the HPC. That's"
    },
    {
      "speaker": "guest_3",
      "time": "26:29",
      "start": 1589.05,
      "text": "really fascinating. So it's like, if I've understood you, it's like some of these big mega miners in the US and other Western countries, they are now kind of pivoting a little to AI, HPC compute. That means they may not need some of the Bitcoin mining machines, which they can sell off to you, and you guys can kind of get those a bit cheaper. Alright. Well, I think, we're gonna have to wrap it up now. So, just quickly, where can people find you online, and we'll wrap it up"
    },
    {
      "speaker": "guest_2",
      "time": "26:51",
      "start": 1611.37,
      "text": "there. Yeah."
    },
    {
      "speaker": "guest_2",
      "time": "26:59",
      "start": 1619.49,
      "text": "All right, well, gridlesscompute dot com is, well, I tweeted it out,"
    },
    {
      "speaker": "guest_3",
      "time": "27:03",
      "start": 1622.85,
      "text": "so people who wanna follow can follow Philip there. that's it. So everyone, please put your hands together for Philip Walton. Thank you. Thank you. So we're back on for the Plan B podcast coming to you live from Lugano. I'm your guest host, Stephan Livera, and I'm joined by my friend, Roy Scheinfeld, the CEO and co-founder of Breeze, well known for supporting lightning adoption and Bitcoin adoption around the world. So, let's start here, Roy. So you wrote an article recently for Bitcoin Magazine, and I think one concept you were touching on there is around value transfer instead of payments. So can you explain a bit, like, what are you getting at there?"
    },
    {
      "speaker": "stephan",
      "time": "27:39",
      "start": 1658.56,
      "text": "Yeah, that's my new crusade, to try and, and people always ask me, okay, why would I spend my Bitcoin, right? It's all about, trying to understand what's the utility behind using Bitcoin as a medium of exchange. And I think what I'm trying to- to convey is the fact that we're all living under a payment mindset. So in my article, I kind of define what payment is And basically the definition I, I came, is to say payments are instructions to settle a debt. What does it mean? So when you pay someone, you're not actually transferring value to that person. You're sending an instruction to a third party to send value to the other side. So that's one aspect where, payments are different than value transfer. The other aspect is that, when you, when you pay someone There's always a settlement. It's always an open debt that you need to settle. You buy something for a merchant, you need to pay them. You're clearing a debt When you pay your employee, you're clearing a debt. So value transfer, and that's a very fiat mindset. Payments are fiat mindset because value can transfer in a very specific path Only when there's debt and only through third parties that are allowing you to facilitate this value transfer. So what I'm trying to say Is that Bitcoin, the Bitcoin mindset isn't payments. It's not about Bitcoin payments, it's about our ability to transfer value exactly like we would transfer value using cash. So Bitcoin is the reimagining of cash in a digital world, because when you make a Bitcoin transaction, the-- it's not an instruction, you're actually sending the value, and you're not relying on any third party to, to facilitate the value transfer, and it can transfer from anyone Anywhere, at any time, and that's, completely different than payments and the value proposition of Bitcoin, what I feel, lies on the use cases that value transfer can unlock. So imagine we have a native currency to the internet that can facilitate the value transfer anywhere, anytime, by anyhow, but a-anyone, how many use cases that can unlock."
    },
    {
      "speaker": "guest_3",
      "time": "30:25",
      "start": 1824.93,
      "text": "And you touched on this idea that basically payments- Require bankers. Do you wanna elaborate a bit on that? And I guess, look, let me steelman a little bit, because people could challenge us and be like, \"Well, look, you Bitcoin and Lightning guys, you're making use of things like LSPs or swap services and things like that.\" So How, why, how and why is that different in your view?"
    },
    {
      "speaker": "stephan",
      "time": "30:44",
      "start": 1844.24,
      "text": "first, you don't ask permission. even, even, if you're not doing You're talking about second layers, but let's talk about kind of the value proposition on the first layer. Before we're talking about optimization and scaling Bitcoin, people need to use Bitcoin in order to facilitate value transfer. People are actually using Bitcoin in order to facilitate value transfer because no one knows how the Bitcoin flows in the, in layer one. Now, where we come to the scaling issues of Bitcoin, and we want to facilitate, value transfer in, in, for billions of, of- Users, then we get into a, a very complicated discussion and convoluted discussion of trade-offs. LSP, is a trade-off, the ability to allow end users to connect to the Lightning Network, encapsulate some form of centralization, and the, this centralization comes in the form of an LSP. The way to mitigate that centralization is to allow anyone to run an, an LSP and to allow anyone to connect to To any LSP they choose to. so we're kind of decentralizing the LSP that is, in itself a centralization factor And the same is, is true about other layer two solutions like ARK and Spark, et cetera. I actually think that, the future of scaling layer twos is about us having multiple sub-networks, different sub-networks, each is running by, multiple operators, different jurisdictions, and, and Lightning is evolving from technical solution to what I call a common language that provides interoperability between all the different sub-networks."
    },
    {
      "speaker": "guest_3",
      "time": "32:39",
      "start": 1958.85,
      "text": "Yeah, I think, I think I'm with you. Like the, let's, I, if I were to look at the fiat system, right? You've got basically there's one Federal Reserve, and there's all these, you know, tens of thousands of fiat banks around the world, I don't know, call it thirty thousand, forty thousand fiat banks around the world, and that's what most people are using today for fiat payments, aren't they? Yeah. now in the Bitcoin"
    },
    {
      "speaker": "guest_3",
      "time": "33:00",
      "start": 1979.74,
      "text": "Millions of these, now maybe not today, but if"
    },
    {
      "speaker": "stephan",
      "time": "33:02",
      "start": 1982.06,
      "text": "someone fails, you can run another. Right. So it's about the optionality, it's about our ability to have an alternative infrastructure. For example, they always say, okay, people ask me, but in Europe we have open banking. So what, what's the difference between having a permissionless open decentralized network and having an open banking API? But when you dig into the open banking API, you find out that just ten- Operators can operate open banking API and you need to KYC, AML, and, and, and through, and go through a rigid process of be, being approved by this open banking service provider to be able to Integrate with the open banking network. And, the first thing they ask you when you want to register to this open banking API is, okay, what's your volume? And, and if you're not like a multi-million dollar company, you're excluded from the network. So it's, the Fiat is all open banking, fintech, all, all this type of solution is what I call lipstick on a pig. It's just a digital facade to the same broken permissioned Closed fiat system."
    },
    {
      "speaker": "guest_3",
      "time": "34:17",
      "start": 2056.99,
      "text": "Right. And yeah, so I think as you said, it's like there's a big optionality difference in Bitcoin. Of course, we encourage people to use self-custody, verify yourself, use your own Bitcoin node, all the normal, you know, Maxi things that we talk about. But the point is it's an option, even if you- Don't, you know, actually do it. You know, of course, we encourage you to."
    },
    {
      "speaker": "stephan",
      "time": "34:35",
      "start": 2074.74,
      "text": "And everything is open source, and, everyone is free to use the BRI software, for example. Everyone is free to run their own ARC, everyone is free to run their own Spark, so."
    },
    {
      "speaker": "guest_3",
      "time": "34:46",
      "start": 2086.16,
      "text": "Yeah. So the freedom is out there. Now, the other big, topic I know is the time to build. So tell us a little bit about, you know, what is this time to build, developer kind of hackathon com-competition, that you're running or you're part of? Yeah."
    },
    {
      "speaker": "stephan",
      "time": "35:00",
      "start": 2099.57,
      "text": "Yeah. time to build, time, the, the, the number two, build dot dev is, something new. We're trying. it's not a hackathon, it's a challenge because we don't want to build hacky"
    },
    {
      "speaker": "stephan",
      "time": "35:16",
      "start": 2116.18,
      "text": "Like my thing from the get-go was to bring Lightning to applications. we-- the last thing the world needs is another Lightning wallet I'd so, so we don't want to build lightning wallets, we want people, we want to meet people where they are, and we want to bring lightning to mainstream applications. So our first attempt in kind of unlocking that is, this time to build challenge where we have a prize pool of twenty five K for developers to in-- that integrate Bitcoin into open source applications using the BRIS SDK. we're working with over fifty communities all around the globe, Bitcoin developer communities that taking place in this, challenge. we have great sponsors that are supporting us in, with this, with the prizes. We had amaz-- we have amazing judges, and everyone is welcome to contribute to an existing open source applica- Application, some type of Bitcoin functionality. So it can be, for example, adding Bitcoin to Signal or adding Bitcoin to a crypto wallet like Trust Wallet or adding Bitcoin to an open source social network or adding Bitcoin to any messaging app out there, games. The, the, the possibilities are really endless. And, and if you're doing a good, a good job and, and, and convincing the, the, the maintainers of the open source repositories to merge your PR, you're eligible to participate in Time to Build."
    },
    {
      "speaker": "guest_3",
      "time": "36:51",
      "start": 2210.8,
      "text": "Yeah, so it's, putting it into practice, and, I guess there's a little bit of a tie-in with Breeze SDK, so maybe some users or some participants in time-- in Time to Build may, may choose to use Breeze SDK, but I guess they can use the Breeze SDK. Yeah. Yeah. So, yeah,"
    },
    {
      "speaker": "stephan",
      "time": "37:05",
      "start": 2225.05,
      "text": "yeah, yeah, I want people to use the Breeze SDK, not because, I, I, I, I really Name it, time to build. The solutions that are, we're building are really making it super, super easy for developers to integrate, Lightning. I don't want them to explore. I love LDK, I love, LND, I love Core Lightning, I love, BOLTs dot exchange, but I think we provide a level of polish and a level of simplicity that is needed for developers that are coming from the generic, Generic development space to interface with Bitcoin, so I want them to try the bridge solution as the first interface to, to Bitcoin. Yeah. So I'm pushing my own solutions for sure. Yeah."
    },
    {
      "speaker": "guest_3",
      "time": "37:55",
      "start": 2274.86,
      "text": "Hey, fair enough. so now let's talk a little bit about what exactly that obviate, right? Because if you are coming from the perspective of a non-Bitcoin Lightning, really deep in the weeds dev What are some of the things that, you know, might be challenging for them? Like obviously in the Lightning context, it's things like, okay, inbound liquidity, which is the big one, and then things like, okay, monitoring channels, thinking about channel liquidity, how much liquidity do I need in the channel? How am I gonna fund that? What's the capital cost? All these things."
    },
    {
      "speaker": "stephan",
      "time": "38:23",
      "start": 2302.74,
      "text": "These days are over. Like, what, what we're doing w-w-with our Nodeless SDK, we're, alleviating the need of running a node, understand the complexities of the underlying We have, we have partners that from downloading the SDK to production, i-it's a matter of days now. and, and we have, we have, developers that are, able to create initial POCs in a, in a matter of hours. So it's super simple. The, the days of no channels, liquidity, offline receive are over. It's time to build, and any developer can interface with Lightning right now. The problems that still remain aren't specific to Lightning. It's the seed management issue that, that is still, challenging for mainstream users to interface with, and on ramps and off ramps, I think that's kind of the two biggest challenges."
    },
    {
      "speaker": "guest_3",
      "time": "39:27",
      "start": 2366.6,
      "text": "And to some extent, people are gonna use like USDT as like a on-off ramp, or to kind of smooth that process. Yes. even if it's, you know, there are certain trade-offs with these, of course. so can you just outline the various forms? Because as I understand, like in the early days of Breeze SDK, it was the greenlight style, and as, as I understand now, you have the nodeless style, and that started with a more, let's say, liquid Bitcoin, LBTC, based form, but now you also are expanding out to other forms. So can you explain a bit about the nodeless, like the different forms of nodeless? Yes. so"
    },
    {
      "speaker": "stephan",
      "time": "40:05",
      "start": 2405.31,
      "text": "the, the idea with Nodeless is not, is to, have a way to interface with Lightning, use Lightning as the protocol of transferring value, well, without the need of running a Lightning node. and, and we started with Liquid. the Nodeless underlying implementation is actually a Liquid wallet, and if you wanted to do a Lightning transaction, you, you did an atomic swap from Liquid Liquid to Lightning, and if you wanted to receive, value in, in, in Lightning, you actually, were swapping Lightning to Liquid. So the funds were held in LBTC, and the problems of, of, of doing that is, is the fact that you're relying on LBTC. LBTC isn't Bitcoin. It's pegged Bitcoin to the Liquid Network, and there's no unilateral exit. and with the latest iteration of the, of our Nodeless SDK, we offer Spark, integration, meaning the underlying implementation. By the way, developers are kind of completely oblivious to the underlying implementation. technical user can choose Liquid, can choose Spark, but, the interface, the developer interface is send payment, receive payment, send and receive. That's kind of what developers need to do. They don't pick which one they go with. They can, they can pick. Okay, yeah. And they, we expose the, the optionality, but I'm just saying from an interface standpoint, Liquid and Spark aren't really exposed. It's the underlying tech that facilitates the, transferring of value. so in Spark, the cool thing about Spark is that you have real instant settlement. Spark isn't a blockchain. it's a federated state chain technology, so the, the, the value transfer is instant. There are no minimum- amounts."
    },
    {
      "speaker": "guest_3",
      "time": "42:01",
      "start": 2520.73,
      "text": "Oh, so you can have like one sat, one sat, one"
    },
    {
      "speaker": "stephan",
      "time": "42:03",
      "start": 2522.55,
      "text": "sat, very, it's perfect for zapping, and, and, and you have unilateral exit. So I think this is a huge advan-advancement over what we offered with Liquid, and we're also integrating-- we don't have that, released yet, but we're also integrating with Arcade, so people will be able to choose Spark versus Arcade versus Alpin versus whatever."
    },
    {
      "speaker": "guest_3",
      "time": "42:27",
      "start": 2546.87,
      "text": "maybe we can just elaborate a little bit on Spark because I think people haven't really heard a lot about it. It's kind of one of those things that- you know, it's out there, but it's maybe not as well understood in the kind of, in the Bitcoin pleb, let's say, world. so my understanding is it's kind of like taking like Rubin Somsen's idea of state chain, and then that was integrated into Mercury Layer, which was another kind of project, another wallet, which was a state chain thing, and then now the Spark guys Have taken that state chain and made certain tweaks to it that allow kind of certain different trade-offs, but with- That made it usable, basically. Right. And with- Because I think in the older Mercurial style, it was like you had to send a set denomination. Yes. Right. Whereas in the Spark context, you, you can actually change that denomination."
    },
    {
      "speaker": "stephan",
      "time": "43:12",
      "start": 2592.17,
      "text": "Yeah. So I think the innovation, the, the second iteration of the next generation state chain model, that, that Lightspark and the Sparking were able- People to, innovate, there are two, it's twofold. One is the ability to use any amount when you, when you do a transfer. You're right, in, in the, the old Mercury model is can you have a fixed amount, so if you wanted to, if I wanted to send you, one thousand and one hundred satoshis, I, I need to send you, one thousand note and one hundred notes in order to send you that value. And in the Spark model, the The amount is variable because they switch from a fixed UTXOs to a, a, a three model where, for example, I have one thousand satoshis and I want to send you three hundred satoshis, I take the one thousand, split it to seven hundred, three hundred, and then I'll send you the, the seven hundred satoshis. State chain, state chain at its, at its core is the ability to switch signature offline. So switching signatures of what? And the, and the, and the Lightspeed and the Spark team figured out a way to dynamically create this artifact of a leaf where I can switch the signature for dynamic amounts. That's a great innovation on top of the first generation state chains. And I think another important innovation is the federated model of operators. So there's not only a single operator that you trust in order to switch The signature between the sender and the receiver, you're actually trusting the trust model is one of N operators. So it's enough to have-- so they figure out a way to build a station with multiple op-- operators, and it's enough to have one honest operator For the entire thing to be trustless."
    },
    {
      "speaker": "guest_3",
      "time": "45:19",
      "start": 2719.31,
      "text": "Yeah. Now, probably the more controversial aspect of that, I'm cur- I'm curious to hear what your stance on this is, is the privacy element, because this is something where people have raised that, basically people can dox the entire transactional balance once you've shown a lightning address in the Spark context. So, what do you see the-- is that, and is that gonna improve in future? What do you think?"
    },
    {
      "speaker": "stephan",
      "time": "45:43",
      "start": 2742.67,
      "text": "I, I think, that's part of, Bitcoin politics. Basically, people take a look at Spark and they don't judge Spark by its technological merits, they judge it by some kind of, facade. They don't like to work with an American company or they think David Marcus is CIA or whatever. I think from a technology standpoint, this is BS. And I'll explain why. the, the, so the design decision behind Spark is to expose the data of the Spark operator publicly. So all the data that is exposed to a Spark operator is available to a public indexer. so when you send a Spark transaction, the Spark transaction is-- you can see the Spark transaction in an indexer exactly like you see it in a blockchain, like you see an on-chain transaction in a blockchain explorer. The problem, and it's a very tactical problem right now, is that s-that some of the Spark SDKs are using addresses. So if a Spark address could get leaked Then, then you can see the entire balance of a user in this public indexer. but, but there, a-and, and, and, and, and there are multiple ways to solve that. we already mitigate that in this business decay by not exposing spark addresses. meaning Spark addresses aren't available in Lightning invoices. It's not a good enough solution because it's prone to timing attacks. I can send you a specific amount and can then see the specific amount in the, in the Spark Explorer. So the next mitigation is to hide transactions from public explorers. That's actually coming, out this week. so you won't be able as a user to see information if I w- don't want you to see it. the second mitigation is dynamic addresses, so all the SDK will convert to a dynamic address, address model, and once that happen, the, Spark privacy will be on par with on-chain privacy. And the next i-i iteration will be to do confidential transactions."
    },
    {
      "speaker": "guest_3",
      "time": "48:02",
      "start": 2881.58,
      "text": "Oh, interesting. Okay, yeah. So it's interesting, it's certainly a quickly evolving space. now can you touch on, like, I guess the fees that end users will pay or the fees that the builders will pay? Like, can you just explain a bit about that? Or I don't know if you can ex- Yeah, touch on that."
    },
    {
      "speaker": "stephan",
      "time": "48:18",
      "start": 2898.15,
      "text": "so Breeze in general, there's no added cost of using Breeze. you can use, you can use us, with, that you can use the li-liquid implementation without additional cost. You can use the Spark implementation without an additional cost. it's a B2B model, meaning the, end user is paying for the transaction and we are doing ref shares either with BOLs or with, Lightspark. That's basically the our business model, so it doesn't affect the end user. We're basically bringing traffic to these networks. the, the, the fees, are different between the implementations. in the Liquid implementation, you're paying point one, percent to send a point, two five to receive. In the Spark implementation, you're paying a point two five for both"
    },
    {
      "speaker": "guest_3",
      "time": "49:17",
      "start": 2957.3,
      "text": "Excellent. Yeah. So look, I, I, I'm supportive. I think it's a great idea that you're still, you're, you're out there building and making it easy for other apps and other wallets and other people to integrate Lightning, Lightning payments. And under the hood, actually, there's Liquid and Spark and, and in the future, Ark coming there. So I think that's really interesting. any, I guess, are there any examples or, interesting ideas people have had on what they could try to integrate with? I actually"
    },
    {
      "speaker": "stephan",
      "time": "49:44",
      "start": 2984.06,
      "text": "was traveling so much The submissions, I know people are integrating, the SDK into quite popular open source implement- implementations, so we have games, we have messaging apps, we have, events platform applications. So really, when you think about the possibility that value transfer can unlock It really can be integrated into any mainstream application. That's kind of the mindset shift and the paradigm shift that, we want people to make. Like any- App that brings users together can start to facilitate, value transfer. So the poss- the possibilities are endless."
    },
    {
      "speaker": "guest_3",
      "time": "50:27",
      "start": 3027.38,
      "text": "Yeah, I mean, I'm, I'm supportive. I think this is really cool. just, explain for people what's the timing of this time to build, like when does it finish? so"
    },
    {
      "speaker": "stephan",
      "time": "50:37",
      "start": 3036.61,
      "text": "we have, until, November 16 in order for people to in- to do the integration into open source application, we give, them, about a month, till mid-December to work with the maintainer in order to get the, the PRs merged, and the winners will be announced, on January 8. Fantastic."
    },
    {
      "speaker": "guest_3",
      "time": "50:59",
      "start": 3059.36,
      "text": "Well, time to build, it's time to the number build dot dev is the site. So So, listeners and people, go and check it out. And, yeah, I, I, yeah, support what Roy's doing. He's doing a great job building and expanding Bitcoin, of course, if you're a Bitcoin maxie, you should support him. So, thank you, Roy. Thank you, Stefan. Hello everyone, and welcome back. We are here on the Plan B forum, or Plan B podcast rather, and, I'm your guest host, my name is Stephan Livera. I'm joined today by Marco Agenteeri, although I know him as Tierra. Everyone in kind of Bitcoin land just knows him as Tierra, so I'm just gonna call him Tierra. Tierra has done a lot of great work on ARC. He's, he's the CEO and founder of ARC Labs, and they have recently just, announced and pushed out the public version of what's called Arcade, and you guys just had a big Arcade Day, so just give us a bit of an overview, what, what, how did Arcade go? First of all,"
    },
    {
      "speaker": "philip_walton",
      "time": "51:55",
      "start": 3114.76,
      "text": "greetings and thank you so much for having me. it's always a pleasure to have a conversation, Stefan. And yeah, Tuesday we, we had an am- an amazing day, I like to call it a family gathering, where we brought on board friends, partners, and early startups building on what we're, we are doing all together here in Lugano, and we also announced- to the world, the public beta, so anyone can use a wallet, can start using API, developer can start looking into integrating arcade in their application. And it's been a, it's been a great day, great reception, everyone wasn't even expecting, the amount not only of, you know, vision and mission which we reiterated with all the participant, but most importantly, other company and design partner were able to demo live, their application and every- Everyone was, was very happy to see that coming live."
    },
    {
      "speaker": "guest_3",
      "time": "52:51",
      "start": 3170.91,
      "text": "Fantastic. So let's just, you know, it's-- this is a new concept for a lot of people, so let's try to take it simple and make sure people understand what this is. Now, my-- I, I'm gonna go, I'm gonna give the ADIQ my simple understanding and then you correct me or elaborate a bit. So my understanding is with this arc Idea. It's like you're taking VT, UTXOs and they become VTXOs, virtual transaction outputs, and these are kind of living on a quote-unquote virtual chain, and you can transfer them around without hitting the main chain. That's kind of the idea. And so the idea is, you know, you could be a merchant and you could be earning and spending, but actually what's happening in the background is there's VTXOs, and there's some complicated stuff around like expiries and things like that, but if you, the end user, you just have a"
    },
    {
      "speaker": "guest_3",
      "time": "53:36",
      "start": 3215.9,
      "text": "Swaps going on and things like this, but to you, the end user, it just looks like you just earn and spend, but there's maybe some additional functionality and features that are being enabled by Arcade Script, and then you have like an ARC- I guess server or operator who's kind of-- Can you, yeah? So maybe you can elaborate or tell me what, what am I missing there? Yeah."
    },
    {
      "speaker": "philip_walton",
      "time": "53:56",
      "start": 3235.92,
      "text": "Yep. So first of all, I think, Arcade operates in a client-server model, which means you as a user, you're a client, then you have like a set of one server, most likely a set of operators, you connect to, and you push all the complexity of Bitcoin transaction or making Bitcoin transaction to the operator, but you retain the- Simplicity of, just having, you know, a simple wallet and just to understand like if you're used to Bitcoin, normal Bitcoin wallet, you have an address, you give it to someone, anyone can pay to you, right? This is a very basics, one on one of how Bitcoin works, and we mirror that in the, in the virtual layer. So you have an Arcade address, anyone can just take it, send it, you don't need to be online, which means, you know, I'm sleeping and someone send to my address, I wake up, And will check the set of indexer and, you know, show the balance, to the user. So it really, really makes the same, easy of developing a wallet or developing an application the same way on the Bitcoin blockchain, but you're doing in this virtual layer, that are ke- arcade enables. Now, as we can imagine, you know, to make this Let's say to have better property than the blockchain, so we don't need to wait for the next block, so we, we reduce the block time and block space constraint, there is some complexity in doing that. And historically, how internet scale, or I would say how, the internet and web application flourish is only when, you know, virtual machine has been introduced, which allowed, you know, e-commerce and e-website to just focus on their application and not focusing on the real complex, server Machinery data center that was being totally delegated to an operator. Now, this is an analogy, just to go back to the concept of Bitcoin, and this can happen, and actually Custodian, Custodian, we're doing this. We're like giving away all the complexity of Bitcoin, but they were just like trading off with custody. And the beauty of having Arcade is like we try to retain as much as possible with the, you know, degrading trust assumption, but we try to allow, you know, the user to start, to retain as much as possible the Bitcoin security when it's possible. We do this thanks to transaction batching and historically, you know, we needed compression algorithm, we needed M-M-P three to make sure we could get the iPod right, and that's what we are, we are doing really. So we try to make sure the businesses, the operator, the startups will think about it how to take your Bitcoin transaction, batch them, compress them, and putting on the Bitcoin blockchain, still giving you as much as possible, the Bitcoin security. I see."
    },
    {
      "speaker": "guest_3",
      "time": "56:37",
      "start": 3396.82,
      "text": "And so as you mentioned, still maintaining Bitcoin security, I think that's the key They want to hear, they want to hear this, I still want unilateral exit. That's kind of the, I guess, key feature that a lot of people are looking for if they want to, they want to be able to call it kind of a non-custodial or a, at least, yeah, self-closed to self-custodial experience. Now, you touched on this batching thing, so maybe let's dive into a little bit further into that. Like, how exactly does the batching side of things work? That it's like, now I understand the end user doesn't"
    },
    {
      "speaker": "guest_3",
      "time": "57:10",
      "start": 3430.42,
      "text": "I have an Arcade wallet, I have an Arcade wallet, I scan your QR and I wanna pay you, you know, whatever, ten thousand sats, whatever. Can you kind of walk us through what the batching looks like there?"
    },
    {
      "speaker": "philip_walton",
      "time": "57:22",
      "start": 3442.02,
      "text": "Yeah, absolutely. So the idea is, I give you an address, you will give you this virtual UTXO, which is like something that at some point anyone, your wallet, can go to the blockchain, broadcast a series of transactions, so it's not just one, a series of transactions to actually- Transform that just by, by the fact that this is a pre-signed chain of transaction in a real UTXO. But of course, we don't want to do this, right? Because it will always consume the block space, it will always need to wait for the next block time. So what we do, we leverage the operator by taking a VETIXO, attaching that is already owning, right? The sender already has a VETIXO, ideally batched before, it will just attach an extra transaction to that and will have a set of inputs which is spending The vTixo of the sender, and then I will attach a set of output. This output is like actually me, the recipient, my own vTixo. Now, we call this pre-confirmed just to make really clear that this is like something that the operator is adding a signature, so it's better than zero confirmation, it's better than unconfirmed because it's putting a signature is actually like locking that sequence of transaction, but still you have some trust assumption, from the previous spender and the set of output operator to not collude and double spend. But this is important because it creates a cue of like intent of where you wanna go. So as a recipient, I go online, I see, okay, I have a payment to me. I was offline before, so I get that crazy nice user experience. And now it's on me as a recipient to decide what I wanna do. I'm okay to remain what we call the virtual man pool and I stay there. I can spend it right away, right? So I can send it to someone else and literally like removing my trust assumption. Or, no, I in an ownership stage, but you don't need to exit from the system. You can stay in the system, retaining all the compression advantage, and you go to batch in the next block. So in a way, you need to wait at least the next block, to get this batching aspect. And the why we say it's important being batching, because no matter many user we get, it will always be better from a cost perspective, because more people, less the cost of that single Bitcoin transaction that can compress potentially thousands of virtual transactions."
    },
    {
      "speaker": "guest_3",
      "time": "59:41",
      "start": 3581.18,
      "text": "Okay. And so when we're talking about the unilateral exit there, does that-- is that a high cost to exit? Like, so I guess what I'm asking is, do you need to kind of have a big enough balance to make it cost effective for you to do, if you really wanted to do the unilateral exit, or otherwise, if you kind of stay in the VTXO virtual chain, maybe you swap out not with a unilateral exit. Is that, am I understanding you there or what? Yes, as"
    },
    {
      "speaker": "philip_walton",
      "time": "01:00:04",
      "start": 3604.92,
      "text": "everything in life, there are trade-offs Sure, you have a cost to exit, so there is like what we call a dust amount, like in the, the Bitcoin blockchain, there are like some amount of utxo that are like not economical to be spent. We retain the same property, that's like really mimics the same approach, and it will always be dependent on the blockchain. The interesting aspect is, you can actually like make sure To use technique like congestion control to potentially, make sure it's predictable your exit cost, trading off maybe some time, maybe I need to wait three, six months, but I know I'm trying to pay the minimum amount possible, so we'll try to be even more efficient in case of a mass exit. And how I see a mass exit is like, like a class action, right? So if you are a consumer against a big company, you need to cooperate with other consumer to get out, right? So to pay the big lo- We are fees, and I see in the same way. The other aspect is like, this is very remote case. If you later exit, has to be there as incentive to not, to not, to happen. So the operator incentivize to, to be, to be, you know, to follow, the protocol, because in worst case they just exit, right? So there's nothing to gain for the operator, which is, in the end, very similar to even mining, right? So mining has this like economic, incentive for, for us to not reach that fifty-one So out there, right? So it's really like kind of a tricky situation. So there is nothing in life which is like totally cryptographically trustless. There is a, a game of incentive, yeah. Fair enough."
    },
    {
      "speaker": "guest_3",
      "time": "01:01:36",
      "start": 3696.95,
      "text": "But I mean, do you have like a rough, I guess, rule of thumb for when it makes like above what threshold? dust amount. Oh, so it's just literally the, okay, right, right, okay, fair enough. now, I know using Arcade Script, so maybe we can get a bit of an intro on that, and then you can do more with Arcade Script. So can you just maybe give us a bit of an intro, just a basic overview, what is Arcade Script?"
    },
    {
      "speaker": "philip_walton",
      "time": "01:02:01",
      "start": 3721.88,
      "text": "Yes. So in our journey, you know, ARC has been formalized this, this spring, we did a partnership with the University of Vienna, with the Department of Mathematik, which has been, you know, leading the game theoretical department of the University of Vienna, and with them, we've been spending time, well, having an academic approach to try to formalize what was just a prototype we've been building in the last two years, and we came out with the conclusion, that in the end, what you're doing is, yes, creating a system system on top to not only let just improve payments, but most important, you, you can take any type of Bitcoin script, that you are using on the layer one and in a way lift it in the virtual layer. And it came out that like when we wanted to add lightning interoperability, we need to mimic the same approach, of the base layer, which is HTLC, right? So Ashlocks, which are very important to do what we call summary swaps, right? So I give you a bit of ETH, so, and you pay for me in an atomic way. And that We were searching how to do that, and we saw a pattern there, and we saw that in the end we need an interpreter, the operator need to run an interpreter, which is what, you know, any Bitcoin full node does. When you broadcast a transaction to the normal mempool, your full node to accept the transaction in the mempool, it will execute that script, right? OpCode by OpCode to say, \"Yes, it's valid.\" Boom, it's a relay to the other node in the, in the mempool. And we said, \"Okay, there's a pattern there, So it's basically what, what is a VTXO? It's like a two of two, right? You and the set of operators, and then you have a unilateral exit, which is just you, but with twenty-four hour of delay to allow the game, game theory to work. And we said, well, an HLC usually is like three path, right? Cooperative, refund, unilateral, and claim with the pre-image in a virtual way, we just need extra three more path to mimic this, right? To keep the unilateral HLC and then the cooperative HLC to be executed The right way. And that, this is a pattern, and it's applied to multisig, so we can do multisig, we can do escrow, right? And they said, okay, this is way bigger than just like, okay, maybe we solve the payment or the onboarding for lightning wallets. And when I started me in Bitcoin, I remember I was helping many people to get onboarded by, via cash, via, and etcetera. People were coming to me with escrow, with zero IT knowledge, were coming with me with the yearly wallet, having a two of three, with"
    },
    {
      "speaker": "philip_walton",
      "time": "01:04:31",
      "start": 3871.54,
      "text": "15, nobody was using anymore escrow. One is a great, great primitive to do many, many type of application, and that's why for us is like, \"Oh, okay, wow, if you can scale Bitcoin Script, you can do better.\" Now, we keep going on because we think that pre-confirmation is a good trust trade-off. There is some reputation aspect, but we did a lot of research to try to use hardware security like secure enclave, so that as operator, I'm using this hardware, cryptographic attestation of what the, the software is running, so this way The key is generated in the enclave, we don't see the key, we can have end-to-end encrypted from the client to the enclave, so the operator doesn't even see the intent. So improve also censorship resistance. So we did that to improve the security model of pre-confirmation, but it also turns out like, well, we already are an interpreter, and people really want covenants, what they're called smart contracts, why we don't add more, why we don't extend our own interpreter? We don't need to ask, you know, the consensus of the Bitcoin layer one, we just"
    },
    {
      "speaker": "philip_walton",
      "time": "01:05:31",
      "start": 3931.58,
      "text": "The way for developer and startups to see the future of Bitcoin with covenants, so they can come. And the other aspect is like, even if tomorrow we get covenants, which will make our Kate script way more, in-eradic the Bitcoin security, you're not going to wait ten minutes, you know, for a trade. You're not going to wait for the fee bidding war in the mempool. You still want to do those smart contract in layer two. So in a way, like, you're already doing what, even if Bitcoin gets the, the covenants, To do it now, of course with the some trust trade-off now, because you wouldn't be able to execute those on-chain contract on-chain because those opcode don't exist. But the security trade-off and the security guarantee that you're doing anyway, even if you're not adding this extra script, is worth, to, to add extra code so developer and startup, they can mitigate their own risk, right? So they don't need to ask permission, they can just experiment and eventually the market will, will tell if it's a good trust trade-off for them, for their business and their"
    },
    {
      "speaker": "guest_3",
      "time": "01:06:31",
      "start": 3991.94,
      "text": "I see. So as an example, there are other builders in the space, like I've seen, Philip from Lendersat. I was chatting with him earlier today just briefly, and I think they posted something as well. maybe you can explain a little bit about what they're doing using Arcade Script just as an instructive example for us?"
    },
    {
      "speaker": "philip_walton",
      "time": "01:06:49",
      "start": 4009.88,
      "text": "Yes, i-it's interesting because, I mean, first of all, Philip is, and, and is one of the best builder in the space and, been working with them in the, in the past on Liquid and many aspect, and, we always had a nice, you know, we, we think alike and we think, you know, you need programmability if you wanna create new type of businesses, new type of platforms, that make Bitcoin more useful in the end. And when we were discussing about, you know, the potential to do much more, interested to explore and to be one of the first design, early partner. And Tuesday, other K-day, he surprised all of us. He was coming from Australia, so very far from here, and literally coded, is, is a machine. he coded, you know, what, we demo, which is like one of the first loan, right? So we do a simple two of three, so it doesn't require any arcade script, so very basic, just to demonstrate like just simple primitive, but removing block space, sorry, reducing block space and block time Through these programmable use cases and we demoed in front of everyone, how to get an instant executed loan, with sub-second execution, and we also demoed a liquidation happening in a batch way, which is the most important thing, because if we want, really want to have non-custodial loans and we can't execute thousands of loan like banks, they do every second, they do thousands of loan, but the blockchain will not, handle that, obviously. So I think it was very, very interesting. And"
    },
    {
      "speaker": "guest_3",
      "time": "01:08:16",
      "start": 4096.37,
      "text": "can you just explain the loan part because what's being used Is it a stablecoin or what's used on that side?"
    },
    {
      "speaker": "philip_walton",
      "time": "01:08:21",
      "start": 4101.6,
      "text": "Yes, the, they already run. Lender South is a platform that allow you to lock your Bitcoin in an escrow, two of two, two of three, so there is like the borrower, the lender, and a mediator, an arbitrator, right? So which is only used in case of dispute. and the idea is like, once you do that, doesn't matter what is, what, how it's been delivered, your"
    },
    {
      "speaker": "guest_3",
      "time": "01:08:41",
      "start": 4121.65,
      "text": "principle of-- Gotcha. Because they could do like fiat, literally a fiat They, at the end of the contract or if the liquidation happens, then they'll kind of resolve it in a two of three style, just yeah, gotcha. Yeah. And so this is an example where it's making lending, arguably it could make the lending user experience, the Bitcoin collateralized lending user experience, very snappy. And so maybe there's, there's something to that, and I, and I know they, they also did something around, was it like a USDC swap out, something like this, but yeah. Yeah,"
    },
    {
      "speaker": "philip_walton",
      "time": "01:09:15",
      "start": 4155.39,
      "text": "the, the interesting aspect is like"
    },
    {
      "speaker": "philip_walton",
      "time": "01:09:19",
      "start": 4159.4,
      "text": "by the launch, everybody was cheering, and, you know, in the end, the infrastructure is already there from their side to deliver stablecoin on other chains, and they said, \"Well, if you can do, you know, simple loans, why you can't do even swaps, across chains?\" So, they implemented, little demo literally the night after the, the, the launch, and this just goes to the how simple it is, for someone that already is building Bitcoin application or already using Bitcoin script, is already knowledgeable about Bitcoin Bitcoin, you think so model for him having a V-tix so as the one-on-one mirror, so and I think I'm very, very happy that they, they leverage, this."
    },
    {
      "speaker": "guest_3",
      "time": "01:09:57",
      "start": 4197.23,
      "text": "So zooming out a little bit, can you explain for us like what are some of the categories enabled by this arcade script? So lending is, is one example, obviously. What are some of the categories that you would- Of course, it's early days, it's hard to exactly know where is the product market fit, but can you just explain some of the categories that you see Ark and Arkade Scripts, working with?"
    },
    {
      "speaker": "philip_walton",
      "time": "01:10:17",
      "start": 4217.19,
      "text": "Yes, of course, it's very hard to predict, where the creativity of builders will go, but I really, really focus on three, use cases. first indeed is Bitcoin lending. I think the ability to use Bitcoin, it is appreciating thirty, forty percent, per year to actually get liquidity without selling it, I think is a use case, and right now either you go custodial to get good rates or need to bridge to another chain to use like so-called lending pool, DeFi, somewhere else, but again, you're, you're degrading your security of your Bitcoin, right? So, and even more importantly, it's not only the security of Bitcoin, but your own UTXO. You wanna know where the UTXO history is coming because maybe you took sort of local time, maybe you mined, you don't want to mix with someone else, so it's very important to have that UTX"
    },
    {
      "speaker": "philip_walton",
      "time": "01:11:07",
      "start": 4267.31,
      "text": "The second use case I'm very interested is the concept of non-interactive swaps. So right now, the problem of HTLC swap is like not only the free option, but they require, you know, some interactivity from the both sides. So I need to fund this contract, and then the other party need to go online at the same time to, to complete the swap. and this is very, you know, it doesn't really allow to create very liquid marketplace for, for trading. So non-interactive swaps means, hey, I'm Signing my UTXO, I broadcast right to the virtual map and here's the"
    },
    {
      "speaker": "guest_3",
      "time": "01:11:40",
      "start": 4300.79,
      "text": "price at which, taker. So kind of like you're the maker and let's say I'm the taker, you can, sign this transaction and I can, let's say there's a D- a Dex, I guess it's kind of like a Dex use case, right? And then the idea is that, let's say I'm the taker, I see that, I'm like, oh, I wanna accept Tierra's offer, and I, and Tierra"
    },
    {
      "speaker": "philip_walton",
      "time": "01:12:01",
      "start": 4321.31,
      "text": "can be asleep and Which are like peer with a, a very strong price, they don't need price discovery, they don't need an AMM, right? So they don't need a pool, because in the end, as a market maker, I want an active market making strategy, I wanna make the quote, right? But at the same time, this will improve and will make easy for Bitcoin native to connect the intent solver paradigm, which has been very used a lot in the rest of the blockchain ecosystem. One,"
    },
    {
      "speaker": "guest_3",
      "time": "01:12:30",
      "start": 4350.69,
      "text": "one question I have on this though is, what if you're a market maker who wants Because once you've signed it, you can't unsign it, right? How does that work?"
    },
    {
      "speaker": "philip_walton",
      "time": "01:12:40",
      "start": 4360.25,
      "text": "Yeah, there, there are many ways. Of course, these are more like a category of non interactive swaps, depends how you implement. we did a prototype, and I think the interesting aspect is to flip the condition so to remove the free option this way. So me as a user will be me to lock in an offer. So I will take a quote off-chain, out of band, I will go to a market maker, hey, give me a quote, and at that I'm putting right now my, my funding, and it's like, you don't need to cancel, right? So if I need to cancel, I will need to pay another transaction to cancel again. okay. We're not on chain, so there is no cost or virtually very little cost to execute a cancel transaction, right? And it will be, it will be instant. But this way, very important because remove the free option problem for the market makers, so they can have lower spread, and most importantly, it will be better for them to have. That's sort of like a"
    },
    {
      "speaker": "guest_3",
      "time": "01:13:31",
      "start": 4411.61,
      "text": "design question"
    },
    {
      "speaker": "guest_3",
      "time": "01:13:36",
      "start": 4416.91,
      "text": "Okay. So number one lending, number two non-interactive, I guess swaps or Decks. Th- what was the third one?"
    },
    {
      "speaker": "philip_walton",
      "time": "01:13:42",
      "start": 4422.42,
      "text": "I think I, something I'm very, very interested is about synthetic asset. What's that? Synthetic asset? okay. So the idea is, you know, if right now I just want to use my Bitcoin to potentially speculate on anything, I will need to, I don't know, I wanna buy some stocks of some company, I will need to offer my, my Bitcoin, go to a custodian and basically buy the stocks in any of those platform and that maybe of course use a regulated, most likely a platform because that's how stocks, works. And then maybe I sell it and make my profit, and then I need to sell it back, go back to my Bitcoin, right? So this is like my use cases, right? So it goes beyond just payment, but like in the end, I just want to speculate on the price. So why I can't buy with my Bitcoin a synthetic Tesla or a synthetic Apple, you know, just to, speculate on the price or go long or go short? And I think using Right? Or even just a Bitcoin backed stablecoin, which has been a dream for many early, you know, adopter, and, and I think that will be a use case that will allow to make Bitcoin use more, right? So we don't need to buy more treasury to maybe create a dollar version denominated, but I can use Bitcoin to, with an over collateralization and a set of oracle to basically track Loosely track the price of that real world asset, but this way, this asset doesn't goes in any regulated platform, but stay in the Bitcoin ecosystem."
    },
    {
      "speaker": "guest_3",
      "time": "01:15:07",
      "start": 4507.19,
      "text": "Interesting. And so that could be-- So I guess in that I, I'm trying to understand how that will work. Is that kind of like, sort of like a DLC but with an oracle to a stock price as an example? Exactly."
    },
    {
      "speaker": "philip_walton",
      "time": "01:15:19",
      "start": 4519.18,
      "text": "the probable DLC is like you have a, an idea into, interactive, setup, and also you need to pre, pre-sign and pre-setup all the exit possible path, which, you know, people like ex- exactly like Landasad, they were building ten ten one before, and literally was this, right? Going long and short using DLC in a lightning channel, and you can ask them how Nightmare, was, in terms of developer UX, but most importantly the UX that the end user was having. So if you can remove that and move it to the virtual machine, the complexity, and you go in a non-interactive setup, they can focus on their business, they can focus, focus on the, on the platform, on the user experience, on the user, and not like trying to fix the interactivity, problem on the side. I"
    },
    {
      "speaker": "guest_3",
      "time": "01:16:03",
      "start": 4563.03,
      "text": "see. Yeah. Okay. So, okay. And so I guess we've spoken about some of these different uses Adoption or just payments, like this is now also a lot simpler, right?"
    },
    {
      "speaker": "philip_walton",
      "time": "01:16:15",
      "start": 4575.96,
      "text": "Yes, it is interesting because, in August we went to Baltic Coin Eager, which is one of the most, you know, reputable conference on the block. I've been, I've been from the early days, and they use from the early days to go to all their merchant, the food trucks out of the conference, and you can buy with Lightning, that's from the early days, and many of these merchant always, you know, had always many problem, and most of the They need to have a custodial Lightning payment processor because the merchant just want to get payment, they don't care much about that, right? So what we did was a little hijacking of the point of sale, of the Lightning, and we didn't set, set to anyone. So we went to them, we put basically BTC Pay server, we b-built a BTC Pay server plugin for Arcade, and the idea is like the merchant were setting Lightning, everybody paid in for those two days, nobody knew it until the very, the very end, and everybody was paid with Lightning Lightning, so to show the interoperability of Lightning, but in the end, the merchant were getting true bolts, atomic swap, they were getting a vTixo instead, which means they just had a key, basically, very easy, no inbound liquidity, no channel, no node, and was very nice because in a way we demonstrated how Lightning and Arcade can actually work together and improve one another, and at the same time we make finally for commerce and retail, we bring Lightning also at that level."
    },
    {
      "speaker": "guest_3",
      "time": "01:17:37",
      "start": 4657.98,
      "text": "So yeah, so it makes it, as I understand then, it makes it very easy to just have like a just works style wallet, you can just earn and spend vTXOs, and in the background, yeah, there might be lightning swaps and things like that, but obviously you, the end user, you don't have to worry about that. So all the swaps and things can happen, and then theoretically, people can even use that vTXO to swap into, in and out of like Tether or something else. So let's say it's a merchant who wants to take Bitcoin, but maybe they Each other, 'cause they've got to pay their bills and whatever. So can you just walk us through what that would look like then on, like, swapping in and out of stablecoins using vTixos?"
    },
    {
      "speaker": "philip_walton",
      "time": "01:18:15",
      "start": 4695.68,
      "text": "Yes, the interesting aspect of the U-Tixo model, which also means vTixo model, is we can chain transactions. So, imagine the linings wop is coming in, so it's creating a new vTixo, but then the merchant right away at the same moment, so it doesn't want any spread, any volatility, it want right away, You know, this market maker and say, \"Hey, there are like one, let's say, zero one BTC coming in. Are you giving me now at market rate USDT, and you can chain that swap? So that Vtixo will right away fund a swap and receive also USDT in a, in a Vtixo on that side, which will allow, again, the merchant not have any volatility, simplify the accounting, and eventually maybe you can also chain again and maybe just with the profit, right, buy Bitcoin, right? So the model will be, well, up to the I will just retain that, so you will do three transaction, which on chain will be expensive, but now you can do it everything in virtual mempool right away, and you execute everything at the same subsecond, you know, confirmation. So which is, again, programmability solves the problem of payment processor, software as a service, which are the one that actually will allow merchant and retail to use Bitcoin, because like everybody focus a lot on the payment side, right? So on the sender side, oh, I wanna send it, but nobody speak or think how a payment processor want to want to actually operate those Bitcoin payments, and I think it's very important to have this program-programmable flow, to allow even something that I really care about myself to pay with my Bitcoin and live, with Bitcoin as much as possible."
    },
    {
      "speaker": "guest_3",
      "time": "01:19:50",
      "start": 4790.48,
      "text": "Yeah, it's, it's fascinating because, I was at the Baltic Honey Badger we were talk-- we were just talking about, and, I made a Lightning payment and didn't realize there was kind of Ark in the background until I think Giacomo told me, and I was like, \"Oh, oh, that's I wanted to just direct pay with ARC, with a, a arcade payment. so I thought that was really cool, that it was like, just kind of seamless, and I think it leverages a lot of the experience that Mr. Cooks has from Mr. Cooks is on the team with, ARC Labs, and Mr. Cooks has a lot of experience in BTC Pay. So, for a lot of people who don't know, he was literally on the ground working on these like merchant adoption, cases, as well as trying to help, w-with And so on. And so it's kind of funny that things have kind of come around full circle now, right? That now he's working with you guys on this startup that helps people do arcade, get vTXOs, and if they want, they can swap into Tether, or they can just hold, hold the vTXOs or exit on-chain to Bitcoin on-chain, like put it in a hardware wallet, of course, self-custody, not your keys, not your coins, all the Maxi, typical talking points. But it's just fascinating where this is all gone. So And arcade scripting."
    },
    {
      "speaker": "philip_walton",
      "time": "01:21:09",
      "start": 4869.56,
      "text": "Yeah, we're very, I mean, we are in public beta, so we got, great, response so far, so we are very humble and we thank the community, on, on this, but it's just the start, right? So it's not the end goal. The goal is really like trying to- Reach a point where, you know, we can flip the situation where like Bitcoin is seen more than just a static asset, but actually Bitcoin is being used to create potentially a platform for new type of businesses that couldn't exist nowadays, and they will only exist thanks to Bitcoin being used as a backend. Yeah."
    },
    {
      "speaker": "guest_3",
      "time": "01:21:46",
      "start": 4906.9,
      "text": "Fantastic. Well, I think that's a great spot to finish up. So just before we finish up, where can people follow you online and keep up with what the team are doing on ARC?"
    },
    {
      "speaker": "philip_walton",
      "time": "01:21:54",
      "start": 4914.32,
      "text": "Yes, I'm Thierry Othier on, on X. arcade-os dot com is our website, so you can find documentation if you're a developer. you can find also our web wallet if you wanna experience, our beta and, yeah, leave a, leave a comment, help us grow, so we can make, Bitcoin better."
    },
    {
      "speaker": "guest_3",
      "time": "01:22:15",
      "start": 4935.52,
      "text": "Fantastic. Alright guys, well that's it. Make sure you check out tiaro and what the team are doing at Ark. Everyone, please put your hands together for tiaro. Thank you."
    }
  ]
}