Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Jorge Timon & Mark Friedenbach: Bitcoin 2014, Freicoin, Freimarkets & Sidechains

Episode Date: May 19, 2014

We recorded episode 20 in Amsterdam the morning after the Bitcoin 2014 conference organized by the Bitcoin Foundation. Our two guests for the post-conference sit-down were Jorge Timon (twitter.com/timoncc) and Mark Friedenbach (twitter.com/MarkFriedenbach). Jorge is the founder of Freicoin, which is, from an economic perspective, one of the most innovative altcoins. They are also the creators of Freimarkets, which aims to bring Bitcoin 2.0 capabilities into the Bitcoin feature set itself. Finally, they are part of the newly formed Blockstream company, which will develop the Sidechains proposal. Episode links: Freicoin Freimarkets Whitepaper Understanding Sidechains Blockstream This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/020

Hello and welcome to Episode of Bitcoin Episode 20. Today is May 18th, 2014. My name is Sebastian Couture. I'm a Bitcoin entrepreneur, among other things. I do the Bitcoin Toxelid Meetup, and I'm also a U.S. designer on the site. And I'm Brian Fabin-Pronkraine. I'm Berlin-based Bitcoin entrepreneur and I run the Bitcoin meetup in Berlin. And this is kind of a special episode because we're actually in Amsterdam, Brian and I, This is the second time we do the episode face to face or side by side as we are sitting. We are on, we're at Satoshi Square or Satoshi Plain as they call it in Amsterdam. Also, Lights Plain.

This is where they have the first Bitcoin meetups at a cafe just down the street from here. And we're joined by two gentlemen that we met at the conference at the Bitcoin Foundation conference here in Amsterdam. That took place over the last three days. Gentlemen, can you introduce yourselves? Yeah, I'm Jorge Timon. I worked at Fryecoin, a propulsive with me is also Mark Friedenbach. Hello, and I would do Bitcoin development. I work on various long-term improvements to the Bitcoin Core Demon.

And I've also worked with Jorge on Frycoin and Fry markets and various other long-term plans for extending the Bitcoin Protocol. And you are Mark Friedenbach. That's correct. Thank you. And so where are you guys from? I'm from Spain, Catharys. city there and I'm from San Jose California cool is this your first time in

Harsdam yeah it's my third I came to the last conference here and also a conference on complementary currencies okay how do you how you liked the conference the conference it's good to meet a lot of people that you only interact with online and have face-to-face conversations I mean I think that's the real heart of the conference I think it's also good on many of the talks that we that we saw were good avenues for getting information about Bitcoin. I mean, one that comes to mind for anyone who's new to Bitcoin is Alan Reneer's talk about securing wallets.

He has a lot of good practical advice. I've seen a presentation that I think he gave it another conference. I don't know if it's changed, but yeah, that was excellent. Yeah, he always does a very good job and he's very user-focused. So I think a lot of the conference was about that. There was a lot of developer Q&A sessions where, again, it was a chance for people to interact can get feedback or get responses about things they're concerned with. And so those are probably worth watching just to see if anything you might have been thinking about,

get some developers opinion on it, stuff like that. Yeah, I think all those talks are going to be available online later. Most of the talks were being filmed. I hope so. I think they'll be online. I hope so. And Horace, where are your impressions? Yeah, it was, I mean, mostly it's about interacting with other people.

with other people you meet there. And I think it's not so much about the talks, which you can watch later. But yes, it's nice to meet many people like put faces to the people you're talking with on the internet. Yeah, I think that's kind of the impression we got too. Yeah, I mean... The talk to, if we can get them online later,

it's better to kind of just like stay on the floor and talk to people. And we were doing interviews. Well, and as a developer, I have to say that, a big part of when you're... when you're working remotely is having some sort of relationship with people that you're working with. And having met people in person who you had never met prior really helps improve that. It helps you get to be more productive.

Yeah, no. I mean, I've, the talks I've seen, I wasn't overly impressed, but I guess once you've been in Bitcoin or kind of engaged with all that material for a while, there was some new stuff, for example, Mike Hurons idea. Yeah, that was new and it was very interesting for funding development and new project. So he's building some sort of a decentralized funding platform. I think he's calling it the lighthouse. Yes, a new lighthouse. And it's a mechanism where you can do crowdfunding over the blockchain using maybe a system like Dropbox or BitCritory sync to share files related to whatever you're pledging.

So it's completely decentralized. There's a server mode, but it's optional. And I think it's really going to help. It's something I wish I had a year ago when I started doing community-funded Bitcoin stuff because it's making posts in the forum and hoping people donate, it just doesn't really work. Yeah. That kind of goes in with his talk that he gave at the Turin Festival, and where he talks about autonomous vehicles and, like, kind of crowd-funded public good stuff.

We didn't see his talk where we spoke about it with him afterwards, and he was explaining to us. and immediately it struck me as like, so you're building this, this is what you were talking about, you're building it. There's a bunch of attempts in that direction, there's like more and more. I think you saw that dark market thing, it's the same attempt.

So taking like Dropbox, Kickstarter, eBay, and decentralizing them. I think it's really good that my current approach from the right perspective. There's so many people who are trying to make here and he looked at it and said well he needs to create a decentralized service people can trust and later on he'll figure out how to make money off of it but the important thing is I think he's gonna charge a fee no like like kick started

I don't want to speak for him but I think I've asked him and I think that sounded like it was the plan so you know like Kickstarter it takes like 8% and then maybe his will be like 1% or I don't know we asked him about that and during the talk he said for now he's planning on actually just kickstarting his own work on it right away yeah I don't know Maybe we'll ask him about it. I think he's going to release like a partial client and then crowd fund features to add to it. So let's talk a bit more about the conference also in terms of, you know, what was your impression?

It was about, you know, it was about a thousand people. It was a nice... It was much bigger than last year. Last year... The one here in Amsterdam, yeah. Was in a more or less small theater and we can't remember exactly, but we were about, I don't know... 500 people or 100 last year. At the Amsterdam conference.

Yeah, I mean I was at the same conference, but that wasn't a foundation conference. So it was about the same size as the one in San Jose, but a very different crowd. Yeah, that's for sure. How different? Well, there's a lot more money involved, a lot more people in suits, which was a little bit strange compared to the San Jose crowd where it was a lot more just technical evangelists, people who are really interested in the technology. So that's an adjustment. but that's part of growing up, I suppose. It was definitely more focused on business,

most of the panels were... Yes, we did see some people doing business dances, in fact. Quite a few of them, yeah. Yeah, no, I agree. I think... I mean, I only got here on Thursday, on Friday afternoon, so I saw half the conference, and my immediate impression was, like,

this serious business now. I mean, even just as press, When we were in Berlin, it was much easier to just kind of grab someone and say, hey, let's do an interview, can you talk to us for a few minutes or whatever. Like here it was much more structured. We had like press rooms and people were much harder to get a hold of. And more cagey too because there's some business thing that they're working out. Yeah, and there's some segregation now.

You know, there are like the speakers rooms. You know, there's a segregation of like a tiered system almost. they're like people doing business having money and then other people so I feel like you definitely notice that maybe that's the beginning I presume if you have like a year from now it would probably be more extreme probably I mean maybe maybe now's the time to start thinking about some sort of a technical unconference where just the community people organize I think that would be I think that would be extremely valuable yeah no I think that's needed I mean in addition to that I'm not saying this

it was also good, but I think something like that would be very useful. I mean, there was a room specialized in technical talks that was good. But I think some other conferences are not very technical. I don't know, you went to consume it, for example? Oh yeah, it was very similar to the Coin Summit in San Francisco. I think it's the same kind of conference that we're moving towards there. I mean, could it be also just because it's the foundation conference and I mean, they are sort of a political entity in sorts. And I mean, I've only been to two conferences, but maybe this is just kind of emblematic of the foundation conferences that feels a bit more segregated.

And you've got sort of this kind of tiered system that Brian can talk about. I think it's something general of the Bitcoin community as a whole right now. we're growing up and you'll be more mature. And to people who are interested in just the tech and philosophy and stuff like that, it's a bit of a change, but you know, that's part of, it's part of growing pains. Yeah. I also want to kind of address one thing that I think was really a theme at this conference, which was, of course, organized by the foundation.

There's been a lot of criticism of the foundation over the last year or so. I get on various fronts, but on the one criticism has been that it's very US-centric. And it doesn't really, you know, most board members were American or in US, etc. No, it is a US trade group, that's what it is, legal-eaten. Yeah, so I think, I mean, that was also an attempt, that's, you know, that's why the conference here, after all. And so that was one attempt, and I think it was very visible that they're trying to change that. Whether that's going to work is another question. They also signed up some, countries as affiliates so for example Germany I'm a member of the German

Association and became like an affiliate now and also the way they addressed that at first they had these very they sent these agreements like become a subsidiary of the foundation give us half a money and then like and people were like are you crazy you're not gonna do that and I think they've come away quite a lot from that so now it's it's become much more that you know you do whatever you want policy content wise, but you know, will help with... And I thought the idea was to create a US-based foundation and then a global one?

I'm not sure about that. Yeah, I don't know about that. I know some people are talking about that. Some people are in German things like, we need this, otherwise, it's a problem. I don't know what the progress is there. And then of course the other problem has been that some of the board members

have gotten into some trouble like market So just before we go into that, though, like, when we talk, so we talked with John and his... John McDonis. Yeah, so his view is that, so like you said, they were building an affiliate network around the world so that the foundation can have some satellite offices in many countries. So they signed up like seven or seven or eight. Five, five, five. And then some two more, some Germany in Poland. No, it's five in total.

Five in total? Okay. And so he says, you know, the individual foundations will keep their autonomy and everything. But to me, it still seems like the impression that I got from it was still like the U.S. is the center of the world and everybody kind of depends on off of it. I mean, there's of course the way you look at it, right? So like you said, you know, it looks. It's a bit like a US trade organization, you know, and then that's certainly the way many people see it. And then the way they want to understand themselves is as a global foundation. I think they're also changing the headquarters of London, or I don't know if it's going

to be an additional quarter, but they are incorporating London out of the office there. And there was also, so there was the members meet up at the very end of the conference, in which you know they had the new board members because of course mark capelli's we signed and uh charlie shrem and you're answering questions and things like that so i was personally i had a rather positive impression like in as a positive surprise i think you know i think they are doing valuable work and it seems a lot of the criticisms as in like lack of transparency etc it's certainly justifying but it seems to be to a large extent due that they're just understaffed and like struggling to keep up with the I think it's gone from like two people six months ago

to nine people now which is also difficult to scale them yes yeah it's very difficult they're way overburdened with what they feel that they need to do for the community and the number of projects that they have on their plate so they've got a tough I'm ahead of them. All the work that I've seen them do is really good. I don't really have anything negative to say about the foundation's work. But I do think that we were talking earlier about other affiliate foundations, and I think there's room for many foundations.

There shouldn't be the Bitcoin Foundation. There should be many. There is, right? There are some people who started this global Bitcoin alliance thing, which is meant to be some kind of anti-foundations. foundation. I wish there was more foundations that didn't define themselves in terms of the Bitcoin Foundation.

Yeah. I see what you're saying. And I'm kind of torn on this because, again, we need to look at, I think we need to have some kind of guiding light and somebody or an entity that kind of gives a direction of where Bitcoin is going and the general guidance. but at the same time that opens up to some problems, so centralization, which is what we're all trying to destroy. But yeah, but I think some things just you can't really decentralize.

When it comes to like talking to regulators and trying to get, you know, as positive loss for Bitcoin as possible, if you're gonna have seven organizations. Yeah. For some reason when they launched, I think because of the association with Gavin, People had this idea that this was the core Bitcoin team launching a group that represented them. When the Bitcoin Foundation doesn't represent the Bitcoin developers or the Bitcoin users, except those who have actually voluntarily signed up to become members. No, that's also one thing to stress that at the members meeting was like that,

like we are not representing the Bitcoin community. We're representing the members of the... Yeah, precisely. And then also, if you look at the funding, they all talked about that. they get 70% of funding from companies. Yeah, so they have to defend the companies in trust. Exactly, but they were very clear about that. You know, it was like we get all money from there and, you know, board,

I think in terms of board seat is 50-50 between individual members and industry elected members. So they're like, it means very clear that there's a strong industry. Yeah, so probably most of the criticisms against the foundation, and from people that are probably expecting too much from the foundation. I have a different view of what it is than what it actually is. Yeah. And what I feel is like there is room here

for something analogous to the Electronic Frontier Foundation, which is not an industry group. It doesn't represent companies. It represents users. And so, I mean, there's certainly room for that. I mean, maybe the Bitcoin Foundation will transition into being that at some point. Maybe there's a separate foundation that's set up.

I don't think there's, should, we should be competing with each other. We don't need to have the one true foundation. Yeah. But, yeah, I feel like my impression was they were trying, you know, they were trying to address the criticism of, like, transparency. Like, they were, you know, transparent with, like, I think they're also publishing board minutes now and things like that,

like all the meeting, what they said, discussed, et cetera. So. And they are becoming more international. I mean, I suppose Mark Pellas was in Japan, and so that was international. But he was replaced with Bobby Lee from Bitcoin China. Yeah. He's also, you know, that represents a very large growing segment of...

Yeah, so I think now there is a few foreigners. Right, there's one, I guess he lives in California, but Mike Malka or something. He's Argentinian initially. So there is some mention, and John McDonis is at least lives in London. Yeah. I think like you said, I think there's a need for a need for a... some sort of foundation that represents users like the EFF for instance that has less of an industry focus maybe less of an industry focus yeah less of an industry

focus but more of a focus a long-term evolution and advancement focus in terms of you know the good of the people and not so much on Well, something that's focused on decentralization and making sure that's the most important, just like Electronic Frontier Foundation is focused on privacy. Exactly. And another thing I was going to say. Oh, yeah, so as far as the board goes, I think that if the foundation is going to branch off, I mean, have affiliates in different countries and really try to be an international entity,

they should really try at least or even have it as a mandate that they're board members. members be international board members, so of different nationalities from all continents. Yeah, I mean, we also have to see that. I think most of the members at this point are American. So it will be, or like 50%. I just complimented them on having Bobby Lee, but of course Bobby Lee is actually American. He moved to China and he understands the China market very well. So I mean, Bitcoin in general is complicated like that. You see so many expats, and so it's kind of hard to classify people in such a way.

people in such a way. Yeah, that's all that's true. But I wish them the best. I'm speaking as an outsider. I'm not a member of the foundation. I'm not involved with their workings at all. So I just think that as long as we have people working towards better regulation, better laws, and maintaining the principles that make Bitcoin what it is.

Good. Cool. Yeah. Well, let's move on and talk about your project. So it's fry coin. Perhaps you can start with that. I remember, I met you Jorge, like a year ago, and I, I had heard about Freitcoin and I thought it was one of the most interesting old coins

because it actually tries to do something different. It's not just like cloning, light coin. Yeah, changing a few parameters. Yeah. The main idea behind Freikoyne is the mortgage, which is Silvio Gessel, a German economist, proposed to have low interest rates. because we pay a lot of interest on everything we pay for. There's a component of interest.

And far more than we realize. Yeah. Like, people sometimes think, I don't care about interest because I don't have a loan or I don't have debt, but you're paying interest everywhere. Can you explain that? Yeah. So if I buy coffee, how am I paying interest or am I?

Well, the coffee was ground in a coffee machine, and the coffee machine cost money and for the cafe to buy. So they bought it on a loan, which they pay interest on. The local where you take the coffee also is paid through a loan. Oh, they have a mortgage. The coffee beans themselves were grown on a plantation where they probably got the seeds via some sort of financing deal. Okay, no, that makes sense. Sure, yeah. A percentage of the price basically goes to paying interest. that says that only 10% of the population actually get more interest than they pay.

I've seen that, yeah, yeah. I think that's true. And that represents a wealth transfer. It's a very invisible, indirect one that no one's aware of, but it is wealth transfer from the 90% to the 10%. Yeah, sometimes Fricon is criticized for being a mechanism for redistribution, but it's actually trying to... To prevent it. To prevent redistribution from the poor to the rich. So let's talk a bit about this demurage idea.

How exactly does that work? So you're, when you have a FreyCoin wallet, every time that a block is found about every ten minutes or so, your balance reduces a very slight amount. And what that does is that provides pressure. You're incentivized to use the currency the way money is meant to be used, to spend things, to invest in things, to lend it, maybe. it out at lower interest rates because you'd rather get the money back later in the full amount than have it just disappear in your account.

And this is very similar to, similar but not the same as the pressure that you have to use fiat currency because of inflation. Yeah. It's not exactly the same. Dermurge is a little bit better, but it's harder to do in fiat. And because of this pressure, it keeps the economy healthy. keeps currency moving even in hard times like for example the financial crisis we had a credit crunch where people didn't want to use their currency they wanted

to hold on to it but if your currency was disappearing while you held on to it well you'd want something a little bit more stable right can you talk about the difference between inflation and the merge why do you think the merge is better yeah I think the effect on interest is different because inflation normally translates into an inflation premium that that's added up to the interest so you could divide interest gross interest in and risk premium that's come from the fact that there's a risk that you don't get the money back in the time fact no there's also inflation premium yeah just discounting what you're going to lose

through inflation and the last component would be the basic interest yeah and that's why what the market is trying to suppress. And if that's difficult to understand the distinction there, I mean one other way that I help, I try to explain it, is how inflation, as it's implemented in fiat currency, for example, it's very localized where the money is created. It's created in the investment banks who deal with the central bank. And there's different mechanisms and every country, but it's a very few wealthy elite who have first access to the currency issuance. And the inflation happens over time because prices are sticky. They don't adjust automatically.

And so people who have access to the money first are able to better use that money before the effects of added money hit the market and prices go up. Yeah, so there was a lot of monetary inflation after the crisis, but the people, the bank, who had most of the money, didn't suffer much from the price inflation that comes later. When the Federal Reserve in the U.S. started printing trillions of dollars and giving them out to investment bankers, the investment bankers got to appreciate that right away, and then we paid the interest when it finally came to us later on. Yeah, we haven't seen the effects of that yet, I think.

I mean, we have... I think there have been some price inflation, but not so much as to... Especially asset price, right? Most people also haven't seen the effects of quantitative easing either. I mean, they're still looking for a job. No, no, exactly. I mean, I think that's my view of that is right. We had with quantitative easing and those things, we had a huge increase in the money supply.

And we haven't yet had price inflation and more than normal. Maybe asset prices like real estate in that thing. But we also, of course, I haven't seen like people getting jobs and stuff. Because inflation, monetary inflation, which is printing more, let's say, doesn't necessarily translate into price inflation because people who get that money can just hoard it and it won't affect prices. Yeah, if you give Goldman Sachs a trillion dollars, I'm sure not all of it's going to go out their door the next day.

No. No, I think that's been shown clearly that most of the money that was given to banks and money easing didn't actually lend out, but they just used it to shore up their balance sheets. But many commodities have rising because they get that money and they use it to speculate maybe on rice or something. Yeah, yeah. And then you feel that when you go to the store and your food is more expensive. So we don't, we don't begrudge bankers.

I don't want to come off as being classist or something like that. Oh, you can. Well, I'm sure we can. But we're not. I mean, because there are roles for people in the financial industry. I think it's very valuable. what they do, I just think that the system itself has been structured in such a way that they unfairly gain from it.

No, I think that's really important to be aware of with all those things. It's mostly not bad people, but it's bad incentives and bad systems. So you ask the difference between inflation and demurge. And so demurge is fair in that. It affects everyone across the board immediately in the same way, proportional to how much coins they hold. And so you don't have an unfair situation where the poor or people who are separated from the financial institutions are affected worse than those who are closer to it.

So can you talk maybe about the distribution of these coins? Oh yeah, we wanted to prevent issuing all the initial monetary base through mining subsidies because we think that's kind of wasteful and the frico community was very much in line with ecological ideas. Okay. people were complaining about before lunch we're complaining about that we don't want to offend any miners out there it's valuable work that you do but you're one part of a larger ecosystem so why should the issuance go 100% to just

yeah and in the end in Bitcoin mining subsidies will stop so yeah minors will have to live on transaction fees or demortage fees in the long run so We thought that 20% of mining subsidy was enough to boost up the currency. What about the other 80%? The other 80% is to be distributed through mechanisms in which we don't take many decisions. That's the idea. That's only currently one mechanism for distribution, which is much donations. non-profit can be listed in the foundation web and the donations they receive are

increased by 10% but but there's more proposals for different distribution so we we've set up a California nonprofit scientific research organization that is meant to oversee the distribution of these coins but I think the very important point is what Jorge just said about how we want to explore mechanisms for the community selecting where the issuance goes. We never ever want to be in the position of choosing winners. And so that's where the so far only distribution mechanism in place has come out. Also the idea is taking this opportunity to experiment in new distribution schemes,

because since in the long run the 5% demurits, if we don't find another solution, it will have to go to go to miners and some percentage of it should I always go to the miners yeah yeah maybe not all of it that's a lot of the maybe five percent is too much some people suggested so we don't know if it's too much or not but it would be great to have a solution before we found out it's too much or not so does the total amount of rye coin stay the same over time or so at any given time once the initial issuance is out there is a hundred million fry coins approximately. And at each block, the entire balances of everyone, in aggregate are reduced

97 fry coins, which 97 out of 100 million is not a lot for a block. But at the same time, the miners receive the perpetual reward of 97. So it is kind of like a recycling. Yeah, that has an interesting side effect. That, for example, in Bitcoin, one, When you lost a key, not coins are lost forever. Yeah, so Bitcoin, the amount in circulation is going to be. But Freikorn recycles them, it destroys them by the mortgage and issues them again through miners. And how big, so you talked about the community? How big is the Frighton community?

Oklum. Oklomb. Right. No, but I mean, there's... I don't know if we have any good metrics on this. I mean, I was running, I was keeping track of how many unique nodes were running at one point. It was pretty surprising. 500 to a thousand or something like that.

Really? Okay. Yeah, but I mean, it's hard because we don't have like meetups or anything. It's less people and some people are active for some time than they live. So it's hard to tell. And you mentioned meetups, are there meetups? No, no. I was saying no, I wish there were.

We should probably get on that. There's too many things to do. So where do you see this project going next year or so? We would like to have more distribution mechanisms. mechanisms. That's something the community is asking for. And we really want input from the community on this because we're being very firm. It has to be something that's very free and fair and trustworthy, trustless. And we don't take direct decisions like here's X frycons for you to do something.

Like we don't decide directly because we don't want to have that power. We've gotten a lot of proposals. Oh hey, you know, give me this many fry coins and I'll go like sign people up and we'll do basic income and that's great I want to support basic income but we need some sort of like something it's hard to do in reality it's hard to do it in a peer to pay away it's got to be something that conforms to the principles underlying Bitcoin you know it's got to be completely trustless and relying just on the cryptography and the protocol in the long run one idea for distribution we call it the Republican and it's using proof of stake first of all we don't think proof

stake it's secure for transactions and realization but yeah for mining you don't prove you stake mining is a silly concept but yeah but but it can be used to to vote on the distribution of these coins it's what's your idea so maybe yeah so the idea is we have that 5% per year that's being reissued to the miners and as you said perhaps 5% of the entire monetary base is too much security so maybe a a few percent of that could be given to other costs, but how do you choose those causes? Well, one mechanism is that you can use proof of stake to vote proportional to your holdings on where they should be going.

And structuring it correctly is a bit of a challenge, so people don't just vote, oh, they should go to me, and you aggregate that up, and everyone pays themselves. Now, we want to avoid that. But if you, but it should be possible, and we have done, you know, some modest simulations and think that if you structure it correctly, it would work kind of like a parliamentary democracy where people delegate their votes to parties who have coalitions, and then the coalition decides a budget.

We're still on a design phase there, so there's much to be discussed yet still. So I want to talk about one thing, which I thought about a lot, and I think it's really important. So when we look at Bitcoin, it's not clear to me whether that deflation, $21 million is a good system, you know.

But one thing that I do think is clear to me that it worked extremely well in bootstrapping the community because it really incentivizes early adoption. So I'm curious, how does Frycoin deal with that? Because it seems like you, even if maybe it is a better system economically, or maybe it's a more just and equitable system, But it seems to be there's a problem in rewarding early doctors. So in the very long term, fry coins are going to be relatively stable valued.

But right now at half a cent each, I'm not sure that's... Not following really the price. But the hope is that since you have a compulsion to spend it or use it for something, Merchains will accept them and will accept both Bitcoin and Freitcoin. But people who have both Bitcoin and Freitcoin will tend to spend always the Freikins first. So they will circulate more and other merchants will think, okay, I should accept it too because people with Freikins want to spend them first. As long as there's a market where you can buy and sell Freik coins and preferably

something like BitPay that will do it for you, then the merchant doesn't care. They would rather make a deal than have no deal, right? Yeah, sure. But the thing is the merchant doesn't have an incentive to start accepting Freik coin unless there is people wanting to pay a fry coin. No, but I mean, yeah, the Freight coins perish with time, but your product as a seller also paris and maybe if you're a worker, your product is your labor. if you don't work that day, that labor is lost forever.

But what I mean is when Bitcoin started, there was no value to the Bitcoin's, right? But in a sense, it rewarded people getting engaged with it because if they saw a potential and they say, like, okay, I'm going to get engaged with it. If I'm right, then, you know, there's going to be a huge amount of reward. And I think that worked really well. 5% is not a lot, actually, but 5% a year.

I mean, Frycoin's only been around for a year, so if you were in on the very early days of mining, your balances are almost the same as they were. So I think if you see potential for there being a wide spectrum of currency types and the use for Freycoin specifically, I think there would be reward for getting involved. I mean, I don't want to make forward-looking investment statements, but... Yeah, it's kind of a currency design not to speculate so much, but yeah, you can also speculate with it because it can rise more than... It's still in its growth period just like Bitcoin was in its early.

Yeah, and it's true, right. If you do have widespread adoption, of course, then the 5% is not like significant amount. Yeah, exactly. You talked about the need for exchanges. Where can you buy Freitcoin now? The Kurex, I don't know if it's close or what happened? No, it's on, what's the popular one? Cripsy is that?

Cripsy also and there's bitter. Yeah, the Chinese. I think these are those three I think and so is that like because you contacted them and or they we conducted some of them and some of them just started we talked with them like if there's ever problems and like there has been once or twice in the past we work with them to get or if we can help things like that but some of them just started on their own but the most recent recent batch I think they just started it on their own so I'm curious are there any merchants that accept for it on yeah Yeah, there's on the foundation website, which is foundation.frightcoin.org, there's a list of non-profits which has accepted it as donations and also a list of merchants that accept them.

Cool, can you talk about a few? Like, where are they? There was a retro game game game in England, I think. I don't know, it's more. Can you remember? Well, I do remember that there's a number of people as well on the Freightcoin forums who have been buying and selling services and just acting basically as an exchange. Kind of like Purse.io is now doing with Bitcoin. There's also Joe's website for auctions.

Yeah, on Friday I think he calls it, but it's an eBay with the... It's easy a like and it's interesting because you go there and. often is empty. The reason is empty is because anytime something goes on there, people immediately bid on it and buy it. Oh, yeah, yeah. That was curious that unlike many other al-coins in the very early stages,

people use it for trading, I don't know, second-hand stuff. That's right. Actually, the first use, like, within a week of launch, people were using it for trading, like, game licenses on Steam and things like that. Coupon codes. Yeah, old hardware. Old hardware.

There was quite a bit of... Some of that still moved on to Frye Bay that Joe is running, but it was for a while very active on the Bitcoin talk forms as well for that. So let's talk about frying market. That's another project kind of related to Freikwai. Yeah, it's related. In fact, we think we might have made a mistake choosing the name because everybody thinks that it's only for Freikon. But I mean, we want to deploy it on. We want to and we will deploy it on Frycoin.

And the Freightcoin miners have already agreed to the hard fork once it's ready. But it's not actually intrinsically required to be on Freik. You could deploy it on it on Bitcoin as well, although a hard fork on Bitcoin, of course, it's not as easy. It's a system for issuing assets and doing more complex transactions such as auctions, as auctions or peer-to-peer exchanges. Yeah, it's like an improvement on color coins. By changing the rules, you make it more efficient and you can support interest rates. And many of the use cases are similar to what's now being popular with projects like

Ethereum and MasterCoin and stuff like that. It's the same use cases, but we're trying to do it within the Bitcoin ecosystem. It is a set of hard fork changes, a minimal set of hard fork changes. So whether it gets applied to Bitcoin in the future is kind of unclear. Yeah, and the idea is keep the development within the Bitcoin or not too separated so you can leverage the improvements on. You can still use cross-chain trades or once it's ready, side chains and two-way pegging to move value onto Frycoin or whatever network it's on.

And then you use the Bitcoin scripting language to build contracts. So we're trying very hard to reuse what Satoshi has given us in terms of generic platform for doing any kind of smart property contract, just add a few of the features that we're missing. Yeah, we want to support what we call transitive transactions. We used to call them Ripple Transitive. Transitive. We used to call them Ripple transactions.

Before Ripple was trademarked. Yeah, we thought that maybe it wasn't a good idea. I keep calling it the Ripple transaction. But it's based on the name comes from Transitive Trust. The idea is, you know, I trust my friend Alice, Alice trust Bob, Bob trust Charlie. I can do business with Charlie, even though I don't trust him directly. Because we can swap IOUs along the way. And that was the idea underlying Ryan Truggers' ripple.

Yeah, I mean, his idea was trying to make lead scale. Let's is a system for local currencies. And it's similar to a barter system with points. So is that related to Frymark? Yeah, you can do that on top of. markets was us trying to figure out how to do this system. Basically like ripple within... Yeah, like Ryan's implementation was centralized.

He had a decentralized design, but... And one of the proposals was to make it on top of our blockchain, to make it decentralized. That you worked on, yeah. So this fry market, I mean, concretely, what is it? Is it a client or is it a website? It's a design for now. It's an augmentation of the Bitcoin Protocol.

So, so fry markets, I'll be. Obviously the name was chosen because it's a pun on free markets. Okay. And the idea was to create a mechanism for having clearing costs for any kind of asset, you know, whether it's commodities, whether it is vouchers for redeeming at its store or whatever. And create the scripting opcodes necessary in order to do complex transactions on top of it. So you can have options and things like that. So it's really an extension of the scripting language.

Yeah, there's a few new upcodes and also new fields. New fields in the transaction and new ways of structuring transactions. So one of the core features is the ability to partially sign a transaction and say almost like prototype a transaction. And you would use this. The easiest way to explain in an exchange is you set a price. You say, I'm willing to buy up to 100 like coins for this many bitcoins. and you sign that and broadcast it. And anyone else can then use that to build a transaction.

But it doesn't touch the chain until someone feels the order. Yeah, it doesn't touch the train until there's an opposing ask for the bid. But when someone does say that that's something they want to, that's a price that they will take. Then they provide the other half. They say, okay, you wanted that many light coins for this many bitcoins. Well, here's the bitcoins you need and here's, and I'll take the light coins. So this would essentially be a way to build a digital centralized exchange.

Yeah, oh yeah. Someone could come, could aggregate all those incompletions actions, all those people send out and then you have like a price-finding. The miners could do the... They look for a crossover on whenever there's a bid that's, you know... And they can take the difference. So you can do it yourself, try the trade, or... And miners probably will do it also.

But you can do this more or less with color coins, but the problem is you have to connect with all the parties in the trade before the trade. With this, you can... Brow comes to your order, go offline, and then the trade can happen. It's not your problem anymore, if it happens, it happens. Yeah, any time. And there's many other things that small additions were made, so you can partially redeem outputs, and that's valuable because you can say,

look, I want to buy, like I said, 100 like coins for however many bitcoins. Okay, I only want 20. You know, but so when the other person on the other side says, well, that's great, but, you know, I'm only going to be selling 20. I'm not going to be selling 100. Well, they can take one-fifth of your output. And, you know, you can have it split as many different ways as you like, as long as it just adds up to what your maximum total was. So I think this is a very interesting idea to achieve this kind of decentralized exchange idea, which I guess is a sort of a holy grail in that all those attempts to extend cryptocurrencies to something beyond and take on more functions. I think that exchange at you is central.

It was kind of surprising. I mean, we saw its value, obviously. But although that was falling on death years a year ago at the conference, and then all of a sudden things like first master coin, and then Ethereum came out, all trying to do the same thing but outside of Bitcoin. And that just was very surprising to us because we think that... You're fracturing development, fragmenting it?

fragmenting development and the community itself has become so well organized behind Bitcoin and Bitcoin has become so successful that it just does not make sense to me why you wouldn't want to move outside of that system I guess maybe we can talk a bit about the side chains Yeah yeah yeah as I think that that seems to relate also to that same idea of Yeah for the things in Bitcoin as development efforts as we said if right markets it can be deployed will be deployed in Freik-Coin, but it could be deployed on Litecoin or... Ideally, we'd want it deployed on Bitcoin. I mean, that would be perfect, but it's a hard work at this stage.

It's a very large change to make. And I don't think... It's unlikely. I don't think it'll ever happen, although I would love if it did. But then the question becomes, okay, so you can't deploy it to Bitcoin, we have to deploy it to some sort of a halt. Well, what if we really want to use Bitcoins on our fry markets transactions? We want to buy and sell stuff for Bitcoins.

Without having a gateway, for example, in the new... Without having a trusted gateway, yeah. You can have Bitcoins, but they're not really Bitcoin. They're... You're giving Bitcoins to someone and hoping that they just don't run off with them. You know, and you're getting vouchers instead. So is there a trustless way to do it?

And that's what Adam Beck and Greg and Greg Maxwell were looking at back in December is basically a trustless way to do that, and that's how the side chain concept emerged. I mean, with some currencies, say the US dollar, or euro, you will always have to trust a gateway, but with Bitcoin, you don't have to trust a gateway with two-way peck. Yeah. So should I go into two-way begging? Yeah. So, yeah, you guys are also involved in side chains, no?

Yeah, well, that's the connection is, you know, we want it, we want, so what we're doing fry markets and it's within the, it's within the Bitcoin ecosystem, but it's on an alt, it's on fry coin or whatever other chain adopts it. And we want to get it even more. more integrated into Bitcoin. So you can use Bitcoin directly. And side chains are the answer to that. So that's how we came around to you to advocating for and working on side chains.

So tell us about the work you're doing inside. Yeah, so there are some preparatory work that needs to be done to enable side chains. I recently sent an email description to the Bitcoin developers mailing list explaining one aspect of it, which is compact SPD proofs, the ability to the ability to demonstrate what the longest chain is without having to include every single block header.

And it's a very technical improvement, but it's something that's needed for chain. You're talking about the committed UDXO, right? Well, that's also helpful, but I was committing to previous block headers and then using that to the construction first. So can you break that down for like a non-technical audience? Yeah, so the basic problem involved in side chains is you send your coins to another chain, but Bitcoin has no knowledge of what that chain is, even how that chain works, it can't validate that chain. So it trusts the miners. It's an SPV level of security. It says, okay, we are going to trust that the chain that has

the most work committed to it is the one that is valid. And so if someone tries to move funds back, we just care that it's the longest. So the question becomes, how do you prove that it's the longest chain. Obviously, you include the block headers, you know, one after another for however long it is. But even though block headers are 80 bytes, you know, a couple kilobytes if you're talking about merged mining headers, it adds up really fast. And very quickly, you end up with chains that are longer than the size of block and Bitcoin. Right. So you need some compact way of representing that. And that's what, one of the things I'm working on right now is a system where you commit to the Bitcoin blockchain or to the side chain blockchain, you commit. You commit to the Bitcoin.

emit the entire history in a Merkel tree structure. It's a hash tree structure kind of like Bitcoin already uses for transactions. And that lets you put just a small number of bytes in each block, and then use those when you find lucky blocks to skip over block headers. And the improvement that you get is that for, you know, to skip over 100 blocks, it ends up taking you like six or seven block headers in order to do that. And this is something that it's generally generally good. Even if you weren't going to implement two-way back, that's...

Yeah, it has other use cases. It's better for header first synchronization. So Peter Wheel is working on header's first sync for Bitcoin, which is going to be really fantastic when it comes out. It's going to cut down the synchronization time greatly. Last time it was tested, which was like six to nine months ago, it was able to saturate your typical home internet connection with downloading the blockchain. Whereas right now, like, Like if you're fetching blocks, it'll do it at random from peers. And sometimes you get the same blocks like four or five times. So it's really inefficient.

But with the headers first, it would be much, much more faster because it's more smart about how it downloads blocks. And so this is needed so that, you know. For finding out which is the best chain to download. Yeah. But I mean, in the larger perspective, this is needed so that we can have fast clients where people can just download an Android app or an iPhone app. Yeah, I mean, we have SPV already,

but this would make SPV more secure and more efficient, basically. So like the first time that you load up Android wallet or something like that, it has to sync every single block header from the last checkpoint in the app to the current one. And if that checkpoint was a while ago because there hadn't been a new release, like six months, you have to download six months worth of block headers. But this improvement would let you download, for the technical people out there, in logarithmic space, the amount of blocks.

And that means that you're dividing by a large factor how many you need to download. So it scales much, much better. You'd be up and running very quickly, not using tons of data on an expensive. So perhaps you can also mention that. The site chains now has a name, at the company. Yeah, it's Blockstream.

Austin Hill and Adam Back are the founders. We're going to be part of the team. We're part of the team. Cool. We're very excited about working on it. And there's a company behind it, but it's going to be a free and fair and open technology like we feel that any Bitcoin tech has to be.

The basic protocol is not something that any company can own. Yeah, and you cannot sell it. You have to monetize it somewhere. If you try to sell it, someone else will fork it. So there's no reason to even try. And it's also, I mean, you try and erase. For example, Ethereum, they're selling ether already, but someone could fork the project.

And they have. That's hard. Yeah, they're ready. So even before lunch, you can fork it. So if they're promising people returns on free software, it's kind of... It's definitely risky. Yeah, then I don't think you can, offer returns on free software. You can get returns and directly but not directly from the free

software. So I'm curious because I've talked with Adam and you know he said he's been meeting VCs and trying to raise venture capital. So I'm curious what if you can say anything about how that might work as as a company because of course a VC will only invest if there's a chance of I don't know. We trust them on that. They seem to know what they're doing, so... Okay. Yeah, it will be very interesting where that goes. I personally think the Ethereum model is... It can work. It's unclear if it will, but... It can raise money. I don't think it can work in terms of getting return on investment for those investors. I feel really sorry for the people who are getting duped into investing these things, because if you're investing in Ethereum, you're buying...

thinking that it's going to become the next Bitcoin, but I see no rational outcome where that can ever be the case. Do you think people that are investing in... that will be investing in Ethereum and getting duped? It's hard to tell, but I mean, they should be investing in companies around Ethereum, not in the currency. Not in actual currency. So you both are skeptical on that? Well, so if Ethereum, I have skeptical comments about... comments about Ethereum's implementation, but I think the general concept is good. So let's say, let's say Ethereum is original, it's not just another algorithm.

Yeah, it's not just a parameter tweak. But let's say that Ethereum is successful and it becomes everything that Battalek and others wanted to become. And yet to use Ethereum, you have to buy these ether that was pre-mined and distributed to some investors and held by the founders. Why would you want to do that? Why would you want to do that instead of holding Bitcoin? So someone can just as easily fork Ethereum

and put it onto a side chain where you can move Bitcoin onto it. I mean, the question there is really going to be how big are the network effects, right? Because you could fork it and have another currency and then maybe it would be cheaper to do things on there. But if Ethereum has a lot of users and developers, and if the cost of going somewhere where there's none or high, then it might work. Well, except that if that happened and some other alt, let's stop picking on one in particular,

became the next Bitcoin, well then when is the next one after that? You're going to replace that one. I mean, there'd be no end. The value of Bitcoin comes because we're all agreeing that it is going to be the system of digital scarcity that we're all going to use. And with dropping a currency, it's not easy. many people didn't thought like that like Bitcoin could succeed because of that. Okay, the system works, but How do you make people? People accept it? And the network effect is part of the rationale of the side chains. So you don't have to bootstraper new currency to implement new technology a new chain that does something new.

So yeah, you can create a new chain and use bitcoins inside that chain. for vision. So one thing I find very interesting about the side change idea, there seems to be a real attachment to that idea of digital scarcity, you know, and it seems almost to be ideologically driven to protect that and protect, I don't know if that's a wrong perception. It's wrapped up in the word itself, digital scarcity. How is it scarce if you have so many different systems of it and more ones appearing all the time? But if you have sidechains, right, you would use the same bitcoins for different functions. And the reason is because digital scarcity is useful in so long as it remains a scarcity, a system of scarcity that everyone is using.

As soon as you have an uninteroperable systems of scarcity that aren't one-to-one transferable between each other, then you lose all of the network effects. And I think that when it comes to the future of Bitcoin, we need to keep in mind the fact that there are people who are investing now in companies, not just in Bitcoin itself, and they're making gambols on the utility of the currency for a whole bunch of different use cases. and if we start playing games about setting up different alternative systems

that are not interoperable, then we start adding risk to every one of these projects and undermining the entire ecosystem as a whole. Yeah, there's a fragmentation risk. Those are the fragmentation risk, yeah. And that's really what we're fighting against here. There could be uses for multiple systems of scarcity, but only when they differ from each other fundamentally

and how they work. Like, frankly, does for big work. Yeah, if the substitutes, then it doesn't work. Then it doesn't work. Sometimes alt chains are, they add a little future or they promise it.

They don't even have to develop it from the beginning. Like, now, yeah, now it's centralized this part, but it will be peer to peer. By now. So, these Pamp andam's skins are often based on premises,

like Bitcoin is not going to do that, so we need a new currency to do this. And sight chains are awake to say, okay, you don't need a new currency. You need a new chain maybe, but not a new currency. So if you make a new currency, maybe it's because you're trying to get rich fast. I think it's an interesting concept that we've seen emerge over these last few weeks and months and I think people are getting used kind of like opening up to this idea that perhaps alt coins are not well not the viable option to creating different types of currencies and that we need to keep everything in the blockchain but then there are

those who will want to get rich right and there are those who will want to try to improve and and fork Bitcoin into something else so yeah well So how long do you think it's going to be until side changes in a kind of a beta stage where one can try it out or will see the first applications? I think in this kind of proposals take some time. Mike Hearned yesterday on his talk was talking about some bibs and how long they took to be implemented like... 12 months, 18 months, yeah.

12 months? Okay. There's some ideas that have taken years. We're hoping that it won't take nearly as long. The technology for how important we're selling it, the technology actually isn't that complex. It's reusing a lot of components that already exist in novel ways. But it is two or three major software changes to Bitcoin. And so I fully expect that those might take an equal amount of time to get it.

accepted. We're definitely working very hard to get them out and ready to be deployed, but I would expect that after that happens, there would be a very long period of public discussion, like there should be, about the merits of the proposals, whether there's better ways to do it, whether there's alternative ways with different tradeoffs, and that's a healthy process. It's something that Bitcoin needs. So if you want to learn more about Fri-Coin, what's the website? It's a Fri-Coy. code.In, so Frycon with the dot between the O and the I. Okay, cool. And the sidechains website is there one?

It's not ready yet, but it will be soon. I think it will be blogstream.io, but it's not ready yet. Okay. Cool, well we'll let people know once it's ready, and I think there's a lot to talk about with the side chain stuff, so we can definitely come back to that. maybe also once the project is a little bit further along. So I hope you guys had a good time in Amsterdam.

We certainly did. Yeah, definitely. A great couple of days. It's a great city. Yeah, and so we'll be releasing some content. We've done a ton of episodes, or interviews rather, around the conference and also recorded some talks. And Sean Jones, who was on a few weeks ago, actually did a lot of work for us.

So we want to really thank her for all the interviews that she did. And those will also be released in the next few weeks. Yeah, no, I think we'll have a lot of content. And I think we had some really great conversations. I really look forward with that. So, yeah, thanks so much for listening. And we look forward to being back next week. If you want to, you know, support us,

then you can visit our website and episode of Bitcoin.com slash tips. You can donate to us. There's also our weekly newsletters. Friday so you can subscribe to that at EFSIBikinkgoin.com slash Neaslater. And we'll go to be in back next week. Yeah, thanks guys. Thank you.