On The Brink with Castle Island - Rob Hamilton (AnchorWatch) on Ordinals and Miniscript (EP.404)

Episode Date: March 8, 2023

Rob Hamilton, the founder and CEO of AnchorWatch joins the show. In this episode we discuss: Rob's career journey and path to finding Bitcoin. The origins of miniscript and how Rob started to build in this area. The potential applicability for miniscript to the custody market. The current state of bitcoin core development. Ordinals and how Rob started to get involved in this project. The future applicability of ordinals and inscriptions. Links: AnchorWatch, Rob's Twitter.

Today on the podcast, I sat down with Rob Hamilton, the founder and CEO of Anchor Watch. This episode is all about what is going on in the Bitcoin development ecosystem. Rob is building a company around Mnisccript and was really excited to talk about that. There's a lot going on in the scripting world in Bitcoin, which is definitely counter to what you hear in the popular narrative around Bitcoin being a stale project. So Rob's really at the forefront of Mnisccript. He's also really involved in Ordinals, which is just a totally new thing and building Bitcoin NFT infrastructure. So it was really happy to have Rob on, I've been following him online for quite a while.

So it was great to get his insights and hear more about the Bitcoin development ecosystem. So without further ado, here's my conversation with Rob Hamilton. Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them or the guests on this podcast are solely their opinions and do not reflect the opinions of Castle Island Ventures. Guest and hosts may maintain positions in the assets discussed in this podcast. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy. but only as an expression of their personal opinion.

This podcast is for informational purposes only. Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of Concentive Easy.

print a couple trillion dollars and all of a sudden people start to worry. So out of this worry, we have something called a Bitcoin. Bitcoin. Rob, thanks so much for joining. I will just point out that you were the first person that has ever appeared on this podcast that is reping one of our shirts. So you have the Cantion outsider shirt on, which is we're off to a good start on this podcast. That's right. The Brink Nation podcast shirt I've worn so many times over the past year and a half. It's all faded out. So this is just the one that actually visually you can still see. But thanks, man, long-time listener, first-time caller. It's really great to be on the show. Yeah, I feel like we've gone back and forth on all sorts of different mediums online, but it's great to have you on

the show. And I mean, there's a lot to talk about in Bitcoin. Who knew? It's not a sleepy project that is like over, I guess. Yeah, it's interesting. It definitely moves at a slower pace than the rest of the crypto industry. But if you look, there's some really cool stuff that's being built right now. Well, I want to talk about your company Anchor Watch, but I guess before we do, just how the heck did you get into this Bitcoin stuff and become, I would say, one of the kind of the key people I look to for information in the Bitcoin space? Well, first off, thank you. I'm flyder to say that. For me, I got into Bitcoin in 2013. I was living in New York City at the time, and I had a couple buddies who were talking about cryptocurrency stuff, specifically Dogecoin

came up in conversation. And I started mining Dogecoin as a joke. Just like, ha ha, I'm on my GPU, I'm getting internet money. Turns out messing around with those coins, big, back when it was fractions of a fraction of a penny, I should have just held on to those wallets. But Anyway, yeah, so I was starting to mess around this stuff. And I was like, the technology is kind of interesting. Let me see what meetups are in the area. And the Bitcoin developer meetup, BitDevts in New York City was there. And this is end of 2013, early 2014.

And I started going to these meetups. And I was just very humbled. There would be 20 people in a room and they were all really easily gifted, going through lines of C++ code, talking about things like consensus and transactions and digital signatures. And it really just pulled me into wanting to learn more. I picked up C++ for dummies, which probably wasn't the best path for teaching myself how to get into more detail.

But I just started following Bitcoin, buying some playing around with it. And I was working full time at the time working actually in ad technology, just digital advertising, like the whole back-end infrastructure for all of the digital media, for a publisher. And I just kept a really close eye on Bitcoin. And over the years, got more technically competent, taught myself how to program, just kind of always following the space, was going to the Bitcoin developer meetup when I was in town when I was still living in New York City. And yeah, it kind of just really followed me ever since and it's just a passion that grew.

And then actually starting a career was coming up on one year ago, started Anchor Watch. I was working prior to that as a data scientist and consultant at IBM. It's kind of jack of all trades between initial sales cycle, sales engineering stuff to hands-on keyboard, doing data engineering, machine learning pipelines, kind of building things at large scale for analytical insights for companies and wrapping them up, automating and putting APIs around them. So I took some time off during the COVID wave, spent time with my kids. I have two youngans at home. And I was getting an itch to go back to work. And it very quickly just turned into starting a company. And that's kind of where I'm at now with Anchor Watch. That's so cool.

I mean, what a story. So we got into Bitcoin probably around similar times. But I mean, so much has happened with the project over the years. I mean, there's been so many ebbs and flows, so many people that were big in the project that have left. And you had the block size Wars. So how have you just navigated the politics of Bitcoin and your personal beliefs in what it is? It's an interesting question. For me, being extremely forward in kind of carrying that initial energy of there's a lot of people who know a lot more than me in this space and being very wary when I get like firm certainties on how things should or ought to work, definitely kind of keeping myself humble regularly, making sure that I'm always kind of evaluating different perspectives.

Yeah, I think that's kind of like the biggest trick for me in being engaged with the technology, also always trying to disassociate ideas, like ego and idea, just making sure that if you have an idea, not taking full ownership and making that part of your identity, because I feel like that's a lot of the fallen heroes, if you want to call them in the space,

people that were looked up to, they fall in love with their own idea and their own status within Bitcoin culture. And then they realize very quickly, that's not how Bitcoin consensus works. So even if you are very influential, you don't get to set the rules for everyone else. And that the moment you get on the wrong side of technical consensus,

you're, I mean, as far as the network's concerned, you are dead to the network. Your node doesn't talk to their note anymore. And that's just kind of the stuff I try to keep in mind. Yeah. It's been such an interesting entrepreneurial journey for a lot of people in the Bitcoin space, primarily due to just maybe a poor understanding of what the protocol actually is. So back when you were getting into Bitcoin,

I would say the dominant form of startup was like payment processing. and folks that maybe thought that Bitcoin was an alternative to credit cards. And clearly the protocol direction was at odds with that vision. So I'm just curious how you think about that as someone who just started a business. And maybe that's a good dovetail into what is Anchor Watch? Yeah, it's interesting. I think that's very true. The payments narrative was a big thing back in 2013, 2014 on building companies around that.

And I think it was just prematurely jumping the gun. There's a lot of core infrastructure that was missing in the Bitcoin ecosystem before you can start talking about payments at scale. And I guess that really just ties into what I'm doing now, my kind of thesis and Anchorage on an entrepreneurial side, I would say probably counter to most founders in the Bitcoin ecosystem today, if you look at the current vintages of company starting, I'm doing a boring layer one company.

Most people are building things on layer two where you can kind of abstract away and add in maybe your own technology or your own kind of way of interface with either Lightning Network or people are now playing around with stuff on like Nostor. They're very much more abstract, whereas I'm actually just very much focused on the core custody management of Bitcoin. And as an insurance company, that's what we do at Anchor Watches. We are trying to make it so you can hold keys and not risk.

And insurance is just near, it's undercapitalized, if I've already put it charitably. There's just not really robust insurance that exists for the ecosystem. And I believe that insurance as a capital market is just a key foundational piece for building these more elaborate tiered systems of kind of utility on top of Bitcoin. Yeah, that's fascinating. And I think the insurance angle becomes more exciting, I think, with the advent of Mnisccript. And so why don't we talk about that? I mean, probably a lot of people that are listening to this podcast might not even know what Mnisccript is. So how did you stumble across Mnisccript, maybe talk a little bit about some of the things that

it enables? Yeah, absolutely. So I actually came across Mnyscript fall of last year. actually after Anchorage was kind of already in full motion. I already had an idea as like a roadmap item of doing more complicated Bitcoin scripts to enhance technology. And so just even before we talk about miniscript, just Bitcoin script. So Satoshi invented a programming language in Bitcoin. It's written in C++, but he wrote his own sub-language within Bitcoin called Bitcoin script.

And it's kind of the instructional manual for when you want to spend Bitcoin. It's the puzzle pieces of signatures and everything you have to put together to have it be a valid transaction. And it's also when you broadcast a transaction, the sequence of instructions that every other node follows to validate. So it's key critical parts of Bitcoin consensus infrastructure are these Bitcoin scripts. They are comprised of, it's a stack-based language, reverse Polish fourth like, which is, you know, I string those words together. And having never really worked with fourth, it's a programming language from the 70s. but like a stack. And the instructions that you have in Bitcoin script are called op codes,

which is probably something you've heard in conversation before when you're talking about a new fork or a new proposed change to Bitcoin. Usually if you're adding programmability to Bitcoin, you're doing it in the form of an op code. And the very vanilla basic ones that everyone probably is familiar with today, even if they're not an engineers like Opcheck multisig. You have a certain number of keys. You have a certain number of signatures.

Opchek multisig. You're verifying that you're satisfied. assign that condition. Op-check-Sig is another one for a single signature. There's a couple other ones, though, and this is where Mnyscript comes in. So Mnyscript is a project that came out of Blockstream initially in 2018 by Andrew Pulsar, Peter Will, and later Sanket joining the team. The idea was, we have this large base of different op codes. There's 256 in total. Roughly 50 of them have some sort of utility today. The nature of Bitcoin consensus, though, is that once you encode the behavior of an op code, you can't really change it.

So there's a lot of unintended bugs and footguns. We can get into maybe some of those, but at the highest level, those are the things that miniscript designs around is saying, let's actually take 20 and make them interop with each other like Lego bricks. And when you are able to do this, that you use something called the compiler. It's actually like a computer program compiler that will take high-level policy like desires and make it into Bitcoin script and wrap it up so you can actually deposit and withdraw money

from these addresses, these more complicated scripts. So now that I've kind of set the stage, what does Mnisccript actually do? There's three key checks or security features in Bitcoin script. First off, what we all know and love digital signatures as they exist today, right? Is your signature valid tied to a given key? Next would be a hash lock.

So you can actually encode a hash on chain, and if you reveal the pre-image to that hash, you can prove almost like a password that you had access to something. And then finally, time locks. Now, time locks are something that exists in Bitcoin today. That's actually an example of an added feature that came from an op code.

Bip 68 is one of them. But there's two kinds of time locks. There's a relative time lock and an absolute time lock. The way I would consider this is, meet me at noon tomorrow versus meet me in six hours. One is an objective place in time and one is relative to where you currently are. So for an example of an absolute time lock,

you would say at block height, one million. Something can happen. Another one could be in 100 blocks, some condition can happen. And that relative condition of in 100 blocks is based on when the Bitcoin enters that UTXO and it deposits into an address and gets confirmed on a block. So it's actually based on that relative timing

of when it enters a block. alternatively, for both relative and absolute time locks, you are able to use wall time, like a clock wall time, which is really interesting because it's the one part of the Bitcoin network that really integrates exogenous information is the timestamps that the miners put in the block headers. And there's actually certain procedural rules in what kind of timestamp are you able to put in a block?

It's actually also one of the things, too, that miners were able to kind of cycle around to get randomness when they're doing mining for different block templates. All that to say, there's the MTP, the mean time passed. The rule, this is a consensus rule in Bitcoin, if you have a timestamp, it cannot be further behind than the median time of the past 11 blocks. So since time is roughly fuzzy, right, in Bitcoin, you can't say exactly at what second something may have been derived because it exists outside the system. The mining pool actually puts this timestamp into the block header. You have the rough rule that

you're allowed to put anything that's after the meeting of the past 11 blocks. But you can use that actual timestamp to actually encode real wall time spending conditions on your Bitcoin. And this is something that is available today. And just to kind of call out an initial footgun of Bitcoin script, if you were to do both a wall time lock and a block height time lock in the same Bitcoin transaction, it's unspendable. the way the compiler works and validates everything

will not let you do that. So this is one of the things that miniscript does is it makes sure that you're not doing certain things that will brick your code and kind of lock your money in perpetuity. Remember being able to get spent. There's also a long graveyard of like 100 op codes that if you include them in a transaction,

the network just rejects it outright. This is back when Satoshi originally had multiplication, division, and a bunch of other op codes in very, very early day Bitcoin. The problem, though, is once it's in the code, you can't undo it. So it just sits there, kind of a landmine. If anyone that touches it, you'll just break your money, right? So Mnyscript puts these guardrails and bumpers to make sure you're spending things appropriately.

And with Mnyscript was the idea from Blockstream that there were some end applications that they were trying to build that were enabled by Mnisccript? What was the genesis for why this even came to exist? That's a great question. So I think we're definitely using it for their own means and purposes for like liquid and kind of constructing different spending branches based on I have my 11 of 15. But after a. certain amount of time, it becomes a two of three. That's a perfect example of a way you can construct with a manuscript. Additionally, with a really

cool feature of the compiler, is it will take the available signatures and all the data you have there, and it's going to actually arrange it in such a way where it takes the smallest amount of bytes on chain, which is just an interesting thing. They put a lot of thought into making this like a very robust system for whatever you're using it for

compressing things to be as small as possible so you can conserve block space. But yeah, it was, I think, partly that in their own product, desires and needs. Also, listening to Andrew Polstra, and this is just a one shout out to him, but also, if you want to go into a deep technical conversation around this, Andrew Polstra in March or February of 2020 went to the London BitDebbs and does a two-hour conversation about Bitcoin script and miniscript, I highly recommend anyone who wants to check that out to go watch

that video in more detail. He points out there, too, there's an interesting observation. People in Bitcoin will critique Ethereum saying, you know, the open-ended nature of the programming language has all of these different ways that you can accidentally lock up your money in perpetuity. And honestly, before Mnisccript, Bitcoin wasn't better. The way Bitcoin risks mitigated around this was very, very simple templates.

Single signature, multi-signature, that's it. Not going too far off the beaten path and making sure that you felt safe there, right? But with Mnyscript, you actually get to do more dynamic creation of these more elaborate spending conditions. And it's really exciting from, I mean, very selfishly, for what we're building an Anchor Watch, it's a very compelling opportunity because I walked into it initially thinking, I want to build custom Bitcoin scripts to kind of store enterprise amounts of Bitcoin,

large amounts of money that could have spending conditions and contingencies to make sure that the money isn't going to get lost. Mnisccript just put it on a nice little pretty bow. So I don't have to be manually compiling Bitcoin script templates. I can use Mnisccript and also make it very easy for other people to create their own and setting it up all in ways that should roughly be safe and you don't have to worry about, you know, losing your money. What were some of those initial configurations or permutations that you saw as very

attractive for building out an insurance company? So very specifically, let's talk about some concrete examples of what Mnisccript unlocks. The first one is, I'll go one level technical, a rule and, and operation. So let's take a moment and think about a legacy multisig. You have a two of three multisig. With a two of three multisig, all the keys are equal. But with this and statement, you actually can add a key hierarchy. You can have it be like, Matt, if you were a customer at a company, you hold a key,

maybe a lawyer holds a key and a custodian holds a key just for a strict hypothetical. Your concern is that what happens to the lawyer and the custodian run off with the money? With Mnyscript, you actually can construct it in such a way where, Matt, your key must sign. and one of the two other parties will sign. So you still have a two of three, but your key has the priority there. The inevitable follow-up question is, well, that sounds great,

but what happens if I lose my ledger or if I get it by a bus? Like, what then? Then my money's locked? No. Because with Up rule or, what you're able to get from the or statement is you can start adding layers

of different spending conditions. And that gets really compelling too, when you think about a spending condition can actually be set up where this is where it gets really interesting. interesting, your spending condition can have an and statement in it. So I can say if it's been 30 days and this two of three, you can spend the money. So you can start seeing the Lego brick start clicking here where you can say each spending condition is an or statement, but within

that order statement, you can have an and statement. So you can have a time lock and a spending condition. And the most straightforward way people have thought about this previously, they've conceptualized it, but no one's truly built it fully out yet, is a decaying multi-sick. And this is a really straightforward example, if you're an individual, let's save a 5-0-5, and after 90 days, it becomes a 4-5 if the money hasn't been spent. And then after another 90 days, it becomes a three-of-five. And you can set up, like, it doesn't have to be 90 days. But one limiting constraint, if you're doing a relative time lock, is you can only go out, it's a 16-bit number. What that ultimately means is you get roughly a year and a half if you're picking block height,

and if you're picking wall time, you get roughly a year and a month. So you can't do a relative time lock 30 years from now, but you can do an absolute one, right, if you wanted to have these kind of different spending conditions, which makes it really interesting, too, on the insurance side, but also things like estate planning, right, trusts, you want to have all these different contingencies and ways of managing money. Escrow is a really interesting way of doing it, too. Another just left field example is you can use hash locks. There's no reason why you couldn't do like on-chain betting.

Instead of using a discrete law contract, you just have a binary, did the Patriots, when did the Patriots lose? And then the Oracle publishes the hash of win or loss when it gets time to reveal it. And you're off to the races, right? Like, it just really makes Bitcoin a lot more interesting to play with. And it's not this vanilla single-sig, multisig binary. You can have a lot more fun in customizing and programming this all out. One of the things that really excites me about this is the potential for market structure changes around custody.

So, like, I don't think it's a great thing to have all of the Bitcoin that's going to be held by institutions be held in five, qualified custodians. To me, that's just not a great outcome, and it doesn't feel very safe. It actually feels like that could be existential if you have a Bank of New York Mellon get compromised at some point in the future, and they hold 10% of the bitcoins. But multi-sig, I don't think is compatible with qualified custody. So what I would want would be for fidelity to be my qualified custodian, but I would want to hold a key as Castle Island. And I would probably want a key held by like a cybersecurity business, maybe a Haliborne or something. But I guess the definition of qualified custody needs to contemplate who actually is the custodian. And in a generic

multi-sig, if I can move the money with Castle Island and Halborn and Fidelity is technically the custodian, but you can move the money without them, they're probably not by definition of qualified custodian. But just hypothetically, I would think with Mnisccript, you could actually ingrain that and you could prove to a regulator like, hey, no, nothing can happen without Fidelity here. And it's kind of similar setup. It's so exciting. I think this is going to change everything when it comes to custody and the idea of what it is to hold custody. Just like going from single-sig to multi-sig or even like MPC kind of abstracting away a single key being a point of failure, so critical. Specifically to your point on the kind of distribution of keys and qualified custodians, this is kind of the tack that we're taking that we call it negative control.

We can have it be set up in such a way that we are never a qualified custodian. Like, we can't actually unilaterally ever move the money. But, you know, for the duration of your insurance policy, we can have negative control. And we can't, like, the money can't move unless we also sign off on it, right? So it changes the idea of control and keys in a quorum where never in a million years could I ever take your money from you. But you can't move it during your insurance policy without us, right? I also agree with the idea of distributing the keys. Because for me, it's a very legacy banking model, the idea of how we're,

custody digital assets. It's like, I have the bar of gold. You have the bar of gold. That doesn't really make sense. If Bitcoin is programmable money, to me, it makes much more sense that we can actually leverage the strengths of that and doing this distribution of keys. And so in the event of BNY Mellon gets compromised,

well, they didn't take your key, right? It seems strictly a positive from a consumer protection standpoint. The fact that you have a custodian, they're able to control it, but you're able to distribute the risk, which is another really compelling piece of why I think this so beautifully complements insurance. Insurance is a very undercapitalized market today because it doesn't matter how elaborate your cryptography or kind of your security setup is. You're all W-2 employees and reporting to the same boss, same board of directors.

You have that internal collusion risk, which is toxic for insurance. Concentrating risk is just, it is rat poison for capital markets around insurance. And what our thesis at Anchorage Watch is an idea of multi-institutional custody and that you can actually have this distribution case and probably you have your official delegated qualified custodian, but you can have this distribution of other parties, which is just all at the end of the day for consumer protection and being able to put insurance on top of it.

And the insurance piece is really interesting because if we are skin in the game aligned, holding your risk for you, we are very motivated to make sure something that's go wrong. So things like malware, erroneous sends, a lot of things that people get concerned about today, we're able to take the on-chain cryptography and smart contracts of Bitcoin and blend it with off-chain compliance, governance, and auditing

to be able to kind of check each other. So you have the set guardrails of what you kind of set your miniscript policy up ahead of time to be for your spending conditions. And then you have the meat space that has to kind of mediate all that and making sure that things are only getting signed off when everything's being followed. And it's a really powerful. It makes me very excited on what this can actually do for the industry at large. Yeah, it's fascinating.

I don't know when multi-sig became a thing. You probably do, but the path there seemed to be this thing was invented or put into the protocol. And then you started to see operating businesses like BitGo and CASA come around and build businesses. So I think about what you're doing is kind of just the first thing for Mnisccript. How do you see it unfolding just in terms of other types of businesses that would start to use this? And I guess what are the catalyst to actually make that happen? It's not like there's a Mnisccript team that's like out there pushing this technology. Well, yeah, so I guess for other products and services, I think any sort of existing service

in Bitcoin today will be introducing some level of a miniscript strategy, quote unquote. There's no reason why, if anything you're built touching, that's layer one today. The FedExit project, there's no reason why you couldn't have Mnyscript actually being the underlying technology that distributes the Federation. For Lightning, it would require some changes in how channels talk to each other, because the way the hash locks are set up specific. specifically in Bolt 3 for the Lightning Network aren't miniscript compatible, but you could use the miniscript compiler to get the same exact script,

and you actually save a byte. The manuscript compiler is so efficient that you had hundreds of man-hours kind of whiteboarding optimal ways of setting up H-TLCs for Lightning, and the compiler spits out something that actually saves a bite, right? So I think there's everything that's touching Bitcoin and anything that's involving custody, anywhere those coins are sitting, it's an open question of would you want to have a more, nuanced control pattern for managing those private keys at the end of the day.

And additionally, on what needs to be done, I would start looking at specifically the hardware wallet providers. So Ledger has been the first mover by a country mile, basically, when it comes to actually implementing support for miniscript. So they had it on TestNet for a large piece of last year. They actually, as of today, I think it was like February 28th, they actually launched it fully on Mainnet. so you're actually able to use all of this manuscript functionality on mainnet.

I know the cold card at Coin Kite, I harassed Rodolfo NVK pretty regularly. He's one of my investors. And they are, I believe, going to be adding manuscript support by end of year. I don't want to hold him specifically to a deadline, but they're working on implementing it now. The Spector DIY is the only other hardware wallet today that has support for it. More hardware wallets, first off, because not only just me selfishly as an insurance company wanting to distribute risk and not have everything sitting within this one wallet of doing it, getting more dev support and tooling,

which is part of what I'm working on at Anchor Watch, we are building our own wallet, trident wallet, that is leveraging this because this ultimately came out of necessity because no other wallet was supporting miniscript. So I basically had to start building my own infrastructure out, which includes a lot of dev tooling and supporting around how do you do this with partially signed Bitcoin transactions,

how do you construct these transactions with these different spending paths? How do you say, I'd like to spend my Bitcoin? Well, okay, now there's a question. From what layer of your vault security, are you trying to spend from? Because you have to construct your partially signed Bitcoin transaction based on all that information. These are the kind of like the immediate like walls that we're hitting. And our path of what we're actually doing at the moment is we figure out how to get it working and we actually upstream it and we open source it to have more people go through.

Because I actually, I genuinely believe that I can't be the only person building on minisccripts. So I'm kind of taking it on the chin on knocking down those initial walls and getting more people to start adopting and playing around with it. So developer support ecosystem, more We're wallets, and I think every business that's touching Bitcoin is going to be one to think about this stuff. I hope you're right. It seems like a natural path forward there. Do you imagine a world where your wallet would enable people to do some of this functionality

with Bitcoin NFTs? Oh, like with Ordinals? Yeah. Yeah. So it's very funny insofar as I just was on what Bitcoin did to talk about Ordinals. And my path with Ordinals was Danny, the producer of what Bitcoin did, who's now on the show too, hit me up maybe a month and a half ago saying, hey, we want to do a show on Ordinals. Do you want to come on?

I was like, sure, I'll learn up ordnals for you and kind of go into it. And I then did the podcast, and I was actually in Bitcoin Park in Nashville when Casey Rotemore, who is the founder of Creative Ordinals, was in town. So I started code jamming with him a couple days to playing around with the code. The direct answer to your question, yeah, because there's no inherent reason the way ordinal theory works. And to be clear, this isn't my immediate priority. I'm trying to get the rest of the infrastructure stood up.

But there's no reason why any Bitcoin wallet, if it puts on the ordinal lens, so to speak, and respecting ordinal theory as the board software prescribes, that you could have a wallet, that you could actually do, you can secure ordinal with manuscript. There's no reason why. It's sitting in the UTXO.

You have your different spending paths and all that stuff. So, yeah, it makes it really interesting. And huge shout out, too. A lot of the wallet technology I'm building on top of is the Bitcoin DevKit team, the BDK software. It's all in Rust. It's really powerful software. This is actually a lot of a work that came out

of Stephen Myers, who co-hosts, the Nashville BitDevs, and Alicose, who is the originator of BDK. And it's a really robust set of software to kind of let me, as an application developer, hit the ground running. So I'm not figuring out how to work on cryptographic curves. I can just get it all working. But yeah, there's no reason why you couldn't have Ordnals as part of this as well. So I've been going down the Ordinals rabbit hole, and I think it's awesome.

I know it's a controversial topic. Your podcast with Peter got a little bit spicy. That was fun to listen to. So I get that there's arguments on both sides around whether or not this is good for Bitcoin. My view is probably similar to what you expressed on that podcast that it just kind of is. And so you don't really need to take a political stance on it. It's part of the reality we live in that ordinals is a thing. I guess my first question is just, why did it take so long for us to get to this point

where ordinals were invented, discovered? I mean, why did it take so long? You know, it's interesting. I guess I could kind of mirror it and look at back because a lot of people have been asking me, Like, Rob, this miniscript thing sounds cool. Like, why are you the first one to talk about it? I think you just have a certain passionate developer who had an itch to scratch like Casey did. He wanted to have these on-chain Bitcoin NFTs.

And he developed his own entire protocol that sits on top of Bitcoin to get it done. He was really motivated to. And for those at home would understand what exactly unlocked this, BIP 342, which was part of the taproot Bips, it was a series of Bips, remove the script size limit. Because the idea was, we don't know with all these crazy tap scripts and tap trees down the line, what kind of contract people would want to use for their money. So let's remove the script size limit, which used to be 10,000 lights. And then that was sitting there for a year and a half. And then Casey came in and said, wait a second, no script size limit.

Awesome. Push a bunch of data. Boom, boom, boom, boom. So it's very obvious in retrospect when you'd remove the script size limit that you would get this fractal of the operative. debate, which is something that actually predates a lot of my time in Bitcoin, when I was following it closely from 2013-2014 of putting arbitrary data on chain, the moment you've lifted the floodgates and you make it look like a normal Bitcoin financial transaction that's within consensus, it was inevitable that someone was going to do it.

But you had to take someone, because to be clear, there are two different parts here. There's the inscription, which is the actual encoding of the data on chain, with the ordinal theory, which is tracking the providence and movement of coins throughout time. because if you actually look at it on a technical level, base chain layer 1 Bitcoin, the inscription exists as a bunch of signature data, but it doesn't belong to any Satoshi, right? As far as Bitcoin's concerned,

that's just random data in a signature and a block somewhere. We put, like, in the Oracle Protocol, basically shared hallucinations contrived to be able to actually track and move these things around to say, ah, when this signature is made, the top Satoshi is the one that's holding that, and you move it forward, right? So it took someone like Casey to be very technically competent, understanding how Bitcoin works,

to be very creative in looking at Bitcoin through a different lens and kind of clicking all the pieces together. And then also a year of work. I think he worked on it for over a year by himself with maybe one or two part-time volunteers or like getting it all done. So it takes someone who has an itch to scratch, an intense passion, and the skill to kind of piece the initial parts together. It's incredibly elegant. I mean, it's just an incredibly elegant invention. And it's also, you know, the fact that he didn't do it with a token, right?

So I think there's also just the element of it is aligned with the ethos of the community, I think. You know, maybe you would have seen this on another chain with like a huge air drop and a long-tail alt-coin or something. Yeah. I also think, though, if someone did that on another chain, it wouldn't have the magic that the Ordeal project has right now. It's the fact that it's on Bitcoin. And Casey, you know, from a cultural perspective, he did this the Bitcoin way. He didn't ask for permission. He didn't ask for a BIP or anyone to change consensus.

He took all of the existing tools that everyone agreed were fair game. And he built something new. Right. And that was my thesis at the end of the conversation. Peter was like, this stuff exists. Maybe you could do a block size decrease. If you don't want this, you want to increase the fee pressure. But the cat's out of the back.

There's no putting this back now. And I think for Bitcoin as a robust system, you have to kind of rely on the existing incentive structure, like a fee market. And I think that is like the best pathway. is more people using base chain Bitcoin, kind of using it as much more transactionally dense to crowd out and make it too prohibitively expensive to do these JPEX. I think that's really the only way to make it work. Yeah, and I don't know if this is a middle of the bell curve take, but to me it just seems really obvious that you'd want this because of that fee market issue, because of the stability

of the network post-mining subsidy is just, hey, why wouldn't we want more people building things on top of Bitcoin that drive fees to the network? Like, it just, why is that just not an obvious thing? Yeah, so it's interesting because I've gotten accused of or other people that have taken that position of this helps the fee market is that we're kind of prematurely making it an issue that needs to be solved when it could have been naturally solved on its own. But the way I view it, and I'm actually, someone tweeted this out to me yesterday, it's a two by two square. And you can look at it this way, where either the fee market needs to be fixed or it doesn't need to be fixed. And then is it a problem or not? And basically, if you look through the different, like, if the fee. If the fee market's going to be a problem and we solve it, everything's great.

If the fee market's not going to be a problem and we try to develop a solution, here it is. Sorry, I found the image. So current action to take, you either do something about this or you don't. And then will it actually cause a problem in the future? And the only problem in this two by two is if you take an action and no problem arises, everything's great. If you don't take an action and there is no problem, that's fine.

Nothing happened. If you take an action and a problem arises, it's handled. The worst outcome, though, is a problem arises and no action is taken, right? And for me, that's like the critical red, like, you're in a really big, bad problem spot. I think this is preemptively just solving any sort of like mining death spiral security budget issue. The fact that you now have someone who's base, kind of like people make the comparison

all the time that Bitcoin miners are baseload. Bitcoin inscribers are base load for block space now. They are constant bidders buying up and kind of, you know, filling up that fee market. And I view it at the end of the day. as for the time being, the idea that there is a robust fee market, I think is positive and healthy because a lot of the use case for layer two and other scaling solutions is predicated on the mental being full. Because why would I do a lightning transaction,

which takes money based on a total fee of the amount of money you're sending? Like if I send you a million stats, maybe there's like a, let's just make them that easy, 1% fee, like 10,000 stats. But if I wanted to send you a million Satoshi's on chain and it costs me 30 cents, or like it's comparable or even cheaper. Like, it doesn't make sense to me. If I wanted to send you a whole Bitcoin, it's definitely cheaper for me to do that on layer one versus layer two because you don't worry about all the routing liquidity.

But if you want to have the Bitcoin network scale, you need to have that fee market start filling up. So you have the miners getting compensated for their energy, especially as the having process continues and the mining reward gets, this mining subsidy gets cut in half every four years. You need something to offset that. Yeah. I don't know that people realize how fast this is growing is kind of the other thing. Like this Bitcoin Ordnals thing is like a real.

deal situation. And I measure that based on just the quality of people that are looking at this right now that are, you know, we're having meetings with that are building things. It would not surprise me if Bitcoin NFTs are the second biggest NFT ecosystem in pretty short order here. Like I could see this overpassing Solana pretty quickly in terms of just like total density of NFTs. And, you know, it's premium block space at the end of the day. So the Bitcoin block space is pristine premium block space. I think that's driving a lot of this. Yeah, I have two thoughts on this. One, this is a point that when I was spending time with Casey in person made this point,

like one of his big passion points of why he got into building this project is he was seeing other people on other chains and felt that the customer, the person buying the NFT was being duped because they didn't actually get to hold it. You know, they got a pointer to a hash to a receipt, whatever. And like you said, Bitcoin Blockspace is valuable. this stuff is permanently encoded on chain. It is an endogenous to the chain. It is in literal Bitcoin.

If you run a full node and you're downloading everything, that NFT is sitting there, right? So I think from a, if you're trying to merge the aesthetics of physical art in the world and this digital art, the idea they have that permanence is really important. Additionally, his concern too was that if someone, like in some cases just pointing to an S3 bucket,

or R weave, which I am not technically savvy enough to know. I know that you follow that project closely. Casey's critique, and I really can't even, and this is just his critique, I can't even really build on top of it, is that once cloud costs, the price of the token goes lower than the cost of cloud costs that you kind of lose the incentive for supporting the network,

and then you would have data bleed out and kind of like disappear. But if it's on-chain Bitcoin, it's totally permanent and it's there. And I think that's why it has a lot of value. Also just Bitcoin is like kind of the premier blockchain, undeniably so. And if you're going to be in the ecosystem, you're better off going there. It's interesting because counterparty has been on Bitcoin since around 2014-ish, and it does something very similar to Eath, where it's a hash representing a receipt.

It has its own kind of design trade-offs, but Casey having the actual data embedded on chain is really interesting, especially if it goes beyond JPEGs, too, right? Being able to have code on there, being able to do different things. I think it's very interesting, now that it exists, like how that's going to continue developing. And from a lot of people building my own wallet myself, I've got a lot of people approach me saying, if you can just drop the insurance stuff, you should just build me an order to a while.

People are asking you because someone who's building a Bitcoin wallet and understands how all the Bitcoin technology consensus and code works, there's a lot of demand for people who have that skill set right now. So I can definitely see that there's kind of continual push. And as more money comes in the ecosystem, these user experiences are going to get a lot better. It's really interesting seeing exchanges. This was one of my initial thoughts when the ordinal stuff started taking off is, well,

you should leverage partially signed Bitcoin transactions to do trust its exchange. looks like over the past week or so, now that's being taken off. Like, that's starting like game steam. There's still other microservices and ideas and features I was talking with some people earlier, the way postage works right now with ordinals, where you have that first Satoshi and your output is the ordinal. Then you have like 9,90099 underneath it. There needs to be some sort of like microservice that allows you to top off that.

Because if once you move it a couple times, you need to have an ordinal compliant wallet pop off your postage so you can keep on moving it around. Right. As these things exist for a longer period of time, you need to keep handing this up. And it's interesting because that stuff, like, it's not super complicated at the end of the day, but it's a vital necessary need. And that ecosystem, I think people are building it out. And I think with the amount of money and attention this has been getting now with the

Yuga Labs entering, it's just going to get more money plowed into it to enable better dev pooling and end user experiences to make this all work. I, independent of liking or not liking ordinals, they're going to be here for a while. And I think it's just going to be something that continues to take off. We're not over 225,000 ordinals made. and it was one, two, as of like end of December. It's going to keep really ripping. I mean, I think this is going to be way more than just pictures of monkeys, too.

I mean, a lot of these enterprise blockchain kind of BS projects that were just notary systems on private ledgers make a lot more sense if you can use Bitcoin. That's really the security guarantee that people want. So this is going to continue to grow at a pretty aggressive rate. I'm curious, just you're, you know, you've been at the front lines of this. and obviously miniscript, what's your view on just the general culture of development around Bitcoin right now? There's been a lot of turnover in core developers over the past couple of years.

Just what's your general sense of the project? Yeah, it's a real shame that there's legal pressures for developers to leave the project because of ongoing lawsuits from people being very litigious, trying to co-op the Bitcoin code base, viewing developers as this choke point of being able to try and influence the protocol to kind of think through it fully, I think that is one big piece with lawsuits that are coming down

on major core maintainers and contributors right now. And the other piece, too, I think some people kind of get dismayed because they want to work on something fun and cool and rewarding, and then nothing ever gets merged. Like, Bitcoin very much in the sense of, and I'm thinking about Nick's piece, about Bitcoin being a cathedral.

A lot of the work that's being done on Bitcoin on the day-to-day on major releases is like polishing stone, sweeping the floor. it's very ruling technical work that's trying to get like marginal percentage points improvements in initial block download or transaction propagation. You're not doing the crazy new things, right? So like Bip 119, which Jeremy Rubin put out, like the Covenant stuff is much more interesting on a cryptographic like technology level, but a lot of the community doesn't

want to touch that stuff right now. And I like Jeremy and I actually like the idea of Covenants. This is kind of what I really love about what I'm doing with Mnyscript is. no fork required. Like, I'm using all the Bitcoin tools that are already here. You can't say what I'm doing is in Bitcoin. Like this stuff, your node already approves and runs it, which is kind of the rhetorical take a lot of people who got Ordinals.

It's like, well, you may not like it, but thanks for holding it on your node forever for me. You know, like it's maybe like Bitcoin is a future state. I think there's just a lot of cultural shock from the 2017 block wars. Everyone feels very on edge and kind of introducing things. Even Taproot, everyone agreed to, turned into a whole meta debate on how to we merge Taproot in. and that was a four or five-year project of going through and adding that code and reviewing it

before getting it plugged in, right? So it's tough. I try to find Bitcoin interesting. And the way I view it is from a system of constraints, what can I really expand upon within those constraints? And that's kind of what I've kind of taken charge with the miniscript. And I think maybe in a couple of years when miniscript has much more wider adoption of people are working on these more advanced custody models in different ways of using Bitcoin

that aren't these binary single-sig multisigs, that maybe there'll be finally enough thought put into the space and enough user adoption to realize, hey, you know what? Like, maybe I should use Bitcoin as programmable money. It can be more than just a shiny rock. I can use it for all these different use cases, right? So I hope for that. Maybe the ordinal stuff too brings people into the ecosystem who haven't touched Bitcoin in a long time and kind of brings them from fresh blood of developers with different

perspectives, right? That's kind of what I'm ultimately hoping for. Yeah. Yeah, I think that's the most sensible approach. I mean, I guess you never want to be in a situation as an entrepreneur where you're taking a bet on a bet. I mean, you want to be building with clear line of sight. You don't want to say, hey, I need this hard fork to happen in order for my business to actually work.

That's a tough spot to be in. Yeah, I've had people pitch me like, oh, you should start working on like crazy covenant thing. And I'm like, when it's merged, I love to look at it. When we know it's being merged and I have reference code, would love to look at it to get like a head start on things. It's funny enough, like the manuscript stuff is just getting merged into core right now. Like 10 days ago, miniscript for Bitcoin Core signing and reading and processing, miniscript output descriptors just got merged. The tech was always technically available, but now Cors officially supporting it,

which is one of those other great things of like, I love being on the bleeding edge of something like this in Bitcoin, playing around with like the ability to kind of like really stay on the space. Very quickly, before I forget to go briefly back to the ordinal stuff, I didn't even talk about the Teleburn, which is what I coded with Casey when I was in Nashville. That was very cool. Yeah, tell people who are not familiar kind of what this is. Yeah, yeah. So Teleburn is a term of our Casey coin called TeleBird.

burn. And the sequence of events was on Twitter, Casey Rotamore tweeted out, the first person to one way sent their Borda Yacht Club or Cryptopunk to the Bitcoin chain is going to be an absolute legend. And one of the replies was Jason Williams going parabolic saying, help me. And so I know Jason and I walk over to Casey and I was like, hey Casey, I know someone wants to burn a monkey. And he looks to me. He's like, you're serious? I'm like, yeah. I'm like, what do we do now? He says, well, we write the code. He grabs me by the shoulder. We walk over, we sit down in the corner of Bitcoin part, and we start talking about, okay, like, how can you encode this Bitcoin stuff into an eth address? And very simply what it is,

is each inscription has a unique ID. You can hash it and code it to make it look like an eth address, and you truncate it so it's the length of letters and numbers that are eth addresses. And there you go. You have a one-way mapping of this inscription on Bitcoin maps to this Ethereum address. And then what Jason did, we got on a call. Well, actually, the first thing that happened I had talked it through with Casey, then Casey wrote up the code in Rust. More of a Python developer by trade. I've been skilling up on Rust because it's a great program in language,

but I wasn't going to touch anything that was burning half-million dollar monkey as my coding project for myself. So Casey tries it, and the first thing he does to test it is he burns his rhodomore.eath. So his Genesis inscription, the only inscription Casey made the original ones like the Day of the Dead black and white skeleton head. And the first thing he does to test it is he just burns his rhodomore.

to this random address that maps to his Genesis inscription. And then we go through, set up for Jason, get his burn address. I get on a Zoom call with Jason, myself and Casey, like Casey Arr sitting next to each other at Bitcoin Park in Nashville, and he sent it. He just shifted right off. So I think it's inscription number like 5,500 and something. I'll have to go look it up. But it's the same exact picture, but he permanently, provably destroyed the ETH side of it,

and he pointed it to the ordinal inscription, which then become a meta debate on, like, are you attacking the capital base of EFNFTs? That's going to be a thing. I mean, this is going to be a thing. People are going to be porting these over. I think it'll be a nice little civil war situation there on certain collections. Well, it's interesting, right? Because if someone just like, someone that took a bunch of crypto punks and like different, like the ETH wrong, and they just recopy paste of them, well, okay, sure. You did that. But skin in the game, making it real is destroying it on the ETH side. one-way ticket, no backsies, right?

Like, if you're saying this is a board ape yacht club, but if it's on the east side, you're just getting a derivative work of it. So this becomes very funny and cerebral, like a very meta-shared hallucination of all these things. Like, this is all social consensus, whereas Bitcoin is like, bodice consensus, like, what are you doing?

The ord layer does have, like, the ordinal theory for first-in-first-out accounting. But beyond that, like all of these rules, like inscriptions and pointings and teleburns are all social consensus, which makes it very interesting from an art movement. You just have people that are arbitrarily assigning values to random Satoshi's that Bitcoin doesn't really care about. It's everyone kind of agrees on top of it.

I mean, one thing is for sure is people that say that the Bitcoin project is stale or not evolving are just completely wrong. I don't think I've ever seen as much vibrancy as probably the past six weeks in Bitcoin. It's been very interesting. I've helped several people who are these crypto buddies of mine download and run full notes. They're asking me how PSBTs work. They're asking me how different SIG-hashes work. So SIG-hashes are its own way of encoding,

what are you signing in the transaction? So everyone uses SIG-Hash-all, which means I'm binding myself to these inputs and these outputs, but you can do SIG-hash single anyone can pay. So you're only attesting to one part, right? And this is where the decentralized ordinal exchanges are popping up now because you're doing partial signatures and you're not fully committing to everything.

And it's all stuff that's existed in Bitcoin for a long time, but no one's really touched because there hasn't been a need to. and it's just very interesting seeing all of this stuff emerge. It's exciting. It's exciting in the sense of having people and developers that are excited about using Bitcoin again and playing with PSBTs and transactions and running full nodes. I think it's going to ultimately end up in a net positive bringing intellectual capital, not just even like the monetary capital, people investing in like ornial projects,

like getting people excited about Bitcoin again. I'm really hoping it's kind of like a bull run where you get a bunch of people who show up when the price rips up and then some people stay from like understanding the technology and building stuff on top. top of Bitcoin, I do this as kind of like a bare market version of that, pulling eyeballs and having people look in, maybe getting some people to stay around for the sound money revolution. 100%. Well, I think that's a great place to leave it. Rob, where can we send people to learn more about AnchorWatch and follow you online? Yeah, so Anchorwatch.com, if you drop in your name,

I'll get you on an early alpha test soon, but I'm hoping to do in the next month or so, make that more widely available for testing for others. You can find me on Twitter at Rob Oneham. and Acrewatch.com is our website. We want to sign up for updates when we're getting ready to launch. Awesome. Well, it was a pleasure having you on. Thanks so much for joining.

Thanks for having me on. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island.V.C. To listen to all of our podcast episodes, please go to On the Brink-Podcast.com or just click on the tab in our website.

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