TFTC: A Bitcoin Podcast - #193: Matthew Black

Episode Date: September 26, 2020

Join Marty as he sits down with Matthew Black, co-founder of Atomic Finance, to discuss: - Building on Ethereum - Ethereum's limitations - ETH 2.0 transition - DeFi on Ethereum, is it legit? - Non-custodial DeFi on Bitcoin? - Bitcoin + DLCs - much more Follow Matthew on Twitter Shoutout to this week's sponsors. Cash App. Start #stackingsats today. Use the promo code: "stackingsats" to receive $10 and contribute $10 to OWLS Lacrosse when you download the app.

What's up freaks, it's your boy Marty here to introduce this episode of Tales from the Crypt. Very interesting episode. Touched on DeFi. Trigger warning. But done the right way, hopefully. I sat down with Matthew Black from Atomic Finance. Formerly Atomic Loans. Actually don't know if they've officially made the switch yet. Sorry Matt, if I'm blowing up your spot here.

But to talk about his experience building out a non-custodial Bitcoin collateralized loan. uh product on ethereum why he's moving off of ethereum and how he thinks uh bitcoin is a better platform to build on specifically for things like dlcs and smart contracts uh very interesting episode very uh inspiring young young man we have in matthew black he's only 22 and he's building some incredible products so you guys are gonna enjoy this episode this episode is brought to you by our good friends at the motherfucking cash you should know about them but if you don't know about them let me tell you what the cash app is helping us do many things we're helping to stack sets and sets receive sets and sell sets if you're

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If you talk about a Fed just gone nuts, all the central banks going nuts. So it's all acting like safe haven. I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bull case for Bitcoin. If you're not paying attention, you probably should be. What is up, freaks? Welcome back to Tales from the Crypt. It's your boy Marty Bent here on a cool Tuesday evening, second podcast of the day.

uh matthew you'll be uh interested to hear this is the second podcast of the day in a different state the first podcast was recorded this morning outside of philadelphia pennsylvania now i'm back in south jersey in cape may county i'm sitting down with matthew black co-founder of atomic loans we're here to talk about a lot of things today matthew how the hell are you doing i'm doing great marty yeah we have uh we have quite a bit to talk about we've uh we've been we've been we've been moving more into the uh the bitcoin space lately and leaving ethereum so uh so it's going to be interesting yeah there's a very controversial project atomic loans is uh people shit on you for being on ethereum and then people are shitting on you for leaving ethereum so

uh you're between a rock and a hard place it seems and we'll uh try to to pull on the thread to how you got to this point so first like how did you come to start atomic loans i guess we should define Atomic Loans, what you guys offer as a platform, and why you are transitioning. I guess we can elaborate on each part of that a little bit longer. I can come back to those questions. Yeah, absolutely. I guess we should probably start with how I originally got into Bitcoin. It was actually back in 2014, it was my dad that actually introduced me to Bitcoin. He's a bit of a gold bug, has gold underneath his bed and whatnot. And so he introduced me to it.

I was kind of just managing his funds for him and kind of forgot about it for a little bit. And then it was in 2017 where I was at, Tony and myself, co-founder of Atomic Loans. We were at University of Waterloo. He was my roommate. I wouldn't shut up about kind of what was happening in Bitcoin and in the crypto space in general. And we were actually roped back into the space, you know, being developers, you know, we got roped into kind of what was happening in Ethereum. I think, you know, they create kind of a, you know, on the face of things, they make it very appealing to developers with all the developer tools

and ended up working on actually atomic swaps between Bitcoin and Ethereum. And it was there actually working at LaQuality that I learned a lot more about the Bitcoin side of things, you know, Bitcoin scripts. I went down the rabbit hole of what is sound money and what are the kind of assurances that Bitcoin brings to the table that, you know, just is not, you know, not comparable with Ethereum per se. And so after working on kind of atomic swaps and, you know, kind of the cross-chain aspect of things, we realized, well, there really isn't any type of kind of financial tools for Bitcoin that were really non-custodial at the time. You had the ability to do finally atomic swaps with Bitcoin, but there really wasn't a way to be able to

get access to say liquidity without giving up custody of your Bitcoin, for example. And the example I give is we were moving to Toronto. Our landlord wanted four months rent up front, and we didn't want to sell our Bitcoin to pay for it. And so a Bitcoin-backed loan is perfect for that. But in today's environment, really the only ways to do that is to lock it up in the custody of an institution. And of course, you know, many different ones have different, you know, kind of different risks involved with them. But we really didn't want to do that. So we ended up, we said, hey, let's build, let's go out and build something that allows for the creation of non-custodial Bitcoin backed loans. And at the time, really, the only way to do that, the only way to be able to get access to any type of, you know, like fiat in a trust minimized way was with a stable coin, which happened to be on Ethereum. And so we said, you know, let's go build, you know, a cross chain thing that allows for non-custodial Bitcoin-backed loans. And that's kind of how Atomic Loans was born. More recently, we've been, you know, kind of more concerned with kind of what's happening in the Ethereum space and the kind of degen activity that's been going on. it's just really not in line with our values and um so we're going in a bit of a different direction

let's dive into that a little bit what specifically about the fact that or i won't put any words in your mouth what uh what about the quote-unquote degeneracy that's playing out the defy world rubs you the wrong way yeah i think i think part of it was for for us like our our goal was always to build um you know sound infrastructure for sound money and the reality is that um a lot of aspects of ethereum are not particularly sound i mean obviously we have the um the supply of ethereum uh you know concerns a bit but also the there's a lot of questions i think around the the the architecture so i mean recently uh you know if you think of if you think of for example you know tether or the various tokens that are printed on ethereum a lot

of people don't realize that those are very parasitic to the underlying chain itself um you know anyone can go and print a token and drive up gas freeze by you know exorbitant amounts and and there's nothing anybody can do about that meanwhile you have a situation where the the scaling solution solutions for a theory mark are kind of all over the place right you've got you've got you know rating networks dark where and each each L you know layer 2 for a theorem has their own token you know when you compare that to Bitcoin where you have lightning network and everyone's kind of collaborating on the same thing um to build

a standard across the entire ecosystem and so for us um i mean i think uh to be honest for us one of the problems was we realized that if we wanted to compete in the um in building non-custodial bitcoin backed loans and we wanted to build that and that had anything to do with the ethereum space we were going to have to launch our own token and we just were not comfortable ever doing that because why should you ever launch a token when there's perfectly sound money like Bitcoin that exists? Yeah, I guess that's been a huge meme. Bitcoin on Ethereum, wrap BTC.

I think I just saw Matt Luongo and James Prech's press switch just relaunched TBTC. It's a bit confusing, right? Because is there really any Bitcoin on Ethereum? You can't send Bitcoin to an Ethereum address. So I guess you have up close and personal experience with these wrapped Bitcoin products. How do they work and how is the description of Bitcoin on Ethereum potentially misleading? Yeah, I mean, I think the reality is that these Bitcoins that are on Ethereum, you're completely right, Mario.

Like these Bitcoins that are on Ethereum are not on Ethereum. They're Bitcoin IOUs at the end of the day. And anytime you have a Bitcoin IOU, it doesn't have the same assurances that real Bitcoin does. So we've seen really two types of Bitcoin and Ethereum that have been the most successful. One is WBTC, which is simply custodied by BitGo. And so, you know, in reality, BitGo is a custodian for many things, you know, many, many exchanges. And so it's no different than putting it on an exchange. And the other one is by RENBTC.

Now, REN is actually a more concerning situation because right now it's really just custodied by the team. I think six team members or so are just custodying, I think, over $200 million worth of Bitcoin. It's supposed to be this decentralized network, but that's a work in progress for them. And so the majority of the Bitcoin that's on Ethereum is really custody by a small number of people, and it's a Bitcoin IOU. TBDC is trying to do something a little bit different. But the challenge that they run into is all the Bitcoin that's locked for TBDC needs to be backed by Ethereum. And so why should I, you know, why should the value of my Bitcoin that's being moved around be backed by an asset like Ether? Not to mention the exorbitant gas fees that are required to mint it are quite concerning.

I think it was $140, you know, today. Yeah, it seems really ironic for a project. whose founder at one point within the last few years said the Internet of Money should not cost more than $0.05 for a transaction, it seems like the people who would need to get transactions confirmed for $0.05 or less are getting priced out of that network specifically. And it's just a disingenuous, to me at least, disingenuous uh description of how these networks should work like bitcoin embraces that like we're

going to need higher fees to have higher security assurances and we're trying to push the uh the low-cost payment network above the protocol level uh it seems like ethereum as a project will virtue signal one way at a certain point in time and then just manipulate the narrative in their favor when things go against that. Hence today, DeFi is blowing up. Minor fees are going up. Therefore, Ethereum is successful when success was defined only a few years ago

as being able to send transactions at very low fees. So it's always confusing. Well, yeah, and I think this kind of plays into some of the questions around the way that, you know, Ethereum is architected. And and I think really there's there's some things from Ethereum that Bitcoin can learn. And there's there's some things from Ethereum that Bitcoin should learn not to do. And, you know, one of those things is everything should not be done at the base layer, because as soon as you do that, you know, you have a situation where anytime anyone wants to do anything, it negatively affects everyone else wanting to do something on the network.

And we should try to at any time we're building something, we should try to put as much things off chain as possible, you know, such as building, you know, financial contracts. Yeah. No, that's actually a question I have to like how much of Ethereum's fee pressure is due to actual demand for DeFi products, which is obviously somewhat considerable right now versus the inefficiency of the chain. uh, it's probably a combination of the two, but which, which one, uh, has more, more weight in that, that feature, that fee calculation, I guess is a question I've had. I don't know if you can answer it, but yeah, I don't know. Like, I think, I think part of it is that, um, you know, there is no, uh, I mean, I guess, I guess when you have whales that are able to, you know, move the market or do things on chain that price out your average retail investor or are able to spam the chain to do, you know, whatever their agenda is.

It doesn't matter. I guess the inefficiency of the underlying chain become apparent when whales are able to take advantage of it. I think that would be my two cents. Yeah. I might say that's something else. Yeah, that's another question I have. Like how many people are actually using DeFi and how many whales?

is it just whales like yeah yeah what are the what are the real real real world uh use cases other than yield farming well bringing this back to atomic swaps and uh stable coins i mean it is a fact a lot of the most popular stable coins are built on top of ethereum so i'm interested to see uh getting back to the roots of why you started atomic swap excuse me atomic loans uh how how are you envisioning a stable coin being used either on bitcoin or lightning and creating non-custodial product uh away from ethereum very interested to hear that yeah absolutely i think recently we've been we've been excited by what's been happening right now in the um the rgb community so for those that don't know um rgb is essentially a protocol that allows for you know

the for assets kind of you know simply for assets to be issued on top of lightning and so the idea is you're able to for example I know that tether is planning to launch on rgb by end of year and they're essentially you know once you have bitcoin and tether on lightning you know things become a lot more a lot more interesting and so you know kind of where we're looking to head kind of over over the next few months to a year is to really be able to utilize the technology that's being developed by RGB and Lightning to be able to allow for more advanced financial contracts.

And I think one thing to mention here is, people might be thinking, okay, well, you're going and you're launching Tether on Lightning. What are the negative connotations of this going to be for Bitcoin? How is this negatively gonna affect Bitcoin? And I think one of the really interesting things is,

As soon as you bring asset issuance into the question, people immediately think, oh, is this going to allow for any shit coin to be created? Is this going to be shit coinery all over again with RGB? One of the nice things about it is that it's opt-in, which means that anybody can opt-in to RGB today and use whatever token they want, and they don't have to hold the data for any token that they're not interested in or doesn't align with them, for example. So I think that's one of the things that we're kind of excited for moving forward. So Sushi could be created on RGB, but it would not affect, at least to a material level, the fees at the base protocol and price out.

Potentially what people would describe as more useful use cases. Yeah, exactly. I mean, you could have Sushi created, but, you know, only the degens who want to use Sushi really need to have any involvement with it or be verifying, you know, Sushi transactions, for example. Can you explain Sushi to me at all? It seems very interesting. Can I explain all the food items? We have Sushi, we have Yam. You know what?

it's it's interesting like sushi specifically because you know they went and they just you know they took uniswap and they just copied it and then they created a token with it and then after that happened uniswap went back and said oh crap like you know uh sushi they just came along and and you know basically stole our uh you know uh stole stole our product and stole our liquidity and that's the thing in ethereum is like you can't compete unless you have a unless you have some type of yield farming and so uniswap was basically forced you know i think uh shortly after sushi was created um they you know uniswap went and launched their uni governance token and you know you really don't need a governance token uniswap's been working for two years uh and maybe longer um and

hasn't needed any type of governance token uh but you know they felt pressure to do so because you know their investors are saying well you know sushi is really capitalizing on this and and we're not you know we need to go launch something to you know to make our returns on this product and it's it's just really unfortunate yeah how does a governance token even function in this context either like does it really have any is it like a comparable to shareholder shareholder voter rights and is it even used as a governance token or is it just used as a way to attempt to to to make money via trading yeah i mean i think to be honest like every every project claims that you know these are non-speculative tokens uh and these are specifically for the purpose of

governance but you know and the reality is is that they're mostly used for speculative purposes and and very rarely used for governance and and so i think that's that's kind of the irony of of all these tokens that are being created yeah and just conceptually like to flesh out the idea of a governance token like it doesn't seem very socially scalable especially if you have whales in the mix uh you sort of defeat the whole idea of democratic governance in the context they would like it to play out in but i guess then vitalik and crew would come back to you with quadratic voting and somehow try to force that into the situation but um yeah you know i so just as a bitcoiner and somebody personally who's focused on bitcoin write this newsletter wrote

the newsletter run this podcast working in the mining industry now hyper focused on bitcoin there's always that lingering feel like thought my the back of my head like am i the old boomer is this really a boomer coin am i am i missing out like is this stuff really the wave of the future and that uh what i've learned having followed this stuff for seven years now is that inevitably all that trash just all that hype goes away and bitcoin is the mainstay that hasn't gone away uh well i think we need to realize the um like the difference in philosophy you know the technology behind bitcoin and ethereum like you know really really isn't that different but the philosophy of the two camps is you know on on opposite sides you know as day and night and so um what's

interesting is i think in ethereum everything is about high time preference you know it's about hey, how can I make as much yield today as possible and take advantage of the situation? And Bitcoin is, how can I build for the future? And how can I make sure that what we're building today is the infrastructure that's going to be in place in 100 years? And I really think that's the difference in philosophy of the two camps. Yeah, I would agree there. And that's the it's that yin and yang i want to call it yin and yang but competing philosophies and both camps seem if we're just taking an objective outsider perspective think they have the right um right mindset in this and it seems like you're coming to

uh believe in the long term let's build out infrastructure and so do you how do you feel making this transition is it a big risk for you confident in it do you lose sleep at night thinking about this or um to be honest i think i think we were losing more and more sleep uh the longer we stayed in in ethereum and um and and the longer we stayed you know building um you know, not our whole protocol. I mean, half our protocol was in Ethereum. The longer we stay doing that, you know, we could just see, hey, you know, gas fees are increasing. The need to create a governance token is increasing. Meanwhile, you know, there's all these, you know, amazing tools that are being built on Bitcoin. You know, RGB, DLCs with, you know,

you had Ben Carman on and the Shredbits guys in Crypto Garage are building great stuff. We have Lightning that's making strides. You have all these things that are coming to light that have been worked on for long periods of time, that they took their time to actually build the infrastructure properly that are coming to light. Meanwhile, the infrastructure that exists in Ethereum is starting to go more and more downhill. And so for us, it was really like we were losing sleep staying in Ethereum.

Really? It's going downhill? From observing on Twitter, it would seem that many people close to the Ethereum project would say things are on the up and up right now. I guess it depends how you look at it. Do you measure progress in terms of use cases, or do you measure progress in terms of the amount of capital that's moved around between different projects? When you look at those two things, I think it paints a much clearer picture of what What are the what are the real use cases and what are the, you know, kind of, you know, shit coin Ponzi schemes that are being created that allows for people to make money quickly and get out?

Yeah, that's a good point. So let's turn this focus to Bitcoin and the future of Bitcoin and the infrastructure you plan on building on. So RGB was launched earlier this year. It's pretty under the radar. I wrote a newsletter about, I believe, like a month or two ago. it was like hey nobody's even talking about this and i haven't really heard much since then like so what's the development around that project looking like particularly is it lively is there a lot of people dedicated to building that out and then how does it even work from a technical

aspect on top of lightning how does it interact with uh the lightning network htlc as i imagine and create this ability to create tokens? Yeah, so RGB currently isn't out in the wild just yet. I think they're, well, technically they have their on-chain, so their layer one implementation done, but they're still working on integration with Lightning. And so the basic idea of how it works is that you have these assets that are issued

that all this data is off-chain. So none of this is going on-chain. We're not using off-returns. The idea is it uses this concept called single-use seals. And so the idea is basically that, you know, if I send a specific asset to you, you know, you can prove basically that I sent that asset to you. And so the whole idea is that you have one issuer that comes, you know, say you have Tether, for example, that wants to issue some, you know, Tether on RGB, they go and they

anchor it to a particular UTXO. So what's interesting here is it uses Bitcoin as a way to prove ownership, but not as a way to store data. And so everyone in RGB basically just goes and they verifies, okay, you know, I have, I have so much USDT. So I have 1000 USDT, and it's anchored to this specific UTXO, or can be anchored to this lightning channel. And then I'm able to kind of use the same functions that exist in lightning network to be able to send transactions over the network. So some of the aspects of lightning specifically still need to be worked out in the RGB protocol. For example, you know, what does it mean to have a lightning channel that has Bitcoin versus a lightning channel that has Tether, for example. And then, you know, can I if I have if I have one that has Bitcoin and there's another one that has Tether, can I route through it or doesn't it, you know, or, you know, or there's an atomic swap occur. And, you know, that's that's a whole nother part of it.

So that the routing part of it, there's still a lot more development that needs to be done. But they're about, the latest I've heard is about a month and a half away from kind of a preliminary lightning implementation that, you know, people will be able to start playing around with. So that's definitely exciting. Yeah. Again, it's underscored, too. Why aren't people talking about this? Just because it's not in the wild yet? How's the developer community that you're close with?

Are people excited about it? Again, there's very few people writing about it right now or talking about it. Yeah, I think people are definitely excited about it. And there's been quite a few Bitcoiners that have kind of voiced, you know, support for what RGB is trying to do. I think part of it might be that, you know, people kind of when they think of RGB, they think of colored coins and, you know, they think of colored coins not really haven't gone anywhere. And I also think that part of the reason is that there's not enough necessary kind of spotlight on what the use cases are for RGB. You know, once you start combining it with various things. So, for example, if you take RGB and all of a sudden you have Tether on Lightning and you have Bitcoin on Lightning, well, now you can create a DEX between Bitcoin and Tether.

And, you know, as we all know, that's the most traded, you know, that's the most used trading pair, essentially. You know, you can take if once you have, you know, Tether on RGB, you could take Tether and you can use it in a DLC. So now you can create, you know, synthetic options on Lightning Network or on on-chain. um and and and you can basically use this within the uh the bitcoin ecosystem so you know i i think i think people just haven't been focusing enough on kind of what are the use cases yeah that's a very good point i mean giacomo um has been a very big proponent of it i'm sure he's he's working on it correct um and that's fascinating though dlcs where you can use tether right because i mean that's a big risk to take especially uh with bitcoin's price volatility that tends to trend

upward you could make a million sat bet that is essentially a hundred dollars usd today that turns into a thousand dollars within a year and that could be stressful for people and the uh some people could regret making those bets so being able to price those dlcs and dollars as we're in this transitionary period makes a lot of sense absolutely absolutely and of course for us like the other use cases of course um is of course loans you know if you can get access to a loan and uh you know you can lock your bitcoin as collateral and then get access to you know rgb tether you know then that's you know that's particularly useful people who want to get access to liquidity um but uh but kind of the first thing that we're actually um we're actually

testing out is specifically you know just taking dlcs themselves right now because that's the thing that's available right now that's in the wild and just really experiment or basically like creating a mini product with dlcs that allows for bitcoiners to be able to go and and test it out um and and and and use it you know with their mainnet funds today what's this product look like yeah absolutely it's it's basically a um it's kind of a mini product for bitcoiners to be able to bet you know on the on the price of bitcoin be able to bet on the election um and it's and it's a web app so you can go it's it's called atomic finance slash odds and basically the whole idea of it is that you can go you can go on there and if you're say you know a crypto crypto twitter influencer or you see

something on twitter that you disagree with you know say you see someone on twitter that's saying hey i believe the price of ethereum is going to be over 500 by the end of the week you can go and you can actually uh you know you can say hey i disagree with you you know why don't you bet me on it um you know like allowing people to put their money where their mouth is finally and and doing this with actual like you know uh you know dlc is bitcoin smart contracts yeah dlc is another underscore technology man i think they're gonna blow people out of the water so uh i guess it's a good opportunity for somebody who's been close to ethereum working with their smart contracts how they're constructed, and how much they cost specifically.

How do DLCs compare when you're talking about constructing a smart contract on top of Bitcoin instead of in a virtual machine, if you will? Yeah, absolutely. So I think there's really two main things that DLCs really bring to light. And number one is the privacy of the contracts created. So if you compare something to like, if you take Ethereum, really everything is transparent, which means that, you know, any financial contract that you create on Ethereum, everybody knows about it. You know, if I'm sending data to someone, they know

about it. If I'm, you know, taking out a loan on compounds, everybody knows about it. But in this case with a DLC, you can create private contracts, which is really, really useful because it just looks like a regular old two of two multisig. And the other thing as well is you get transparency of the oracle. So, of course, DLCs require kind of a trusted third party to make them work. That basically just comes in and basically reports on a particular price, whether it's the Bitcoin price or the election, for example. And it's really easy to get transparency on that oracle. But the other thing that's really huge about these oracles compared to Ethereum is that the oracles that exist in Ethereum are required to make an on-chain transaction to actually report on the price,

which means that in times of high congestion, you know, you may be, you may end up in a situation where the Oracle is not able to report on the price correctly and positions don't get, you know, liquidated, for example, which causes, causes insolvency, which we saw in, you know, in Black Thursday. So in, in, in DLCs, those Oracles, they're simply signing, you know, they're, you know, they're, they're creating signatures and that's all off chain. And they, you know, there's there's no uh there's no additional requirements other than that which is really great yeah and it's essentially free to send and broadcast to sign and broadcast the signature correct yeah and it's super cheap for you know anyone to set up so anyone who has you know if

you're you're a company and you have you know quite a bit of reputation um you know and you're able to go and set up an oracle and you know people trust you to do that it's it's a really you know it's really really simple for them for them to do so and and you know kind of make some extra you know cash on the side yeah and then staying on this topic of the fact that the way smart contracts are constructed on ethereum and everybody can see it like how prominent is bot front running uh do you think in the d5 space like being able to see what your uh competitors or counterparts in the order book are doing before uh their transactions are confirmed is there a lot of front running there? Yeah, we actually, we actually heard about, you know, quite a few

instances during Black Thursday where there was, if you take MakerDAO, for example. So the, so, so first off there's, there's actual bots in Ethereum that anytime, if you make any type of transaction and, and, and the transaction that you create, you know, they, what the bots will do is they'll run a quick simulation of like, does this transaction make money? And if that transaction makes money, then they'll just, you know, replicate the exact same transaction at a higher, at a higher transaction fee. And then, you know, kind of take whatever arbitrage opportunity you had in the first place. So that's one thing that like bots are doing constantly. And we've had this situation occur ourselves when we were, you know, testing out, you know, various things

and, Hey, here's an arbitrage opportunity. Oh no, it was just taken by bot. So that's, that's definitely a big concern. And then the other one is with liquidations as well. So you have a situation where miners, miners now are actually, you know, reordering various transactions in order to kind of give themselves an advantage in the process of liquid liquidating positions. So if you take like MakerDAO DAI, for example, you know, miners are able to, you know, if a miner is also a liquidator, then they can just reorder their transaction to make sure that their, their liquidation transaction goes through first and and we did see that on black thursday as well so it's uh it's uh it's getting crazy out there that's uh insane to think of and so do you it's by steel

man this devil's advocate transition is eth 2.0 would it would it solve any of these problems yeah i think this is always a question and everyone thinks that you know ethereum 2.0 is the is the solution but i mean really what's happening with with ethereum 2.0 is um first of all you know when is it going to happen you know we should create a bet on that you know on this new dlc product but uh um i mean i'm not betting for it but um i personally don't think it's ever going to happen uh yeah well well i think first off like there's a big kind of issue with ethereum 2.0 which is that it's a completely separate blockchain and then on top of that um when you're dealing with ethereum 2.0 like it solves it's the purpose of it is to solve some

scalability problems. And they do that by sharding the chain and having various shards in different places doing different things. But the whole reason that Ethereum DeFi works is because of composability and because all of these decentralized apps can interact with each other. So what are you going to do? Have MakerDAO on one shard and have Compound on another one and they can't interact with each other? So I think there's a lot of questions about what is DeFi going to look like when this happens and even if Ethereum 2.0 is going to happen

and whether the transition can even be successful. Yeah. I mean, it's the whole adage trying to do, I don't even know if it's an adage, it's a heuristic trying to do too much at once is going to lead to some trouble, which I think the trouble's already here. It's just whether or not who you talk to.

And so coming back to Bitcoin, like how is Bitcoin being a comparatively simple system benefit you at Atomic Loans and as somebody building on top of Bitcoin? Yeah, I mean, I think one of the things is like we get to sleep at night. So, I mean, I've always said this about our contracts, like even when we had it cross-chain, you know, we had our contracts that existed on Bitcoin and we had our contracts that existed on ethereum and those bitcoin contracts were were solid you know i wasn't worried about you know any type of hacks occurring the ethereum contracts on the other hand there's just so much more

surface area for things to go wrong i think and so one of the things i really like about kind of the bitcoin ecosystem is that um you know the way in which things are built um you know really reduces the surface area for attack and the things that can go long can go wrong. You know, Bitcoin script is very simple, but it's also very, you know, it's very effective for building secure, secure contracts. And so I think that's one of the things that, you know, we've really liked kind of working in Bitcoin. Oh, and the other thing as well as actually being able to iterate, you know, if you think of the development cycles that exist in Ethereum, generally what happens is these projects, they take, you know, six months,

eight months to a year to go and build up these contracts for every possible scenario that could happen. They go, they get it audited. They know they pray, pray that there's no bugs in it. And then they go and release it. And the problem with that is that, you know, if there are any bugs in it, well, either you put an admin contract in and you can upgrade it or you don't. And now you have a bug and now you have a honeypot. And so in Bitcoin, you know, one of the things we've liked about dlcs is the ability to iterate we can go and put something out there in the wild and we can make improvements to the software over time because you know all the contracts in bitcoins are single use you know you use one contract you use one two of two multi-sig for dlc and then it

then it's then it's finished and it's done and you can actually you know upgrade the software that you're building really nicely yeah and that's because it's just single transactions correct or the dlcs are in the transaction format correct yeah it's mostly because it's it's uh bitcoin revolves around like single use contracts so like you can you can go and you you know uh in ethereum you go and you create a smart contract and then you know it exists there forever whereas in bitcoin you know you send your bitcoin to a you know to a uh you know p2sh for example and you send it there and then you redeem from it and that's all all you do is you send it and you redeem it and you know that's really simple and it really reduces the surface area for attack

yeah there's beauty in bitcoin simplicity freaks i keep saying it uh absolutely so how long do you think it takes for this this this sort of space on top of bitcoin to mature you guys are it seems like early first movers i'm taking a risk right like rgb isn't here yet dlcs are uh pretty new and the first implementation or the first dlc live on mainnet happened only a couple weeks ago uh so what what do you if let's just assume that uh all the kinks are fleshed out and you got the ability to build what you want to build what's what's on your roadmap what what types of products and um financial offerings are going to give users of atomic loans on top of bitcoin in the future yeah absolutely i think i think one of the things that

um you know in general right now like things are very early um you know we yeah i mean you know sure bits has been doing god's work and crypto garage as well and kind of building up dlc to where they are now you know the rgb team has been doing this you know the same thing uh but it's slow moving and it's slow moving to figure out you know how are all these pieces going to fit together. I think the reality is it's going to take a little bit of time to get to kind of advanced financial contracts that are non-custodial on Bitcoin. But I think it's going to take less time than people think. So if you take RGB, for example, I mean, we're going to have tether on Lightning by end of year. I mean, that's fingers crossed. And so once you have that,

if you have that by end of year then you know i mean you could see a dex by uh you know march of next year someone creating a dex on top of you know uh with bitcoin and tether for example on top of lightning um uh dlcs are you know there's already dlc's happening right now with the election um uh we're we're we're about to um kind of you know beta beta test and put out our mini product for uh being able to bet on various things um you know in the next next couple weeks now um and, and people would be able to do that on main net. And so, and so I think, I think simple things like that, we're going to see like, you know, pretty soon, I think in order to get to more advanced financial contracts, like if we're talking about standard options, if we're talking

about margin trading, you know, those types of things, I think will take a little bit longer because we need to do a little bit more work on, on the things that are important for those types of contracts. So for example, you know, if I'm entering into like a margin position or a, you a standard option, I need to be able to have transferability of that. And I need to be able to have some type of order book where I'm able to buy and sell it. And that's essential for any type of those contracts to exist. And it's going to take a little bit longer to get there and to get the libraries built and to get the interactions built in order to get to that place. But that's kind of where we're thinking is, DLCs will enable betting in the first place, then they'll enable

standard options and then after that you know we'll be looking into building more advanced you know type of contracts whether it's um you know simple margin or margin trading um or even you know loans uh maybe maybe several months to a year down the line yeah so i can hear the bitcoin screaming in the background why do we need d5 why why do we need it like who are the target customers outside of degenerate gamblers or traders if you will yeah i think well i think part of it is is is a question of i mean here i i mean i i i'll ask you a question marty like what what do you think of the um what do you think of the financial tools that exist like for bitcoin right now i think they're pretty rudimentary um the pretty high interest rates too

um but yeah i think uh and the custodial aspect of it for some of them i do i do prefer uh If I am going to engage in some of these financial products that force me to send my Bitcoin to another address that I don't have complete control of, I'd rather have a multi-sig setup where I can make sure that it's not being re-hypothecated and that they actually have the Bitcoin in the contract at the end of the day. I guess that would be my feelings on it, too. So I'm a humble SAT stacker where I just stack SATs and throw them in cold storage once they hit a certain threshold and rest on my laurels. Really, Marty? I thought you were a 100x leverage trader, you know?

I tried it before. I got my dick pushed in. It's not worth it. I think that's a lot of people. Yeah, I mean, I agree with you. And I think that I think, you know, to be honest, in the kind of the centralized finance space for Bitcoin, I think there are some tools that exist that have done a really good job of being transparent and honest with their customers. I think like Unchained is a really good example of that. But there's other ones that are doing, you know, rehypothecation left and right.

And the reality is that, you know, what kind of future do we want for financial tools for Bitcoin? Do we want all the financial tools that exist for Bitcoin to exist within kind of what I call, you know, crypto banks where, you know, whether that's a centralized exchange or whether that's, you know, some other tool that requires me to give up custody of my Bitcoin and, you know, they have full control of it and then I do whatever I want. And they're essentially the gatekeeper for me getting my Bitcoin back. Or do we want financial tools for Bitcoin that retain as many properties as Bitcoin as possible? So, you know, like, you know, Bitcoin is really great because it's verifiable, it's scarce, you know, seizure resistant, auditable. And, you know, why can't we have a lot of those properties for our financial tools as well and so um you know if we're able to to build up um the ability to create you know whether it's whether it's betting products and in a non-custodial manner or whether it's you know

margin trading in a non-custodial manner and i'm just you know reducing the risk of of the financial contracts that i'm creating um you know in our minds like that's that's a great thing because it makes sure that i'm always able to exit you know whatever that position is and that i'm not locked into whatever you know wherever place or whatever crypto bank i'm depositing my bitcoin into because at the end of the day like you know a bitcoin is different than a bitcoin iou that's a very good point ah it's crazy are we going to get the decentralized future and so what did it so i get to again steel man this what are the trade-offs then in engaging in uh set up with atomic loans as opposed to something like an unchained like i guess some

would argue that you have some uh amount of recourse if something goes wrong with a custodian that you know if these contracts are set up where you really can't control and don't know your counterparty at the end of the day there's less recourse if something goes uh the shit hits the fan i guess that would be the pushback there yeah absolutely i and i think the questions there are really like what are the things that are you know how how is the shit going to hit the fan and and the thing is in ethereum the way that shit hits the fan is there's a smart contract bug you know and and and there's something wrong with the you know the contracts that are being created whereas the question in bitcoin where you know shit hits the fan is more you know i have a dlc and uh my

oracle didn't sign okay well you you know you're you're at the end of the day you're trusting a you're like even if you use unchained like you you're trusting a central party if you're using a dlc you're trusting a central party with an oracle signature um you know uh and and and the deals you know it's just it's a different level of of trust essentially is kind of the the end solution and so um and so yeah i think i think that's the main the main difference is like uh you're always going to have to trust something with any type of these financial contracts because you need to get access to the price data. But it's like, how much of that do I need to trust?

And what elements do I need to trust? And what are the things that can go wrong? And I think generally, if it's being built on Bitcoin and if these financial contracts are being built on Bitcoin and they're built properly, which most things on Bitcoin tend to be, then there's a lot less things that can potentially go wrong. Yeah. There's that sliding scale trade-offs. that's fascinating do you feel like you're onto something that most people i mean this

sort of been a theme of my questioning here is like how come people aren't paying attention to this how come people aren't paying attention to this like how early are we and how robust of a marketplace do you see what you're working on becoming in 10 20 years i mean i think it's interesting because i mean i think we're in i don't know 1985 of the internet i don't know in terms of financial contracts, at least for Bitcoin. Um, you know, you know, what's interesting is like lightning, what's lightning good for lightning is good for payments. It's good for games, but there's no financial contracts for it. Right. Like there's no, there's no kind of more advanced, uh, like feature set that we can do with it. And so

what about it? What about Ellen markets? You like that? Oh, Ellen markets is awesome. Uh, but of course, like, and I think, I think, uh, you know, they have the intention to go non-custodial but of course like ellen markets today is is is custodial and i i love what they've been building what they've been trying to push forward um but i think they'll always run into you know um i guess like uh it being custodial they'll run into regulatory problems so if they can make that non-custodial you know um uh not with dlc specifically because dlcs are good for options specifically but a different type of uh bitcoin contract then i think uh something like that is going to be phenomenal but um uh but yeah i mean i think we're very very very early on in

the stack and uh and we don't even have we don't even have a you know a dex for for bitcoin yet between bitcoin and tether i mean that's how early we are yeah i had this pot to my head earlier forgot to say it so i'm happy you said that so this stuff is basically counterparty done the right way right because bitcoin did have a dex and counterparty at some point at the color coins on top of it but proved was that using op return was using some op code wasn't it oh it was i can't remember if it was using opera turn or yeah it might have been using opera turn and it was also i remember they um uh was it luke dash jr he uh like changed changed kind of the structure of bitcoin to make sure that counterparty wouldn't work and then uh yeah it was actually pretty

up luke oh man but but i mean like if if it's that i mean also if counterparty was that fragile then you know it you know it probably wasn't uh wasn't here to stay but uh but in general i think um you know the tools that are being built like say like rgb for example that doesn't rely on you know any kind of the you know the network aspects or a bitcoin node to be able to function properly um i think once we have things like that that are more more resilient then uh you know then it will become very very interesting no i agree i agree how old are are you if you don't mind me asking yeah i'm uh i'm uh 22 holy shit dude you're fucking badass man again because you mentioned uh you mentioned regulators earlier and like so building these

products that could potentially defang regulators at some point in the future uh you feel like you're living on the edge yeah i mean you know we might need to uh Yeah. I mean, we always try to build things that are compliant at the end of the day. I know we live in Canada, so the SEC is just south of the border. But if something like what happened in 1933 occurs again, we're going to have to skip town. So yeah, it's hectic. I don't know. We always think that I mean, at the end of the day, I think I think a lot of Bitcoiners agree that, you know, we're on the pathway towards the separation of state and money. And and so I think like, you know, eventually, you know, there's only one way to get there and it's to make sure that whatever we build can't be can't be easily stopped. so yeah so how'd you seeing the product that you've built in atomic loans is very impressive in the ideas in your head like how did you develop this uh engineering prowess i guess at such a young age like what were you working on before you even found bitcoin you've been

building stuff since you're younger or yeah i remember um i mean i was building stuff since i was uh you know i remember when i was like nine or ten just you know right clicking on a website being like inspect element and being like holy crap how does this work but uh i had a phase kind of in um uh elementary school high school where i was you know building building a ton of flash games and at the time i was like flash is the future you know and of course uh of course steve jobs killed that for me but uh that was that was fun back in the day so i i i had a i had a lot of fun kind of building building games uh you know back then and i guess that that translated and And then of course, like my dad, kind of how I got interested in Bitcoin is my dad's always

been talking about kind of, you know, trusting the government and kind of what do you need to be worried about? Or like, what happens if, you know, what happens if there's a, you know, there's a nuclear, you know, strike on Canada, you need to escape, you know, you know, where are you going to go? You know, so I've always been kind of, you know, kind of thinking about those things. So it just happened that those, you know, kind of this, you know, love of programming And, you know, what if shit hits the fan?

You know, I guess those two things coming together made me really interested in Bitcoin. Some would argue, I believe Francis Paulette, that shit is currently hitting the fan in Canada. I imagine your dad's been angry this year. He's been escaping to the cottage with no Wi-Fi or anything. So I think he's living a peaceful life while everyone else is uh is losing it but uh yeah i mean it's been crazy and you know it's

been crazy the amount of um you know and uh the amount of rights that have been kind of um kind of taken away i suppose in a way uh and the and the way that people aren't aren't fighting back against it i think canada has been you know as a country that is very um you know they like to like to follow follow the rules a little bit more than than down south where you guys are and so people don't tend to be uh you know don't tend to fight back as much so i think that's that's unfortunate and we're starting to see that with uh kind of what's happening in canada which is so weird because there's so many incredible bitcoiners in canada building some of my favorite products that exist on the market it's like whoa it's like it's breeding uh some of the best

most actionable anarcho-capitalist i've i've come across to date yet uh you're sort of beholden to this extremely incompetent government and justin trudeau that dude is such an idiot uh and the logical inconsistencies of all the lockdown stuff that's been going on is uh it's infuriating here i can't imagine how infuriating is north of the border yeah well no kidding well it's gotten pretty bad i mean it's interesting for these bitcoiners because um you know a lot of people i you know you see on twitter all the time these these bitcoiners like francis like why don't you move to the why don't you move to the u.s already and uh you know maybe that's uh you know maybe that would make sense but it's been crazy like in yoy quebec uh you know the

police being able to get you know subpoenas for uh you know going into people's houses for not um for you know for neighbors snitching on them for having more than the capacity and that isn't you know allowed for covet you know you know just just just crazy things that are occurring yeah make sure you're wearing a mask when you have sex it's uh it's important it's going to make all the difference in the uk you're not allowed to have sex are you together no no i believe at one point i forget who it was which country but uh there was recommendations of only having sex through it through glory hole um yeah that's the uh that's the safest option you know that's the wholesome option people the wholesome pun intended uh no to bring it back to a serious

note you're 22 i'm 29 i'm not that much older i'm seven years older there's enough distance where it's like all right what are these young kids thinking it is so do you find yourself as a 22 year old focusing on bitcoin and liberty into the digital age are you you're an outlier in your age group would you say or uh do you feel are the are the youths of the world beginning to rise up behind the scenes and really think about this stuff yeah i mean it's interesting because i think a lot of my my social circle like specifically you know comes from uh comes from university of waterloo and i think you know you know waterloo is of course where where vitalik went and so you know there's a lot of um uh i think there's a lot

of kind of like, you know, more Ethereum presence there. And there's a lot more, I guess, shit coinery and like in Toronto as well. So, you know, the people that we interact with, you know, they're much more idea, you know, kind of focused on the idea of, you know, blockchain, not Bitcoin, not Bitcoin, not blockchain, which is, which is unfortunate. But to be honest, like, you know, if you if you talk to your average kind of person, I guess, who's 22, you know, they've of course heard of Bitcoin, but I really don't think they're aware of the ramifications of why bitcoin is important or what what is what is the concept of printing money mean you know like during covid you know people have been getting you know stipends here in canada um i think it's

every two weeks i have to double check um but you know you know when you ask them like where does that money come from where do you think that money comes from their answer is oh i don't know they have you know they have that in reserve somewhere it's like well no they're printing that so uh i think there's definitely some more uh waking up to do and i think i think the other thing is that your average Bitcoiner is, is really, you know, a little bit older than myself, because, you know, they got in when, you know, I mean, Bitcoin was released when I was, you know, I was, you know, 10 years old, you know, so, you know, so crazy. Yeah, it's pretty, pretty, pretty wild. So I wish I was playing games back in the day. And I don't play RuneScape and getting Bitcoins. But

unfortunately i wasn't but yeah don't worry i was 17 drunk at a philly's parade when satoshi dropped the uh the white paper i was nowhere near thinking about bitcoin but i'm uh finicking around my computer right now because i actually coincidentally interviewed matthew from the crypto voices podcast and they do a quarterly update on the world's base monies in canada uh trailing 12 months so this this chart i pulled up a chart in the last 12 months uh when this report was dropped which was a month ago so this data is a little stale but pretty fresh actually only a month old uh canada had expanded its base money by 431 second in the world only to norway which had done 851 expansion it's crazy how much money canada has printed considering how

small your country is as well oh absolutely well and the other thing i think people that um people don't realize and i eric i you know i looked at this number a long time ago so it might be very you know might be might be incorrect but you know the the actual backing of the actual money that's backing um you know capital that exists in canada today you know banks are 0.2 backed you know so you put 100 bucks in the bank but you know they have 20 cents you know you know at least in the us it's it's a minimum of 10 uh backing and and and so it's uh you know we're i mean we're we're we're ready for a for a 2008 here in my opinion not anymore that changed in march the uh the backing requirements we're we're catching up with you but canada sold all your gold you get over

like last over this year though um uh his stint as the prime minister he sold all the gold there's none left that's uh that's what happens when you don't uh believe in sound money right that's why talking to steve barber uh he tweeted out today hinted that the canadian city i'm just assuming it's a canadian city could it could be wrong uh is mining bitcoin there's i mean with the amount of abundant energy that you have uh uh in canada alberta specifically and even in quebec with the hydro electricity like there is an opportunity to change the tides via bitcoin um but it's going to be a hard sell and a long process and canada is lucky to have entrepreneurs like you who are forward thinking and and and working on these problems because yeah the world's so fucked right

now man it's not only canada it's everywhere even here in the united states it's pretty bad yeah no kidding well we're lucky to uh i mean for the for bitcoin specifically we're lucky to have you know uh cold weather half half of the year so you know that keeps the miners running right keeps them cool uh i'm trying to think of what else we can we can latch on to here we've done enough ethereum hating in this podcast but i can i can always do more uh how how does the developer community view the d5 pumpers uh you have to yet i have to assume there is a developer builder community that's altruistic and really wants to build products that that help the world but it seems like it's being co-opted by degenerates yeah i mean i

definitely know you know what's interesting is i know a lot of um you know we've heard from a lot of like ethereum ethereum maximalists that are hating what's going on in kind of dgen defi right now which is hilarious um uh you know like just being really um really dismayed by kind of what's what's going on in the ecosystem right now um and even you know i know i have a few folks like kind of in the ethereum space that are like you know tweeting about things like you don't need a token to create a project you know and and i think that's it's really interesting to hear kind of like the two sides because there seems to be this disconnect between um you know the degens that are going and you know building a project in a week and launching a token and like these developers

that have been around and you're trying to build like legitimate projects for a longer period of time and it's it's it's just crazy to see the see the disconnect yeah no it's interesting with atomic loans and your product specifically i mean you've probably seen it up front and personal like how like what's the ratio of bitcoin uses collateral to ether like as a token i can and have you seen up up front like what people choose this collateral and trust this collateral own does that give you any insights into what is a better digital money if you will yeah i mean i think we've seen a lot more uh interest in in using bitcoin as cloud or like especially on ethereum like maker down for example i remember you know they were um you know i mean of course

it's wrapped bitcoin so i mean i imagine a lot of people are a lot more wary of putting you know wrapped bitcoin into ethereum but regardless of that you know there's 85 million dollars of um of Bitcoin on, you know, on Ethereum in MakerDAO. Another one of the protocols, you know, Aave, they have, I'm just checking here, actually, I imagine they have, you know, I don't think they have quite as much, but I imagine they're getting up there in terms of the amount of like Bitcoin that's actually locked, you know, on their system. Yeah, they have like 124 million. And so, you know, clearly, there's a demand for people being able to use, you know, being able to use Bitcoin you know as collateral because at the end of the day it is the best you know collateral type like

what is what is better as a collateral type than are you ever going to be able to use it than bitcoin and so um and so it's interesting that people are willing to you know they're willing to take a bitcoin iou to be able to have exposure to this scarce asset so um i think that's that's definitely um it's definitely exciting for bitcoin that's another thing i've wondered too all this rap bitcoin and these claims on bitcoin that are used in these smart contracts that are susceptible to bugs from time to time as we've seen like so at the end of the day if that smart contract goes bunk it gets locked like simplicity contracted and you just can't access the funds you still have the bitcoin at bitco and so to me it's like uh it's a weird

like even if you play the game you can take gains from that smart contract that's using that iu for a time until it gets locked up but then you get your collateral back at the end of i can't fully flesh out my intuition that there's some fuckery going on there like it seems like you're able to get all the upside another downside with that which some people be like oh it's a benefit but it's like it's a it's fuckery in my mind well yeah it's not like it's not immutable i mean you know it's basically like using your bitcoin on an exchange and oh okay like you know Ethereum is essentially the exchange and Oh no, you know you know, the exchange had a bug and so that's fine because they still have your Bitcoin

and cold storage. So they'll just give you a Bitcoin back to you. And so it doesn't matter what type of, you know, contracts you create, you know, on Ethereum because Bitcoin is always holding there, you know, sitting there with your Bitcoin at the end of the day. So, I mean, I mean, yeah, it's, it's a little bit of a weird situation because it's, it's really, know people talk about um ethereum as a layer two uh for bitcoin but i mean you know ethereum is as much of a layer two for bitcoin as coinbase is a layer two for bitcoin you know i mean you know i can send to my i can send to my my grandma uh on coinbase and oh it's no fees you know i don't

have to have to pay any fees on coinbase to send bitcoin to my grandma you know right so it's uh that's very interesting and i think i think the other thing as well that people don't realize is that like um what's interesting is like bitcoin iru's actually uh compete with bitcoin itself um because like if you think of like a bitcoin that exists on on ethereum or a bitcoin that exists on my coinbase for example um you know there's different properties that exist for that bitcoin you know all of a sudden you have bitcoin that doesn't you know doesn't have any transaction fees um it's not censorship resistant it's not auditable you know it's not verifiable but you know you don't have to pay any fees versus bitcoin that exists on the base layer is you know very

verifiable audible you know scarce um but like you're paying transaction fees for it so i think it's very interesting how both of those actually you know directly compete with each other yeah that's a good point uh right as a miner it's like you don't want those fees taken away from you via an IOU. There's some weird game theory dynamics at play. You can't deny. That's the other thing.

All this stuff can go on until one day it doesn't, like we found out with the DAO hacker. And again, the plan to transition to E2.0, do you literally pause

everything that's going on, transition, then restart? Is that how they're... Am I correct in assuming that's how it's going to work, or is there going to be some transitionary compatibility well i always wonder but like what is the what is the developer

overhead going to look like you know and and um and and you know this there's something that's very interesting going on right now so you know even if you know if ethereum 2.0 launches and everyone's kind of you know uh utilizing it and you know what happens is maker dal go and they have a version that's on ethereum 1.0 and on 2.0 this compound do the same thing like you know do all these contracts that i've been working together on ethereum 1.0 do they all go and you know relaunch the same thing and that exists on on ethereum 2.0 um and and what does that transition actually look like because it's a completely separate blockchain it's like all these projects needing to you know just uh you know pack their bags and you know uh oh we've got a new we've got

a new spot for you you know uh and and what's interesting actually is that there's we've heard of a lot of projects in ethereum d5 that are now planning to move to other blockchains um uh for example like solana which is this other layer one uh that probably has uh apparently has a bunch of new improvements over ethereum for example a bunch of d5 projects have been talking about moving over to solana because uh you know ethereum 1.0 is just not working for them anymore but you know i think the question for us was always okay when does it stop you know ethereum you know ethereum was great because you everything should cost five cents and then and you do everything at the base layer which means that it's not going to be like that forever and then as soon as it's not okay well you just

jump ship to polka dot or solana or cosmos and then you go build your d5 project there well then what happens when you know everything's being done at the base layer on those chains and then uh those ones those ones become congested uh or are you just going to move to the next one and like you know where where does it end there's no loyalty there's no loyalty there's no ability to a plan for the long term which circles back to what we got got into earlier and so again to keep steel manning steel manning a lot here so how would potential upgrades to bitcoin like snore signatures taproot uh affect the products you're building would you have to do any of this re-architecting um if they're implemented yeah so there's some there's some improvements specifically

that um you know taproot brings uh that that enables a lot of kind of interesting stuff for us. One of those is actually transferability of like DLCs over Lightning, for example. So that's really exciting because then, you know, imagine, you know, imagine you and me were able to enter into an options contract and then, you know, and then we're able to trade it, you know, to a third party, you know, whenever we want. And we're able to route that over the Lightning network. There's some exciting things like that that are definitely coming to light. I'm also really excited about kind of what Jeremy Rubin's been working on with CTV. Hey, you know, all of a sudden, you know, CTV is implemented in one Bitcoin transaction.

You can open a thousand lightning channels, you know, that's, that's pretty cool. And then the last one I think is probably, you know, a Ccash no input or now known as Ccash anyprev output, like being able to do finally have L2 for lightning. I mean, I think that specifically, and this isn't something I've talked about yet, but You know, that being able to work really effectively with kind of what's happening with the development that's happening with state chains. And for those that don't know, state chains are basically, you know, kind of a side chain for Bitcoin that is censorship resistant. You know, the ability for state chains to actually be able to be created in a manner that doesn't have ridiculously long timeouts or long timeouts for Lightning in general. I mean, that's just going to accelerate adoption of Lightning like crazy.

Let's give a refresher on state chain. State chain is basically doing transactions where you transact and private keys, correct? You just move them forward or to, to a next user. Yeah, exactly. The idea is basically, you know, every user, they, they're basically locking their, their funds into a, it's kind of like a two of two multi-sig essentially. And one key is held by the, the, the, the federal, the state chain entity. And the other one is held by, you know, the users. And it's,

it's essentially a process of it's like you're transferring the private key from like one party to the next but you're not actually um uh so no party you know reveals the private key that was before them but the basic thing that it enables is it allows you to lock into this kind of side chain and allows you to exit at any time so if say the state chain entity goes offline you know i can still get my money back and uh and the other thing is in a capital efficient manner i can send money like that exists within the state chain i can send bitcoin to anyone i want um you know without you know without them needing inbound liquidity and like lightning which you know is the common thing for problems in the layer two um but what this enables that's really interesting is it enables

dlcs to be done in a manner where you can have you know instant transferability of dlcs without any capital efficiency requirements so say you know me and you marty say we go and we enter into to a dlc and we want to transfer uh i'll use ben carmen because he was just on the podcast but say we want to transfer to ben um you know we'd be able to transfer that dlc without him needing to go and set up a lightning node and have you know channel liquidity in there etc etc we can just do it um you know by by you know those private keys basically being moved yeah it's fascinating shout out to uh reuben sompson for for putting that idea forward um yeah it's crazy man and it's like that's it so i guess i'm trying to phrase this right before i get yelled at um

like there's part of me that wants to to move fast and implement all these things or uk with the pace of development on these particular upgrades right now is is there any points of frustration where you're like hey this stuff seems ready if we could probably implement it uh pretty safely without without too many headaches yeah i mean to be honest like i've been um i haven't had a ton of um kind of involvement with the um you know looking into kind of these these features and those getting implemented into bitcoin other than being involved kind of in um i guess a little bit in in kind of the discussion uh for taproot but i from what i've seen from like you know the telegrams that have been telegram groups that have been created for

for taproot is that you know there's just a lot of um kind of back and forth and um you know no one's really willing to you know kind of uh you know put their put their foot down and say like you know this is how it should happen because as soon as they do that they're considered you know they're considered a roger ver you know and uh and so and so i think there's a lot of um there's a lot of scar tissue, I think, from Segwit. And people are scared. And I think that that's not great. I also understand why that's the case and why people don't want to necessarily push things, push people too far, or they want to make sure that everything is built properly in Bitcoin. But I think at the same time, if we don't come together and figure out a way to allow

for these some of these changes that are you know very rudimentary um and and and don't have that much of a you know intense feature set uh that are going to negatively affect bitcoin if we don't get some of these things moving along then um you know we're going to be at a standstill and the the reality is that we're going to have a future where financial tools for bitcoins are going to exist within crypto banks you know and and we just have to you know realize that um if we don't um if we don't push the needle forward obviously don't do it too fast you know we don't we're not here to you know move fast and break things we're here to build for the long term um uh but but if we don't make sure that some of these things get through then uh then that could be the reality

that we're facing um i don't know that's my two cents obviously other bitcoiners probably have a lot different opinion but yeah no that sort of echoes what craig maxwell wrote in a reddit post or read a comment I believe a little bit over a month ago like hey it's like if you stagnate too much people are going to stop uh reviewing and then stop building wallets and libraries and other things that that support these these upgrades and there is a window of opportunity that needs to be seized upon especially if you consider how hectic things get during bull runs uh it's free freaks have never experienced bull run uh it's pretty distracting can't think about anything about the price or talk about anything about the price and uh developers have even come

out and say yeah it's even hard to like write code and review code during that these bull runs i can i can definitely relate arguably arguably when it's most important to when the stakes are raised considerably due to the amount of money being preserved by the network Yeah. Yeah. And I think one important question here is with all these changes that exist in Bitcoin, you know, what do we want the future of Bitcoin to look like? Do we want it to be, do we want Bitcoin to end up like gold, where it's, you know, it's, you know, it's sitting in vaults, you know, in various, you know, financial institutions, and it never moves from there. And your average person might have some gold, but they don't really do much with it. Or do we want Bitcoin to be, you know, programmable money and be able to be used for various things? And I think it's really just up to us, the community, to decide what do we want the future of Bitcoin to look like? Me personally, I just want the optionality. I want the option to be able to do either. And it seems like we need to build out more of that optionality on the non-custodial programmable money side, which you're working on.

Thank you for working on that. It's important. And that's many people will be like, hey, I don't need this. I don't want this. Why are we building this on Bitcoin? But again, if it doesn't erode any of the assurances that make Bitcoin Bitcoin and provides more optionality for Bitcoiners to explore or leverage Bitcoin, then I have no problem with it. Again, I'm a humble stat stacker, but I have no problem with optionality. I completely agree.

And I think at the end of the day, as long as as long as what's being built doesn't negatively affect the base layer, it doesn't negatively affect, you know, everyone else who's subscribed to what exists in Bitcoin and what exists there today. I mean, I think that's a that's a good thing. As soon as you start getting into things like, you know, we're going to massively change how Bitcoin works and, you know, add new opcodes that enable all these fancy things to be done at the base layer, you know, then I think there's another question to be had, which is, you know, is this going to negatively affect what people are doing today? But if these things are being built mostly off-chain, I mean, I don't see why it would be a bad thing. Yeah, I mean, as a miner, I've got a theory that you can apply Jevons Paradox to UTXOs. I think it would actually be helpful for a fee market, too, like creating that utility on top where it doesn't touch the chain very often. But you do have to initiate transactions to get into that that will create a robust fee market and driven by the fact that UTXOs become more useful. The utility provided by UTXO increases significantly by the products and optionality that UTXOs can interact with.

Yeah, absolutely. I'm not familiar with that paradox, but I would definitely agree. And I think that I think that being able to, you know, at the end of the day, like Bitcoin should be used for for settlement and we should be building layers on top, which are starting to be built. We have layer two, which is lightning. We have layer three that's being built as RGB. And these are exciting because these things these things work together and we don't need to do everything at the at the at the base layer. Yeah. So Jevons paradox states, it's a paradox because it's commonly applied to oil specifically. The paradox is that as you become more efficient with a good, so in my theory, a UTXO, I'm considering that the good, the fuel in this economy, you would assume that the more efficient you are, you'd use less of it. You can stretch that gas molecule or UTXO further, but what actually plays out and why it's a paradox is that you actually consume more because it's more useful, more utility, and applies to more applications.

Where we become more efficient with gas, people are like, oh, we'll consume less gas then, but you just do more cool things with it. Oh, is this similar to, you know, if you have a road? You know, I think L.A. runs into this problem where you have a road and then, you know, you have a certain number of cars and then it's, you know, there's a traffic jam and you just expand the road that, you know, there's going to be, you know, less traffic on the road, but it actually just grows. I think you could probably definitely apply it to traffic. And if the pictures of L.A. traffic that I've seen are any indication, it seems that that is the case. I'm not sure if Jevons Paradox has been applied to that. it's supposed to be a positive though like you're not that road's not providing any more utility so

i don't think uh arguably it's providing less utility because you're not getting to where you want to be as quickly as you thought you would now you got me thinking here matt we're uh we're going down the uh the rabbit hole yeah um yeah shit man so what uh where can we learn more about you what you and tony are building how can we help if uh if you guys need help and what uh yeah what do you want to leave the freaks with here yeah absolutely i guess like really uh i mean you can check us out um we have a we're not uh we're i guess we're rebranding from atomic loans to uh atomic.finance and uh kind of the first product we're putting out in kind of the bitcoin space specifically with with dlc's is our odds project um so you

can check, check that out there. But, um, you know, the, the main, only thing I asked from the freaks is, you know, if you're a, you're a developer and you, you know, you're interested in DLCs or you're interested in being able to create financial contracts on Bitcoin, um, you should check out, uh, the, the DLC spec that, uh, uh, we've been working on, um, with, uh, with, with, uh, that sure bits and crypto garage I've been working on to kind of get a standard for, for, uh, for DLCs out there. Um, so that, you know, any, any clients that are really created with it will be uh you know interoperable in the future so yeah well matthew it's uh it's young men like yourself that give me hope it's crazy to see

a 22 year old uh creating products like the products you're creating and thinking the way you're thinking as a as a millennial boomer who who can only write newsletters and shittily edit podcasts i'm always impressed by the the amount of uh impressive work that you guys put out uh you and ben carman last two uh last two dlc guests under the age of 22 22 and under it's crazy um so shout out to you guys yeah i appreciate that i'm gonna i'm gonna change my uh my twitter bio to uh boomer millennial um all right well freaks go check the stuff out i think we did enough ethereum bashing to to repent for your for your work on on ethereum so i think uh i think the freaks will take it relatively easy on you i know i saw somebody

uh shitting on you on twitter for taking consensus dirty money um leon the fact checker i think it was yes leon if you're listening hopefully you have a different impression now uh where can we find you on twitter yeah i'm at matthew j black and uh be uh be tweeting mostly uh uh i've been trying to tweet some more dlc stuff lately so uh we'll be pushing that hell yeah all right i'll link to all this stuff in the show notes uh again thank you enjoy the rest of your evening that's all we got tonight freaks peace and love