TFTC: A Bitcoin Podcast - #206: Ryan Gentry

Episode Date: November 4, 2020

Join Marty as he sits down with Ryan Gentry, Business Development at Lightning Labs, to discuss: - Austin, Texas - Ryan's time at Intel - Chip fabs - Proof of Work as an essential component of cryptocurrencies - The Order of Operations necessary to create a truly distributed cryptocurrency - Reading white papers - Will Ethereum scale? - Lightning Pool - Shadow Pools - A LN yield curve - much more Follow Ryan on Twitter Check out the Lightning Pool announcement Check out the Lightning Pool specs 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.

Sup freaks, it's your boy Marty here to introduce this episode of Tales from the Crypt. I had the immense, immense, immense, immense, immense pleasure of sitting down with Ryan Gentry from Lightning Labs. Long rip. Three hour rip. Great rip. Talked about a bunch of stuff. Started out with Austin, moved to the order of operations necessary to fulfill the dream of a cryptocurrency, particular Bitcoin, proof of work, the importance of proof of work, specifically how to scale these protocols efficiently, and then Lightning. We talked a lot about the Lightning Network and particularly the product they launched earlier this week, lightning pool which frankly i think is going to shock the market to the upside

something that wasn't even on the top of my mind of how to apply this technology and create incentives that incentivize channel liquidity and easier ux between node operators and users i think this is a massive massive massive product drop that we just witnessed here with lightning pool ryan and i jump into it jump into shadow pools how all this can be applied what it means for the ability to stack sats in a non-custodial fashion using the lightning network the the yield curve that could potentially uh that will potentially materialize from this product hitting the market and a bunch of other stuff i think you guys are really going to like it you're going to learn a lot an incredible rip ryan's as i say in the beginning of the podcast uh somebody

who i've had some he's been the counterpart in some of my favorite conversations about bitcoin this year particularly had the pleasure of meeting him in dallas at bit block boom and was very excited to record this podcast and i'm even more excited to release it to you freaks because i've been sitting on it for more than a week now at this point and uh i wish i could have dropped it right away but due to uh the timing of the launch i had to wait a little bit so with that being said This episode is brought to you by good friends at the motherfucking Cash App. If you don't know about the Cash App, let me tell you about the Cash App. You should know about the Cash App.

We talk about them before every episode, middle of RHR sometimes. The Cash App is helping you stack sats, send sats, receive sats, and sell sats. If you so please. We're saying sats, sats, sats, sats, sats, because you can make sats the standard within the app. There's no more buying fractions of Bitcoin. That's for losers, buying fractions of Bitcoin. People with unit bias. We're stacking whole sats now, okay?

Stack whole sats. thousands hundreds of thousands millions at a time tens of millions hundreds of millions if you're a baller you can stack those sats on top of that uh you can dca in the sats you can set and forget if you want to buy daily weekly or bi-weekly you can set a recurring buy so you don't even have to think about your sat stacking your purchasing of whole sats you can just set it and forget it and beyond that they have cash app investing if you want to stack slivers of stonks you can invest in the stonk market on the cash app as well buying as little as one dollar worth of a stonk if your favorite stonks too expensive don't worry you can buy as little as

one dollar worth of it all this is connected to your bank account so there are no four to five day waiting periods you can start stacking sats or slivers of stonks today cash that may even be your bank account they're offering account numbers and routing numbers if you want to get your paychecks direct deposit into the app so go check it out and when you do if you have not done so already when you download the app use the code stacking sats that's s-t-a-c-k-i-n-g-s-a-t-s you're gonna get ten dollars and ten dollars gonna go to our good friends at owls lacrosse that's owls lacrosse all right enjoy this episode very long rep very worthwhile to get through it all

very wide ranging and incredible conversation enjoy freaks you've had a dynamic where money's become freer than free if you talk about a fed just gone nuts all 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 i just ninja launched the start of this podcast while we're talking about bourbon unbelievable ryan

jim bean drinker what the hell's going on over here wow that's how we're gonna start this this podcast off you're just gonna outmate jack daniels or jim beam i forget jim beam jack daniels is too sweet that's that's that's my level of standard um i want it i want it to hurt a little bit when i drink it when you're drinking bullet thank god for this podcast you you got some on your head i was just about to explain that's my house whiskey i had to i had to i had to class it up just for you well thank you down down here in texas their standards a little bit different from from you yankees in jersey what are the texas standards like i've been to texas before i don't know it's just and i take offense to you saying i'm from jersey i am in jersey right now

but i'm from philadelphia it's a very very uh very uh controversial topic in the philadelphia jersey area there's there's uh there's some there's some blood between the border there bad blood well from my perspective you're north of the red river so you're a yankee i don't care you're far away and you're different uh freaks i'm sitting now with ryan gentry from lightning labs officially business development at lightning labs correct that's correct very excited to be so i'm very excited to have you here we uh we met in texas in person end of august at bit block boom i didn't realize i was talking to you because i known you from twitter uh because i'd write i've written about a couple of threads that you wrote

at multi coin in the bent um yeah we were sitting at a bar by the hotel where bit block boom was we were talking for like 45 minutes i was like oh you're that ryan gentry dude that i've written about a couple times so i'm very happy that number one we were able to meet in person and number two that we're recording this now because i think uh some of my best bitcoin conversations this year have been with you in that one weekend in Dallas. Well, I very much appreciate that. Yeah, I'm thrilled to be here. Long-time listener, first-time caller slash guest.

And absolutely, I think we're going to have a really good time. That BitBuck Boom was a shout-out to Gary and all the organizers who put that on in the midst of coronavirus. It was still, we managed to have a great time. Really good conference. great conversations great crowd um that was very energizing in the middle of summer end of the summer i guess it was extremely energizing yeah there's something about that conference particularly i think it's texas texas does have a vibe to it i have only been down there two times now

both for bit block boom i love it dallas is like it's not my cup of tea of a city a sprawling city with a bunch of bypasses you can't really walk too many places but there is something about the vibe down there like we got a ride to dinner and hop in the back of the four runner and there's just a essentially a terror gun on the floor of the of the car i was like wow i'm definitely in texas yep that sounds about right uh you know you you want to talk about taking freedom seriously right uh the come and take it flag was i don't know something like 30 miles away from where i'm sitting right now um in gonzalez county uh familiar with like the come and take it flag the don't tread on me all that sort of stuff like that was all just right here during texas revolution

yeah what's it like down there now you're in austin is austin i hear all the californians are moving there are they ruining your city they've been i'm a native actually which is rare um grew up in austin um been here most of my life spent four years in uh in arizona which is like basically the same as texas um just a little bit different uh and then moved back but it's people have been moving to austin ruining the culture since i was born you know since my parents moved here in the in 1980 or something um texas has a very and austin in particular has a very resilient culture um i think we'll be fine we're doing a good job a better job than san francisco at handling massive influx in terms of building up which i think is helping a lot

the one thing that's really sad that's changed is uh when i was growing up austin was you know well known as the live music capital of the world because downtown austin was just tons of you know every bar had a live music every night of the week all year round and all the musicians live downtown and unfortunately they've been kind of priced out of that central area over the last you know probably decade or so yeah i'm a sucker for live music i think who came out of austin i'm thinking of right now in my head gary clark jr gary clark jr phenomenal amazing i've seen him live a handful of times i have as well one of my favorite live shows that duke and shred yeah like like one of the one of the real like last living like real rock stars right i've seen

i've seen i've had that i've seen jack white who i thought that oh this guy is a rock star right i saw the rank of tours about this time last year really jack white is a here in carolina drama live was one of the great pleasures of my life yeah he's uh he's amazing the godfather of austin music scene is uh willie nelson though um be remiss not to mention willie yeah of course always always got to mention willie uh it's funny the um if you're a foo fighters fan they did their on their album um sonic highways uh and did like an hbo series along with each do you remember that yeah so i was gonna say they did a documentary series with it right yeah they did a docu-series on it and they did a song in austin about the austin music scene it

was really cool uh really cool view at like austin at the time it was just like you know it's the capital of texas but this really small tiny city you know like there was nothing really here um and willie showed up and it was a very tense time during the 70s you know nationwide with you know the hippies and conservatives and yada yada yada and willie and austin kind of brought together these two disparate groups of pot smoking hippies and the rednecks um by playing this weird brand of you know pot smoking country country music uh and austin has just kind of had that vibe of everybody getting along um ever since which is pretty cool i forget it was that documentary series i think it might have been but we're just a separate one i think it might have been a

separate one i'll see austin city limits where willie um they had like a weekly tv show didn't they yeah they had a weekly tv show and there's i mean you name it every artist for the last you know 50 years has come and played austin city limits here um and that's you know the the name of the the annual music festival now uh but for a while it was just yeah like a weekly tv show um so like you know it's one of the most famous another another austin music legend stevie ray vaughn of course rest in peace gosh rp indeed that plane crash took him way too early and just amazing talent and my face my favorite mtv unplugged stevie ray vaughn yeah he just just incredible and so he had a phenomenal a handful of phenomenal austin city limits episodes that

every once in a while on, I don't even know what the local channel is anymore, but every once in a while they would just kind of replay it. Just like how they do they'll replay the 2005 UT National Championship win still when that was 15 years ago.

Vince Young, baby! Yeah, exactly. That was a great game. I remember watching that game. Everybody does, man. What was USC's quarterback name? Matt Miner. that line of reference

Vince Young yeah and that was the Reggie Bush's senior year you know RIP to his accomplishments they got invalidated they'll live on in our memories though you can't take that away I know he was incredible

but yeah that was Lendale White was the USC running back just was untackleable but man those were yeah i'm a diehard ut football fan um and a diehard cowboys fan which is just really hard sorry to hear that yeah it's tough like it's sad it's sad i'm an eagles fan we're we're like two three and one i had bragging rights over you right now and pretty much the rest of the nfc east nfc east is

just a cripple fight it's it's depressing it really is and so is the big 12 i don't know man like i thank god for bitcoin right i have i have i have a hobby outside of football now well i guess i guess you can got a hobby and in austin you guys have a very powerful group of bitcoiners on their bitcoin companies you got unshamed capital um that's the only one that comes to the top of my head right now but the you have just a moon running the the bitcoin dev meetup down there um you're down there uh a lot of good vibes we got a really really powerful michael and pierre down there absolutely jimmy song blasting out mean mean magic jimmy song and i don't know we there's a lot of other folks down here i don't know who would would not appreciate being doxxed

and he'd be okay but it's we got a really good scene and more honestly more moving here like every week we had a meet up two weeks ago maybe um three weeks ago and there were like three people that had moved to austin there were bitcoiners in the last you know two three weeks from northern california chicago new york um and we're kind of like hey just moved here figured i'd meet some bitcoiners like excited to be in austin and to you know help work on this stuff together which was just amazing yeah parker text me once a week like when you're going to make the dream a reality move to texas you know it's uh it's something that i hear from folks all the time especially my or our brother in san francisco where they're like oh man it's like i was looking at housing

prices and like you know austin's not like cheap cheap anymore but good god in comparison um it's amazing and yeah the quality of life and the backyard you can get is yeah it's a great place to raise a family and hit nudge nudge yeah right right considering what's going on in philadelphia this week and uh the new york city i escaped from and somebody who has lived down south in south carolina for a good portion of his life the south is becoming more and more appeasing yeah there's something about the south whether you're in texas south carolina georgia those are the states i frequented the most um thank god for the south literally like honestly like we talk about a lot in this podcast like oh the creeping

uh autocratic state like i think the south would never let true liberty in the united states fail simply because of their penchant to take advantage of the second amendment and you really whether you're in charleston or dallas or austin i've never been to austin so i can't speak for austin it's a shame um dallas and charleston are two cities down south that i've in myrtle beach i could talk about myrtle beach too dirty myrtle um there's just a vibe of freedom the southerners have a way of life that if you haven't experienced freaks definitely go spend some time in the south yeah absolutely one one funny thing like again i after college i moved out uh out to arizona i was working for intel um in scottsdale and one like very funny thing

that all the arizona people always asked they always thought was hilarious so they'd be like so do you consider yourself like you know an american first or a texan and i was like a no brainer obviously a texan of course like isn't that what everybody says about their state they're like no texans are the only people that say that like everybody else says american first i think we have a we have a really good you know i can't speak for the rest of the states in the south but really um localist tradition down here now that might seem a little ironic with um you know texas is kind of a vibe of its own you know there's a famous john steinbeck quote um texas is uh not a not a state texas is a state of mind um or something like that yeah it's uh you know

yeah very very uh take liberty seriously take a right seriously um take kind of local affairs seriously and just in general we're just kind of like you know just leave me alone let me let me do do what i'm doing down here um see that's why i think parker's trying to recruit me so hard he's not the only one who's noticed this penchant in me like i have that vibe too like people before they know where i'm from or where i live i've had a couple people like oh i always thought you were from texas i was like no never never lived there i've only spent my whole life 29 years old 29 and a half years old i've spent six days collectively in the state of texas which is pretty sad it's a state of mind man i'm telling you all right and austin too you got

a lot of people coming right joe rogan's down there now adam curry's been there for a while but he's there two podcasting legends like i would love to see the bitcoin community in austin merge with that absolutely that vibe like so you got to start going to like bjj uh brazilian jiu-jitsu yeah my my my blanky ass six four you know 200 pound body doing jiu-jitsu i get twisted into a pretzel that's the one thing i gotta get another way in when uh when we met in person dallas was like holy fuck you're tall as shit man make me look so fucking short um it's a blessing and a curse yeah but no i i will tell you um you know if you if you search through adam curry's tweets uh he has tweeted about lnd a couple times i have it on good authority that he runs a uh

a lightning node um in his in his home office which is pretty cool i um i've actually been in email contact with adam carey uh after the podcast 2.0 platform is launched which i think is it's like starting to to hit the market soon um the dust has settled he's going to come on tftc at least he said he'd think about it via email um but i mean yeah he's really into it like he was he accepted private keys from rodolfo novak uh via radio ham radio wave really oh i didn't know that yeah him the dude one of the dudes from i want to say purse.io i think sam um sam paulette i'm sorry if i'm butchering your name sam the and elaine you i think the four of them were were passing private keys along ham radio waves and yeah adam was one of the guys to to receive

a private key via radio wave so freaks you can send bitcoin transactions outside the internet if you did not know that amazing i didn't yeah i didn't realize that that was him i know and he's you know i actually it's funny that you brought him up because i only really heard his name recently um but adam curry the podfather and he was he was but was he he was on stage with steve jobs when steve jobs like unveiled um apple's podcast platform or whatever yeah no well well steve jobs like asked him for advice i believe he's told this story so he's got he's the podfather he started the first ever podcast i don't know if it was no agenda no agendas one of the podcasts that he hosts now john c devorek um uh he's told the story on that

podcast a couple times i believe steve asked him for advice and apple it's like a platform where i forget actually i'm not going to butcher the story on behalf of adam but basically adam's belief i think i could say pretty confidently is that podcasting and more importantly broadcasting podcast via rss feed is one of the last bastions of free speech and free publishing that we have like all these publish uh excuse me platforms have like youtube has monopolized video twitter monopolized the the tweet and that that form of messaging and podcasting via rss feeds that allow multiple platforms to pick up your content distribute it his last bastion of sort of open and free content production and distribution and

he's with his podcast 2.0 platform is working to preserve that which i think is extremely important i would co-sign um that thought that this is the last true bastion of free content production and distribution that we have left outside of blogging yeah spotify is coming for you oh believe me i know i've talked about on this podcast before they they did like some user research with me where they asked me like what would it take for you to like publish exclusively on spotify i was like i don't think i would ever do that yeah it's really interesting like i think all of that stuff is just is it's so fascinating um the like the business strategy around building that platform kind of sucking in the talent little by little you know taking in tons of vc money

sucking in that talent running a loss for for a while and all of a sudden like you got the network effect you got all the users you know and then you just start kind of sorry you start kind of uh you know just tapping away at their margins little by little um until it's too late and you have you know there's no place else to go right like all the stuff it's it's interesting too because all the people i remember you know again working at multi-coin being really heavily involved in and all of like the crypto discussions all of the web3 stuff you know i thought was really interesting and there are all these youtube people that were so mad at youtube all the time right they're always pissed about being demonetized about censorship blah blah blah blah blah but it's

you just there's nowhere else to go right like all the user you try and start up your own site you do the same thing with twitter you try and start up mastodon it's like the network effect is too strong you can't you can't get out of it you can't break it you know people people don't care enough about censorship and about talent kind of squealing about their problems to switch platforms with them uh and the really good talent like they get paid enough to where they're kind of like the anchor people uh that people aren't going to leave right yeah well i have faith of podcasting will say um excuse me burping with the whiskey uh sufficiently distributed because spotify the first platform to make that huge jump to silo content creation on their

platform specifically they're shooting themselves in the foot they're already fucking up with rogan like they got rogan with a 300 million dollar contract and the employees at spotify are already complaining about past content and obviously he had alex jones a fellow austinite oh yeah our our local crazy it was a great podcast yeah he was fact-checked throughout and you speak in truth mostly um he's he's like so that that was really really funny during 2016 when you know people were wearing info war shirts at uh trump campaigns just because being from austin like alex jones used to be on like public access radio in austin like all the time doing his same thing right just furious ranting about everything and so like we know it's gay i know i know right like we know

alex jones everybody here like knows who he is i was like oh yeah like he's just you know harmless like whatever and so then seeing him pop up on like national television and being like you know this horrible fake news thing was like whoa that escalated very quickly did not think that he was going to get that type of reach right but somebody somebody brought up an interesting point last night i mean it was interesting in the fact that it put spotify in a weird spot like they censored info wars and his podcast on their platform yet they're letting him on joe rogan their anchor content creator uh and and distributing his his voice via rogan's podcast like is that hypocritical the point i'm trying to get to is like you shouldn't be put in that

position you should have an rss feed like distribution model where many platforms can pick this up absolutely i have a feeling it's gonna be like a five-hour podcast because we're not even like done talking about austin personalities but well but that one like that one in particular right like the and this is it's the same one of many many reasons that i'm really passionate about working on lightning is that the reason why spotify is able to do that and why these platforms are able to you know aggregate creators and just keep them is because they're able to aggregate you know the uh the advertisers they get the users they bring the advertisers all of a sudden they can pay and the advertisers are not willing to branch out and the

creators most importantly do not have a way to independently monetize without advertisements right you put a podcast out into the world you spread it on rss like how do you get paid for it right for directly from your listeners it's impossible but if you had native payments over the internet if you had some way of kind of streaming payments for listening or you know requiring a payment before your phone downloaded the secret that unlocked the the content itself right all that sort of stuff like all of a sudden the landscape starts looking very very very different yeah i mean we were talking about our boy dj seeds shout out dj you make me very proud uh his product ln cast uh absolutely right yeah it's a nice mvp for that and that model

or at least one of the models you just described when i when i got like yeah shout out to dj because when i got really obsessed with lightning like i don't know maybe a year ago year and a half ago or something i was just looking for anything that was you know direct payment to content creators and i actually you know had kind of a little bit of an intuition like oh man like maybe maybe podcasters would be interested in this because like they aren't they haven't been captured by a platform yet and so i found lncast from dj and messaged him i was like what are you doing with this how does this work how many people are using it blah blah blah pretty cool um so it's i was i was i did not know at the time that he was working with you

on your podcast but i think that that's it's a it's a really really cool application that i think is is gonna make uh maybe a big deal pretty soon i mean when you say working with me i here's a story dj seeds all right a young gentleman i i admire very much we met 2018 consensus i believe yeah it was we went to bit devs the week of consensus in new york city and then it was me dj seeds michael tidwell from therion i don't think he's there anymore though is he he's at zebedee now yeah he's at zebedee uh and um who else was there i'm drawing a blank on who else was there but it was ah give me a second i want to figure this out real quick

um dan anderson that's who it was dan anderson from counter party uh michael tidwell myself and djc it's this young little 19 year old who just he like came to the bar i don't think he was even drinking because he wasn't old enough yet and we met there and we were just talking about bitcoin that night and uh i just remember how uh enthused he was about bitcoin and he said he was like a developer interested in lightning and then when we made the website a year later in may of 2019 i emailed him i was like yo can you like hook up btc pay server to our website and like make it so we can accept bitcoin payments and non-custodial fast she was like yeah dude and then i was like

can you connect our btc pay server to shopify and he was like yeah dude and i was like awesome um in between then uh the inception of tftc.io and the first time we met at consensus he had made lncast i believe we were the first podcast um to sign up on there and it's it's crazy like yeah like even to this day dj has hooked it up in a way where it hooks up to our tftc node so on our btc pay server i don't even pay attention to lncast sorry dj but like i go into our invoices uh our paid invoices on btc pay server and i just have a bunch of lncast payments 10 cents for episodes that people pay to listen to it's just like i don't even pay attention to it but i am getting extreme payments via lightning uh for people want to access my content they could

go listen to it for free on some of these platforms so some people decide to give us 10 cents via airline cast which is pretty cool yeah absolutely and i mean i think that's you know like it's because it's still like it's you know i use i don't even know what i'm on android so i use all like janky apps i use something called podcast republic for my podcast and it's like still kind of hard to find new podcasts and like you know there's not like a standard link that you can send around to people and stuff like that but there's a there's an opportunity still for somebody to build you know like something that's user-friendly enough where you know yeah you pay 10 cents per listen i'd pay 10 cents to listen to your show marty absolutely right like

like no problem i might even pay like you know uh you know a dollar for somebody that has like a bunch of ads to listen to an ad free version right um like you know and that's like the if you could get to that point where that was the choice like all of a sudden you start having podcasters that like you know they'd be beholden to their audience not to the advertisers right and that just it's a very interesting thing that you know i don't really know what the implications of that are yeah see what we have to figure out because matt and i talk about this all the time we'd love to just do podcasts without advertisers where it's just purely off donations or patreon model it's probably a nature of freaks not wanting to part ways with their sats yet considering where

yeah yeah and it's uh in its monetization path yeah um but we have we have the contribute page we have the shout outs we get i'm probably averaging like three to four shout outs a week now which is like 150 bucks which is good yeah um not enough to feed a family right yeah no i know i know it's like but i do i do see and i do hope that one day we will get there and i think it will it's just having the protocol being fully fleshed out to a point where it's easy and the ux and the ui is such where it's like boom boom boom um so before we dive headfirst into a lightning network conversation let's rewind a little bit here you talked about the fact that you lived in arizona and scottsdale for a little bit intel what were you doing there what dragged

you away from intel uh to multi-coin and what drove you to focus on lightning at multi-coin that eventually led to your job at lightning labs yeah so um the origin story not very exciting but um i was actually uh an aerospace engineering undergrad at ut here in austin um was not you know i always like to say like i was an engineer i wasn't like a very good engineer but i was an engineer um and uh with aerospace my funny story about it is i was like really excited about like i wanted to be the guy that like plotted the orbits for you know satellites or whatever like i was i thought that was so cool and so i sat down like second semester junior year in my orbital dynamics class but i was like oh man like this math is gonna blow my mind but like this i'm

excited about this i want to learn that stuff very first class phd student who was ta presented to us his excel spreadsheet that automated the orbital calculations for any orbit that you could ever want forever and like he had figured out the algorithm and it was done and there was like no need for a human to do it he did he did he ran the numbers he did the math he wrote the excel macro he's like yeah here yeah i figured it out i was like well shit now what am i gonna do so i had a i had a roommate senior year uh because i didn't really like like you know the materials engineering all the other stuff like it just wasn't really all that interesting to me um uh but like i had a uh a roommate senior year my buddy josh um who was like really into

startups and vc and stuff and so i kind of got the bug of the tech industry then um and like wanting to work in tech i also was working on like there's a bunch of controls and communication stuff in aerospace and so i got really into that i thought that was that was really cool it's like you know like the nervous system of an airplane or a rocket ship right i thought that was like this is actually where the action happens right this is what makes stuff you know either either go or not it changes the flaps and you know controls propulsion all that sort of stuff i that was interesting so i went intel um to do controls engineering um mostly just because like i liked controls and intel was hiring um and so i uh i moved out to scottsdale and was working

was really cool experience looking back on it because like the fabs that intel makes their chips in you know intel they've fallen off in a pretty big way but you know at the time they're probably like one of the biggest manufacturing sites still in the us right like these tabs are just like staggeringly huge uh bullish or bearish on the potential fab being built in arizona by tsmc bullish in theory um we'll see we can talk about that later personal theory i think intel needs to get like taken over by michael saylor and he needs to spin out um a couple of fabs and just turn them into manufacturing facilities for asics instead we need to bring andy grove back from the dead yeah uh but so i was working in these fabs and like you know these are just i

mean just like like you know 10 football fields long you know five stories high filled with you know like billions of dollars worth of equipment there's like you know hydrochloric acid flowing all over the place there's all these dangerous chemicals like it's just this crazy 24-7 operation but the coolest thing about it is because the control systems are so good like there's no humans in the building like at all um you would like go and i would like go and like walk down and like try and find out like where this panel was and stuff and like i'd be walking you know for 30 minutes and like not see a single person and yet all this stuff is just running it's crazy man like like seriously it's it's it was like it's it was like if you ever get a chance to tour

are you in like a hazmats not like a hazmat suit but like a no you would be you would be if you were like up in like the actual fab and i have like did go up in the fab but like the only time people would go into like the actual clean room itself is like to fix tools or to do diagnostics like the rest of the time it's just totally automated like 100 the whole process it's it's insane let's describe these clean rooms a little bit more like you need a very very very very very very specific environment for this stuff to work oh man i forget i forget the statistic i'm sure it's on intel's website or something like that but it's like um within like a cubic foot of air the specification was like within a cubic foot of air there wasn't allowed to be um a particle

bigger like wider than a single um strand of hair like you know which is like a micron or something like that it was like it's like a micron per cubic foot or something like like just just like ridiculous level of clean right because you know any any little piece um any defect on a chip you know would cost millions of dollars i think it was something like the arizona plant was producing um 10 million dollars worth of revenue per minute or something like that oh shit maybe per hour that might be a little too much it was like it was something like so this was you know for the control side it was like okay this stuff can't go down right it can't fail because every minute that we're down we're costing the bottom line millions of dollars and so like this has to be

redundant it has to be 24 7 it has to it has to keep going and so yeah like the clean rooms themselves um and intel are like it was something like you know a thousand times cleaner than an er or something like that um was like the the stat that i remember um so just i mean just just like the amount of engineering that goes into ensuring that's the case 24 7 without a human in the loop is just unbelievable and so you know like you go to get in the gear it's kind of like um uh if you envision like the airlocks coming in from outer space right where like you you you have the suit on you go into the airlock you close the door right like they hose you down all the space juice and then like you know the door opens and you can walk back in and take off your

suit like that's it wasn't that cool but like the experience was not all that different from that um going into the clean room which was it's it's pretty amazing stuff what kind of perspective does that get you for how much people take all the technology we have today for granted like all the work that goes into that that is a a great question um and it is so much of tech that people think about today is like it's all software right it's all moving bits around on the web page and the most important thing is that you know if you make a mistake all you have to do is just like push an update and so like you know people will do ab testing and all stuff which lets you iterate really really fast but if you're making stuff in the real world like

there's like real world consequences right you learn the most important thing i think this is one of the reasons why i grokked bitcoin um the way that i did it leads you to really really value prioritizing reliability and uh reliability particularly over efficiency right and to understand like why sometimes you should just you know intel's i always this was like a very interesting this had a big impact on me intel's like main core value was safety right because like when they were building fabs in the 90s like semiconductor industry was killing people like like construction workers because i mean seriously they're like you know hydrochloric acid and like like really really dangerous chemicals and all this stuff they're on really high pressure

timelines like people were dying on the construction sites on like a not super regular basis and so intel's number one core value was safety and the reason why this was actually there was a business reason for it is if you're designing a process and it has all of these steps and you're dealing with chemicals and blah blah blah blah blah the only way that you can know inside and out all of the failure modes all the way like how it works step by step how it can most importantly how it could go wrong each step is if you've thought it all the way through in case of like what if my friend is doing this process and he dies like and it's not safe and he gets hurt and they like can't go home to his family right so like prioritizing safety is like the core value

which is something you know that's not the core value of google or facebook or like any any software company software development company right that's like totally just a foreign idea entirely but prioritizing safety in a in a company that deals with hardware and deals with the real world like there's a business value for it and like people took you know these are like grown men with beards doing construction like you know tattoos serious guys who were like really took safety seriously and i was just like that had a big it was something totally i did not expect but it had a really big impact on me um specifically because it's like you've got to understand all the ways this thing can go wrong before you even pilot it right which for the the astute

listener kind of sounds like making changes to bitcoin core doesn't it right it does think about that like i'm using a computer with an intel 4 core processor i'm pretty sure they're everywhere maybe not for all that much longer um but but they still are today i uh i have hope that intel can make a comeback i hope so too um but yeah so i was at intel for a while learned a lot of really good lessons about specifically like like like exactly what you asked about about you know engineering in the real world when there are consequences to your actions um and then 2017 happened um and i had like you know uh a relatively insignificant amount of bitcoin um but you know had some friends that had had some bitcoin too and at the time i

had like moved from being a controls engineer to being it's kind of a silly title but i was an internet of things engineer so i was on this team that was like piloting new cool internet iotg products so you know like smart um trash cans and like you know smart toilets and like stuff like like nothing like really all that exciting but like the concept of like you know you're going to have a computer on every traffic light and on every car and they're going to be talking and blah blah blah all this sort of stuff um was really interesting and it was really interesting specifically because i just couldn't stop thinking about like man well like in order for there to be all these devices out in the wild somewhere like they're gonna have to have some way to pay each

other to forward this data right like the telecoms are not going to be able to manage all of this stuff like they're they're they're too old they're too bloated this is too low of roi like they gotta there's got to be some way that these devices are going to be able to pay each other um and so that just happened to coincide with 2017 and the ico madness and all this sort of stuff um and so i just caught i caught the bug um and there was so much noise in the space you know like i was uh there was so much noise in the space and of course i went from you know having an insignificant amount of bitcoin to having a kind of significant amount of bitcoin to having like a huge pile of shit coins as as everybody does right uh and i was just like man

like the answer to what i'm looking for like this is obviously the next big thing somewhere in this pile of madness this is obviously the next big thing um but uh i don't know which of these things is for real i don't know you know where in this space is the solution that i'm looking for for all of these machine to machine payments but like i'm certain that it's here somewhere um so that was really well timed and then you know what better way to get a vantage point of kind of the whole crypto space and you know dive deep into every single project than working at a venture capital firm and it just so happened i was living in scottsdale at the time that multi-coin capital was based in austin and was hiring kind of a technical analyst to read a bunch of white papers

and kind of call bullshit on projects that were real and that weren't now i was like you know was a match made in heaven i got to move back to austin um the summer that i was getting married to my wife who's from san antonio who we met at ut together um i got to you know get paid to research this industry that i was like certain the solution that i was looking for was was a part of um it was just kind of like a match made in heaven um so got to move back got started you know working on multicoin and you know really enjoyed it was was it's a group of really smart guys spent like a year there you know after really like diving deep into bitcoin like figured out like this is the thing right like this is this is what makes sense the the thing that really got me

more than anything else was um the about bitcoin's value prop was the lower time preference more than more than anything else like that was that thing so i remember like you know we both i think we're about the same age but you know being in kind of high school in uh 2000 2007 2008 um was just like what are these people doing uh and then like like all of the short term i just remember like you know being very naive with paying attention um and seeing all the just like ridiculous short-term thinking when like people i knew had lost their jobs and lost their houses and all this sort of stuff and were hurting and like watching all the politics on tv and stuff and and hearing about how it all got fixed when obama got elected and then seeing obama like you know disappointment a lot

of things he set out to do because of like all of the short-term thinking was i was like this this could all be fixed if we all just agreed to think long term like these aren't unsolvable problems right like i was you know i'm dealing with you know aerospace engineering and working at intel like this is there's nothing like unsolvable about this it's just that we all have this like really you know what i didn't know at the time was high time preference and so figuring out like oh the problem is the money that makes sense like i can i can get behind that right that just it just like i remember reading i don't remember probably like a um i heard a meester thing or some some bitcoin or on twitter or maybe it was like a you know a screenshot of a mises

piece i haven't actually read any mises but maybe one of these days i thought you're i thought you're sub-tweeting my bent today i had a screenshot of a human action at a bent today i did yeah i did see that uh uh but that just like it just like it just grabbed hold of me and i was like oh well that's again like this is kind of the solution i was looking for and like to digress a little bit one other interesting thing about aerospace was like you know um spacex's phenomenal achievements aside like there's there's really like there's not really all that many technical barriers to you know settling the moon and you know launching rockets to mars or europa or whatever like all the problems are political and economic right it's it's it's that we can't agree

how to fund this stuff it's all government managed because none of these companies can make money on their own like there's no market for any of this stuff um and so like it's we've has been stuck for you know 50 years with this amazing technology that just like can't find a way out um and so i was like you know interested in kind of what those political and economic problems were um and then just kind of bitcoin just hit me like a ton of bricks um and then the other thing of course that we can jam on for a while i think is falling in love with proof of work proof of work is just amazing it's it's so elegant it's so beautiful that's what um as you've been describing your journey here i'm trying to figure out how to structure the rest of

this conversation because i want to take it down so many paths and i think if you're going to bring a proof of work i was going to ask you like what was it like reading all those white papers but we all know it's all bullshit like you you read five and then you're like all right the rest are to be like this there's nothing really novel yeah and it's sad it's it's correct and i and and it's this is a good time to take a divergence because like really the the most the genesis behind so many so many of the white papers and the icos and all of this stuff is not understanding proof of work not appreciating proof of work is thinking they can improve upon proof of work rather than Because, again, it's like a fetish for efficiency, rather than accepting like, oh, man, this thing is so resilient. And that's the point. And we can't design something that will be more resilient. And so we should just accept that this is going to be what works.

and that like because it's a global free market um for energy like we can we can kind of have you know the faith is that market forces will make sure that proof of work continually decentralizes with the caveat of course that if you guys haven't read um andrew polster's paper on proof of work and on asics in particular he makes the argument that proof of work actually has like a thermodynamic incentive to decentralize because like there's only so much energy that you can take up in one spot and that's something that just i mean that just goes like way over all of the crypto vcs and the you know computer science phds they they don't they again because they've never dealt with anything in like the physical world right like they that doesn't make

any sense to them yeah i mean it's one of my dcs in the space people like you mentioned and have been uh alluding to a lot of people vcs particularly see this as a software revolution where i think it's just as much as a hardware revolution that many people are overlooking has been i know i talk about great american mining a lot on this podcast now but it's hard not to considering how close you are to what's going on on the ground with mining and this is again just as much as a hardware revolution as it is a software like there is physical infrastructure that needs to be built out to make sure that this networks assist into perpetuity absolutely no and and and that's something that people forget and i just i tweeted about this the other day it's like

it's a misunderstanding of what layer we're at in the stack right like you know intel was intel was an important company until you know from like the the the first fairchild seven conductor folks which i think was like early 70s um they were an important company all through the 80s when like you know it's 10 years of internet existing uh computers existing pcs existing you know enterprises using um you know the internet before the 90s when they became like a globally important company and they're still like you know they were improving massively on their hardware the whole time right but people you know the people only remember post iphone when all that stuff was just magic right it just happened like there was a long time

that infrastructure build out hardware improvements all this stuff before it got to just app layer stuff and yeah i i think you're absolutely right that we're just in this we're in this early build out period where you need to have kind of a low time preference you need to understand that it it takes time not only like like one of the things with the internet was like really it a generational shift for people to just for the kids that grew up with the internet to be able to just take to it like water right um i think it'll be a similar kind of thing here where like you know your kid's gonna grow up and be like wait why would i want somebody else to custody my money or like why would i trust somebody else with the money supply that that's

ridiculous but like our parents and even you know people in our generation who who haven't really gotten religion yet uh they they don't get it right they're like no but it's always been this way uh and that's just it's just it's going to take time right and while it does take that time I think this is something that both you and I believe and have talked about earlier this year when we were in Dallas is that there's an order of operations to this. I say it a lot,

but you particularly, I feel like, are the one person that I have actually meshed with like the most on this particular thought. It's a thesis, right, for me. I'm dumb. I'm a fucking podcaster. I studied economics. i don't i can make you a shitty website with html css i'm dumb i've had six concussions

but just like you know the meme where it's like the the caveman oh yeah side of the bell curve i love that i love that meme absolutely i'm the caveman on the left side where i just have this intuition where i'm just like yes i feel it and this is the way is there an order of operations to all this and if so what how would you articulate that order of operations it's a great question i absolutely think there's an order of operations um and it's i mean like you get really wild what i think is is really happening here is um i think that bitcoin is uh like a digitally native i got this idea actually from sergey at uh at bit refill who didn't say this in so many words but he certainly like inspired the idea bitcoin is a is a is a

internet native nation state founded on principles of sound money and we're going to war with all of the rest of the nation states economic peaceful war for the world's capital right and so you kind of see this nation state that started off on the internet like slowly expanding like if you were to go to war with all of the rest of the world's nation states like what's the most critically important industry that you would try and infiltrate energy number one right most important out like you know people have gone to war over energy for thousands of years there's proxy wars right now going on over energy proxy wars right now absolutely over pipelines over you know it's the most important thing is the lifeblood right and so what is the first

industry the bitcoin's like really going after and attacking thanks to proof of work the energy industry right and it's not like we're going in it's not you know maybe not yet it's going in and companies are doing like hostile takeovers or anything but it's it's infiltrating right we're getting in there getting on the balance sheet um building relationships and you know going after oil and gas is just you know like there's the most important thing that people dismiss the most important thing i think going on in the world today that people dismiss um which just it just blows my mind that people don't take it seriously um it's it's it's phenomenally important we at great american mining hope that people keep uh overlooking

this aspect of Bitcoin proof of work it's it's and so like you know so I think order of operations right you want to go and take over the world's capital and be resilient right and be able to protect the capital of your citizens what's kind of like the next industry and it's interesting too when you think about it like this it kind of progresses in a stack in a layered uh layered manner if you kind of consider like you know mining is layer zero or something right layer one with the actual asset itself is the financial industry right so you know being able to provide and this is why i love unchained being able to take advantage of the native features of the bitcoin provides in terms of multi-sig is like that's a you've never been able to do that before

right what's like you know every you know again the with the i love the bell curve meme because what's something that everybody on each side of the bell curve knows is the saying possession is nine-tenths of the law right if i have it it's mine right uh and so if all of a sudden the most important asset in the world you know you have the ability for no it's actually you know these three or five keys have it and like everybody agrees because we're all in consensus on on which key is on the ctxo um that's just a brand new primitive right that that finance doesn't really know how to deal with and i think we're really early like we can see this happening you know those of us the enlightened ones can see this happening with energy right we can see it

happening with before it's it's it's happening and it's not slowing down and you know i meant to say this at the at the start of the podcast but um sorry on me i know you launched it yeah the number one reason i'm bullish on bitcoin marty is i'm bullish on bitcoiners and and and the the entrepreneurs that i met when i was at multicoin that are working in just working on bitcoin companies the the steve barbers the elizabeth starks um you know the the unchained guys drew and joe um you just go down the list right just unbelievably impressive people um like they're just just so impressive so so sharp so driven um so so committed to to what they're doing and just just talented what they're doing um steve barber i think is i think pretty much

everybody agrees it's like the best example of that steve's my boy i fucking love you steve um but so you got you got energy industry right and we can see that happening the next uh is finance right and i think i think through a combination of letting people kind of hold their own keys um letting there be this new kind of collaborative custody primitive um i think that's kind of like the next industry that gets infiltrated right maybe like after this next bull we start seeing companies kind of you know start even if it's just acquiring bitcoin right or acquiring custodians like paypal is rumored to do with bitco right like that's one way that would be crazy that would be crazy right that would be one way i don't know if i want i don't know if i

want paypal uh buying bitco yet though i don't know if i just i don't need it it'll be it'll be interesting to see who jp morgan buys uh in at the in november of 2021 it'll be interesting to see if they can even buy anybody right right yeah hey bitcoin companies out there know your worth know your worth do that do that future cash flow and even if it is coins at a million dollar coin right absolutely no uh so that'll be really interesting i think um and then i think what's next you know and i think i i i did uh again because like my my iot experience like what's the next like critical industry um that's generally state-owned and it's like one of the things also is like when you go about this on this kind of industry level on nation state

it's like you know the energy energy industry is kind of ripe for disruption because of all the um manipulation and and and stuff by the state right um in terms of regulations flaring all that sort of stuff right subsidies um and and and and non-us countries generally the energy industry companies are owned by the state um just outright so they're super inefficient and and corrupt and all that sort of stuff right so so right for disruption by you know purely capitalist um companies powered by their coin finance same thing generally state owned uh heavily regulated um generally right for disruption fat and happy What's, like, the next industry that's like that, that deals with mostly digital goods?

It's telecom. Telecom, trillions of dollars of capital, of capex every year, right? Massive, massive industry. Completely owned by the state. I think AT&T, Raoul Paul tweeted about this the other day, AT&T is the most heavily indebted company on the planet. Right? Really? Yeah.

I don't know. I saw Raoul Pal tweet about it, fact check me, Stasi, on the internet. But I believe it because their business model is the government gives them, the banks give them, they sell 30 year bonds and then they have 30 years to make up that revenue in subscription payments. Talk about an incentive to become complacent, a mechanism through which to drive complacency. Right? And so everybody hates their telecom, right?

And so I think, like, I don't know if that's lightning itself, if it's a layer on top of lightning, if it's, you know, how exactly this progresses. But I think that's kind of the next major industry to get toppled by Bitcoiners or to get infiltrated by Bitcoiners with telecom. And then after that, I'm like, that's about as far as I can see right now. um but those three right energy first finance second telecom third is just massively important and you get you get kind of big corners in control of all three of those like do you really need everything else right like i think i think your bitcoin bitcoin's capital would be pretty safe um if if if you had kind of the energy industry the financial financial industry globally and the telecom industry all fighting to protect it

because the incentives are aligned. I 100% agree there. And so that's, I mean, I think you ran a little bit there. No, you ran it, but the question we have to ask is, is that order of operations necessary for a cryptocurrency protocol to succeed, right? and take most of the market with it, right? Yep.

So let's compare what you just described seems to be the order of operations that Bitcoin as a protocol and industry is taking. Is there any way that that can be reorganized? Like Ethereum's going software first. Yeah. Doesn't really care about mining. Wants to go proof of stake.

Yeah. Is there any chance that that is a more advantageous order of operations? If so, why? If not, why? Well, I think for cryptocurrency to succeed globally, I think the whole point of succeeding is it avoids being captured. It avoids being captured by any specific cartel. this is one of the really interesting things you know i don't know if if it's just that like in the bear market i really unders i understand now why all the people that are

around in 2015 and 2016 like in 2017 2018 when i first started paying attention they're like man i missed the bear market right because in like 2018 like reading all those white papers like people were serious people were talking about like no this protocol you know will be captured by a cartel because of these reasons and like having like like really serious debates and telegram on twitter and stuff i'm like now it's just food tokens right and and and nobody cares anymore um but there was that was like a really serious thing when talking about you know new consensus mechanisms and so i just think proof of stake like by by definition is captured by a cartel so it's it's a non-starter so or ipso facto like you have to use proof of work and the only

way for proof of work to really get globally decentralized is to get in bed with the energy industry and so like i i i don't even think we need to project any further out than that honestly i think i think on i mean if you don't take proof of work seriously and you don't um you don't buy-in to ASICs and the decentralization that you get from having ASICs and the censorship resistance that you get from having ASICs in your protocol. Like, I don't think you can make it to the next level. Let's dive in here and circle back to Andrew Polstra's paper and dive into the specifics of that.

What is the nature of the hardware involved and the scarcity of the energy involved that in andrew's mind would lead to a natural decentralization of the physical nature of the protocol yep um well so first off like the the problem with prioritizing gpus i mean it's it's one and the other thing about it is like so much of the uh the distaste towards proof of work is not clear-eyed and and reasons it's it's political especially when you're close to it you're like you people have no idea what you're talking about yeah they have no idea it's all politics right and so it's not even politics it's feels like yeah well yeah politics is feels these days that's yeah but it but it is both right

and it's it's it's they're they're interlocked and so um like the the idea that like you know oh this isn't decentralized because like i can't mine with my gaming computer anymore it's like come on grow up like that's just it doesn't matter right and and what you're sacrificing the trade-off is is if you you've prioritized gpus um you like how many there's how many gpus are doing deep learning right now you're 51 attackable by anybody that matters on the planet instantly because you're not the highest value use case for your hardware and then on top of that i would argue you're prioritizing inefficiency like why wouldn't you want the chip to be as efficient as possible absolutely yeah like prioritizing other use cases for it's a it's not a serious

thing right serious people like you want somebody to go out and and you want the incentive to be so good that somebody is going to go out and knock on the door of somebody with a wellhead in north dakota and say hey like i can i take your energy off your hands like we can we can work out a deal here right like that's that's somebody taking this seriously right you want somebody protecting the consensus mechanism of your blockchain is you know like in the old days protecting fort knox right or like you know protecting the emperor of your of your country right like that's like the most important thing that you can do protecting the consensus mechanism again like like like taking safety seriously at intel um like you should sacrifice almost everything in order to

make sure that that is as safe and secure as possible and so like that's like the first reason for for having asics um the second reason is you know you want it is inevitable if this money becomes a global money this cryptocurrency becomes a global money that somebody will try and set up a farm to control consensus and print themselves seniorage right like that's that's that's inevitable it may take a long time but like that's that would be the only rational move to make uh is to try and capture the consensus mechanism because who doesn't want to print themselves free money so because it's inevitable that that will happen um you want people to professionalize as soon as possible and for there to be it to be an open competition that everybody is is trying to

do this same thing right like you know although um you know the the main tribe already and failed to do this like it's good that they tried it's better that they failed icarus yep absolutely i mean you say that a lot and i i i don't know how many people like really get it but i just like is so correct to me that's exactly what they are right they flew too close to the sun they they they reach too high and at some point if i ever have like you know a month of downtime i would love to write like a harvard business review type study on like how jihan just screwed up the best opportunity to be king of the world that anybody has ever had right it's like ah you had the ability to to get out of a proverbial jail being you are subject to certain whims of your government

or anybody in the world and you fucked it up like for bcash oh man just what an idiot oh man you know what that lesson needs to be learned though somebody needed to yeah some somebody needed to fail somebody needed to fail and it just so happened to be him but it's like it's inevitable that if you're if you're if you're your cryptocurrency becomes important um and and so again i think we can we can bash proof for stake here in a little bit but i think it has to be proof of work um and so it's inevitable that that um you will people professionalize and try and capture the consensus mechanism so you know bitcoin's kind of before udy disappeared from twitter he had a great tweet um you know r.i.p where'd you go yeah r.i.p out of nowhere i know

um he had a great tweet about how like you know the whole point bitcoin is that the rules were set and you know what you're planning for yeah we everybody knows it's it's that's that's like you know equality of opportunity right everybody knows what the rules are right it's it's, it's a land grab. There's 21 million spots and, you know, go, right. And, uh, Some believe that there's 21 million spots that these 21 million spots will be distributed in this fashion with this technology. Yep. Go. Right. Absolutely. And so you want people to, people will inevitably professionalize.

You want them to do that, you know, as soon as possible. and the beautiful thing about requiring the burning of energy in order to participate in consensus is there's only so much energy in each spot in the world right even if you were to go and like flare natural or flare oil in saudi arabia or something i don't even know what like the the most dense energy rich part of the of the planet is um but even if you were to do that or you know mining in hydro in china like still you're gonna hit a limit right and you're gonna have to geographically disperse i think we're i mean speaking with some miners in china i think the hydroelectric energy is already starting to the price of that hydro is starting to get driven

up because of the demand from from proof of work mining yep i i heard that i had like heard kind of whispers about that and theories about it like a year ago but that's really good to hear that it's it's happening now because then it's like okay well you know i'm not just gonna like sit on my hands and shut down my business right like i'm gonna go scavenge i'm gonna go find energy where i can compete uh and where i can continue and so like just naturally because energy is a geographically distributed resource and because miners have to have energy in order to mine they will geographically distribute um and so then all of a sudden it's like okay so we have this massive competition brutal one of my favorite charts um of all time is you look at um

i think it's it's like dollars per hash or or something i think it's i think it's dollars per hash or maybe it's maybe it's bitcoin per hash earned it's just like dollars per terahash goes down no but the one there's there's one i think it's i think it's in i think it's bitcoin for hash because it's like the native unit and it is just like straight down i mean it is like like this is what a purely competitive commodity market looks like right this is just brutal market pressure on on pricing i think hash rate index um the guys from luxor mining track this yeah so it's funny that i'm saying it's when i looked at it like a year ago i was like oh holy shit i don't know what the actual metrics are but it was just like like this is this is what it looks like

to have a brutally competitive perfect free market globally competing for this scarce resource is it's just like just drives drives the cost down just immeasurably right just just amazingly efficient um and so we have that working and like the nice side effect of everybody going out and trying to win the lottery uh by by you know burning energy to to win uh to try and win block rewards is they just naturally geographically distribute and you know it's really hard and this is another thing that's it's tough for people to get it's like because these are people like this is not a software business these are people like you need somebody there managing this stuff even if it's like a contractor or something right like that just de facto means that it's going to

be really really hard for one company to own all this stuff right it's going to be distributed You're going to have to have local relationships with local people because all of these like really important energy sources, like either they're owned by private property owners, like in North Dakota, or they're owned by the state. And like, you're going to need relationships. You're not going to be able to be a rich guy from New York walking into, you know, the Sudan or something to go and mine Bitcoin and like, you know, just make it happen. Like, you're going to need to be a local. and that's something that people really don't understand and yeah so there's many factors to the point you just made there you need that boots on the ground because you're specifically so i'll just speak from the context of mining an oil field that is and you're using waste gas the waste gas

It isn't the same on every well pad. You have a different BTU content. Depending on the BTU content, so the British Thermal Unit ranges usually between 1,000 and 2,000. And the closer you get to 2,000, it's considered wet gas. And the wetter the gas, the more you have to scrub it and condition it to make it consumable through a generator. the lower the btu content the uh the better you can take it out of the ground at a btu content

of 1200 and basically put it in a propane tank maybe a bit lower around like 1080 you could probably push it into a propane tank and so there's nuance there with you have to have the ability to know how you need to treat the gas specifically that's just one thing you need to know the molecules you're dealing with and what you need to do with those particular molecules number two like you mentioned there's a bunch of small like i think people don't understand that there are a bunch of small landowners that have mineral rights and own minerals the amount of small businesses that have uh that run oil producing businesses is crazy that's the number thing i know that's you're in texas you

know better than most i i the only thing i know about oil and gas which is i'm sure disappointing to all of my friends and family who work in oil and gas is that anytime i try and argue about them or argue with them about it i get owned like i i it is way more complicated and uh way harder for somebody to just like step in without knowing all that much to try and say well actually why don't you do this like every time i try i just get dominated so yeah i it's complicated it's really complex and it takes a lot of expertise and like local expertise in particular yes well all right transition to the locality here you have different regulations different laws and different jurisdictions like and that's so like particularly in the bakken the bakken versus

the permian is completely different like north dakota has crazy strict laws and there's a regulate there's a regulatory arbitrage there as well as a btu content arbitrage as well as a price arbitrage like the the variables that go into all this stuff are are many and complex and like you're alluding to the likelihood of one company being able to figure that out and monopolize that whole stack especially considering property rights and the fact there are a bunch of small producers who who could just withhold from allowing the monopoly to come in it doesn't make sense that whatever becomes centralized in my mind at least not at all and you're talking to somebody you're talking to somebody who's trying to go consume as much waste gas as possible to buy bitcoin

and that's and that's and that's that's the beautiful thing about it is everybody who like like that's one of the things that it it you know you know working at a venture capital firm it was like well mining businesses are are terrible businesses for for bc money right like they're not going to hit scale like why would i ever like it's just not interesting to them and like i don't know i can i can kind of see the argument like software businesses scale better like you know blah blah i was really interested in investing in in mining companies but like i would you know it's it's kind of like it's honestly a better use for like private equity capital than venture capital um at this stage right like investing in like an asic manufacturer would like that would

be a venture capital worth investment like investing in somebody that has like a really asymmetric access to energy that would probably work but yeah but anyway like that's not really all that important the important thing is is that they like because they disregard people work and they disregard miners um they don't really consider the fact that like nobody is more bullish on bitcoin than miners are right like miners are the ones that they're like i want a dollar cost average i want to work my ass off and go and talk to all of these you know people out in the sticks that own these mineral rights because like i want to buy cheap bitcoin for forever for my job right and it's possible freaks it's happening it's happening it's it's it's not easy though

uh and it shouldn't be no but but like everybody like the incentive that will just continue to drive increased efficiency it will continue to drive um increased um decentralization distribution it will continue to drive these ambitious miners to go and find cheaper and cheaper sources of energy and one thing that can bring you freaks peace of mind is knowing again this is so we do a weekly webinar i hate to bring great american mining i don't hate to bring it i love to bring it in but i know some of you freaks may be like oh he's bill baby chill he's uh he's being self-serving right now but like honestly like it's my day job i can't not think about it there's a symbiotic relationship budding between the oil and gas

industry and bitcoin miners and it is once you get it it's like very obvious and it's like all right this is what we need to focus on but it's not easy it's there's so much give and take it's i forget exactly the point i was trying to make i'm ranting now the uh the buffalo trace is starting to hit me um but no it's it's it's like the once you once you get it and you get kind of the point of going after like i don't know i think bitcoin itself price goes above 20k that'll be your best marketing to the oil and gas companies right all of a sudden they'll be like hey who was that guy that wanted to get us some of this bitcoin and when it was at 3k and now it's back up at all-time highs like we should we should get him back on the phone we should figure out what's

going on here with this thing yeah fuck i wish i remember what i had a really good point to make i just fucked it i'll think of it later but you'll think of it later no but it'll be a no-brainer and not to harp on great american mining too much but that's like our thesis is that bitcoin mining as an alternative revenue stream especially when we get to levels that you were just describing when you approach all-time highs again and uh we get back into like a raging bull market the opportunity cost of ignoring that revenue stream becomes too high it's just like you can't ignore it at that point yep i've been showing it to my friends um i again i know a ton of people that work in oil and gas i've been showing it to my friends ever since i like really

probably like i don't know year year and a half or so um since i really got it and figured out what was going on here and like slowly and slow they didn't take me seriously at first but slowly they're like hey like you know especially there's a i don't know you know you guys might be aware of this there's like a lady running for a railroad commission here in texas uh next tuesday that's like really gonna crack down on on flaring and like she has a pretty good chance to win so like they're all kind of like oh man like we're like wargaming this in our office and like we were thrown out crazy i got a buddy tell me this the other day we were thrown out crazy ideas and i was like what if we mine bitcoin with it and like i didn't get laughed out of the room right like

it's it's it's slow and and you got to have like a low time preference and kind of trust the process but like it's happening and i think that that's like that's like one of the most bullish things that can happen yeah no the what's going on with the texas railroad uh commission we've been planning for like it's been obvious that they're gonna it's so i'm thinking of alex jones's appearance on uh rogan last night because they talked about carbon emissions and stuff like that but we should be as efficient with the energy that we're pulling out of the ground as possible bitcoin mining presents that opportunity you should not be flaring and venting natural gas you're literally just burning it and wasting economic activity or opportunity excuse me

you should be running that through an asic and producing bitcoin with it but with that being said like a lot of what's going on like it's a virtue signal like the esg mandates and stuff like that it's i wish it was more driven via efficiency narratives versus the world's going to end if we don't do this yeah person you know it's one of those things where it's like it's it's a narrative i think that's in general with a lot of that stuff i subscribe to the belief that like these are mostly good people that think they're doing the right thing and they've just kind of like bought on to a wrong narrative and either they've like they realize it and are too deep in to like

pull themselves out or they haven't realized it yet and they actually you know or think they're doing the right thing you know for better or for worse i think reality will prove them wrong um hopefully they don't do too much damage um of course i'm in california right now you had rolling blackouts in san francisco last night i know you know like that's one of those things where like gonna seem i'm i'm very you know that's one of the really nice things about living in texas right like this lady might get elected she may like crack down and stuff things ever got like a little too weird if the state was cracking down like a little too hard on things like the texans would kind of perk up and be like uh hey this isn't really how we do things around here you

You know, like, we got a nice thing going here. You're not helping. We're going to kindly ask you to leave. Yes, politely. Politely. As we have our hand on our holster here. Yeah, tip of the cap and a hand on the holster. Yeah, right, exactly.

Yeah, we're not threatening anybody on TFTC. This is... Absolutely not. No. I don't know the text away either. Chivalry. It's not dead. Is it dead yet?

that's the question absolutely not absolutely not it's alive and well in austin texas well it's really alive and well and like sticks um austin is kind of like just a normal big city well big hold the door freaks yeah just that that one little act of chivalry just hold the door just hold the door wow r.i.p to hodor though game of thrones fans all right well didn't um what's his name the author come out and say that's not the way uh i would envisioned it i don't know i uh i was a i read the game of thrones books in high school and was like an enormous fan um and i'm just glad that i got to see an ending because i've been waiting for the next book for like eight years now and it's like what's what that's a ridiculous thing to have

happened were you uh was the ending good enough for you i don't care i i'm glad i got to see it end i i had waited for forever to see some sort of conclusion to see what had happened after the fifth book and so like you know whatever and i don't really care i'm glad i got to see that i don't have much skin in that game i never read any of the books so my brother did and he would tell me about it i'll be a nerd he is a bit of a but back to bitcoin we just took a deep dive into proof of work i think it's imperative if this is ever going to be successful and actually one thing that reinforced that is rereading the paper uh by trebitsky i forget it trebitsky i forget his first name but if you freaks listen to the episode of crispin dixon from coin shares

he brought it back up and this is excellent yes i love chris one of my favorite people to talk to in the space that's another one you want to talk about sorry being bullish on bitcoiners like the mining space the crispin dixons um you know the luxor guys the biduda guys um man just just top top notch like like phenomenal people the guys that you want on your team right and it goes back to like low time preference like the thing that pissed me off and still pisses me off to this day about like ethereum and everybody's been caught hook on sinker to that narrative is it's a shifting narrative there's no

stability in what was it first was like casper and radon and plasma so let's get into this like yeah let's on ethereum for a little bit let's let's show them they're they're they're nihilists right well so i i've been back a couple of days so so we talked earlier about like what's what's the number one thing you want to avoid for this thing to get globally big you want to get you want to avoid capture you want to avoid capture by a cartel ethereum's already been captured like like it's already been captured remember what like the number one thing like the the the number one application that people wanted on ethereum in like 2014 was die right was maker dao the

decentralized stablecoin to be able to pay people for running servers in like us dollar denominations you know what the number one collateral in maker dao is right now the number one usdc another of a fiat-backed centralized stablecoin it's hard like that was their number that was was their central bank right their distributed central bank that was supposed to be like the thing that bitcoin couldn't do it's already been captured hey we've got the transition to 2.0 coming it's going to fix all the problems but is it coming right like you know you've been around a lot longer than i have but even i'm kind of like man like what are they doing uh it's been forever and like it's going to be really really interesting to see because you know one thing that

you know hopefully the freaks are not paying close enough attention to know this detail like 2.0 but like if the beacon chain launches if it's phase zero of the three-phase plan happens people that send their eath off to phase zero they can't get it back yeah right so like they are literally lighting their eath on fire you know shooting it out into the river uh trying to land it in you know some boat that they don't really know which direction it's going like how much eath is actually going to take the plunge what if like both sides i think are bad what if not a lot of eath goes and it's like oh 2.0 is obviously a failure nobody cares or what if a ton eth goes and it's just oh shit we have to build this thing now right it's it's such a it's such

a cluster man like it's gonna fall it's gonna fail under its own weight i used to be like get pretty like mad about it mad about like the waste and the all of like like one if there's any aspiring journalists i still get mad about it the opportunity cost is so high it's like why why are you focusing on this but then it's like all right maybe some good ideas are coming out like from a ux ui perspective but like is it really worth that opportunity cost i don't know it's not i don't think it is but but i've come to terms with it because i think it's just it's collapsing under its own weight um one of the uh what was i gonna say um one of the really interesting things i don't know if you read uh nick carter had a great post like last week or

the week before about like the the fee cycle and price where it was like usage goes up price goes up fees go up that kills you like there's this yeah usage goes down there's like you know there's this this this this cycle to it and so like the interesting thing about what ethereum chose to do is they didn't listen to any of the gray beards in bitcoin that told them that all of this was a bad idea they decided to build exchanges directly on the blockchain they decided to have you know contract accounts they decided to have all of this stuff that everybody told them everybody told italic was a bad idea and now like you know there's a ceiling on how big ethereum can get like they finally built something in uniswap that people like right like there's no denying it

right like people people like trading through uniswap they like the defi stuff there's there's some five figures six figures of users who are trading on this thing with like some real money but it's crippling the platform right like it doesn't scale it's priced out all of the world computer stuff right now it's just like an exchange it's a casino that's one of my big questions is like how much of that is actual usage versus whales just putting capital and having bots trade against each other like that's yeah i mean like it's not helping like you know forget remember the remember the banking the unbanked and like bitcoiners don't care about you know the little guy and the person in bangladesh who like you know wants to be able

to send a transaction now it's a it's a casino for whales it's monaco on the internet right monte carlo right wherever people gamble vegas i think that's that's the thing i stopped getting angry at it's just getting angry at these people virtue signaling like they're building something yeah it's helping the world and it's really just helping entrenched insiders yeah this this this this latest defy one was like particularly gross um and one of the so one of one of my one of my favorite my absolute favorite things that came out of it though was like one of the main ethereum influencers the guy who ran like eric connor who ran like whatever blog right he like deleted his twitter or he didn't let me see when when his last thing was um

he deleted he left twitter in august his very last tweet it's still up i'm looking at it right now his very last tweet august 15th is don't forget to sell the top oh my gosh he was like one of the biggest influencers throughout the entire bull market he's like you know the heart and soul of the ethereum people and it's his last message to his followers is dump bond retail wow i didn't ever like i i don't know if i blocked or muted that dude i haven't seen him quite a while that was his last message i didn't realize he was gone he he took an indefinite leave after like he probably got paid under the table to promote a bunch of d5 products and yield farming stuff i'm sure and i'm slandering him right now but i think i'm probably right um and his very last tweet

don't forget to sell the top if that doesn't tell you everything you need to know about ethereum and the defi ecosystem like i don't know what to tell you like that's that to me is like okay well you know this will inevitably fail at some point and i don't really need to worry about it anymore yeah i got a lot of shit fuck fuck you know what we talk about ideas we don't talk about people here freaks we're moving on from talking about people that person always pissed me off but the idea of ethereum's never made sense to me especially their their their extended product roadmap and the moving narratives i think we can have a bit of a cathartic session here on this episode of tales from the crypt of ryan gentry i think the thing that pisses people off

is that the influencers like Eric Conner speak so confidently that ETH is the new money. It's going to take over Bitcoin. And knowing the fundamentals of Bitcoin from a proof-of-work perspective, from a development perspective, from a second, third-layer perspective, inherently just pisses people off

to see these, frankly, charlatans speak in this way about something like in my mind it's bitcoin or nothing right like if bitcoin fails everything goes with it right like if you were if you were and i've said this many like i haven't said this on it's probably been over 100 episodes since i've said this on this podcast it's bitcoin or nothing like if something overtakes bitcoin how could you ever have confidence that that thing that overtook bitcoin would not get overtaken by something else you just start a vicious cycle of the inability to have any confidence in that system it doesn't make any sense doesn't make yeah uh i forget exactly the words that he used but jacomo when he was on um

peter mccormick whenever you know a couple weeks ago it was like the highlight where he was like you know this is our only chance for sound lending like this is this is it we can't screw it up right like it has to work um i think that's i i think that's exactly correct and i think the thing with like the the eth marketers they make me really mad too but you know what's what's really interesting um now that you know their thing has devolved into a casino like all of the you know all of the big corners told them it would for forever now that you know their thing isn't scaling like all the big corners told them forever now that one like really interesting dagger in the heart of proof of stake that you know nobody really talks about anymore but like i can tell

you when it started happening because i was working multi-coin at the time and the crypto thought leader ecosystem was like oh shit we didn't think about this was and i know matt odell's been all over it was exchanges staking changes yeah right it's like boom your things captured already You get a higher interest rate at the exchange. Done. Yeah, done. Like, they're re-apologizing. Done.

Like, your whole consensus mechanism is screwed by the casino operators. Like, you're done. It's over with. Right? So, like, that was a big deal. I hope it was Matt that accepted that idea in the VC world, too. That would be beautiful. I don't know if I can give him credit, but, you know, it's just, yeah, like, that started happening.

uh and it was like very obvious and now um the last bastion that they have right the last thing that they can throw a bitcoin is um that the fee market is not going to develop the 21 million is not going to last so we're going to have to inflate uh and i was looking at the blocks today and there were like five blocks in a row with over two yeah like the last block 2.21 bitcoin in feet shout out to mempool.space phenomenal block explorer that's 30 of the reward right that's 30 of the reward you know like i think for uh i did like some back of the napkin math a while ago like for like a healthy velocity of money um with 21 million diluted like the the right number that you would want is about like four bitcoin in fees per block right like

we can do the math offline probably wouldn't do a very good job of it right now we're already halfway there and it's like it's it's 2020 we still got like 100 years left right and we're going back to the bell curve here like just the caveman to me is like uh if this ever becomes even a modicum of successful i don't even know if that's a good description i don't even know if that makes sense but it becomes like a a fraction of what we think it will be like the activity that will go on on the network like you need to pay fees to get your transactions and like we are so early we're so early like thinking about how many people are using bitcoin right now and then trying to extrapolate that out to the future if you assume that more people are going to come

to the conclusions that we did and therefore use bitcoin like the activity is going to increase and therefore the fee market is like you are an idiot if you don't see that i'm sorry a lot of friends who who poo-poo the potential development of the fee market but just like the caveman to me is like look to where the puck's going like if the shit like ever takes off like it's not even a question not even a question absolutely and that's that's what's like so that i think i don't know we'll see i think the best thing that could happen um would be e2 crashes and burns there's some like black swan and defy and it just collapses honestly i don't think that's going to happen i think we're going to be the way i like to think about ethereum um so i'll give you i'll give you

two analogies the first is like silly and local um i don't know if you're familiar with the relationship between the university of texas and texas a&m um but the university of texas was first the biggest it's the flagship university of the of the biggest you know i'll just go out and say at the best state in the union are we about to shit on hokies right now uh no then the uh and the the farmers of the aggies of texas a&m aggies the aggies yeah yeah the hokies i think it's virginia tech that's what it is um yeah the aggies the aggies are just they were second they're smaller like they're an agricultural mechanical school like they have a place right like like they they they they fit their role very well for a very long time which is like you

know a an agricultural mechanical university whereas university texas was like the prominent state um you know liberal arts university they're different roles they should they should not compete but it just drives a&m crazy and all a&m fans crazy that they're second tier they just cannot accept it right and so like this is there's a large amount of arrogance here like i know i have family that are a&m fans um i i like them they're nice people but like i like them you don't love your family i like i love my family uh they're in-laws so like you know um uh uh but uh i was gonna say something but i'm sitting in my father-in-law's bedroom right now Yeah, probably a bad idea. But it's like they're second tier, right? They're not the flagship. They will never be the flagship. And it just drives them nuts. And I see so many parallels between Bitcoin and Ethereum where it's like, you know, we shouldn't take them seriously.

They will always be the second cryptocurrency that got traction, right? They will always be second. They're probably not going away, honestly. But they just, it drives us crazy because they can't accept the fact that it's like, no, like, I think the meme, the saying that we should start or that Bitcoiners should adopt is Ethereum is a, it's an attractive sidechain. You know, like, it'll never be money. but like they built they built a nice little casino thing over here and like it's a it's a

it's a good side chain for bitcoin right it's not great it's not you know the ideal that we dreamed up but like people like it they just shove it to the side it's never going to be money you know people can use it if they want we prefer it if you didn't but you know that's that i like that i can get behind that i think that's that's like that's like taking the higher road Now, whenever they inevitably do, this is like the hilarious thing, right? It's like in Texas, there are always, there's just like, just lists and lists and hours of Aggie jokes where it's just like, you know, it's kind of like, like blonde jokes, but for Aggies where they just do, I know, sorry, where, where there's just like endless jokes

about, oh, well, you know, the Aggie did this. and i think that's that's like we will always dunk on furions when they do stupid stuff but at the end of the day like it's it's never going to be money it's not competitive the platform is already captured it's like an interesting side chain that they kind of built into a casino which is ill-advised but you know whatever yeah you have a mental opportunity cost where you have to realize when you're wasting mental bandwidth on that it's really not a competitor at all again going back to the order operations that we described earlier yep and the one thing the very first one right they're trying to they're trying to get rid of

their miners like that's that's that's the first step and they already blew it yes completely agreed but then they'll i don't want to focus on ethereum but i want to use ethereum's ethereum's argument to transition to the lighting network which is like oh we're doing all this better you can use ethereum as a transactional currency much better than bitcoin at this point which is arguable to begin yeah and people are like

oh look at all the bitcoin locked on ethereum which is disingenuous at best and a complete fucking lie at most because all that bitcoin's on a fucking multisig wallet on the bitcoin blockchain there's zero bitcoin on ethereum

and they like to use lightning as the the punching bag like oh look this is your second layer solution look where it is now so speaking with you particularly i think you are a very uh good person to speak with this topic specifically like what is the state of lightning right now uh we are here talking because lightning labs the company you work for uh works on lnd the most popular lightning network protocol which is making its uh second major release uh next week the day that this podcast will be released or the day after um the protocol is released this podcast will be dropped what does this say to lightning why are you bullish on it what can we look forward to in the future

so the comparisons are stupid it's like comparison it's like the comparing you know um the gallons in a fish tank with i don't know something that's not a fish tank um it's it's it's like it's it's not a good comparison it's it's it's the the the coins that are locked in the ethereum are there you know the honestly the best comparison is the bitcoins and coinbase like again ethereum is a side chain right uh the miners the database that is ethereum compared to the database that's coinbase like that's what they built their side chain into into a casino like coinbase has a million Bitcoin right that's what ethereum is competing against and they're failing miserably and it's it's it's it's it's not interesting lightning is much much much different

right lightning should be compared to radon right how's radon doing right the payment channels and state channels does it exist i don't know they raised 30 million dollars you would think that you know i think that that's i think like the entire lightning ecosystem when i looked when i was writing my my paper in like march the entire lighting ecosystem i think it raised around like 45 million dollars so like raiden raised you know two-thirds of that what happened to all that money right where'd it go well like could they even build a lightning like network considering that bitcoin works on a utxo set and ethereum's on a state um what is it a state yeah the account the account account system yeah no i mean like i it would be it would be harder it doesn't matter

the point is it didn't work um they weren't able to do it they built something else uh instead i like quit multi-coin and you know had been begging elizabeth stark for a job for months um because i saw the potential for lightning and it is just enormous it's going to take some time to get there right because the key thing is this is actually a decentralized peer-to-peer network Right. Decentralized peer to peer stuff goes slow because everybody has to upgrade. Right. Everybody. We can't force people to upgrade. We can't force people to build up new limits. We can't force people to put their own money into the protocol. We can't print new tokens to incentivize people to spin up nodes. Right. like this is actually a real decentralized peer-to-peer network and the important thing about that to recognize is that it will be slow it will be resilient it will be around and most importantly there's actually a network effect at play here the more nodes that get online

the lightning network the more people that download wallets the more valuable the network gets just like any other transportation network in history and so i'm like writing working on it On a blog right now, it's talking about how lightning is a transportation network for Satoshis, just like how railways were transportation networks for, you know, pork and clutter. Highways are transportation networks for cars. Airways are transportation networks for planes. You know, fiber networks are transportation networks for data. You know, power lines are transportation networks for electricity. all of those things once they got started they didn't go away right like like transportation networks have the most dominant and how like you know the social graph is a transportation network

for attention that one's like a little bit more i gotta do some work on that one but like once those things get started they don't go away right like people don't give up on them they get more useful to figure out more ways to travel to transfer more goods across these networks it's it's it's an actual real network effect like there is no network effect in defy because like we've seen already empirically like people just yank their coins out of the you know out of the automated market maker or whatever right like once the yield drops they just take it away yeah they just force the protocol and create a whole new one doesn't even absolutely and so like this is you know and at the series a raise that um any labs did elizabeth uh wrote a a blog

about how this was the decade of lightning right like the next thing about that like the next 10 years think about where bitcoin was 10 years ago think about where it is today and i think i think we've been talking about the the layers and the order of operations think about where mining was 10 years ago and think about where it is today could anybody mining at their home in 2010 think that you know whatever chase lockmiller would be talking to chevron or exxon i forget which one like major oil conglomerate about equinor natural gas in equinor yeah right like oh my god um massive massive like this is one of those things where it's like people probably would have been disappointed in two years by the progress but just been astounded by 10 so we're in the same

thing enlightening right like i think you know paper was written in 2015 nobody could really get started building it until post segwit at the end of 2017 like mainnet was launched only really at the start of 2018 right i think like that was the first the first mainnet transaction was like january february 2018 um so it's only been you know two years two and a half years since it really happened and so like where was mining two and a half years after it started like probably i think in like the gpu era asics hadn't been introduced yet and maybe like if the gpu are yeah like maybe maybe if the gpu era little known fact the first bitcoin miner to gpu mine was laslo dude who bought

is more famous for buying two pizzas for 10,000 Bitcoin but he was the first GPU miner as well I'm pretty sure that's one of my favorite like every time yeah he invented and he wrote the first Mac implementation

of Bitcoin Core that's what like whenever pizza day comes around and people are like oh man can you imagine being that guy I love the comments like dude He invented GPU mining. He is fine. Right?

He is fine. So, like, so if you think about it, I think it's really important to talk about this in that same sort of context. And, like, you know, order of operations, we saw how mining progressed, right? I think lightning will progress faster than mining did because it's not dealing as much with the physical real world. um and it's building on top of like a very strong network effect already which may give it like a more of a booster again enemy coming out like intuition like yeah and and like bitcoin is much further along it's all software all that sort of stuff but still it's a decentralized peer-to-peer network right like those those take time to get going but once they get going like they don't go

away right and so i think the the better question about like is lightning progressing like why is taking so long the better question is like how big can this actually get right if we think about 10 you know 10 years from now how big can this actually get how many nodes can we get on the network how much volume and what type of volume is flowing through this well that's why i was so excited in dallas when i finally realized who i was talking to when i was talking to you i was like oh fuck you're ryan gentry the dude because i believe the first time i wrote about some of your content in the bent was your thread at multi coin about like the potential of the lightning network particularly around like the uh ln url auth and lsat and the web

three stuff the web three stuff yes i was like oh like because you thank you for articulating like a vision to strive for in this stuff and it really is like people get caught up in the nitty-gritty of oh i can only i can only create channels with 16 million sets yeah it's not the case anymore but like everybody focus on what's going on at a given point in time and don't try to see what you can do in the future once this is fleshed out and you did a very good job doing that in that particular piece that you wrote in that thread um yeah explain the potential of the lightning network i i i have again i have like kind of a unique perspective on this because you know i came to crypto and to bitcoin looking for a network

like a communications network where machines could pay each other right and so like that was what i was looking for this whole time and like i think lightning is it um for a whole variety of reasons but we were talking about like you know what's the state of the network today what am i bullish on so So the number one problem in the Lightning Network so far has been, well, it's really two problems in one, but it's been the inbound liquidity problem, right? So you have a node, you stand it up, you put some Bitcoin in some channels, you can't receive any payments until somebody opens a channel your direction and provides you inbound liquidity, right?

That's like, everybody knows, well, most people that pay attention to Lightning know like that's a very thorny problem um it depends on a lot of altruism you know people have gone out and like been posting on twitter there's telegram groups kind of all this different stuff looking for ways to get inbound liquidity their direction so um the brilliant people at lightning labs that i am just amazingly fortunate to be able to work with um have built lightning pool uh our new product to solve exactly that and i mean we could shit marty we could we could you know record a whole another hour and a half podcast just talking about this because i think it's so cool i got time all right all right um but what lightning does what

lightning pool does is it solves the inbound liquidity problem like you know this is probably a bold statement but i think it's it's done like it's not a problem anymore um and and the way it does that is through just a mean again i'm so privileged to be able to work with these people every day um because it's all this in a true to bitcoin way that i think is very rare and very special um because what it did is it solved it with free market mechanics and it solved it without requiring custody from any participants and so the way that it did this is you know if you have a node right now um you know the normal process previously would have been you set up a node um you fund the wallet with some bitcoin you then open up some channels with that bitcoin to

you know popular destinations um and you hope somebody responds back what you'll do instead now that you have pool is you'll spin up a node you'll fund the wallet with some bitcoin and you will deposit some of that bitcoin into an account in lightning pool and so what this account is this is i think just so brilliant it's just a two of two multi-sig um with lightning labs right so we don't take custody of your coins we have you know collaborative custody in the unchained manner of talking about it where we we share custody of your coins but we can't move them without your without your permission so it's kind of like the blockstream green wallet um if you're familiar with with that right it's just it's just like that um and so what we can do with those coins

is um we are running a marketplace uh an auction every block off chain where anybody who has an account in lightning pool can put up an ask can put up an order and say in order to open a channel and provide you inbound liquidity pay me you know 25 bps up front which you know is something like you know three percent annualized or something like that right like like a small amount of sats um for a certain amount of capacity right pay me up in front and i'll open a channel for you and so now it's like oh so i want inbound liquidity like i just need to pay somebody in this marketplace and i get it and it's just it's that easy right and the beautiful thing about the structure which is called a shadow chain which is i mean again we could film we

could do a whole another podcast just on this because i researched all of the scaling solutions And trust me when I say all of them and this is it's it's a phenomenal innovation because it's it's so true to to the Bitcoin ethos while still providing just like amazing scaling benefits. So we have this this off chain auction that's running on the shadow chain. And because, you know, we are partial owners of all these UTXOs and these accounts, when somebody goes to open a channel and say, you know, five people want to open channels, you know, five new channels want to get open between 10 new parties in a given block, we can batch all of those channel opens together into a single transaction, slot it into the blockchain, and only pay, you know, 30% of the fees that the whole transaction would have paid altogether. right and this is pre-schnorr right right that's what you're gonna say like how does this once we get stored that scales to like 90 right like so think about we could we could end up doing you know like uh you know a thousand channel opens uh in a single block for the price of one or the price of i don't know five push nor right it's not gonna be that in the early days right

going to need to bootstrap to kind of that liquidity first off but like so this is you know it's a marketplace for solving the amount liquidity problem um it's non-custodial um it's market driven like this is as as true to the bitcoin ethos in terms of solving bitcoin problems uh that i think that you can get as a solution um and i think it's just it's like it's a beautifully elegant thing um that will you know the most important thing is it solves the problem of the inbound liquidity but the second most important thing um is that uh now this is an extra uh an extra line of revenue for a routing node operator right like right now it's kind of hard um to to it's it's the actually like the analogy and this is why i love that it's called pool

it's just not dissimilar from joining a mining pool to smooth out the variability of your earnings right like um if you join our kind of you know capital pool liquidity pool whatever right like you should for each period that you get paid up front for providing inbound liquidity you get you get you know this additional line of revenue and then hopefully you earn fees on top it's like a speculative bonus but like today you know you may get lucky and route a bunch of payments on like a monday and then not route any for another couple weeks kind of like you may get lucky in the cpu era and mine a block you know once every couple weeks but then like you go hungry for the rest of the time right and so this is like not not dissimilar to that um and then we

hope that people will, nodes will join the pool and sell their liquidity through our auction mechanism because it smooths out the volatility of their earnings and it gets them an easier mechanism to get new inbound. And there's just a very natural kind of network effect here where the more people buying and selling channels and pool, the cheaper the channel open cost is and hopefully the more resilient the network as a whole becomes. okay and so just me trying to conceptualize this here as somebody trying to provide liquidity liquidity to the pool I can put up let's say a Bitcoin and say hey over the next 10 weeks I want to open up at least a point

or excuse me matter they'll be pissed me I want to open up 10 million sat channel once a week with X fee over the next 10 weeks knowing that I'll get paid out that fee like i put up a bitcoin liquidity and say i want to uh i want yeah so the way over 10 weeks the way the way the contracts are structured right now like in in this very in this alpha is we so the way we're calling it we're calling it as a lightning channel lease because what you're what you're doing technically i think this is really interesting because this is like again if we're going after the financial industry right like you don't start at equity like um ethereum does right you start at the bottom level of the capital stack right collateral so i would

have i would have thought that we would have started at bonds but we're starting a level below that which is property leases right like your utxo your bitcoin is your property and so like you know i have you know i'm uh we have some land up in the panhandle and like we lease it out to the neighbor and it's still our property our name is on the deed we don't give up custody of the property but we do get paid a little bit for for leasing it you know to our neighbor who uses it for a while so what you would do is you would open a lightning channel lease you would you would sell a lightning channel lease to another um to another node and they would uh you would have that channel for two weeks for 2016 blocks that's kind of like the default term right now duration but

the really cool thing about this is like once we get this first market built up once i'm on a roll Once we get this first market built up, you know, we'll have a duration for two weeks and it'll have an interest rate, right? And then we'll have a duration for four weeks and then we'll have a duration for eight weeks and we'll have all these interest rates for the yield that you will earn in these different durations and we'll get a Bitcoin native risk free rate of return, like a yield curve for Bitcoin, which for you financial freaks out there, that's an enormous deal. something nick batia has been been running about and talking about for a couple years now

right absolutely yeah absolutely yeah he was he was he was the forefront of that and so my question is it a rolling two week to four week to six week duration or do you guys settle at a difficulty adjustment or yeah just pick no you just pick the 2000 like you know this is this is again an alpha right so like we'll see uh how people use it and and what kind of people demand um i think that like right now it's just when your batch gets settled it's two weeks from there uh from that block and and then you can close the channel um uh i think that there will be demand for wanting to roll contracts um specifically if you get like a good peer where you get a lot of velocity through your channel right because like the game to make money in lightning the game is

you want to turn over your channel as fast as possible you want that velocity in your channel to be um to be turned over as quickly suck the sats to one side of the channel get the feeds for that close reopen not even but you know and just to shill our other product instead of instead of closing the channel you loop it out right you do a submarine swap you loop it out um and uh you keep that channel open because because the thing about the lease right is the channel is it's open for two weeks so like ideally you know you would be able to loop out that balance like four times five times before that least yeah you don't want those stats stagnant on one side of the channel exactly you want you want velocity going the whole time right which is which is i

think is really interesting and we'll see you know like we've been again thinking about order of operations we've been in kind of like the cpu era thus far it's been you know there have been Like real businesses, Fold, Strike, Divity, you know. Bitfadl. Yep, absolutely. Bitrefill. There's been, you know, there's a number of really, really great entrepreneurs and startups on Lightning already. But a lot of the routing node operators have been, you know, hobbyists, right?

People with a Raspberry, like, you know, my node is a Raspberry Pi right there. Right? Like, yeah, right? Like, there's a lot of those. We've been kind of in the CPU era. But I think here with this additional incentive, this additional revenue mechanism, we're going to start seeing it professionalize a little bit and start seeing people actually look at this as like instead of a cool thing that they're doing because they like the network and they want to support it and they're Bitcoiners, now it's something where it's like, oh, man, I can actually make some money on this, right? like i could make a couple percent annualized you know and if i'm really good at it maybe something like 10 percent um on my bitcoin like risk-free right like i don't ever lose custody um if you

do it correctly you don't even have to have you know any keys hot you can just use psbts oh let's jump into that because that's what that was my question like what it what would the risk-free stack include a watchtower i would imagine um where do pspts come to that because that's that's that's like the one major knock against lightning up to this point is that you need uh you need to be you need a hot wallet at all times essentially yep so i think this is still this is that risk still exists um you you know even if you fund your channels with psbts right like you still do have it may not be your master public or your master private key

that's exposed um it'll be you know the derivative the partially signed key instead um it's hot i think we are we have a path to making that as cold as possible um to where something like uh you know a one-time key um that's used per transaction i don't want to speak for the engineers on that but i will say that like in my opinion you're not well it's a fact that you're not taking counterparty risk you're not taking any oracle risk you're not taking custodial risk um i think the only risk that you're taking is hot wallet risk and that is being as ruthlessly minimized as it possibly can right and so we're going to get you know like the risk-free rate in traditional finance is the risk that the u.s government doesn't default on

this debt right and like that's risk-free but as bitcoiners we know that risk is non-zero right um and so i think we're going to deal with a similar thing here where it's like instead of depending on well the interesting actually you could just come out of this The interesting parallel is instead of the risk being a sovereign default, you know, in terms of the federal government defaulting on their debts, it's going to be the risk is like a self-sovereign default. Like, do you fuck up? Does your OPSEC get compromised? Does your key get stolen? It's all under your control, right?

Which is a lot for an individual. but yeah but it's containerized to one channel not the whole network which is considerable which is which makes which makes this just massively resilient right yeah holy um yeah it's a it's a big deal like i think i think this is i think this is a really really really big deal for the network um as a whole and i think it will be something that you know it's one of these it's one of these virtuous cycles where you know it'll probably start off a little slow you know like we're launching it's just a command line tool right now um right but but you know eventually soon you'll see you know a ui soon you'll see it pop up in your mind node dashboard

and Thunder Hub and RTL and all of these great UIs and these entrepreneurs will figure out ways to display it attractively to people. And that'll bring kind of more people into the pool, which will bring more capacity to the network, make it more resilient, make there be more paths for payments to succeed.

And once more payments start succeeding and there's like more nodes and more capacity, that will just naturally bring in more volume, especially you know thank god fees are going up um that's like the biggest tailwind behind us for sure it's forcing the hand right absolutely it's like you know this is the scaling solution this is this is how you avoid those fees is getting on lightning and like this is coming at just the perfect time uh in my opinion to give you know exchanges to give atm companies anybody that's moving bitcoin around on a daily basis like they should be calling me and and

banging down you know my door to get on the lightning um and this is the perfect reason why like right now you can here's a here's a way to make money on lightning just sell your channels right like that take your trading fees get your trading fees and you know what here's a considerable more amount of bips on top of that as well it's a good selling point it's not bad how do you make people comfortable with this though all right it'd be remiss of me not to bring up absolutely the two major bugs that happened like that's what's like oh lightning isn't ready like it's too buggy like people had to upgrade to version 0.11.0 all i mean uh the bugs that were disclosed over the last week and a half uh nobody thinks they were um

exploited but people hear oh my god two two major bugs that force you to upgrade in a two-week period like is this really the future like how do you how do you quell fears around that narrative specifically and and bugs moving forward yeah um one of the so one of one of the projects that i did again bring this back comparison to mining because i think i think like we can learn a lot from the past um one of my one of my projects that i did at multi-coin was i built uh you know this thing called the crypto archives which was a repo public repo on my github it was just a list of like just i honestly i don't know how many hundreds of research papers um that i had read most of them like i kind of like read the abstract and like

that was it um but i put them in there and like categorize them as like interesting research papers the longest section is um attacks on proof of work right is is vulnerabilities and all of these things that have been disclosed and and been discussed about how proof of work was broken and it was never going to work and yada yada yada and like you know people love to hate on the big thing um vulnerabilities are never uh are never something we're happy with but this is beta software right it's being worked on it's being iterated on it's improving um the last two vulnerabilities were you know not exploited um and were fairly obscure right like cv a year ago that was the spec issue um that was like a really severe bug right like that was that was not good at all these most

recent ones um were you know if you look at them like they they were both very very obscure bugs and one of them was like a very obscure implementation and setup um not to say that that's okay but you know i think it's something that lightning labs team is taking very seriously and is always taken seriously as a culture um and you know it's it's it's experimental software i think you need to protect yourself but it's definitely ready right like there are there there are businesses depending on this for their livelihood today on L and D. Um, absolutely.

I got my hand up. I use, I use L and D every day. Legitimately. Like I received, I received payments via lightning via the L and D protocol, literally every day. Yep.

Um, it works. I'm not saying my, my, I'm not like a bit refill, but I get sats every day via L and D. and i brought up these vulnerabilities because again it'd be remiss me not to because i i agree with you i think it's just par for the course of building out this uh protocol and then on top of

that you have the individual who's pointing this out antoine riard who is one of the greatest minds thinking about these problems that i've encountered personally and encountering him and him being so up front with the uh the the hurdles that face lightning in the future but also being extremely bullish and optimistic about it gives me a a sense of confidence that this is actually a good thing that we're finding this stuff patching it and moving forward from there yep i mean like that that's that that's a great way of putting it i think um you know one of the things you know as a business development professional um you know i want people to come to lightning because they have a business reason why right like because they you

know because fees are going up or whatever and they're like look we're willing to take the lumps with you uh on beta software like i i have to have your protocol you have you know something that i just can't get anywhere and i need to have right like those are the people that like you know where i'm i personally am really really excited to work with um if it's if if bugs like this you know scare you off and it's rational and reasonable too um because we're dealing with your money with your bitcoin right like i i understand that and um you know it's still early days you'll be on lightning eventually i have i have no doubt um right uh if you if you want to take a couple months or whatever and let it let it get more solidified that's fine right like i want the

people right now i'm really interested in the people that like their hair is on fire right and they have to have what we're building yes and i will say um putting my neck out there right now our neck here at tftc out there we are what i would consider lazy users it took us quite a while to update our node after the uh the vulnerabilities became public so if you're an attacker out there just look for our node and try to attack it we have a bounty on the of the lightning network out there uh come for a set like it it's not like it's pure laziness not laziness incompetent probably incompetence on my part like i can't do it myself we need to tap dj and it's a very busy man my god dude should we update our node he's like yes we should update it

like a couple weeks ago i was like all right luckily nobody exploited us yeah um but it's it's we're very lucky we're very fortunate to have um you know the engineers on on lighting lab staff of course you know connor and eugene who do a lot of thinking about security are excellent um you know people in the community like like anton riard like yost um who's been doing a lot of security focused stuff right like you're absolutely right that it's it's we're very lucky to have such adversarial thinkers making sure that we fix this stuff at this stage um because you know we you know it's part of the bitcoin ethos to be first principles thinking to be uh you know honest uh to to not try and cover things up you know if they're not serious

uh and so i'm i'm you know uh you know i'm glad that these are coming up now i know that you know this quarter one of the things that we're trying to do is is to post a bug bounty um program um to to you know incentivize more people to to take a deeper look at at our protocol and our implementation um yeah just put the tftc note up yeah just like attack this thing they're lazy as that i know that yeah that'll that'll i'll pass that on in our in keybase right now um oh like that i just heard an airpod it's still going but yeah if you go out i think you'll be fine okay um yeah but so so let's see so other things i'm really bullish on lighting for um so we got we got pool i think pool is going to be a just an enormous deal right um i think i think

um the the other really cool thing about pool that i think is interesting like lightning aside is the shadow chain structure um you know like um enormous respect for for block stream and all that they've done uh and and and all that they're doing i think that this is a better version of a side chain um i think that this because the really cool thing that we figured out or i didn't figure this out but the team figured out is that we can actually do multiple batches um of of clearing channel opens we can safely do multiple batches in between blocks so like you know does that work right so the if you're familiar with um with grin and with mimble wimble you know how they do the like transaction cut through thing does that ring a

at all vaguely vaguely so it's like you know because we know on our side um you know these accounts have these balances and so if an order gets processed and it says you know alice paid bob x amount and bob is going to open y amount of a channel like we can take that out of our database and say okay they no longer have this amount of money to play with but before it settles back to the chain because we know the balances everybody had alice could buy another channel from somebody else and we can say well her account still has enough in it to be able to buy this channel and carol has enough in her account as well to be able to buy this channel so like we can do that batch as well right so you know the limits are this can you prove this by the sum of the cryptographic

function or something like something like that yeah so i'm like i mean i don't i don't even think it's that i don't even think it's that complicated right it's just like from our perspective it's just account balances right um and and like everything else is abstracted uh and and like you know nobody's able to double spend right so but you have to uh centrally uh store those account balances well because it's all on chain so this is the other like a really cool thing about this that like brings in some trustlessness there's it's all in like this client side validation paradigm right so like you make an order you send it to us we check our database and say oh yep like that checks out you have enough money in your account

to be able to buy this bob has enough money in his account to be able to create this channel this all checks out but before we actually execute the transaction we send it back to you and say hey does this look good you okay with this can you verify on on your nodes that this works for you and you have a chance to say yes or no and so if we ever lie if we ever say it doesn't work if we ever you know try and do something byzantine the you this is the beautiful thing about the security model the default is you just say nope i'm good i'm just gonna sit here and wait and you're not gonna be able to have access to any of my money and that's it i'm gonna wait and i'm is just going to take it back at the end of the period so i imagine the mempool comes into play

here like do you have to scour the mempool to try to because it's it's like it's got like a private mempool kind of between um it's it's in in the shadow chain right there's like a shadow pool that's it's not a term um we don't use that but it's like the the transaction actually gets sent only to our server to lightning labs is to the to the pool server so is the pool server coordinating signatures and you can okay all right exactly that makes sense okay um and so it's uh yeah so it's like you know it's a sealed bid auctions so there's not going to be like a public order book but you send in your bid we then match people up and when you say hey like okay alice and bob like you two are gonna make a channel together figure it out and that makes a lot of sense

because you could decide all right i didn't put this transaction up to sign like i'm not gonna sign it you have to sign exactly the other day okay exactly that makes sense all right yeah um wow so this is crazy it's it's it's amazing dude it's it's it's it's really really cool i'm i'm really excited about it because like you know for if there are any people any if sympathetic people listening um what this kind of is is this is like bitcoin's version of an optimistic roll up and optimistic roll-ups are like i wanted the scaling solution of choice i wanted to talk oh is it ck roll-ups or optimistic roll-ups because you you are uh immersed in a big bet with eric wall and i believe this technology is uh very integral to that bet it is absolutely this is

this was my this was one of two um cards i had up my sleeve when i made that bet um so i think that this is because for the for the uh curious listener um the bet is that by march whatever i don't know 20th or something like that um that there will be 10 percent of um the lightning network total capacity, public capacity will be greater than 10% of the total value locks in each layer twos. Um, and so that includes optimistic rollups, CK rollups, et cetera, et cetera. Um, and so, uh, let me think of this one. Um, so what I think is going to happen here, my debt was basically that layer two is really hard. Um, it takes a lot of work to like actually do it correctly i think that they're the ethereums are doing the classic

thing that they always do which is over promise and under deliver um specifically when it comes to like shipping critical software protocol software that like has to be correct um and so i think that that's going to take a lot longer than they expected to i could be wrong about that um but but my bet is that i'm not um and uh specifically it's really interesting with optimistic roll-ups um they don't really scale as well as advertised like like maximum what you can do is like 2 000 transactions per second but that's assuming that like you take up the whole ethereum block let's back up one second and try to discern between optimistic roll-ups and dk roll-ups the way i understand optimistic roll-ups different trust model where a quasi validator needs

to step in to um approve something zk roll-ups zero knowledge roll-ups uses math to make it happen automatically correct yeah um and and really what the difference comes down to is um the exit game so like and this is this is i think a very subtle but very beautiful distinction between what we're doing with shadow chains and just ethereum in general because what you're doing when you deposit coins into an optimistic roll-up or zk roll-up you're giving up custody of your coins to a smart contract right and the smart contract in this specific case is just a server somewhere like it's a single like optimism or zk sync or whoever like it's just one company right the whole all of the complexity is what happens if that company disappears that server

disappears and i want to get my coins back how do you prove to the miners that they're still your coins so this is like fraud proofs and optimistic roll up it's like you know yeah you need to wait like a uh a withdrawal period of like two weeks or something like that before you can withdraw just in case like somebody lies and tries to withdraw your coins you need to have two weeks to be able to produce a fraud proof yeah it sounds like green wallet um uh and well i don't think green wallet requires a fraud proof it's just like there's a time similar yeah exactly yeah because because because so so um with zk rollups because like you don't have that withdrawal period but of course there is like a trusted setup and things like that so that's really the differences

in the exit game but the only reason you need the exit games is because you're giving up custody of your coins right with shadow chains you don't give custody of your coins you keep it the whole time right it's in like the green wallet thing so we don't need any of that complexity which is just amazing right like that's that's a beautiful beautiful thing that um you know you just like the default is let's say the the worst possible scenario happens um you know we get hacked you know um half the miners drop off the network like something terrible happens everything looks horrible all you have to do is just sit and wait and once your your time lock on your two of two multi-sig um ends you just take your coins back and that's it that's that's like the default

the default in the ethereum world is like your coins get burned forever in the smart contract the default in the bitcoin world is you just wait and you take your coins back in best case scenario you're just able to keep signing that to keep the channel open yep yep absolutely yep um so that so like so you know in in the paper that the white paper that we're releasing alongside the code which is i know elizabeth and lala were both thrilled that we're we've launched um working mainnet software alongside a white paper like who does that right i thought white papers were just you know fever dreams that's uh that's a big accomplishment congrats on that um yeah i know right uh and so so in in the white paper and some of like the

future directions it's really what i think is really cool in drawing this parallel is like right now you know the worst thing we can do just being upfront about it it's like we could censor orders right if somebody like i don't know why we would do this but if somebody were to send in a channel open order and uh we could like take that order and say nope nobody needs to see this because it's sealed bid right it's non-public um so we could technically do that that's like the one attack vector so okay so to open these channels you need to sign part of the transaction to send it to the mempool to be included in a block which would open the channel here in the shadow chain is that correct okay yep um because you don't know you don't know who is bid on your

channel like you don't know who you're matched with we do the matchmaking which is part of like making sure that the auction is fair um is the sealed bid format uh and so what's what's what's really cool about this is there's a zero knowledge proof edition to upgrade this to remove that censorship uh vulnerability where you send in your order we store it in like some merkle tree and send you back as zero knowledge proof it's like okay your order is you know here in the tree like a dlc like concept where like do oracle is just signing something and you just receive that and add it to your transaction or not quite dlc but like i guess a similar sort of structure where like we would send you this this similar incentive model where yeah yes and like and

similar also an incentive model where like probably to make this work we would need to post like a security bond type thing that then would be like slashed right um but we have like like like using zero knowledge proof similarly to how ethereum is using zero knowledge proofs to make their roll-ups like less more safe we can also use zero knowledge proofs to make our shadow chains more trustless um which is i think like a beautiful symmetry it's just that ours have the amazing amount of simplicity of not requiring fraud proofs because we don't take custody and so like you know i'm i'm you know of course i want all you know for selfish reasons just like all miners want to mine every bitcoin block i want all economic activity on bitcoin to

run through you know lightning pool of course um but i fully expect that um some entrepreneurial people will be able to spin up you know decentralized exchanges on their own shadow chain um uh or you know any number of things that people have always wanted to do on drive chains on on side chains on anything that's not the bitcoin blockchain i think they'll be able to do it uh on shadow chains which is just like incredibly bullish i think like that's that's that's so exciting to me a shadow chain seems like a black swan event for the bitcoin space like is anybody even outside of lightning labs talking about this i don't think so like like seriously this is one of those things so like i had heard at a very very high level about

lightning pool the marketplace um uh before joining the company but like i got access to the google drive on like you know like you know sunday night at midnight or something before my first day and i was like sitting up waiting for it like the very first thing i did was i went and i read um the the white paper for this and i was going through and reading about the auction reading about everything else and then like i got down to like the description of the shadow chain and i was like holy shit this is like just massively important how does nobody know about this um and like that was in you know june right this has been kept very tightly under under wraps because they wanted to ship the working code before you know releasing the paper but like i

I, you know, I hope I'm not overselling it, but I don't think that I am because I think I actually do know what I'm talking about here. And like, I think that this is just like an enormous, enormous deal for Bitcoin. This is insane. I'm just trying to get free some a little bit whiskey drunk. Yeah. Trying to comprehend this right now.

This is kind of why I was like, we should, we should lead with the infomercial for lightning labs instead of with. i'm happy we're back ending it because i think i think honestly i think the conversation build built build it built perfectly to where we are now because you can stack layers order of operations like how can you even conceive of a shadow chain if you don't understand the the base on which it's being built and the primitives if you will um i don't disagree again excuse me while i try to digest and comprehend this but comparing it to alternate like the so trying to hone in on the essential product differential here

it's the non-custodial nature of that's being able yep right yeah that's the key that is that is the magical thing here um yeah because and so one one thing people haven't even been thinking about the concepts of optimistic roll-ups or zk roll-ups i think the non-custodial nature has never come it's you always need a validator for this you've always needed a trusted center for this and this goes in a completely different direction yep and it's it's so simple too like that's why i'm like how come i've never heard of this i know it's so that's that's like all of you know multi-sig baby just multi-sig just a two of two multi-sig and like and then of course like this is the other part of this is um uh so for the semantist out there is it technically

non-custodial or is it collaborative custodial like yeah i mean it's it's it's collaborative custody the the the key thing is is the way that the script is written and i will you know scripts are in the on-chain scripts are in the white paper so i will let um the the curious go and actually read and validate that there um we cannot move coins under no circumstance can we move coins without your consent um so you know in effect it is non-custodial um in you know semantically it is collaborative custody and that we're sharing ownership of the utxo but we are so worst case worst case scenario you just have to wait a little bit yep yep and so that it's like it's just this this this this beautiful system um that the team designed uh that i think is is just

immensely powerful it's like a brand new application framework you know really like so so one thing is interesting right like i wrote the thread the other day about how uh you know vitalik was talking about like the roll-up future of ethereum i was like okay so now that we're all agreed um the blockchains are for verification not for computation right and the competition should happen off chain right if you imagine ethereum putting all of their you know all of their applications all their dexes and things in these off-chain roll-ups like if all of it is is it's a single server that's doing you know some off-chain computation and settling back to the chain like literally all of those could be shadow change instead and just use bitcoin

instead of ethereum and why won't you use bitcoin because bitcoin is the best collateral in the world absolutely it's the most liquid collateral on the planet like look at how you know one thing that i'm watching um we're not there yet but when it happens i'm going to be so loud on twitter about it you know wbtc wbtc is number three on defy pulse bitcoin why it's a multi-sig bitcoin transaction held a bitcode doesn't make any fucking sense to me i know i don't care all i care about is the tweet uh oh no my ipod just died all i care about is the uh the tweet that um bitcoin is the most popular defi application we're almost there it's only got like you know a billion dollars left to go

but it's third it's only it's about to pass maker dow again um which has already been captured so how much of a step function improvement is this like is this something that you believe will entice exchanges to start taking this stuff seriously to entice large economic actors on chain to do this uh to implement this is it easy enough to implement is it uh understandable for the engineering teams of these exchanges and uh important economic actors on chain economic actors to implement like is it easy to implement like i do i i really i really do um you know one of the things i've been working really hard on you know the goal is to get it shipped by november is kind of like more more kind of enterprise friendly you know not like like

you know microsoft enterprise but like more enterprise friendly documentation on our website Right. Making it like, you know, easy guides to integrate L&D and to get on board and stuff like that. We're at the stage where, you know, I think it is easy enough. I think the security model of having your coins in like this, you know, my buzzword for it is like hot wallet 2.0. Right. Because it's like a lightning wallet. It's no different than every hot wallet that every exchange has. right it's the same thing it's just that you get um instantly settled payments uh and you have to deal with channels but like our goal the goal of lightning haves um is to make it to where you don't ever have to think about channels right you have multi-path payments you have your liquidity

automatically managed it's all just pooled it's just the same thing it's a liquidity layer that's all even it's straight up if this is going to be successful the end user should never have to think about channels like ever and i don't think they ever will i don't think they ever will i think we're in one of these we're in one of these periods where it's like it's really hard because it's so engineering dominated right and there's so many trade-offs and there's all these security stuff like it's really hard to you know say let's just fast forward five years and assume let's assume all this stuff works right like you're not going to have a lightning balance and a bitcoin balance right you're just going to have a balance and your wallet will know and they're going to

route a certain way yep and your wallet will know like okay well i'm you know he wants to send these coins fast so like i'm just going to send his own lightning if he doesn't have an you know enough capacity i'm going to do you know a submarine swap with part of it a loop with part of it you know like breeze breezes you know you know thank god for breeze they're phenomenal pushing lightning network forward uh on mobile and on the ux side you know their most recent update was you know um trustless zero conf channels where if you receive a payment and you don't have enough capacity they'll hold the payment for you open up a new channel in your direction and then allow it to be forwarded you know so your end wallet how do they do that do they have to have like a treasury

of bitcoin yeah well well uh until they get into lightning pool when they'll actually be able to this is i think this is this is not implemented today but it is one of like the major next features to do which is called sidecar channel so that would be um breeze will instead of you know having their own treasury of bitcoin on chain that they will use to um to provide to another user instead they will actually be able to reach into pool the pool's treasury and pick a channel up from you know open node or bitfinex or or anybody in the pool and connect that channel to the user instead instead of using their own um they're like re what i like to call it's like reselling a lease so like they purchase the lease from um from bitfinex and then they sell it back

they resell it to their user and take like a small spread so they won't have to use their own capital on a balance sheet um but they will be able to yeah right so it's like a loan on this well it's it's still leased because it's like they're just a pass-through right it's still bitfinex is still on one end of the you know whatever bitfinex is on one end of the channel the new user is on the other end of the channel and breeze just facilitated the interaction and they get a little big for that that makes sense and they get a little big yeah um it's like that's that's a concept called sidecar channels which again like those are that's a game changer because then it's like you know what you know what problem that solves

that solves the problem of um you download a lightning wallet and you don't have a channel yet all of a sudden now breeze and like right now what breeze is doing is breeze is funding those channels themselves which is you know they would prefer not to do um but now all of a sudden breeze can access a whole pool of capital providers and say you know here well you just downloaded the wallet we automatically you know are are buying you these three channels to these well-connected nodes like congratulations you're on the lighting network yeah and if you play this out to its logical conclusion and you get enough liquidity and enough individual users on the network like just the interest rates on these services will just get driven down further and

further, but it will still make sense for a service provider because of the the total amount of people interacting with these products, volume. And then you know, like, like you said, right, like the game is, if you're if you're facing the end user, how do you get the user to turn this channel balance over as fast as fast as possible? Right? If you're providing capital, you know, to end users, like how do you get them to turn the channel balance

to earn you enough fees to cover your cost of capital. And if cost of capital is, you know, I have no idea where these numbers are going to end up, right? Like, you know, risk-free rate on treasuries is like 1%, I think, for like a three-month T-bill or something like that, right? That sounds about right, but I have no idea, no clue. But that's limited to the offering of T-bills, right? Yeah.

And this is Bitcoin. Yeah, you can't limit that. Yeah, I know. So, you know, like, I am very lucky and very privileged to be able to be working for this company, I think, at this time when this is happening and to be here. Like, I think this is one of those things in, like, 10 years that people are going to look back on and just be like, wow, like, what a time to be paying attention. My mind is blown right now. because when you think about all these factors added and compounded on each other

like you're talking about primitives of a new financial system that you can't even fat you can't compare it to this system because the system that we're comparing it to like you said t-bills is so constrained by the offering of those securities and you can't constrain that offering on these open source networks i know like like so this is like we are in inning we just got done stretching right not even in inning one yet of the lightning network and and of of bitcoin native financial uh applications bitcoin native capital markets like you know people have been it's only been it's only been two years like you know let us

get to five and let's do a progress report right and even with that being said i'm a happy lightning user i know like it already i haven't had i haven't had problems receiving payments or sending payments like sometimes i have to try it twice but like all right that's the biggest problem like i'm not gonna i'm not gonna scream bloody murder over it i know so you know i'm i'm enormously bullish um i'm very glad that fees are going up you know i've already i've already even had you know this week a couple companies reach out kind of inbound being like okay like thanks for you know cold calling me a couple months ago like i see what you're talking about it's time to get on lightning right these are these are you know serious companies that move

a lot of the coin around um the kind of thought of lightning is it's like a you know a toy like a thing to pay attention to maybe you'll be ready soon and now like you know things it's it's one of those things where it's maturing at exactly the right time um everything is kind of lining up well um and i think you know i think next year is going to be just great for us wow i know this is going to be a great conversation we haven't even started talking about telecom yet right let's get into it fuck it we're only two minutes two hours and 45 minutes into this uh so like so yeah you need to build these primitives to get to actually where you want to go where the fuck are we going so where we want to go where we want to go and i think

i'm sorry for using the buzzword primitives too much no it's exactly right like like what we what where we want to go honestly what i think where we want to go is like a brand new internet right totally new um you know i think i think the political climate and the discussion around censorship right now is really driving that point out yep there was a really good there was a really good i forget where i read it there's a really good article talking about like like when the big thing that was like a whoa moment for me was uh all the wechat stuff that was going on about banning WeChat right like everybody in China uses WeChat I know I have a lot of you know Chinese a lot but I know several Chinese nationals who live in the U.S. who were

distraught like this is how I talk to my parents right yeah Leo Zhang on the podcast from Anitra Research and he is one of those people he said it on the podcast he's like this is how I talk to my parents it's pretty fucked up yep absolutely and like that doesn't make any sense to any rational person right like i i'm not doing anything wrong by talking to my parents like you big countries figure your shit out right like i i want to be able to do this so i think we're going to see i hope i hope i'm wrong about this but i i think the trend is that we're going to see an increase in censorship on the internet we're going to see a splinter net right there's going to be a u.s internet there's going to be a russia one there's going to be a china one you know all that sort of

stuff which is not the way this was ever supposed to work out um and it's not the way people that grew up with the internet and grew up you know remember being able to and in you know middle school chat and chat rooms with like people in iran right chat with people in in india learn about other cultures figure out like oh man like they're just people just like me they're not like these you know evil demons like i see on the news right they're just normal dudes they're normal girls that like have the same you know it was the internet in middle school so they were all probably they're just curious they want to get good music they want to watch movies like exactly right i want to watch porn they want to do yeah exactly right like it was it was it was it was a

great experience and i think there's going to be a hunger to get back to that um but i think what you need before you can get that the primitive is you need you know millions of nodes always online distributed throughout the world they're willing to forward traffic for sats um i think like like it'll look like a a global you know this is one thing that all the crypto people all the crypto vcs are like certain is going to happen it just makes so much sense is like a distributed vpn right um like uh you know they're certain that it's going to happen but they always try and like shove a token into it um right i looked at a lot of dvpn designs and it just was so obvious to me as i looked at them as i go well like lightning lightning they all should be paid over payment

channels and they all will want to be paid in bitcoin yeah and you do it mesh networks whatever you think and you can pay millisets like you make it economical like it's not economical if you need to fucking confirm a whole nother token in a block associated with a fee yes the fee may be low now but if it ever gathers the the volume in traffic that you would want for a successful decentralized vpn the fees are gonna get too high absolutely i guess that's i guess that's a good question for lightning like will the fees ever get too high i think so personal suspicion uh you know there's a lot of folks who really like the idea of interledger and packetized payments um as opposed to htlcs i think what we will see and there's been a lot of really good conversation

recently about like channel jamming attacks on lightning where like there's kind of a fundamental trade-off uh on lightning of um uh privacy and private payments and dos prevention right and so like if you make every payment totally anonymous um and you have no idea who they're coming from and you just accept them um without a fee then you open yourself up to being dosed and to having your channel jammed and have people like locking up your liquidity right that that is i think we'll see if it's like as fundamental a trade-off um as as like the cap theorem of some of the other ones i think it's it's pretty reasonable to suspect that that that won't change um which sadly probably ruins the perspective for like actual milisat um uh micropayments directly on

layer two however what i think that we will see if we see you know again assuming a ubiquitous lightning network right there's millions of nodes there's channels that'll replace there's tons of commerce happening um on the internet between all these nodes i think it makes a lot of sense to actually have like an interledger style layer three um that settles down to layer two just like layer two settles down to layer one so you'll have kind of like a credit system where it's like my node says look um i'm gonna send some millisats over and like when i get up to 100 sats of payments like if i haven't sent you an htlc by then like shut off my service right and it'll be like tiny amounts of money right like tiny tiny amounts of money but i think we'll kind of get

around it in this again like a layered approach where there will be stuff like that happening and on that third layer you'll probably set up a service that batches all those htlcs yep sign up one signature for thousands just just like how you do the exact same thing for batching um you know htlc's down to layer one right when you close my brain hurts after this conversation sorry uh we go so far into this like are we going too far are we getting too far ahead of ourselves or i don't know man i think it's important I think it's important like you know it's it's Bitcoin is very engineer dominated you know all the creatives not all the creatives the majority of the creatives unfortunately got

sucked into the to Ethereum um we're very engineer dominated we're very sober we're very serious um I think it's okay every once in a while to let your hair down um and and and galaxy brain it and think about like what could be and get excited like one thing that I think is really interesting is i get really excited about this stuff i love talking with um drew von saul at uh and unchained about this stuff right we geek out about this all the time um and uh one thing he tells me every once in a while is like yeah man like i try and get you know parker and some of these other guys excited and their eyes just glaze over and they're like isn't fixing money enough no it's a very good point i don't know i i could be wrong about a lot of this stuff i don't think

i am um i could i don't think you are either again the caveman to me is like this fucking makes sense like i know i can't i can't code this shit and make it work myself but like intuitively and i can't code it but i know understand the mechanisms that allow you to sign a transaction to release funds one way or the other to how you could tie it up and time lock it like i understand that i believe so at a fundamental level and what we've been discussing tonight makes a lot of sense to me and i think i'm comfortable saying that many people are not looking at it this way most people are not looking at it this way like i again particularly shadow chain like black swan event in this space oh yeah 100 like i i i

well i don't think i don't want to do i don't think i'll do any extra work to get people excited about it but if people are not like oh my god this changes everything i i will need to do something drastic on twitter and and soul searching yeah no no no i mean like i'll need to do like you know daily tweet storms about why this is a big deal and just annoy the shit out of everybody until they read the paper well that's like it's such a small fundamental change right just the non-custodial multi-sig versus the validator and zero knowledge trusted setup model yep it's so obvious now that we've discussed it i know right how did nobody not think about this like but that's that's that's what gives me the confidence that

that i'm right about this and then it actually is as fundamental of the breakthrough as i think it is um because all of the really big ones like the really really big breakthroughs are just something where it's like oh of course like obviously it's never something that's like super complicated and like you never would have thought of it's just like oh yeah that totally makes sense again the bell curve right yeah well this is like how close is lightning labs been keeping this to the chest because i've had extensive conversations like i've just trying to educate myself about this i'm very happy we're having this conversation at this particular moment of time because roll-ups particularly are fresh in my mind because i've been educated about them

myself the last couple weeks particularly optimistic roll-ups for ck roll-ups and this never even like ventured into the conversation that's wondering because i feel like i've been talking to people that really understand this and think they're in the know yeah and to have them not even like i don't want to i don't want you to disclose like yeah i mean i've only been around i've only been around for a couple months now right like since the the summer um so i can't i can't really say all that much but i do know that you know uh elizabeth and lalu and and and brian and the team in general um have a culture of a very strong culture for better for worse of only wanting to ship excellent stuff and like of not wanting to you know there's an aversion to

any sort of um hype i think from you know the ico era also probably from getting a lot of a lot of flack for you know um lightning being delayed from the paper even though that's ridiculous of course because of the segway delays um so i think they it was very important to them that before they made any noise that was working on magnet um so i think they've been keeping it close to the vest um and i understand why i i think that it will speak for itself um once it gets out into the world um and how important it is and and what people can do with it i can't wait to wait i can't i'm all drunk now i can't wait to fuck around with it um i think it's gonna be dope well i actually let me see let me check real quick let me see if i've

actually made i think i'm like even uh on the amount of money that i've made so far I mean, I haven't liked them, like, treating this like I'm a shark or anything. But it's, I mean, it's pretty amazing to just put up an order and then wake up the next day and have it be like, oh, your order got hit. Overnight you made, let's see, what did I make on my last one? overnight you made you know 60 000 sats not nothing right 60 000 sats let me check right now one dollar is worth 7 500 sats around there so yeah 8 50 i mean i'm not like slaying a huge weight here um yeah i think you know like what we're looking like what we're seeing right now

there's zero price discovery so like this is not a real number what we're seeing right now is is people feel comfortable bidding for a two-week lease like 25 bps right so two-week lease you know compound that whatever 26 times of 25 bps that ends up being like nine percent annualized and this is way less risk than something like a block fi or frank like unchained as well where we're actually no unchained doesn't have that product excuse me sorry like it's different than than different than a block fire like a salt lending because you don't give up custody like that's that's the innovation yeah the innovation you're not giving up custody and your sats aren't being lended out to anybody on the other end they're literally being used to provide utility

to other people who need liquidity yeah so like the the cool thing too is like what this what this does really is um it takes and it's all native bitcoin too right like there's no token there's no anything else there's no redemption it's this is just bitcoin it's like um you know you lift your bitcoin up into layer two you take this like you know utxo this brick you turn it into like a conducting wire right uh it's this like conducting payment flows and all of a sudden it has utility yeah like you're thinking about like applying oil and gas like you just create like a a pipeline that pipeline is bitcoin at the end of the day but you're able to flow shit through that that gives you revenue yep yep and so and so this is like i think i think

pipelines there like that's the perfect analogy because all these are right like like there's some really interesting stuff where it's kind of like uh you know a lot of the verbiage around capital treats it like a liquid right liquidity um capital flows um you know i don't know there's a bunch of other ones it's really it's really infrastructure but it's infrastructure it's infrastructure for something much much bigger right yeah it's pipelines it's a transportation network for moving satoshi's around the financial system a bit of bitcoin right um so i think i think that's one thing that's that's you know we'll see how it plays out um it's it's it makes bitcoin a medium of exchange but i think thinking that lightning is for retail payments and for

coffee payments is thinking way too small like you know who i'm really excited about getting into lightning is like high free high frequency trading firms because the one thing you look at roll ups you look at every scaling solution every single one and i said this in like my announcement tweet or whatever the killer advantage that payment channels have that nothing no other solution can touch like this is the one thing the payment channels have that nothing else can do is instant settlement um jack mahler's has been beating this drum for for forever um instant settlement of bitcoin in particular right nothing no other technology can do that it has to be a payment channel right so you know like you know the hft guys right

they're spending you know billions of dollars to co-locate their servers as close to the new york stock exchange as possible they're building radio towers in chicago so that they can you know get a direct line of sight to new york all this sort of stuff they're willing to do whatever it takes to shave milliseconds off you think they're going to be okay waiting 20 minutes to send bitcoin between exchanges when somebody's sniping them with a millisecond payment channel like it's it's a matter of time right like i don't know if it happens this year or next year or the year after but like it's a matter of time it's going to happen they come here and they see that holy shit yeah it's inevitable it's inevitable you're literally arbing arbing

latency at that point the latency is at magnitudes of what are better at this layer uh ryan i told you freaks i love talking to this guy it's exciting stuff man i get fired up about this um you know it's it's one of those things where like i would love to fast forward five years and to see all this fully matured but at the same time like i wouldn't i wouldn't sacrifice the experience of like getting to be here when it all happens for anything right right yeah no i totally totally get that mindset just feel it's like why me why am i like for me and what i'm doing particularly like even with this podcast and newsletter like why am why am i putting this out why are people reading this like working on the technology and the infrastructure that i write

about like takes it to another level where it's like wow um it's fucking nuts man i'm happy to be here with you i'm happy that we met in person that we crossed paths i am too again i'm really happy i mean you know like i think the you know we're we were born too late to explore the oceans too new or too young to explore the stars but just the right time to fix the money like right awesome yeah i completely agree now let's strike while the iron's hot let's fucking send it right fucking not even 30 yet let's get after it i'm sorry if uh my rambling in my increased drunkness throughout the podcast uh threw the conversation off a little bit or for if my caveman uh intellect uh forced you to to dumb things down for me but i think

the freaks are going to get a lot of value out of this episode i hope they do at least i know i did well i i did too look uh you know my wife is uh my wife is a high school teacher she actually just came home that is the uh the garage door opening that's what i was gonna say there's something going on there we go uh she's a she's a high school teacher so you know she gives me like you know 15 minutes a day uh to talk about bitcoin with her right that that's about all i get uh so you know i i have a a lot of practice in making it concise and making it understandable um so you know having having three hours to ramble about this stuff was a real treat um so so yeah thanks for having me thank you for coming on i wish we could post it right now

unfortunately we cannot embargo embargo embargo my first embargo ever may have to break it just say fuck it no i'm kidding um i do not want that to happen what uh before we wrap up here we're three hours six minutes 24 seconds in what should we leave the freaks with where can we find out more about you more about uh what's going on at lightning labs with lnd particularly with this major release particularly with shadow pools all that yep so um i'm at ryan the gentry all one word on twitter um you know i think to keep up with lighting labs we have a newsletter um lightinglabs.substack.com i would subscribe to that um a lot of you know hopefully you saw

um you know our announcement for pool this week all across twitter and the internet but you know lightning.engineering we'll have the blog posts um you know i don't think we've decided yet where the white paper for for lightning pool and shadow chains will be stored um but at a minimum it'll it's on i know it's on the lightning pool github um look regarding getting on onboard lightning in general like i hesitate to do kind of like push the like spend and replace support the network type stuff because i think like if it's not ready yet for you know mainstream retail adoption um i'm gonna leave a bad taste in people's mouths so you know if you have users experiencing high fees that they're pissed about if you get mad about slow block times

um if you uh you want to earn a yield on your bitcoin without giving up custody like get on board the lending network um it's it's ready it's time um you know it's not it's not for everybody but for those specific three pain points like it's it's it's time shoot me a dm email me um you know just message me on on twitter or telegram wherever um and we'll get you set up because it's it's things i think are going to start getting are going to start accelerating pretty quickly this next year and and you're going to be you're going to want to be along for the ride yeah i am invigorated after this conversation i knew this was going to be a great one i just had a feeling going into it and i did not disappoint at all i can't wait till we're

able to link up in person again absolutely hopefully i'm in austin and you're not up here and in the terrible north but maybe um thank you for what you're doing man i think uh again one of my favorite people i've ever talked about bitcoin with like just diving into it because I think it's probably just a product of the way I think and how I conceptualize all this, but I think you particularly have a mental model of how this all works, very similar to how I do, and who knows if that's me just confirming my bias,

but I think you're on to something. I think you guys at Lightning Labs are on to something. I honestly had no idea what was going on with the pool stuff until you explained it tonight, and i'm still trying to comprehend it and i do think at least off off the bat that it is a black swan event not to bastardize telebian word use but something that the market is not expecting so i'm very excited for you personally in lightning labs as a company to sort of shock the market here and feel honored that we were able to have this conversation before the news

officially drops i will keep it close to the chest it will not break the embargo even though i want to very bad um so ryan thank you for coming on it's been an incredible pleasure absolutely likewise thanks for having me this is a great time all right that's all we got tonight freaks peace and love