TFTC: A Bitcoin Podcast - #435: Bitcoin Solves the Payments Problem in AI with Kody Low

Episode Date: July 19, 2023

Marty sits down with Kody Low to discuss Fedimints, Lightning, and how they can be applied to power AI tools. Kody on Twitter: https://twitter.com/kodylow Check out Fedi: https://www.fedi.xyz/ Join the #Ai4ALL hackathon https://bolt.fun/tournaments/ai4all/overview 0:00 - Intro 5:30 - Marty Barbell Bender 7:10 - Kody’s background, every Bitcoiner a dev 13:59 - What layer is Fedi? 19:38 - Explaining Fedimint 25:43 - What do Fedimints fix about lightning? 30:23 - Expanding on federation 34:46 - Scaling Bitcoin for the world 38:56 - Federated operating system 49:23 - How it works for guardians 57:57 - Privacy 1:00:41 - Synth dollar trading 1:11:18 - AI/Lightning intersection 1:20:33 - L402 and M2M payments 1:35:53 - Lightning’s headstart on crypto 1:38:24 - Avoiding Bitcoin’s volitility with Fedi 1:41:02 - Bitcoin is the best money 1:49:10 - Pushing AI companies to Lightning 1:52:02 - Answer the call, freaks 1:55:25 - Privacy and gpu hosting 2:05:27 - Wrapping up Shoutout to our sponsors: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Unchained⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠River⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠CrowdHealth⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Bitcoin Talent Co⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TFTC Merch is Available: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Shop Now⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the TFTC Movement: Main ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠YT Channel⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Clips ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠YT Channel⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Website⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Twitter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Instagram⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Follow Marty Bent: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Twitter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Podcast⁠⁠⁠⁠

this report was brought to you by good friends at river i want to do mining talking about mining river makes it very easy to mine in a professional way you go to river.com slash tftc set up an account you go to river.com slash mining after that and you can pick an asic they have many asics for sale uh some are already plugged in with hosting contracts so you can buy an ASIC and lock in a hosting contract immediately you purchase it you're already up and hashing and sat or streaming to your river account whether you're an individual or a larger institution that wants to mine a lot river is here to help you they have a white glove professional service it'll walk you through the process that'll get you set

up if you don't want them walk you through the process you can just go through the website through the app and do it without having to talk to anybody. Which I shouldn't say. I'm not certain. Maybe you do have to talk to somebody. But the point is it's a great way to mine. You're doing it the right way. So go check it out. Go to river.com

slash tftc. Set up an account today. ASICs are cheap. Still cheap. Still in the bear market. It's a good time. About 11 months out from the halving. Get all those SATs with 6.25 block subsidy.

rewards while you can river.com slash tftc this trip was also brought to you by good friends down the hall unchained they're here to help you eliminate single points of failure in your custody model they're building a bitcoin financial institution the right way by leveraging bitcoin's native multi-sig properties their vault product is a two or three multi-sig wallet it allows you to hold two keys and unchained to hold one you eliminate single points of failure in this model since you hold two keys you control the bitcoin in the vault at any given point in time but if you're ever in a pinch unchained is there to be the second in the two or three multi-sig quorum beyond that they have their trading desk if you want to buy bitcoin and send it straight to

your vault after you have it set up unchained is the best place to do it you can do it all in one place it's the best place to buy bitcoin in bulk you buy it goes straight to cold storage on top that they have their lending desk their ira their inheritance protocol again all revolving around native multi-sig properties that bitcoin has that reduces single points of failure it is the future go to unchained.com tell them the tftc sent you talk to their concierge team they'll walk you through everything i just described this rip is also brought to you by good friends at crowd health crowd health is here to help you bring sovereignty back to your health care and how you pay for it. Incumbent health insurance is notoriously opaque, expensive, impersonal.

CrowdHealth is the complete opposite. It's cheaper, it's transparent, and it's very personal. You get a personal health advocate. Once you get onboarded to CrowdHealth, CrowdHealth is not health insurance, it's crowdfunded healthcare. So the way it works is you become a member, and then when you have to go to the doctor, you let CrowdHealth know, hey, I'm going to go to the doctor. They'll either help you find one or connect to your doctor that you're going to uh once you go to the doctor you get the bill you bring it back to crowd health they negotiate the bill lower with the doctor and then you pay the first 500 of that bill and the rest gets crowdfunded by the crowd health community me and my family are on this we've used this it works flawlessly and again it's cheaper because

you have metrics that you have to meet to get into the crowd health community it's a relatively healthier community of individuals. And so overall healthcare costs for the CrowdHealth community are lower. So you're paying less than you would with insurance. So if you're on Cobra, any of that stuff, consider CrowdHealth. Go to joincrowdhealth.com slash TFTC, sign up today. You can get a deal on your membership fees for the first six months. This report was also brought to you by our good friends at Bitcoin Talent Co. It's a recruiting firm built by bitcoiners for bitcoiners if you're a company in the space looking to hire the best talent in the world go set up go get set up with bitcoin talent co they'll understand your needs

what you are looking for what your company does against a recruiting firm by bitcoiners so they understand the difference between multi-sig mining lightning they actually understand bitcoin so you're not just spraying praying with a random recruiter to hope that they can actually understand what you need. Bitcoin Talent Co will understand, already does understand. Likewise, if you are talent stranded in big tech, big banking, big finance, you're a Bitcoiner looking to get into the space, set up a profile with Bitcoin Talent Co, go to bitcointalent.co. To do all this, tell them the TFTC sent you and enjoy this rip. You've had a dynamic where money has become freer than free.

When you talk about a Fed just gone nuts, all the central banks going nuts. So it's all acting like safe haven. I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bull case for Bitcoin. If you're not paying attention, you probably should be. Cody.

Marty. It's a pleasure hanging last weekend. It's a pleasure hanging. Yeah. You know, it's like always, always fun to meet your heroes, especially when they live up to it, you know? So. I'll stop that.

No, it was, I mean, I've heard a lot about you and all the work that you're doing at Feddy and incorporating Bitcoin and the AI. And yeah, you did live up to the hype, man. Oh, well you did too, Barney. If anyone is listening to this, instead of watching this, Marty's been packing on a lot of muscle recently. and uh it's one of the most surprising things to meet him you're like whoa like marty you're a lot

like stockier like like much bigger build than you are on coming through my headphones i come from a family of mongoloids it's all it's all natural i do try to supplement it with some with some weight lifting it was leg day today excellent did some uh did some box deadlifts felt good yeah um yeah sorry for you can hear the rain in the background it's torrential downpour here on the back studio back porch studio here in south jersey but i'm extremely excited for this conversation because the convergence of bitcoin and ai particularly bitcoin over the lightning network and ai is something i think could be massive for bitcoin adoption and just the usability

of the internet overall i think ai is just one particular use case yeah yeah the gods agree the gods agree you're sending us a message right now that we're onto something here but before we dive into all that uh we were chatting a little bit before we hit record about your background in the military and how you came to understand bitcoin a bit intuitively like how'd you go from being a marine to working at Fetty on the cutting edge of bitcoin lightning network and AI uh yeah sure thanks Marty so like a two minute two minute summary uh so I was an infantry officer in the marine corps um when I was finishing up active time uh was when coronavirus happened and so one of the because we're like very this was like very

very early when it first started uh was we were on deployment and we were getting stuck in these like hey you got like two weeks stuck in your room or we were having these uh like while you're on watch you have to be like hey you've got 12 hours on watch or 24 hours on watch while you're in the tactical operations center and normally you're like waiting for the phone to ring and we're going to jump on a bunch of birds we're going to fly to syria or wherever it is and um but because coronavirus was happening like not a lot of stuff was going on not a lot of phones were ringing and so um what i ended up doing was uh like started reading a lot more and found bitcoin was one of the things that wasn't blocked on government computers like bitcoin.org and so my first kind

of like intro into bitcoin was like this is one of the few things i can read while i'm on watch sort of waiting for uh stuff to happen and so started going down the bitcoin rabbit hole one of the things that was kind of immediately intuitive to me and why i kind of went down bitcoin versus like altcoins because after you read bitcoin you start talking to people about it they bring up all the altcoins and you sort of look at it was the proof of work aspect of it and i know that you've had some conversations with jason larry and uh well like i don't just agree with him on everything i think that there's some um there's some really valuable stuff that he's been doing in terms of framing bitcoin's proof of work in language that can uh like really

appeal to people with sort of military backgrounds and so that was one of the things for me like i like wasn't able to exactly identify it but once you kind of came on the scene being able to see that yes the same maneuver warfare language that we use in the marine corps like sort of applies within bitcoin as the importance of proof of work right like the way that bitcoin establishes like hey you actually have to work in order to combat it those sorts of things and then coming out of the marine corps i started working on bitcoin development because one of the cultural aspects of the Marine Corps I really enjoyed was, and that made it really like such a great organization was because every Marine was a rifleman, right? Is that if you look at the ranks for Marines,

like one of the differences between us and the other services is that you've got cross rifles on it because first and foremost, every Marine is a rifleman. And the reason why is because insofar as you're in this organization, insofar as you're a war fighter, it's because you exist to serve the rifleman is that there's going to be an 18 year old jumping in a hole. And if you're a cook, if you're a pilot, if you're a jag, if you're like anything in this organization, the reason why you're here is to support that guy. And so coming into Bitcoin, I knew that it was important. I knew I want to work on it. And so I knew I needed to become technical and become a coder because insofar as we're here is because we're building open source software and creating

environments to do that. I think you've done a lot of work with that with 1031 and just generally the podcast, right. Of like kind of putting open source developers front and center. And so working on open source and working on bitcoin um like i just kind of did that for like a year where i was sort of teaching bitcoin through um like you know first through pomp's crypto course i was like the bitcoin guy for it and the technical bitcoin stuff and then um through and then uh kind of i was one of the first guys with lisa nigut we did um base 58 and then i was helping her teach that for a bit and then um just kind of working in open source eventually i come across fetty mint and i meet Justin actually at Bitcoin, uh, Bitcoin comments in, um, Austin and after meeting him and sort of

seeing that, Hey, Fetty Mint is actually something that's, I think is a really interesting sled of trade-offs for scaling Bitcoin in a privacy focused way. Um, started working that on that for about a year. And then afterwards, uh, like I joined Fetty and so now Fetty Mint, the protocol, right. Worked on that for about a year and now working for Fetty, the company, which is building off of Fetiment. I mean, that's pretty impressive to go from COVID lockdowns, bored, scouring bitcoin.org to understand Bitcoin better, to contributing to open source projects, contributing to Base58, and now working at Fetty. How were you able to sort of scale your knowledge and your ability to participate so quickly yeah um i'd say a couple things and i talked to when i talked to

like newer developers and like also you know i'm very junior i've been here for like two and a half years about and within the bitcoin space right and that's how long i've been doing development stuff for is that the things i normally talk about are like you know start building right and so like just pick an open source project and start contributing to it is that like everyone within bitcoin is extremely welcoming and looking for new contributors like one of the things that Fetiment that we do really well is onboarding new contributors. And so, um, like I did this for a while. I've kind of had to like, it's become more intermittent, but like when I first started joining with Fetiment, I knew that there was a bunch of stuff that I have to learn. Right. And

so there's like a stack of white papers on my desk that apply to Fetiment because Fetiment sort of you get like the most difficult of everything, right? Like you do Bitcoin at the base layer, you do lightning, you do distributed consensus, you do all sorts of fancy cryptography with blinded signatures and music and all that sort of stuff. So I had this sort of stack of white papers that I knew I needed to get through. And so what we started doing was like white paper Wednesday, right. Where me and a bunch of other FedEmin contributors, like we would go through these things and we would be teaching each other and kind of making it more approachable so that new contributors coming onto the protocol could sort of get upskilled faster. Right. And so I

think that was actually, if you kind of look at the development of FedEmin, right, was there was basically Eric for a little while, and then he worked on it for about a year and then Justin comes in and a couple other contributors. And then there's sort of like this explosion after bitcoin plus plus in um austin and that was when um it was uh like me justin a couple other guys who were there like we did the first implementation of simpiment which was using simplicity block stream scripting language that they've been developing for bitcoin as a fediment module and then after that there's this big explosion out and i think part of the reason why for that is because fediment became much more approachable for people to come work on right and so as you're

like a new contributor coming to the project or anything like that like there's a bunch of of developers now who've uh like they're very we're very good at onboarding you guys and so the same thing with like core lightning which um like you know working with lisa of course like you end up working on core lightning stuff a bunch right but i think bitcoin generally has just gotten very very good at taking people who are new and if they're willing to put in work and they're willing to kind of like take on new projects then onboarding them into the ecosystem so they can start contributing more yeah and i think what you just described is a great example of the breadth of the space i get in lisa will teach you like transaction construction at base

58 you'll learn a little bit about sea lightning and now we have this other second layer third layer protocol it's actually something i'd be interested to learn how do you refer to feddy as a second layer third layer that people can then learn about and contribute to so there's many different areas not everybody has to be a core developer these days it's getting easier and easier to apply your skills at different parts of the ecosystem and build apps on top of that yeah and this is something kind of going back to that um philosophy i was talking about before right of like every marine or rifleman is that one of the things i really think is coming out within bitcoin is this sort of concept that i've been calling like every bitcoin or a developer

right is that within bitcoin like it's like it was very surprising me looking at because like you know when i was working at okx for a while is that when you look at some of these other ecosystems, there's a lot of people working on them who don't really understand the core protocol. And a lot of people who work on them who don't really understand like the fundamental computer science behind it, right? So like they can't explain, for example, or just it's not everyone, right? But it's like, if you talk to a Bitcoiner, generally, he can give you a rather good explanation of some of the underlying technology, even though he might not be technical himself, right? And so I think this is coming out more and more is that within Bitcoin, everyone's kind of

building up some development chops and building up this technical background for it. And so for example, like I think you just brought up for like Fetiment, right? So maybe we can like start talking about like the technicalities behind that is that for Fetiment, like in terms of talking about layers one and two, it kind of gets a little confusing when you talk about Fetiment that way. And the reason why is because the Fetiment eCash claims are against base layer Bitcoin, right? So I peg in or I peg out of the federation. And when I do that, I get eCash. And so, but that's against underlying on-chain Bitcoin. And then we use Lightning Gateways as an interface of trading those e-cash nodes between people within the federation in order to be interoperable with

the wider Bitcoin network, right? And so talking about Fetiment as layers gets a little confusing, because the e-cash that you're holding is a claim against the layer one, but the interface that you're using for it is like using the Lightning Gateways of layer two, right? And so it gets a little confusing when you do that one right yeah i guess you i mean i guess you could call another layer two that's complementary to lightning's layer two because if you do that yeah maybe we take a sec for just sort of like the layers analogy it comes from like sort of bitcoin so bitcoin and the internet right is that the internet when we think about it we think about it in terms of layers and part of the reason why we do that and this is like sorry if you go to

school for computer science normally you end up learning about this of like the osi model and it's this very i'm sure like you know if you just kind of look around on the internet you see this stack of like hey there's seven different layers and things start up here at the application layer they go down to the transport control protocol layer which is tcp and like intermediate is ip and then it passes over to this way and then once it's over here it goes back up the application layer right and so that's sort of like the analogy that we're trying to go for within bitcoin when we talk about layers but this is something that like i only learned because i like kind of did a deep dive down the um like original arpanet protocols uh protocols and um

like the sort of design philosophy that they had was that if you look at them they're kind of like it's kind of like bitcoin and eth right where you had these original darpa guys and then the osi were like some corporate guys who broke off from them and tried to reinvent the internet protocol and that's they're the guys who came up with this stack thing that people learn about that's not actually how the internet's run that's how like they kind of like portray it to people the way that it's actually run using the original DARPA layers is that there's basically four layers where IP is the only thing that's important for doing that connection layer between them right and so the whole point of internet is that it's inter networking and so you can have these networks

where at rest they kind of work differently between each other but as long as they speak IP then they can communicate across each other right so it's not this clean start from the top go all the way down everything has to be sort of mirrored and then it goes across it's that you can kind of think about it as more of an hourglass and what's cool about lightning is that lightning is kind of becoming this ip layer for bitcoin right so you see lightning being the bridge between a bunch of different things so there's all this new stuff about like drive chains space chains like different ideas for different ways we're at rest at like the base layer you can hold your bitcoin in different ways then also at the application layer having like all sorts of different interactions but the

rail between all of those the kind of inter like the inter networking part of it is lightning right and so that's one of the really cool things about fediment where because fediment like the thing that you're holding at rest are these e-cash notes but we don't expose a lot of that to the user right and so that's a little different than cashy right where you see the e-cash notes up front the experience that you have using fediment is you're just paying lightning invoices and on the back you're like basically like the thing that's happening is that you're using the e-cash and you can get into a little bit more of like the e-cash and the privacy benefits the scaling benefits that sort of thing but the thing that's going on in the background that you're not exposed

to like this is sort of like the man behind the curtain is the e-cash notes but the experience that you have is just using lightning and so that's like if you look at the way the internet actually works that's kind of the same experience of that the thing that gets exposed and the thing that kind of like connects everything is the single ip layer right and then like at rest you can have different networks that kind of operate differently if that makes sense yeah makes a lot of sense to me and that's i think because i went to your demo in nashville last friday and you explained a lot of this and i think it'd be a good time and we've talked about fediments and particularly on the show a few times in the past but i think the way you articulated it during your

demo was very concise and made it very easy to understand so just i guess refresher on fediments generally what Fetty does on top of Fettyment, the Fettyment protocol, and then diving into the Lightning Gateways and how they work with the invoice creation and what's going on with the e-cash tokens when those invoices are getting paid. Yeah, totally. So let's kind of like build up from base principles, right? So you've got Bitcoin at the base layer. There's a block every 10 minutes. The blocks have transactions. The transactions have inputs and outputs, right? on layer two which is lightning and there's base layer transactions you have an output and instead of just me sending it to somebody it's me opening a channel which is going to be a two of two multi

sig so i can sling payments back and forth right so at the base layer we're optimizing for security and robustness at the lightning layer we're trying to optimize more toward there's some trade-offs associated with it but the thing we're trying to do is instant final settlement of payments right and so that's what you can do on lightning that you can't do on bitcoin and some of the things that kind of emerge out of this is that there isn't an extremely good solution for privacy right so i like i know you've had tony on the show and like uh in austin like tony talks about this stuff all the time right is that like on the base layer and on lightning there's still significant privacy concerns but there's also concerns for at the lightning layer is that

that's not something that scales to billions of people right and so while we have a really good base layer of the optimizing for the 21 million in a block every 10 minutes while we have lightning which lets us do the interest like the instant final settlement for payments it's like we still don't have like a really good robust scalable custody solution that doesn't involve like a third party eventually running lightning nodes for example and we also have some privacy concerns as we go up that right and so Fetty Mint when Eric Syrian originally came up with it was that he didn't have the lightning component it was just a privacy and scaling solution for Bitcoin which was you run a Chomian e-cash mint. And so this is back in the 1980s when David Chom comes up with

his blinded signature scheme so that you can basically run a bank where there's no concept of a user. There's no concept of an account. There's just notes. There's just dollars, basically. And the dollars, it's impossible to correlate the inputs and the outputs. And so anybody who uses the bank, the bank is completely binded to the use of the users. right and so off of that the problem becomes hey well the mint is centralized the mint's like one guy right and so fediment is what if we took this accounting system this uh this sort of bank system with blinded signatures and stuff and we federate that mint and we put it on bitcoin and so the way that that works is that you deposit bitcoin you get e-cash notes that are signed by the um that

are signed by the bank you unblind the e-cash notes so that when you use the e-cash notes back at the bank, they have no way of correlating the inputs and the outputs. So you achieve like great privacy. Your anonymity set is every single note of that denomination that's ever been used by the bank or the mint. Sorry. We'll use mints just to kind of clear things up is that used by the mint. But for Feddy mint, we're going to take that centralized mint who's doing the signatures and we're going to federate him. Right. And so now you get the privacy solution for this, but you're trying to you're trying to lower the trust assumptions by federating him. Right. So So we can do like a three of four or a five of seven or a seven of 10 or like whatever

we want to do it for such that somebody, for example, be malicious and they could try to steal the funds, but there's nothing they can do, right? Because they need to coordinate across the larger federation in order to do it. And so when Eric first came up with this, this was just a privacy and scaling solution for on-chain Bitcoin. But so he solved one problem of that, hey, what if we federate the mint? But then this is sort of like where Feddy Mint becomes this larger scaling solution and being able to kind of address a bunch of the concerns

that now you had at Lightning, right, is that you can, the problem with the mint is that you're only going back and forth with the e-cash to that single mint. And so it's not very useful unless everybody's in the same mint and that becomes a problem, right? Because we don't want to have this centralized solution for it.

And so what's cool about Feddy Mint is that we came up with this concept of gateways. And the gateway is just somebody using the mint who also runs a lightning node. And so you pay that node in e-cash, which is the claims against the Bitcoin and the Mint, and then they complete the lightning payment or vice versa. And so now this becomes like a really good scaling solution for a community where we can show up at a community. We get seven to 10 to however many people within that community are like technical enough that they could run a node and have a FedEmit daemon run alongside it. And then anybody

in that community who's running a Lightning node can provide Lightning services for the community. And so now within the community, you've got eCache nodes going in, eCache nodes coming out, so you achieve very good privacy. You've got the eCache nodes, they're highly scalable, right? Because you have like multiple people, when you deposit into the Mint, then you're not having like a single UTXO or multiple UTXOs for individual people, right? Like you can consolidate the reserves within the mint. And so now it becomes a scaling solution for like on-chain Bitcoin. But so you have privacy, you have scaling on the on-chain Bitcoin, and you have interoperability with the wider lightning network by swapping e-cash to lightning. So the experience that

people have of using Fetiment is that they're just paying lightning invoices. But what's on the background is that they're settling using the e-cash notes, right? And so that's kind of like the Fetiment protocol, how that works for that one. If you got any questions or I didn't cover something specifically like that's sort of the big overview there and then we can talk about fetty after i mean you touched on it i think we should elaborate on it because i think after having listened to the last session of the lightning summit in nashville with tony lisa and alex from river is that light lightning in and of itself probably isn't like the end-all be-all scalable solution unless you want to centralize amongst large third parties who who can become

targets to government regulation and scrutiny uh and i think you said like if we want to avoid that adding fediment to the mix is is vital to ensure that we have sufficient distribution of lightning nodes at that layer why does fediment help this yeah so here's here's a couple elements for it right so one is that when you're servicing a federation as a lightning node or you're providing lightning services to them is that you're basically balancing the liquidity across everybody within the federation right and so this is something if you've ever run a lightning node is that you want to basically have your lightning transactions represent a ton of economic activity and not just be linked to hey one person like 100 channels right and so like we kind of get

there a little bit with spicing right which is pretty cool so now like i don't know if you saw recently is that phoenix like they announced like their version of splicing where now as a mobile user i have a single channel that i'm resizing with the async node with the async node which connects me out to the broader lightning network so that's like one way of kind of getting much more efficiency from lightning but what's cool about using fediment is that now you can have these communities that are all using the uh the fediment right in order to do the custody of the bitcoin and so you can balance the interaction of course maybe they have like five or six or seven different people across a community servicing maybe like 100 or 400 people

within it and they're going through those different lightning nodes and because they're using the ecash for the transactions they're achieving privacy from the lightning nodes privacy from the mint and the lightning service providers or the lightning nodes they really like this uh this model because now i can have a single lightning channel that i'm using to service maybe like 200 or 300 different people right and so that's why it becomes like a scaling solution for lightning is this is something else that we've kind of like figured out of people running lightning nodes for this stuff the tendency is for lightning nodes to kind of become service providers right and the reason why is because you need the economic incentive to run the node and like

become a good router and stuff and the thing that you want the ideal person on the other side of your channel is somebody who represents a ton of economic activity right and so that's like one of the ways that through fediment you can kind of scale out that part of lightning but like the simple solution for scaling it out right is you just have everything be custodial this is an option where there's sort of a natural limit to the size of these federations because of the trust assumption required for like, Hey, there's five or seven people or six of 10 or seven of 10 people who are running this federation. If they're not close enough to you that you can socially sanction them. And like, uh, you know, NDK likes to call this proof of punch, right? Like they're close

enough to me that in the event they tried to rug me, then it's like, Hey, this is Bob from down the street. He's part of my community. Or this is like, you know, like John from the VA, right. Is that they're close enough to me that I can hold them socially accountable for these things. But But the guys running the Fetiment, they're not being paid for what they're doing. The Lightning service providers who are providing services to the Fetiment, those are the ones who are making routing fees. Yeah, so this provides a clear economic incentive for people to spin up and maintain Lightning nodes. Exactly. And an ideal partner on the other side of it, because this is the issue for anybody running an LSP,

and I know Async, for example, they're like the poster child for this, is that you spin up all these nodes, they lock up liquidity, right? And so somebody, they do a transaction into Phoenix or whatever, in order to have to like have them receive or have like a good UX on that, you have to lock in some inbound liquidity for them as well, right? And so this is one of those ways where, well, now you just have like an individual who maybe uses lightning wallet, like one, two, three times a day or something like that, right? Like he's locking up a ton of liquidity as it goes to that. The ideal party that you'd want on the other side is someone who represents a ton of economic energy. So he's slinging payments back

and forth, or is just using the channel much more, right? And so when you're a Lightning node providing Lightning gateway services for a federation, that's like an ideal partner and something that's very good for scaling out and having Lightning be like a good rail between everything. Remember that analogy we were talking about before of that Lightning becomes like the IP layer connecting these separated networks? That's sort of like the image you can have in your head of how Fetiment sort of scales this out. You've got all these different Fetiments, you've got hundreds thousands millions of them potentially right um and then all connected via each other via lightning and to be clear it's not the federation members that have to run the

lightning nodes it could be a user within the mint that's providing a service maybe we can talk like specifically about what the fediment is doing right so basically and this is why fediment it starts off as just a way to custody bitcoin but it becomes this wider building solution for federating any application and why Fetty, which we can move on to eventually, is that Fetty is talking, the way that we like to talk about it is that it's a way to create a federated operating system for managing your money, your data, and your digital life across all of these different federations, right? And so let's kind of like take a step back of like, why do we need the federation at all? And so one of the issues, like I'm sure that you've run into this and I'm sure

everybody in Bitcoin has run into this of that when you go from third party to first party is that when i take self-custody right if i'm like technically capable of like absolutely we should do that right and this is an issue that a lot of bitcoiners run into is that you start thinking through the consequences of self-custody which is that okay well now it just exists on my phone or my hardware wallet or wherever it is i need to make a backup right i need to make a backup such that in the event that i'm in an accident or something specifically happens to me that i can have a recovery mechanism for it and so kind of like the gold standard for this right now is that you want to have something like Unchained or Kasa, right, where you have a threshold multi-sig

backup. So in the event that something happens to you where you lose your keys or your specific hardware wallet, you can go get a quorum of people like my wife, my mom, my lawyer, and, you know, like my friend who's also very technical or something, and they can come together and they can help me recover my funds, for example, right? And so, like, just kind of the little nugget that I keep in my head for this one is that any self custody solution resilient to you being in an accident implies some sort of threshold custody, threshold recovery mechanism. And so that threshold recovery mechanism could just be a one of one, which is that I have a copy of my seed words on like a steel plate. And my wife knows where that is. And I've like hidden it somewhere

or something. And the problem becomes, well, now what if I like get a divorce from my wife or something, right? Or my wife just like does something where to own Bitcoin is to know how to spend it, right? And so the moment that she holds on to those seed words, she owns it just as much as I do, right? And so kind of the next step for that is, okay, well, what if we split that up? We can either like shard it using Shimmer Secret Sharing, or we can do a multi-sig or something like that. Well, now this is something that people run into when you try to do like a multi-sig solution. If you only, you say, hey, I'll move this stuff into a multi-sig. Well, now in order to do any spending, I need to get signatures from everybody, right? And so people

are like, okay, we'll move the cold storage funds into the multi-sig. And then we'd never touch the cold storage funds, right? And so what's really cool about eCash for this one, and this is like, look, first, like the federation is that you can think about the federation as we're going to formally set up this threshold backup mechanism, which is that, you know, I go through this process of setting up the initial guardians for this. And so this is like a threshold backup in the event that I lose my phone or in the event that I lose anything or whatever, I can recover by using this threshold backup mechanism of the federation. So that's like called social recovery, which like we put into FedEx as well. And so you have this threshold backup mechanism, but on a day-to-day

basis, I'm using the e-cash notes and the e-cash notes are single SIG. And so you get the experience of using something like Wallet of Satoshi of just like, Hey, I just scan it. It doesn't have to go talk to anybody else. It just does the e-cash payment or via the lightning gateway. And it just gets completed. And the lightning gateway, because it's a larger node servicing a bunch of people, the routing is more reliable, right? So you get the experience of using a third-party third-party custodial app, but you also get the additional privacy and you get this threshold backup mechanism out of the box, right? And so that's sort of like why we arrived back at a federation once we started thinking about like, oh, self-custody, right? But in the event, like

you can't self-custody, absolutely do it, right? But this is like, if we want a scaling solution, for example, that we can bring to like the global South, there's not even the infrastructure for getting them hardware wallets, for example. This is one of the things that from working at Fetty, I've kind of learned for this, that like for me, right? I can get five cold cards, I can split them up i can like get steel backups and all those kinds of things like if you don't even have the supply chains in place in order to reliably get someone a hardware wallet without it having being tampered with right you need some sort of uh like different solution and feddiment's kind of an interesting trade-off for those solutions right and so that's kind of what covers the federation

side of things and so we can kind of move on to the other stuff later but like if you got any questions there like i think i covered a lot so no i like how you guys classify it as second party custody it's in the middle of that spectrum between first party full bitcoin and cold storage and third party full you just completely rely on an exchange or a custodial wallet like wallet satoshi and it is a bit controversial like uh that's definitely the the hardcore hold utxos on chain in a wallet that you control or run your own lightning node or you actually don't own bitcoin but if we're being honest with ourselves like it's not going to be possible to scale bitcoin at the base layer two billions of people um there simply will not be enough utxos you

cannot create an individual utxo for every every human even a billion humans if you want it to not even the whole world just a small percentage of it um which then leads people to the question of Well, maybe Bitcoin's not for everybody. Maybe it's for the hardcore people who just want to do stuff out of the purview of the state. But I'm not under the impression that that's where we're going with this. I do think everybody should have access to Bitcoin and the value it provides. And we do have to weigh those trade-offs and sort of find out where that happy medium is. And I think the Fediment and Feddy solution is a very creative way to solve the scaling problem. Because again, if we want to get as many people as possible access to the best money on earth, there are going to be some trade-offs made along the way. And it's just evaluating those trade-offs and making sure you don't go too far in one direction. Yeah. And that's something that's like a real motivating factor behind a lot of the work that we do at Fetty. Right. Which is that for like that initial reaction that you get where people say, oh, hey, well, maybe Bitcoin can only be for like a couple of people or something. Right. Well, it's kind of hard to do that. That's kind of hard to have the conversation with somebody. Like, for example, one of the things that I did after I finished up my active duty time, I got reactivated as a reservist to go help resettle Afghan refugees after the Afghanistan withdrawal. Right.

And one of the things over there, that's something that really taught me that like, hey, Bitcoin is something that people need, not just something that like certain privileged people want, for example. Right. And so like when I was there, one of the really valuable things I was able to do was help teach them how to use stuff like because like OKCoin was still operating in both Afghanistan and the US. So after they closed off TransferWise, they closed off Western Union, they closed off everything. The State Department shut down all fiat flows from the United States into Afghanistan in its entirety. The only way to get money in there was using some sort of permissionless protocol. So like Bitcoin, which they would go over there. And then normally they would end up swapping it to a stable coin or something and just figuring out a solution in Afghanistan for just getting money to people. Because they need to pay in order to get people to airports.

They need to pay in order to pass checkpoints and those kinds of things. like you know it was a huge wake-up experience for me where you know if the the answer can't be hey we're really sorry but we've got this amazing money but we just can't like like do like fix it in such a way that you can use it right like when we're talking to somebody who's living under like 30 inflation or 70 inflation or who's like governments or like stopping them from you know just like living their life generally right like we need to build out tooling so that we can scale this out to everybody else and i think fediment is like a really interesting trade-off space just like you said between first party and third party custody where we can create a scaling solution or

privacy solution that allows us to bring bitcoin to a bunch more people than if we were just using like base layer bitcoin or lightnings on its own yeah and that again the trade-off is you're getting access to bitcoin but you're trusting a federation of individuals or companies maybe institutions whatever it may be we're not exactly sure how this will progress i could see it going down a number of different paths and i guess that's just being aware of how the federation could rug you and well that i think kind of leads us into feddy right and so for feddy maybe we're calling a federated operating system but the idea behind feddy is that you have a front-end application that on the back end is coordinating all of your data your money digital life across these

different federations. So the, like the world that we see is that you're going to have many, many different ones of these federations, because like you said, there is this trade-off of, yes, you are trusting the federation, right? But we already have existing communities that are high trust or that like, you know, it depends on how you define your community. You can define it as your local community. You can define it as your larger diaspora. You can define it as like social groups. Like I know you got Balaji on the podcast recently. You can kind of think about it in terms of the network state and the different scales that you grow out to there, right? And with Fetiment, basically you give them this out-of-the-box solution where you can take the existing community

and you can equip them with really, really, really good Bitcoin, Lightning, privacy technology, right? And this is like where we kind of get beyond, because what Fetiment started as was just a scaling solution for Bitcoin and eventually Lightning, right? A privacy solution. But when you think about it conceptually is what does it mean to own Bitcoin? Is it means to own and manage the data associated with sable is spend that bitcoin right and so basically managing secrets and so what you can do is because originally when we built fediment is fediments all written in rust it's like a very complex code base just in order to organize it kind of for ourselves and like eric eric and uh dpc who was both uh fediment contributors like major fediment contributors

they kind of like took the lead on this of that splitting it up into this module system and so the initial modules that you get out of the box with fediment we call them the default modules are Bitcoin, Lightning, eCash. And so the federation is just running this distributed consensus and you're plugging in these modular capabilities to it. And so the same way in Bitcoin, we have inputs and outputs. In Fetiment, you have a distributed consensus, just like Bitcoin, where they have different current, we're moving away from this, but for using a different distributed consensus mechanism. But the way to think about it is let's, we call them epics, right? And epics contain transactions. The transactions have inputs and outputs. And you

as a developer can define those inputs and outputs. And so, for example, like the normal transaction when you peg in is the input is Bitcoin, the output is eCash. When you're doing a payment, then the input is eCash, the output is some like an advertisement to anyone in the federation who if I'm running a lightning node, I can complete this payment in exchange for this lightning payment in exchange for eCash. When we built that SimpyMint module, which was Simplicity, which, again, is the scripting language that Blockstream has been developing, which is going to, like, hopefully be forking into Bitcoin so that we can use, like, much more advanced, like, base layer scripting, is that the input for that was eCash and the output was execution of a smart contract as defined in Simplicity. And so you start building with this FedEmit module system. Well, you can build out a module for basically any application that you'd like to run in a federated manner.

And so one of those might be something like a password manager. And so you get an out-of-the-box federated backup of all of your locally run passwords. And so now you don't run into like a last pass situation, right? Because like all of your data is run within like people that you trust, which is like your local community never goes outside of that third party. Or something else like you could do a stability pool, which is another module that's been developed for Fetiman, where because you have this larger pool of liquidity, you can do stuff like synthetic dollar trading strategies.

And so you can lock in the price of Bitcoin to a dollar. It becomes this sort of really modular platform for building out federated applications. And Feddy is the front end application for interacting between all of these different federations. So maybe you've got one at like the VA level, like, I don't know, think about them for like the federations that I'll be setting up probably, right, with other people is like at the VA level, at like a state level or a city level, like my local federation, that's just like people within like my, like local area, or then maybe like a larger Bitcoin or federation or something is that Feddy is sort of the front end for interacting across all those, how do I manage all of my life and my data and my money across these things? So for example, if I have too much in like a larger federation where they're kind of further away from me, well, maybe I can immediately sweep that into like my local federation. And then from there, immediately sweep that to cold storage if I wanted to or something like that. Right. But it becomes this really, really cool way where we're thinking about, hey, I only have to expose as part of my identity, those parts of my identity that I want to be exposed as part of this community that I'm within. Right. and so i can use money which is bitcoin right and i can use my data which is managed across these different federations right to make sure that i'm only exposing those parts of my identity that i want to be exposed in those ones i don't have to like tell them everything about myself in order to just be part of a community yeah the modularity of what you guys are building at feddy is extremely exciting and i don't think anybody listening this can really grok it until you see

it like last friday during your demo we went from the fetty alpha fediment to the ai for all fediment and it's really crazy when you join a new fetter fediment like they have a suite of apps that are specific to that mint um like yeah fetty alpha it's pretty vanilla you can find out where people are accepting bitcoin as payment do a couple other things um and then you get into the ai for all fediment and they have stack work which makes sense for them because they're doing ai hackathon and they want to leverage stack work to help out there you have ln chat which i'm sure we'll talk about in a bit here but like that was the first time i joined another mint outside of the the fediment alpha or the fedi alpha excuse me and it was like whoa like this is really

personalized yeah exactly and that's one of the things for basically what we've been talking about is like the Fetty Mint protocol layer of that at the protocol, when you initially set up the federation, you can configure it with certain modules. So for example, if you want people who use the Mint to be able to lock in a dollar price of their Bitcoin, they could be running the stability pools module, right? If you want them to be able to have like a threshold backup mechanism, so this hasn't been built out yet, but you know, if you're a Rust developer out there and you'd like to give this a shot, like we're doing a hackathon this month. And so this would be like a cool submission for it would be like a password manager, right? Where the threshold backup of all

the passwords is managed across the different federations. Right. And so for each federation, you can configure like at the protocol layer, like what you're running. So what like the Fedament transactions are going to look like. Right. But on the Feddy side, what we also allow you to do is like, we've got kind of three phases that we're going to be rolling this out in is that the first phase is just like web LN interactions. Right. And so you can take a website and you can run it inside of Feddy. And so when you're running it inside Feddy, then it gets direct access to um, like the, uh, the lightning wallet, but it's not the lightning wallet. Right. But it's like the e-cash paid over lightning. And so you can do something like run stack work, or you can run

stacker news, or you can run like, uh, you know, like a Nostra client or something like primal. Right. And you can have the experience of that's very clean because it's been able to directly talk to, um, Betty. Right. So that's what it kind of starts off that way. And that's what just like in the initial alpha release that we've developed out for of that, you can make like really clean web outline applications that play with Fetty very well. Right. And then phase two of that is going to be, okay, well now I have this federation aspect of it. Anything that you want to pool community resource wise, like for example, if you in a community have like a couple of people who have access to graphics cards or something, and you want to pool access to that and make like

a tiny little graphics card farm and like gate access to it. That's something that works really well in a federated context, building on top of Fetty Mint as a module. And so the space two is going to be okay well now the federations and the different fediments they're going to be able to host different applications and stuff on behalf of their communities right so maybe they host like a nostril relay that's like extremely well run and they can manage access to it based on lightning payments or like membership in the federation or something like that they can manage like encrypted chat applications and stuff they can do anything like that you can host it at the federation level and then phase three for fedimods is going to be okay well now i've got the webln application

running inside FedE. I've got these resources on the backend and I've got the FedEmit protocol underneath it that's got running these different modules. Well, how do we pipe through and allow somebody using FedE to be able to access the resources of the federation and the different FedEmit protocol configurations through modules that they've done and expose those to the application, right? And so if I'm running on like a WebL Insight, for example, I go on a website, I could have like a chat bot. This is just like an example for this. If you want to build this out, like you know please like submit to the hackathon or just contact me like happy to work on this with you right um is uh maybe they have like a an ai chatbot that is running against graphics cards

along locally in their federation and so every time they want to interact with the website on the ai side of things so with the open up a chatbot that can expose it but they don't want to really have their data get passed over to third party like open ai then they can have that passed back run at the federation level but maybe they're running the new lava 2 that just came out today right like a 70 billion parameter you need like big beefy graphics cards to run that right So you can have anybody using Fetty as part of that federation, they can pipe that back in, run it at the federation level, and pipe it back out.

And so it's kind of very ambitious. We're moving toward that. Right now it's more just the WebLN side of things, but very soon after the mainnet releases and stuff, we're going to be trying to allow the federmans to also be hosting resources for the Fetty mods and then also having the Fetty mods be able to directly access those resources via Fetty.

I think you're on mute, Marty. I was on mute there. I mean, you said it's early days and you've got big ambitious goals, but, I mean, it's just the stacker news example. Like in the Feddy for All, Feddy Mint, I jumped in there and used WebLN to sign in and then boosted a post or upvoted a post, and that was a beautiful thing.

The first time on iOS for me, doing a lightning payment on a site like stacker news i didn't have to leave the app it literally just popped up it was like pay now done and just that umx improvement alone is massive for making the barriers to entry much lower for people totally yeah yeah in the um in the before we jump into ai because that's actually why i hit you up it's like you need talk about bitcoin ai you're on the cutting edge i would say um but just to wrap up like the the trade-offs with the federated model and diving into the individual guardians the federation members i mean i did ask this question on the panel after your demo last week which is what

are the hardware requirements for an individual guardian and it's if they're running an umbrella all the start nine whatever it may be just have bitcoin core downloaded and you download fediment right alongside it and boom you can be um a guardian within a within a federation the follow-up question i wasn't able to ask but wanted to able wanted to ask you now is what are the liveliness requirements for each individual guardian like say one of their servers goes down temporarily what's the process for that to get back back in the swing of signing these token transactions? Well, this is a Bitcoiner podcast, so I can talk a little bit technically about this, right? Which is the ideal configuration that you want to have when you're setting up these

pettiments is you want it to be Byzantine fault tolerant, right? And so that's like fancy computer science. Byzantine fault tolerance is when you're talking about a distributed system, it's very hard to distinguish between somebody who's lying to you and somebody who's actively being malicious or somebody who just hasn't been connected, right? And so in terms of there's like certain distributed consensus protocols that require you to be online continuously right so if anybody drops out then like everything stops and like you have to do this whole restart mechanism and like sometimes you can't even restart depending on the different protocol that you're using right so the thing that we're using is we're using an asynchronous byzantine fault tolerant consensus

mechanism and so what does that mean it means that federal like different federation guardians can go offline. And if they go offline, as long as they're above the numbers, three M plus one, where M is the number of malicious peers. So if you have a three of four, then that's three M of one. And so one person can go offline or be actively malicious trying to steal the funds. And there's nothing that they can do is that the protocol will just continue because you have the three signers who are able to continue going, right? If you have a federation of like five of seven, then two people could be actively malicious and trying to steal the funds or just go offline completely. And there's nothing that they'd be able to do. And so now it's like, okay, well,

what if two people, if you have like a three or four, and what if two people become actively malicious or something is that the specific one that we're using right now is called HBBFT, which is honey badger Byzantine fault tolerance, which is like, you know, like little Bitcoin joke about it. Right. And the one that we're moving to, there's a different one that we're moving to called Aleph, right? But one of the properties of both of these is that in the event that you've got less than two thirds of the guardians who go offline or actively malicious, the protocol just stops. And so because you can't get the three of four or the five of seven, because you've got additional people who are malicious, you can't sign additional transactions in order to continue

with the protocol, but they can't steal the funds is that you're just stuck there is that. So for example, if we're doing a three or four federation and one person goes offline, then nothing like the user experience is nobody notices that right but like you know for on the feddy side we'll probably do like a notification that it's like hey you've got a guardian who's been off for a while or something like that who like maybe you want to sweep your funds to a different federate to a different feddy mint or something and then but if two people go offline so you've got two of the four who are offline or actively trying to uh like you know be malicious and rug or whatever like they can't do anything and the reason why is because it requires three of four in order to do

anything with the protocol and if you don't get three or four it just basically stops where it is and once you get three or four it continues right and so that's like a little bit technical on those things but i think uh we covered each of those right is that if you've got less if you got one third up to one third of people can be malicious and they can be like actively malicious guardians or something like you know one of the guardians is or just go or just goes offline because in a distributed consensus system it's very difficult to determine distinguish between people who are actively trying to be malicious people who are just offline and so the way that you solve for that is you build a protocol that doesn't distinguish between those right it's that

we treat you if you're offline as being malicious and we solve for it anyway right yeah that's what i was going to ask because my assumption is that a lot of guardians are just going to have problems every now and then with their servers like i've seen this with our lightning node at tftc it goes down every once in a while if our disk requirements aren't up to enough we have to upload upload the amount of data we're buying from our cloud provider and well so it's the process of running a guardian node right is that if you're running the fed mcdamon you just run it alongside a bitcoin node like a bitcoin you don't have to have a lightning node for it remember the guardians are just running bitcoin and so you have a bitcoin node

you just run the fed mcdamon alongside it and you just keep it watered with electricity and hard drive space and you don't have to touch and that it just sits there and it's just running this distributed consensus with everybody else right and so this is another benefit of it right is that because we have this distinction between the guardian nodes and the lightning nodes because lightning nodes are extremely sort of like intensive to like go back and forth with this i think callie just a couple days said like you know um something that people don't really talk about is the ptsd associated with running a large lightning is that it's very hard to do and very hard to do effectively right and so like yeah there's like some of these solutions that are

coming out which are like breeze and um like phoenix or whatever that like make it a little easier but kind of like abstract that away a little bit right but just generally speaking it's very hard because lightning you have to be live all the time right and so what's nice about bitcoin core nodes right normally and this is why people can just kind of like have them run and sit in the background right is that it doesn't really require you to interact with it fediment would just be something you run alongside your bitcoin node and you can just like have it sit there and you don't have to touch it you don't have to um be doing anything crazy about it you know just make sure that the electricity

is still running, that you have enough hard drive space and it's not too much additional hard drive space versus just running a Bitcoin Core node. Yeah, I'm really excited for what Breeze is doing. Things like Blockstream, Screenlight, VLS, those solutions that separate the private keys from

the node and allow you to run the private key in one piece of hardware that can always be on and just allocate everything else to the cloud on the node side of things. I think that's going to be massive. for usability it could be wrong but that's just my assumption yeah i mean i've even seen it right and just in terms of like kind of being doing lightning stuff for the last two or so years right is that the ease of use of doing this stuff i mean like the breeze sdk is really beautiful in

terms of making like a good developer experience for um like running a lightning node for this stuff but like this is also just another issue that we have and this is why we talk about this like kind of spectrum of first to third party custody where there's this big spectrum in the middle of second-party custody right is that there's an interesting set of trade-offs within there that we're exploring right which is that and like even within uh like running lightning nodes right like you can be like very close to the metal you can also be okay well phoenix is running on my uh node on my phone right and like i don't really have to interact with it or touch it in any any way right there's kind of spectrum between those is that you can use that same

spectrum when you're developing different lightning applications right so for example one of the easiest ways to get started building lightning applications if you're just a front-end developer is using lightning addresses where you don't have to manage any of the node stuff you don't have to touch any of the node stuff you just do normal http requests and like on the back end like there's a lightning address server which is serving this stuff up right so i found that a super effective way for getting new devs to start building on bitcoin is just using lightning addresses and then once they realize oh hey i'm actually making a bunch of money in terms of doing the lightning address stuff um uh sorry i'm just letting my dog in um once i start realizing i'm

getting a bunch of money well okay well now i'm trusting the lightning service provider who's running the lightning address server so maybe i want to move to doing my own node and i can kind of move that way and it's the same sort of thing with fediment right where maybe you start with a very close to you federation and maybe you like join some like further away federations the money and data that you have associated with that larger federation is like okay this is getting a little bit too far away from me maybe i'm like not as close with those guardians anymore so you can roll it back to something closer to yourself or you can um so you move it back to something closer to yourself or you can sweep into the cold storage or like first party custody for example

yeah i mean i think having that optionality is very important and at the speed of lightning as well because like equating it to something like a binance where you have that full custodial relationship and at some point they thrust kyc on you and if you don't fill it out you're not going to get your bitcoin yeah the federation at the state of lightning if you begin to worry that that's going to happen with your guardians you just get it off right away and then um since they don't know who you are individually it's much harder to do all that yeah and for that privacy aspect for it right like let's talk about that for a second of that when i'm talking about like some third party over there who doesn't know me who doesn't know my family who doesn't like not

very close to me in terms of the private there's different privacy privacy trade-offs associated with it where like i'm not very concerned that they like see some of my like personal interactions and those kinds of things like i'm not like the most like generally speaking when people are using big um when people are using money and using credit cards and stuff is that they're not as concerned that like hey some random person may or may not be able to sorry my dog is digging um may or may not go in the background my uh transactions um like but once you're talking about like hey very very close to me like this is bob down the street this is like a community leader this is somebody who's like very very close to me like my wife even right is that you

need to have that baseline of privacy right of that like or maybe i'm like living in a government where a lender under a government that doesn't like approve of what i'm doing if you're running these local federations with second party custody you kind of start from the building off of like hey you have really good privacy and then after that like maybe you can make an opt-in module like this is something that's a couple people have been working on is like making an accounts module for example so you want to do something like if you want to run like the evm as part of a contracting system for Fetiment, then like you need some like account model for it. And so in accounts of persistent identity, you don't have as good, you don't have as good privacy associated

with it. But the default out of the box options for Fetiment are that you achieve very, very good privacy, right? And that's because you're like you're running in these local communities. So you want to be able to opt into it. It's kind of like the cypherpunk ethos, right? Of that like privacy is not secrecy. Privacy is the ability to selectively reveal yourself as part of a transaction. And that's sort of like the design decisions associated with Fetiment of that like out of the box it's that hey we're using the e-cash system we're using lightning we're using bitcoin right but then you can add additional modules and configurations for so you want to have like a persistent identity like you want to do something like lightning addresses so we're

actually coming up with some pretty cool solutions for doing lightning addresses but maintain your privacy but like if you wanted to do a lightning address normally you'd have to do um you'd have to have a persistent identity for something like that right because it's you know i'm marty at get albie.com or something right that is my lightning address if you guys want to send me subsets but um yeah that's one of my like addresses what do you think the first killer module or killer app or use case the fediments or within fedi particularly is going to be um i've been extremely bullish on synthetic dollar trading strategies and so this was actually back when i was at okx um so i was like originally just kind of that was like my first software

engineering job and so um but like while i was there i was like running these like weekly sessions on like this is how bitcoin works this is why it's important this is why like bitcoin not some of these other coins right and so one of the things that while i was there was um they had the collapse of uh all the banks like the crypto banks remember that they had like silicon valley bank silvergate bank and um signature bank like they all collapsed within like a week of each other so and like in the days before that in the weeks before that i had been like hey this is not a question of going from, you know, like one bank to another, this becomes a question of what if there are no banks? What if we can't get a banking license at all? Right. And I think that a lot of people are

running into these issues. And so one of the really interesting solutions for that is using synthetic dollars. And so the way that that works is basically I go, I hold some, I take my Bitcoin and I deposit and I like hold my Bitcoin here. I take some percentage of it and open up a short position against that Bitcoin. And so now if the price of Bitcoin goes up, then some of the Bitcoin that I'm holding goes up, but the short price, the position that I'm holding is the short goes down. And the net between those is a stable US dollar price, right? And so this is a way that you can do without having to touch a bank, because all you need is Bitcoin and a place to trade it. You can lock in the price of Bitcoin to dollars. So for example, this is what Galloway is doing

in order to give U.S. dollar bank, U.S. dollar accounts to everybody who uses Galloway, right, on the Blink wallet, is that they, because it's a custodial solution on that one, and they have a sufficient liquidity associated with it, they can do these hedging strategies in order to create synthetic dollars. So they don't actually touch banks at any level of the stack. They're just shorting Bitcoin on an exchange using perpetual inverse swap contracts, and they're holding, and they're going long. So maybe I have like a million sats or something. I take like 600,000 of those and then I keep them like segregated off and then 400,000 go to the exchange or the DeFi pool or whatever it is that I'm using to short the instrument. And so I open

the short position and say like the price of Bitcoin goes up. Well, then the price of my sats goes up. That's over here. But when I close the position on the exchange and I get it back instead of the 400,000 sats, now I have like 200,000 sats or whatever. Right. And so I haven't been exposed to the price volatility of bitcoin the net between those two is always a stable us dollar price but in order to do that you need sufficient liquidity because like in order to get like good order book depth you need sort of like larger than like in order to not get like killed while you're um uh doing these trades in order to like hedge out the position properly and so what's cool about fediment is that we've got this stability pools module that like fed

like federations that it's not that one of the default modules but it's something that federations might be able to run is that now because you have additional liquidity and you have additional depth you can basically create an api for locking this in locking in the price of it because you can have liquidity providers for the federation or like hey i want a short bitcoin or i want to go long bitcoin or whatever it is and like they can be the other side of that trade in order to for people in the federation lock in their price of bitcoin so the experience they have is just using dollars like the thing that shows up in their app while they're going back and forth is like a dollar price, but they can still scan Lightning invoices. They still get the advantages of the e-cash

claims and those sorts of things. So I think that's a huge unlock for that. Because something that I've seen personally is that the price volatility of Bitcoin is a huge deterrent for a lot of people who otherwise would join in. They want the rails of using Bitcoin. They want the instant finally settled micropayment over Lightning. They want to be able to... I know you were talking about this. I actually started this. I haven't finished it up yet because I was a little bit busy this morning but making like basically do a lightning payment and then get like a stable diffusion 2.0 generation or something that costs 0.1 cents but you can pass that'll cost along in sats they want that experience but they don't want to be exposed to the price volatility of bitcoin

right and it's not something if you're like in the global south and like your net take home into the week is like 50 bucks or something like you can't be exposed to a 25 price swing for example and so i think that adding in those stability pool module where even if you're in a place that doesn't have a banking relationship you can set up one of these federations and then on the like the people within the federation they can lock in the price of dollar um bitcoin to dollars so that gives them a really cool strategy for now i get the permissionlessness and advantages of bitcoin but i can don't have to be exposed to the price volatility associated with it i think that's like a huge unlock i completely agree i could see that being the first killer use case

not to answer my own question but no peter mccormick was tweeting about it the other day like i had to pay somebody in argentina and they asked me for stable coins over bitcoin like there's obviously a use case over here for this it was running over ethereum like are we doing enough in bitcoin and again i think there's in order of operations to all this we will get to that point where you can exchange stable value using the bitcoin rails it just took some time to get things set up the protocol layer to enable lightning and get lightning mature and then have eric and a bunch of others come up with this idea or really eric come up with this idea of fediments uh leveraging lightning and then bam we can do it stability pool is one that hackathon in

the fall correct or yeah that was a hackathon i think it was january ish right but um they were the ones that built that one and the stability pool you can kind of think about it as like a DeFi pool. Right. But like without all of the problems associated with doing that, where you try to support like all of these crazy multiple currencies and have like all of these weird issues associated with the liquidity providers. Right. Is that it's just a very clean interface of the reason why this thing exists. The exclusive thing for this module is that you have people on one side of the trade trying to lock in their price of Bitcoin and people on the other who need liquidity provisions in order to like put on a longer or short position

or whatever. Right. It's like a very limited set for that. But because you're just limiting that set out of it and because you have the additional liquidity of the federation versus like an individual where normally like the batch sizes for these hedging positions is normally updates of like a hundred dollars ish right is that in order to like make this thing work you need the additional liquidity and depth of an order book of a larger group right and so the federation becomes like a good intermediate layer between hey you don't have like this third party um who's like you know like kraken or something like that right where um but you it's not like an individual And so in that intermediate layer, you can still get the good execution costs

in order to make it so that you're not losing your shirt and all of the trade costs associated with doing the hedging. Yeah, and then liquidity providers are incentivized to provide that liquidity because they're going to make some money on the fees for holding that liquidity in there. Yeah. And another thing, too, you can abstract all that perp swap, taking a short position away where it's like,

okay, how much Bitcoin do you want to lock up? How much USD do you want? Super simple, right? And this is one of the really cool things. I actually did some initial work on this. I haven't gotten time to finish it up, but of taking stable sats as it exists in Galloway, and it's just an open source Rust implementation

of that taking that and turning that into a Fetiment module, right? So that you could literally, if you wanted to, then the strategy for doing the liquidity provision for it is that you could use a third-party exchange if you wanted to. And this is something like, you know, it would be better to use stability pools where you're just doing it locally within the federation but like the whole point of fediment is that it's an opt-in system right so like out of the box you get really good privacy you get

bitcoin you get on-chain you get e-cash right but you can opt-in using these modules to additional stuff like maybe i want to have an account system maybe i want to use an evm as the smart contracting system maybe i want to like run simplicity right or maybe i want to have like space chains or something like this like what's really great about this is you can just take any application that you could run in this federated context through because you already have the like the fediment system set up there where they're running a distributed consensus you've got access to bitcoin you've got interoperability with lightning you've got the e-cash abstraction in order to do sort of like the bearer instruments of moving between uh between different modules and between

different inputs and outputs as on the transactions and so it becomes this really really cool layer for you can just opt into these different layers of like you know for this one i maybe it's i want to like maybe we can start moving on to ai with this stuff is that one of the cool applications i really think is going to be um another really cool one for vetting mint is going to be hosted access to gpus right and so for a lot of these like communities that we're thinking of launching in you don't have a bunch of individuals who have graphics cards themselves or the ability to access graphics cards at a cloud level right so like one of the issues that um like this is what kind of prompted me to start going further down the ai side is that they really have serious monetization

problems and the reason why is because like i show up at your website i hit a gpt4 call that costs two to seven cents right and so the cost is going to go down but the quality of the models is going to go up and so whenever you want to get access to the most recent stuff most like cutting edge stuff it's going to be uh like you know a couple cents or a couple fractions of a cent or something it's not something that you can just amortize out your cost because it's basically free right which is what kind of like the previous computing paradigm that we were in with like i don't like the web 2 web 3 thing right but like web 2 is that you know it doesn't cost facebook much to just have me show up at the facebook website a bunch but if i showed up at

facebook and the first thing that happens is i do an interaction with their new llama 2 model right like replicate which is one of the companies that's like exposing apis to a lot of these things they don't even let you hit the 70 billion parameter one which is like the biggest like most performant version of the model and the reason why i think is because it's too expensive and they can't just like let people hit against that and even if you wanted to pay for it the mechanism they currently use for paying for it is credit cards and so that limits the number of people that you can have access to and it requires them to dox themselves to give their information to give all their credit card stuff you have to work through stripe it's like this whole thing

right and so what i really think is going to be cool is fediments running basically hosted access to graphics cards for people within their community so that you can run something locally that you can't just run on your phone right but you don't have to reach out to a third party in order to do the execution for yeah i mean you provided the jumping off point for the ai discussion but before like is that i do have some questions around that particular use case specifically it's like will you be getting access to the best ai products in that model and before you answer that maybe we just start pretend like i'm the idiot i am don't know anything about ai what is the ai landscape i mean i'm sure everybody's heard about llms

generative ai the compute necessary to make it all work ai agents like what's the base of artificial intelligence and the industry growing around it and like the iterative process getting built on top of it yeah sure so let's kind of do like a brief overview of why this stuff has exploded recently right is that the specific things that we've been kind of working on and that have sort of like been developing are these large language models and so basically a language model uses well let's like make it even more simple right is that basically with large language models what you're doing is you're basically training it over a giant data set which is think about like the entire compendium of human knowledge and we're just taking all of

that and we're just saying okay based off of everything that has ever been written which is like you know the data sets associated with doing this are scrapes of the entire internet giant code basis. Like, you know, I think like for like Microsoft's models and open AIs models that use like the entirety of GitHub, for example, right. Like all the open source stuff available there for not only the language models, but for the diffusion models, they're training them on like billions and billions and billions of different like pictures, right. And images and videos. And so you're just taking all of this stuff and then you're saying, okay, based off of everything that I have there, I can predict what the next letters are going to be

in the input that you're giving me and so this is something where like if you've been playing with chat gpt or any of these chat interfaces for this stuff the big thing for this was now you have these new chat models which are trained over instruct data sets and so what does that mean is that normally what the language model is doing is it's just predicting what the next token is based off the entire like corpus of history the next token is probably just a continuation of the sentence or a continuation of the paragraph right is that the interface of chat has been super useful because the way that they model the data sets for it and they specifically fine-tune it over it which is basically you like take the larger corpus of information and you say hey

specifically i want you to like have a higher probability associated with um answering in these ways right which is like the smaller data set it's more refined data set that i'm training you over like an instructor data set where there's more questions and answers is that instead of like you know i post a question and based off the entire compendium of human history it's just asks more questions it's i pose a question and it can give me an answer right and so that interface has been extremely useful and extremely intuitive and this is kind of the first time that users has been able to see like just for themselves that like this stuff is really useful and powerful and i can do a lot of stuff right so like everybody's had like probably a couple like

weird experiences with chat gpt but also some great experiences right of like these are things that i didn't think it would be able to do and so that's like sort of on the large language model side and so one of the really cool things about this is that you get access to intelligence access to like you know i can instead of having to do like search and i've got like the 10 blue links or whatever i can just ask a question and get an answer like you have this problem of hallucination and the reason why you have these hallucination problems is because the model itself is just saying based off the entire compendium of human knowledge and the fine-tuning parameters that you put into here i predict the next couple couple letters to be this and then i predict it to be

this. And then I predict it to be this. So when it's hallucinating, it doesn't like have complete context of everything that's going on inside of that sentence. It's just predicting what the next token is. Right. And so this is kind of like a bunch of different stuff, but in order to run these models and have access to them, these are very expensive. And you think about every single time that you hit against chat GPT or every single time that you hit against stable diffusion or anything like this, stable diffusion is like an image model, a text to image model, or like any of these other stuff, right? They've got like the whisper models where you can take audio and turn into text all of these things is basically every single time you're doing that you're setting a

graphics card on fire right and so that is expensive and that's costly and so like there was a period when chat gpt first came out where everybody was using it where open ai was burning millions and millions of dollars a day and the reason why was because hey we want to give people an access to this stuff and we want to see it and get the initial response for it but you run into these issues and so one of the big issues in this last couple weeks has been that the quality of chat of chat gpt for the gpt4 models has gone down enormously and you see like hey it's faster but all of the like things that i really like it for of that it was able to do all these amazing things like now the quality of the answers is going down significantly well why is that well

it's because they're basically cutting back on their burn it's what i think is going on and so this is extremely expensive the whole model of oh hey i've got 10 of my users who are going to pay for the 90 who don't pay at all doesn't work where every single time somebody shows up my website they cost between like five and twenty cents right so this is why i was so excited about lightning because a lot of the stuff we've been building in lightning is this instant finally settled micro payments specifically some of the stuff that i was working on and like this is sort of the space that i've been spending a lot of time in is over the web and so basically you hit an api the api returns a 402 a payment required code and you complete the invoice and then complete the call

right is that this is the first place where okay well api calls beforehand basically were free and And so when we said like, oh, hey, you can monetize an API call. You can have someone cost like one cent to show up at your website. That wasn't a very appealing thing to tell people because they were like, hey, my API costs basically cost nothing, right? Like this is not like a big expense for me. But now it's becoming this huge expense. And there is no better solution than the Lightning Network.

And specifically just doing this, hey, I hit against the payment. I hit against the endpoint. It gives me back a payment required code. I pay the invoice. And now I can continue interactions with the website as my authorization code. there is no better solution than lightning in terms of the speed and in terms of the final settlement of the bear instrument and that's like another kind of side thing for this of why ai is like such a good opportunity for monetization on the bitcoin side is because the issue with a lot

of these guys are running into is that they're using credit cards and so if somebody shows up my website it cost me four cents right and then they swipe their credit card and then okay well the minimum transaction i can do is two dollars and so now i can't just like open up this i have to have them get credits. I have to like do this whole thing. I have to get their information. I have to get so that in the event that they do a chargeback, I can like contact them and all those sorts of things. It's this whole mess, right? But with Lightning, when you do a Lightning payment, you as the sender achieve very good privacy. So I as a developer can make a Lightning gated website and then users can show up and I don't have to know anything about them except for the fact that

they paid me. And I can pass along the costs to the user as they're using my website. And so this is like a really cool use case for Lightning, where for a lot of the other stuff that we've been doing it's like yeah sure i could do this with lightning but i can also do it with dollars and there's a whole infrastructure for dollars and all that sort of thing right is that i think we first started seeing with noster where it zaps where like you really can't do that with um like a fiat system this is another example of this where there is no mechanism to do this with fiat you're not going to be able to pass the cost along to the users in that way the only way that everyone's doing it right now is basically with credit cards and that becomes huge like huge

issues like one of the things i made was a like a basically wrapper around chat gpt that you can pay with lightning for and like the initial context that i got about it were like oh hey i'm in nigeria or i'm in brazil like i can't get a credit card and i haven't been able to use any of this ai stuff this is the first thing i've been able to do because i can like use bit knob or i can use um like whatever in order to swap my money into bitcoin and just pay for you as you're using it like i had no idea that that's where they're coming from because i don't know anything about them except for they paid me right so that's kind of like a big overview of like ai and lightning sort of the intersection between those two so hopefully it's a good starter that was a great

starter and i think that last anecdote they just shared really shows the power of this like opening up these tools to markets that don't have access to them because of the incumbent payments infrastructure which when you think about the impact that could have not only those individual communities but the world overall if you get smart people who are just limited by their access to technology and services you finally get them access to that stuff it's crazy to think what could come of that but as you were prefacing that i think to dive more deeply into what's going on the lightning side of things specifically you mentioned l402 and so let's jump into that obviously i mean lsats they had to rebrand to l402 ryan gentry was telling me the the law

the legal apparatus here in the united states really the tests that lawyers take to become lawyers the the lsat had to say hey you can't call your protocol lsat unfortunately so they renamed it to l402 it's been around for a while lightning labs has been utilizing it in a few of their products but it seems like um they had a major release last week which implemented it into a popular ai development kit lang chain and so what's going on it's l402 what is aperture and why is it really big that it's now in lang chain yeah sure so lang chain is basically so like now we can kind of go into like the specifics of like how people are using these models is that one of things that we figured out is that you can take the models and you can feed them back into each

other and you can feed their outputs to each other and so what agents are and that's what people have been working a lot with there's been a lot of production deployments of them yet but like it's something that people are experimenting with and i think is a really good use case for lightning is that you basically have one model that's operating as like a planner and then he takes your task and splits it out into subtasks and then that agent that model output can be fed into a bunch of different agents beneath it so this one is like an agent that can access the internet and so maybe it does a web browse like it interacts with the web and so it gets some information from there it goes back and then it has an eight you have an agent that when you're

basically the way these agents work is that they're just large language models that you're passing in specific personas and like hey you are this these are your capabilities and this is how you access the apis that you have available to you right and it can output code which you can then execute for example and so what these agents is that you can create an agent and then have it go do stuff for you right and so what's really cool about the l402 integration with langchain which is like langchain bitcoin tools if anyone looks to look it up i think it's like github.com slash lightning labs slash langchain bitcoin tools is that langchain is this kind of framework that people are using in ai for building out these applications where it's like hey i want to take

an input and feed it into this large language model and then clean the output and feed that into another model and then have it browse the web and then give the output is what we're calling what people call that is chain and so langchain is a way to chain these different large language models together with just the rest of your code and your application that you're doing and langchain bitcoin tools is a way to have that agent and have that model one of the tools that you're giving it is tying it into a lightning node and saying this is the capabilities that you have of being able to access it. So it can output code and execute that code in order to send and receive Bitcoin payments, for example, on your behalf. And so currently the way everyone's

kind of playing around with agents is maybe they exist for like, you know, seven, 10 seconds or whatever it is. Right. But if you want to have longer running agents, like something that's just sitting in the background doing stuff for you, one of the things that people have found was building out these agent models is the agents using these models is that the more specialized you make the agent, the better the performances, right? So like, you know, back to military terminology, I think about it as like weapon to target match, which is that you make a very specialized agent with specialized skills. And when you ask it to do something, it's very good at doing that thing. Right. But the problem that people are running into is, okay, well,

if I make all these specialized different agents, right, how do I have like an orchestrator agent across them? And how do I like host access to all of those things? And this is just kind of like going back to economics is that the way that you coordinate value transfer and the way that you get things done in an economy with very specialized agents with very specialized actors so you have money as the intermediate value transfer layer between them and so this is like the thing you can do with langchain bitcoin tools is you can give the initial planner agent a wallet and say hey these are the things you have access to this is how much money you have you can go hit against services you can pay for them you can give these things to those and so this is what we think is

and that i'm very excited for i've seen a lot of cool projects getting started built out for the hackathon for this is that laying chain bitcoin tools and just like giving agents access to bitcoin wallets is going to be sort of the best interaction layer for using agents because you can have all these specialized agents that get paid in bitcoin or like this is something that's really exciting and stackwork's been doing some work on this i've seen a couple projects working on this for the hackathon is that the agent can identify oh i don't have the tools to complete this i'm going to post a bounty using that bitcoin that you gave me to get a human to complete this part of it and then feed that back into myself so i can continue with what i was doing right and so

sort of just agents specifically are one of these places where bitcoin is like a very very useful tool that you can give them in order to make them do the things that you want yeah it's mind-blowing and i i mentioned this to balaji before i recorded with him last month is it seems like via the emergence of the lightning network and now l402 and these lang chain bitcoin tools that lightnings produce like the machine payable web is finally viable like it makes sense to go after that particular um i don't want to say use use case i guess you can say but that particular market of machines paying each other and well this is something i up and realized was that because i'd exposed my open ai key by these bitcoin payments right and so i woke up

and i had like a two thousand dollar bill from uh open ai right because i was like oh hey like a bunch of people are using this thing now because i just left it on gpd4 right and so each one of those calls is between three and six cents right and depending on how many thousands of tokens that you're doing and like a bunch of people have been using it like i had it running for the entirety of prague when we did the pop-up federation as like one of the feddy mods and so people were able to like click into that and just ask some questions and stuff and when they were doing that the entire time it was like hey they're just passing along bitcoin payments to me right and so i see my open ai key is like oh hey my expenses are like i've got 2000 bucks in expenses or

whatever and then i look at my bitcoin wallet and it's like 2020 bucks right i'm like okay well this is like something that becomes really cool with this is that once you have payments for all these apis and this is something that people are running into because everybody is scraping everybody else's data for training sets and stuff right like twitter if you remember last week they were like hey we're going to gate access to this stuff now and you can only hit a certain number of times the reason why is because everybody's trying to like scrape against twitter in order to generate training data and those sorts of things is that when you gate something behind a payment for the api then the concept of spam kind of goes away right and the reason why is

because every single time someone's hitting me i'm passing the cost along to them and i can add like a small profit to that or whatever i can do like you know if it costs me 10 cents then i can have 10 cents convert that to sats and then add like you know like half a sat or add like two sats or something right is that i can pass that cost along to the user and so i just don't care about how many people are hitting my service because i'm always profitable is that just hit me more right is like hey show up at my website interact with the chat bot right like you're passing along the cost as you do it and so it becomes this really cool like kind of change of pays for it right because this is something talking with some of the like more like ai focus

guys who they run into this issue or the moment that they deploy something with gpt4 in it and it becomes popular well they wake up the next day and they've had hey i've got like two thousand dollars or twenty thousand dollars worth of open ai expenses but then the problem is they don't have a monetization mechanism for it or if they do have a monetization mechanism maybe it's stripe and maybe like hey twenty percent of those things become chargebacks or something right and so it just becomes a super super cool abstraction layer of whenever you want to do any of these ai calls is that you can pass along the cost along to the user and so people start taking in and they start using bitcoin for all this ai stuff and then as you're passing those payments along and stuff

the reason why they're doing it is because of the speed associated with it and because it's a instrument with final settlement but we sort of backdoor in is that hey a sender on lightning achieves perfect privacy well not perfect privacy right but very very good privacy especially relative to the current solution which is this is my name this is my credit card information this is my address right so like that's the that was what initially was really excited about the and it's been really cool seeing people building out projects for the hackathon to kind of like show this works right and so yeah yeah no i mean it's going to be massive i think and like i kept depositing this at the summit last last week like how how long is going to take before

a large percentage of or if not a majority of transactions of the lightning network are machine to machine payments of agents going around and completing tasks on behalf of humans or maybe even other agents if things get really heady but like it really does open up this digital economy that was not possible like you said before and the use case you brought up of terms of giving access people giving people access to your gpt4 key you made 20 bucks on that like and that's another thing like if you're providing the service of access to the key which is giving others privacy like you could charge a little premium on that and probably make a bit more money on top of that which is great economic incentive and then

on top of that like i guess the big question is like that will open ai ever get to a point where like hey we don't like this this is this is weird that you're paying on behalf of thousands of people or is that sort of how it works anyway if you're building apps on yes applications right And so, like, I have an API key and I hit against a service and, you know, I pass along for my users or whatever and, like, I'm a client of that person. And so then, you know, if it's, like, over smaller than microtransactions or something, then, like, maybe I would have to do, I'd have to know some more about them depending on the service that I'm offering them and those kinds of things, right? But, like, the thing that, I think that the, like, I mean, this is still, like, nothing's really in production in terms of, like, the agents. There's, like, some stuff that's, like, starting to roll out. But the big thing for it, and you'll notice this when you start playing around with these applications, is that they're all like, hey, bring your own API key.

Or this is how you run this yourself. Or it's sign up with a credit card in order to get access to any of this stuff. And the reason why everyone's doing that is just because of the cost associated with doing this. And so it's been super exciting for seeing this. And I think we can talk about Aperture for this. Is that Aperture is something that Lalu built and Lightning Labs put out. and I just did a new release for it, where it's called a reverse proxy, is that you hit against Aperture the exact same way you would normally hit against the API. But the only difference is

that you just don't put the authorization key basically, is that you don't have an OpenAI API key, but you hit against the Aperture reverse proxy exactly the way that you would hit against OpenAI's API. And what happens on the Aperture side is what that's doing is gating it with a micropayment on the Lightning side, and then attaching whoever the developer who's running the Aperture proxy, attaching his API key, and then completing your call for you and passing it back along. And so that's just been that concept of that, like, you know, I can take my API key and then I can just wrap it with Bitcoin so that anybody can hit against it and then hit against

using that API key. They can hit against whatever service they want, right? Using the other one. That becomes a really cool abstraction layer for developers who want to start using this technology, but they can't get access to credit cards. they can't get access to open ai keys or like maybe they live in a country where they're not even allowed to have those services right and so that's that's been super super cool to see yeah like i've played around with godmode.space which is an ai agent tool to try to do it try to

get an agent to do something simple like hey i've got this website feed them tftc.io like look around and see how i can improve the seo strategy like what tags can i be adding to to improve the seo and get it in front of an audience of bitcoiners or people looking to learn about bitcoin and it's been about a month or two since i last tested it really wasn't able to complete the task it was probably because i'm not that good of a prompty quite yet but you can see it's there like i was watching this agent like going to google scrape certain websites for keywords scrape my website like it was insane to watch it go and do things on command but like yeah like you said i'd get an open api open ai excuse me get my um get my api token put it in there it was like a very

clunky process it wasn't really straightforward yeah and this is i mean like just yesterday i was at a meeting with someone and they were proposing that hey i think the thing is going happen is people are going to have single sign-ons with their api keys right of like hey you log into the website and then it passes along to this and i was like no like the solution for this is that you just pay for stuff as you use it right and so the so because like just like think about it from the developer perspective even right of that it's like oh hey i have to go hit against somebody else's api key and i have to like go along there or like they're passing their api key to me so that i can complete a call for them or whatever and it's just like this is one of those issues

where i mean it's crazy like this is like what people basically do with credit cards too right where like when you swipe a credit card you're basically giving that dude root access to wherever you're like wherever you swipe it to be able to charge whatever they want right and then it's uh well it's a bigger problem with debit cards right but um like that's not the way that we should be doing this the way that we should be doing this is that you provide me an invoice and i pay the invoice for the service that you're providing for me and so i can do that like i can do that and i can do it with lightning so it's an instant finally settled micro payment and because of that i don't have any risk of a chargeback i can charge down to a couple mil satoshis like i probably do over

a mil satoshi because those aren't real right so that's the joke right but um like you can do it that way or you can do that like this is like what the l402 specification like normally recommends and that this is I've seen a lot of successful people implementing this is that you just have them initially do a call they do a payment for like one cent or something and that might be up that gives them credit for doing like 10 or 15 different calls to stable diffusion or something but because you have this really cool infrastructure built out with lightning where this is like I don't think we've talked about this yet but this isn't 2018 anymore right is that lightning is reliable lightning has infrastructure around it like you can spin up a voltage node in

a couple minutes right and start connecting out to channels if you're a developer if you wanted to self if you wanted to host by voltage if you wanted to host like a core lightning node like i've got templates set up for that you can just like run a temp run a core lightning node out of a repl right is that this is not 2018 anymore where like hey 90 of the payments were failing and like all that sort of thing is that like the it's a really clean user experience of like having the payment just be done in the background or just like you do the initial payment for like 0.01 cent and then you just do the payments in the background as the user is navigating around your site with like albie or fetty or whatever like the things that we've kind of been building out for the last

two years i think i have a really cool intersection with this new computing paradigm of ai where we can take all the stuff that we've already built and because we were focusing on payments we weren't focusing on like web3 stuff of putting real estate on the blockchain or whatever right now we have this really robust payments infrastructure that we can take and we can apply to this where this problem where everyone is running into of how do i monetize this stuff effectively right yeah i mean i had this epiphany last week at the summit as well it's because like a lot of people in bitcoin are like oh the shit coins are going to come back next wave is going to be crypto and ai's and tokens specific for ai functions and i was pushing back on the people saying this because i don't

think the dev tool ecosystem it will be obviously it won't be as robust if you're spinning up a token and trying to smash it into ai like tooling around lightning specifically that's been built out over the last five years i think as a significant head start in terms of actually providing utility and value to these ai companies at the end of the day yeah and this is the kind of like why bitcoin and like this is something a universal reaction that i would get like as a bitcoiner working at like okay coin and okay x right was that the reaction i would get is like hey why are you focusing on payments why are you so focused on money right there's all this other stuff you can tokenize right the reason why is because money is like the single most valuable

thing out there. It's like half of every problem, right? Of like, Hey, there's the problem. And there's the relative value of that problem compared to everything else. And the money is what we're using to make that relative valuation, like in a larger economy and this economic model. Right. And so the fact that we've been focusing on making really, really good payments and using a money that can't be corrupted is like really starting to pay off because now when people are saying, Hey, how do I monetize this thing? I want to use the best payment technology which has the best user experience like lightning currently is like there's all sorts of hard edges on user experience but specifically around like the dev experience of

hey i have a lightning address i can hit against it to get an invoice make sure that invoice is paid and then complete the service that specifically i've seen tons and tons of people who know nothing about bitcoin not very interested in bitcoin and they can be like oh wait i can do this and then i can immediately start getting payments and i don't have to as a web developer like sign up for and like take all the information from all my users and pass along to stripe right like i can just have a transaction with them like it's a really great experience for them i think that's something that there's like a lot of hard edges around lightning still and stuff that's like getting ironed out but that's something that works that's something that can

be done at scale that's something that we can show up to different dev communities for and say hey this is immediately how you can start getting paid and monetize your existing applications yeah stripe better keep keep their head on a swivel because it seems like this could disrupt them rather quickly if if bitcoin catches on and if it does catch on or you might want to get some just in case it does catch on blundered that one but no thinking heady here just like as you're describing this like having ideas maybe you're a company that doesn't want to take on the volatility risk of bitcoin uh could you like auto forward the paid lightning invoices to something like a fetty stability pool and yeah for right now that's not that doesn't exist but that's

clearly like i think i me personally like working on this is something that i want to build and something that i think would be very useful and something that um yeah like i think that that's because we were just talking about that earlier of that the price risk associated with bitcoin is like an additional factor that kind of gets in the way of some people who would otherwise be more open to adopting bitcoin and that's one of the things that i think that was the big unlock that galloy proved was that for the galloway bitcoin beach wallet and now blink wallet is that once you added in the stable dollar price that was a big adoption mechanism for merchants because merchants they have a hard enough time just the operational side of their business they also don't

want to have to be investors right and like this is like one of the great evils of fiat right is it kind of turns everybody into an investor is that they have to constantly be thinking about like okay well i can't just hold money so i have to go speculate on like whether stock is going to go up or buy some real estate and hopefully that goes up and that sort of thing is that if you can get rid of the price volatility of bitcoin as part of the adoption process for it like that's a huge unlock for a lot of people where hey i don't have to also do the price volatility i i can't emphasize that enough in terms of like i saw this a lot with like um like trying to get afghan refugees initially when i started with them because like you know i'm a hardcore bitcoiner and like i

didn't have a lot of like empathy and experience when i like first met them but like seeing the problem they were running into which was that hey i just need to get like money from here to here right and like i need it to be worth the same just because like i know i need to get this amount and i need to get that to that person and then he has that amount but like in the intermediate process of like two days between like hey when they receive the payment and when they have to do the uh like get the service on the other side or whatever right if the price moves by like five percent or ten percent or whatever like that's not something that's something that just gets in the way it's like it's not something that people need and it's something that kind of complicates the

interactions and the process of like being an operating business and so if you can lock in the u.s dollar prices of bitcoin and use bitcoin just as the rails for all these payments right then operating businesses they don't have to also add the bitcoin price volatility as part of like the complexity of running a business anyway yeah yeah i completely agree it's if you can create a user experience where they're able to use bitcoin i mean obviously strike is working on this and others but that's what's really cool about this space is there different experiences at different parts obviously strikes connection between lightning and the income and banking system what you guys are building at fetty with these stability pools and using a lightning network as

a as a gateway i think it really does show how dynamic bitcoin can be and how it can be utilized in many different ways and the fact that many people think bitcoin isn't innovating is mind blowing to me you describe everything you just did whether it be at the fediment level or the interaction between lightning and ai like it's increasingly becoming very obvious that this is to be one of the most disruptive payment and savings technologies that's ever existed on the planet yeah well this is something for specifically within bitcoin right of that there's a lot of stuff i think when they're talking when people say hey there's nothing happening in bitcoin or whatever is that normally what we're working on right is we're just making better payments

mechanisms right and so when people are like oh hey you made it so payments are faster like that's not like a huge thing for a lot of people or something like that right and so i think that's where they're coming from like hey why are you spending all this time on payments there's like all this other stuff you could be doing and that sort of thing but now it's kind of really coming to show of that all of the work that we did on making this really robust payment structure that was the thing that is missing on everything else right and so because we have that and we can like i mean it's a crazy experience right it's like you show up at somebody with somebody and you say hey you know that whole monetization problem that you have like this is an out of

the box incredibly good solution where you can instantly get paid for the cost that you incur and pass those along to your user right and you don't have to like store their information like they don't have to dope you don't know anything about them except for the fact they paid you right and so that's something that we can do that none of these other like crypto projects and stuff can and the reason why was because they weren't went off and we're doing all sorts of other things right and now it's really coming to show that hey like just having the better money is a very important aspect of this right it's like yeah sure you can do and maybe we can maybe i don't know yeah well we can talk about this too right of that the differences between bitcoin and crypto

and like some of all this other stuff that they're doing where bitcoin at the base layer is turing incomplete and something that you can analyze and you can know the security behind you can actually analyze this at rest right this is actually something within ai which is getting pretty interesting is that george hotz is working at tiny corp he's like hey we're trying to like get turing completeness out of the stack just like sort of how bitcoin at the base layer doesn't have Turing completeness, because then we can sort of analyze it and we can actually make it like use it as a building block for building other abstractions on top of without being worried about, oh, there's this crazy stuff going on underneath. And if you go back to sort of the

history of Bitcoin, like one of my favorite things is going back through all of your Ethereum move to proof of stake sort of tweet history. If you go back to there, like the big thing that they wanted at the base layer for Ethereum and a lot of these other coins is they wanted Turing completeness. And the reason why was because they said, hey, we're not going to build in layers the way we're going to build is plugging everything on the base layer of that you get during completeness you get smart contracts you get all that sort of stuff right and now that's really starting to show and the reason why is because now that you have this really robust payment infrastructure which we were able to build on top of in a secure way because bitcoin at the

base layer optimizes for security at the lightning layer it's optimizing for like like i said like there's trade-offs associated with it right but it's like trying to do like very fast payment mechanism or instant final settlement of a bearer instrument right is that a lot of these other chains so they're like okay well now we want to add in the payment stuff or whatever well now we're getting to the point where we can't do that at the base layer so we're going to do a layer two and the problem with some of a lot of these layer twos is that they're not mutually compatible right so it's not like we have a rail between them like lightning like you know the if you've got like one roll-up section on like using optimism or whatever right and you've got like a

separate type of roll-up those things are incompatible and they have to resolve back to the base chain in order to move across right not like an instant finally settled payment like lightning where you can just like zap in between the two and so this is something that people are running into and so what's the other element for it is that because we've got inscriptions now right and i know that there's like different opinions about inscriptions is that you can now use bitcoin as a data availability layer and so even though some of these other chains they're like oh hey we've got well now we're building our own layer twos well the thing that the layer two needs the base chain for is for data availability and as like an arbitration mechanism right and so

you can take some of these layer 2 stuff this is already starting to happen eric wall has been working a little bit about this right and um is like taking sovereign roll-ups and eventually zk roll-ups right and taking those and just using bitcoin as the data availability layer for it and so now all of the other stuff like all the other cryptos where they're realized that hey you should be building in a layered model well now they have all these problems at the base layer because they have Turing completeness inside of there and other complexities and difficulties. And so they try to build a second layer.

But now because Bitcoin can operate as the data availability layer, well, you could just take that same second layer, move it onto Bitcoin, and then put it there, right? And then if you want to move from that second layer to a different layer too, or whatever, like, you know, zap into Liquid or zap into a Fettingman or whatever, right?

That as long as you make it compatible with Lightning, you can instantly move between these different sort of like top levels, right? and so i it's got a big big can of orange i just opened there right but that's uh i mean this is like i've heard a couple people say this right it's like there's never been a better time to be a bitcoin dev right because there's a long time where we were thinking oh hey like are we wrong like are a lot of these crypto companies are getting a bunch of money and they seem to be getting like a lot of more developers there and stuff like there's never been a better time to be

a bitcoin dev because we've got the infrastructure we've got sort of like the roadmap of like this is what we can build now this is where it's going in the future and we can start start building in that direction for it and lightning's the connective tissue between all this stuff which is fascinating yeah like i don't know if you've used it yet but the bolts exchange is like this is kind of like the first time where people have been able to use liquid in like a productive way right i mean there was other stuff they were doing but just like on a day-to-day basis right it was like kind of annoying because i'd have to like swap in order to get back into uh back in the liquid or like off of there or something but now because i can use lightning as like the rail between

those two i can instantly go in and out of bitcoin uh bitcoin to liquid right and so now like uh you know like tieros companies and barack and those guys like they've been doing a bunch of liquid stuff for a while but in order to get over there if you wanted to actually do the movement of bitcoin around the liquid like it was kind of annoying to do right but now because i can use lightning to instantly move between the two uh networks right all of a sudden it becomes super interesting of that oh maybe i do want to do something with like on the liquid side using like their more advanced smart contracting i want to try something out with like check for stack or anything right uh some of the more advanced scripting stuff like that because i've

got the lightning layer to move in between those i can do it instantly it works really well but so if i'm on like one of these separate chains right well i can't instantly and finally move between the two different layer twos over there right because they don't have this like kind of connective tissue between them like lightning that we that we do yeah whoo doggie seems like it's happening it's always been happening marty is that we're in this slow process of hyper bitcoinization and you know it's uh you know it moves in fits and spurts but like the important thing that's going on right is that like we kind of have an answer now for how do we make great money and how do we bring that to a lot of people and what are the next steps that we need in

terms of ushering in kind of more adoption of bitcoin like that was i think those were very unclear for a lot of devs for a long time but i think we're getting to the point where we kind of like see it in the mirror right we see it in the distance of like hey this is like something if we continue along this path and we continue operating in this way then we can continue making incremental progress there and eventually like we'll get there right yeah that's why i've been so obsessed with ai i mean i was playing like an idiot earlier but i have been paying attention to ai its growth and the convergence with bitcoin um over the last few months over the last six months now but like it solves such a massive problem for them with the amount of capex they have on the back

end and needing to know that they're going to be able to pay that while offering a service to their end users um that i like i could see the ai industry being like the first massive adopters of lightning outside of like bitcoiners just who have been playing around with it for the last five years like it solves such a massive problem for them that it's a no-brainer which gets into like the last question what do you think is needed to tip that industry over the edge because obviously a lot of people in artificial intelligence have been very hyper focused narrowly on what they've been doing understandably so because it's such a a cutting-edge technology and it's going to change the world in ways that probably can't imagine right now so they've been hyper focused

on that and probably view bitcoin as lumped in with the broader crypto industry and something of a scam but again after everything you've described everything we've been paying attention to everything we've been seeing being built at this intersection it's a no-brainer like what do you think we need to push some of these ai companies over the edge yeah the big one and this is like the reaction that i've had and why we did this hackathon which is i know we like you always want to make podcasts evergreen right but so specifically and this is this is 2023 is that uh running through the end of july from when this comes out um we were running this hackathon called AI for all. And the idea behind it is to use Bitcoin with AI to build out a bunch of projects

that kind of show Bitcoin doing this, right? Because this is the, one of the things that I think a lot of people run into is when we say Bitcoin fixes this, is that maybe we're talking about this in the future or talking about it abstractly, right? When people talk about like, oh, hey, Bitcoin fixes war or something, right? It's like, yeah, we're talking about it like in the abstract. And eventually like once we're on a hyper Bitcoin as standard and people become like they lower their time preferences, then people will be less inclined to go to war in just like keep the fiat machine moving and stuff right but when you say like bitcoin fixes this that applies as it applies to ai this is there's very clear applications of this that we just need

to build it out and so the we running this hackathon called ai for all and what we're really hoping comes out of this is a bunch of bitcoin and ai projects that kind of also just you can be related to either if you want to do a submission but like i really hope that you kind of like see both of them of like tying bitcoin payments in and tying some of the privacy benefits of using bitcoin um to ai because that's like another big issue we didn't talk too much about it right but um that's why we're running this hackathon and so any devs out there um who want to contribute a project like we've been doing a bunch of uh workshops and stuff on like how the ai tools work how to type bitcoin payments in how to use the l402 specification and stuff and so

anybody who's um like building anything like i know there's a bunch of noster devs who've been playing around with ai is um like definitely submit a project for that and uh at the end of that for the judging for it that's going to be our like this is because again this is the reaction i've been getting when i go to these ai events and i talk about how bitcoin fixes this they say okay show me right and so i can like show them in the abstract right or i can show them like little demos and stuff i can show them hey well this is aperture this is just a reverse proxy you can run it against here you can do that but like the biggest uh the the biggest way to do that is to just build out a bunch of cool projects that are doing this and are solving this problem and show

them right and so we can show up at the like you know the uh the guys running the bard uh bar team at google and say hey like this is a way that we wrapped bard into lightning payments and we are entirely like in the uh in the black when we deploy these models and because we're always getting paid for them stuff like that right and so i really hope that people can uh can help contribute to that one just because this is one of those um like bitcoin fixes this but it's bitcoin fixes this if we build out a bunch of projects that like actually show that it does and then that can get people excited about it and say okay yeah sure bitcoin does fix this problem and here's an example of it and this is something that we're going to scale out and do within our own company

as well yeah when this podcast release which will be tomorrow july 19th 2023 just 11 days left to take a trip through the hackathon mentors right so on the ai side on the bitcoin side and so just like hop in the discord and uh like we're also running a pull top fund and so um just like anybody who wants to like even if you just want to like learn and become like this is something before doing like being the head of developer support at Fetty like one of the big things that I've been doing is that I've been very active in like teaching Bitcoin and teaching programming and teaching like people who like want to be devs like how they can start contributing it's like this is a really great first opportunity for it because with all this AI tooling especially chat

GPT and like similar instruct models for it that can do code generation it's never been easier to become a developer and so a lot of people have been talking about this where we need more devs in Bitcoin. One way to do that is to take existing devs and move them to Bitcoin. The other way is to take Bitcoiners and turn them into developers. And I think that that's the better model for it, because I think that we're getting to the point where we have the tooling that we can build out that doesn't take a lot of effort, especially if you're using something like Replit, like the time between idea and deployed product is like nothing, right? Like you can make a cool Feddy mod, or you can make a cool WebLN enabled website, and you can wrap in langchain with it or something. And

you can do that in like half an hour even if you don't know anything about coding right and so if you do want to learn to code or you do want to learn like how do i start using this stuff um like this is i think a really good opportunity for it and so i really hope people come out and join answer the call freaks answer the goddamn call please yeah and this is you mentioned it on the website a little bit apparently it was that it's like ai and bitcoin right so even if you're just working on like cool bitcoin projects or nostril projects and stuff right is that like we want to see those two just because you know like when we talk about bitcoin fixes this and oster fixes this and like ai fixes this and stuff um this is sort of like the opportunity to show that right and uh

yeah yeah i know you mentioned we didn't touch on it but maybe we should touch on it before we wrap up here which is the privacy benefits that paying over lightning i mean you mentioned it a couple of times but i don't think people realize some of the privacy pitfalls that are out there particularly for companies leveraging other companies llms yeah so here's a couple things for it right so one of them is that so let's talk about the privacy that you get on lightning right so there's basically two ways that lightning gives you good privacy that you can apply to these large language models and stuff right one of them is that you can do a login with lightning right and so that actually doesn't touch lightning but it's just that when i do a login with lightning i can

also show that i can make payments right so it's a very useful way to do that of like having a persistent user identity as a developer making websites where I can want the user to have like they can leave and then they come back and all their chat history is there for example right login with lightning is a way that they can log in they're just a public key right I don't have to know anything about them except for the fact that they have a private key associated with that public key they can sign messages I can encrypt things based off of those public keys so I can have encrypted copies of all of like their chats or like I don't have to store anything on encrypted I don't have to store any information about my user if I don't want to right that's one element

of it the other other element of it is sender side privacy is that when you're sending on the lightning network you achieve very good privacy because of the onion route associated with it so people don't know what onion routing is like if you've ever heard of tor tor as like a oh it's a private way of using the internet tor stands for the onion router and onion routing is that when you're using the internet you have multiple hops so it's me and then i hit off a router at this place which hits another router which is another router which finally lands at Marty. Right. And so normally that's a clear net route. And so you can just see the packet moving along, but with onion routing, every single hop along there, you can

think about it like an onion where every layer of the onion can only see the layer underneath and the layer on top of it. And so when I'm sending a payment on lightning and, um, I'm onion routing that payment. And so I'm hitting one hop and then another hop and then another hop. And each one of those hops doesn't know where it ends up. They just know where it came from and where the next hop is. And when I'm receiving on Lightning, I can't see where it came from. I can just see the final hop that it came along with.

So as a sender on Lightning, I achieve very good privacy. As a receiver on Lightning, I have worse privacy. And the reason why is because I have to tell you what node to send it to, right? And so now you can go look at that node's channels. You can see what their balances are. You can probe against that node in order to figure out what its side balances are and those kinds of things.

All the work that Tony's been doing, he's at Muni now, but before that, when he was doing all of his Lightning privacy research. All of those things with that. On a sender, as a sender on Lightning, I achieve very good privacy. As a receiver on Lightning, I don't have very good privacy.

And this is like a joke within Lightning, right? It's that the slowest part of the Lightning network is all of the Chainalysis API calls from all of the nodes you're hitting along the way, right? So like separate from the protocol is that the guys running the nodes, if they're like industrial level operators or whatever, like they're hitting against Chainalysis

in order to do the know your transaction for it and stuff, right? And so, but as a sender on Lightning, I have very good privacy. And so even though they're doing those calls or whatever, and even though I'm hitting along that route is that I have a really good privacy and I can do a login with Lightning. So I can log into a website and I can send you payments and you don't have to know anything about me except a public key associated with me. And so that's why Lightning is good on the privacy solution for these. So now we talk about on the AI side of what are the privacy implications of doing this stuff is that everybody is scraping everybody else all the time for

training data and the other element for it is that every time that you hit against a third party like they have some agreements that say hey we're not going to use you for this training data and stuff and like you know you're just trusting them that they're not saving a copy of this or they're doing that but people are already running into these issues where you're hitting against a third party model like open ai or quad or anything like that and when you're just copying stuff over you're also copying like customer information or you're copying like api keys or you're copying code which is not open source this is like hell behind your company and stuff right is that you really want to be able to run these models locally right and so then because they're running locally nothing

leaves your computer but the problem becomes okay if i'm running it locally then i need access to a graphics card and most people well you know some people have access to graphics cards right and they just find this very easy but there's a very good way to do that right and so this is like kind of where feddyman comes back in of that at the federation you can host some of these like gpus and stuff that you can run local models for and it doesn't go all the way to open ai or like a third party or some like hosts uh some host in like a country that's entirely separate from you is that you're hitting it against a locally run model at your federation level and so in the event that like something happens or like your data leaks or anything like that right it's like you

know they're still within the federation they're still within your community they're close enough that you can socially sanction them right yeah which is fascinating and then that feddy model where you're crowdsourcing gpus these gpus are getting access to like the best llms yeah so i mean that's the that's the idea behind it right is that at the federation level when you're when you're pooling community resources right is that you can do things that you as an individual might not be able to and so like if you want to get access to like a bunch of a100s or whatever right like those are like three to five thousand dollar graphics cards and so like there's a lot of people who can afford that there's more people who can't and so you want to be able to have like

maybe one person buys that or the community buys it and they host it in some place and then they just gate access to it at the fediment level right and so you know but within the federation like they sign up and maybe like the federation's getting the api key or something there's different implementations you could do for this right but um then you can gate access to the hosted community resource and then maybe like the person who's providing it or whatever they get a cut or you get like a discount if you're doing there's a bunch of different ways you can do it the whole point of fediment is that it's just like a you know like create your own optimized federated application right of that you're running this fediment and you're choosing the modules that

run with it and when people join in you can choose like what they have access to those sorts of things yeah i guess what i'm trying to get at is running a gpu similar to running an asic where yes you may have three asics or 30 000 but you're still contributing to the the open bitcoin protocol with on the gpu side of things like can you point your gpus at open ai or uh you can't do that specifically but what you can do well so basically the large language model consists of two things right there's like basically the configuration of this is like the parameters that we're using for this thing right of like the neural network that we're using basically like this is like the description of like the general outline of this thing and you have the weights

which is the specifics of okay well now you combine like the general outline and you apply the weights to it and then you can run this model locally of like this is what the graphics card is doing right and so like today llama llama 2 came out which is like the newest version of facebook's uh model and like that's entirely open source available for commercial use so that's going to be very exciting because llama 2 is kind of the closest thing that people have on the open source side to something like chat gpt right and so that's something where you would run that locally on the graphics card and so the graphics card in this way that it's not like hitting out against this uh separate service it's just everything is happening on that graphics card right and it

makes sense because a feddy community would be smaller than the over the overarching universe of people calling open api so you don't need as many cheap gpus okay yeah i got it right all right and yeah and also benefit you get there is that it's like the data that you're pushing over them is only what so this is why we say feddy is like allocating your money your data your digital life across these different federations right is that i can say okay these are the passwords you have access to these are the identities you have access to associated with me when i'm in this federation right and then i can go hit against this separate federation i could like strip out all that identity stuff in order to use the more powerful model that they're using and then get the output

feed it back into what i'm doing over there for example oh yeah this is actually a good way to bootstrap open a open source ai versus close everyone's running this issue of like how do i run this stuff locally right and like there's some people who are like oh hey well how do i run this stuff locally consists of how do i get it running on my five thousand dollar macbook right but then how do i run this stuff locally when you're talking to somebody in nigeria for example or like togo or talking to somebody in like um like mexico or talk even talking to somebody who's like not a developer in silicon valley right now right is that how do i run this locally it becomes okay how do i even afford the infrastructure or like do the setup in order to get the gpu set up such

that i can do this because like i can't afford like the three thousand or five thousand dollar graphics card i want to amortize that across um like a bunch of uses uses have like one person running a graphics card for a bunch of people that sort of thing yeah wow that's gonna be massive gotta keep building though yeah well this is actually something i've really enjoyed of that i i love this perspective i think you were the one who first started doing this within bitcoin of that um you know when people critique bitcoin from the environmental perspective it's like you chuckle to yourself and you plug in more ASICs is that the same thing has kind of been going on within AI. There's all the safetyism stuff within AI. And then there's the guys who kind of chuckle

to themselves and plug in more graphics cards. And it's been really cool to see that sort of like parallel and sort of like the same attitude. There's like this whole crew of AI guys who are sort of take the same approach as like the Bitcoin of like, Hey, we're just going to keep building this stuff. Right. And so like you can critique it and you can try to stop us. Right. But like, you know, anybody with a graphics card is going to be able to do this stuff. Right. Some people say oh we're going to gate access to ai and all these things right it's like yeah well everyone has access to it and you know you've got federal information so that even people who don't have access to like graphics themselves can also like access these things at like a community level

that sort of thing it's like it's very it's very fun it's very cool seeing the culture kind of mirror across the two yeah it's almost like there should be like a convergence you know yeah ai for all hackathon through the end of july go check it out um i've been keeping it for like two and a half hours now we were a half hour well late in and hitting record here but time flies and you're having fun this has been an incredible conversation well it's been really cool to talk to you marty i mean like you've been someone who's been very instrumental in my bitcoin journey and so this is a big for me as well well um i'm flattered that you consider me instrumental in your journey as you may have

told may be able to tell from this conversation i'm just uh curious dunce trying to learn more about what the hell is going on here yeah i mean you're this is like another i don't know i know we have to wrap up and i keep adding these things right but it's like you know like getting the ego out of the way of like the conversations that you have with new people and like being able to onboard new guys like you got people in the podcast who don't know anything about bitcoin and like you're able to kind of like effectively onboard them like that's like a good scaling experience for everybody else who kind of comes into these uh bitcoin conversations and like maybe they're coming from a different perspective you had like a guest on who's not related to

bitcoin but the perspective that you're getting is not like oh hey i mean you know sometimes you do this right but i mean everybody does this right on the bitcoin side is like well yeah you guys are wrong right this is why i'm gonna explain why you're wrong right but like something i think is really cool within tftc and like a couple of these other bitcoin podcasts like kind of like a onboarding mechanism for people is that there's a lot of like ego that kind of gets in the way of a lot of people and like one of the big things that this was like kind of like the big takeaway from my time in the marine corps is that it's like it's not about you is that the moment you start thinking about stuff in terms of like me being right or like me having to be like this

person needs to walk away from this conversation understanding that i am correct about bitcoin or whatever it's like the moment you start thinking in that way it's just absolute poison right it's like it's not about you it's about the marines like it's not about you it's about like the future that we're leaving for our kids right of that do we want to have them grow up on a sound money standard or do we want them to like grow up under fiat right and so like when you think about it from that perspective and like it comes out a lot in these conversations that you have is that like you know people will like do things and you'll be like okay well you know like ego aside like let's do the answer right yeah i think i've developed that skill slowly but shortly

over six years i was one of those i'm right you're wrong have fun staying poor guys for for a bit there in the beginning and then matt got you to stay humble success so yes yes i mean if you if you say it incessantly for five years straight to somebody it'll begin to internalize uh cody thank you for doing what you do sir i mean it's honestly very impressive going back to um you finding bitcoin in 2020 getting to the point you are now with fetty and being able to explain this stuff with breadth and depth um pretty clearly and succinctly that was the one thing i was really impressed um about your demo in nashville last week is number one you can tell your marine you can control a room uh and really force people to hone in and listen and then

he did a very good job of just explaining everything and making sure everybody was keeping up and i think you're a massive value add to the space i'm extremely pumped for the team that they have they have you working for them again like not about me right like this is about bitcoin and so exactly it's true mine stay humble sack sats it's not about you all right all right get back to work peace of love freaks