TFTC: A Bitcoin Podcast - #436: Building Sound Finance For Sound Money with Atomic Finance

Episode Date: July 24, 2023

Marty sits down with Tony Cai and Matt Black from Atomic Finance to discuss returns on Bitcoin, DLCs, and the future of Bitcoin's scaling. Tony on Twitter: https://twitter.com/TonyCai_ Matt on Twitter: https://twitter.com/matthewjablack Atomic Finance: https://atomic.finance/ 5:30 - Atomic Finance origins 15:44 - What’s wrong with defi? 21:15 - Explaining DLCs 25:26 - How Atomic uses DLCs 28:39 - Risks 34:13 - Atomic’s oracle 37:39 - State of DLCs and lightning 44:51 - Plans for Atomic 47:46 - Ethereum’s centralization 50:26 - Order of operations in Bitcoin adoption 54:04 - Scaling Bitcoin and ossification 1:04:59 - Staking reputation on BIPs 1:14:28 - A lot at stake 1:21:00 - Wrapping 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

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You've had a dynamic where money's 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. We're rolling, rolling, rolling, rolling, keep those lots of rolling, we're back, back

with the Atomic Finance team, well, now the whole team, Matthew, you've been on the show before, Tony, I believe this is your first time. First time on the pod, long time listener. First time, long time, I'm very excited for this discussion, we met up in Miami a couple months ago now at this point uh to catch up on what you guys have been working on at atomic finance and i thought uh i thought it was funny because you guys did pitch day and you got booed for saying the word yield is this true yeah that's true well i i started off with uh asking everybody what they thought of um you know when i say eight percent apy uh what do you think of

and everyone in the audience yelled scam which was perfect so uh but you know there's different types of yield out there some types are better than others yes as we as we've come to find in this market over the years but before we jump into what you guys are building at atomic and what you've been iterating on over the last couple years matthew it's been what like one and a half two years since you've been on the show so why don't we start just giving the week's refresher about what atomic finance is how it works why you guys founded it what your backgrounds are to to level set the conversation yeah absolutely maybe i'll start with um i know i talked about this previously i think it was two and a half years now but i'll start with like

maybe where where we got into bitcoin how we how we met each other um i actually originally got into it back in 2014 it was my my dad that introduced me to bitcoin and he's a bit of a gold bug and so something like bitcoin was really interesting to him because uh obviously it's you know outside of government purview just like gold and so back in the back in the day i was just in you know i was in high school i was just managing his uh you know bitcoin for him and i kind of forgot about it for a couple years uh fast forward three years later i was at the university of waterloo um and i i meet uh i meet this guy here tony uh he was my roommate and basically i wouldn't shut up about bitcoin to him um and oh yeah i mean you're quite the persistent guy in terms

of trying to show me bitcoin but uh there was just a span of three weeks i remember like um where you know first week you were like hey tony you know there's this bitcoin thing went from 1 000 7 000 in the last couple months maybe you should check it out i was like i don't know like it sounds kind of scammy i heard about the silk road thing not so sure about it and then second week, I remember you changed tactics on me. You were like, hey, like, you know, you might want to get into this earlier rather than later. There's this kind of fork that's happening, the Segwit2x thing. This was back in 2017. And then I remember you were like, hey, like, you know, if you buy Bitcoin now, it's a buy one, get one free. You get two kinds of Bitcoin afterwards. I was like,

okay, that sounds kind of weird. And then third week, Matt was like, hey, there's also this thing called Ethereum, you know, and, uh, you know, you can start using it to write smart contracts. You can, you know, run code on it and, and you can kind of start coding on it just with knowing like JavaScript. Right. And then start building decentralized Uber, decentralized apps, decentralized everything. And I was like, well, I was mind you, I was like this 20 year old contributor science kid, um, didn't know much. I was like, Hey, that sounds kind of interesting. And that was how I actually fell down the rabbit hole, buy my first little bit of E, first little bit of Bitcoin. And then fast forward a couple of years by that point, I think both of us, we had aped into numerous shit coins, got wrecked at that point.

I had worked at a traditional finance insurance company. Then we both went to work at this Ethereum company called ConsenSys. And we even started working on a DeFi project of our own. um in our defense i guess it had a bit of a bitcoin twist to it but all in all it was quite coinny it was cross-chain there was lots of smart contracts involved and i would say like for both of us our come to bitcoin moment did not really happen until um summer of 2020. that was like the whole d5 summer thing you know if you were in any way associated with defy you got to launch a token you gotta set up yield farming and use that to you know bring in liquidity you gotta

hype up the token as much as possible that was the only way to stay in the game when it came to eve defy and for us it was like you know i don't know like i don't feel so comfortable with this whole thing isn't the whole point of bitcoin to just stop the money printing why is why are all these guys like just getting up and printing out a token and and doing these pump and dump type things you know didn't seem right and around that time that was also when i personally started reading the bitcoin standard at that point finally and then really started understanding money um started understanding how hey you know bitcoin isn't this just stock like investment where you're waiting for it to pump and then you're going to sell it for fiat it's something fundamentally

different you know it's this new monetary system it's a more sound money it's you know a money where folks can actually have full transparency everything's verifiable and you know we can control it and secure it without the need for a bank or custodian and of course you know other aspects of it was that hey bitcoin you know there's a true supply cap there's no no figureheads or anything like that's truly unique amongst all the different cryptos out there and so at that moment i remember pretty vividly i was like sitting in my chair in our office i was like staring at the ceiling i was like holy crap like what have we been doing you know what the hell have you been doing the past few months building on eve doing this cross-chain stuff you know i i got up i

called matt i was like hey matt you know i think if we're going to build bitcoin financial tools we've got to build it on bitcoin you know if we're going to build non-custodial sound finance we've got to build it on the soundest money out there right and so that was kind of how we both kind of started going Bitcoin only at that point, and what kind of led us to the current incarnation of what we're building at Atomic. And in terms of what we're doing at Atomic, well, basically, Atomic Finance is a mobile app where Bitcoiners can earn a yield on their Bitcoin while holding onto their keys. We never take custody. There's no BS, you know, rehypothecation, and users have full transparency all the way through and before i kind of dive deeper into i guess how that's

possible maybe take a step back to talk about you know kind of longer term vision why we felt it was important to do what we're building you know longer term what we really want to do here is make atomic finance uh the one-stop shop for non-custodial sound finance for bitcoiners around the world uh you know sound finance for sound money what does that mean well for us it means building financial tools that are self-sovereign transparent and verifiable and whether that's earning a return taking out you know line of credit backed by bitcoin hedging price uh downside in bull market be able to do all that stuff and still hold your keys uh where you know your risks are fully transparent and you have private and secure control over what happens with your own

money um and ultimately kind of like the way that we arrived with at that was we just asked ourselves hey what can we build in bitcoin that we would personally actually desperately want to see exist you know what's what would we actually use our own bitcoin with right and after being in the bitcoin space for a bit one thing was immediately clear and was that hey these current bitcoin financial tools they suck they suck a lot you know and after last year i think a lot of us in the bitcoin space have kind of learned that hard lesson. You know, if you want to do anything beyond self-custodying your coins,

say you're interested in taking out a loan or earning a yield with BlockFi or Celsius, you're handing over custody. And the moment you give up that custody of your coins, the moment you quote unquote lend to them, you're just a number, that's just a number on the screen, right? You no longer own that Bitcoin.

You don't have any control over it at that point. And it's just a promise. It's just an IOU to pay you back. and you're opening up yourself to lots of counterparty risk. It's a complete black box as to, you know, what they go and do with your coins after that. And it turns out that a lot of them were just random bets, right? Like with Celsius, they were doing ETH staking,

Terra Luna, with BlockFi, you know, it turns out that they lent some of their customers' funds to FTX. I mean, we still don't even know, like, the whole picture, right? And it's just a black box, layers and layers of unknown risk. And, you know, we kind of want to take a different approach, right? We want to build robust and easy to use non-custodial alternatives because until non-custodial alternatives come, you know, these guys are going to keep popping up. They might be a different name, might be a different founder, but, you know, custodial

financial tools are going to keep popping up until we do something different. And so that's kind of why we're doing what we're doing. Hell yeah. And before we dive into the dynamics of the discrete log contract and how you guys are providing your end users with yield, which has become a dirty word, but freaks do bear with us. I do think the way that the Atomic team has set up their DLC is very interesting in terms of allowing Bitcoiners

to make some more Bitcoin on their Bitcoin that they're willing to lock it up um but before we get into that i mean you mentioned like defy summer and all these token projects were spinning up and doing cross-chain sort of bridges to commingle collateral to provide these defy products that were promising crazy apys um before we move into discrete log contracts and the products you guys are building i think it's important for the listeners out there who have heard about these complex defy chains and the bridging and the cross chain compatibility to understand like what in your mind doesn't work there like why don't you think that works in the long term yeah that's a really good point marty i

think for that it really like there's there's multiple aspects there's the there's the the ethereum um ecosystem and why those challenges with ethereum and then there's the whole cross chain so on the ethereum bit you've got these smart contracts that exist right and everyone's heard about oh 80 million dollars hacked here 100 million you know um hacked from this defy application and it's really because if you think of a smart contract on ethereum there's a really large surface area of attack, right? You're writing all of this, you know, solidity code with all of these different functions in it. And there's, and you'd never know what the end state is. So you might have an, you know, a multi-sig admin that's able to change kind of the parameters

of it, that they're upgrading the smart contract. And you don't know what type of hacker is going to come in there. And lastly, the other thing is everyone's pulling their money into one place, uh which is which is really uh concerning um and then on the other hand you try to have these you know all these cross-chain solutions um that are you know trying to provide a way to you know build between all these different chains but the the problem is you know how are you how are you achieving that at the end of the day it's it's really um custody with extra steps uh they like to say it's a multi-party computation um but you know who are the parties that are custodying it at end of the day so i think it's really just a challenging environment to work in whereas if

you look at something like bitcoin or building on bitcoin um you know generally the surface area of attack is is much smaller yeah then you combine like the fact that with all these tokens they have varying liquidity profiles and it just creates this extremely high risk environment where if you're using multiple forms of collateral within these contracts and one of the tokens is highly illiquid, it creates very precarious situations if somebody decides to dump the coin

for some reason or another, which, I mean, obviously, Lunaterra is probably the most popular example of that over the last few years where that is how they met their demise, ultimately. Yeah, did you hear about the project where the... Oh, I was just going to say here about the project where the where the founder had like 30, like he had like 40% of the tokens

and in as collateral basically in a DeFi loan, which is just just craziness. But yeah, sorry, Tony, you're going to say I was just going to say like the other the other the other issue with like the whole yield farming thing in terms of like giving you a token, giving you tokens to kind of incentivize usage is that you know there ended up being like a bunch of these basically whales in the eef d5 space that were really just mercenaries right they were like they just you know move their coins

around to these different d5 protocols depending on which was giving the best you know yield farming incentive and for these projects like there was no way really for these builders to kind of tell whether they actually had product market fit or not like whether or not what they were building was actually meaningful or useful beyond you know the free yield yield farming that they provided to these kind of mercenaries and so that was an as a builder that's also another kind of major issue that i think um the defy guys run up against yeah it's a bit cockananny very complex and then a lot of the ones that become what they would deem very successful have essentially fallen back to centralized stable coins driving the collateral which really makes it interesting

to market yourself as d5 when a lot of the smart contracts that are powering your platform are wholly dependent on a fully centralized stable coin that can be regulated out of existence at the snap of a finger yeah 100 i think like something like makerdao is a good example that where at one point they had 70 of die was backed by usdc and um you know and then you have situations that occur where something like silicon valley bank goes down and now usdc is deep head you know it's 90 cents on the dollar um and so i mean i mean really what you know i there's a lot of there's a lot of nonsense i think in defy that exists and you know most of these like financial applications that you want to build in in bitcoin or that you want to build in general you know

really can be built using very simple primitive primitives directly on bitcoin itself without kind of all the nonsense um yeah and i that's a great segue into like the point that i think everybody should take from the chaos within the ethereum defi world is you need to eliminate like touch points and points of failure within your model and the best way to do that is just to wholly encapsulate your products with one currency which is what you guys are doing at atomic leveraging dlcs to create these financial products for bitcoiners using bitcoin natively so i guess using that as a jumping off point we've talked about discrete log contracts many times on this show, but the show's grown.

We have a lot of new listeners out there who may not be aware of what a discrete log contract, which we will be referring to as a DLC throughout the conversation for anybody listening. What are they and how are you guys leveraging them? Yeah, that's a great question. So I think, so what is a DLC? A DLC is really just,

it's just a simple Oracle contract on top of Bitcoin. So imagine you and your friend want to enter into a bet, for example. Maybe you want to bet on the Super Bowl. And how would you do that today? Maybe you and your friend would just be sitting there and you say, hey, I bet one Bitcoin on this team. And your other friend says, oh, I'll bet one Bitcoin on the other team. And then it comes time to pay up and your friend doesn't have the money. Okay, well, you can solve that by having a third party that maybe custodies that Bitcoin for you and says, hey, I'll custody it for you and I'll give all the Bitcoin to the winner. But what happens if your friend's a little shady and they don't actually end up paying out the money and they run away with the Bitcoin? Well, that's not great either.

And so what something like a DLC allows is it gives a way for essentially for you to lock your Bitcoin into a contract where rather than your friend having to take custody of it, you and the counterparty and the other party have shared custody of it. And there's an oracle, an external party that can report on the event that happened, an oracle that basically announces what occurred, and that can allow for either party to get access to the funds that they were due in part of the bet. And so it solves the problem of custody. It solves the problem of counterparty risk. And these simple contracts can actually be used for much more than just betting. you can use it for bets you can use it for futures contracts you can use it for options contracts um a lot of the different like financial instruments that you really you know need for bitcoin can all be built using you know one of these uh simple contracts and one of the great

things about it is that um the on-chain you know footprint of it is really tiny um you know on chain it just looks like a two of two multi-sig uh and and so you know from a privacy perspective it's it's really nice too so yeah yeah it's again just encapsulating it within a bitcoin transaction essentially because that's essentially what a dlc is is you create a special conditional transaction which is like hey i'm going to put my bitcoin up here the counterpart is going to put their bitcoin up as well here are the conditions that would release the bitcoin to one address or another uh and to determine where that bitcoin ends up you pull a hash from the oracle that basically determines all right if the bears win today send the bitcoin to this address

the person made the the bet on the bears if the eagles win send it to the address of the person who made the bet on the eagles it's really fascinating and in um like matthew said you can build more complex products on top of this which is what you guys are doing at atomic with your passive strategy which is i guess the the first product out the door many to come and so diving into that what are you guys giving your customers access to in terms of leveraging dlcs to um allow individuals to get a return on bitcoin we'll use return instead of yield yeah um so one so the first thing that we thought about was like okay so like is there a way for folks to be able to kind of use dlcs in a way to earn a passive return on a portion of their

Bitcoin stack, right, without giving up custody to a third party. And basically, like the way that we kind of thought about it is that, OK, well, DLCs can be used to represent things like futures and options. But the key is, you know, who are the folks that we're targeting early on, like long term Bitcoin holders that don't want to be staring at like monitors all day long trading and all day long. And so basically, that's kind of where we got the idea of turning these DLCs into what we call passive strategies. And the first passive strategy that we wrote out a few months back is the covered call passive strategy, where basically you earn a return or premium in exchange for selling a call option.

It's not completely risk free. There's a possibility of losing some upside if Bitcoin rips up in a very short period of time. But the difference from BlockFi or CeFi is that, you know, you're not risking your whole stack to earn and collect a couple percent. Right. But the cover call, there's no possibility of being rugged to zero and wiped out to zero on your stack. There's no leverage. There's no margin call. With a cover call position, there's only two outcomes. Right. You either get more Bitcoin or you increase the USD value of your stack. There's no outcome where you don't add to your stack or get more USD. so it's conservative in that way but at the same time you know when we were kind of like testing it out with bitcoiners you know one of the things that we heard was that uh i don't know like it

still sounds a bit it sounds conservative but like it still sounds like trading right it's i don't have time for or the temperament to stare at monitors and and and kind of you know keep tabs on the market right and so to make the experience as passive as possible um we were like okay how can we build an experience where folks can get started? You don't need to know the ins and outs of trading or keep tabs on the market all day and earn a return for the long term. And the way that we did that was the passive strategy aspect. So use, you know, some stats, statistics and back testing, look at market data going all the way back to 2011, 2012, and use that data to kind of identify points in the market where statistically speaking, you know, it's most likely to be a

downtrend or a sideways trend for Bitcoin. And that's when the strategy enters a covered call. All that is fully automated by the strategy. No need to keep tabs on the market and folks can get started in minutes. And while it's not completely risk-free, you know exactly what's going on, the risks that you're taking, and that the strategy is backed by historical data. yeah let's dive into that too because the strategy is looking to identify price points of which there's a statistical probability using um back testing to predict when the price of bitcoin will go down or stay flat um two questions how much value is at risk at any given point in time another way to say that is like what is the downside risk per

cycle for an individual um using atomic finance and then two how do you guys think about like the idea of hyper bitcoinization and the point at which like the back-tested data may not compute with how the market's reacting to bitcoin's relative scarcity uh and the attention around the networking essentially the point at which people have the light bulb go up go oh crap i need i need a ton of bitcoin yeah i think the way to think about like the way that we think about it is that um cover call strat the cover call strategy is a way to be able to kind of monetize bitcoin's volatility it at first glance you know a lot of folks hear about cover calls they're like oh that

sounds like betting against bitcoin right um but the reality is you know bitcoin doesn't go up in a straight line all right there's a lot of kind of downtrends and sideways trends that happen um you know over the course of time and these kinds of strategies are an interesting way to be able to kind of capitalize on market inefficiencies uh what to capitalize on sideways trends and and downtrends and so like you know moving forward i think cover calls are just one kind of strategy there's different ways to monetize volatility uh too um but uh it's cover calls are one of the more conservative ways of doing it because um you are uh you know you're still kind of like either growing your bitcoin stack or basically like increasing the value of

your of your of your um the increasing usd value of your of your bitcoin and basically like in uh in the context of you know any particular uh cover call position say you know let's take a sound uh let's take a like an example where okay um by i'm gonna sell a call option that expires at the end of the july um for 40 000 at a strike price of 40 000. well basically what happens what you're saying there is that okay well if bitcoin remains below 40 000 then obviously you just earn the premium uh there's no other issues or or anything but then if bitcoin does go above 40 000 well that's where uh basically your upside gets capped uh at the 40 000 level um and so um basically like there's the there's the risk the risk there is to that you're capping the upside uh at a

predetermined point um and so um yeah it's like with bitcoin there's no the the thing to remember is that you know there's no guaranteed yield on bitcoin right that's the thing that was sketchy with block fi and with celsius you know because you can't earn a return on your bitcoin without taking some risk right um in bitcoin there's no risk free rate there's no lender of last resort and uh if a bitcoin bank does screw up right that's why i think centralized bitcoin banks they're worse than even tradfi in some ways because you know when at least when silicon valley bank screwed up there was still a backstop right there was the us government came in they were like hey don't worry you know we're going to protect your funds in bitcoin there's no such

thing there's no such thing if a custodian screws up or uh you know a lending company screws up and so basically like when it comes to earning a return it's always a question okay is a return worth the risk right and there's i think it depends on the answer that question depends on the person and there's always going to be a spectrum of folks who are hey i'm going to hodl only um everything in cold storage not attach it for like 50 years and then there's folks who are you know more interested in you know putting a portion of their their stack to work and you know earning a return on that i think people there will always be people at different ends of the spectrum the key is having that optionality having the choice to be able to you know do these financial

tools and use them and earn a return in a transparent self-sovereign verifiable way um and kind of like the thing that we've seen is that hey users come in they're like oh yeah i don't know i maybe i'll start with like you know the smallest possible amount 0.01 and then basically they slowly kind of make their way down the risk curve uh down the spectrum over time and as they get more confident understand what's going on with dlcs and you know all that kind of stuff so So, yeah, it's an interesting question, but there's no risk-free rate in Bitcoin. You know, you're always taking some amount of risk to earn a return. Yeah, and it's important to be straight up with that in the beginning.

Like you mentioned, the BlockFi and Celsius of the world. I mean, I'm pretty sure there's a pretty popular clip of Alex Mashinsky sitting down with Tone Vays and SAFE saying, no it's it's a guaranteed eight percent return and safe and tone or like you literally cannot guarantee that like it's but anytime anyone's mentioning guaranteed yield on bitcoin you know run away well that could uh another thing too i mean obviously there's an oracle necessary to basically provide a hash to determine what's going on at the completion of the dlc what are you guys using for or for an oracle or are you leveraging i mean that's probably another thing we should touch on the way dlcs have been designed you can you can leverage

multiple oracles to make sure that there's some redundancy there in terms of the data that's being served to the contract yeah that's a great question one oracles are really the um kind of the the failure point of dlcs right like if you want to have any type of financial contract on Bitcoin, you need some type of external data. So the way our contracts are set up right now is we've got we've got an external market maker that takes care of, you know, the other side of the contract. So, you know, any type of any time a user takes a cover call position, the market maker is taking the other side of that. And then we currently run the Oracle. But we're planning to transition to multi Oracle in the future. And what that can look like, there's a couple

different you know options of what you can have for multi-oracle and dlcs uh you can have you know say like a two of three model or a three or five model where essentially you know you need to have at least you know two of the oracles that agree or at least three of the oracles that agree on the price point and as long as that is the case you'll be able to go and execute the dlc and and retrieve your funds you know directly from it and so that can really reduce that you know central you know point of failure in the long term and so that's something we're definitely excited to to move forward um uh move towards in the future yeah no it's really exciting when you begin to add multi oracles in the mix because that's one thing what was the project on ethereum um

that really ran with like prediction markets i forget i think auger auger was they were marketing that they had solved the oracle problem but i've become pretty convinced over the years of observing all this is that the oracle problem is something that can never really be fixed i believe chain link is trying to say that they've solved that problem too the most that you can do is just mitigate the risk by creating eliminating single points of failure by leveraging one oracle and creating that multi-Oracle setup that you just described, Matthew. Yeah. Well, I think the other thing too is that anyone who's claiming to have solved the Oracle problem or, hey, we've built decentralized Oracles, the more likely thing is you've just

distributed it to a bunch of different parties and you don't know whether those parties are the same person, right? And so in general, simple is better, just like multi-sync, right? Simple is better um it's not better to put your bitcoin into a 999 out of 999 signers right it's better to have maybe a two or three that's simple uh same thing you know with something like like dlc it's better to have um you know some something simple where you know you know exactly what the risk is and who are the parties that you're trusting versus having something that's over complicated and really just being custody plus extra steps. Yeah. Yeah. So this gets to the question that's been lingering in my mind. I mean, I've been fascinated by DLCs for many

years, written many bents on the subject, recorded many podcasts on DLCs. And I'm just curious from your perspective, what is the current state of discrete log contracts and what may be on the horizon that would make them better more efficient more reliable because i know what was a digital garage or crypto garage out of japan came out with dlc's upper lightning using extension signatures um what in your mind are you guys excited about right now what's currently been improved within the dlc landscape since we last spoke yeah i think the main and uh kind of innovation that's been going on lately with DLCs is really, yeah, at first based, you know, just more implementation around multi-Oracle. But the other one is moving DLCs to Lightning. And so there's

been some developments in the space around that. You can actually, you know, we currently do DLCs on-chain, but it is possible to move DLCs over to Lightning in a manner where you actually have a lightning channel and it can be used both for dlcs as well as for lightning payments and so that's really cool because what what you can do is you can convert a wallet that is you know just focused on dlcs to actually a lightning wallet and allow for payments to be done with it in addition to uh actually entering into these type of you know financial contracts and so that's definitely something that we're planning to transition to uh down the road uh probably you know late uh this year or early next year is move towards a lightning wallet. And once you've got something

like a lightning wallet, you can do really interesting things. One of those is something called stable stats that allows for essentially you to be exposed to the, basically it's like you're holding USD and you basically just do a 1X short, you just short Bitcoin. And so you could imagine this being used in the lightning wallet to allow for folks to, hey, say Marty, I want to send you um you know ten dollars right and uh you know let's say in a alternate universe you know you're not a you're not a bitcoin maximalist you don't even know about bitcoin well i could send you ten dollars of usd right in essence and i could send that over the lightning network and on your phone you could go and enter into a stable stats basically which is uh like you know just the

stable value of bitcoin um and you know that becomes really interesting for being able to onboard merchants of course so that's going to be really exciting um and there's more applications being built on bitcoin and dlcs too you know uh bitcoin backed loans being done by lava 10101 finance is working on futures contracts so the ecosystem is slowly but surely being built out yeah i think stable sats i think there's gonna be many ways to solve it obviously before we hit record we're talking about galoy and what they're doing with blink wallet to bring stable sets there that they leverage okx to create that that stable value so there's an external third party involved i was mentioning that i recorded with cody lowe from fetty yesterday and they

were talking about the stability pool he was talking about the stability pool module that they're going to be rolling out which allows you to do exactly what you just described within a Fetty Mint, within a Chalmian Mint. But I completely agree, once that problem's solved, and there may be multiple solutions to that problem that people get to choose from, depending on their particular risk profile or comfortability with each solution, that once they hit the market,

it's going to be a massive benefit for the ecosystem at large. Because, like you mentioned, there's a lot of people who really don't care about Bitcoin and cannot stomach the volatility that comes with it. But we gladly use it as a payments rail if they were able to get stable value at the end of the day. Yeah, absolutely.

And imagine if the process, like for say a merchant using something like stable stats, imagine if the process of buying Bitcoin was just closing a DLC, right? And so you basically get a way to be able to easily convert the cash that you've received which is really stable sets and then just convert that into bitcoin at basically you know no cost other than if you're on chain network fees or if you're on lightning um you

know the the cost of um you know a couple millisatoshis um which is really cool yeah and diving deeper into using dlcs on lightning like is the latest cutting edge that extension signature work around that that crypto garage came up with about a year ago yeah so um one of the guys at crypto garage like thibaut he's been doing some really great work on um essentially implementing uh what's called dlc channels um and uh it uses that signature work around and and essentially what it enables is as of course is he's building that ecosystem out in rust dlc right And we've heard there's quite a big ecosystem being built in Rust. We've got Bitcoin Development Kit, BDK, Lightning Development Kit, LDK, and now Rust DLC.

And I think what's going to be really cool that we're going to see in the next little while is more and more applications being able to be built on top of that foundation. So Rust DLC allows for both on-chain DLCs as well as DLC channels, which is really just DLCs on Lightning. um and so i think we're going to see a really nice ecosystem being being built out there in the future yeah but from what i understand it's not it's a workaround as you described it right it's not like the ideal way to build dlcs on lightning or am i wrong in assuming that i i believe i believe that's the correct for rust dlc but i know that 10 10 1 finance built on top of that where essentially what they did um not to go too technical in the weeds is uh you can have both a dlc channel as well as a lightning channel by using a parent commitment transaction and so um

if you think about it you have that parent commitment transaction that uh then can be split off um into either a lightning channel or a dlc channel and then you can actually close it um into the original lightning channel um so that's what 10101 finance has done but that's that's what was built on top of um rust dlc but that's not in uh rust dlc to my understanding right now um so i i believe 1010 one finance has implemented in a manner that is not a workaround and that of course i expect to be coming to rust dlc down down the line but that's something that we're planning to investigate more in the coming months hell yeah so what else beyond this passive strategy how are you guys approaching product development for atomic right now what are your thoughts of

ideas that you have on the horizon beyond transitioning to lightning when possible that that are getting you guys excited i think like you know it comes back to you know longer term we want to be a one-stop shop in the medium term in terms of not just limiting ourselves to these passive strategies you know being able to you know offer maybe let bitcoin back lending or stable stats as matt mentioned um but uh in the in the shorter to medium term you know i think there's tons of interesting kind of ways to offer additional strategies whether that's you know right now we have a covered call strategy but you know could we offer a short put strategy moving forward and that might align with some uh some folks market sentiment around being bullish on

Bitcoin and whatnot. The reason we didn't start off with the short put strategy was because basically, you know, Bitcoin has a tendency to when it has a really when it has, you know, a kind of COVID crash day, you know, you're talking about going down 30, 40 percent in one day. And, you know, if you're in a short put

strategy like that's probably not a good day for you. And so kind of the tendency to for Bitcoin to dump massively within a very short time uh period of time is is the reason why we kind of chose to start with um you know a cover call strategy um but uh uh beyond short puts you know there's interesting um ways to hedge price downside you know with a you know with different types of strategies in a bull market say hey you know bitcoin's now at 250k uh yeah it's feels a little bit bubbly right now and you know everyone and they're every one of my friends and their grandmas are asking me about bitcoin well maybe

it might be some time to kind of you know take some off the table or uh and before you know before you know all these kind of tools came about you know the only ways to kind of take stuff off the table was you know to sell it but you know there's some interesting uh potential ways with options and with dlcs to be able to actually hedge in more creative ways with like Like things like caller strategies where, you know, you're hedged below a certain price if Bitcoin's price falls and stuff like that. And so I think there's some really kind of interesting use cases for options and DLCs in the short to medium term that we're really excited to kind of start building out, especially in advance of the next major bull run. And, you know, I think the sky's the limit when it comes to all that kind of stuff. But longer term, I think definitely even things beyond the strategies themselves, like stable stats to what Matt was mentioning earlier.

And do you guys think with what you're building with 10.10.01's building, really proving that you can do this type of sound finance on Bitcoin, you think there will be a shift in sentiment in the broader market looking at at crypto to have an aha moment like oh crap like maybe like have the aha moment that you had in 2020 tony like oh we're doing it all wrong over here like do you think it's getting to a state within the sound finance arena of bitcoin where it can be more attractive than the d5 yield farming that's going on over there i certainly hope so you know like one of the things when we did that pivot back in the day um it was i mean we could have we could have like stuck with eve launch the token it would have been a lot easier to make a quick buck but like you know kind of like our like our whole

thing was that you know we don't want to do anything that compromises our our you know what we see as bitcoin's main value prop which is like stopping money printing and and all this kind of stuff we didn't want to do all that yield farming stuff and but like you know the the thing is like um for a lot of folks in the crypto wider crypto space i think that um the view on bitcoin is that oh yeah you know bitcoin you know they might have bitcoin but bitcoin is just kind of a pet rock It's something that folks buy and then just huddle and stow away for the rest of time. I think that the way that I see Bitcoin evolving over time is I see it like electricity in a way. Basically, electricity, light bulbs, that was the first killer use case.

But after that, you know, there were vacuum cleaners, there were electric, you know, electric washers and stuff like that. Right. With Bitcoin, I think the clear first killer value prop that we've really discovered as a community is that, hey, it's the best self-sovereign store of value out there. Right. That's the first killer app. But, you know, what's our version of electric fans and irons? Right. Maybe it's going to become the unit of account that we spend it. maybe it's the thing that we do commerce in and conduct finance with and you know our view on it is that there should be a finance component right we should be able to do uh we should be able to have a non-custodial infrastructure to enable more finance to be done natively on bitcoin and do so like non-custodially transparently and so that's kind of our whole view on it you know longer term

yeah and using that view to juxtapose what are your i know you guys have been out of that world for quite some time but the view on a state of ethereum since we've spoke last spoke matthew they made the transition to proof of stake uh the the staking environment is interesting interesting insofar as like it's just fun to observe from afar what's going on there it seems like there may be some centralization risk what what are you guys saying i think the biggest thing we've seen for the the move to proof of stake well first of all it took took them long enough uh and then once they actually did um you know we all knew that what proof of stake was going to do is was just going to move the power from the miners to uh to the exchanges and i think we've

seen a situation where that has essentially occurred where you've had a lot of centralization around ethereum and a lot of concerns around that um and so i i think i think like with something like ethereum you can have a lot of progress but a lot of progress on the wrong things and so um and i think there's this belief in ethereum as well that proof of stake is going to solve scalability but i i don't but i think i don't necessarily think that's the case because you Ethereum has so much state on chain, you have such large blocks, you have so much information that is stored in the chain itself that over the long term, I think it's going to be almost impossible to scale.

I think, Tony, you were mentioning that there was an issue with the Lido contract as well on Ethereum, right? Yeah. I mean, right now, one of the big discussions in the Ethereum community that I know about is that Lido, which is this kind of large staking service that a lot of ETH holders, ETH bank holders are staking their ETH with, well, that's basically now like taking up

a very large portion of the ETH staking power. And basically there's lots of centralization, there's increasingly even Ethereum maxis are like kind of ringing the alarm bells and saying, hey, is this really good for Ethereum and stuff like that? And so, you know, but that's the kind of, that's like, you know, ETH is gonna continue to trend towards centralization because they've made,

you've turned it into this proof of stake where everyone's just incentivized to kind of stake with, you know, these large services where it's easy and it's convenient. And so basically like, I don't see that issue really going away and that creates like a large pressure point for say state or nation state kind of actors

to, you know, potentially push ETH in a certain direction one way or another. Yeah. And isn't Lido marketed as like the decentralized staking validator? Isn't that the goal is like get a bunch of individuals to put up their ETH, stake via Lido and wave a wand and it's somehow decentralized? essentially yeah um but my understanding is um uh to be honest i don't know that much about it so i i can't i can't comment on it that much but uh yeah that's that's that's essentially that's essentially what what uh what the point is but like the the yeah i i yeah kind of blank for there there for a moment it's all good so what else uh what else have we haven't we touched on

that we should bring up oh we have the freaks engaged because this is again this is very exciting i do agree that like in some capacity we're going to need financial products on bitcoin if they're going to be on bitcoin they should be leveraging the native properties and giving end users transparency and the ability to validate what's going on at any given point in time but it's still like a scary proposition for people in the hodl mentality which is like hey we're still in the early stages of the monetization process um is it really worth it to engage with these types of products right now is there an order of operations to all this and Does this sound finance product fall on the back end of those operations?

Well, I think, Marty, I think it really comes down to, you know, just looking at, you know, what are the different layers that need to be built in Bitcoin in general, right? You've got self-custody, right? You've got people that are locking their, you know, Bitcoin in their cold storage wallet. Then the next layer is maybe your payments on Lightning. but why is it to do anything related to finance the next thing is going to an exchange right that just seems insane and so if we want to avoid people being rugged by exchanges then we need this you know sound finance layer i was chatting with a with a company recently and um you know here in canada and they they they were using bitmex back in the day just for hedging right so

people buying and selling bitcoin and they were just using it to hedge that's all they were doing um and what happened was obviously bitmex ended up being banned in canada and then they went on and and they they ended up using switching to using ftx and of course ftx blows up and they entirely lose a portion of their balance sheet but if and honestly that was that was really heartbreaking for me because i was like well what what's even what's the if we can't allow for for companies to be able to hedge in a non-custodial manner well what's the point right um and so to me it was just like wow we really need to hurry up and allow for these folks to be able to to do these type of things because that's that's really what's missing here um but i think i think

the other thing that's like really interesting about these layers is um you know we're getting dlcs on chain we're getting dlcs on lightning but at the end of the day where where does this go You know, how do we, how do we scale this? Because there's not going to be enough space on chain for every, you know, individual to have a UTXO, let alone a payment channel for Lightning. And so where does that leave DLCs? And so the, I feel like this, you know, there's this ethos, right? We have this ethos around, you know, non-custodial and this ethos around self-custody. But, you know, how does that scale over time, which I think are some of the really big questions. yeah completely agree and that's i was at the lightning summit in nashville last week and the last panel with tony uh tony from mutiny lisa from blockstream and base 58 and alex from river i think that's what they highlighted and one thing i really appreciate about bitcoiners is yes we have these grandiose ideas about where things are going and the possibilities that lay before us but there's also whether people want to recognize it or not a lot of sober recognition of

the limits that we have as we're trying to do all this and one thing that's becoming abundantly clear with lightning is that it has limits itself it's not going to be the only solution that on boards the world to bitcoin and that's why i was really excited to have that conversation with cody from fetty yesterday and the way he prefaced lightning was for the ip layer of the second layer on top of bitcoin's protocol where you'll have many complementary second layers like fetty mints lightning liquid and you'll basically be able to interconnect them using the lightning network and i think what fetty meant the open source project and what fetty the company are doing to create a scaling solution within these shami mints is really creative and one thing we

should really be focusing in on and doing more research around is like all right how do we create scaling solutions on the second layer beyond lightning um that really make it so you don't have to touch the chain as much as possible to either move Bitcoin or open up channels. Yeah. Well, and I think this brings up really interesting questions about, you know, scaling long-term. We just saw, you know, a couple of months ago, Lightning completely broke, you know, based on on-chain fees going up substantially. And so then what are the solutions? Well, we have solutions like Fetiment that exists, but there's some considerations around, you know, how are the funds in Feddy Mint or in the Mint being secured, right? Is there a

potential for a fractional reserve Bitcoin to emerge from that? Then we see, you know, large discussions around things like ARK, which might allow for, you know, this is oversimplification maybe by like a um you know a non-custodial version of fediment but with uh very high capital requirements for for the business running um arc and so um and i so i think this brings up a whole notion of questions around how is bitcoin going to scale long term and and are we going to end up in a system where like the majority of bitcoin is e-cash or are we going to end up in a system where we still have non-custodial solutions um but they're that non-custodial is just at an upper layer and then can we can we then after we do that can we build you know

financial tools on top of that but um i don't know i think we have to be really careful to not end up with systems that we we think are um you know are safe but end up you know being rugged in the long turn yeah yeah it's a bit unnerving but also exciting too because there's so much to explore so many ideas to test out and again i think that's one thing that i appreciated toward the end of the lightning summit and something i think everybody should internalize is hey like we're not exactly sure how this how this baby's going to scale at the end of the day like we're still figuring it out on the go um there's no panacea right now but what gives me confidence is that there's an incredible number of smart individuals like yourselves really

focusing on these problems to make sure that it does scale and if bitcoin's history has taught us every anything it's that we'll hit these limits these scaling limits and say all right here's where we need to improve and then people go back to the drawing board and say all right let's let's try this out yeah absolutely well when i think that you bring up a really interesting point there which is around um you know well i think that's what we hope right we hope that when we hit these limits there will be you know there's smart people working on solutions that will allow for you know bitcoin to scale without compromising on our ethos too much right like one of the big ethos for bitcoin is is self-custody right but does self-custody scale from both a uh from a

social perspective are people willing to self-custody but also does it scale from a technical perspective and the thing is the default for this is is failure essentially right like the default for this is that bitcoin scales by largest institutions custodying it um and us ending up with a situation where a state actor can end up rugging a large number of people. And so I think, and so then this brings into an interesting question around, you know, ossification, right? There's a new group of people that believe that just Bitcoin should not change, ossification maximalists. But the situation is, if that is true, if Bitcoin does not change, then that dark future of Bitcoin just being custodied by institutions is the default.

And so I agree with you, Marty. I think there are a lot of people working on scaling solutions, incredibly smart people. But I guess the hope is that we don't ossify Bitcoin too early, right? Like I'm not saying change Bitcoin like crazy. Absolutely not. That's Ethereum, right? We don't want to go into that. But if we can make some small changes, then maybe that just allows us to avoid that default outcome. I don't know. What are your thoughts, Marty? i agree i mean i think ossification at some point could be advantageous and i do think the term ossification is not really it's descriptive of what is needed because there's always going to need to be maintenance we know we need at least one hard fork because of the unix timestamp bug um and i i don't i do think like if we're being honest you probably want to leave the ability to change bitcoin open in case there's some unforeseen unknown that we encounter in the future that um essentially forces us to fix something on the go but i do agree like it shouldn't be a theory and

we shouldn't be changing just to change but um yeah if we do any more soft forks or hard forks in the future we'll have to do at least one reminding everybody out there um it's gonna i mean and that's the weird part about distributed consensus too it's like even if we wanted to we'd be able to but these conversations have to be approached extremely seriously and there's going to be a lot of open discussion around it, obviously. Yeah, it's a question of how do you do governance on a distributed protocol, right? And, you know, it's funny, Marty, I was I was talking to, I was trying to orange pill some, I went back to my old high school, and I was trying to orange pill some kids there. And one of these kids, one of these kids in grade 12 came up to me, and she

asked me, Oh, well, how do you how do you make changes to Bitcoin, if no one controls it? And I was like, Well, you just asked the question that we're like, all of us have been trying to figure out for 14 years so uh there you go yeah well on that note too are there any sort of changes that are being talked about right now that could potentially be merged into bitcoin that you guys are excited for would be willing to back with your reputation oh geez marty well if you back anything and then it goes sideways uh but uh you know i think i think in general there's a couple interesting ones like obviously the one the biggest ones that come to mind for me are really you know apo and ctv obviously

i think um there is this viewpoint for um and for those that don't know apo is any prev out so it's you know just a small change to bitcoin that allows for you to um commit to uh changes in uh in the future so we would allow for you know a better version of lightning network without the penalty um so obviously something like apo i think is interesting but then we originally thought that APO would enable a scaling solution like ARK. And then we realized, oh, you know, the founder realized, oh, actually that's not going to work. We need APO plus something else. The one that's really interesting to me and I've been following for some time is CTV because CTV not only, you know, would enable for interesting, you know, like scaling capabilities in Bitcoin, but also has

cool applications for dlcs too you could have uh right now if you want to enter into a dlc we basically like have to have the user have you know some type of hot wallet like say on their phone or on their desktop or something of this nature because there's so many signatures that need to be created if you imagine like a futures contract or an options contract you need to create a signature for every single one of the possible outcomes so imagine trying to use a hardware a device imagine trying to use a cold card and like clicking to go through each of those to create a signature you know you'd be there all day creating 5 000 signatures um whereas something like ctv could allow that to be done with one click and could also reduce the time to enter a

you know a dlc from you know one or two minutes down to like you know two or three seconds so i think that one's really interesting um and i think it's really fascinating how the community was kind of initially opposed to ctv until um you know more and more interesting applications started relying on it and then now that restarts the discussion so um i'm not saying like ctv is perfect or there aren't maybe like some flaws with it but i do think it enables some particular um use cases that are that are really compelling yeah and if i recall correctly to the controversy around ctv's activation when it was being broached last year the year before wasn't necessarily about what it would add to the protocol was the

um the mechanism that essentially allowed it to get merged into um into bitcoin so like the the consensus mechanism of speedy trial i believe was what they ran with and we just did speedy trial with taproot and a lot of people are not happy with how that went and so i I think, again, talking about the concept of ossification, I think the biggest hurdles to getting something like APO or CTV moving forward would be coming to consensus about the activation mechanism that actually gets it into the code base. Well, and I find it funny for something like Taproot too,

something that was very uncontroversial at the time. It wasn't that people couldn't agree on what changes should be made, but how to activate those changes. And I don't think we've come any closer to coming to a consensus on what the activation method should be. And so I think there's a likelihood for that, you know, there to be kind of two sides of the equation, like BIP-8 or BIP-9, like for speedy trial versus the others of, you know, what's going to be activated. But I think that actually brings up an interesting thing as well, Marty, which is, you know, now there's new people coming out there that are like, hey, Taproot and Segwit were a mistake because they enabled ordinals, which I think is pretty wild. Because if you just looked at each of them individually, you would never expect something like Ordinals to come from them. But then the addition of Segwit, like the discount, plus Taproot increasing the script size enabled something like Ordinals.

And so that just put fuel on the fire for the ossification maximalists that are now like, well, should we not change Bitcoin? It's just crazy. yeah and then you add in the fact that bitcoin adoption is growing and so more people are joining the network and then you just have a bigger coordination problem as that happens so that's that's the other thing i think about when it comes to upgrading bitcoin in the future like obviously we believe that others like ourselves or other people who have not rocked bitcoin today will begin to grok and therefore adopt it and there'll be more full nodes added to the network and more stakeholders within the distributed consensus and that makes it even harder to change

and it's yeah it's really a mind fuck when you begin to fall down the rabbit hole of all the nuances that go into that stuff yeah that's why that's why media sorry that's that's why that's why content creators like yourself marty are so essential to our ecosystem right like community like bringing in uh you know experts talking about uh you know talking about what's happening and like educating the folks the freaks um that's that's what it's all about well that's a good point too and it's it's scary too like matthew like you mentioned like the combination of segwit and taproot created these unforeseen abilities and i was a big advocate of segwit and taproot and i am not technically competent enough to actually audit the code and think

deeply about the interactions of those two different upgrades and looking back in retrospect like i was a big cheerleader of taproot we talked about it on rabbit hole recap week in week out leading up to the activation and we put our thoughts out there and looking back i'm like god maybe i'd like it i think moving forward i will definitely be more calculated in the way uh i quote unquote cheerlead for for upgrades and be more upfront with like hey i actually don't understand the math or the code that makes this stuff i mean i understand parts of it um but in terms of like thinking about complex interactions of multiple changes it's something that's above my pay grade well well wait wait so hold on marty so you're a fan of segway

and you're a fan of taproot wait is it are you you're an ordinals lover no i'm just kidding um it's crazy though right because like well the other thing too is that um there's a very small number of people that can actually audit all the code right so um you know you might say oh i can't audit the code myself but even like most lightning developers right that are actively building with bitcoin that have a technical understanding of bitcoin don't understand all all parts of core all parts of the you know underlying you know protocol of bitcoin and so there's such a small number of people that can see and then the other thing is trying to think of these edge cases ahead of time is almost impossible um for you know a change upon a

change that could you know lead to this outcome like nobody foresaw ordinals um before we we got to this point and so um you know it's it's a it's it's a hard problem and i don't know i guess it just requires more more education and people people talking about it people being creative i guess and coming up with ideas and what's what's possible if you if you do this change or what's possible if you do that change if we have more creative creativity and ideas you know before we merge it then maybe we have a better idea of that but it's hard yeah i mean you mentioned barack and arc earlier but he's the one who broke lightning network twice uh via taproot maybe that's what we need is just more robust testing environments before something gets merged and

sending people like barack in to do weird things like create a 998 of 999 multi-sig to see what breaks on top of that yeah but i i think even that's hard too because most people don't pay attention until there's money on the line right you could have the most elaborate scaling solution or elaborate um uh like well-tested um you know new soft fork for bitcoin on a uh you know on signet or on test net and people could be you know testing it out but at the end of the day people aren't really going to pay attention to that until there's money on the line and i think that's what it makes it so hard is the testing process and so i guess we just need people earlier on and you know in in the stages of development to look at those things

and maybe more money going to um you know earlier stages of development uh i don't know yeah again big problems it's uh unnerving but also exciting is on the cutting edge of all this stuff but i mean a lot is at stake like i mean we have it on the agenda to talk about the inflation numbers uh up in canada and i mean they're coming in low but i think you two would argue that they're being severely underreported and i would agree uh i would i would say i think that's happening here in the u.s to an extent too if you've been to a grocery store in the last couple of months um and that's yeah the weird balance that we face as people building out this network and the layers above it is we deeply believe i intuitively believe that it's essential

for for freedom in the digital age and providing humanity with a monetary good that will preserve value and respect people's savings but it's also like oh it is a software project a open source software project uh bringing a distributed system to the world that's very hard to maintain and um again people don't like to talk about the boogeyman scenario of getting down the line and being like oh shit this actually doesn't work but um we've got to have these conversations you know yeah well i think it's like with something like bitcoin it's like there's there's it's like we only have one shot at this right we've got one shot to make the most fun like the the most impactful and foundational money for humanity and we and and there's going to be millions billions

trillions of humans in the future that could be relying on what we're doing today right like no because like i mean if humanity expands right if we if um if the agenda for depopulation doesn't happen then uh then you know then we'll be able to you know then we'll have that many people so that many people are dependent on us doing it right so we got to get that right You were talking about Canada, Marty. Like, yeah, I mean, it's crazy for us up in Canada here because, you know, there's talks that we just had COVID tyranny for three years. And then, you know, the talk of CBDCs and they like to lie to us about the inflation rate. And so, geez, you know, you guys down in Texas are, you know, it's looking better and better every day.

So what are you guys seeing on the ground? I mean, what was the inflation print 2.8%? Yeah. And anyone, anyone who's been living in any of the big cities here, I think would strongly disagree with that. I read, I actually like dug into it a little bit. It was like, you're saying like, oh, you know, like the reason why inflation rate has come down is because, you know, your cell phone bill got cheaper and, and this, this got cheaper. But I was like, I don't know if anyone's cell phone bills in my circles, I got cheaper. But I think the way that they're doing it is just saying that, hey, like, oh, you're getting more data for the same price or, you know, and that kind of stuff.

And that's the way that they're justifying, you know, oh, a decrease in pricing. And, you know, it's just manipulated out the wazoo, you know. It's just like when it comes to CPI, probably the most manipulated thing there is from the government. Yeah. yeah it's it's almost like a humiliation ritual it's like don't believe your lying eyes it's 2.8 yeah we've got a leader that's in that's obviously in bed you know with the the wef you know it's uh so we're hoping for maybe paulie ever to get in here he's the he's the the potential you know the the pro bitcoin guy although he he went out there and he he uh you know promoted bitcoin and

then the other the other side of the aisle has been uh been after him for saying that for the past like you know two years so we'll see what happens it's also tiresome gentlemen it's also tiresome i mean we have rfk pumping bitcoin trying to restructure treasury bonds by embedding bitcoin into them which is an exciting proposition by a potential president but again i'm not holding out hope that the the politicians are going to solve this well i'm excited that there is at least a politician that is in the process of being orange billed i i think that's very bullish i think you know what did he tweet today he was saying hey you know i would have the us dollar partially backed by bitcoin um i think you know maybe that's a good stepping stone right but the

reality is if you just have the dollar backed by bitcoin it's not convertible then you you just run run to the potential for the same fractional reserve system we have today in the long term um but if that's if that's his stepping stone for becoming orange pilled then then maybe that's a good thing uh i don't know yeah i'll take as many orange pilled politicians as we can get again don't want to depend on them but if they're pumping bitcoin and making it more palatable for individuals who have historically been under the persuasion that it's some sort of Ponzi scheme. That's, I think, a net benefit overall.

Yeah, absolutely. Well, we just need more folks like that that are pushing for freedom, pushing for being able to hold your own coins, pushing for making sure that a 6102 doesn't happen ever. You guys, I'm pretty impressed, actually. the United States and what you guys are, you have two senators that are pro-Bitcoin, you have RFK, people on both sides of the aisle that are pro-Bitcoin. You know, Canada has a lot of catching up to do, I think, in that regard.

Don't worry, we'll come save you guys up in Canada one day. We'll annex the good parts of Canada when the time is right. We're looking forward to it, Marty. We'll be America's hat, you know, there you go. Hey, I mean, if you guys get rid of capital gains tax on Bitcoin, we'll move down there ourselves, you know? Hey, Texas is open. You just have to come to the southern border illegally.

Fair enough. Oh, man. Gentlemen, this has been a great conversation. I'm excited for you guys. It was great to catch up in person in Miami. And I think you guys are working on one of the most interesting parts of Bitcoin and underscored parts of Bitcoin, which is DLCs. Again, I've been very excited about DLCs for many years and to see you guys building products that actually leverage the

technology is extremely exciting and it works. I've used it. Yeah, no. And it's not easy. It's not easy, you know, building on Bitcoin, doing things non-custodially. It's not an easy thing to do um but uh you know we're excited more than ever to kind of keep focusing on bitcoin to keep building out non-custodial financial tools for folks and uh yeah really enable kind of a financial layer a non-custodial sound financial layer to be built uh on sound money and so uh yeah excited for lots to come where can uh the freaks find out more about you two atomic what you guys are building? How can they help? Yeah, absolutely. Check us out on atomic.finance. That's our URL. You know, I always encourage folks to kind of start by learning with

like a very, very small portion of their stack that they feel comfortable using and learning with, you know, it can be as small as 0.1%, 1%, you know, see how you feel, you know, it gives you, it's enough to kind of give you incentive to dig deeper into the tech, learn what DLCs are, what's happening here, and, you know, take a step further into being a true Bitcoin native participating in the Bitcoin, wider Bitcoin economy, right? Whether you have options experience or not, doesn't matter, right? Because we built it to be ridiculously simple to start with, and you just need 0.01 BTC to get started. So that might just be one DCA, see if you like it, right? And, you know, that's how a lot of us got started in Bitcoin anyway, right? Just by

trying it out with a small amount. And yeah, we'd love to kind of see freaks out there on Atomic.Finance and checking out the app. In terms of on Twitter, we're trying to tweet more now. Me personally, I'm on TonyKai underscore. Matt's Matthew J. Black. And our company Twitter account is at Atomic Finance. Awesome.

We're going to link to all that in the show notes. Matthew, anything to end it on here? You're muted. Thank you. Thank you. I was just going to say, you know, I think, Marty, it's time for people to stop getting rugged. It's time for us to build the layers that Bitcoin needs.

It's time for us to, you know, believe in self-custody, self-sovereignty. So I don't know. I'm just excited to build it. And I hope more people, I hope the people from Ethereum that are building nonsense right now, they realize what's important and we get more of them over in Bitcoin and building sound finance for sound money. Building sound finance for sound money. That's a good bite.

It's a good bite, gentlemen. I like that. It's a good sound bite. Thanks, Marty. Sound finance for sound money is a good sound bite. Yeah, we can't call it DeFi. You know, DeFi is too tainted. You want sound infrastructure for Bitcoin?

You need sound infrastructure that creates sound finance for sound money. That's, you know, we're not building nonsense anymore. Well, you heard it here first, freaks. Or maybe you heard it on another podcast or on Twitter. But sound finance for sound money. Matthew and Tony, thank you guys for coming on. It's always a pleasure. And who knows when I'll see you next in person, but can't wait for that day.

Absolutely. Thanks for having us, Marty. Peace and love, freaks.