TFTC: A Bitcoin Podcast - #451: UTXOracle with Steve Jeffress & Daniel Hinton

Episode Date: October 3, 2023

Marty sits down with Steve and Daniel to discuss UTXOracle, a way to estimate Bitcoin's price using nothing but node data. Steve on Twitter: https://twitter.com/SteveSimple Daniel on Twitter: https://twitter.com/DanielLHinton Check out UTXOracle and other data visualization: https://utxo.live/ 0:00 - Intro 6:41 - Steve and Daniel’s background 10:59 - Explaining UTXOs 13:34 - Visualizing data 20:46 - Effect of Bitcoin ATMs on patterns 25:24 - How to infer price from UTXO data 35:27 - Usefulness as an oracle 45:28 - Possibility of price per block 46:41 - Human action, opportunities and attack vectors 53:26 - Effect of ordinals 55:49 - UTXO mismanagement 1:02:37 - Spending old coins 1:06:51 - Taproot changes and far future problems 1:18:20 - Fun new concepts 1:27:43 - Run the numbers yourself 1:32:58 - Wrapping up Shoutout to our sponsors: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Unchained⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠River⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠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

what's up freaks it's your boy marty here to introduce this rip of tftc i sat down with steve and daniel behind the utx oracle project fascinating discussion we nerded out about bitcoin didn't we logan he's nodding his head yes i promise you you not want to tell anybody it's gonna sit here acting like i'm gonna say something right he's giving me soy soy jack faces now this is very embarrassing i didn't take you for a soy a soy face guy before we jump in to the sponsors we're going to read the top four boosts from at 449 death athletic a dissident architecture with jessica solche i highly recommend you guys go see the movie when it comes out you can pre-order it now

it'll be on streaming platforms everywhere you should buy it directly as jessica explains in this episode at poor ben gunn 21 420 sets cheers for all the recent quality content mate the documentary for death athletic is credit card only exclamation point could someone hook these guys up with the btc pay server given the nature of the subject they cover have no fear ben they do have the btc pay server i believe i think jessica talked about didn't she talk about in the episode that somebody was buying with bitcoin over btc pay server they put like a fake email in she had no way to deliver the movie she did say that yeah and so they have to uh figure out a way to make sure that people are giving them actual email addresses so she can send them the movie once

it's released at mark c 5000 sats looking forward to watching this you're gonna like it mark at blockchain bug 2500 sats thumbs up like a thumbs up and that mcot 445 sats looking forward to seeing the documentary cheers it's a good one go see it deathathletic.com this website you can go buy that pre-order it let me see if bitcoin's back up i'm not sure if uh it wasn't yesterday when i checked when i saw that boost pre-sale bye okay maybe it's not back up yet we'll see this room is brought to you by good friends at river

do you need to buy bitcoin do you not have a place to do it yet you should sign up for river go to tftc not tftc you go to river.com slash tftc set up an account you'll get five worth of bitcoin you'll get access to the incredible services that bitcoin that river offers bitcoiners i guess bitcoin provides it in some roundabout way but river if you dca if you dollar cost average using river you're not gonna pay any fees on that uh other exchanges charge high fees for dcas and they have higher spreads river's got tighter spreads uh they built their own infrastructure so if you hold bitcoin on the exchange which they don't recommend uh you can have confidence knowing that your bitcoin's in multi-sig cold storage backed one-to-one

like i said they want you to send your bitcoin to a wallet that you control that's why they've all created auto withdrawal features so you can put an address in and as soon as you stack a certain amount it'll auto withdraw to the wallet of your choice they have like river lightning services if you want to build on the lightning network and leverage uh rivers api you can do that they have 24-7 call support. You can pick up the phone, call somebody, and get a human to answer to walk you through any problems you may have or any questions. So go check it out. Go to river.com slash TFTC. Sign up today. This report was also brought to you by our good friends down the hall, Unchained. Unchained is here building a financial platform of the future, a financial platform on a

Bitcoin standard. They leverage Bitcoin's native multi-sig properties to bring you a suite of products. They have their vault, which is a two or three multi-sig wallet where you hold two keys, Unchained holds one. That's their collaborative custody model. They have their lending desk where you put Bitcoin up as collateral in a two or three multi-sig. You hold one key in that quorum so you have visibility into your loan knowing your Bitcoin's not being rehypothecated. You have an IRA product that you can get access to and they've really made the onboarding process a lot smoother in the last couple of months. You can transition your IRA into Bitcoin and hold your own keys. It's a beautiful thing. Go to unchained.com

slash consultation. Set up a consultation. You don't have to ape into any of these products. Just set up a call with their team. Learn more about what they're building, why they're building it, and how they can help you out. If you're an individual, a business, an institution looking to secure your Bitcoin or get access to financial services, hit up the Unchained team. Go to unchained.com slash consultation. Tell them the TFTC sent you. Last but not least, this rip was brought to you by our good friends at Bitcoin Talent Co. recruiting firm built by Bitcoiners for Bitcoiners. If you're a company in the space looking to hire the best talent, hit up Bitcoin Talent Co. They understand what's going on at

the protocol level. They understand multi-sig, they understand lightning, they understand mining, anything that you need. These are Bitcoiners, so they're going to be able to understand your needs and then go find you the talent that you need. Maybe you're a company that doesn't need full-time talent. You don't want to take on the cost of a salary and benefits and all that, but you do need a quick sprint done on the engineering side, on the design side, on the growth marketing side. Bitcoin Talent Co. has a flex product now where you can access a roster of part-time talent

that they have access to that can help you with these sprints so you don't have to take on a bunch of burn and a bunch of extra costs associated with full-time employees. If you're price conscious and burn conscious right now, this is a great product for you. Go to bitcointalent.co. Get connected with them. Tell them that TFTC sent you and enjoy this rip.

Thank you. 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. All right, we're recording. Steve, are you there? I'm here. You're here. Take two. All right. We just had some technical difficulties, freaks. Steve's mic stopped working as soon as we went live for take one but we're here take two to talk about utx oracle whenever i say utxo i want to say utxo whenever i say utx i want to say utxo so getting like you it's kind of a hard word to say yeah it's kind of a tricky word to say yeah i mean it's a really cool project project uh has got me pretty excited in terms of how we can well we'll get into like is there an oracle problem what are like the correct trade-offs but before we dive into utx oracle which is the project that you guys built and launched uh this month

i believe so correct me if i'm wrong there but um before we jump into that we're sitting down with steve jeffress and uh daniel hinton how did you guys meet and why did you guys decide to tackle this particular problem for the problem in the bitcoin space uh you want me to do that daniel or you want to yeah kill it uh well we just met at the raleigh bitcoin meetup we um we know we're never going to be like the biggest meetup like nashville or austin so we just try to be the most toxic meetup try to uh claim something for ourselves now not really it's um kind of light-hearted but yeah we met we have a great meetup scene here in raleigh north carolina it was started by jameson lopp

and then um i took over organizing it around 2017 um and yeah me and daniel met at one of those actually we met at one when jameson was still running it didn't we yep yep yeah so uh yeah i just became good friends and um i don't know do you want me to dive into etx oracle or oh no that's the worst context daniel i think your experience at sfox and what you're seeing on that side of the market is interesting because i'm sure you guys deal with this particular pricing problem day in and day out yeah we definitely do and now you know i started with sfox back in 2018 when i was living up in raleigh and uh it was you know back in the day it was a lot more common uh so at s fox we we aggregate liquidity from a lot of different venues on the exchange and

the otc and the market maker side so from my perspective looking at the at the market it's always been clear to me that there is no single the price of bitcoin right so wherever you go and check the price that's never going to be the price and even if even if you know s fox and coinbase and kraken and a bunch of other places had the same dollar price down to the penny there's different depth and there's different there there's all kinds of things that factor into what a price is or what the price is right so um yeah this has always been sort of uh obvious to me and and that's one reason why people come to s fox is because we aggregate But looking at things from this side of the veil, from the UTX Oracle perspective, we don't have an authoritative stance on what the price is, and nor does anybody else.

So from Steve and I's perspective, we were just talking about it, and Steve can talk some about his visualizations. And through the process of us over a number of years just looking at these visualizations and understanding different pattern sets that appear in the UTXO set, it kind of became more obvious to us that there was a price signal. and uh and it's led to some pretty interesting findings and hopefully truly decentralized use cases for people to operate in the in the market yeah and before we jump into utx oracle and how you guys are discerning these trends on the charts of of the chain data let's just start with the basics pretend like anybody listening to this doesn't understand bitcoin fully yet so like let's start with what is a utxo and how can people track that throughout the blockchain and then visualize it on charts uh you want me to do it this time daniel yeah you got it man um

i like the analogy um of bills in your wallet like hundred dollar bill fifty dollar bill and every time you receive bitcoin you receive it in a bill and to spend it you have to spend the whole bill and then you receive change and other bills and um that's how the bitcoin blockchain works and another way to think about it is as a database that keeps adding rows so i mean bitcoin does use a database um and you can think of every new transaction as a new row in the database and when you have bitcoin it means you kind of have ownership of one of those rows And then when you spend Bitcoin, that row kind of like goes gray because it's spent. And then you create new unspent transactions.

You can think of those as like new rows added to the database, which are now unspent. So they're kind of like, you know, you can think about it kind of like white and gray rows in an Excel spreadsheet with like spent and unspent Bitcoin. And if you add up all the unspent Bitcoin, you'll get the total amount of Bitcoin in the system. Is that a good one? Yeah. And this is one thing that really highlights it to me with why are UTXOs important. You take however many UTXOs there are right now, 115, 120 million or so. You take all those UTXOs and just add them up one by one.

And you come up with the exact amount of Bitcoin that exists in the world at any particular point in time. And this is something that anyone with a full node has full access to and full validation of. So you're not trusting anybody in this. Yeah. Yeah. UTXO, I mean, it's a very important part of Bitcoin, particularly understanding that it's like a push system and not a pull system. You have to push these UTX forward into the network when you're making economic transactions. They're, like Steve said, destroying UTXO that you're using to spend.

And then if you're not spending the whole amount within the UTXO, you get changed back, which is in the form of new UTXOs that you can then push back into the network in the future. Right. Yeah, and it's all, you know, public data. It's all data that everybody has on their node. It's a lot of data. You know, the full blockchain is, what, like half a terabyte now. um and so you know i i part of my like phd program i did a lot of data visualization so when i first got into bitcoin i knew i was gonna like do some cool data visualization stuff

and it's it's hard to visualize 500 gigabytes of data um but um through like a lot of kind of doing, um, histograms, bell curves, simplifying. Um, I was able to create really cool ways to visualize both the UTXO set and all transactions. And, um, so I've been playing around with that for quite a few years now. And the USD price was just kind of one of the things that I saw that was clearly visible um if you visualize the blockchain the way that i do so that's kind of where it all came from oh i was thinking when daniel was talking about um the price problem uh it might seem like we developed utx oracle because we wanted to do that uh it didn't really happen like that it was just kind of like whoa what's that oh that's the price oh wow that's

cool like maybe we should just pull that out of there and this happened like a number of years ago and i kind of finally got around to writing a program to do what like you can very clearly see by eye um if there's like if something goes wrong you know there's a difference between like something going wrong in the program and like not actually being able to see with your eye what the price is um and the heat maps so yeah it's just a very strong signal and steve that that concept of us just sitting around at the meetup and you know looking at some of your visuals visualizations and asking questions about them and zooming in on a particular area and you know finding satoshi's half pipe and all those kinds of crazy little things we've found

over the years uh it just it produces interesting conversations and and findings that wouldn't be possible just looking at that database view of things like visualizations are so powerful for synthesizing this tremendous amount of data over this 15 year period and uh yeah it's very cool just at the start of the podcast here we should definitely recommend people go to utxo.live to see you know a real visualization of this and a lot of the things we're talking about here um that's great and don't everybody get to it at the same time because i pay 40 a month on a digital ocean server and uh yeah like going to a 1990s style website takes a while to load well don't worry bitcoin will not break if the if this website goes down

well i agree the visualization is very powerful i think my first sort of run in to understanding the power of visualization, visualizing the blockchain particularly, was back in, I think it was 2017 or 2018, when Laurent from the OXT team tried to hunt down, he had that research series that he called Bitcoin's Moby Dick, where he sort of identified that there was these spam transactions that were clogging the mempool and driving transactions fees up.

And I think his thesis was that it was part of, like, the Bcash sort of propaganda war to incite this problem of high fees when it really was the product of this fee-spamming attack or whether or not you wanted to find it as an attack. And he found that basically by doing the visualization and wondering what he saw. yeah you could see all these like equal dust transaction utxos i believe is right at the dust limit of 5 64 or 546 whatever it is i think the first yeah i mean there's so many things yeah go ahead i was going to say that i'm thinking back to my earlier bitcoin days there was a pretty early website that had you know the size of the transaction sort of denominated as a circle and it would fall and it would like hit the keyboard or something it would make a sound based on the size of the utxo being spent and it would make funny little musical themes and

yeah visualizations are very powerful for educational purposes yeah and i mean i guess jumping into utx oracle like how long did you guys have to stare at the visualizations that you created steve before you're like oh there's something here we can we can glean the price out of this i mean i stare at these things every day like some people wake up and check the price i just i just wake up and like i look at like the cool patterns and all the utxs that were spent last night um i've i don't want to even probably an hour a day for the past eight years however long that is um it's probably underestimated in a daniel um but uh yeah um but i mean the the price was in there you know i probably first saw it in 2017 um and i saw the price start to pop

out of there around 2013 and um because you know there wasn't really a price of bitcoin before that And then because people spend these round amounts of Bitcoin, they just got stronger and stronger. Sorry, I meant round amounts of dollars. Really interesting that back in the day, it was mostly round amounts of Bitcoin. If you look at what's spent on chain, it's kind of like a normal distribution, just kind of random, kind of small. And then there's these giant, massive transactions that are at rounds amounts of Bitcoin. I mean, massive number of them. It's like not even close.

You know, it's not like there's a lot of transactions at random amounts. It's like yesterday there was 4,000 transactions right at 0.01 Bitcoin, which is usually the most common round amount of Bitcoin, 0.01. And there was like 20,000 transactions at exactly $100. So people spending round amounts of dollars has massively overwhelmed the round amounts of Bitcoin. And that switched around 2019, 2020. Before that, everybody sent each other round amount of Bitcoin. After about 2020, round amounts of dollars kind of took over. And I mean, you guys mentioned it in the Bitcoin magazine article that you guys co-wrote, but what is driving these round dollar amounts of people spending on Bitcoin?

I mean, you mentioned ATMs, are services like BitRefill contributing to that as well? Yeah, yeah, definitely. Yeah, I mean, on the utilization side, we just talk about a few of those use cases. Because Bitcoin ATMs are a big one, but there are a lot of other types just to help people who've never used a Bitcoin ATM. You know, it's going to work that it's almost always going to be a buy. So you're almost always buying Bitcoin at an ATM like this. And you take your money, you put in your $100 or $500, you get quoted a price there on the spot and you show them your Bitcoin wallet and they immediately send you the Bitcoin. Right. So this is this is one of the good things that contributes to these dollar denominated Bitcoin signals is that a lot of the dollar denominated activity is more real time.

Right. So it's you sending to a friend to get them set up on their first Bitcoin wallet and you send them 50 bucks or you're buying it in ATM or you're buying a T-shirt or a gift card or something with refill or a bunch of other services or buying a gift card. right so these are they're more real time and that really helps us looking at the blockchain to know that these groupings all relate to about the same time frame even if their mind is a slightly different block height you know so it's it's all real time mostly transaction related use and uh and just peer-to-peer activity right paying for dinner for a friend or just getting someone onboarded onto bitcoin and uh you know it's it's cheaper to give somebody a hundred dollars than 0.01 bitcoin today so people might have just switched to dollars yeah and on the atm example particularly like do you guys have to factor in like fees whether it's network

fees or the the the fee that the atm provider is taking out of each transaction yeah you know one thing that daniel said to me i think you might not even remember it a couple years ago um we were talking about how atm fees are kind of ridiculous or whatever like 10 15 and then i think daniel i think it was you you said to me yeah but that's the price of getting bitcoin now you know it's not the price of buying something on coinbase and withdrawing it in a week and it's like oh well then what's spot price you know is is it shouldn't spot price be the price of bitcoin now so it's kind of it kind of blurs um but you know i mean one of that's one of the positive aspects of using utx oracle is that like these aren't people that bought bitcoin

and then withdrew their bitcoin later these are all people that got their bitcoin on that day so it that's kind of a i don't know and it's yeah they're just the scale of the the dollar denominated sins makes it to where um like the average signal you know versus a centralized venue price it does skew higher by like 50 to 60 basis points so half a percent you know or a bit more um and that makes total sense because when you see the price on coin market cap or coinbase or wherever you look you know that price does not include exchange fees right that doesn't include the spread that or fees that you're going to get it also doesn't include the withdrawal fee if you get charged a withdrawal fee right so the the quoted you know centralized spot price is

always going to be lower than the on-chain price just because there are more things that go into getting those transactions finalized on chain and actually getting it in your possession so it we didn't really have to account for fees they end up not being very meaningful in the in the analysis but it does sort of intuitively make sense why the utx oracle price would skew a little bit higher than the centralized price and centralized price centralized price we're We're just going to start calling them the centralized price now. Yeah, we got to, we got to, Bitcoiners love terminology, you know, you just got to create a bunch of new confusing terms.

The cucked price. Yeah. Yeah. Well, with all this in mind, like how, like obviously people are sending round dollar amounts of Bitcoin through the network, but how do you actually begin to tease out the price at any given point in time using uh the inference of those dollar spends dollar amount spends yeah this is something that's um it's very easy to explain if you're looking at one of the heat maps or do you want to pull it up again can you like zoom in to the price level um i don't

know if you if you can't that's fine but yeah like i said like so yeah that if you're looking this on video that yellow area on the right those little like wavy lines on the right those that's the u.s dollar price line right there those are people sending even amounts of bitcoin you can see that like the bottom one is clearly visible back to when like 2012 or something like that that's the one dollar line so people used to send each other one dollar very commonly and but now the most common amount is a hundred dollars and i expect that to just keep going up as bitcoin goes up in price and all you have to do to just you know get just you know a rough estimate of which is the one dollar line you don't even have to be close to be like just go one day

where you knew bitcoin was 10 000 and this isn't how the algorithm works but you know we know that Bitcoin was around $10,000 on July 26th, July 27th. So 0.01 Bitcoin, if Bitcoin is $10,000 is $100. So you know that that's the $100 line. So then you just follow that line. And the first version of the algorithm, this is what we did. We were like, okay, this is the line. This line crosses 0.01 bitcoin on july 26 so we know this is the 100 transaction line and we just followed that line and we're like okay whatever however this line goes up or down you know that's how we're going to calculate what the price is now because a hundred dollars is a different amount of bitcoin every day and then and then kind of version two or three we're like oh let's not

use the hundred dollar line let's use the 10 and the 50 dollar and you know all of them and then in the version we released um which is version six it not it uses 17 different round amounts of bitcoin and you actually don't have to start it from that peg day either because it it pretty much just it's kind of like you know sliding one fingerprint over top of another fingerprint we We just made this thing called the stencil, which is kind of like a bell curve just with spikes right at all the round amounts of U.S. dollars. And we just see where that stencil fits over the day's worth of transactions the best. And wherever that stencil kind of locks in, that's how we estimate the price. And I was very surprised.

i mean i knew the uh following you know from a peg today would work well because it's easy it's just like where did this line go tomorrow um but i was really surprised that stencil method without um any peg day at all just seems to lock in it really yeah like it's fair to say that this was back tested i heard you and marty talking on right but how we caught uh yesterday by the way huge fan of you guys i've been listening to you since bartles barstool sportsman um huge fan of rabbi holy cap uh yeah but yeah i heard marty um definitely a fair point like or yeah sorry matt i heard matt say definitely a fair point that um it was back tested and kind of fit to the data uh that's for sure but i was surprised like as soon as i created that stencil there was only a

couple days um where it didn't work immediately and those couple days were days where bitcoin just jumps or crashes like a lot and so i just i just had to tweak the stencil a little bit um just kind of hand crafted it a tiny bit like made some bars a little higher and some bars a little wider um and then it then it worked and um so and yeah and it's been working on untested data since about june so that's why we decided you know we gotta we gotta release this some point because you know people are gonna say it's been back tested to fit the data no matter when you release it so you got to release it at some point so people can see that it works on untested data yeah and to better understand like how these lines extend moving like when you're going back

to like july when the price was 10k and you sort of identified all right 0.01 bitcoin this is hundred dollar spends and then extending that into the future is that extension essentially determined by like an amount of equal spend like do you just aggregate like all the utxos and just do that bell curve distribution of like particular sat spends and then use that to extend the line that makes sense um so i thought it made sense until you said extend the line do you want to answer that any well i i think i understand where marty's coming from so you know just take okay and this this is another thing that people need to understand about it is this is not a single blocks worth of utxos you know 4 000 transactions or so this is a full day's worth

transactions anywhere from you know two to five hundred thousand transactions so it's it's a full day's worth of data so you you cut out you know a lot of the the the minutia with oh it wasn't perfect in this one block you need a you need a decent size set of data for this to work because not every single block has a good signature but over a day you essentially always do um so steve when you have that full day's worth of transaction data um talk about how you kind of remove some of the things from that to really highlight the usd amounts i think that that helps explain it a bit better sure um yeah so if you just think of uh you know like you said you have thousands of transactions during the day um and transactions have multiple

outputs so you have this collection of outputs and so you just make a or we just make a bell curve out of that so we have these bins and you know you see a output that's between 0.01 and 0.015 then you just increment that bin and you just build this bell curve of transactions that happened that day and that bell curve if if there weren't round amounts of bitcoin and weren't round amounts of u.s dollars and you did it over a long time that bell curve would be like very smooth it'd be like a very nice smooth even you know the peak would be at around 0.01 bitcoin and it would you know start going down on either side look nice but because most people do round amounts of bitcoin and u.s dollars there's these like giant whiskers sticking up at just a few spots

and so it's very obvious it's like okay here's the round amount of bitcoin i can remove the round amount of bitcoin and then what's left is just the round amounts of dollars and it's very clear that the only spikes on this otherwise smooth bell curve are um u.s dollars so you just see like where are those u.s dollars like and which one is the 100 which one is the 50 the hundred dollar line is just um it's always the most popular followed by 50 and then like 10 and 25 and then on the other side um what a thousand dollars five thousand dollars those are all kind of like a quarter of what the hundred dollar and fifty dollar is in terms of popularity the amounts that marty sends to his friends when he he gets him a new wallet yeah right whatever

yeah exactly i'm i'm holding on stop gifting no more friends and family gifts yeah i used to i used to do 20 bucks back in the day i still have this one friend tim every christmas when i'm home pulls up his coinbase account he's like look how much it's worth now Hold on to it. Back in like 2013 when I was sending my friends like $10 for Christmas, Coinbase had a feature where it would return it to you if the person didn't log in and create an account. I got so much Bitcoin returned to me.

Happy now. Which is great in a way. You intentionally put a typo in their email just so it comes back to you in six months. I tried. I tried. but yeah but you know like yeah iris i got hey you got it i was just gonna say you know how it is kind of a problem gifting people with bitcoin sometimes it's a good thing sometimes it's a bad thing sometimes you lose it it is nice you know there's a system there that's like okay if this

person gets interested in bitcoin they get it if they are like whatever then that it comes back to me it doesn't get lost yeah yeah it's kind of cool it's probably better to uh gift people the knowledge about bitcoin rather than the bitcoin because they're going to lose it if they don't know what's going on this is what i've learned over the last decade like coming back to utx oracle like you've created the system where you can tease out the price data at any given point in time but now using this this oracle feature in actual applications like how viable do you see this tool being as an actual oracle for business functions or smart contract functions yeah yeah i'll talk a little bit about that

i mean with with the code that steve has produced already it's just a very simple python script you can just download it at utxo.live slash oracle and run it you just need to have a full node running on your local computer and you can just query your node and it'll you'll put in a day's worth of you'll put in the particular day where you want the price and it'll go to your node download the blocks for that day and then verify it and you get the price for that day according to this version of the model and that's that's a very cool thing that I think everybody should do and we've already had a good number of people doing that and some people have even spun up their first full node in this process, which is very cool to see because it's a lot of people

really don't see the incentive of running a full node. And it's a very important thing for the Bitcoin ecosystem to have people not only running nodes, but using them for various things. So yeah, we definitely want to encourage that. But as far as using it, like we, you know, you've got your block clock back behind you there and like this could be a very easy thing where if if uh you know the block clock folks didn't want to subscribe to an exchange price feed they could just either embed that into the clock themselves or just run the script without having to reference any centralized venue right and this would be a quite accurate price that they would end up with and this is another thing that steve and i get a kick out of is you know who's to say which is

right and which is wrong you know so it might be it might be 75 basis points different from fill in the blank central venue but i mean we're looking at the bitcoin blockchain of settlement activity that's happened so maybe this is right and they're wrong so there's this is one of those things with bitcoin there is no authoritative um you know reference for the bitcoin price and I think this version within reason is is just as you know it's just as good as any other right so as far as how you can use it in let's talk about you know kind of the DLC application which is the one that I'm kind of most excited about so in the in this kind of project there's phase one which is just get a

working prototype that people can run and verify independently to produce a a price signal, which they can do today with the code that exists. Phase two is use that in some way where you can actually settle decentralized trading or other DLC type activities. With the way that most all DLCs work today is that you and your trade counterparty enter into an agreement and then you agree to have either one or multiple oracles involved that will, at the resolution of the contract, sign a statement as to either the price on that day or the outcome of the event that you're betting on or trading on, right?

So it could be, you know, Biden wins or Trump wins or the price on this day was this value. So, the way that this could work with that type of setup is that instead of just flat out trusting this central oracle to quote you the price that's going to settle your contract, you would just agree that the oracle uses this version of the UTX oracle price methodology. and uh if for some reason the price that they produce on that day is different than the price that's produced from this v6 version then you could have some kind of punishment mechanism for that right so you're not you're not just blatantly trusting that your oracle is going to um is going to do the right thing and not try to exit scam you or something right so this is it just gives the individual more more say so in uh yeah and the ability to independently verify the outcome that the oracle is attesting to which you know given the right given the right setup i think

could be a really compelling use case the the example that i like the best is say you're you're you're a little you're a little skittish and you don't trust centralized venues and you enter into a three of five Oracle set up to where five Oracles are going to produce the price on January 1st, 2024. And, um, and you're going to use that to sell your contract, right? The five Oracles that you chose were, were FTX and BlockFi and Celsius and Voyager and somebody else. Right. And, and now you thought you had five Oracles and you thought, okay, I'm, I'm safe. Right. And it turns out you're not safe because there are no bailouts in Bitcoin and things happen, right? Especially over long timeframes. So in this type of setup, even if you wanted to use that, that three of

five Oracle setup, you could maybe just have UTX Oracle be a backup for that. So if these five Oracles don't produce a valid signature when they're supposed to, you just default back to this price that's going to get you you know close enough for for government work yeah i've actually never thought about that particular aspect of the oracle problem what happens the oracles go bunk and they can't attest to an event and then you don't have anything to sign the closing transaction signature with and it doesn't even have to be a catastrophic blow up it could just be that they've changed their direction of the business and they don't want to do this anymore and they're going to wind it down at some point and somehow you didn't get the

memo and so you're relying on it and you know the the company's still there but they're not they don't have this division anymore right yeah and you're sitting there the transaction that can't be spent because you don't have the attestation yeah right attestation um um so that's that's like that's a version that could work today you know given the right people participated. What I see as the true goal would be for Marty, you and I, we want to do a trade about the price on January 1st, 2024. What would be fantastic and what would be more of like a lightning style setup with sort of a punishment mechanism that's built into the protocol would be if you and i could agree to use the v6 price and you and i could just run the v6 code ourselves

and then somehow produce a valid signature at that time to settle so it would still be a two of three but i i would produce my own signature and then i would use the v6 code to produce the second signature for the two of three um and then you and i you and i can just do it ourselves without having to rely on any external you know trusted third party so that in my mind that would be like the gold standard for for usability here but uh there's some technical challenges in that that i have not worked out yet and i would i would really love it if people could uh could opine uh to to us in the telegram channel or on twitter about ideas you have about that because if that were possible in some way that would be very very cool and would would really open up a lot of avenues

for expansion of this what are some of the hurdles that are in the way well it's just there's uh there's no obvious way to prevent you marty so so january 1st comes around and you think well this is this is ridiculous like i want the trade settled at the price i wanted not the not the true price within a bitcoin transaction today i don't know how to make it so that that your signing software knows that that was a fake v6 price that you input right so it's kind of like there's not a good punishment mechanism for you to game the system you could maybe like do some kind of like hash of the code that you used like hash of the python script itself maybe and i i think that something like that would be possible but um yeah i just

haven't put the pieces together for how it could work in reality but that would be phenomenally cool if we can figure that out yeah because you have to think and come back to the oracle problem more broadly like you can't fake i mean the problem you just described would be me faking some data but at the end of the day really like if you're actually running the full node and you're verifying against your counterparty you really can't fake that data yeah and this and this example it's kind of more like a man in the middle attack because you who are signing up an an inaccurate price you didn't change the blockchain you just changed your wallet software to force it to sign something that's not true you know so that's that that's the area

where i would love some feedback from people um because it really would be very cool if that possible yeah and going back to utx oracle right now you're doing the price at the end of the day um once a day but could you have like a rolling per block price just doing like a trailing 144 block look back just have a price per block yeah that's definitely possible um i just decided to release the daily average just as kind of a simple thing uh you definitely need a number of blocks you know because you know some of these blocks just have one you know wizard ordinal in them so you couldn't just look at one block and be very confident about finding the price but yeah trailing 144 blocks should work fine um

you know i i have a little robot on my server that runs this thing every night and publishes it every night i don't really want to use my servers just running that 24 7 um but yeah certainly possible come on man you got to do it do it for the uh digital ocean's gonna go up to 40 bucks to 45 bucks a month man yeah not stacking it hard enough well that gets so interesting like should there be dedicated services and companies built around providing this type of data or does that defeat the whole purpose is the whole purpose that individuals should be doing it themselves it kind of does yeah yeah this is something that steve and i have joked about for years as far as you know it's very difficult to start a company in the

bitcoin space that doesn't artificially insert yourself as a trusted third party so i mean one of the nice things about utx oracle is that you know i have it on my computer steve has on his and several other people have it on theirs already and you really don't it's not a very computationally intensive thing like on a on a normal you know macbook you can run it in a minute or two and it it'll give you the price for the day right so it's not not overly complicated and steve's made he made the program very user friendly for non-technical people as well so it's just follow a few instructions and you'll end up where you should be yeah that seems like there's something here though yeah it does seem like i mean

me and daniel been talking about this forever like there's got to be some kind of business case um to be made from this but just like everything else in bitcoin is just so hard to um to make a you know ethical virtuous business on bitcoin i mean you got wallets you got exchanges you got mixers maybe but um other than those you know i'm sure you know marty it's hard to think of one yeah well that's i mean but that's always been one of the business cases that makes sense to me is like an oracle provider just getting paid for providing an attestation but again with what you guys are building it's like this could be the individual should be something that's more like uh more like a value add within a fediment setup you know to where that fediment just has either

a dedicated member or a dedicated server and it's like hey this is this is the price according to the raleigh fediment you know server or something like so um yeah yeah but it i agree with you we yeah it there's a lot of thought that's gone into that and um it's it's kind of you don't you don't know what to hope for right so it's you you want it to be available to the public and freely accessible and usable um but yeah i think that there could be this could be a nice thing for existing businesses to layer into their offering too yeah and it's something i can't really grasp what i'm trying to articulate but there's just something beautiful about being able to pull this data from the chain and using the chain to get this instead of depending on a centralized

third party like an exchange yeah like it highlights that there's new ways to do things with bitcoin whether it's multi-sig custody it's like a new way to secure an asset and then using the chain data to get information about the purchasing power at any given point in time yeah we yeah there's there's just something very cool about it and yeah that's that's essentially why i did i was like dude this is awesome we gotta we gotta release this we're not really sure why it's so cool but there's just something very cool about it i think it's so cool because nobody forced this to happen right there wasn't some committee meeting then we said okay let's all send around you know around usd amounts and sizes that are big enough to where we can

find it on chain and and make a model around it it's like this is just some weird emergent behavior that that bitcoin just happens to have right it's like nobody there's no committee meeting that said that you know miners have to go out and uh and create these phenomenally you know capable new asic chips either it's like it just happens and it's it's just bizarre all these incentives that align in bitcoin to create these outcomes that that seem to make bitcoin stronger yeah yeah yeah and because there wasn't some initiating thing it was that makes it a lot harder to game too um daniel can talk about that more than i can but i was just talking to my mom on the phone earlier today actually and i was like yeah mom i mean the you can't stop everybody

around the world from sending each other a hundred dollars you can't just like make an announcement and just say hey stop doing that like that's just not going to happen you know it's like a rumor going around to high school like you can't stop that i mean you could pay to have all the block space you know you could just pay enormous transaction fees to crowd out everybody sure uh that's very costly but i don't think you can stop this signal in the chain i think it's kind of unstoppable yeah it's just human action you can't stop human action right yeah because yeah there's no there was no central place that started it so and yeah and this is and there's just something very cool or sorry god well i was just gonna say about the the sort of the attack

factor is people people are very quick to say oh well at you know how many transactions would it cost to produce a you know a derivative or a fake signal or a duplicate signal and you can do some quick mental math on that it's it's you know it it essentially starts at costing you like seven bitcoin a day and then it would go up a lot from there once it once it actually started happening um but it's like what could you do with with seven bitcoin a day at a central venue you know like if you needed the if you needed the closing price on a particular day to show a value like you maybe you you could do that a lot cheaper than manipulating the bitcoin blockchain on some other venue yeah just use like futures or something like that yeah or just get some

get a database guy to to change a number on the screen yeah yeah uh did uh i'm just go ahead see i was just i had never thought about it the way daniel just said it right there like instead of just yeah just compare it to someone manipulating the price on an exchange yeah which is probably about the same yeah and the cost of that is zero just convincing somebody to do it where seven bitcoin a day right now is more than 150 grand yeah rather expensive quite quickly you can't blackmail the bitcoin blockchain so yeah something i'm curious about since you guys been looking at this data and visualizations obviously ordinals and inscriptions have been a big thing this year did the emergence of that phenomena like change the visualizations

at all well those transactions are uh usually very low satoshi amounts um they're kind of near the dust limit um they're like less than a dollar all those transactions so those transactions didn't really affect uh the or the oracle that much and the the oracle is affected more by the price changing a huge amount on a day because in the morning a hundred dollars is a lot different than it was at night so there's there's no clear spike um but now the the ordinal transactions didn't really affect it too much yeah and just for for round numbers for people listening you At the beginning of the year, it's not a requirement that the number of UTXOs go up over time because it can go down when you consolidate UTXOs into larger amounts.

But in general, it does go up over time. And at the beginning of the year, it was about 70 million UTXOs, and now it's 120 million or so. So a lot of that UTXO proliferation has been the inscription stuff. But, yeah, Steve has a nice chart showing, you know, the entire history of blockchain, the entire history of the blockchain. And there's just one little tiny piece down at the bottom, right, for this year's values. And it's very, very low on the on the y-axis. It's like those are the inscriptions, right? It's like pretty, it doesn't really matter much when you look at the entire Bitcoin blockchain.

and it's pretty inconsequential interesting yeah people have been doing very strange things on chain for a long time um and inscriptions is just one of them she's like oh what's that and she's like well what's all those other like crazy things that people have done over the years like yeah ren btc was had a 10 000 btc hot wallet that they would do 100 transactions a day out of it's just like what in the world change the wild place man wild place well on that note like what are some of the i'm sure you guys have some insights into broad utxo mismanagement like do you guys have ideas around i mean daniel you mentioned consolidation i'm a big believer that people don't have proper utxo management even some of the most popular companies in the space like

what lessons have you learned from looking at these visualizations day in and day out? Is there anything that like sticks out to you? Like what are these people doing? Like there's a better way to do this. Um, well, you know, don't send yourself like a ton of really small ones. That's for sure. Uh, because you're going to have a hard time getting those out. I, I think I was on spaces, some Twitter spaces where somebody disagreed with me on this,

But I would recommend sending yourself not just one large one either, but something in the middle. You know, if you're kind of, if you're going out to the strip club at night, you know, you don't want all ones. You don't want all 20s either. You know, you kind of want something in the middle there. So I recommend a distribution. And I also recommend labeling them, especially, I mean, maybe not on your kind of phone wallet, not on your everyday wallet, But on like your cold stash, you know, use one of those good wallets like Sparrow or Spectre because they let you label. You're going to be like, oh, yep, this is the one that I got from here.

This is the one that I got from here. And then you can also see if you keep up with labeling them, you can also see if somebody is trying to dust attack you. You know, you're like, oh, where did that one come from? You know, if you get a UTXO, you don't know where it came from, don't spend it. Do not spend it. but that's mostly from personal experience i would love to see the labels i feel like you got you have some wild labels in there steve i i'm dying to see these now great um no i think the just the the things that you see people doing on chain is just really cool

the the ren btc one was very interesting and it took it took you a while to figure that one out but it's just this this massive single UTXO that just gets just it just gets it's like it's a working bitcoin stash you know it's like there's some bitcoin that are like lazy on the beach somewhere and there's some that are like out in the field working all day long like they get turned over you know dozens and dozens of times a day just because it's a it's a hot wallet and it's just just churning through transactions constantly those types of things are interesting to me like these are your your your utxos of leisure and your hard work and utxos you know out in the mines so you're saying ren btc was churning over 10 000 bitcoin 100 times a day is that what they were

doing yeah they were destroying their 10 000 btc utxo completely destroyed every day multiple times a day like 100 times a day so you know it'd be like an exchange or something if you pay let's say you're withdrawing from ren btc they would just send you they would destroy their whole stash send you one output and send the change of their stash back to a new utxo every time somebody would draw yeah every time somebody would draw they destroyed their stash and sent themselves the change that's amazing like one time i was very confident yeah yeah that seems reckless it's it was crazy reckless i can't believe but they ren btc made it for like three years what was ren btc doing again better i don't even know some defy stuff yeah i don't know

i'm not sure yeah that seems terribly risky like if you're changing that dress yeah you fuck that up well some of the other cool things that you can see are these kind of frequencies these oscillations so you can definitely see the weekly cycle um saturday and sunday very small noticeable kind of you know sine wave kind of in the weekly cycle of outputs um also back a while ago it was pretty common for all the exchanges or sorry all the mining pools to pay out on a certain day marty you probably know more about that than we do but like you could see that like okay this this mining pool pays out on sundays you know this mining pool pays out on tuesdays or once a month or something like that so those things are pretty striking in

the heat maps as well yeah i imagine bitmex where they do every monday morning yeah something like that yeah they would do withdrawals but i yeah i mean i love what oxt.me has done and like what was the other one kycp.org i think the related one i mean i love that they're trying to give people some kind of open source way to do some kind of chain analysis people have asked me to do that i i don't know i can't make myself do that for some reason people are like who is that i'm just like i cannot make myself try to dox this person yeah it just goes against my nature to do that. Aside from RENBTC no doxing, Steve.

No, it is, but it really is a fascinating conundrum if you will, because the data's there somebody's going to look at it and that's why I do really love what Laurent and Samurai now are doing with OXT.me and Ergo

sort of, you need our chain analysis experts to be on the front lines to sort of tell chain analysis and elliptic and point out when they're egregiously wrong if somebody isn't watching the watchman um you get these weird situations with like the the bit fog situation where this dude could go to jail on some bunk chain so bad yeah man i hope it turns out like the ross olbrook thing and it ends up like chain analysis people go to jail because that that bitcoin fog story is so bad yeah i mean chain analysis getting all that money funding and

needing to like prove that they're great so they go after somebody i mean i shouldn't talk about it because i just know what i heard but it sounds terrible it sounds a lot like the corrupt fbi agents going after ross olbrook yeah and then they're trying to claim that brian bishop isn't an expert on this stuff and oh yeah okay anybody who knows anything knows that's not true yeah yeah um hey steve just uh talking about kind of the the routine of what the what the daily bitcoin utilization looks like um just talk about how like what a normal day's use looks like when you look at the you know that that one visualization that looks like the rocket you know shooting out stuff and then like how frequently seemingly rare utxos show up being spent because this is i think

a source of kind of confusion and angst for some people if they see like oh wow there was a big a big spin from 2010 or something it's like how often does that happen oh yeah yeah so when like you hear a news story that's like oh my god someone just sent a coin from 10 years ago the news story kind of makes it sound like this never happened and some old guy sold something and this is going to be a big deal every day people send spend bitcoin from like 2011 2012 2013 i mean it's that happens every day you know someone will send one from you know a little bit earlier in 2010 or something and it'll make the news and be a big headline but this is just it's a very consistent distribution if you look at the age of um coins that are spent

you'll see it's very consistent it's just this bell curve um oh yeah it's actually like a bell curve in log space so i don't know log normal distribution or whatever but you know it starts at the dust limit and then at about 0.01 bitcoin you'll see the top of that curve and when if you look at the age of that that 0.01 bitcoin will go back to roughly like 2017 or something because there's a lot of people still holding on from spikes so whenever the all-time highs were you'll see people spending from those a lot um but then after 0.01 bitcoin you know it just goes back down normally on the other side of the bell curve and it's very um it's very satisfying just looking at that every day and just seeing how how consistent it is um i guess you know

people like glassnode are more interested in the changes in those things like do we have a lot of ogs um selling right now a lot of ogs buying um i i think the opposite's cooler just how how stable that distribution is yeah are you like tank in the matrix so you're like i see a woman in a red dress i see i can't help it man did his world's most beautiful data this is so interesting somebody just uh reproduced um my stuff on ethereum just yesterday started making the heat maps in ethereum and you can do that even a few people that run a full node is what's that you can do that with since they don't use utxo they use they use state um it's just like account account based system so you can do that with account based systems

well it's been a long time since i've run an ethereum node um apparently the geth node if you run the full which they call archive in ethereum language full node means archive node um full node in ethereum means pruned node just to mess with us i think uh but that geth node is now 12 terabytes apparently there's this node called aragon which does the archive node a little bit more efficiently and it's like two or three terabytes so this person was using that node and yeah i mean even though it's a state-based or whatever you can still look back in history and see what transactions took place and it's kind of eerie how similar the ethereum blockchain looked to the bitcoin blockchain um did not think i was going to be talking about ethereum

on this podcast it is you got baited into it man well yeah another thing i'm curious about too is the updating of the address structure like so from like legacy to wrap segwit to segwit to pit to taproot does that introduce any changes to the visualizations um so not really yeah we talked about that before i had not seen the data on that and i don't know if you've looked at it on that axis, Steve, but that I would, it'd be interesting to see. Yeah. I mean, but I just look at amounts.

So it doesn't really matter what type of transaction it was. It just, yeah, it doesn't really matter that. I mean, if somebody was doing some, you know, one of those fancy tap script things where people own little pieces of the tap, you know, and one of those multi-sig thing, That might mess it up. Yeah.

If it is in there, it's not significant. Yeah. Well, that gets to an interesting point, too. Just something that many Bitcoiners don't like to talk about, but it's like, hey, we've got to talk about it. Not everybody's going to be able to own a UTXO in the future. We may need these TAP script-like solutions that allow multiple people to own partial parts of individual UTXOs.

And that gets into the broader question. is like adoption picks up like how consistent do you expect these trends to continue into the future like 10 years from now bitcoin is multi-decade trillion dollars worth of the economic value of the world like do you see this sort of evolving i mean my my thesis has been that the signal's going away at some point you know for better or worse but it i don't think that this will be something that's around you know 20 years from now maybe 10 years whatever but but yeah it's just it's very difficult to estimate time scales in bitcoin because you just it it's also hard to imagine beyond you know our line of sight like what's going to happen because

these these are you know truly like global geopolitical things if these types of things happen like a lot is going to change so if if if we're talking in uh you know in 30 years and the the usd price is still visible in the same way it is today i would be very surprised disappointed probably disappointed yeah yeah i've called it a dating app you know it's designed to be deleted you know it's designed just to work until bitcoin totally takes over yeah usd price isn't there anymore um but in terms of other things like you're talking about the utxo growth and and stuff like that i think it's i think it's funny how people will um worry about a problem that's like so long away like so far away but they won't worry about a problem like the 2106 bug

which is much more clearly a problem and nobody wants to talk about that either well i want to talk about that i mean i'm not on this podcast but i've kind of been working on that a little bit Adam back once I love Adam but Baltic Honey Badger I believe is 2018 like I asked about the 2106 bug he's like yeah we'll worry about in 80 years I was like I don't know if that's like the best way to attack this problem all right it's like yeah freak out about too many UTXOs 500 years from now but don't worry about 2106 bug it's like what I mean like Andreas love Andreas Antonopoulos I know you know some people don't really follow him very much anymore but he was very wise about scaling like there is not just one way to scale you know if you look at the

history of technology and utxo management i think is in this world of like how are we going to scale and you there are so many creative ways to scale that we haven't discovered yet um it's it's not a problem like the 2106 bug where it it is very clear what the problem is and it's not very clear what to do um well i have idea what to do but the in terms of the scaling problem it's just like no there is going to be thousands of creative scaling solutions in the next 100 years like i'm not worried about somebody coming up with a clever way to deal with utxo growth i'm not worried about that at all i completely agree with you there and for those of you who are listening you're like what the hell is this 2106 bug uh when satoshi launched

bitcoin use unix time stamping and that has a sort of end date it's called the 2106 bug or is it the 2064 bug but it won't affect bitcoin until 2106 correct yeah 2106 yeah if blocks are produced as they have been historically and a particular increment which the difficulty adjustment modulates or moderates can i just take like two minutes and talk about that daniel yeah i would love for you to make i think you have a really good point and it's it's it's the reason why we definitely need a hard fork in bitcoin yeah soft fork people don't understand we need to hard fork bitcoin at some point right but i i i worry about that language a little bit because it makes it seem in somebody's

mind that like everybody has to change their node version at the same time like in between the same two blocks like when you it it unnecess because i think i know a way to make a two versions of bitcoin run together in sync with one another like one version that's protected from 2106 and one version that's not and if you can get these two versions running together with each other for several decades then when somebody gets a new computer they have to they have to install a version of bitcoin and then they that once it gets widely known that you can either install the version that forks off or not install the version that forks off then in my view it will become a well you kind of chose to fork off um but that's all dependent upon getting a version

of bitcoin core that can run with you know the patched and the unpatched version running together and sync um for several decades and i i think that's possible like me and greg maxwell and like a couple other people have been like well we could just keep 32 bits in the block header and then in the node software we just kind of do something to detect the overflow and then when you go back to publish the new block header like a minor whatever just publish the 32 bits with the overflow because the patched versions of the node can detect the overflow yeah and um i think i think that version can run together just keep 32 bits in the block header like then we never have to do that crazy hard fork that people have in their mind when you say you have to hard

fork eventually you know yeah no and i completely agree and um i will admit like i'm not technically competent enough to understand like the interaction between the block header and the overflow but it always has intuitively made sense to me stopping decrypt and i used to talk about this a lot and a few years ago and he's been making the point like yeah like you just said like get get the software that will protect you from 2106 in the future uh introduced as early as possible so you have like this snake shedding skin thing where it's just like yeah like you just mentioned over time people are going to need new computers they're gonna have to pick right um when you get a new computer you don't install 20 year old software on it i mean if you got a new computer

and installed the first version of bitcoin today you'd fork off but nobody would care because that's not what we mean by hard fork what we mean by hard fork is like somebody has a modern you know last few years version of bitcoin and they got kicked off the network against their will not like somebody chose to install software that they knew was going to hard fork um so yeah and Just because of how previous soft forks have been activated, we think, okay, that's how we do it now. And I just think that this is a type of thing where the rules are, there are no rules. And that each time we need a soft fork, it's going to be some different mechanism. And the participants in the Bitcoin system change a lot over time and the incentives somewhat change.

And the thing that worked last time is not going to be the thing that works this time. And we just have to keep an open mind and, you know, not push things like this off, but also not feel like it's an excuse to get a bunch of other goodie bag things that might give us things that would be nice to have. But those are not the point of the 2106 issue. So it's not like we have to do this hard fork. So let's just do what Congress does and cram a bunch of other stuff in there just to get what you want, you know. yeah that's bad politics for this distributed network yeah like 2106 i completely agree with you steve like i'm completely of the purview that we are going to find creative ways to scale bitcoin whether it's on-chain utxo consolidation in multiple individuals owning a piece of an individual utxo second layer solutions like and that's what a lot of the focus is right now but 2106 is somewhat existential like if something doesn't happen between now and then like bitcoin will just stop working yeah it feels like just the right thing to work on you know so i've been working on it a little bit we're gonna get some headlines out there new york times

discuss how bitcoin's gonna fail in 2106 yeah exactly right that's the other reason like you to like front run those narratives which will definitely pick up once people realize the energy stuff is all bullshit once they realize the transaction per second is all bullshit like they'll go for the next thing it's like oh it's got this critical issue like yeah yeah oh yeah can't stop fudsters i've had to think about this proposed solution for a bit and it it it sort of does make sense to me that i mean for a for a real world example that just happened today you know we all had it on our calendars to do this uh next week and it hadn't happened yet so it's okay that we changed it to not be the original time you know and this was the original time and then i

messed up on the calendar that was my fault and then nobody's nobody's the wiser that there was this alternative plan it's like no this is what happened then this is the plan so yeah yeah yeah fascinating stuff what other what other things within bitcoin are you guys interested in right now um i would i would love to just just bring up another concept that uh is near and dear to my heart of smelting which was another kind of raleigh bitcoin meetup uh concept and it's just a concept that you could coordinate with a miner to pay a very high transaction fee with the with the UTXO that has any type of history, good or bad, and then have that miner, you know, essentially do a coin join swap with you for their newly minted Coinbase transaction.

So you end up burning a historied UTXO and get issued a new Coinbase transaction or a near Coinbase transaction without any history and essentially the same size. And this is something that was possible with some more complex ECDSA work back before Schnorr, but it's much more possible today. And this is just one of those things where I feel that there is a lot that can be done with Bitcoin today that we just have scratched the surface on that really changes the dynamic of blockchain surveillance and chain analysis and other things. And this is more of a privacy-minded topic, but there are scalability things and other things that I just think we need to have more conversation about these possibly interesting new ways of dealing in Bitcoin that really changed the narrative around like, oh, Bitcoin doesn't have privacy. it's like okay well if you could have a utxo with you know whatever history you can imagine that would be unsavory and if you can just enter into a trustless coin swap with someone and end up with a fresh near coinbase output like that seems pretty private to me yeah so yeah that's a pretty

yeah mixing mixing has always been kind of a problem mixing through coinbase outputs is like the holy grail of mixing and me and daniel and a few others have been like trying to figure out how this would work actually i saw that super test net was starting to do stuff on this too recently so i'm super interested what he ends up doing um but yeah if you could swap a very history to utxo for a clean utxo for a small fee um that would be as long as end the privacy conversation well that would it's very interesting too once you consider the economic incentives of these pools mining pools are notoriously cutthroat i think they're not very profitable businesses at the end of the day so you have them forced to create value-added services when there's firmware

futures markets which they're trying to develop basic brokerage whatever it may be farm management um but yeah this seems like a way that they could get quote-unquote yield on their inventory um revenue stream just just uh to steel man a bit here the this idea in particular has one major downside in that um if there's a block reorg where one of these super high fee transactions happens um it ends up the miner who loses their their coin not the participant in this melt so you know reorgs do happen occasionally and who knows how if they'll happen more frequently in the future but that's the main the main downside of this that the miner does take actual risk in a reorg that they would lose their you know lose their coin so what if

just sort of tied it to the actual utxo of the block the transaction gets mined in but you'd have to make sure that the pool mines the block and then you don't really get a piece of the coinbase transaction that's released 100 blocks later yeah and there's there's some implications with stratum v2 on this about you know how do you actually make a system like this and yeah i think that that could be a more yeah a more workable approach to having something like this work but it's a it's a pretty complicated idea but it is pretty fun to think about though yeah yeah because if you make a deal with a particular pool and another full mind your transaction is there maybe something like mempool's transaction accelerator can help this and you just

pull the mining pool inventory via market like that i don't know i'm getting a little heady here just thinking about this idea i haven't thought about that i mean welcome welcome to the conversation we've been having for years now it's like how do we get around that daniel was even thinking about an insurance company like you just have like a you know a company that just provides insurance against orphan blocks maybe it's like a third layer solution though just just more complex i don't know yeah these are fun ideas to think about though it is and just getting together with bitcoiners to talk about this stuff is awesome and yeah if you don't have a local group to meet up with and talk about these things you should you should start one

or get one or join one because it's it really makes it so much more fun yeah god now you got my mind running i do feel like this is i think maybe the accelerator model i haven't thought about that like the accelerator model the aggregated accelerator that mempool's trying to launch or has launched oh okay yeah but like applying that model to this thing and so what do they do they just they just have a separate transaction that's like a a higher fee just to to drag yours along with it they well they don't do it so like if you want to get your transaction accelerated you'd pay mempool has deals with all the mining pools um and then they create the market book for transactions that need to be accelerated the person that needs

their transaction accelerated pays mempool and then mempool pays the pool that actually mines the transaction um so you have this sort of aggregate mempools like this aggregate market um so instead of depending on one pool to mine your transaction mempool aggregates all the transactions that need to be accelerated then the pool that actually mines it gets paid for doing that by mempool so like similarly could you apply that to like mining pool utxo inventory with the smelting idea just have like a market aggregator of that inventory and then the pool That actually mines the transaction with the higher fee that you're paying. It gets the Bitcoin.

But I don't know if that would work. There's so many. They're like 98% perfect, and then there's some critical flaw. That accelerator, do you know if they're also including transactions that aren't broadcasted? What are we calling them these days? non-standard transactions or not or out of band or whatever well yeah i mean i i mean these are out of band payments because you could have a transaction in the mempool then you

pay out of band to get a pool to include it in the block and they get paid for that service that's cool but the non-standard transaction i think that's different um where you're going yeah behind behind the mempool to yeah and this is also one of those ideas where like you you kind of hope that it's not necessary because if it if there really is a big market for this it means that the chain analysis is having an impact on the fungibility of bitcoin and and you know you kind of don't know what to hope for if this is necessary it's maybe not the best the best for bitcoin that it is necessary yeah no that's all right i know lisa lisa niget um hits the comments when mempool announced that

accelerator people are for that particular reason the non-standard transactions where you're not actually introducing a transaction to a mempool um but you're sending it straight to an accelerator or an individual pool mining pool how does that perturb the incentives is it introduce something like mev um yeah but again all this stuff is possible you have to assume that people are going to do it and how do you just work around that framework like transaction accelerators have been around for almost 10 years now or six years i believe via bitcoin was the first to do it yeah that's super cool stuff to think about yeah just this open market of ideas where people are just trying all kinds of different things and seeing what works and what's possible is is

is fascinating yeah yeah i was holding on hope that uh we could record until this turns into a palindrome block we're two blocks away lawn miners it's a good it's a good palindrome block too 809 908 i like that that is it would be well when i'm gonna have to get yeah i'm gonna have to go in here in a little bit um Um, but, uh, I, I do want people to, uh, if you're one of those people that has a node and you're just bored, you're like, oh, I thought I was going to have something to do with my node. Uh, give my program a shot, like go to UTXO live.oracle and just like, look at the Python

script. You don't have to go to GitHub. Uh, you know, GitHub can be a terrifying place for non-technical people. You can look at the Python code on the website and, um, I think you'll understand it. more than you think you will it's very well documented like here's how you connect to your node here's how python asks for the blocks that it needs here's how once you have a block you go through all the transactions you can see all the outputs in the transactions it's kind of cool like you can see the the package structure that bitcoin core puts the blocks in i mean it's a great way to

learn i mean some people can read mastering bitcoin by andreas and and figure it out um but you know the real way to learn like exactly how does bitcoin works is you know just do something cool uh technically with it and so i think somebody that doesn't consider themselves very technical could actually like run this python script pretty easily and understand more about how their node works and you know so yeah i want to encourage everybody to and give me feedback too i mean part part of utx oracle is like you know i didn't want to write an ai black box where you didn't know how the oracle was getting this price i think part of if it's successful utx oracle will be because a lot of people understand how it worked because that's where you can kind of like

get that trustless element it's not just the decentralized it's not just the decentralization of the code itself it's a decentralization of the understanding of the code um i'm probably being too hopeful here so the three people out there that might do this let me know well i have to imagine like the umbrellas and start nines of the world would make this available pretty easily on their on their operating systems so you can see it as like a button just like yeah yeah we actually already had someone yeah they already put it into their umbral so um with the right app setup it's yeah it's possible today yeah yeah like if they just add it to their app store i can see this getting downloaded pretty quickly because who wouldn't if you're running this anyway like oh

i want my own sovereign price oracle as well yeah yeah it's very fun there are several things that happen when you run a bitcoin node that are just mind-blowing and you know taking your latest block hash and then comparing it with a friend's latest block hash and you you see that they're the exact same or you count up you know all the all the coins that are out there down to eight decimal points and you ask your friend and it's like oh that's the exact same number that i have too this is one of those really fun uh educational moments that you can have with somebody to say like the price that you come up with will be the exact same price at block 809 000 you know and that's crazy that you don't have to trust anybody to do that it's it seems like it could be really

powerful yeah people don't understand the gravity of that reality yet we're still learning it's so crazy yeah just that we all have these identical databases in our house and there's no central authority given us this identical database we just all have identical databases on our computer that are updating with each other and it's just it's just it's just so sometimes i think there's something so much more powerful i mean not like there is anything more powerful than money but i think yeah there could be something else just with that fact that we all have identical databases like some other kind of communication could happen with that yeah i completely agree i don't think we've even scratched the surface of understanding what this how this is going to

affect humanity in the long run obviously money is very most important aspect of it but i do agree steve that there's like just again like i said i can't really grasp what i'm trying to articulate but you can just feel that there's something there so fortunate to be born into this era yeah it really is it's crazy and we get to hop on podcasts and talk about all these crazy ideas just wish everybody could see it yeah they will they will eventually at the price they deserve uh generally this has been fascinating thank you for uh for coming on and walking through utx oracle with me and thank you for building it and getting it out there in more people's hands i think it's a really cool project and like we've been alluding to at the end of this

conversation throughout the conversation there's uh unknown unknowns that could come from this that could that could be massively beneficial moving forward yep yeah for sure and appreciate all you do and uh it's great to be here well it's great to be on the front lines for you gentlemen keep crushing it thanks man thanks buddy peace and love Thanks for watching!