TFTC: A Bitcoin Podcast - Tales from the Crypt #68: Patrick Dugan

Episode Date: April 30, 2019

Join Marty as he sits down with Founder and CEO of TradeLayer, Patrick Dugan, to discuss Patrick's run in with pot smoking bandits in Argentina, what he's building on TradeLayer, how decentralized derivatives markets may help drive demand for Bitcoin, the flow of money, and sovereignty in the Information Age. Check out TradeLayer: http://tradelayer.org/ Follow Patrick on Twitter: https://twitter.com/duganist Follow Marty on Twitter: https://twitter.com/MartyBent

what is up freaks welcome back to tales from the crypt it's your boy marty bent here on a hot wednesday afternoon evening now in brooklyn uh very excited for today's interview i got a random dm about five days ago uh with our guest telling me that he's going to be in new york wanted to hop in the studio. So somebody I recently discovered on Twitter about six to eight months ago. I've been fascinated by what you're saying on Twitter and your thoughts on the space in general. I'd like to introduce you, Freaks, to Patrick Dugan, CEO and founder of Tradelayer. Patrick, welcome to the pod. Thank you very much. Well, thanks for coming on, dude. It's a great pleasure. Thanks for hitting me up. Absolutely. It was a great random DM. Yeah. Well, you know,

you're like the Joe Rogan of crypto podcasts. So, you know, I had to, you know, you go to New York, You go meet with the big money guys, and then you go on Marty Ben's podcast. Well, I'm flattered, right? I'm blushing. You freaks can't see it behind the mic. I'm blushing. I don't know much about you other than Twitter. I don't know about your path to Bitcoin.

I've been following TradeLayer at an arm's length more recently. For you freaks out there who don't know what TradeLayer is, basically a decentralized, you described as a decentralized savings vehicle. We'll get into... Yeah, if you could take that posture, or you could take the other side of the swap and be leveraged and punt around. Not if you're a US person, I'm not going to get into that.

But yeah, decentralized derivatives exchange protocol on top of Bitcoin. So what is your tale? How did you find Bitcoin? How did you end up making this decentralized protocol, this decentralized exchange? Well, how I found Bitcoin, I maybe have told this story a few times before.

It's kind of a classic. So I bought the dip after the bubble in 2013 because I was trading for a while. And I'm like, okay, here's a trend, right? Buy the dip. Treating it kind of just like a financial asset. And then I was in Argentina trying to deliver cash to my baby mama

who got out of there, but I'm out in the hood and hanging out with these dudes because I figured I'd take a little hit of their roach. Their wacky tabacky? And yeah, chat them up. I would do this sometimes in Argentina and make friends with these guys. and you know we don't have a lot in common right but you know I'm like I like to be like a man of

the people or whatever but this time around these guys got one of these guys got a bright idea right and he went we called it texted his friend and then um you know he's like hey come with me um it's dangerous here you know I'll walk you to the bus stop so I'm thinking like I'm probably gonna get robbed right so I'm chatting with this guy and he's like uh I'm like so what do you do you know I've told you a lot about myself how about you and he's like well I do a few odd jobs and I rob people and I'm like hmm thinking yeah I'm definitely gonna rob and then um and then he's like hold up hold up and his friend's rolling up and his friend pulls out this piece and it was like pretty new it was like a it was like a hand it wasn't quite a hand cannon but you know it was

like a pretty big chrome gun and I thought all right if that's fake I'm gonna beat the shit out of these guys right and he pulls pulls the thing back puts it up against my ribs I'm like all right that's not fake. So, you know, I do what they said, like give me my backpack. So I had like, uh, HSBC bank account, which of course HSBC closed my bank account when I was trading Bitcoin later. Right. But, uh, yeah, I lost the security device for that. Uh, passport, laptop, tablet, the wallet, you know, all my cash, like a thousand and a thousand dollars in the wallet. Cause that's how, that was the most efficient way to pay people back then. If I used to zoom, when is this? This was in 2013. Okay. So if I'd use zoom, the

fee would have been about as much on all that volume including you know what you can get for the street value of a dollar in because there are capital controls right so you had to you brought a dollar physically and they generally like the really crisp $100 bills or 50s so if it's like a crumply 20 they don't want to deal with it you know you get more paces for that right so figure out I'll just go and hang out with people but yeah I lost all that cash and so I only had the five Bitcoin on Mt. Gox funnily enough was my safe haven at the time what a terrible safe haven well yeah this was about six months before they

went belly-up right and so I went local bitcoins at the behest of my friend Adam straddling who's kind of an OG he started trade Hill with Jared Kenna back in 2011 in vineyard Elmar Chile which is around the area where I live nowadays anyway and I found this guy I'm a local is a hardware store owner sold the bitcoin to him he gave me a lot of cash and i was like holy shit this is real man we just jumped over capital controls just like that you know so i kind of saw the matrix in that moment so you got robbed and and found the uh the use case of bitcoin yeah pretty much i've only been robbed once in my life and it was for a bag of chips when i was like eight years old but uh what was

the south america's pretty wild man yeah i almost got robbed i gotta say i was telling your wife before we started recording i like to go down to costa rica and serif and and jaco and jaco is not not the best town so if you if you get somebody asking you to come down an alley do not go yeah that's a good rule of thumb yeah i don't trust people well yeah you grew up like really naive and gringo right and and everybody's like you know puerto vito puerto vito it's like yeah puerto vito until till the lights go down yeah well because you know when there's money on the line you know then she gets real yeah pretty much so I got involved um I started trading it uh there were people I was in startup Chile back in Chile so I knew some people who were trying to get money

out of the country so I'd sell them bitcoin and then I would like I had to call these guys up at Banco Bisse which is a smaller bank and like put in an order in their java applet and then call them up so they would like tag the the ticket and that that's how they they trade currency over there that was the best uh chilean peso dollar spread i could get then i wired out hsbc of course is like what's going on guy and i'm like oh yeah it's you know capitalization whatever and you know shut my account um but yeah i managed to make you know some points in a safe way doing that so i was there i was always like coming at bitcoin thinking of it as like a flow business and being you know reticent to like load up on a lot and like take a lot of risk what do you mean by a flow business

Like I'm freaks out like I'm not trying to just hold a bunch of Bitcoin and be exposed to the market I'm trying to extract like a dollar denominated yield by trading it in this like arbitrage sort of fashion You know, so it's like maybe I'm like kind of a nerd, you know cuz I ever made a lot more money if I had more of that risk tolerance, but um, so I got into that I Wearing this a lot bit conf t-shirt. So that was my first crypto conference back in 2013 and that's where I kind of met the world you know like uh back it was like all the OGs right so like um like Tone Vays was there uh Tony Gallipi was running uh BitPay uh met Jay Kwan at that thing he was trying to figure out what he was going to do uh he just like finished doing Yelp's uh mobile

app and got some shares and he's like what's the next thing so we're talking about doing a decentralized exchange and how would you do that um just a bunch of people man it was it was a wild time uh johnny dilly he was like 24 working uh he was an analyst for pentera back then what a character yeah he's a good guy um so yeah that was like my oh and uh you remember that galt sculch guy yes gary johnson yes i had i brought a bunch of cash so i could arbitrage him and uh i ended up handing it over to that guy so i could buy his bitcoin at five percent under and he was like oh man five percent i'm like hey you know take it or leave it guy so i'm like i'm the only guy who gave gary johnson money and and like made a profit out of it um so that was my my first i mean so

that was a great conference right just like uh and of course like uh diego of uh rootstock back then they were just uh trying to get a little hedge fund together and they were getting this community together so it was i was like coming off of that i was like okay if i don't get rich off of this stuff i'm a fucking idiot right like something's got to give like this is gonna be big and um and then my thought was like i'm gonna do um like a hedge fund where there'll be a token it'll be redeemable and if and we can arbitrage it in the secondary kind of like our own little etf and then i looked into it and i'm like well that's that's like super illegal um so i didn't quite go that far um but before i got to that realization i uh was attracted to the master

coin project as a way of issuing it so i reached out to brock pierce on linkedin and i said hey could you intro me to them and he said yeah absolutely you know so brock pierce did me a solid he said willette right um his last name willette yeah who shot jr yeah yeah jr willett yeah yeah jr willett yeah that's what we call the uh the satoshi increment of a property in omni is a willett oh really yeah interesting yeah it's like you know he uh he wrote the second bitcoin white paper so that's what people don't understand yeah it's the second one so it's like a sequel so maybe the trade layer white paper is like the third bitcoin white paper oh yeah but not really it's like the 1200 and eight million i'm not gonna lie it's the first

white paper i've read in a while i was very white paper jaded there yes for many years well you know what i did is i took the bitcoin white paper and i as a template so i could like keep it nice and tidy and focused on like the technical stuff so so let's talk about trade layer yeah what problems is it solving what uh how does it benefit bitcoin and what stage is it currently at right now okay so um well first off wouldn't it be nice if we could decentralize bitmax to some extent right so you wouldn't have to uh worry about what happens to arthur hayes when he flies around the world um you know you got the custodial risk and all that jazz um so that's interesting if you're a degenerate gambler, you can have sovereignty in your speculations.

But what about the other side of that, right? So my dream since like 2014 when I got involved with that project and I started poking around at how would we do leverage and had this realization, this was before you had like inverse contracts and the perpetual swap on BitMax about two years earlier, that if you did an even hedge, so you buy a Bitcoin, let's say a thousand bucks and you sell a thousand dollars worth the contracts um that you could create this dollar synthetic dollar right um and i was like holy shit i just invented like the new financial system like this is decentralized banking you know is what i was calling it so i don't call it that anymore because i don't want to get like

it's a kind of a lightning rod term especially after that uh texan guy remember that um yeah state i don't remember this is one you know it's one of these shitty fundraiser things and then And he was like, excuse me, but we're decentralized. And what your role is, you know, it's a different meaning. So the state of Texas, like, gave him a slap or something. Yeah. So, okay, so it's not banking, you know. It's just sort of getting at, like, what is banking, right?

You're issuing debts, right? So these are contracts. You've got the government, you know, and the sheriff will, like, show up with this gun and take your furniture or whatever if you default, right? You go through bankruptcy. You've got to liquidate some. I mean, they give you limits depending on the state. So you can keep your furniture.

but um you know it's ultimately backed by this uh social contract between you know capital and and violence right which is like that's what leftists like have kind of a point is that capitalism depends on this this handshake you know uh and where so i was like an anarcho-capitalist and then i got like a nice taste of that you know out there in anarcho-capital land um living under capital it was like sci-fi man i'd go i had a cash dealer i had like living in argentina i lived entirely in cash and really clean for about a year in 2014 and it's not it's like better to just get the ach deposit and have auto bill like take care of it it's a lot simpler yeah like i would spend like two days a month just running around town taking care of business like that you know what

so was that normal activity for like argentinians during that period as well or were you a lot of Well, no, because not a lot of people were like trading Bitcoin and shit coins for a living and earning consulting income in Bitcoin from an ICO foundation. You know, I'm kind of a weird guy. I've always been a little bit on the edge there, you know. But, yeah, people would do shadow banking before Bitcoin in that environment. So you go to Guido and Guido's like, all right, wire the money to this accountant in China. So you wire him a couple grand. And then a few days later, this guy shows up to your house with like an ankle band and counts out the cash and you got your cash.

That's how I did it in early 2013. Right. So you're familiar with shadow banking. Like it's a big thing in China. Yeah. Right. So like what Bitcoin does. Well, and then the legitimate peeps in. In Argentina at the time, like Globon is a pretty big IT outsourcing company. They've made a few video games. They would do this thing called the dollar grease or the gray dollar, which is in between black and white. where they buy the Argentine bonds here in New York for dollars and sell them in the local market and get settled in pesos. And just starve that. Yeah, so I mean that, right.

But it would end up being somewhere in between what the street value was and what the fixed scam value was, right? And if you think that's bad, because it was like a 50% differential, the soy farmers had a 30% excise tax on their exports. So they would get... Good, they deserve it. soy yeah right exporting soy to the world i'm kidding yeah so so they get like six pesos and you'd get like 12 pesos on the street so that like that's that was the scam right um so so yeah

bitcoin is kind of like that bond you know it's something that you can trade and and you know make this transfer that effectively um so my vision was like we could have dollars on the blockchain that are decentralized and i was also considering having dollars that were like offshore bank account deposits that you just tokenize right is this after seeing tether what they've done yeah so i was talking to craig sellers about it and and he and i said yeah you could have these two species and like the the contract-based one's probably going to pay and the other one probably won't but they kind of have a utility because the other one's redeemable and he's like oh you know it's interesting you mentioned that i've been working on on this thing called tether so i'm

like oh yeah okay so keep it so i actually used tether in early in january 2015 uh with my my guy dante who's the cash dealer um to save you know 20 bucks from bitfinex from having to buy it and and sell it right um so that was like a use case for tether that actually saved me money when i was like pretty broke last crypto winter um but yeah obviously there have been some problems with tether and what happened with omni was it had sort of a regulatory capture if you are not a regulatory capture yeah that's my notification of this very it's very recording um um what am i trying to say uh yeah so basically like what if everybody could just have like the denomination they wanted dollars whatever and not have to worry about the

banking system not have to worry about getting their money frozen right that's what so bitcoin's all about right so wouldn't it be nice if you didn't have to take the price risk to have that optionality of sovereignty um so i was calling it decentralized banking now called decentralized currency i think um you know it's interesting from the point of view of like a wealthy baby boomer investor to be able to get yield in dollars um so i ran a fund to that effect for a little while um but it's very complicated and like tax accounting is hell I'm having a meet tomorrow about helping this uh tax software get get this this hedging use case accounted for uh because I need to do it so you know so it's not it's not for like the everyday person right so what I want

to have is just a dollar unit that people manufacture kind of like how maker dao manufactures it right but maker dao uses this lending model and it's rather capital inefficient and there's somewhat centralized board of governance from the maker token holders and they have this negative rate the stability fee to try and hold it together i think that's the wrong approach yeah it seems pretty terrible it seems very arbitrary they're just throwing interest rates at the wall to see what will stick uh yeah we're in a very experimental time um but i think that's not the right direction yeah yeah so let's get this this this maker dow this these synthetic dollars are very taboo in the bitcoin world why do we need synthetic dollars uh via bitcoin and

a blockchain ecosystem or decentralized exchange uh how long will this be needed if we ever trans like say we transition to like a bitcoin eyes world where maybe bitcoin takes over as the reserve currency uh is this sort of just like a bridge uh time period between the traditional fiat world and a bitcoinized world and you've read hayek right the pyramid you got the power money and then you get the subsequent things that are a little well let's walk through it for the freaks all right so like his vision back then was like gold right so you start with gold at the base of the pyramid then you get uh government currency and and there was a time where they had breton woods and monetary policy was somewhat tied to gold um first there was a hard gold standard

then Bretton Woods was like a soft gold standard and now we've had the petrodollar standard right so it's basically if this if you can get the vision fund to buy out your startup kind of a deal um so then you go up the chain a little more you know from the government notes you get the like corporate notes and the stocks and then you go out further and you get like all the interest rate swaps and all that stuff which becomes like a quadrillion dollars in open interest from you know total gold value is five trillion dollars to the extent that gold is serving as a check on all which probably isn't anymore yeah they did a pretty good job of uh bastardizing it with the uh the market infrastructure although china's been doing a pretty good job of taking

that over right so they bought out the uh the london uh metals exchange they're trying to make shanghai well this is what i wrote about yesterday in the bent is over the last two decades china's four and a half x their gold holdings and denominated in tons and then russia's 5x their holdings in the last 10 years so it seems like well and those numbers are at the uh central bank level but what china's done a really good job of is uh culturally encourage people privately like india similar similar to india like like india has a gold culture well that's a little deeper because you got diwali and it's it's a custom that goes back a long time and you've got the wedding aspect where you've got to have gold at the wedding so that's always so indian wedding

season's always been a part of the seasonality and the gold i used to be a gold bug and i traded it on alanda and stuff when i was starting out so yeah and i got into read a lot of zero hedge you know so yeah right and then what happened right we all were like yeah yeah all right we're gonna we're gonna be the bond the bond vigilantes against ben bernanke and then we had 2011 and everything topped out and uh they actually succeeded at engineering this uh goldilocks situation for the better part of the decade uh which was cool for me because i worked for like vc funded companies and that's all just this low time preference uh shuffling that you know worked for me so you know i can't complain too much uh it's better than like the economy crashed

in 2008 and we all came of age to a mad max uh desert environment right um but yeah i mean are they going to be able to do it forever i don't think so yeah that's the question is how long can they do it yeah and so the one scenario is they um create they succeed at creating inflation but then it's like it's more than they imagined well i would argue it already is more than they imagine this is another thing we've been talking about like the shadow stats inflation versus the official cpi well that's true and even the official one ticked 2.8 last year yeah which is uh maybe a head fake of trumponomics so we'll see it's 50 above their almost 50 above their target of two so that's uh right yeah well and what's really important are our real interest rates so they

fixed the uh the fed funds rate at like two percent 2.5 right so it's like you got this little bit of a real yield there and uh you got negative nominal rates in europe and japan and their inflation is quite low but it's a lot it's more of a negative real yield uh whereas america you can get a slightly positive one so that you know everybody comes to america buy the American stocks right so it's kind of worked out and yeah the other scenario is if the inflation doesn't show up and then we see the IMF is really kicking this around lately but they've been kicking it around for years you know just keep beating the drum about going to nominal negative rates

and then I'm pretty sure you're gonna get see negative real yields that way too right so it's kind of like you know New York right now is very lovely lovely springtime it's a great place it almost feels like vibes are high yeah it's like a mediterranean climate but not really but it feels like it um so that's the goldilocks economy since the 90s and then uh new york in the winter kind of sucks and new york in the summer kind of sucks right so uh that's that's kind of the state of the global economy it's like they're short a straddle and they don't want the thing to go up or down too much they've got to thread the needle in this narrow band and then if you know the inflation runs away or they go too negative it's gonna be

it's gonna get pretty pretty weird right it i feel like it already i mean 2008 was definitely weird but yeah it was weird they've set themselves up for a weirder weirder situation going forward and uh one thing a podcast i listened to last week with this dude jeff snyder talking about like the euro dollar like shadow banking system man it's so great that you brought up jeff snyder that guy like he's one of the best analysts in the world well let's talk about what he's talking about the euro dollar situation he puts the dollar in parentheses a lot yeah to highlight its sort of post-modern nature right the dollar is largely an accounting entity right so if um i have a dollar account in chile or wherever and you know they've got n million dollars in their

branches and cash because and that's the great thing that the dollar's got going for it the physical the m0 physically is like being hodled by a lot of peeps right like in argentina they've got about 200 billion dollars in cash literally under the mattress or maybe it's in the walls whatever i don't know the details of those particular apartments this is usd yeah and just to add i don't want to interrupt but to add to the fact that uh there's more hundred dollar u.s dollar bills in existence than one dollar u.s dollar bills in existence right now well it's that store of value in this case right so i think it's exactly what you're talking about yeah well or if you go out to like a border village between cambodia and vietnam um they're mostly trading

dollars they're not trading even though euros theoretically are liquid you know this is like the maximalist argument that like there will be only one uh like highlander um it's not literally true but when it comes down to to the edge then yeah you you do pick one thing usually right and like with finance the collateral of choice the bitcoin of the 80s was the u.s treasury bond so like solomon brothers were flipping the bonds and you had like the uh savings and loan crisis You had Michael Milken milking them with the junk bonds. And you had Louis Raniere come in and collateralize all that stuff. Right.

And that was really innovative back then. And in a way, it was almost a good thing because now you're getting a lot more capitalization out. And the 80s were a really weird time. I showed a bunch of bankers in 2015 at a conference in Miami this chart of M2 climbing and climbing through the 80s and the inflation just trailing along. and they all lived through that if those who lived through that i mean these are somewhat older people so i imagine a lot of them lived through that decade um you know all the latin american countries that were doing the same thing but their inflation was through the roof right it was it was a mess so um so like solomon brothers figured out oh you can use treasury bonds as

collateral and um you know treasury bond represents in a way the spine of this whole kissinger petro dollar engineering that was was working so well and um you start trading uh interest rate swaps with that right so now they're making money off of money in in this fashion and um so the interest rate swaps are nice because people can be in debt and it's like uh margaret thatcher said the problem with socialism is you run out of other people's money well not true because you can go to wall street and they will help you they'll help you create money out of thin air yeah you You just have to hedge your interest rates. But then the joke's on you because they have this trend downward in yields.

So ultimately, a dollar became this fuzzy unit of account. And if you have a debt in some currency and you're trying to do international transfers, shuffling it around through the correspondence system, and you go trade an FX swap with Citi, you can turn what is a foreign asset into this synthetic dollar denomination. So my dollar bank account with, with BSA back when I was, was doing that, you know, I saw they had dollars in the branch, you know, I was able to take some out, but, um, they surely have more digital representations than they have the actual cash. Right. And, uh, they use these FX swaps in the way that you would buy a Bitcoin and hedge it

into synthetic dollars. They do that with, with their foreign current, what, you know, they have the power to print money in those currencies, not in dollars. They don't have the FDIC. They don't have the Fed bailing them out, but don't worry about it. It's a pretty liquid global market, and that's like the wholesale finance system. So Jeff Schneider is a big, he digs into that, and he's smarter than me. He gets all the numbers and slices and dices them.

Well, that's like what I was particularly interested in, his analysis. This is the Macro Voices podcast episode from last week. I'll link to it, or two weeks ago when this was posted. i'll link to it in the show notes but uh i don't know if it's proper to link to other podcasts in your podcast but whatever uh describe like basically describing that there was a liquidity crunch in the euro dollar system market and that's probably what was the major cause behind uh 08 07 08 instead of mortgage-backed securities yes the mbss and cds's were were very important in pushing things like over the edge but he he would argue that like a liquidity crunch in the euro

dollar market is is really what caused well i think one begat the other right so the the stuff at the risky end uh started a contagion and then it's like you know what happens if deutsch bank goes bankrupt like we did these wire transfers we're not too far from that are we well i don't know i'm not gonna how much derivative exposure do they have 242 million trillion dollars trillion of notional derivatives or something like that? Yeah, but it's more complex than that because a lot of that might be netted out. And now with Dodd-Frank...

How do you unwind that, though? How do you unwind a $242 trillion notional book? Well, you get the most capitalized banks to acquire the less capitalized banks, which is what happened, right? And we've had this, this is something that Schneider talks about a lot, we've had this nice little downtrend

that's been kind of slow and steady in the overall open interest in those markets. And then Dodd-Frank has forced people to actually have tighter margining requirements. So it's not just like, yeah, I'll write you a swap, I'll write you a swap. I mean, the Salomon brothers had that. They'd get credit lines back, those were in the 80s,

they'd get credit lines and they'd be trading Forex with, there was no notion of how much leverage you're using. It's just like, we don't have any equity capital for this, we're just trying not to lose the money on the trade. So it was like that in 2008, and in a way, things like CDOs were a way of getting around the capital requirements because it's like, oh no, it's off balance sheet, right?

so they're kind of taking advantage of the bilateral exemption and the commodities exchange act because when they made that they didn't want to be hassling you know some farmer doing a contract with archer daniels midland or whatever right that's beyond their scope of regulation uh so the investment banks or like there was a famous example i read this book when i was in my formative years uh called traders guns and money by uh sajid das it's quite good and he tells a story of a japanese trader who lost like 400 million dollars and then he used a derivative to make it go off the books and he was able to maintain face for several years before you know the chickens came home to roost um so dodd frank is like okay forget about it like you gotta you

gotta bring this in um they do have an eight billion dollar a year turnover de minimis before you're a regulated swap dealer and you gotta be in the nfa and you gotta be on a sef right so you can do um so like medium-scale capital for instance with trade layer could do and million dollars a day in turnover and and be shot well shy of that that threshold so it's you know there's some i've been doing a lot of work on dot frank trying to figure out how to make that that play right and and there's some room and they're also pretty progressive at the cfdc so they're it's an evolving situation so

this is one thing I've studied the history of the 07-08 crisis pretty intently because I was a senior in high school when it started and was in college while it was going on and studying economics and I'm interested to hear your thoughts on this like so a lot of people would

blame Graham Leach Bliley Act the act signed in 2001 here in the states that basically made the Glass-Steagall Act obviously in the glass deagle act put barriers between uh commercial banks retail banks and insurance companies and a lot of people would say this sort of breaking down of those barriers led to 0809 and the contagion risk that well there's only a 10-year window then you got the volcker rule right yeah and they put a stop to that uh yeah i'd say that there's something to that right

and it's uh yeah you could you could lay it on the clintons a little bit that they they did some of that deregulation in the 90s that led to like Enron and such but you know I think I think derivatives got a bad rap though you know I think derivatives are actually very useful tools and they don't just have to be tools for wholesale international banker finance to create what Jeff Snyder called quote-unquote dollars right anybody you know a mom in Botswana can create dollars in this fashion and it's incredibly useful it's incredibly liberating especially if the the saving rate is pretty good i'm not making your representations that might be anything at all depends entirely on where the market's floating um i've been working on uh interest

rate floors we could talk about that in a minute so that people can kind of set it and forget it and then you're gonna get a lower blended rate than you would on like bitmax with that because obviously with bitmax uh you can do this synthetic dollar position and if the market's down and there are negative rates you come back a month later and you're down 15 percent on you know it's What the hell is going on? Well, all right, before we jump into this, again, let's quell the – I can feel some people – I can feel the heat from some hardcore Bitcoiners saying derivatives markets, derivatives on top of Bitcoin. What are we thinking? Aren't we trying to get away from this?

Are we repeating the mistakes of the past? We're trying to get to a sound money. Is this type of financialization worthwhile? Is it advantageous for us? Are we trying to get away from this, or do you think there's an argument to be made that we can build an even better derivatives market with Bitcoin? The driving fact of that thesis being that there's no backup. Like, if you fuck up with Bitcoin as the end-all, be-all collateral at the end of the contract, like, you fuck up, and the market just washes over you. Sure, right?

Yeah. Yeah, I mean, so there's systemic risk, right? Yes. So the thing about Bitcoin is everything's out in the open. So you can quantify systemic risk better. And then people can make better decisions, right? Whereas, you know, your average American, they got to balance with Bank of America. They don't know what Bank of America's balance sheet is like, right?

So I think this transparency aspect right away is an important thing. Two, Bitcoin needs a business model. What do you mean by that? when the block reward gets thin in about five years, we're going to need the fee revenue to be significant. And so a lot of the transactions have been batched exchange withdrawals where people are zipping money in between to do arbitrage or to go speculate on shit coins. And we saw when they started using Segwit that that cleared up a lot of congestion. And also the amount of tx's was very correlated to the price so it's like the

speculations this is what no coiners always say oh you guys are just a bunch of uh you know speculators and a bunch of gamblers drug using gamblers there yeah yeah you're just you're going in a circle uh you know jerking around like that right but no there's a real financial system that we can make and having things settled in cryptocurrency does create a parallelism where you get independence there while being able to maintain dollar denomination or yen or euro denomination or whatever you want really and it depends on ultimately the liquidity in those contracts so yeah if we got a lot of settlements so we cannibalize this very high margin

not totally kind of sketchy you know not totally above board centralized exchange business and we factor it out into decentralized exchange so we can get into side chains in a minute that's how it becomes modular and you're not going like no systemic risk yeah we're not gonna well there's systemic risk but it's all visible it's modular to the the side chain if the side chain is gonna offer 100x they got to deal with their own clearing um we're gonna set a 10x limit for the on-chain stuff uh by default if there was a spill you know there'd be like a socialization to keep the thing even and then uh we're gonna design the cash flows so that it's like the taker fees are lower than anything else half of them a prox is a rebate but if it was all rebate it would be

wash trade city right and that wouldn't be any good for the value of the data um i used to trade on okay coin back before the the party got stopped by the pbse right you ever get uh ever get thrown into the wood chipper um no i manage this pretty well i mean look yeah i've been liquidated a few times and i got liquidated on bitmax a few times in early early 17 but i learned my lesson um and back when I was starting out and I had like 500 bucks in an OANDA account. Like, yeah, I got margin calls like left and right. You know, you got to take your licks

to have your brain like soak the lesson up, right? So let's reorient. Can you reorient me a second? I just kind of lost my mind. No, yeah, let's reorient. Oh, yeah. I remember seeing like prints on OKCoinCN back in 16 where like 634 bitcoins would hit the tape

and I didn't see it hit the book, right? It just, like, that's watch trading, right? So then OKCoin's volume looks fabulous. Yeah, if you go, look, if we pull up Bitcoin it, we'll pull it up right now. If you pull up Bitcoin, Bitcoin is, I think, one of the few resources that still has, like, this information.

Like, look at the volume back in 2016. OKCoin's leading it. OKCoin had 70.7 million Bitcoin contracts traded, apparently, in February 29th of 2016. but what what's not that china's yeah it was pretty much china well and also like um there was a the china premium so i was working with brave new coin on a bitcoin index i was trying to figure out some math to discount that what what's the like real value of that so i was chopping it down by about 10 or 20 x and and weighing that in with like okay coin i mean i'm

sorry like coinbase or something like that where you're paying enough of a fee that you better know what the heck you're doing because you're paying like 25 basis points for it um and yeah market structures evolved since then right so then for a little while it was like bit flyer that was leading the market and they had zero fees but they're like more regulated um and then at this point when i look at different trading pairs and i'm trying to like kind of watch what's moving so i can click the other thing you know over on derivate or something real quick and take a trade on it um i look at a binance uh tether that seems to be where the heat map is right now and maybe bit max to some extent is like the tail that wags the dog but it's liquidity right well and that's

that's the advantage of derivatives right is that you you get the leverage and then people who know what they're doing can can quote pretty deep and so you get more liquidity in the derivative than you do spot right all right wait so to recalibrate here i feel like we've been talking like two traders who know what they're talking about i feel like we may need to dumb it down a bit for the freaks out there um so yeah let's explain it like i'm five so i want to offload my risk and you want to take your 0.1 btc and what is your risk my risk is that uh the price of bitcoin might go down okay holding bitcoin and i don't want to sell it to the bank you know i don't want to get into the banking system for whatever reason uh maybe a perfectly legitimate one which

is i want to be in control of my money right which is that's not legitimate you can't do that you need the nanny state to do that for you yeah right well i think it's a fundamental human right and that's that's why i'm well we're gonna get enough of a bitcoin maximalist to be working on bitcoin enough of we're gonna get to uh no i few toros in liberty oh yeah eventually i'll very like that quote yeah i can go all over yeah the the dystopian dynamics here yeah we'll get but before we get into the dystopian dynamics explain it like i'm five you're trying to offload risk okay So I've got a Bitcoin and I sell and bitcoins trading at fifty four hundred bucks So I sell fifty four hundred contracts and my counterparty some guy who might have

One Bitcoin and he wants to double it up right or you might have a point one BTC, right? So because it's inverse quoted Like normally when you short a stock and your collateral is dollars if the stock doubles You're out right you get margin called you beat. So shorting is kind of a blood sport for that reason But if your margin is Bitcoin, then this is where the magic happens. So if the price doubles, I don't get margin called. I just have half of Bitcoin, which is worth the same amount of dollars, right? Plus whatever interest I swap yield.

It was interest is for that, right? This is a little different. So whatever swap yield I've received, I'm going to have the 5,400 I had originally plus some of that yield, right? and then you my long speculator friend are going to be up uh 0.5 btc on that double off of your you know 0.1 0.2 btc that you put up originally right so and then you're in dollars you're you're really happy right so you know the flip side you know to to be exposed to that possibility uh you have to take the risk that you're going to lose that that 0.1 btc right um and then in theory if i'm hedging like this and bitcoin goes down to 2600 it gets cut in half

now i have two btc still worth 5400 um with bitmax you'd probably have some negative funding right so i'd be off a little bit on that so let's talk about the two traders in this trade ones they have different units of counts that are trying to earn value incorrect one is worried about the usd univ account the others worried about their bitcoin yeah one is one is trying to make sure that they can uh feed their kids or whatever and they're not so uh antsy they're not so gainsy and the other one is uh stacking sets trying to stat well they're risking stats to stack stats yes yeah um and and it's a beautiful uh a beautiful call to adventure in a way it's kind of addictive um so i used to do that when i was younger and then i got into my 30s i like more

the the hedge part of it right but before we go are you a trader or an engineer or both um yeah mostly trader uh i did study computer science a little bit when i was at virginia tech uh but then i hopped over to do creative writing so what is your life you're you're an american living in in chile yeah you've lived in argentina i've worked as a game designer i wrote a novel when i was 17 i started writing sci-fi stories again recently so i'm like kind of a creative guy I understand technology. I do JavaScript, so I can lift some things. I'm not the best coder.

The guys I hired code in C++, and I'm like, I wish I coded in C++, and I could get a lot more work done. Yeah, so I'm kind of a generalist in some levels. Yeah. Writer, trader, designer. Into Bitcoin. It's fascinating. Again, like I said, I've only been exposed to your tweeting for about six months,

and just even on Twitter, you're fascinating. Meeting you in person, it's even more fascinating. So how did you... Thanks, man. Before we get into more Bitcoin stuff, how did you get enamored with Latin America? Well, I like the ladies, for one thing. So yeah, my wife's here.

She's Chilean. I think she's a cutie. And I was interested in the possibility of, in the Southern Cone in particular, it's like oh hey it's just like north america climate wise or western europe and it was cheap and i wanted to make video games with like eight thousand i wanted to make a video game with eight thousand dollars you know so what am i gonna do i ended up working with some argentines and for three grand i got a whole game worth of art which is a pretty good deal so then i was hooked right

so i went down there i spoke at their video game conference in 2007 went around to some different uh, companies in Buenos Aires, picked one, worked for them. Uh, then I worked for a company called Vostu, which was run by some Harvard business school guys. Um, and they were copying Zynga games, uh, to Brazil. And the CEO once told me, uh, that he wanted a zero innovation. And I said, well, how about basis points of innovation? And he's like, no, let's just, let's just play it safe and stick with zero. Cause I'm like, I'm trying to, you know, I'm doing the numbers and I'm like, well, this would be better. This, you know, no, He's like, this already works.

Yeah, they wanted the carbon copy. So they ended up getting sued by Zynga. And I think they settled for like five mil for copyright infringement. So that strategy kind of backfired. But that company was briefly valued by Tiger, I think it was, at about half a bill, half a yard, as the traders like to say. Half a yard. Yeah, because then it's like not a big deal. You're talking about, no, it's a yard.

It's just a unit of measurement, right? That's what the trader meant. Oh, no, it's a buck. It was a million dollars, right? Like, don't worry about it. But, yeah, so I got to see the boom and bust cycle in social games, you know, and it was kind of like ICO mania, the vibe of whole, you know, okay, like, these people are stupid, we're going to take their money, like, let's go get it, and, you know, I was like, what about the craft of game design, you know? So I teamed up with this guy, Nat Jacobson,

who left Facebook, and now he has a fund called Spark. And I was going to make some games with him. So I worked for King.com a little bit. I helped them make a game. I was producing with some Argentines. And then they canceled that. They later went on to make Candy Crush

and made billions of dollars. Guy worked with Avost, who, not the CEO, but the sort of the metrics, business numbers guy he started a company called oscar health with uh yeah they're here in new york right so uh he taught me a few a thing or two he was a pretty smart guy i actually applied to a lot of product manager jobs at oscar back in the day when i was still trying to break into that oh yeah that role yeah so i ended up veering into some some product management stuff when i was in

the social game industry um yeah it's cool you know you analyze the numbers you're gonna optimize things like it's you know but there's some aesthetic sensibility about it so yeah i like product management and you've landed on bitcoin yeah man i think bitcoin you know like the the passion that the bitcoiners have like i definitely have i'm loyal to bitcoin do you believe uh do you believe in its endeavors to become the uh the world reserve currency of the world yeah i think it has a good chance of being a five trillion dollar asset like gold for one thing um and then it could sure have a higher uh real yield associated with being in that ecosystem than being in the sdr ecosystem that they're going to be pushing you know where the baskets yeah but

everything in the basket's got a reference rate that's under zero like that's what we're looking at i think uh so i think i think we'll be able to compete you know but we need some features man we need people to have some optionality some flexibility they need to be able to have a portfolio where they could actually base a lot of their money i'm not going to say everybody like go into decentralized dollars and be in i mean i know i know a lot of y'all are just straight up long bitcoin and cold storage and you chip off a little bit or use a bitcoin credit card and or a normal credit card and you pay it off periodically and you try to live frugally for the hodl for the long long-term time preference and i think that's great um but

not a lot of people in the world can afford to do that you know so if your cost basis is two hundred dollars or twenty dollars and you're like rich on paper but you're sticking to your principles and your lifestyle you know that's great for you i respect that i in my own entrepreneurship have run a very scrappy uh you know sort of budget myself you know i live in south america my rent's 600 bucks a month so i'm all about that but um people who have little money can't afford to be all in bitcoin you know uh so if they could be in a blended portfolio and they could be like you know maybe i'll get some interest and that would be nice that helps me with passive income and then you know people might might you know so i think if we onboard peeps in a safe way you know what

they perceive to be psychologically safe which is going for the yield but then they got their foot in the system and then uh all of that so what happens is people buy spot and then they sell the drip right wait so how does it's for the freaks out there what do you mean by buy spot sell derivative so what is what is what is the little man doing i got cash money in the banking system i go to gemini and i trade it off to somebody that spot is when you're using cash yeah there's no leverage so now i have a physical bitcoin uh in the i suppose in the sense that the private key configurations of all the bitcoin addresses is a physical electrical configuration that gets replicated and all you have a call you have a call and some utx's right yeah there you

go yes yeah through your private key right so you physically you heart you own the underlying bitcoin spot and then you hedge it so you have this dollar position right um so once so in the process that that creates this little you know uptrend maybe right um soaks up the float there's less bitcoin available to buy because people are trying to to peg it at different dollar levels right so of course they're losing bitcoin as it goes up but they're earning dollars so they're kind of happy with that and then as we fill in that cup and handle and then we pop that top right we get over whatever resistance we pop 10k or something then people go oh maybe i should go 50 50 or something like that right so then you get it starts to then the premiums go up in the

process right and and everything starts to get zany again so you should be fun so you're trying to create a product to make this easy so people can have sort of digital synthetic us dollars that they can use whenever and then if they need to quickly switch over to bitcoin it's made easy via trade layer yeah so we have a dex um that's an improvement on the original omni dex where you could trade master coin for trade layer and it was like kind of one way and that was used for for pepe cash too correct or no pepe cash but that was on counterparty yes yeah but yeah counterparty had something similar yeah but it was a bit a bit clunky yeah so we've uh we've tuned that up so that's a bit smoother and you can actually post a bid and then you can

trade spot on the DAX Bitcoin to token so I want to be totally upfront with everyone about the trade-offs unlike a lot of people who hit people up so the we're creating a meta coin on litecoin and a meta coin on Bitcoin it's a ll on like when it's total on Bitcoin so it's kind of like omni but instead of being an ICO, here's a tranche of coins. Good luck, everyone. It has its own economy, right? So there's a liquidity reward. People earn some posting orders and getting those filled. And to get the ball rolling, because we're starting from zero, there's a node reward. So I came up with a mechanism where you can signal that you're running a node and get

paid for it in this coin, right? So the tradeoff is, of course, you're not using raw BTC for these trades um so like blockstream recently just did a contract with their friends in japan at crypto garage where you put bitcoin in a multi-sig there's a snore sig off chain and the secret reveal is called the discrete log contract it's it's discrete in the sense of discretion not in the sense of discrete math um so the benefit there is you're using bitcoin directly um the trade-off there is that a clearing it is really hard so you know how do you how are you going to flow that across a whole chain so maybe we can get into lightning network derivatives right so this is what's going to grow beyond trade layer as i set this precedent uh you know trying to be like

magnanimous and move the science forward i see lightning network achieving something possibly implementing a version of our peer-to-peer graph based clearing algo in the lightning network so That path is actually how the checks flow as you settle in the, you know, you could swap Bitcoin in the Lightning Network and then you're dollarized with Lightning, right? So I think that'll happen. I think MAST is going to make that possible. So I see the future. I'm not like, oh, yeah, buy my shit coin. It's going to be the next big thing.

Bid it up to 20 BTC. It's going to be fine. No, you know, don't bid it up to 20. don't bid it up higher than the value of Bitcoin because then that creates weird distortions, so don't do that. I see the value post-masked as being, well, A, people who aren't like Bitcoin maximalists

might prefer just having a dollar unit in cold storage, and B, it creates this endogenous price reference, right? So if you get enough volume going on and there's enough orders placed so that the cost of manipulation is quite high, you can infer the price of Bitcoin triangularly from its on-chain trades against this orbital money supply.

All right. I'm still trying to grasp this concept. So it's run with side chains, correct? So by default, you can just do stuff on-chain, but there are problems with that, right? Yeah. There's adverse selection, costs, and miners could fuck with you, right?

Yeah, I think where I get caught up mostly with this so let's bring tether and back in again so like tether like with their u.s dollar collateral on the other end like they've had to prove that they have the dollars in the bank account so with trade layer how like so you're creating synthetic u.s dollars that are similar to like die or something like that and how does that become connected back to meat space or actually connected back to the u.s dollar system so people are paying a certain amount of dollars for bitcoin they're going to people can trade for the native coin and then you get some some data so that the native like say AOL LTC contract can settle in a fairly

reliable way you get the supply of synthetic litecoin so then it's a bit cleaner you trade synthetic litecoin for litecoin right and then you get the supply of DUSDs and then you could just be using that as a way of paying for things right so it can tie in physically a bit you know my dream is to have like a money changer on every corner you know people are running kiosks and they're selling cigarettes and they reload your card like an azteca what's up like an azteca like vision i'm not familiar with azteca that's what beauty on's working on it's uh oh you can go it's like similar to by being able to load up your burner phone with minutes at a bodega or something like that being able to go buy 30

dollars worth of bitcoin right yeah yeah yeah so i i want to percolate that out and then people are of course going to be able to to choose and um i see uh bitcoin ultimately being the dominant money and with mass you're going to be able to try and replicate this auto magical clearing process with with a little bit more fine-tuning you got this tree of signatures that handle different scenarios to pay it out so let's talk about mass uh merkle eyes abstract syntax trees yep correct or signature signature trees um and this will be enabled via snore signatures and the way i understand it is that you're basically able to just dumb it down for like able to store a lot of data in one little merkle root yeah well the the idea is you're staying in the utxo environment

but you add some programmability to it, right? And then the other thing is, like, Lightning Network has this issue with watchtowers, right? So to make Lightning Network secure, you need a watchtower to provide the service, and then you're trusting the watchtower, right? And if you have Lightning derivatives, you still have the Oracle problem.

You need to rely on an exogenous data feed in order to settle those, right? Unless you have on-chain data, and it becomes endogenous, right? so um all right so let's get into side chains for a second so um big problem with bitcoin is that and you know i'm not like oh this is we're solving all the problems with bitcoin and with our old coin now like the problem with bitcoin is uh pseudofinality and you can have reorg attacks right and this is why the side chains research of black stream where it was proof of work side chains didn't work because you get into this recursive nightmare you're just dependent on

the miners not stealing your bitcoin correct yeah well that's more like uh drive chains which is also a bit too much game theory the way I look at it in this space like when you're designing these systems an ounce of mechanism

is worth a pound of game theory you know so what we're trying to come up with is a mechanism where if so the kind of side chain

that I think really fits is something like Tendermint which is my former acquaintance Jay Kwan's innovation

and this is via off the Cosmos chain correct or no not necessarily so Cosmos was so Jay Kwan invents this algorithm that's pretty good

it's a what is Tendermint Yeah, so it's like a purification of some insights from the 1982 paper on Byzantine fault tolerance where they realized, you know, two-thirds is about the threshold where you're safe in whatever protocol. And they were trying to theorize about the space of algorithms in general that could do that. And then we got things like Paxos where you can coordinate, you know, without the Byzantine aspect so much. um so what jay did is he he kind of boiled it down to the minimum amounts of validation that you need to create this two-thirds you know assuming the two-thirds are legitimate you can have have them all going around signing blocks and of course jay's bias because he thinks the

proof of work is this environmental cancer jay jay it's an it's a it's a boom for environmental energy efficiency i well i think so yeah i'm more on on the uh you know team bitcoin with that right like uh i think nick carter's done some good analysis on on disproving that that claim um but likewise the blockstream guys were in their own ivory tower thinking it's got to be proof of work right so that's why that became a dead end so um the kind of one-winged angel form of bitcoin its final form i think and you can do this permissionlessly you don't have to do a soft work or hard work to accomplish this you can just have these channels uh people who are running the side chain with tendermint they're the validators htlc or no it doesn't have yeah htlc fits in uh

lightning but yeah we can get into that in a minute and the option value around it that's kind of interesting but um you just have these these multi-sigs where the private the pub keys are congruent to what was used to create the tendermint chain right so you got your validators representing down to Bitcoin that's the bridge and so let's say you go deposit Bitcoin to them and then it's like what if they they just ganked my Bitcoin right this is the the two-way peg problem so what I among other applications what what we're trying to do is have a proof mechanism where if there is a Byzantine failure on Tendermen there is a two-thirds

collusion and they go mint a block where they like rob all your your validator stake and it's way out of bounds of what is appropriate for slashing and there would be like a template encoded in in the trade layer logic and so you you have your state from that channel which is like just a signed transaction you don't have to spam the blockchain with these you're just kind of holding it as insurance so you throw that down on the table you cook up a Merkel proof to link that to the alleged bad block with the hash of that and you can stick you Contiguous data trade layer

We're not quite there yet in the protocol but when as we fill out the roadmap the logic of the protocol would parse that and it would say, you know, that's That's bad or that's okay, right? You have like an FDIC insured side channel. It's yeah almost like Like fast arbitration that happens on Bitcoin. Mm-hmm We're on litecoin this we're gonna launch on litecoin and then circle back to the Bitcoin is like when bitcoins test net Do you think what's that? Do you think like the coin is bitcoins test that? Well that and it's it's interesting because anybody who talks Talks turkey about the block size and when do we raise the block size and all that?

Well, you've got litecoin as a four mega effectively a four megabyte throughput chain So let's get the demand filled out like in 2017 on Bitcoin and then you could fill up litecoin And then you know, maybe we could have a conversation about this, right? But until then, it's there as the lightning rod, if you will, the grounding circuit of that extra demand. And I have speculated about how Lightning Network and cross-chain swaps might enable routing. So if we are in an environment where you've got to pay like $150 to get your Bitcoin confirmed in a block or a few blocks, that you could just cheaply paying the counterparty value adjustment to do the swap over, which we'll get into.

swap it over to Lightning, I mean, over to Litecoin and do the transaction there for last, right? And then maybe we'll be in an environment where everything's like crazy, you know, $100,000 Bitcoin and the backlogs are 100,000 transactions and Litecoin's filled up. And then, I don't know, maybe the Deccred guys are going to start looking credible at that point, right?

But they might be in the Lightning network too, right? Well, that's what I was about to get to. It seems like you're trying to create like a quasi-PoW-PoS combination. Yeah, yeah. So what Decred claims is that they have this 90% threshold because in addition to the 51% of the hash power, realistically it's more like 30% to do a selfish mining attack. You also need to have a lot of stake in Decred.

So therefore you have to like, you know, it's like very secure, right? So it's a nice claim. I think it's three times more secure than Bitcoin, according to some people. Well, there you go. That's just math, right? Yeah. Um, so, but, but there's something there, you know, because if you have pseudofinality on Bitcoin, but it's very like, like Mr. Dink and Doug would say very expensive to, uh, to break it. Right. Um, and then you've got the side chain with instant finality. You can cash your, your signed transactions on the side chain. And then if you have a good proof mechanism to hold them accountable in case they break, um, you kind of get the best of both worlds. and you can reward people for cashing that on the side chain cash as in c-a-c-h-e c-a-c-h-e yes

and it works for lightning now it could be like a third layer would be analogous analogous to staking no staking would be what you're you're trying to do as a validator um but if you're a user and you just sign like a zero comp payment over or you're depositing your bitcoin and you want to have some insurance well that's that's a little different but or you're doing a trade and you want to have instant fast confirmation, if you're able to hold those guys accountable and they have like a one-second block time for a globally distributed tendermint chain

or a regionally distributed one might have like a 100-millisecond block time for the latency, theoretically, or maybe a little bit tighter than that, then you have a pretty, you have a decent assurance, right? And of course, you need to be like three or four blocks deep in confirmations

to have that same level of assurance just in in naked proof of work right yeah so i believe this will uh really allow bitcoin to spread its wings because now you can do things on chain you can do them off chain to some extent right uh to where the extent that is economical right so you could also like uh pledge your money uh to the side chain trade your heart out maybe they have a good clearing engine to manage their risk and they let you have 100x leverage and their fees are super low and you get the fast comp on all those

trades. So you trade for a month and then you order a settlement out of there and then they don't settle you. So then you throw down the doom. You throw down your proof of Byzantine failure and you get settled that way. So the issue is, before we have MAST,

let's say I'm putting Bitcoin on a multi-sig so I can go trade on sidechain mechs. It's like the more decentralized bitmex right and uh and then they gank my coin they just the transaction goes out all these bitcoins just moved out of the multi-sig because there was this collusion right so if i can prove that and they've staked a bunch of synthetic bitcoins that are hedged with an on-chain contract then and and with you know some threshold of over collateralization maybe 50 maybe 20 depends right so there's side chains can be competitive and broadcasting you know what's

their quote depth. So they're going to be staking to be held accountable for that on a block by block basis. And in these parameters, like if it's a Bitcoin custodial side chain, how much extra synthetic Bitcoin do you want, right? So then if the trade layer contract is in deep backwardation, like 30%, which is probably not, it probably wouldn't get that bad. And it's a 50% overcollat then you know okay it could be messy in the unwind right right but people could come out of that hole and then in the future i think mask might be able to affect the same kind of guarantees yeah so maybe in the future this kind of proof could plug in to as uh as like the the you know break this in the event of an emergency push the red button part of the uh the mass tree

and trigger trigger payout that way yeah this is gonna take a few more years though no this is i mean this is the first time i've had a conversation with a bitcoiner where like a lot's going over my head i'm like happy i'm happy about it i am i swear to god i am well thank you patrick we need to distill this for the freaks out there okay distill let's like we're drinking the frag which is pretty we're drinking the frag it's very distilled so we might as well do the same justice to everyone else cheers again um so are you creating an altcoin i guess that's what what the freaks want to know well you know an altcoin is like forget about bitcoin here's here's our blockchain yes and then you've got the whole issue of uh well this altcoin better support a mining

environment where this is a secure blockchain and it's like oh don't worry about it we're doing very innovative things in proof of stake right so like jay's thought was how do i monetize this awesome that i've invented that's moved computer science forward in an open source way you know create an altcoin right so they created cosmos right and cosmos is um a base layer built on on tenderman so i don't think tenderman is great for being a base layer i think it's great for being a side chain layer and proof of work is good for being a base layer uh i would agree so so no it's not an altcoin uh it's it's a meta coin and uh udie uh werthenheimer would would make fun of me and say that i'm uh you know i'm just bullshitting but um uddy yeah uddy's a funny guy i like uddy

yeah well i figure if i can pass muster with uddy then i'm i'm not doing too bad but uh if i can't you know it's it's not the end of the world um had the pleasure of meeting him in riga last year in rio riga oh riga latvia oh right for the the baltic far far uh far stones throw from from rio sure uh probably the much weather uh much more would have been in rio rather have been in rio for the weather but i was in rio for la bitcom 14 i got robbed on the beach how many times you've been robbed in your life three yeah no it's always been instructive i guess well the the instruction there was that rio is not like miami you can't just go for a moonlit walk on the beach I hear you got to go to – where's the southern coastal town in Brazil?

Or it's not a coastal town. Oh, yeah, like Florianopolis. Florianopolis. Yeah, that's like a little bubble. Yeah. Yeah, she was trying to sell me on going over there. And Florianopolis. I don't really take vacations.

I only take business trips. Well, I'm very flattered that you decided to stop here on your business trip. Absolutely, yeah. Let's get back to Udi's objection and what he said to you. So like, you know, he would just say that like a meta coin is just some kind of bullshit thing that the ICO purveyors of the original ICO master coin would say to dress it up. But no, there's a taxonomical distinction that's very meaningful. So it's native. Well, you know, he put native in quotes.

That was the thing. so i mean it is native in the sense that it's born and and dies if if the blockchain were to fizzle to a halt like a white dwarf in the future or a black dwarf eventually right um you know it lives and dies by the blockchain that that it's born on um so omni hasn't really done i mean it did go benoodles during alt-cism in in 2017 and now it's back at like one two mil but you know they didn't really do much with that they didn't they never acted i i came up with this idea that there would be a fee distribution, right? They never activated that.

Maybe they were afraid of the SEC because it was, I mean, technically, with the ICO, you know, it's kind of a security ready, right? So, yeah, so the thing about a Metacoin is because it's native, it has the same kind of contiguity in history as the UXTO set.

So we're going to have this monetary policy and the thing that is with ALL in total where, you know, it's a little more inflationary than Bitcoin. I'm not like, it's not so inflationary like Grin because like i think that was like way too deferential and grins inflation every minute or something like that yeah right so the first block well say the first block you get the first the second block it's a 100 inflation rate the next block it's a 50 inflation rate and so on

right so it takes years for the annualized and then the annualized inflation rate in 2019 is very very high for grin and whenever you're creating something that has that that relative commodity relatively decent commodity like decentralized monetary policy where you just put it out and there's nobody like pulling the the levers behind the curtain uh you know wizard of oz style or vitalik style um etc uh you know that is you know this it's in the public it's in the public domain you know so and then the other thing is that bitcoin uh got all this value by having some seniorage in excess where the value increased from that incentive was in excess of the inflation right uh so i believe in that i think that that has potential so that's why we've got

like the liquidity rebate and um the thing is all of these trades right to the extent that people are willing to pay for them right or they could batch them onto side chains and have these these settlements more periodically if the fees go up they add data to bitcoin right so there's this This was back in 2014. It was Luke Dasher saying, you know, any operaturn code is spam. That was like the hardline position. So I met Luke for the first time at the last LibetConf, and I was forced to confront his humanity,

and I just had a lot of empathy for him. And so I just said, hey, you know, how's it going? I hope your business picks up over free or anything. I'm fine, you know. So I get Luke, you know. I mean, he's like an uber conservative Catholic. Like my interpretation of Catholicism is different. My interpretation of Bitcoin is different, right?

I think our interpretation of Catholicism is probably in line with each other. Luke's a hardcore, hardcore guy. I went to a Jesuit high school. Luke would call me a heretic. Oh, the Jesuits. Yeah. Well, I was trolling them a little bit on Twitter. I said, like, why is Luke having trouble making money?

It's because of the Jesuits. They're just stonewalling him. But no, I stopped trolling him. I stopped trolling people in general. We got Catholic married. don't ever stop trolling no well you got to be like a force for for love and for positivity i think is is a better use of your time i agree yeah but a little a little light trolling that is a sort of socratic dialogue yeah tough love that's respectful i think this world needs some

tough love but then but but that's but like some guys have gone way over that yeah some people yeah so i i was my twitter etiquette am i okay my no you're totally chill okay thank you no and i think it's yeah and even a little bit of hostility you can undo a lot of goodwill and like if i'm going to succeed in getting this thing off the ground it's going to be because I'm like being a decent person and being honest and being amicable I think so yeah we went and got married uh I had this priest give me a confession for the first time in like uh 15 years or something like that since uh I was 18 and I was in college and I just kind of like dropped off of it and then I you know I circled back recently so we could get the sacraments because you know you want to get

makes your marriage stronger I don't know maybe couldn't hurt that's what they tell us and it was like the chillest priest that i'd ever met it was this beach priest you know and like we had to wake him up from his nap when i we showed up to do the papers and then he uh he did confession and i told him all my sins of the last decade or so and and uh he gave me uh one one our father as as penance oh one our father yeah not even a rosary you know you've been a good catholic boy this last decade i know well no he was just really lenient you know what i mean because he's like yeah he was just kind of a latin american beach guy you know did he make you say it in latin paternoster no my dad's my dad likes to do that in gaelic he's he's an uber catholic yeah um so then he did our

our wedding and um the music didn't work so we did the the bomb bump it on like acapella and uh everybody was like giggling and the nun said that it was like the most joyous ceremony because you get a lot of these like rich people from viticura that come out there to do because there's like this old colonial style chapel so it's like a very picturesque place to do it but it's like you know the son of this oligarch and the daughter of this oligarch and you know what and they're gonna end up cheating on each other but they'll stay you know then they'll do confession and they'll stay married and that's fine because it all washes out but okay um so the nun said that it was the best uh the most joyous ceremony and yeah my

interpretation is like not so legalistic i mean obviously i don't go to church that much so but it better not be because otherwise I'd judge myself pretty badly. We have been going to church a little bit now and then. It's kind of a nice meditation. I'm not even a christer anymore. I don't make it to church that often. Yeah, well, we should go. Well, we'll go on Sunday for the wedding, obviously.

Yeah, but so, yeah, I mean, you look at Jesus a little bit out of the Orthodox. Here's a guy who had little money. he went around uh being a sex worker advocate uh an advocate for the poor right not a socialist because he didn't believe in uh marxist economics right because that didn't exist yet yeah it's like the crux of catholicism is pulling yourself up from your bootstraps it's very capital well it's also that like this old lady who was only can only afford to give like whatever the equivalent of like ten dollars back then was like better than the rich guy who writes a check for like a million dollars but it doesn't mean that much to him right so there's this like center right

thing of like do it all in charity and then the left would say well like it should just be systematically that people get the medicine or whatever okay i wouldn't say he was a socialist but but he was definitely kind of uh kind of a rad dude right and um in the gospel of mark which i consider to be the most uh grounded in in historical facts like luke is luke and john are kind of uh kind of fanfic a little bit there's a lot of uh you know it's like the wizard of oz It's like a political, especially Revelation, right? Revelation is like the Wizard of Oz written in the first century. Yeah, for all you non-Catholics out there, we transition between four books of the Bible,

depending on what year it is, or the gospel, excuse me. Yeah, they do like a roulette. Yes. But I like Mark because it seems like pretty down to earth, right? So in Mark, he gets up. He's hungry. He's hangry. He's having some cramps or something.

He's not in a good mood. He curses a fig tree because there's no figs. He loves figs. Then he walks into the temple and he sees everybody doing forex and he flips out and he flips the tables. Right. And then they're like, man, you guys got to take care of this guy. He's messing with our financial infrastructure. Right. So they execute him by the empire. Right. The state and the religious conservatives in collaboration put this guy to death for messing with their their their money biz.

Their issue, their usury. Well, it wasn't it wasn't usury. wasn't usury and not in that instance okay it was just that they were doing the the forex trading in the temple it was in the place of worship right that was it so maybe some bitcoiners think that i'm doing the same thing by bringing derivatives onto bitcoin and bitcoin's the temple and you know this is how we're bringing it all back to bitcoin yeah yeah so are you bringing are you bringing forex to bitcoin and so it seems like it seems like your intent is to solve the i don't want to say unforeseen but the expected fee pressure problem that may come once the block subsidy right the reward is the subsidy and the fees so yeah the block in the meantime you could

pay uh two and a half basis points as a taker on an oracleized bitcoin dollar swap which is probably how we're gonna get things going early on and that's uh well derib it's moving to five basis points they're dipping their toes into that because you know somebody's got to compete right seven and a half basis points is way too much um so we're gonna take it even lower right and then when the uh the native environment gets going and people are more comfortable trading that that's gonna that's one basis point so i'm like trying to destroy all these dudes profit margins and uh so and then maybe we'll fill up some blocks and then we'll have to modulate out to the side chains so as a trade layer user what's my ux flow gonna look like well we have a little wallet uh built

and view. It's kind of decent. It's like an order book, like you would see on typical exchange. And you type in your order and put it out there. And we have a block explorer, so you can check that. And then when we have... Well, so the annoying thing about doing things with an omni-layer style environment is you need UTXOs to get anything out, right? So you got to manage, you know, having a little bit of Bitcoin or Litecoin on the different addresses. So we came up with a way where you can trustlessly construct a transaction with like a third-party wallet hoster so that the wallet provider is feeding you the input

and you could have your layer property just on a Bitcoin-less or Litecoin-less address. And then they build a TX where they'll feed you the input with the outputs that you want, including the operand. And you have to sign it or something? You, the user, sign it.

Yeah, it's totally non-custodial. So you're not constructing it, they're putting it in front of you and then you sign it. No, it's kind of like a three, four-step handshake process. Yeah, yeah. Yeah, so that's a way where we can generate a little bit of revenue that's not seniority revenue, the infamous revenue model.

Just from, you know, paying like five cents worth of Litecoin and getting ten cents worth of layer property as compensation, right? So that's nice because it smooths things along. And then later on when there are sidechains, the wallet should be able to key into one of those of your choosing of course and then you could get um the fast confirmation back on on the side chain so it's possible you could do like a hybrid trade uh or you could just like deposit to the side chain and trade your heart out that way so this be a little bit like the experience i have on a casa node now where i

send bitcoin to my casa node and then if i want to bring it to uh htlc contracts on the lightning network as i basically fund a lightning network channel this is what we're we're doing with trade layer is you put bitcoin on your basically you'd lock it up in a side chain and then you'd you'd get be able to spend that bitcoin and denominated in whatever token is running on trade layer and then use that on your decentralized exchange well if you're actually putting bitcoin on a multi-sig address that's run by the side chain validators then you'd be doing it bitmax style where you're depositing Bitcoin and you withdraw Bitcoin, right? You don't have to mess with the other stuff, right?

And then there's a number of applications for these sidechains, right? So ensuring zero comp payments is one. Doing a hybrid on-chain thing is another. I don't know if that's going to be as popular. Doing custodial Bitcoin is another. Pledging your layer property is sort of a cousin of that. And then longer term, it's nice because you want to have a lightning watchtower that is reliable and if they don't do what they're supposed to do you throw down this proof of

byzantine failure on them right and then you get you get compensated that way so they're they're taking they're really taking the risk as a watchtower so um so is this a way to strengthen watchtowers absolutely yeah i mean i i could see um on chain and the all total environment being worth whatever it's going to be worth and you know you get a certain amount of on-chain things then the fees go up people start modulating it um and then i think when backed eventually gets their regulatory approval um which is going to be a more complex road than most people think but it'll happen don't hold your breath sometime in the next year and a half maybe um and so on right and they're embracing lightning i think ultimately bitcoin is going to be the preferred

wholesale finance tool and i think uh if you're doing like lightning network derivatives um well lightning's kind of weird right because it doesn't have its own blockchain so it's kind of almost like state channels in a way right i mean but there's payment channels right so state channels just add in more more metadata that you want to be signing off on um but because it's bilateral in that way the latency could be quite low so you could get a lot a lot of volume and lightning network derivatives, and then if trade layer is serving a good purpose in backing up these side chains, pre-masked, so that you can ensure that, right? And also in that case, the watchtower is kind of like the local Darabit or the local Bitmax.

They're keeping track, because people are using leverage in these things, otherwise going long, you want to have a little leverage, right? That's what greases the wheels, right? So then you've got to manage the clearing risk between all those lightning nodes, right? So ultimately I could see, okay, maybe there's like a billion dollars a day in trade layer would be great. SEC, this is not a, you know, I'm not making a promise to anybody here. I would love to see that.

And then maybe we have like $20 billion a day in lightning network swaps. And if the math around manipulating the feeds and trade layer, manipulating these markets to skew that is concave so that it's like every basis point of manipulation costs like more and more money because there's a lot of guys standing with passive orders that you got to plow through. So you start disincentivizing bad behavior. Right. Well, and like if I'm talking about like a $1 billion a day environment that's providing data feed to a $20 billion a day environment. The only way that's going to work is if there is this concavity, right? So that's something that we might get around to with my math PhD on putting out a paper on that. I'm hoping that's true.

I don't know. But we'll figure it out. We'll do some math. And if I'm wrong, then we'll publish that too, you know, whatever. But, yeah, this might be how the ecosystem ends up looking when we go, okay, let's say, like, Bitcoin is $5 trillion. Whoa, awesome. So what's that? like uh it's like 100 b now around 5k so it'd be like 330 000 or something like that yeah it's a

lot of money yeah this is these are the sort of you know mcafee's still going to be eating his his dick but he's going to be eating his dick yeah he should have nuanced it more but um well my co-founder and i were talking about this and uh his theory is that he'll take one of those little cryo things that urologists use to treat uh sores and and like pinch a little bit of skin and freeze that and then eat that and that's technically eating your own dick but but with with the added benefit that you still have it afterwards yeah but you get to satisfy that technically i don't want to know what john mcafee's dick looks like at this point well whatever they all kind of look the same it's like the least interesting thing in the world

but yeah it keeps keeps the race going um anywho yeah mcafee's having some troubles that's i know a lot of older guys in their 60s and 70s who are interesting, but that guy takes the cake. Yeah, meth will do it to you. Well, no, he was really into the bath salts. Oh, yeah, bath salts. Yeah, the designer drugs. That was like 2011.

Come a long way since then. McAfee has been pumping a lot of shit coins. He's not doing bath salts anymore. Yeah, he went from bath salts to coin of the day. I'm not sure which one is more problematic. I don't know. I'm not sure which one's more addictive. That's the question. Right.

the free uh shit coin money or or the the invigorating rush of a bath salt high well i've never tried bath salts i have tried um taking a shit coin that i was holding that just got listed on polo or something and selling it and selling into the the frenzy and that is very addictive and um so you know this is this is you know if you're doing if you're a founder it's like okay are you going to try to be a leader you're going to be centralized well no i'm like going to publish this thing and you know we might have a roadmap where we have some activations and then we like drop the whole we drop the mic and we're like all right that's it you know but uh pretty much committing to the monetary policy and you know so i you know went back to that spreadsheet

a few times because you only you only get one shot right uh that's like the satoshi style and his monetary policy was pretty simple so it wasn't such a i don't think he overthought it very much right i don't think he thought much about it especially if you take into consideration the halvings and yeah it's rather inelegant and yet and it's you have the supply released in four years and then but then we get these four-year cycles i mean it kind of worked right so that was a simple enough it's a great fomo creator i think yeah yeah there was no art behind it i don't think but i think uh it played out for the best uh in a way it was artful because of how simple it was yes yeah so so my thing's a little bit more more curvy but uh you know because i've

been doing game design i gotta i can't help myself but uh the other thing is um all right so the way that we uh capitalize this for ourselves me and my co-founders and like i got like a few investors that are like small time um is we have a vesting token which is basically like it's not a it's not a tokenized security it's like a token that is a security basically so that's like closely held and we can like sell that to accredited investors or reg S guys. And that melts into the native coin as volume occurs on chain.

So we have to actually make this thing go and it's like a logarithmic volume scale and it's like an S curve. So to get up that curve, we have to get up to like billions of dollars. So your incentives are very much tied. Right. And it's like,

why did I spend all my fucking money doing this and then make my guys spend like a month and a half or two like programming it to make it even harder for us to cash out well you know i guess that's just how much i want uh bitcoin twitter guys to like me i don't know i mean i think i think it's good design you know i i think it uh it solves a lot of the problems that we've seen with these things and then also um it's gonna end up being a pretty small part of the the all in total money supply by the time it actually does totally the best you know yeah so that's uh where i'm trying to set the bar and then also i am i'm going on the record here uh i'm going to take the byzantine challenge

two-thirds of my founder position and i made money in 17 i plowed it into this thing it's pretty much most of the money that i got in the world at this point but i'm committing to holding two-thirds of it uh maybe not indefinitely but for like 30 40 50 years um and i'm gonna put my money where my mouth is and actually put these in time lock addresses oh and uh yeah so it's not as it's not putting your money where your mouth is yeah i'm not just idly virtue signaling here which is uh which is a very common common thing in this yeah well yeah it's easy to write a check that you can't cash it's easy to write a tweet that you can't cash yes well in the spur of the moment yeah absolutely and uh you know maybe before i do that i want to get to the point

in the roadmap where we implement a ford transaction so you can you can mark an address where any yield that accrues to the DUSD or any interest. So if we have, like, a lending mechanism and I'm holding ALL or total, like, long, I can put it up so that people can short sell it. So go ahead. You think it's a shit coin, man? Pay me some interest and short sell my stash

or other people's stash, but, you know, be on that order book. So that way I can get income off of that principle, but I can't, like, dump on retail. Right. My grandkids maybe could dump on retail. I mean, that's by then it's like whatever. And I did a spreadsheet going out to like twenty fifty eight or twenty fifty nine. I'm looking 40 years or whatever it is, like three. Yeah, it's like 40. Yeah, I'm drinking too much scotch. Yeah. Yeah. It's like 40 years in the future.

And plotting out the quick math on Tales from the Crypt is always bad. And so, you know, it's like Jeff Garzik said, it's built to last. but this really is built to last because it's on bitcoin if bitcoin dies my money dies and if it and also bitcoin lives but my thing doesn't like you know that i've originated doesn't get anywhere then then it also fizzles out and doesn't get any income so okay so at least i'm uh relatively principled i guess this is no how i'm trying to wrap if you're time locking it's very principled i've i've told people that i've time locked some bitcoins they'd be like are you fucking kidding me time locking takes some fucking balls man because it's like oh i hope this is around

so you really got to believe it you know yeah no and it's so what i'm trying to get at is like you it seems like you're trying to benefit bitcoin again absolutely i am uh i'm still not completely i don't completely understand what's going on that's like where i'm at right out like so like in regards to the trailer in regards to like the macro in regards to the macro so let's go back to shitting on maker dal and they're let's not shit on maker dal because like um like my friend rick dudley who's one of the smartest guys in the space and he just and he could be doing some great things for bitcoin somebody go fund him uh really smart guy they're one of his biggest clients i don't want to say shit on maker dal but i think that's not shit

on MakerDAO let's compare what you're doing to MakerDAO yeah MakerDAO is the hottest chick on the block right now in this well yeah because it's a native dollar unit on Ethereum right yeah so MakerDAO is a little bit problematic because a you're not earning off of your DAI unless you go put it on one of these other services like nobody wants to use DAI it seems like everybody's just looking to get the leverage well that's that's a core use case or you could like put your ETH up and go pay your rent, right? And then you're leveraged that way. So it's like the secured credit card model, which has also been catching on. There's a number of places to let you do that. Or you could take it and go buy more ETH, right? And then you're sort of taking a

margin loan out. But the ETH-focused investors that I follow seem to believe that Augur and compound and these other things will help it to gain more more use right and that makes sense like this is exactly usd well yeah i mean this is what i'm swinging is like yeah you got a good dollar base so now you go trade derivatives with it and you do what you do whatever portfolio you want right so i think that will help but structurally they're problematic so a they've got this oracle problem and they've had this centralized federation of of feeds right now they're trying to decentralize factoring that out a little bit more if you knew how to do uh double negatives with the auger oracles you can really mess with those markets yeah i i don't

doubt it um and i mean oracle problem is a long-term problem that i i think can only be solved with the game theory around putting your money on the table on chain and and having that firm up the market so like rep has this thing where you got to vote you use it or you lose it like in a 40 year old virgin is it true that if you don't use it you lose it well in the case of rep it is true yeah it feels like a like a big sandbag i've held it in my hand yeah well if you own a lot of rep it feels uh feel like a bag of sand also and um you know like when i saw everything that went wrong with uh master coin and it's like money fucks people's brains up man i mean look at donald trump like i i don't want to be too polarizing we already talked about jesus so why

night um i think he's doing a few i think he's doing some good things economically for the country it's hard to say it's also hard to over you know maybe the president doesn't really affect the economy that much i like the tax cut i'm in the latter camp yeah but but he's a guy who got every he got all the money ever he ever wanted all the pleasures he ever wanted and his brain is trained around this you know and if i had not invested all most of my money in trade layer and i was just sitting on it and picking up basis points and playing a lot of playstation 4 you know i i could have become one of these guys right or if i uh you know if i was like calvin ira and i was uh getting on getting a different crew of chicks and every every time i'm pictured

in different countries you know maybe that's not the best thing for my my life for my soul if you were my conscious my my material consciousness never mind a soul whatever but like maybe maybe I should be a better person you know I have a little bit of challenge in my life train my brain to not be totally like oh the pleasures like give me the more pleasures don't be in hedonist yeah and then you know these ICOs it's like totally disgusting I saw it happen with with master coin and then you you can't like you can't know what you're paid to not know right so like in the case of maker now they got the 600 million dollar asset and they don't want that to go down by 300 million dollars that's you know those they feel pretty rich they would feel a lot less rich if it

were valued at a you know what if it was 30 million dollars probably that's a reasonable valuation for maker now also right um and then they've got this value capture thing so i think maker dow kind of has the cart before the horse in what serves you know the original ico holders and the insiders are holding maker which is pretty closely held and it trades a pretty small float relative to its its total thing and uh then they voted to raise the stability fee again and again it's like 15 percent now or something i think it was like 14 but uh so this is almost like negative interest rates really like the whole idea of the imf fixing negative rates so that everybody goes to restaurants more or whatever um is is pretty much the stability fee it's like

you know but a little bit different the thing that confuses me with so make her down and die and what's the like it's extended to other similar protocols the thing that sort of stands out to me up to this point maker down particularly stick with maker now like it just seems like enthusiast trying to prove a use case in a use case that will not be used by the masses which is the over like literally the over collateralization like you need 150 collateral to get a commensurate loan from right now which any re like this is technology to help the masses and the average Joe. At least that's how it's marketed.

But it's not very capital efficient, is it? No, exactly. Nobody wants to put down 150% capital to get 100%. Well, so let's go to the swap example on BitMEX, for example, right? So it's inverse quoted. So you've got this convexity going against you if you're long, right? So if I buy a Bitcoin long on BitMEX and i have 1.5 btc in on the account then um my liquidation price is going to be i think closer

to the 50 line right um and unfortunately your downside is like infinite btc whenever you go long one of these these inverse quota things and that's how people can have the synthetic dollars that they don't have this risk on the upside right um so the 150 numbers kind of has some cachet but the difference is that when that guy gets margin called somebody else can pick it up and then my head just getting cleared through to that guy right there's an arb there there's this uh daisy chain going on yeah well there so sometimes it's quite good when you uh i remember in 16 there were a few dips and you see these big red orders on bitmax and um the number one trader on bitmax that year i think made like a hundred or several hundred bitcoin off of a few

bitcoin was it angela btc might have been him and his strategy was he he just went mad leverage long uh on those margin call stacks and uh so you know so and and that's semantic fragility to it but that's actually profitable putting in in that liquidity but uh like the problem with maker dao is that your 150 is with yourself uh for one thing and the other is that it's like this loan thing so like a swap you know like doing things with a derivative it like kind of releases energy because instead of having to like actually like do alone you represent like the math of it and it's like much much cleaner right and then you can also you know have this whole chain of other peeps that get margin called one after another and you're still sitting pretty from six thousand to three

thousand uh feeling like you still have your your dollars intact um so you could say it's capital efficiency is really more a problem about clearing and i think maker dao needs to pivot to a swap space model in order to keep going um so the problem there is you've got this incredibly huge you got 600 million reasons not to do it right because then um you you would be earning on die based on whatever the prevailing swap rate is uh so where's the maker model where's the where's the business model for maker well they could um have a fee and minting it and it could burn some maker or something like that you know so they could pivot to that and uh probably they will like my my hope is uh that the innovations that we put forth with the derivatives clearing catches on

lightning network and elsewhere and um my hope with the uh side chains innovation is that it helps the root stock guys like get their ship in order uh i don't know block stream will take advantage of it but you know might help them uh might help cosmos um and and then you know i think Maybe these guys, MakerDAO might figure out that you got to do it this way eventually. So good for them. You know, people don't need to lose their shirts. I don't know. Whatever.

I mean, they're like so much richer than me, those fucking guys. Like, God damn it. I don't know. So, well, I think another thing the freaks would like to know is like, why did you choose to build on Bitcoin and not Ethereum? I've just always been a Bitcoin guy, man, you know, but more than that. Is it ideology or practicality? It's a little bit of both, but I think Nick Carter's done a great job detailing the fundamentals behind Bitcoin.

So for one thing, you've got the brand. The brand is this, you know, and Jack Dorsey appreciates this. Did you actually have Jack Dorsey come into this apartment, by the way? No, I went to him. Ah, yeah, yeah. I went to San Francisco. Yeah, sure. I wish, he'll be in this apartment at some point.

Jack, if you're listening, the invite's open. Yeah, so, you know, Jack Dorsey gets it, right? and uh today i just bought a bitcoin wisdom.com which was apparently all that i saw you tweeting about yeah it was available you know and there's like funny brand ass tangentiality to that and um the idea that there's no like oligarch behind it which is kind of what makes bsv so so fetid other than like the impracticality of like 128 gigabyte blocks obviously but um that that's very compelling and and it's like there's a lot of uh you know christian guys who are in the bitcoin maximalist sect and i think that the reason for that is there's some analogy

between like the holy spirit and the bitcoin spirit the holy spirit you know um like bitcoin is something that's bigger than us that we can uh you know benefit from in a you know a nice conservative way like it makes us money we can feed our families by being hodlers we're better off etc but but also it's it's there there's this altruism to it and that was like what the occupy movement had right and bitcoin started to get real traction around bitcoin's the true occupy baby it's the yeah it's uh well pretty soon wall street's gonna try and occupy bitcoin and in the process make bitcoin uh even even richer right so um what do you mean by that well you know it occupy wall street so now i'm saying that as uh well so this whole thing about the time value of

money right so like everybody riles in the fed right used to be a gold bug oh the fed the fed and then i'm like in the bay area getting paid pretty well out of vc money and i'm like oh man maybe bernanke's okay but the what's the problem with the fed right is that they take what should be a global price discovery process around the time value of money which is like the most fundamental price discovery process right so you had nick batty on yesterday and and talked about this um and i could you know with the lightning derivatives i think you can get more leveraged and there's there's different rates so you've got the rate from like quarterly futures you've got the like wildly volatile interest rate on on the typical perpetual swaps which is sort of at the

like t-bill side of the curve um the interest rate floor perpetual swaps that i am working on will have much you know you have the zero percent and then it won't be as high when things are good right so i would say that's even more like in the present because you're you don't have to worry about like a drawdown from the negative rates um so these are time values that get priced by how much fomo there is in buying the swaps and so on right um and i think that is even if it's relatively illiquid early on i think that's superior to uh whether it's the maker holders or it's the fed board we're getting more that value we're getting more accurate time value yeah yeah i think so and well okay so with like bitmex swaps and the bull market things were just

wild and it's speculative mania and the koreans are jumping in the japanese are jumping in and you know it's sort of like what time value needs that needs to be for that day you know like and the rates were crazy you get point three seven five in eight hours on the upside and then the market crashes and that's like negative twenty basis points on the downside right it's really wild so with a more attenuated interest rate what I call the grandpa swap or you've got this interest rate floor it's it's even more thoughtful I think it's very experimental so we'll see but more emergent to as well yeah right well that's creed on the market it's more

derived from the economic activity on the network it's not yeah 12 dudes in a room you're like here's the rate 12 angry men yeah the famous movie yeah by the way attenuated great word haven't heard that one in a while oh yeah well um yeah i mean there's front running right so then you know indexes do their rebalances on a 30-day window this is a thank you for saying front running this is a question i need to ask you because you're running a dex miners front running on dexes um yeah it's a problem at some scale right so that's why you need the side chains so let's jump in yeah so let's jump into the problem so would this be a hypothetical problem like uh zero x or uniswap where the miner is aggregating the transactions can see what people are trying

to trade within those transactions yeah i called a relay attack where they don't relay your tx and they spit one out instead right right so that doesn't even need like selfish mining or anything how would you how would you describe this situation like i when you put out a transaction to bitcoin it spits out the eight nodes that your node is connected with or it goes from your front end wallet client to some server and their node spits it out and then they do the validation and then they spit it out to eight others and it percolates and there's a certain number of hops there's the speed of light as a limitation and then it takes a certain amount of seconds to get in through enough nodes that you're quote unquote in the mempool which is kind of a moving target

right so the original omni um dex matching is based on mempool timestamp um but it's not atomic until you get the confirmation so mempool timestamp is that and that's like so you're we're talking about that or putting transactions on a block just in a normal block with the mempool that's sort of contingent on any particular node too right each node has a particular right so if i'm a miner who's also a trader and i run my i have a different client that has a little bit of different logic i don't relay those transactions i go oh here's a good front run i'll take that instead and then if you're trying to support liquidity in the market as a passively quoting market maker who's quoting all the time uh in addition to the cost of canceling and replacing

that you have adverse selection so people aren't trading with you too much generating revenue when things are quiet and then when the market moves people are trying to pick you off for however many basis points they can um so i think early on you could do it raw and you could get a little bit of liquidity um ethereum with lower block times uh like i used ether delta back in the uh the bull run when i was flipping them them shit corns and um you know it's still kind of a clunky user experience and with litecoin it's even slower but it's it's better than doing in bitcoin blocks so yeah i mean like i'm trying to keep pushing for it i brought in a a new developer who's uh crypto twitter as as a sort of centrist uh skeptic i won't i won't drop his name but uh

he's pretty smart guy so we're gonna try to keep moving forward with this this proof of byzantine failure thing um i was just talking to rick dudley yesterday about collaborating uh vulcanized db is doing some two-way peg type stuff so that's interesting you should bring him on man he's a really smart guy um so yeah i'm gonna i'm gonna start reaching out to more people and like just make sure i can get this thing moving so later in the year i guess we can get sidechains out um so like early on it maybe doesn't matter that much it's all very experimental but yeah you need the sidechain uh confirmation and the the caching aspect of that to ameliorate uh these these weaknesses in the raw infrastructure you know yeah so where does this all end up in

your mind do we do we end up in a world of thousands of shit coins do we end up in a world of bitcoin and thousands of sidechains yeah more of that i think maybe i don't know about thousands but definitely like dozens or hundreds yeah um well what i don't want to live in is a world where you can't even go buy a cupcake with cash because they're afraid of being classified as a money transmitter you know what i'm saying uh or a world where it's like china's one belt one road dominating africa dominating central asia uh influencing europe uh doing real-time tax excise and uh real-time seizing all of your money because of something you tweeted or well they don't have put something you put on weibo i guess um and then brussels uh in more in the mainstream because

you know china you go oh china you know well okay china's its own thing i mean they're gonna encompass like a proper 40 odd percent of the world economy before too long but okay we're not china right we're good americans right so in brussels they've been behind uh common reporting standards um which is uh probably better than fatka because fatka is very like American exceptionalism oriented. It's like you got to give America the tax info, but they're not going to give you any tax info. So common reporting standards is everybody in the OECD does this. Right. So if you're doing any kind of financial business, you've got to KYC everybody. There's no more of this like do us a shells thing and blah, blah, blah. Right. And the classic thing

is like Wyoming or Nevada LLC, where you're like this nice American financial services guy and your client is like some chinese guy or whatever and it's a single member llc and they just put their money in there and then you can like help them invest in stocks or something right so the irs in 2017 started forcing you to report every inflow and outflow of that just in case they want to join crs later which under trump is unlikely but you know because trump is like no america should be the number one tax haven in the world of course it's good business right i mean that's like the trump mindset i can't argue with it um it's like the lesser of two evils um of course morally like should people be able to embezzle money through corruption and then go get into

vanguard funds and and sit pretty or sit in new york real estate or whatever sure vancouver whatever yeah um no you know i mean like it's it's a reasonable idea that people should have some accountability if you're paying taxes but it's a slippery slope right so what if we get to like common reporting standards for trusted computing because now you don't need accounts per se you just need to run a tenderman validator and you can be doing things for people well now we're gonna like get every server farm in sechelles to have a certificate and you know like we can end up with this panopticon internet in the name of of people paying their fair share right it seems somewhat impractical that how practical is that i hope it's very impractical right but but you

never know we could be there in 10 years if we don't do our job as bitcoiners to uh move the needle in the direction of financial sovereignty uh all right thank you for saying that let's let's wrap up on this topic yeah no i futuro scene libri dodd yeah well that's it isn't it and how are we doing do you think we're doing okay man i don't know so in 2014 i'm hanging out in system d you know living off of cash and bitcoin and you know the argentine government was like the enemy right they were making everything hard but they weren't like enforcing too much they didn't really have their their data game together um they did start requiring kyc from my man dante and then he like exit scammed in in late 2015 i think so that's like a good time to

exit scam is when the kyc overhead started to start building up um and back then it was like yeah system d it's gonna be like in africa it's gonna be latin america it's gonna be this cash economy um and then you fast forward five years okay so common reporting standards is out um you know the the internet panopticon is rolling along there are mesh net projects that are very promising shout out gotenna what's up shout out gotenna yeah yeah gotenna and there's a few other ones um orchid is another one working yep so that's very very important that's like strategic right so that's a ray of hope um but the slow you know boiling frog scenario of centralized bureaucrats just tightening up on everybody's financial privacy they've made progress in the

last five years and bitcoin's made progress bitcoin got to be a serious asset it got super liquid it got all these financial services orbiting around it um it got it's gonna absorb cool r&d from the ethereum side and augments its technical capabilities so that's okay that's pretty good um but it's totally up in the air at this point it's anyone's game the game could go to big brother the game could go to little brother a little sister let's be feminist yeah yeah um i think uh you know women are are jerked around in the developing world their husbands take their money and stuff so having financial sovereignty at a micro level we're not talking about like the geopolitical chess where we're just talking about cultural shout out our girl janie yak in afghanistan

fighting a good fight oh i should follow her i don't know her she's a great advocate a great bitcoin advocate a bitcoin carnivore too oh nice yeah well we're we're like flexitarian i guess we try to eat more plants but that's where i differ from some of these guys i'm an omnivore i'll eat whatever sure as long as my gut doesn't get too big right i'm cool with it yeah just like less carbs is definitely yeah less carbs yeah when you come from philadelphia where they got good hoagies and you're just eating turkey and bacon hoagies every day uh philadelphia is a fat city because of the bread that's what i'm gonna say yeah so so i say there's no future without liberty but you know in the like multiverse like there is a future without there are many futures

without liberty but they're not good futures well yeah i wouldn't want to live in them right no so they'll they'll be happy to execute me i'm sure like i won't have to worry about it i'm i'm optimistic but i do think there needs to be like a more of a concerted effort more of an awakening if you will i think more people need to wake up the the next the fifth great awakening the fifth great awakening yeah the fifth or not the fourth turning into the fifth great awakening you know yeah there you go well maybe all the young millennials who are supporting socialism or they want basic income and then if we got that they'd be like well maybe i should like take part of this check and buy bitcoin with it you know maybe we can like it doesn't have to be

like ah these are these leftist kids and these are these like uh like austrian libertarian bitcoin carnivore guys like maybe there's something in the middle that can really appeal broadly where our generation in the spirit of undoing the corruption that we perceive in our our forebears uh we embrace decentralized finance as a way to kind of meet in the middle right because it's not like oligarchic capitalism you know a lot of things leftists decry are the things that like libertarians decry as well right right and so i think this is the real middle path moving the overton window towards more liberty uh and and it's you know it's one of the best ways to do it um so we just got to keep plugging away man right and it's not it's not even uh

i feel like bitcoin's like taking that back too i think i feel like bitcoin's very uh it's not passive it's very proactive it's like you're proactively thinking like i fucking want financial sovereignty and the only way to do that uh in my mind right now is bitcoin you could argue gold but or litecoin ltc guys out there huh no screw litecoin litecoin has not had any development like for the last like six months well so that's one thing i'm worried about we're doing some development on litecoin that's one thing i'm worried about patrick is is a world of a multi-coin shit coinery that sort of bastardizes the the glimmering ray of hope that bitcoin presents you know nah like the goodwill out the the cream of floats at the top i i would like to

see a top five of bitcoin um total litecoin all and then maybe ethereum is still around and or monero maybe maybe when they are so the uh the guys at um tavi they're doing like a layer protocol on monero and they're saying that it's in the spirit of selling tickets right well just do that on on omni layer right um i think it's kind of a trojan horse so they can get this kind of functionality going on on monero and have like a really do you think monero's too bloated at this point well i don't like this business of hard forking to disenfranchise the capex investors that make your layer secure it's kind of like trotskyism you know like permanent revolution yeah that and then we're gonna like what's monero's reason for being privacy like are there

enough privacy assurances if if short signatures mass becomes a thing like we were discussing earlier like is monero even worthwhile at that point where you have like so there is a threshold of privacy assurances that need to be met where yeah i would argue monero becomes useless well we'll see i'm not that much of a maximalist um but i do think it won't be like thousands of crappy coins i think it might be like a few i mean right you got the dollar you got the euro and then you've got like all these pesos out there right so the shit coins are like the pesos of the world but you still got the euro right and the euro's got problems so you might be like ethereum right they got everybody like doing this uh governance dance to keep it alive um well is this

a product of the fiat system and are we extrapolating ideas or frameworks mental frameworks of the system we grew up in into the system that we're building so you're saying we're all too spoiled by growing up with banking that no i'm saying we we no no we view uh the quote currency competition that exists in the traditional financial system euros yen dollars and we analogize that to a currency competition in the bitcoin world where i would argue that uh in a bitcoin world it's completely different because these currencies in these given countries are decreed to people you have to use these currencies within these borders well and they are scams right like the argentine pace is a scam the brazilian real is a scam

And Chile's got kind of a clever thing, though, which might give Austrian economists, armchair Austrian economists, I guess, out there. I'm sitting in an armchair. Yeah, there you go. So it's very appropriate. So Chile had this chronic inflation, right? And they had the socialists and they had the FACO. And then when he left, they introduced this thing called the Unidad de Fomento, which

means unit of fomentation. And they came up with an inflation index. And then all of the mortgages would be in this currency. so what happened is uh in 1990 they had like uh 20 something percent inflation in 1991 they had 16 inflation in 1992 they had 12 inflation 1990 the numbers aren't exact but by 1998 it was four percent and you're you're in the ballpark of sanity you know so it really really worked and the reason why it worked is that it allowed the banking sector to capitalize itself with positive real yield so i think um thinking about it as like bitcoin money good dollar money bad

is kind of problematic like money is all about flow and it's all about organizing human behavior over time and colonizing the future so that we arrive at the future that has more economic organization and value right right so positive real yield lets you know that you're actually doing that when you allocate capital right uh so as positive real yield is increasingly dislocated by the late cycle of you know goldilocks central bank manipulation um i think that the uh like dollarized bitcoin could come to replace like the u.s treasury bond as like the safe haven asset based on positive real yield so is this more like a free banking system that you're arguing for where you can have like synthetic currencies on top of bitcoin that sort of derive themselves

from bitcoin yeah ultimately they do yeah yeah and i think the way i mean ultimately the way it's going to scale to hundreds of billions or trillions in that kind of float is probably going to be at the wholesale level in the lightning network or in this like we won't even call it the lightning hour because like the lightning network is right like two of two multi-sigs right well what of the what about these uh two-thirds of n multi-sigs that are these uh side chain channels right well they all they're all going to interact like physics and and it's just going to be bitcoin right right and it's going to be pushed to the background yeah well yeah ideally the ux will be really simple and all of the wholesale stuff won't be out like retailer retailers that

go to the atm and get cash out don't have to think about the repo market right all right so i guess the ending question on this is are we building a roided up replication of the system that we currently live on are trying to get away from or a more conservative and risk averse system i think it's more conservative because you can measure the systemic risk of a contract in real time based on on-chain data so that by itself gets you a leg up from what we had pre-dot frank um and post-dot frank it's like very cloistered in these these seps you know and it like doesn't really matter because you're trading with like city bank so it's like you know a city bank you know bankruptcy is a bigger deal than just at that level um so i think the accountability gets us

there i think uh having a scarce money base at the bottom of the pyramid gets us there as well so i think this that's the most important part of what scares bitcoiners they talk about like derivative markets and stuff like that like the difference between are we going to dilute bitcoin synthetically yes okay so i read an article about this for the yes this is the question thank you for asking the question i've been thinking about the whole time yeah and i articulate so um after the financial crisis uh quantitative finance figured out um that uncollateralized trades have a cost and they um combined a credit default swap uh sort of credit optionality like the put option on credit yeah so a credit default swap was basically the insurance policy on the mortgage

backed securities that were yeah like i own some stocks i buy a put on it that cost me something i own a bunch of bonds i buy a credit default yes yes so the guy who's selling the credit default swap is getting less yield for the same risk than if you just held the bond but don't worry because they're inflating you know they're selling a lot and they're just you know aig belly up with that right yeah so okay people would argue 2008 was a run on aig that's what and if you know quite a few others as well um and the thing is everybody a lot of them were swimming naked right they were super leveraged and it would have been this domino effect um but what they did is they took the math from pricing credit default swaps they combine it with the math of pricing options basically

and they figured out okay if you're going to do an uncollateralized trade and there's this window prior to delivery they have to pay they have to pay a premium right so if they if they float off well whatever we got the premium at least right so they call that a counterparty value adjustment so right around the time that that guy posted that article on the uh lightning uh dev list uh saying that you know light light coin has no place in the light network because the the htlcs have this optionality risk, that you're sort of writing a free call option. I found something on LinkedIn that was a slide share from a quant guy going over like the history of quanting stuff. I should go fish for a link to that. I think some people might want to dig through that. It's quite mathy,

but if you just kind of skip over the differential equations, it gives you the broad strokes. So basically they figured out how to do this. And then the most crazy derivative that exists is writing a counterparty value adjustment on a whole network of counterparties, right? So in the article that I published on The Block a couple of months ago, I was saying how in Lightning Network, of course, this is permissionless tech.

People can run on their clients that operate more loosely, right? So you could pay a premium to take care of the counterparty risk in the time window of an HTLC to do Bitcoin to Litecoin. You could also do a counterparty value adjustment to float a check just within the Bitcoin lightning network and get around this incredibly high redundancy rate that we're experiencing as a limitation on it. So now we're starting to play with fire.

But my thought is basically you temporarily increase the money supply in this band. right like i mean if um if i take my coin how would you do this well if i take my coin to bitmax and somebody gets long yeah they're holding synthetic bitcoin right and i'm also holding a bitcoin so you could say that that open interest in futures and swaps and call options even is some degree of inflation in bitcoin right but it makes bitcoin more useful and it's limited and yeah it's limited to it's limited to the point where at which you get margin called and then right so if it so there are checks and balances that that keep it from being truly inflationary in that sense whereas in the legacy financial system that we've had today you can you know

write these things write these things the feds got your back right we don't have that in bitcoin no no i i would argue that's beautiful yes absolutely that's the uh well that that's what liberates us is that we have to be accountable for our own decisions basically right it's the price of freedom and coming back to liberty um there's no future without liberty like what like outside of bitcoin like what drives you towards this mentality um well i've always been kind of a freak you know yeah as i've always been a non-conformist yeah so and and my wife's the same way she's just spent her whole life not doing anything anybody told her to do boss which is why uh where we get along so well and uh although we do we do fight sometimes for for

that reason but then we fight with my wife we resolve it well there's arbitration and we do a proof of uh of byzantine failure and and we resolve who was right who was wrong yeah or whatever we just forget about it and move on to the next block you know and settle it out even so uh i mean we saw in the soviet union that they took away the general decision making latitude of the average citizen which costs them economically it also costs people psychologically right and in america you know you can criticize capitalism for commodifying things and people are but this is a criticism on the left and the right that you know people shouldn't get drunk every night or whatever and like run up their credit cards like they should be more thoughtful

okay and this is what has made america great is you have a rule of law that allows people to make decisions in which an aggregate has accumulated a lot of value plus there's the military conquering people and shit but okay you know and that yeah factors in but not as much as the economic activity i like to think so i mean you could say that uh the military is like proof of work for the dollar um but i think that if we cut the military budget in half it wouldn't destroy america and it would probably i don't think i think the nuclear game theory that exists already has sort of locked us into a... And the economic game theory.

The economic and nuclear game theory in particular I think has locked the world into a point where... And drones. That's going to completely change the game because then you can actually do guerrilla warfare. Well, sorry. We saw it happen in Venezuela, right? A little bit, yeah.

I mean, it wasn't successful, but it was an attempt. Well, we saw it in the first Purge movie that came out last year. The government sends some drones out to shoot the guys when their mercs can't get out. Well, that's what gets... I mean, God, I wish we had enough time to jump down. this we were talking about we were talking about facial recognition on twitter yes yeah yeah and

like if the government can send a drone with facial recognition ai on it like oh go kill this person because they i do not like what they did well and this is i think this is the next phase is like having people be able to control their economic destiny is is a good step but then there's all this info that's like robbing us of sovereignty in other ways so like the ethereum guy's trying to like decentralize everything and they're poking around in that direction may end up being useful as we distill these things because like AI in the future and like your data, like everything's going to need cryptographic checks

in order for you to know that you're not getting like bamboozled by the Panopticon, right? Yeah, you're not getting, what is it? The face swap, what is it? Like somebody makes a video pretending to be you. Oh, deep fakes. Deep fakes, yes. Right, so that's an example where cryptography is useful.

Yes. And really history in general, the ability to rewrite history is increasingly predominant. You have to sign the videos you paste on Instagram with a PGP key going forward. Yeah. Something like that. And that,

you know, yeah, I think that's a general model for keeping people in control of their lives and not getting into some crazy sci-fi nightmare, you know? Are you optimistic or pessimistic? I'm generally optimistic because like I said, I believe in the Holy Spirit,

you know what I'm saying? So I think there's a prevailing shelling point of goodness. if you will um i'm kind of like john lock in that regard um i like that comparison yeah yeah i think the problem with being conservative is that you get too pessimistic and then you bias yourself against um or it's like being bearish like bearishness is like economic conservatism like oh this is this is bullshit it's overvalued and then you miss the convex you know you can only lose zero but the thing can can go up logarithmically i've really uh in the last six month's been diving into thomas soul's uh thought experiment of the constrained versus the

unconstrained mind and trying to find the balance between the two is so like an unconstrained mind would be a bitcoin maximalist who doesn't think you should change the protocol at all and you should be as conservative as possible the unconstrained vision or mind would be like an ethereum where hey let's do fucking everything at once yeah yeah i'm trying to find a balance between the two well that's what i've tried to accomplish with trade layers distill some of the good r&d that's been out there and applied to bitcoin and again these trade-offs these trade-offs exist at different layers so i i that's why i'm a bitcoin i'm not even i don't know i hate saying the term bitcoin mac that's why i'm a monetary maximalist and i believe in bitcoin in the long

run as the accumulator of most of the value in these crypto in these cryptocurrency systems and that is because at the base layer i think the un or excuse me the constrained vision is more advantageous where so you'd be conservative as possible you change as little as possible and you have these assurances you want assurances that it's going to do the same thing that it's done up to this point like into an unforeseen point in the future and that's that the certainty that it's going to act in that way is a very strong assurance that you can build off of and then you can build an unconstrained sort of vision on top of that yeah yeah well and uh like for example the checkpointing issue that bitcoin has with potential reorgs you can do checkpointing

as a service like today and then with uh shout out james o'burn fellow beefy bitcoin boy he's uh what's his thing he well he just brought it up on the bitcoin mailing list uh uh assume utxo set which is quasi checkpoint yeah um no it is a checkpoint but it's buried 10 000 to 100 000 blocks into blockchain oh nice yeah um but the well the idea is that you would have a checkpointing and the ibd would be distilled down to a few minutes instead of 12 to 18 hours and then you'd have sort of a if you wanted to use bitcoin and transact sort of in a timely manner you'd have this assume utxo function it would give you sort of like a quasi spv model that you use to uh transact and meanwhile the whole state of the blockchain is downloading in the background over

time and once you're fully verified um you'll be using like a full oh just a way to bootstrap people with onboarding okay yeah but also to solve the issues around reorg attacks and like settlement finality being distorted by miners you can like the sidechain thing i was saying is like a more potentially resilient checkpointing as a service oh and um so yeah so you use previous quasi proof of stake this is your checkpoint yeah sure yeah i like that that's i mean it's the marriage of heaven and hell it's the yin the yin and the yang it's the peanut butter and the chocolate that's like the steak and the work i know people don't like uh don't like talking about shit coins on this podcast i don't like it in particular either but that is again like

we're talking about decred earlier that's one of their main cruxes like we're we're quasi we're the maximalist credo is we'll just uh osmosize all the good ideas and i think that's what's gonna happen yeah i'm trying to make it happen with with this well because i do think it is a good idea you get it you get extra assurances yeah yeah yeah definitely um well i think we're officially now too drunk to keep uh ambling on i think so as well we're two hours and 11 minutes oh man what a podcast um i think i learned a lot i think i did me too it's uh i think it was it was very like all over the place but i loved it yeah um patrick do you have a parting note for the freaks out there yeah so i'm about to try and roll out this test net you know we have a wallet up that

we host we'll have a explorer up and um initially we want to do like a qt interface that's kind of for a niche audience but i know y'all would appreciate that love the qt interface uh we might roll out just like a trade layer d client with like a bash script and then to launch this thing we're going to do a node reward so instead of just running a full node and virtue signaling about it online you can get paid for it in a metacoin and i want to get a lot of people downloading what we publish and running that so i'd love to have you on board where can we find more information about this well um tradelayer.org is our main website um i got layer explorer.org and layer wallet i haven't loaded those up yet so don't don't go to those just yet but

Bitcoin wisdom exists as well. Bitcoin wisdom, that's right. And we're going to go public with our GitHub and have the checksum and everything, and you can download this. And you can follow me on Twitter, at Duganus, and also at TradeLayer. We don't update that very much lately,

but that's the brand name thing. So when we do publish this, we'll do it through these channels. I think there's also a mailing list at the bottom of our website, so we'll put it out through that. um yeah we'd love to have uh the uh true bitcoiners come on for the the fair launch and uh you know get get more i mean obviously you're if you're running a full note already

why not uh get paid for it right so then yeah so well thank you for dming thank you for coming through uh it's been a fascinating conversation i think we're gonna have to have a couple more because i think we're gonna have to like dive deeper i'll come back on in 2020 and we'll see if uh we're in a panopticon yet or or if this is hopefully we're not hopefully not i don't think we will be but uh i think this is the first of many conversations we're in a panopticon but like it's not that bad it's not that bad it's not i feel like we we still have the power to fight back yeah definitely um patrick thank you the truth will prevail i i feel like i feel like we need to have like seven more conversations before i fully understand you what you're working on and

and and how it's it's gonna and i just from speaking with you i think it is going to benefit bitcoin from like a fee pressure perspective yeah like from the mechanics i still need well and if it gets like you know blown by the wayside and all the r&d advantages get absorbed into whatever is like sort of the block stream approved like pure btc model like you know i don't have any regrets about doing what i've been doing now that's the beautiful thing about the space is you can fucking try whatever you want to and you're putting yourself out there and trying something and I'm fascinated to see

how it's going to play out so thank you for spending a couple of drunk hours with Uncle Marty on your trip to New York I hope you guys enjoy your wedding this weekend it's not our wedding it's my sister's we'll drink more then

peace and love freaks