Unchained - Stacks’ Muneeb Ali On Why Bitcoin Is Exciting Once Again - Ep. 612

Episode Date: February 23, 2024

Listen to the episode on Apple Podcasts, Spotify, Fountain, Overcast, Podcast Addict, Pocket Casts, Pandora, Castbox, Google Podcasts, Amazon Music, or on your favorite podcast platform. Fifteen years after the birth of Bitcoin, the network is now entering an era of remarkable innovation and change, according to Stacks' co-creator Muneeb Ali. On this episode of Unchained recorded at the Bitcoin Builders conference, Muneeb explores the complexities and advancements within Bitcoin's Layer 1 and Layer 2. He shares his perspectives on what's fueling innovation in Bitcoin's Layer 1 and discusses the implications of Ordinal Inscriptions amid criticism of it by core developers.  He delves into the various scaling solutions within Bitcoin, highlighting how trust assumptions vary among them, and how BitVM could be a 'game changer'. He goes over the advantages of integrating smart contracts on Bitcoin, and why he considers BTC the only true form of monetary asset.  Show highlights: What's driving innovation in Bitcoin’s L1  How Muneeb feels about Ordinals Inscriptions in Bitcoin, considering the criticism from some core developers How, in the recent years, research and development in crypto happened outside of Bitcoin, and how that's changing now, according to Muneeb The different types of scaling solutions in Bitcoin and how the trust assumptions differ in each of them Why he feels like BitVM is a 'game changer' and what it enables What the Nakamoto upgrade is on Stacks The advantages of having smart contracts on Bitcoin, according to Muneeb Why he says that BTC is the only asset that is money The challenges to having privacy in Bitcoin Thank you to our sponsors! Popcorn Network iTrustCapital Polkadot Guest Muneeb Ali, co-creator of Stacks Previous appearances on Unchained:  Bitcoin Ordinal NFTs Are Hot and Getting Hotter. What's the Hype About? - NFT Crypto Blockstack On Getting Independence From Google, Facebook And Amazon Links Recent news: Unchained:  Stacks, a Bitcoin Layer 2 Protocol, Sees All-Time High in Total Value Locked A New Era for Bitcoin Is Here, Whether Bitcoin Maximalists Like It Or Not Bitcoin Passes the $1 Trillion Market Cap Mark; All Cryptos Combined Reach $2 Trillion Bitcoin L2s: Unchained:  Are Layer 2s on Bitcoin Having a Moment? How Botanix Aims to Enable Smart Contracts on Bitcoin An Ethereum-Like Experience Built on Bitcoin? Learn more: What Are Opcodes in Bitcoin? A Beginner's Guide What Are BRC-20 Tokens?  What Are ORC-20 Tokens?  How to Create a Bitcoin Ordinal Learn more about your ad choices. Visit megaphone.fm/adchoices

So I agree with you. I think, like, in the last five years, this is probably the most exciting time for Bitcoin. Hi, everyone. Welcome to the future of Bitcoin. I'm here with Manib Ali, co-creator of stacks. Welcome, Meneb. Thanks for having me. With I trust capital, you can buy and sell crypto in a tax advantage retirement account. Enjoy significant tax advantages, 24-7 access, and the industry's lowest fees. VaultCraft is your no-code defy toolkit for customizing non-custodial automated yield products on any EVM chain. Join the referral program today and start earning rewards. Learn more at vaulcraft.com. The scorebed app here with trusted stats and real-time sports news. Yeah, hey, who should I

take in the Boston game? Well, statistically speaking. Nah, no more statistically speaking. I want hot takes. I want knee-jerk reactions. That's not really well. I do. Is that because you don't have any knees? Or? The score bet. Trusted sports content, seamless sports betting. Download today. 19 plus, Ontario only. If you have questions or concerns about your gambling or the gambling

of someone close to you, please go to conicsonterao.ca. Pocod is a leading layer zero blockchain with over 2,000 developers. And the Pocodot 2.0 upgrade will be a massive accelerator for the ecosystem. Join the community at Pocodot.network slash ecosystem slash community. I'm super excited to chat with you.

So everybody, the title of this talk is the future of Bitcoin. And I actually really love this just because the future of Bitcoin is at this huge inflection point right now. So, Meneb, assuming you agree, what do you think the future of Bitcoin previously looked like and how has it been changing? Yeah, so I agree with you. I think like in the last five years, this is probably the most exciting time for Bitcoin. And it's for a couple of reasons.

I think one is that we saw more innovation and activity directly on the Bitcoin L1. So we saw Ardenols, which basically like Bitcoin NFTs. And Ardenal saw enough like interest and demand from both users and developers that the trading volume for Ardenals actually flipped Ethereum and Solana. And it remains there like pretty consistently. That's a pretty interesting stat. Like within six months, out of nowhere, Bitcoin NFTs came online. and now they're like one of the largest NFE trading volumes in the industry.

So that was like really interesting to see. And that also sort of like proved the demand for Bitcoin block space. And Bitcoin fees started going up. That sort of like triggers a renewed interest in Bitcoin L2s. Because I think everyone sort of like, you know, theoretically gets the idea that Bitcoin L1 is not going to be the place where you use your Bitcoin because it's going to be very expensive. It's going to be slow and so on.

So theoretically, I think Bitcoin L2's, the idea has been around for a while. But until the gas fees on the L1 really started spiking recently, I think people weren't feeling the pain point. So as soon as the pain point became very, very real and it's like right there in your face, I think that renewed interest in Bitcoin L2s, which is a work that, you know, we've been doing at Stax for a while. And we started seeing like tons of other products like trying to bid Bitcoin L2s, which I think is really, really good for Bitcoin as a whole.

and we can get into some of the more details there. Yeah, I'd love to. But before we do, I do have one question because I'm sure, as you've seen, ordinals and also BRC20s have been pretty controversial with, you know, people like core developer, Luke Dasher, saying that ordinals are an attack on Bitcoin. And I know, you're a proponent of ordinals and all this activity. So, you know, if you were to kind of speak to that part of the Bitcoin community, like what message would you have for them?

Yeah, so first of all, I think I'd like to point out that Lucas is one person, right? Luke is one person and he's had like controversial opinions on things all the time. So I would separate him out from other core developers. A lot of the core developers who are actual, you know, sort of like very active maintainers right now, they're pretty supportive of Ardenal. They see that, you know, the chain is open and permissionless and people can use it however they want. In fact, a bunch of core developers are actually doing work that helps things like Ordnals. because Ardenles was almost like stress testing the Bitcoin L1 notebook.

And there were some edge cases that were showing in like the Mimpool or some other parts of the Bitcoin software that the core developers are actively working. So if they thought that this is an attack on Bitcoin or something, like they wouldn't be doing the work that actually sort of like supports like this type of traffic. So I would just point that out. It's one person. And I think that any of the attempts to stop Ardenal's have, miserably failed in the market as well, right? Like miners continue to mine them because they're

collecting fees. They're sort of like gaining more and more traction. So I would, I would say that the free markets sort of like speak louder than anything else. Like people can have their opinions, their individuals. But I think what we should look at is overall the Bitcoin network and the Bitcoin market is actually fully supporting R&Ls and there's no resistance. It's a, it's a technology that's winning in the market. So in terms of all this activity around layer 2s and just the sort of renaissance in Bitcoin, you actually recently tweeted, Bitcoin L2s redirect intellectual capital developers and VC capital to the Bitcoin ecosystem. This will end up helping Bitcoin Core with a pipeline of new devs.

This will also help mature APIs, indexers, dev libraries, and tools for Bitcoin. Can you elaborate on that? Talk a little bit about what you're seeing in terms of this activity? Yeah. So I think I'll sort of like classify the time between like, 2017 and last year, 2023, almost like five years, as a time where a lot of attention actually went away from Bitcoin, from our industry. And Bitcoin was sort of like, hey, this is this passive asset. Yes, it's sort of like money, but you just fold it and there's nothing much

you can do. But most of the interesting development, most of the new funding rounds, new R&D efforts, they were actually happening the rest of crypto. And I think the, the, the, the thing that I'm most excited about is for our industry to mature, like, we have to all agree on certain standards. For example, if BTC is clearly winning as money, which is, I think most people would agree to that, that BTC the asset is the thing that's winning as money or as a store of value in our industry. So if everyone sort of like agrees that, hey, BTC is money, BTC is where we sort of like, you

know, store our savings and so on, then converging on that and then building on top of Bitcoin, building all the different types of applications, instead of that getting fragmented on all these other disconnected networks, building that on top of Bitcoin actually makes a lot of sense. It helps our industry mature. I think one analogy would be that on the internet, once everyone converged on TCPIP and everyone's like, hey, that's the protocol that nobody wants to change.

If someone today wanted to make a change to TCPIP, people would freak out. They're like, no, that thing runs, you know, like all these other applications and billions of users on top, don't change that. There are other layers built on top of TCPIP on the internet. So I think Bitcoin is like that. So Bitcoin can actually start to ossify, but that doesn't mean that there isn't going to be innovation around Bitcoin. I think most of that stuff is actually going to happen in L2s,

which are sort of these extensions to Bitcoin or other layers on top of Bitcoin. And they can have functionality similar to a Solana or Ethereum and so on. and the type of applications people were seeing, they would basically experience those applications with BTC as the asset. So if you want to participate in a decentralized lending protocol, you can participate with BTC. If you want to do trading against stable coins, you can do that with BTC in a decentralized way and so on. So I think this switch off, and there's already market evidence, I think so many startups are now getting funded for Seed or even Series A stage funding rounds that what wasn't happening before, so many developers are coming in. And there are,

There's the sentiment. Like I meet so many people who are like, yes, I was working and name your ecosystem, that is not Bitcoin, but at heart I'm actually a Bitcoin. I always believe in Bitcoin. I hold Bitcoin. And now these people get excited that now they can actually work in the Bitcoin ecosystem as well because these opportunities are opening up that just simply weren't there like two years ago. All right.

So now let's dive into these different layer twos. Because for a while now, we've already had things like lightning. We've had stacks. But then there's kind of, you know, several new ones. And I think they can actually be divided into multiple different categories. So do you kind of want to give an overview of the landscape? Yes. So I think taking a step back, I would say that Liquid actually deserves a lot of credit

for being sort of like the first L2. And Liquid follows a Federation model. So there are a lot of sort of like trust assumptions that you're trusting the Federation that is running the nodes or they have the keys to the Multaseg wallet, how you're transferring BTC. That's like the first generation or sort of like the one end of the spectrum. And I think Ethereum has actually done a lot of research on L2s since 2017 onward. And state channels is something that early on the Ethereum community looked at as well. So there have been some R&D on state channels.

And Lightning is effectively a state channel. So it's in that category. Lightning doesn't have like a full ledger. It doesn't have like full VMs. can't write smart contracts. It's a state channel that sort of like settles on Bitcoin and is really focused on payments. And the good thing about Lightning is that it's very trustless. So in terms of, again, if you look at a spectrum, the most sort of like trustless thing would be that a user can unilaterally withdraw funds out of the L2, right? Don't need to trust anyone else. I can just send

a transaction directly on the Bitcoin L1 and I can take my BTC out of the L2. Lightning actually qualifies for that. There are some sort of attacks that can happen, right, but putting, putting that aside, I think lightning basically is extremely trustless on that spectrum. And liquid would be the other side of it, right? It's a federation and you are completely trusting the signers on the multi-sig for withdrawing your PDC. And then there is like things in the middle. Like, for example, the stuff that we are building with stacks called SPDC, it has a decentralized group of signers, and you need an honest majority of those signers to process the withdrawal from the L2 back to the L1.

And then there are things like BIPBM, which we'll get into more, that sort of like drastically lower that trust assumption. So instead of M of N, meaning honest majority, it becomes one of N. So only one honest party in the set is all that's needed for withdrawing your assets out of the L2. And that honest party could be you yourself, right? So it's actually, I actually think that the different. between fully quote-un-quote trustless and one-of-end is actually pretty little from a practical

perspective. And I think that was also one of the things. So a lot of people in Ethereum and other places, they would criticize Bitcoin L2s as, hey, these are not really L2s because you can't, you know, you'd actually withdraw your assets. Because on Ethereum, that's possible. Ethereum has full smart contract language at the L1, so you can build those systems. And I think my answer to that is even honest majority withdrawals from a commercial and practical perspective, like they can work. But then things like BIPVM completely changed the game.

I think that was the final sort of like missing piece because the cool thing about BIPBM is you don't need any changes to Bitcoin L1. Bitm can be deployed without modifying Bitcoin at all. And I think that's key because a lot of people are skeptical about the timelines that it would take. for making any change to Bitcoin. So if your L2 depends on a change to Bitcoin at 1, then people are less interested in it because they're like, hey, this is theoretical. This is not going to happen until Bitcoin can adapt.

But because of BitPM, and now that sort of criticism goes away, you don't need any changes for BitPM. Bitcoin is already there's still some, you know, work happening before it becomes practical. I think it would require like six months to a year. But it's there, it's basically straightforward at this point.

There's no like breakthrough needed. It's just like more engineering work that needs to go into Bitcoin. Yeah, let's talk a little bit more about BitVM. As far as I understand, I guess it's sort of an optimistic roll-up for Bitcoin. So computation can happen off-chain, but then be verified on Bitcoin. And I saw there was a little bit of back and forth where I think people assumed that it would sort of create kind of like an Ethereum-like environment on Bitcoin. And then the creator said he didn't necessarily see it being used that way, but more like as an improvement on like. So can you talk a little bit about what you think it might be used for or where you see the future with that?

Yeah. So it's very exciting. Right. So basically the key discovery with Bitcoin is very limited by design on purpose so that the attack security attack vector is pretty small. And what Robin Line has discovered was that you can break any program into logic search. logic circuits. So think of logic circuits as like, you know, the lowest level way of expressing a computer program and just try to run the logic circuits directly using the Bitcoin existing

opcodes, right? And that works. So it's almost like discovering that Bitcoin is accidentally tiering complete, right? But obviously that is very, very inefficient. Most of these programs are off-chain. So whoever wants to run the program, most of the logic is off-chain. And just the verification and the proofs, they happen on the L-1. So people who are more familiar with Arbitrum, the fraud-proofs model, I think that's probably the best analogy, that if you think of Arbitrum L2 as the off-chain component, like, whatever you're doing is off-chain.

And in between the off-chain company is a little bit different. It's not like Arbitrum. But just as an analogy, the important part is that there can be fraud-proof. So BIPVM basically supports quote-unquote fraud proofs on the Bitcoin L1. So whatever computation you were doing, maybe the thing that you're trying to prove is that I actually have capital in an L2 and I want to withdraw it. And the bridge was implemented with BITVM. So you can actually have a fraud proof that a Bitcoin L1 will execute and enforce.

And I think that's the key part. So that given that these computations, because they have to be expressed, as logic is, they're very inefficient. I don't think people would be running general purpose programs using BIPPM, but very targeted specific things. Most importantly, I think a bridge, like an L1, L2 bridge. It just needs to be built once and then deployed. And most people would use it only under like catastrophic scenarios, right?

And so that's how I see the most like commercial use cases of BIPM. Okay. So really targeted things like bridges. So then it would kind of be, like, would it be limited in the number of different types of applications that you would see, you know, flourish from that? I do think, like, you know, we should never underestimate, you know, ideas that humans can come up with. So I'm pretty sure people would do some unexpected things. But at least for me, the thing that I'm the most excited about is the type of functionality that, that we would want from Bitcoin L1,

by for example, some op codes that we wanted to introduce. I think ZK roll-ups is another example, that people wanted to have some sort of of op-op-z-K verify or whatever, or start verify op-code. You can almost build these type of primitives in BitVM without requiring any changes and then try them out, right, and see commercially how much interest there is,

how do these things work, and then once you have the data, you can then sort of like go to the Bitcoin community and say, hey, look, there's so much usage that we are seeing in L2s using Bivm. And now I think maybe it's time to introduce that as a op code because that would make things a lot more efficient instead of relying on BIPVM for executing these things. So I think that's where my mind goes. But people are playing around all sorts of things.

I've even heard that someone is running a Linux kernel using BVM at the experimental stage, but you can build anything. You can build anything with it. Pocodot is the original and largest layer zero blockchain with over 2000 plus developers. The anticipated Pocodot 2.0 upgrade will be a massive accelerator for the ecosystem, upgrading the infrastructure with eight times higher

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this mean? When you buy crypto outside an IRA, like on an exchange, you face taxes on gains. But in an IRA, like a Roth IRA, gains can be tax-free. I trust capital. I trust capital. also has some of the lowest fees in the industry and 24-7 accessibility. Start now and maximize your retirement savings with I-Trust Capital. Okay. Well, there's, I mean, so many layer two is when I went to do the research for this, I thought I knew of a number. And then when I did more research, I was like, oh, it's like two or three times what I even knew about. So I'm just going to throw out a bunch of names. I saw Ark, Babylon, which is, I guess, something related to cosmos, botanics.

Citrae, which is a ZKRola, Intralay, which involves Pocodon, Mint Layer, which sort of defy, RGB threshold network. There were just so many. So I don't know if there's any particular, I mean, obviously, then you have stacks, but I don't know if you want to call out any of these other ones that you're especially excited about or why. Yes. So I think the thing I'm excited about is tons of experimentation, which is amazing, right?

So I would say even a year ago, I was sort of like the more lonely voice in the industry, trying to educate people about Bitcoin L2s and why they're important and why I think that they could be a very, very big deal. And now it's a category, right? If there are 20 plus or 30 plus projects doing something, it automatically sort of like becomes a category in the industry. Just like, you know, Alt-L-1s or faster competitors to Ethereum was a category. And then capital comes in, developer comes in, people built like their different designs and then they can go and compete in the market. So I think that's going to happen in the Bitcoin L2 space. I, I, I, uh, Ethereum L2s, for example, are already like a 70 billion market, right? And I think

Bitcoin L2s are likely going to be larger than that. Like my, my, my guess is like 100 billion plus market. And when people see that, then they see commercial opportunities and they want to come in and try to pursue them. And I think that's how free markets work. So my stance here is, uh, I think some people have this gut reaction that they become very, uh, cynical or they start criticizing some of the projects that, oh, no, you're not really an L2 because you're doing X, Y, and Z. I think my response is a little bit different. I think my definition of an L2 is very broad. What I care about is BTC is being used as the asset, right? So if BTC is being deployed in applications, even better if BTC is the gas asset, that is something that, you know, Stax is, for

example, look into it as well. People can just pay gas fees. There's a proposal out there. People can pay gas fees in BTC. BTC is the primary asset that is getting deployed in smart contracts and defy applications, so on. To me, that's a Bitcoin L2. And then you get into how security works and security is like bridge security and then your consensus, right? And there are different models and let people experiment with all sorts of different things, be very upfront about sort of like what is your design and what are the tradeoffs.

So that's sort of like exciting. I would typically, when I would look at L2, I would look at three things in general. one would be bridge security. So I think one end of the spectrum is that liquid is sort of like a federation. You're trusting the multi-six signers, and that's the bridge security. And then on the other end, you have something like lightning, which is completely non-custodial in a way. And I think BitPM, to me, is actually pretty close and completely non-conspirators. Some people might disagree with that.

But I think one of n security, for a practical perspective, is very, very close to. being completely processed. And a bunch of these projects that might have been working on other designs before, now are thinking about how do they use BitPM for their bridge. So I wouldn't be surprised if a lot of these projects end up using BitPM in the next year or two. I'm already seeing proposals in Stacks. Like the Stacks bridge is going live that has on us a majority, sort of like assumptions.

And there's already R&D work that's popping out that, hey, how do we use BitPM for doing that? So that's how I would categorize it. And then there are different ways of doing consensus, right? And over there, my sort of like takeaway is because Bitcoin itself is slow, and we have real world, the experience of doing that, the existing version of stats runs at Bitcoin speed. And it's a big pinpoint for users. Like they're waiting for 10 to 40 minutes for a single confirmation.

So I think any L2 that is relying on Bitcoin L1 for, it might be a ZKR. up or you're relying on finality to come from Bitcoin L1, it's a tradeoff against UX. So these L2s would either discover or maybe early on would realize that they really need to work on faster confirmations internal to the L2. I think practically that's the thing that matters actually more. Sure, there are different ways Bitcoin can actually give you the security guarantees, but practically I think the faster confirmations is the thing that's going to matter. And Stacks is already working on it, right?

our Nakamoto release is focused on, you know, giving people, like, really fast confirmations internally. And then other altos are going to come up with their own ways of, like, how do they do it? Do they not have any internal confirmations? Are they just relying on Bitcoin? It's a tradeoff because maybe for security, going to Bitcoin for full execution is actually better in a ZK roll-up style. But maybe you're losing out on speed and so on.

So I would say, and the third thing would be, you know, programming environment, right? So Stax has a safe programming language called clarity, but now we are sort of, the ecosystem is launching VASM support, which opens up potential for other types of runtimes as well, including solidity. But some people would do EVM, some people do Ross. There would be all sorts of experimentation. And I think those are the three main dimensions on which I would try to classify the L2s. And I think, I think experimentation is great. Let people come in, let them build all sorts of different things, just like what happened on Ethereum. and there are like 20, 30 different L2s there.

Yeah, yeah. I mean, there are some people who say that they expect a future in which we have 10,000 L2s or, or what, you know, roll-ups. So, you know, you reference the Nakamoto upgrade, which I guess is going to happen in April on stacks. And you mentioned that the block time will be shortened to five seconds, at least on stacks. And then you're also going to be instituting 100% finality. And I was curious for both of those, like how you're achieving that. Yes. So I think basically the biggest upgrade that's happening is that right now, the current version

of stacks, the stacks blocks are one-to-one with Bitcoin blocks. Right. And you're sort of like breaking that correlation. And we can have cryptographic proofs that time is passing after a Bitcoin block. Right. So whatever frequency there is. And now once you have those primitive in place, you can actually keep upgrading and keep improving the latency as well, right? So that's sort of like the key breakthrough that we can tell

time, like cryptographic proofs of time passing between Bitcoin blocks. And then we have a much faster consensus, so they're validators, there's sort of like signing these blocks at a much faster speed. And then when a Bitcoin block arrives, then everything settles on Bitcoin. Right. So you get the, let's say you were trying to do a BTC transfer on the L2, you're probably paying like cheaper gas fees, and you get a faster confirmation. So today, I think something like $700 million is locked on stacks. So it's that capital that is signing off on like, okay, we sign off on the transaction, and it's not going to reverse.

But as soon as the Bitcoin block arrives, then the security guarantee is Bitcoin finale. Right. So for someone to reverse the transaction, they would actually have to go and attack the Bitcoin L1 chain and try to re-arge Bitcoin blocks. So transaction ordering and finality come from Bitcoin, which I think from a practical perspective is really great because if a user wanted to do an L1 transaction, they have to wait for a Bitcoin block

until they get a single confirmation. The L2 user would have the same experience. They would just get the faster confirmation stuff goes through, but as soon as the Bitcoin block comes, their security guarantee is now comparable to the Bitcoin L1 transaction that you were doing. Okay, interesting. So now I want to ask a slightly contentious question.

I'm sure you've heard this kind of thing before. But, you know, why why you said that people would want to do all this on Bitcoin when a lot of this functionality already exists on Ethereum or Solon or any of these other smart contract chains? Yeah, I think the first answer is that imagine there's a trillion dollars of BTC capital that is just sitting there. Like you look at ETH, a lot of ETH is actually actively deployed in smart contracts and applications and is earning yield and so on. So I think it's just a market force. Like imagine if even, you know, I think 25% of ETH has deployed or something, that's at Bitcoin's current market cap, not future market cap, current market cap, that's 250 billion dollars of capital that's just sitting there for developers to come in and sort of like do interesting things with it. So I think one is just the market pull of like how large a capital base BTC is. And I think the other thing is Bitcoin has established itself as the most sort of like secure chain as the number one brand name.

even in terms of active addresses, Bitcoin is up there. Like it has the most number of active users on daily basis. Sometimes Solana flips it, but Bitcoin is up there. So it's a very large user base. And I think Ornals sort of like short us that people value their NFTs more on Bitcoin. When it's secured on Bitcoin, they value it more because Bitcoin's block space has that premium. And I think same thing with VTCD5 as well. So we have seen like several false, you know, sort of like starts to Bitcoin D5 and Bitcoin

if I weren't really there with taproot, but it was over-marketed. But I think when it actually happens, when people are able to deploy BTC capital into all of these applications that we've seen on Solana or Ethereum, I think users are just going to sort of like intrinsically know that BTC is more secure and more valuable. So these applications can actually gain a larger capital base, more users, and so on. And I think that's the exciting part. So, you know, earlier when we talked about the inflection point in Bitcoin, what I find so fascinating is that all the news has been about the ETFs recently

and yet that didn't really come up. But it's been a big catalyst to price. And then also coming up, we have the halving. And I just, you know, thought, you know, I wanted to hear kind of your thoughts on where the future of Bitcoin is going when you look at like that whole picture of kind of trad-fi, the tech happening and then the software just chugging along and doing what it does every four years? Yes. So I think basically the way I think about this is some of the more larger institutions and especially institutions that are more risk or worse, they sometimes stay out of an industry until it matures to a certain level. So that's why I think Bitcoin becoming clearly the only asset that is money or in some ways becoming a standard for doing

supplements is actually a really good thing for adoption. Because once Bitcoin becomes a standard for settlement and BTC is the asset in which most things are happening, then the more risk-averse mature institutions, they're like, okay, this industry is actually maturing enough that their standards emerging and we can come in. Because they want to come and build something that's going to last like 50 years, 100 years, whatever. They don't want to build on something too experimental that disappears in two years, three years, four years or so on.

So I think I look at all of this as like being very, very good for Bitcoin. Wall Street is now plugged into the Bitcoin ecosystem through the ETF. Like ETF is sort of like an API interface for Wall Street, right? Like now they'll take all of their traditional products and they will start offering them for Bitcoin and so on. And that's going to have a lot of demand on BTCD asset. And I think L2, interestingly, are going to have a very similar effect on Bitcoin demand as well. Like imagine something like 3% of BTCD. is already sitting under ETS.

And a very, very small amount of BDCs actually sitting on any bridge or any L2, a very tiny amount. And I think that's going to change, where these L2s would have a ton of demand for Bitcoin. Bitcoin capital would basically sort of like move into these L2s, just like it's moving into ETS. But in the L2s, it's actively deployed. So people are earning yields, people are sort of like doing active trading in a decentralized way. They're getting liquidity.

Like a lot of Bitcoiners, like myself, we don't like to sell our Bitcoin, right? But we wouldn't mind getting some liquidity by locking up Bitcoin in a decentralized smart contract and getting partial liquidity for, you know, our daily expenses or whatever. Like, I don't want to get a tax hit. I don't want to sell my Bitcoin. But I am a human in the end and I want some liquidity for expenses this year, for example. Right. Yeah.

I mean, that's obviously one of the most popular use cases on Ethereum. You know, when I asked the question about other possible layer two, I did mention a ZK roll-up. And I just wanted to hear your thoughts on privacy coming to Bitcoin. Yes, I think that's a pretty big thing. I do think there are some challenges as well, because one of the reasons Bitcoin has been getting institutional adoption is that it's not completely private and anonymous, right?

There are a certain level of public information that people can try. trap. So I do think that technically a bunch of these L2s will, it's just inevitable that they will end up doing shielded transaction than more private transactions with Bitcoin. But I think it's going to have a little bit tension with this idea that Bitcoin is sort of like has traditionally never had very strong privacy solutions. Obviously there are things like coin joint and others, but not at the level of like ZK mixers. Yeah. Well, we'll have to see what happens with all that. Well, Meneb, this has been so fascinating. Thank you so much for chatting with me. Awesome. All that's great talking to you. Yes. Defy just got way easier with Volcraft, your no-code toolkit for building,

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With Amex Platinum, $400 in annual credits for travel and dining means you not only satisfy your travel bug, but your taste buds too. That's the powerful backing of Amex. Conditions apply. Welcome to this, week's Crypto Roundup. Today, we delve into the Reddit IPO filing revealing Bitcoin and

Ether investments, Starknet's response to community feedback with a revised token unlock schedule, and the legal journey of Terraform Labs co-founder, Doe Kwan. Additionally, we'll cover the remarkable surge of Athena's high-yield defy platform, the latest strategic moves in the NFT market, including Pudgy Penguins Ascent, Overbore Ape, Yacht Club, and more. Thanks for tuning in to the weekly news recap. This segment is written by Juan Aronovic, edited by Uni Hong and read by me, Meg Christensen. Let's dive right in. Terraform Labs co-founder Doe Kwan is set to be extradited to the United States, where he faces serious fraud charges. This decision made by the High Court in Montenegro over rules of previous request by South Korea

for Kwan's extradition. The charges against Kwan are linked to substantial financial losses suffered by U.S. investors, related to the collapse of U.S. Terra, an algorithmic stable coin developed by Terraform Labs. The sequence of events leading to this decision began with Kwan's arrest in March 23 in Montenegro. He was apprehended for using a counterfeit passport while attempting to leave the country. Although Kwan initially agreed to be extradited to South Korea, the situation took a turn when a Montenegro court in June found him guilty of document forgery and sentenced him to four months in prison. Despite an appeal, Kwan lost and served his sentence. The extradition ruling follows a series of legal challenges faced by Kwan.

The U.S. SEC has levied civil charges against him and Terraform Labs, accusing them of raising billions from investors through the sale of crypto asset securities, many of which were unregistered transactions. This trial initially scheduled for January but delayed due to logistical challenges is now set to take place in late March. Starknet, a layer two blockchain network on Ethereum, initiated the much-discussed distribution of 728 million Stark tokens to about 1,000. 1.3 million wallets, causing its market cap to reach nearly 1.3 billion and a fully diluted valuation,

FTV, of 18.9 billion at the time of this recording. This position Stark among the top 10 tokens by FDV, surpassing long-standing networks like arbitram, optimism, and avalanche in valuation, though not in total value locked. However, the tokens launch wasn't without controversy. Starknet faced backlash from its community, particularly over the exclusion of active members from the airdrop due to not meeting specific wallet criteria. On Thursday, Starkware, the company behind Starknet, responded to one of the criticisms by announcing a change to the lockup schedule for tokens held by its early contributors and investors.

Originally, about a third of the tokens, or about 1.3 billion of them, held by early supporters, were set to unlock on April 15th. However, after, quote, listening to feedback, end quote, Starkware has revised this plan. Now, only 0.64% of the initially minted 10 billion tokens or 64 million tokens will unlock on April 15th, a sharp decrease from the plan 13.4% or 1.34 billion tokens. This gradual unlocking will continue at a rate of 0.64 monthly until March 15th, 2025, shifting to 1.27 monthly for the following 24 months and ending on March 15th, 2027. Under this,

new schedule, 580 million tokens will be unlocked by the end of 2024, substantially less than the 2 billion that was previously scheduled. On last week's podcast, Starkware CEO, Eli Ben-Saysson, said that the original lock-up period for Stark tokens was not misaligned with the company's goals, but was influenced by early governance and payment utility plans for the token. The popular social media platform Reddit disclosed its investment in Bitcoin and Ether as part of its IPO filing. The company, which plans to go public on the New York Stock Exchange under the ticker, RDDT, joins a small group of corporations, such as Microstrategy and Tesla, that holds direct digital asset investments in their treasuries. In a landmark filing with the U.S. SEC, Reddit disclosed

not only its investment in cryptocurrencies, but also its acquisition of ether and polygon as payment for virtual goods sales. While the exact amount of tokens held remains undisclosed, the company indicated that the net carrying value of these digital assets is currently, quote, immaterial, end quote. Athena, a decentralized finance platform, has garnered attention by attracting over $350 million since its public launch, offering an alluring 27.6% annual yield on its USDA stable coins. This yield, derived from a combination of staking ether and shorting ether futures, has raised eyebrows in the crypto community. The platform operates by allowing users to deposit various stable coins and receive USTE, which can then be staked or supplied to other D-5 platforms for additional yields.

However, skepticism surrounds the sustainability of Athena's model, particularly its reliance on high funding rates from short positions and the inherent risk evolved. Critics point out the potential for a decrease in ether's funding rates, which could undermine the high yields and threaten the stability of USDA. Additionally, concerns about the impact of large-scale shorts on the market and the robustness of Athena's $10 million insurance fund against negative funding rates add to the apprehension. Circle, the issuer of the USDC stable coin announced an immediate halt to the minting of USDC on the Tron blockchain. Circle's phase discontinuation plan include supporting transfers of USDC to other blockchains through February 2025 for customers of Circle Mint, a tool used. by institutions for minting and redeeming stablecoins. Retail holders of USDC on Tron have the option to transfer their stablecoins between blockchains or redeem them for fiat currency through various crypto exchanges and brokerages. The decision follows Circle's refutation of claims linking it to

terrorist funding and its denial of banking services to Tron founder Justin Sun. In response to allegations by the nonprofit campaign for accountability, Circle clarified in a memo to U.S. Senator Sherrod Brown and Elizabeth Warren that, quote, Circle does not bank Justin's son, neither Mr. Sun nor any entity owned or controlled by Mr. Sun, including the Tron Foundation or Huybe Global, currently have accounts with Circle, end quote. This announcement also coincides with Circle's recent filing

for an initial public offering in the U.S., reflecting its ongoing efforts to comply with regulatory standards. The recent airdrops by projects like Celestia and Starknet, rewarding GitHub contributors have unintentionally spurred a new trend. Airdrop farming on GitHub. Developers are facing an influx of low-quality contributions, primarily from airdrop hunters, seeking to mimic successful airdrop recipients. For instance, one Starknet contributor received 1,800 tokens for a simple spill check,

worth of about 3,200 at pre-launch prices. This phenomenon has led to over 1,000 spam comments on the scroll GitHub repository, versioning the development team. Togrual Maharamov, a senior researcher at Scroll, told DL news that spamming GitHub trivial contributions like typo fixes is a waste of time for both the spammers and the project teams. The WorldToken of WorldCoin has seen a significant surge this week rising over 100%. The curious thing is that this increase appears linked not to WorldCoin's achievements,

but to founder Sam Altman, also the CEO of OpenAI. The launch of OpenAI's new AI product, SORA, seems to be driving world's value, illustrating the influence of high-profile individuals in the crypto market. This trend is exemplified by world's fluctuation in response to Altman's role changes in OpenAI, despite no direct link between WorldCoin and OpenAI. Key beneficiaries of this rise are the liquidators of three errors capital and FTX's bankruptcy estate, holding substantial amounts of worlds. Their stakes, gained from early investments, could potentially aid in creditor recoveries,

though immediate liquidation is impossible due to vesting schedules. In a surprising twist in the NFT market, Pudgy Penguins' floor price briefly surpassed that of the esteemed Board Ape Yacht Club. The Pudgy Penguins collection achieved a floor price of 22.7Eath, overtaking Board Ape Yacht Club's 22.15Eth. This significant growth has been observed since Luca Schnutzler became the CEO of Pudgy Penguins in April 2022, leading to strategic expansions and partnerships. In parallel, Yuga Labs, creator of Bored Apes, announced some changes in expansions. The company acquired

proof, known for the Moonbirds' NFT collection, planning to integrate Moonbirds into its Metaverse project, Other Side. This acquisition marks Yuga Labs' continued dominance and diversification in the NFT space. Additionally, Yuga Labs has seen a shift in leadership, with co-founder Greg Solano known as Garga, taking over as CEO. This change follows. is Danilegre's 10-month tenure. The leadership transition occurs at a time when Yucalab's faces increased competition in the NFT market, exemplified by the brief floor price lead of pudgy penguins. Over the weekend, crypto exchange fixed float was hacked, resulting in a loss of approximately $26.1 million in Bitcoin and Ethereum. The breach was first indicated by unusual transaction activity

on the platform, with on-chain data revealing the theft of $409 Bitcoin, valued at $21.1 million. and 1,728 ether, approximately 4.85 million. The issue surfaced on February 17th when users reported issues with transaction processing on fixed float. Initially dismissed as, quote, minor technical problems by the exchanges team, it later emerged that an exploit had occurred. While the team acknowledged the breach, they have yet to provide detailed comments on the incident. Flotchain security experts have discovered that the attacker has begun laundering the stolen funds through exchanges such as EXCH-C-H.c-C-X and hit BTCC. Time for fun bits.

Virginia's foray into the crypto world might not break the bank, as their new blockchain and cryptocurrency commission is set to operate on a modest budget of just $17,192 a year. That's right, in the land where digital currencies often spill big bucks, Virginia is counting pennies for its 2025 and 2026 crypto adventures. This budget, slightly less grandiose. and their artificial intelligence commissions $22,048 yearly allowance will primarily cover the exhilarating world of meeting and travel expenses. It's like planning a road trip with a focus on budget hotels and packed lunches.

With 15 members on board, the commission is tasked with demystifying blockchain and digital assets, all while keeping an eye on the fiscal odometer. It's crypto advice with the side of budget-friendly pragmatism. Virginia's message, you could explore the exciting world of cryptocurrencies without splashing the cash. And that's all. Thanks so much for joining us today. If you enjoyed this recap, go to unchainedcrycro.com.

That is, unchained crypto.substack.com and sign up for a free newsletter so that you can stay up to date with the latest in crypto. Unchained is produced by Laura Shin, with help from Nelson Wang, Met Filchard, Wanneranovich, Megan Gavis, Shashank, and Margaret Korea. Thank you so much for listening. Unchained is now a part of the Coin Desk Podcast Network. For the latest in digital assets, check out markets daily five days a week with host Noel Atchison.

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