Unchained - tBTC: What Happens When the Most Liquid Crypto Asset Hits DeFi? - Ep.169

Episode Date: April 28, 2020

Matt Luongo, CEO of Thesis, the parent company of Fold and Keep, describes the just-launched tBTC, his plan for a censorship-resistant Bitcoin-Ethereum bridge. He explains his personal reasons for wanting such a platform, why tBTC is different from other versions of Bitcoin on Ethereum, and how it works -- including the process of becoming a signer in minting tBTC, how the system will handle crises, the reason for high collateralization levels, why staking assets are limited, and the necessity of a work token, Keep. He also discusses the economics behind tBTC-backed tBTC, his vision for DeFi, how tBTC could buffer an ETH crash, and the reasoning behind minimal governance mechanisms -- playing into why institutions trust BTC more than ETH. Plus, he contrasts the Bitcoin and Ethereum communities and talks about the possibility of tBTC2.0.   Thank you to our sponsors!  Crypto.com: https://crypto.com/ Kraken: https://www.kraken.com Episode links:  Matt Luongo: https://twitter.com/mhluongo Thesis: https://thesis.co/ Keep: https://keep.network/ Fold App: https://foldapp.com/ tBTC white paper: https://docs.keep.network/tbtc/index.pdf Initial reveal: https://twitter.com/mhluongo/status/1162481737525583873?s=20 Announcement on Keep blog: https://blog.keep.network/bridging-bitcoin-and-ethereum-b2f9923630a7?gi=5c9040ed3a72 Some criticism of tBTC: https://twitter.com/peterktodd/status/1162728205607985152?s=20 Matt on the Breakdown podcast: https://www.coindesk.com/will-defi-matter-in-a-post-coronavirus-world-feat-matt-luongo Matt on Sendwyre podcast: https://blog.sendwyre.com/announcing-tbtc-with-james-prestwich-and-matt-luongo-of-cross-chain-group-c424e2b0b40c?gi=d1e8b53ca80e How tBTC works: https://defipulse.com/blog/what-is-tbtc/ The Block on tBTC: https://www.theblockcrypto.com/daily/55284/inside-tbtc-the-bitcoin-backed-erc-20-token-that-could-go-live-in-march Keep raises $7.7 million: https://www.forbes.com/sites/justinoconnell/2020/04/03/coinbase-co-founder-invests-in-project-to-bridge-bitcoin-and-ethereum/#368a6f737df4 Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi everyone. Welcome to Unchained, your no-hype resource for all things crypto. I'm your host, Laura Schitt. Twitter fights, medium posts, scammers, fissures, and promotional content? Want to cut through all the noise in crypto? Sign up for my weekly newsletter at Unchained Podcast.com to get a quick and easy summary of the top news stories every week. In response to the challenging times, Crypto.com is waiving the 3.5% credit card fee for all crypto purchases. for the next three months. Download the crypto.com app today. Cracken is the best exchange in the world for buying and selling digital assets. It has the tightest security, deep liquidity, and a great fee structure with no minimum or hidden fees. Whether you're looking for a simple fiat on-ramp or futures trading,

Cracken is the place for you. Today's guest is Matt Luongo, Project Lead for TVTC. Welcome, Matt. Hey, Laura, thanks for having me. Just a heads up for listeners. The main topic of today's show is TBTC, but we're recording before the launch. And so by the time this comes out, TBTC will just have gone live. So, Matt, I guess I'll give you a preemptive congratulations. Thanks, yeah. Hopefully that doesn't become the headline that it didn't go well.

So you're involved in a number of companies, fold, keep, thesis, and obviously now, TBT, which isn't a company, but a project. Can you explain all the various things you do and also talk about where TBT fits in? Yeah, sure. So clearly I've got a bit of brand ADHD. I like to work on a lot of things. So I started Fold in 2014. And originally it was a Bitcoin kind of 1.0 payments company.

And since then, you know, when Bitcoin kind of stopped, the narrative for payments died. and we started realizing the store value is really what made more sense for Bitcoin. We started pivoting Fold, but I got bored. So we found a new team to run Fold. The CEO, Will Reeves, is frankly a better consumer app CEO than I could ever be. And they have raised their own money and they're doing their own thing. But then we started working on something different called Keep. And I started to realize that I really like starting things and then growing them.

but eventually I'll probably want to step out. So when we start a Keep, which is a confidential data layer for Ethereum, we also started working on this kind of parent company model called Thesis. And the idea behind Thesis is the tying thread between all of our projects, which is empowering individuals and protecting individual rights and liberties. So yeah, so Thesis is the parent company of Fold and of Keep. and this latest project, TBTC, is an app built on top of Keep to bridge Bitcoin and Ethereum. And how did you come up?

Well, so why don't you describe what TBTC is and how you came up with the idea for it? Yeah, sure. So it's a bridge between Bitcoin and Ethereum, and I mean that in a couple ways. On the technical side, what we want to accomplish is take all the things that we love about Bitcoin and make them accessible on Ethereum. So what is that? So Bitcoin's hard money. It's censorship resistant. Obviously, it's digital, but, you know, that sort of table stakes. And so we said, okay, if we were to have a one-to-one Bitcoin-backed token on Ethereum, how could we preserve those properties? So we made sure that there wasn't really a way to, there's not a way to print more. There's not a way to mess with the supply. But the next part, and this is the tough part, is also making sure that this bridge is censorship-resistant and resilient to. you know, government or corporate intervention. So that was our goal on the tech side. But the other piece is, it's homo sociological.

Like I'm totally outside my field here, but I think it's really interesting, which is over the years crypto has split into these, like this Bitcoin purist group, this like group around Ethereum and then a whole bunch of other little splinter cells. And the Bitcoin folks are sort of, they're more fiscally conservative. the entire hard money narrative is, draws a very particular kind of person, me included, frankly. And then on the Ethereum side,

we have these sort of like techno-optimists who lean a little, like almost left anarchist. And so, you know, what I really want to do with this project is, I don't think Bitcoin versus Ethereum is a useful dynamic in this space. I think it's really Bitcoin and all of crypto

versus the world versus the money printers. and banks taking advantage of the situation that we all find ourselves in. So that's what TBTC is both on the tech side, but also kind of my aspirations for it. And I just have to ask you to tell your personal story of like why, yeah, because I just love that story. And people might agree it, but in case my listeners didn't. For sure, for sure. Yeah, so we, so I've been in the space for a little while and we have a little bit of crypto, not, you know, not like some crazy people, but a little bit. And so, you know, when our second child came along, we, we were living in the Bay for a while. And it's just like, it's very

hard to raise a couple kids in the Bay. So we moved back to Georgia. And, you know, my wife was like, well, now in this market, like, we can definitely buy a house, right? And I was like, yeah, that sounds great. Let's get a house for our kids. And so she said, cool, well, this is why you've got all that crypto. And I did not like that. And I was trying to like, you know, explain, no, this is like a long-term holding. We really can't. I would look at any thing else in our lives before I would sell this. So I said, okay, what if I can find a loan? And this was kind of before loan desks really became more popular. Like lately, we have tools like BlockFi. But so I went to a local lender that my family recommended that said they were crypto-friendly.

And I met them and I said, hey, here's how much crypto I can use as collateral for this. I'd love to do this. And they said, yeah, we're totally crypto-friendly and we're so glad that you have this crypto. Why don't you sell it? Come back in 30 days and we'll pretend like we never had this conversation. So I never want to name and shame these guys because it's like a small local joint. But like, I guess they thought that I wanted to avoid taxes or anti-tops. money laundering or something? I don't know. I don't know how. It was something sketchy. So ever since then,

on the Bitcoin side, obviously, like, I think it's good collateral and I think the hard money narrative is strong. But the thing that you get on the Ethereum side is a little bit more like, I have this kind of millennial finance idea where it's like, why would I ever have to talk to a human to get a loan against collateral that I already have that's provable? And so I kind of started of thinking it would be really cool if I could get a die loan against that Bitcoin. It would be really cool if I could, you know, I mean, ultimately, I think that I should have, should have just been able to talk to somebody and get a mortgage at a super incredible rate because they could see this additional collateral. But I really shouldn't have to talk to anyone. And so that's what led me to getting

really interested in this problem of bringing hard money and bringing Bitcoin to defy in Ethereum. But so one thing I just want to kind of break down. and understand is, like, why is it that important to have Bitcoin in particular? Like, what do you feel that you can't do in Defi using Ethereum that you could do with BTC? Yeah. So, I mean, I think there's like, there's like a really pragmatic answer that the Ethereum folks like. And then there's also maybe a little bit more philosophical an answer. So the pragmatic answer is Bitcoin has 10x, the liquidity of ether. And finding a way to access that via Defy is, critical. I don't want to say that ether right now is tapped. Like there's still,

there's still more money slashing around to use as collateral for sure. But there's this whole huge user base in Bitcoin of people who have never touched Ethereum because they've never really been given a reason. And so, you know, it's not, it's not necessarily that defy needs Bitcoin. I would argue that, but a lot of defy people disagree. But they do need users. And it's a lot easier to tell someone like, hey, you love Bitcoin. Why don't you try this new technology? Bring your Bitcoin with you than it is to convince someone off the street. Like, you know, what is the value proposition for a mainstream person today for Defi? Hey, you can take this incredibly over collateralized loan to get 3x leverage to it's just like so far outside of their

day to day. And obviously, I'm interested in that, but like it's not, you know, it's not like, it's just, it's not something that most people are going to care about day to day yet. So that's pragmatic. Philosophically, you know, I like Ethereum and the technology quite a bit. As a developer, it's given me tons of tools. I'm not yet convinced of the asset. I think the story of replacing central banks with an algorithmic alternative, which is Bitcoin, is much stronger than Ether's current value proposition.

That could totally change. I'm not an economist, but that's kind of the direction I come from. Yeah, it's really interesting you're bringing this up, because in my most recent Unchained, I interviewed Kathy Wood and her blockchain analyst, Yassine Al-Mantra. And I noticed on Twitter later that people were saying, like, oh, you know, these are investors and they're like saying Bitcoin is like the main thing to invest in. But we think ether is money and it's investable.

And they were kind of taking issue with how in the episode, Kathy and Yassine were saying, like Ethereum is more like technology. And, you know, it's not like I have a stance, but I would agree that, you know, Bitcoin has a certain, its monetary policy probably is more in line with, yeah, something that's kind of purely financial. But one thing I wanted to ask you was, so TBTC is somewhat similar to some existing products, liquid or WBTC. So how do you differentiate TBTC from those? Oh, yeah. So I think there are two, I think there's kind of two interesting camps for alternatives. So liquid is great.

It kind of started to show people what we could do. We've all been talking about this idea of side chains and Bitcoin. So how can we expand Bitcoin's utility in a way that is safe and doesn't kind of sacrifice the stability on the main chain? And so sidechains was this idea that we've been talking about since like 2013. and they're hard because to do a really great, perfectly, like sort of the strongest version would require some changes to Bitcoin that people aren't willing to make.

So Blockstream launched Liquid and it's kind of this, it's like what is the almost simplest way you could do this and still call it a side chain? So the basic structure is you've got 15 members of a first. federation. And so on the Bitcoin side, what you're doing is you're saying, you know, here's my Bitcoin and you put it into a multi-sig. And this multi-sig is composed of these 15 members. And that's it. So it's sort of like, I mean, you don't even need to worry about the tech for a second. It's sort of like if you were to just give your money to a consortium and then

hope they gave it back to you. And what's interesting about this consortium is it's across many jurisdictions. So it's very hard to actually like sue them if you want legal recourse. And then what the consortium does is they're running this faster chain that has some additional power. And then if you want, you can ask them for your money back. So here's my problem with that structure. You have to ask them for your money back. So permissionless, you know, is not a thing here. And it's maybe the closest we could get when Liquid was first launched.

So for me, that's sort of like, it's just a Bitcoin bank. It's kind of like if I were to give Wall money for a gift card. Like, I hope they'll let me redeem it for the same amount that I got it for. But that's not why I got in the space is to hope that people would give me my money back. So, but, you know, it was a great step forward. It's a good effort. And then WBTC is quite similar. The difference between Liquid and WBTc, though, is liquid, once you have money in liquid, it's like, what do I do with it? So you can move it between exchanges, but there's really not a lot more. With WBTC, it's quite a, it's quite a similar idea to liquid, but with even fewer

federation members right now, the only custodian is BitGo. And, but you can plug into Defi. So like, now you have Bitcoin and you can, you can use, you know, compound or whatever else on Defi. So at least there's like stuff to do. But you have to, going in and going out, you have to KYC at any point, a transaction can be censored. And this is not. not like, Bicco, they're good players. They did this to help the space. It's just because they're a single company that was what was legally required of them launching this, right? So I think those are two different approaches. Like, they're both, in my opinion, Bitcoin banks, but one, one is kind of off without an ecosystem and the other is tapping into the Ethereum ecosystem. So the difference

with us is we don't want you to have to ask anyone permission. So, you know, you don't need to talk to our company. In fact, we go out of our way. We're trying to get our company out of this as quickly as we can and just launch this thing into the world. You don't need to, you know, send your passport and hope it doesn't get hacked and leaked on the dark web later. You don't need to ask permission for redeeming your Bitcoin. And so what we've done is we've taken this like Federation idea originally in Liquid and we've expanded it to way, way, way, way more people so that each deposit of Bitcoin gets us on federation. And then that federation also puts down money.

So if they're dishonest, you can just take their collateral and you'll actually have made more money than they did being dishonest with you. So it's not quite the same as like perfect trustlessness that we expect on Bitcoin L1, but I think it's as close as you can get. And so walk us through everything that happens when someone comes to the system and wants to create one, TBT. Yeah, sure. So, yeah, so I think how deep you want me to go. Well, just, I have a whole bunch of detailed questions here, but I know that if I ask this one, you'll probably explain most of it. And for whatever you don't, I can dive in and ask the more specific questions. Fair enough. Okay, well, I'll still try to keep it a little short. I don't want to bore you. So here's the rough idea. You can go to this app.

Initially, it's going to be DAP.t.tc.network. But shortly after launch, you'll be able to run it on your own machine or IPFS or just sort of whatever other way you'd like to get to it. And if you have Bitcoin, and you have metamask, so you do need to know a little bit about Ethereum in this first version, you can say, I'd like to make a deposit. And you can choose an amount that you'd like to deposit. Unfortunately, you can't in this version just deposit. any arbitrary amount, and you'll hear why in a minute.

So you can choose an amount up to one Bitcoin at a time to deposit. And then what happens is on the Ethereum side, we put out a request to, and this is all of the infrastructure that our team's built, to this random beacon on the Keep Network. And what the random beacon does is it chooses signers from a large candidate set, who will ultimately be your decentralized custodian for your Bitcoin. So it chooses these signers randomly, and then it also says, this is how much this person would like to deposit. We need you to put down 150% of that deposits value in ether. And so now these guys are bonded.

They've agreed. They come back and they say, here's a Bitcoin address. The way the Bitcoin address works, it's quite similar to Multisig. It's actually a little fancier. It's called Threshold DCDSA. But the basic idea is that all of these signers have to agree. to move money. And then you, as the user, backup here in your browser, are like, okay, this looks great. I see a place I can pay Bitcoin. I'm going to pay. So you send your Bitcoin, and this is

one of the coolest parts. This is maybe my favorite part. So once you send Bitcoin, you then send a proof to Ethereum that shows that you paid Bitcoin. And so at this point, you've only talked to the Ethereum chain, and now you've talked to the Bitcoin chain. You don't need to talk to anyone else, you prove that you've made this deposit, and once that happens, TBT can be minted on the Ethereum side. There's a small fee taken. I think it's incredibly low at launch, but it'll end up fluctuating with the market. And then on the other side, you now have this TBTC token. So as cool as that part is, if you can't get back to your Bitcoin, that's not a great trick. So redemption, that that works is you take your, you take your tokens back to a particular deposit group

and you say, I'd like to redeem this. And then all of them come together to make a signature to move funds. And then they take your tokens and they burn them. So it maintains this one-to-one supply peg. And at any time, if those guys, either if they send the Bitcoin to the wrong place or they don't send you the Bitcoin, their collateral is ceased. and auctioned off, and then it's given back to you plus profit. So there's a pretty huge incentive for these guys to be honest and timely. And then, you know, you sort of pay them for their time with that fee, so they're happy with the profit in the system.

And that's it. I mean, that's end to end. And how do people sign up to be signers? Yeah, great question. Great question. And so earlier I was talking about liquid and a fixed federation, and I was complaining, but I didn't really say anything about an alternative, right? So the way that we work and the way that you join the candidate set is initially we have a permission set,

and that's a whole slew of people will be sharing over the next few days. It's a mix of like, you know, like VC types and like professional operators, staking providers, like bison trails and staked and figment. So at launch, all of these guys will be there. and I think we should be able to get to around 80 signers. And then starting- Did I also see Coinbase Custody and Anchorage? You did, yeah.

Oh, okay. So both Coinbase Custody and Anchorage are also going to be working here. I think they're figuring out how much they're going to stake versus outsourcing. But yeah, so if you're either of their customers, you can just sort of get in there and you can do it. And then June 8th, we are going to start opening up the signers set to everyone. So, you know, on the one hand, like, this system requires a lot of ether. So we actually, in the first version, we need enough ether to make sure that we're confident that this Bitcoin won't be stolen. So we needed ether in the system.

But also, like, as much as, like, ultimately, I want a wide signer set and I want this to be a system that's resilient across jurisdictions. And the whole team wants that. So we need these signers to be everywhere. We need them to be in different regulatory environments. We need them to be geographically distributed. So what we're doing is we're launching something that we are calling a stake drop, June 8th. And the idea is that you can take your ether and you can start staking. And you don't actually need to have any preexisting arrangement with us.

You can put your ether down and you can act as a signer. And there will be a brief period where anyone can do that. it's looking like it's going to be three to six months, or we're pinning down the exact length of time. And once you do that, if you prove that you're good at being a signer, you'll then be granted these tokens that allow you to sign whenever you'd like. One thing that I was also wondering, though,

for when you open it up is, so obviously they need to be able to keep enough collateral that's, you know, 150% ETH against whatever BTC they're signing for. but like because that exchange rate is changing constantly, how can you be sure that they'll have enough if the exchange rate changes? Totally. Is there some way of proving how much ether they have and that they'll keep it in reserve?

Or like how does that work? Yeah. So there were a couple like options here. So one is trading this like a margin account, right? So like if the exchange rate goes too low, you know, signers can like top up and put in more ether. but the problem with that is even if you make it incredibly easy to top up, you need a lot of people to coordinate very quickly to do that. Otherwise, you have this situation where like, you know, maybe one, it's like a common situation where one person ends up paying for the other signers. And so we realize that we really can't treat this like a margin account.

So instead, what happens is if any of these deposits goes under collateralized, the deposit opens up. and any signer or anyone can then redeem the deposit. So the idea is that if the signers want to get out of this situation, because they think that ether is in the middle of taking a big drop or a lot of to Bitcoin or something like that, they can actually just close their deposit and redeem the Bitcoin and get their ether back and sort of rebalance their books however they'd like.

And so one thing that I wasn't clear on is, are you moving to a system where people will only be staking keep, or are you moving to a system that's more similar to multi-collateral die where you're just going to keep adding collateral types? Yeah, so both. I know that sounds impossible. So, okay, so we could have launched a system where you just use Keep. But here's the thing. You know, again, I come from Bitcoin Land and it is totally unclear to me that this token that we're launching is going to magically be good collateral overnight.

It takes a lot of time for things to be trusted. and have liquidity and to actually be good collateral. So the way that I look at this is this version, we've really overdone it with collateral so that we can make sure that, you know, no one can lose a cent here. If you're a bitcoiner and you're playing with Ethereum for the first time using this system and you lose money, you're never going to come back. And so we really overdid it with both the ether and the keep

in this first design because we just can't have anyone have a mistake like that. what we're moving toward eventually is once we see the fees that a system like this can take in, there's this trick where you say, okay, how much am I making? How much is that worth to me over time? And you can basically treat, you know, your position as a signer as this like income generating property. So now we know that that's valuable to you and it can act as partial collateral. And then the second piece is, okay, well, will it just be ether? So I guess what I'm saying is first I would like to lower the ether requirement.

I think we can get it. Like my very rough models have said maybe like 40 or 50% can be ether in some future design. That's impossible in this version of the system, though, because I want people to be confident. We don't have like the power to upgrade the system or anything. So maybe we'll have this multi-collateral future. But I think what we're seeing Maker run into right now is that there aren't that many interesting assets on Ethereum. And I know that's like a theory, and people don't want me to say that. But, you know, there's some security tokens, which are not really my jam, but I see why people want real estate on chain.

There's some interesting systems like auger, where the token does have properties that maybe matter. And then there's ether. And almost everything else, it doesn't, I mean, a lot of it doesn't have a reason to exist. You know, a lot of it was a speculative, like, land grab. And that's like the nicest way I could possibly say that. And so maybe we'll end up moving to multi-collateral, but I think we'll find ourselves in a similar position to Maker, which is, you know, there's not that much good collateral to have on this chain.

There's ether, hopefully, I hope that we'll prove that TBTC can be in that category. And then there's a bunch of security tokens. So I guess, like I just have so many questions about this, but one of them is like keep, you know, if ether can be used, like, what is the purpose of keep? Oh, yeah, totally. Yeah, why is there even a token here? Yeah, it sort of feels like, I mean, you were talking about a land grab and now it feels like there could be an argument made that this also isn't necessary. 100%.

So I think if we, yeah, oh gosh, you're ready for some radical candor. So I think if we, so I think there's like sort of like two very different. takes on this. So one is if we ship TBTC like just the way it is and we increase the collateralization to like 200%, you would never need another token. And people can just keep dumping ether in. And so like that's super inefficient from a capital standpoint. But that's like one way to do it. And then we could just walk away and the thing would exist. Eventually though, someone would build something that required way less. And the system that requires way less is the system that we're building with keep. So what's really great about using, and it doesn't have to be a fungible

token, that was an early decision we made, but it could be an NFT for signers as well, is if one of these guys cheats, you can kick them out of the system. So if you only use ether as collateral and somebody loses their ether, they can come right back and they'll just have more ether. Like it's such a large cap that there's really not a way to exclude them without burning all of the ether in circulation. But a work token like Keep, the idea is that if someone does something malicious, so I don't mean like I messed up or like I became under collateralized, but I mean I stole Bitcoin. If you steal Bitcoin in a system like this, we take all of your keep and you're ejected from the network. You can't join as a signer unless you buy back in. And very quickly,

because this is a work token, there's no liquidity. That's not, you know, that's not really a property of a token that's primarily used like a taxi medallion. So I think, like in V1, if we increase the collateralization quite a bit, I could probably build some sort of system that didn't require any sort of work token. But as we move more and more toward lessening the need for ETH, you either need a token like Keep, which is an ERC20, or you would need to give people a whole bunch of NFTs that represent their like signing rights and then take those away from them. So it is a pretty necessary part of the eventual capital efficient system we're building. But yeah, I could totally imagine building this in a way that was just much more expensive,

but that didn't have another token at the beginning. So essentially, tell me if I've got this right, you're going to do this steak drop. It's going to be six months. And then after that, there won't be a way for people to like earn more keep to enter the system. Either they get kicked out, in which case they'll have to buy keep again to get back in. And after, that six months like anybody who wants to join after we'll have to buy Keep to get back in. Is that what you're saying? I have no idea if they'll be able to buy it, but yeah, they'll have to hold it somehow. And yeah, so it just gives us a way to basically say this person is a bad actor. They've proven it cryptographically. They're clearly a bad actor or they were hacked, in which case they're incompetent and they shouldn't be on the network and you can just eject them. And when you say you don't know if they'll be able to buy it, you're just saying you haven't requested any exchanges to list it.

But like, I can't imagine. that people won't be able to buy, like, in what scenario would that happen? Oh, yeah. Well, you look at systems like, so for a long time, it was very difficult to get MKR. And it was just a, it was just a bunch of kind of, I mean, you know, I don't want to totally mischaracterize because I wasn't there, but my friends were, early MKR holders were true believers who were constantly meeting up in video calls. And it was very difficult to get a hold of the token.

And even now, it's a pretty low liquidity token. And I think what we're looking for is something similar here with Keep where if you hold this, the reason you hold this is because you want to participate in the network. And if you don't, like, that's sort of it. That's sort of the only option. So maybe you buy it. We've got a grant program where we're making sure that folks who we think would be excellent stewards of the network can get Keep regardless of whether or not they want to post. money down. And yeah, we'll just see how it goes. Huh. Okay. I'm going to ask you more about that in a second, but first a quick word from

the sponsors who make this show possible. Local news is in decline across Canada, and this is bad news for all of us. With less local news, noise, rumors, and misinformation fill the void, and it gets harder to separate truth from fiction. That's why CBC News is putting more journalists in more places across Canada, reporting on the ground from where you, you live, telling the stories that matter to all of us, because local news is big news. Choose news, not noise. CBC News. When McDonald's partnered with Frank's Redhot, they said they could put that

on everything. So that's exactly what McDonald's did. They put it on your McChrispy. They put it in your hot honey macnuckets dip. They even put it in the creamy garlic sauce on your McMuffin. The McDonald's Frank's Red Hot menu. They put it in your McGroup. That's not everything.

Breakfast available until 11 a.m. I'm participating Canadian restaurants for a limited time. Franks Red Hot is a registered trademark of the Frenchest food company LLC. Today's episode is brought to you by Cracken. Cracken is the best exchange in the world for buying and selling digital assets. With all the recent exchange hacks and other troubles, you want to trade on an exchange you can trust. Cracken's focus on security is utterly amazing. Their liquidity is deep and their fee structure.

is great, with no minimum or hidden fees. They even reward you for trading so you can make more trades for less. If you're a beginner, you will find an easy on-ramp from five Fiat currencies, and if you're an advanced trader, you'll love their 5x margin and futures trading. To learn more, please go to crackin.com. That's k-r-a-k-en.com. In response to the challenging times, crypto.com is introducing three measures to help the community. First, the 3.5% credit card fee for all crypto purchases will be waived for the next three months. Second, you could get up to 10% back by using the MCO Visa card on food delivery and grocery shopping at merchants like Uber Eats, McDonald's, Domino's Pizza, Walmart, and more.

Don't have a card yet? Buy gift cards on the Crypto.com app from merchants like Whole Foods, Safeway, Burger King, Chipotle, Papa John's, Domino's, and more. And get twice. And get twice. 20% back on food and 10% back on groceries. This is a global offer, so check out which merchants are available in your country. Download the crypto.com app today. Back to my conversation with Matt Luongo. So right before the break, you kind of were saying that people could be chosen if the system thought they would be good stewards. Like, how would that work?

Is there like an application process? Yeah, yeah. So there's two components. So with the stake drop, it's just prove that you don't lose money for a period of time and that you're honest. And then you'll be granted this position as a signer and you'll get these tokens. And then for now, what we're doing is we're playing a test net game. We're calling it playing for keeps because we got tired of everyone calling it game of zones or pegs or whatever. And so the idea is that anyone who can prove that they're a good staker right now,

on testnet and then who like add to the community so maybe they're like doing translations or they're helping other people learn to use the system they can just be granted a position as a signer and the tokens that will let them sign on mainnet so so the downside of that is it's permissioned right so like my team not really my team we actually have a panel of outside judges but people that are affiliated in some way with me and that know me are going to be granting these to people that they think would be good so that's like the human component And then the part that's just objective is the stake drop where you just put your money where your mouth is. And if you're honest, you can keep using the system. Hmm. Okay. This, yeah, this, it sounds interesting. I guess one other thing, though, is like we were talking before about adding other types of collateral. Is there like some system for determining, you know, obviously now we can say like maybe there aren't that many compelling collateral types, but sure.

down the line if there are is there a way to to add yeah so i'm about to so total left turn on you here sorry if this is if this sounds like a lot so like there's this trend to be incredibly governable and upgradable in ethereum and like the like geeky engineer optimist to me thinks it's so cool but the cragly bitcoin opsec security guy is like what are you doing the whole, you know, the whole premise of this space is censorship resistance and immutability and people not being able to sort of like mess with things. So, so when I talk about like a V1 or a V2, I have no idea if V2 will exist. I could get hit by a bus and our whole team could, you know, COVID, I don't know,

anything could happen that prevents that from being a thing. And so, you know, no one should get involved with the system assuming that. that there will be a V2. And we have not built in anything to allow the team to upgrade the system as it runs. And the reason that we did that outside of like sort of philosophical leanings is if you're a Bitcoiner, like it takes an incredible, incredible amount of coordination to change Bitcoin, even for a soft fork. And for a hard fork, we've seen that fail. And I was there on the front lines watching that fail. And so for TVDC.

Are you talking about SegW2X? I'm talking about Segwit 2X. I'm talking about I was a, what was it? I was a Bitcoin classic supporter. I was a big blocker. You're a big blocker. Yeah, I was a big blocker until Segwit 2X. And when I saw how that was going, I was like, no, this is wrong.

Like we can't make these decisions with a bunch of companies in a room in New York. That is wrong. And not what the system is supposed to be about. So originally I was like, engineer, engineer, we need to grow this thing. We need big blocks. And then I became, I just sort of realized like, what is Bitcoin for? if it can't be for payments at L1, that's okay. The most important thing is that it's not captured. And so anyway, so this kind of really shaped how I look at these systems. And so what I've done is,

you know, the team does have a privileged key to this system, but I can name all the things that privileged key can do. So the first thing is let's avoid a kill switch. Let's avoid an upgrade process and a kill switch. So here's the one closest thing we can do to a kill switch, which is if there is a zero-day exploit and we think a whole bunch of people's funds are at risk in TBTC, the dev team has a multi-sig wallet that can press a button one time that will pause TBTC's new deposits for 10 days. That's it. You can't press the button again. If I'm compelled by law enforcement to press the button, it only lasts for 10 days. And then after that, we have three other functions that that key can do.

One is to set the signing fee. We do not yet know how the market will discover signing fees, and we're just going to have to mess with it. But what we've done to keep that from being incredibly dangerous for users is we've said this only impacts new deposits, so anyone would have to opt in before this became effective. And it's in a tight range. We can't set it to like 100% or something. The second is we can set, or sorry, the third is that we can set collateralization. ratios. And that's also tightly bound. It has to be over 100% and less than 300%. And then the third, and then the third is, oh, there's another fee rate structure that we can set as well. So there's

this enumeration of these are all of the things that this dev team can do to this system. So if there's a V2, it'll be because a whole bunch of people on Twitter trolled us so hard that V1's not good enough and it'll be because we think that we have a better design and we'll propose it. And if people like it, they can move to it. But I just want to be really clear. So this discussion of V1, V2, like, V2 is, we have some designs, but like, please don't get involved with this system expecting any of that stuff. And wait, I'm sorry. So just, like, I asked whether or not you're going to add collateral toast.

So you're saying that you're not going to fiddle with the system. Is that what you're saying? That is what I'm saying. So we are going to try to add new types of collateral in this next version. But in this version, the only acceptable collateral is ether. And all that Keep does is it can additionally kick out malicious signers. That's it. Okay.

And then we, but so you just said this next version. But before that, you said there may not be. So what are it? Both. I'm trying to say both. So you guys are working on potentially how. having an exversion. But you're saying nobody should put their hopes on you guys ever launching it. Something like that is what I'm saying. Yeah, I know that it might sound like two sides of my

mouth, but I'm actually trying to do people a favor here, right? So like in the Ethereum space, people love to say like, oh, well, this is how it will work. So, you know, I had actually, I had a really terrible public eating crow incident the other day where as I'm trying to explain to Bitcoiners what's interesting about Ethereum, you know, they're like, I don't see anything here that's new, and they're mostly right. Like, there are a couple things that are really cool, but a lot of it isn't new, and you could just do with, like, multi-sig on Bitcoin. So one of the things that is new is robust privacy, like robust privacy tools.

You can launch a new snark circuit or another sort of, like, privacy tool on Ethereum. And so I've been really excited about tornado cash, right? It's not like, it's not as robust as something like Zcash, but it's interesting, and it's on Ethereum and you can use it today. So I've been so excited about it that I've been telling people, like, you should really check this out and consider this as an alternative to coin join. And I got into this little Twitter spat with Udi, who, if you guys are familiar with Crypto Twitter, he's a fun guy. I got into this spat with him and he said, you know, this isn't the robust thing you think it is. And I actually looked at the contract and I realized the team has the power

to upgrade the contract in such a way that my funds could be totally moved. And so, look, I'm so excited about tornado cash, but not yet. And there was just this misunderstanding where a bunch of us in the community thought this thing was ready to roll. But it's not going to be ready to roll for another three to six months. And it looks the same to users. And so for me, it's really important to say, hey, guys, this week, by the time this podcast is heard, you'll be able to start interacting with this system. And you'll be able to start playing with your Bitcoin on Ethereum. But, you know, all of these ideas of new collateral and more efficiency and better privacy

constructs, they're ideas that our team has for V2. And, you know, we'll probably still call it TBTC, but it's incumbent on you. Like, these tools are sharp and you have to do your diligence. And I don't want to, I don't want people to think that this is magically just going to, like, get better without them paying attention. And, okay, so just so I understand. also about the V2. Sure.

Like, if you were to ever launch something like that, would you have to wind down the current TBTC network? Oh, okay. So it's totally a social. It's like, it's sort of like a hard fork. It's a coordination event. So if people like V2 better, they can drain their Bitcoin from V1 and they can move it over. If they just want to keep using V1 forever, cool.

We didn't, again, we don't have like a long term stop button. And I mean, you know, I guess what I'm trying to say is I think that even though that might be in my business interests, I don't think that's in the user's interest. And so that's why we've made sure to not include it. Okay. So it's a little bit different from the transition from a side of die where if I remember correctly, I think there was, was there a deadline on like one? Yeah. Yeah. Yeah. They have some buttons. Okay. And they were trying to move everybody. But you, if you were to ever launch a V2, it would be like up to people. whether or not they wanted to use the new system. That's right. That's right. And with my CEO hat on, guys, we're totally launching a V2.

But with my Bitcorner hat on, please don't. Trust me. All right. Okay. So one other thing that I wanted to ask about was for when people meant TBTC, you know, obviously the number of signers is going to be somewhat limited. Do you have a sense of how many there will be? Yeah.

So it should be. around between 80 to 100 at start. And then I expect that before the stake drop will start to approach 200. We're trying to take this thing kind of slow. So it could go slower, but I think the most important thing is that users can see. So as you decide to mint TBDC, you can actually see how large the signer set is and decide, like, am I comfortable with this security? The other thing that we're doing is in the DAP that we run, we can't do this in the contracts, but in the DAP that we run, we're actually going to limit the initial deposit size to pretty small and then slowly ramp it up.

So people can, you know, play with this thing and get comfortable before we are off to the races. So anyone who's integrating in the contracts, they can just go for it. And YOLO, it's your life savings. If you want to put it on the line, that's your choice. but the rest of us who are using this step, we'll get appropriate warnings and, you know, take it easy. Don't move too much money until you feel good. And as for choosing the signers, you have this random beacon that does that,

but I guess I was wondering, is it always randomly choosing a different set of signers each time? Or is it like groups within the... Yeah, so it's actually always choosing random signers. So the way, so I'm going to try to not delve it, the random beacon is super interesting. And if you guys are familiar with ETH II, like it's kind of an alternative design to what the ETH two team is shipped, but it's on ETH one. So it's super interesting. But the basic idea is that we're just sampling. So we use this idea called like sortition, which if you look into it, it's actually really fascinating just from like a governance perspective.

It's this way to randomly elect people and the Greeks actually have a history. history of doing it. So I would really suggest if you feel like going on a Wikipedia rabbit hole to check out that. But we use sortition to choose signers randomly. And, you know, a guarantee of the system, or a guarantee that we can't offer in the system that you can in something like liquid is we don't know if these people are different people or not. Ultimately, you know, these people aren't all like providing their KYC information every time they sign. So you're not confident that these are different people. And so what's important with this random beacon is just to make sure that each time it is actually random and that folks aren't colluding. And then the other thing is that

even if they are colluding, that's why we have all this extra ether so that if they do try to hurt a user, the users got recourse. And one other thing that I heard you talking about on a different podcast was you're going to allow TBTC as a collateral type? Something like that. Yeah. Yeah, I didn't, I was trying to listen sort of quickly. So, can you explain that? Yes. So this is, this has totally been kicked to V2,

but it's one of my favorite pet ideas. Oh, this is V2. Yeah, but still keep going because this is very confusing. Yeah. Oh, it totally is.

It took me a long while, but like convince myself that it was real. So like, if you use a system like Maker and die, and if you make dye backed by dye, so a synthetic backed by itself, the system diverges,

right? Like, it's going to swing more and more wildly because every time, the base swings, the collateral also swings. So every time it would swing up, it would swing up harder. Every time it swings down, it'll swing down harder. But in a system like this, what you're actually saying, if you use TBTC backed by TBTC, and this is a huge difference. It's like people are like, is TBTC a synthetic? No. And this is exactly why is if you use TBTC to collateralize more TBTC. What you're actually doing is you're taking TBTC off the market and you're having signers put more

of their own Bitcoin at risk. And so you do that, and what it does is it provides more system security, but less system utility on the chain. And so, like, you ask yourself, like, well, why would you do that? Well, if everyone is moving their Bitcoin to the Ethereum chain to get leverage on it as collateral, that's okay. That's actually fine. So anyway, it's really interesting.

And I cannot wait to, like, provide a proper. formal treatment of of this thing because it's it's really kind of a counterintuitive economic effect and anyway so so I think wait but let me make sure that I even understood what you said because it sounded like what you were saying was that essentially a signer signers will be like minting TBTC and so they'll be oh okay oh so now that makes more sense to me yeah yeah so the signers are basically they also become depositors. Or, I mean, they could have bought it on the market or whatever.

But it's like, you know, so it actually has this like increased structural property to the system. But like balancing those incentives is going to be tricky. Okay. So something that I was wondering about, and this mostly applies like especially for ETH backed TBTC. Sure. Could there ever be a situation where the price of that collateral crashes?

and then it would just make more sense for the signers to just steal the TBTC and take whatever punishment they get because their collateral is just so worthless. Like it doesn't even make it, you know what I mean? Oh, totally, yeah. So here's how I will reframe it the way that I like to talk about it. So here's how I like to think of it, right? So like if the ETH became zero overnight, this system falls back to security like liquid, which is that.

that these people are going to be honest by default, and that most of them will run the default software, and that probably if you go to withdraw your Bitcoin, you'll get it out. But, yes, the incentives totally skew. So because we're starting with 150% over collateralization, if you were to lose 33% ETH to BTC in, like, less than six hours, this is where things start to get crazy. So ETH just takes a total nose dive relative to BATTS,

Bitcoin, or alternatively, Bitcoin goes on a run and ETH doesn't follow. And these deposits start moving into under collateralized. And if no one does anything, they move into liquidation and the sign and bonds get sold out. So again, fall back to liquid mode. A lot of these people, the majority of these people are going to be honest. We don't like to make that a primary assumption, but, you know, this is what you're left with when the Eath goes away. And then the people who do decide who, you know, and they have to have prepared for this. They have to have, like, written a malicious client up front and be ready to, like, steal everyone's Bitcoin. The people who do decide to actually be dishonest and steal, those people, this is where Keep comes in.

They're ejected from the network. And so, you know, maybe they get to do that once, but they're never going to make these fees again, especially if the work token stays. Yeah. I think what's fascinating to me is from what you said, like I. can see how just having that second collateral type of keep will help at least a little bit in a Black Swan type situation because otherwise what I could imagine happening is if Heath, like let's say there's some sort of, you know, Dow hack like event and the Heath price just drops precipitously. Like you could end up with this crazy feedback loop where TBTC is also exiting the system.

That's right. And yeah, and that would, well, actually, Now that I think about it, though. Right. Yeah. Wait, does putting TBTC in the system, will that make the price of ETH go up? Yeah, so I don't love to. It might. Yeah.

So the reason we're going, and I keep going back to the reason we chose so many conservative, we made so many conservative design choices in this first version is we don't know. Now, each time you meant TBTC, there's more ETH locked up. And so this could have a great. impact on the price of ether because it's going to be it slows velocity of ether right either gets stuck in the system and so i what i don't i truly don't know and where and when we're running simulations but i cannot give anyone like i mean i can't be sure we're right now running simulations with like a black thursday style event like happened recently with maker and you know what happens if this

loses if eth loses 50% relative to btc and there's a ton of arb opportunities where you where people should, like, air quote, should be minting TBTC, and that could actually have a positive price support impact on ether. But I just don't know. And so that's why we've kind of done this multi-tier approach, because could you imagine, like, if we just relied on keep and we only had a little ether or something, you know, the price of keep could just be swung around everywhere,

and it would really be like you would have no idea what happens. And so, so yeah, so I think, I think, what would happen in that scenario is that there is an ARB opportunity to actually met more TBTC and that has an ETH price support. I just don't know, like as TBTC gets bigger, that has a bigger impact. And I think while it's still small, it's, you know, I mean, it's small. It's more likely to break probably in the first 60 days than it will in the next three years. Huh. Okay. Well, well, yeah.

Yeah, we'll find out. Well, we will. And speaking of that, so, you know, this fact that you're only going to have this admin key that allows you to do the pause one time, if, God forbid, there is some kind of second situation that is life-threatening to the system, then what? Like, are people just screwed? Or do you know what I mean? Like, yeah, it's a sharp, it's a sharp thing. Yes is the answer. So like, and this is a huge difference. And this is why you're hearing, I mean, you're hearing me, you're like, well, is there V1 or isn't there? Like, this is why you're hearing me be so, try to be so careful with my words is if we have to use this pause, there's not another one. And so you either have to be very happy with how that pause got used to continue to use the system or maybe don't ever use it again, you know? And I think this is the sort of stuff that we as a team are trying to be much more upfront about. a lot of folks in Defi, especially in Defi right now are cowboys, and they're losing, you know, $10 million here, $25 million there. And, you know, it's sort of gratifying to be like, well, caveat mTOR, you should have done your research.

But, you know, it's really hard as a user to keep up with the fire hose in crypto. And it's really hard to know if a system is trustworthy or not. So my expectation is that if we have to use the pause, button ever, that probably people will use those 10 days to exit and not come back. That's what I would expect. That's probably what I would do with my money. And there might be a few cases where that's not true. So maybe there's like a widespread like zero day exploit on a whole bunch of different

types of computers, but the core TBDC system's not impacted. And we just didn't want people losing a lot of money. So we press the button. Okay. But if we press the button because there's a Black Thursday style event, that means the system wasn't, it's not resilient. And so my, I mean, you know, my goal as the person who will be part of making that decision if it ever comes up is, is this the economics like working as designed? And if I can, I don't really want to ever press the button because of an economic reason.

What I'd rather do is only press the button if there's a, you know, an actual hack that has been disclosed in advance. And we know that we can save people tens of million. of dollars. But if there's a, if there's a huge drop in the price of ETH, well, yeah, the systems, it was designed for exactly that happening. And don't press the button. This is, this is how it's supposed to work. Oh, this is really fascinating. Because when I first heard you say that you could only press the button one time, I, I kind of assumed that at some point you will, you guys will need to engage that. But what you're saying is we will always have, like, like you're saying, as long as the system exists, we will have that backstop. And if we ever have to use it,

that would be kind of life ending for the system. Most people would leave and like game over. That's how I look at it. I mean, I think that's probably how I would manage my money. And again, this is why we've taken kind of a different approach. Like, I have spent a long time collecting the little Bitcoin that I have, I do not want to see it disappear. You know, when I joined the space, it was in the middle of like the 2013 rise and then the Gox crash. And that was quite, oh my gosh, actually, I've got another one. So not only did I join the space mid-Gox, but the day my son was born, I was, so that was, so I'm

very, well, I won't share because it's bad Opsack to share his date. but the Bitfinex happened, the Big Phinex hack happened right around when my son was born. And I was in this position where I really had to focus on my family, obviously, and we were having our first child. But I was also seeing that I was, I was long, long on BitFinex. And I was watching a big chunk of my life savings just get eviscerated. Yikes. Right? And that was really, I mean, I learned a little bit via proxy with Gox and watching what happened.

But I learned a lot. Bidfinex taught me a lot. It taught me a couple of things. As a user, it taught me not your keys, not your coin. So a system like TBTC will, will be weaker than keeping your Bitcoin on L1. And my hope is that we can show that it's less risky than like centralized lending, for example. But the other thing that it taught me, and this is, and this part makes me sad, is that people will forgive you for making huge mistakes. So I do not use BitFinex anymore, and I stopped using it after that, and I was done. But, you know, a lot of people, they recovered, and it was sort of miraculous. And it took a lot of guts from that team, and it's very impressive. But so, so I would hope, though, that if there were something similarly disruptive to TBDC, that people would be out. But if I'm in the position where I try to regain that trust, I mean, I'm going to try and we'll just have to see, are people forgetting? but I know that as a user, I'm not very forgiving. And I know that as a user, I would probably be done.

Well, one other thing I guess I thought initially when I heard about the pause button was, you know, we're just coming out of this period after the Deforce Lend-FME attacks. And that, you know, in large part was caused by this issue around the ERC 777 tokens being, you know, kind of like having more optionality built into them. but then making, yeah, older systems vulnerable. So I assume that you were maybe going to use the pause button to integrate stuff like that. But so you're not saying that. So it almost sounds like for things like that, like as the technology improves, essentially

you'll just have to do something like launch a V2. That's right. That's right. And if people want to keep using the old one, they can. And again, this also goes back to Bitcoin, right? We aren't constantly upgrading Bitcoin and that can give people confidence. which is really powerful. That's another reason, like, Ether, again, I love Ethereum as like what it lets me do as an engineer, but just the institutions can't get comfortable with it.

Like institutional investors and funds can't get, it's difficult to be comfortable with Ether because things can change, hard forks happen frequently, and really big, like, I mean, you know, the Ice Age change over New Year is where a whole bunch of our teams were kind of like, oh, we need to upgrade clients very, very quickly on a holiday. That doesn't inspire confidence. And so with this system, we've done everything we can to, I mean, not to inspire confidence now, but to build a system that can build confidence. And so that's why I don't want this to be, I don't want anyone using the system to be,

do I trust Matt and his team? Like, that's how things used to work. Do you trust Satoshi? No, it's totally irrelevant to whether or not you think they're, coin is a good place for your money. And I hope, I hope that one day that's where this system will be to. And so a couple last questions we're kind of getting, we're basically over time, but just a couple last questions, because this is so fascinating to me. So as far as I understand, one of the reasons that you're interested in creating TBTC is because of the ways you can use it on

defy. So what are you expecting people will do with it and how do you think it will change defy? Yeah. So I really think, I mean, I think it's going to depend on obviously on people's risk profiles and defy is changing very, very quickly. I think for me, just going back to my story to scratch my own itch, you know, I ended up having to do like a side deal with a friend to say, look, here's my crypto collateral, here's how much cash I need for this long to get this house. and and I think I would really like to see die solve that problem. I would like to just open my browser or open, open an app on my machine and say, here's how much Bitcoin I have and then get a die loan.

That's really, so I want to see that, and I think we will. I think we'll see sort of the collateral aspect. And then I think, of course, they're going to be crazier things. People are likely going to do leverage and all sorts of settlement. But I also think, you know, this is almost hard to say. I think I've come off as a bit of an odd duck to both communities. A lot of my Bitcoin friends are annoyed or are wondering like what I'm doing in Ethereum. A lot of people in Ethereum, they look at me kind of askance because there's this sort of paradox of tolerance where they're a very tolerant community.

But it's hard to be tolerant of intolerance. And so they're really skeptical of people who come from Bitcoin. because a lot of them have said bad things about Ethereum in the past. And but I guess what I'm thinking, and the reason that I bring this up is there are more people like me. There are a lot of them. And I think that they might even be the silent majority that believe in the economics of Bitcoin and then the technology of Ethereum. And so while I think like defy is step one, and it's going to be really interesting to see Bitcoin use as collateral and see people take leverage against it. And it's going to do a lot for the defy space, right?

we're talking about, you know, a 10x liquidity injection in this space that, you know, that thrives on over collateralization. So I think that'll be big. But the biggest part, the thing that's most exciting, is when people will be able to get robust privacy. So not coin join, but zero knowledge robust privacy on Ethereum with their Bitcoin. And anyway, so I guess that's my end game. Sorry, I've strayed a little bit from your question. but well wait so just i actually just want to walk through that for a second so essentially i turn my i i turn my btc into t btc yeah and then i use it in a private transaction so then the person

receiving that receives t btc privately yeah and then they can cash it okay and one of the thing i want to ask was um what are you going to do when ethereum transitions to east 2.0 So, well, again, you know, I can't do anything with V1. So it'll just keep on, it'll just keep going. And we'll see if the incentives are compatible with ETH2 or not. And by the way, this is exactly what I was talking about with people struggling to have confidence in Ethereum. So, you know, the first release of TBTC will continue on. And maybe it will be perfectly compatible with ETH2 staking.

And maybe it'll make it, it'll make the fees shoot through the root. because no one will want to put eth up. It's totally unclear. But, you know, for my next, for our next release that we're working on now that this one's about done, this is another reason that this work token becomes much more useful. So where the base collateral on the chain is not as easy and the rates are already kind of set by the protocol on what you need to earn there, you can either compete for that collateral or you can say, here's collateral. that's more closely tied to the operation of the system. So eventually that's my goal for Keep is to move to this system where maybe you still put a little bit of Etherend to make sure that everything is kosher and that you have safety margins,

but that almost everything relies on Keep. Okay. This is interesting. So just one last question, which you kind of talked about a little bit, but I want to have you elaborate a little bit more. What is your take on the difference between the Bitcoin and Ethereum communities and why do you think that there is kind of a bigger group that, you know, believes in both but for different reasons? Yeah.

Because the evidence, at least from crypto Twitter, is that there isn't that big of a group. That's right. That's right. So crypto Twitter is a fun place because it really behooves you to say ridiculous things on one side of the spectrum or another. And there are like a handful of people that maybe are in the middle and who are trying to, who are trying to do. just be real or who are trying to provoke one or the other. But, um, but, you know, if you, I mean, the numbers don't lie. Like, if you look at the people who own Bitcoin and Ether and some tokens, like most people, I guess I shouldn't say, I'm fairly confident. I actually don't have

totally have dated back to someone. I'm fairly confident that the majority of individuals who have bought Bitcoin have dabbled with another token or, or blockchain. So I believe that's true. I could be wrong. But the fact that a lot of people, for example, buy their first Bitcoin and Coinbase, and then there are like five other assets there, it's just, you know, you're probably going to try these other assets. And I think that that's this like silent majority that, you know, like that maybe that they're excited about this idea of Bitcoin and that they see that the world is changing. You know, I don't want to not to get too ranty about the COVID stuff, but we just saw so much money printed.

And I think that we're all about to see whether or not we know that Bitcoin is having a moment right now. And we're not really going to see the impact of it for years, but it's going to be pivotal. And so I think that there are people who see that and see this macro stuff going on or they're uncomfortable with their local government or they're uncomfortable with how the world's changing. They're thinking about opting out. But I think those people have also experimented with other things. But, you know, as far as the actual difference in, like, the really vocal communities, Bitcoin has developed this social immune system.

And I love it. A lot of people don't, but I do. It's this idea that, like, anytime someone says, hey, try this new thing, everyone else is like, no, that's a scam. And it might not be a scam. And you know what? They've been right 98% of the time. That's the thing. Like, people, they've been right.

most of these things have been scams. And so, you know, earlier, you know, you're hearing me being really soft about our having a token. And I was really reluctant. It took me a long time to convince myself that there was an economic reason to do this. And that's because the vast majority of people, you know, there's just been money printing and Bitcoin copies. And this has been going on since, you know, alt coins have been, I think, since Lightcoin first launched. And so I think there's this. there's this thing in Bitcoin where if you believe Bitcoin is the asset that will win, and it should be the asset that will win, anything that threatens that narrative is in the way.

And conveniently, most of the things that threaten that narrative have also been a scam, or at least not interesting, maybe in the most charitable way. So that's Bitcoin. It's this hardened community. People talk about having strong hands. People talk about never selling. It's borderline a religion. And I think that's incredible. But it means that when you want to propose something new in Bitcoin, the chance of you getting shouted down or called a scammer is incredibly high.

So, you know, it was really hard in the big block days to have a conversation about tech because actually a lot of that debate wasn't, it had nothing to do with technology. It was about like money crypto and this idea of what's the most important asset versus tech crypto, which is this idea of like building the future and everything. being so cool and whizbang. And so Bitcoin is money crypto and and it's it's this hardened, it's got this hardened immune system that shouts things down and calls them scams. And there's a very high bar for something being acceptable and trustworthy. And then in Ethereum, you have all the people that got kicked out as well as a whole bunch of new people who have found, you know, that there's this much more open community where, you know, okay, maybe, maybe Ethereum saw 2017 and they saw all these scammy Icos, but they're still like, oh, this is a new token, this is

interesting. And that's sort of incredible. That sort of like tolerance and open-mindedness is sort of incredible. And it does them a service and a disservice, right? So the service is every new developer who comes into this space, it's very hard to stick with Bitcoin because you'll start exploring all these ideas. And not only is Bitcoin's L1 fairly limiting, it's cool and it's interesting, but it is limiting. Not only that, but also the people don't necessarily want to talk to you about your ideas because you can very quickly become heterodox just by kicking ideas around and sort of be shunned. And so in the Ethereum space, it's the opposite where they like wear unicorn costumes and do badger dances. But they also, like if you have an idea,

they'll talk to you about it because they're like any of these ideas could change the world. And so you have these very opposing viewpoints. And what I really want to see is, like, you know, bring these people together and sort of make them be in the same room, because it turns out that both, and I really do think of Bitcoin kind of as the right and Ethereum is left, both of these people are against big government. They're against the sort of like corporate surveillance state. They're against, you know, all of these, they want power to be inverted and they want it to be grassroots rather than top down.

And that's so fascinating and outside of the status quo. that I think that they have so much more uncommon than that they have to fight about. So, yeah, so those are some of the differences that I see. This is now veering into the political, but there is something very of the moment that you were describing if you look at some of the populist trends in the country. But, yeah, I mean, just as a journalist who's been covering the space now for, oh, my God, you guys, it's going to be five years in a month or no it's not even in like two weeks or some three weeks which is crazy but anyway um i would say that like i do agree with you that bitcoin has gotten

traction you know as money as an asset ethereum's gotten traction as technology um you know just just as somebody who's just kind of looking at that facts like i feel like they're they have carved out different areas and um they're not occupying the same needs but And so, you know, what you're doing is very interesting linking the money aspect, which is Bitcoin, with the technology aspect, which is Ethereum. And so I'm very interested to see how this plays out, you know, obviously a little concerned about, you know, just the security of it all. Because as we've seen, that's, yeah, which isn't anything to say about your project specifically, but just about Defi in general that it's pretty. deserves all the scrutiny in the world. Extremely risky, yeah.

But, you know, this looks to be super, super interesting how this plays out. So anyway, thanks for coming on the show. Of course, yeah. I've got a parting thought. Oh, uh-huh. Thank you so much for having me. We're talking about veering into the political. Every time we talk about this stuff, it's political.

And I think that this is maybe using this technology is probably one of the most political things most of us will do in our lives. So I just want to give you that little parting thought. that getting into crypto is opting out. And yeah, let's do that. It's your rallying cry for the end of the show. Thank you so much for having me. Yeah, well, thanks for coming on Unchained.

Thanks, everyone, for tuning in to learn more about Matt and TBTC. Be sure to check out the links in the show notes of your podcast player. Whatever your favorite crypto meme is, Lambos, Uticorns, or the Guy Fox mask, is probably on the Unchained Rabbit Hole T-shirt. Check it out at shop.unchainedpodcast.com and also be sure to check out our hats, mugs, and stickers, too. Unchained is produced by me, Laura Shin, with help from factual recording, Anthony Yoon, Daniel Nuss, Josh Drew, and the team at CLK transcription. Thanks for listening.