We Study Billionaires - The Investor’s Podcast Network - BTC083: Jack Dorsey’s Decentralized Identity Network w/ Pablo Fernandez (Bitcoin Podcast)

Episode Date: June 22, 2022

IN THIS EPISODE, YOU’LL LEARN: 01:20 - How Pablo found Bitcoin after two decades as a software developer. 07:15 - Jack Dorsey's Web 5 announcement - what is it? 08:32 - A deep dive into decentralized identity and data storage over the lightning network. 28:36 - What his general thoughts are on the lightning network. 36:57 - What are some of the biggest misunderstandings in development? 41:22 - What are your thoughts on the decentralization of the lightning network? 49:34 - Do you see a world where most people are running their own full node via something like a router? 1:01:11 - How the world will be split between the producers and consumers. *Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences. BOOKS AND RESOURCES Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, and the other community members. Pablo Fernandez's Twitter. Pablo's website for his upcoming book: Bitcoin 201. Pablo's company Swan Bitcoin. New to the show? Check out our We Study Billionaires Starter Packs. Are you looking to start investing? Check out our article on How to Invest in Stocks: The Ultimate Guide for Beginners. Our tool for picking stock winners and managing our portfolios: TIP Finance Tool. Check out our favorite Apps and Services. SPONSORS Support our free podcast by supporting our sponsors: Bluehost Fintool PrizePicks Vanta Onramp SimpleMining Fundrise TurboTax Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

You're listening to TIP. Hey, everyone, welcome to this Wednesday's release of the Bitcoin Fundamentals podcast. On today's show, I have Pablo Fernandez, who's a Bitcoin software engineer and all-around technical subject matter expert. This was just a fascinating discussion where we talk about some of the more interesting things happening around the Bitcoin ecosystem. We start the conversation by covering the big announcement that Jack Dorsey recently made about the decentralized identity and data storage app run on top of the Bitcoin Lightning

network, something he creatively called. web 5, and for people not tracking, this was a jab at all the Web 3 folks who don't have decentralized protocols. And then near the end of the conversation, Pablo and I get into this really interesting conversation where he talks about some of his personal experiences from Argentina's aggressive currency debasement and how he's able to eloquently describe how he thinks central bank digital currencies will actually accelerate Bitcoin adoption. It's a discussion you won't want to miss, so let's jump right into it. You're listening to Bitcoin Fundamentals by the Investors Podcast Network.

Now for your host, Preston Pish. Hey, everyone. Welcome to the show. Like I said in the introduction. I'm here with Pablo. And Pablo, you have a lot of experience as a developer. You haven't just been doing this for a couple years. You've been in the developing space for two decades.

Yeah, it's been quite a while. And I mean, obviously. you haven't been working on Bitcoin for two decades, but you have a lot of experience in various sectors of development. So I guess my first question for you is how does Bitcoin and being in this space differ from other developing jobs that you had worked for so long before kind of coming here? Oh, man, that's such a good question because I've noticed that I've been working at Bitcoin companies for a couple of years. And one of the things, that I've noticed working at Swan Bitcoin is that there seems to be sort of like a moat

when it comes to hiring and finding people that makes it very easy when you hire Bitcoiners compared to just hiring engineers for any other company. Because we are all working towards something we believe in from first principles, you find immediately, you find people, if they are bitcoins, you find that you are immediately aligned. Like culturally, yeah. It's an immediate fit. If there are bitconers, it's an immediate fit. So I worked at a bunch of big companies, small companies. I did a stunt at Merrill Lynch.

I worked most of my life. I worked at either really early startups, like maybe two, three, four, five people, larger startups, like 20, 30 people. And you never get this feeling that they are there because they believe. Like I worked at hotel tonight, for example. I never got the impression that I was working with someone that was there because they were passionate about selling that last room at that hotel. You know, they wake up in the morning thinking, oh, yes, I want to sell that last booking.

No one, not a single person. But every single person that shows up at the Bitcoin company, a real Bitcoin company, is there because they believe in Bitcoin. They want to make Bitcoin succeed. And yeah, man, it's such a different experience. It's a whole different level. And you see people that will take a pay cut to work at a Bitcoin company. You don't see that anywhere.

Pretty much anywhere else. Like, bottom line, what's the wage? What's the stock? What's the comp? But at a Bitcoin companies, okay, what am I going to be doing for Bitcoin? You know? Yeah, that's absolutely impressive. What got you down the Bitcoin rabbit hole from the start?

My rabbit hole story is pretty sad and lame. It took me. So I was into, like you said, I've been in software engineering for many, many decades. Well, not many, many decades, but a couple of decades. And I was into Austrian economics before Bitcoin. Like I read Human Action in 2006. And when I first got into Bitcoin, I saw this thing, this chart on the screen that had a lot of difference between the different spot exchanges.

So my first couple of years in Bitcoin, it was just I started trading, well, not trading. I made an arbitrage platform that would compare the prices across, I don't know, like probably, probably around 40 different exchanges. I just started to create trades. And yeah, it took me a couple of years to realize that Bitcoin was a bit more than that. Well, I mean, there's so much to chew on. And I mean, everybody kind of comes at it from a different angle. And then the more you learn and the more you get into it, you're like, what? is this that I'm even dealing with. But that's fascinating. So you came with a lens of looking at all

these different exchanges and how they fit together, the liquidity and the volume. Absolutely. And it on its own, that aspect of its Bitcoin, but it could be any market. It's super interesting because my first trade, I did a manual trade where I bought, I think I bought one Bitcoin at Krakken, and I sold it at Coinbase. Well, not the same Bitcoin, but roughly I, I, I, I, did, had one Bitcoin in crack and one Bitcoin in in Coinbase. And then I sold and bought at the same time, right? And I got like 20% profit from that trade. And I couldn't believe that that was real,

that that's such a huge inefficiency would exist in the market. But as the market starts becoming bigger, creating that kind of, getting that kind of margin, it's really hard. And the arbitrage market is really, really, really competitive. It's sort of like mining where every single edge will be exploited. So I started talking with exchanges, which would sell you collocation on the same data centers that they were using.

So you would get a little bit faster access to the author book, a little bit faster execution. And yeah, playing around how to create basically a synthetically atomic trade where you sell and buy at the same time because if you're doing arbitrage, you don't want to be exposed to the price. You just want to be exposed to the delta of the price across the exchanges, right? So dealing with the algorithms to make sure that you are not getting risk that you don't want to take. It's super interesting. And then finding the way to move liquidity around because, yeah, moving Bitcoin or moving whatever can you want to trade, it's super easy. But moving Fiat, around exchanges, especially before stable coins, it's really, really, really hard. And solving

that problem was the most interesting aspect of this whole part of my Bitcoin story. Well, no, that's fascinating. So recently in the news, Jack Dorsey made an announcement about what he's calling Web 5, which really made me snicker when I heard that that was the, tell us about, the name or at least your opinion on the name and then let's do a deep dive into some of the tech on this dude the name epic epic troll it's i love jack dorsey uh yeah i think i think the name is hilarious i think it attracts all the right kind of reactions i think the web three bcs who got wrecked now dumping on on retail with the latest crash are going to like get really triggered because it's clearly a call out.

The people that the unaware retail is going to be, oh, that's even better than Web 3. Yeah, I think it's a genius name. Yeah, when I first heard it, I thought it was just a troll. I didn't think they were actually building something. I mean, I knew they were working with the IDs, and the work blocks has been doing. But, yeah, naming it Web 5 is absolutely.

I mean, with regards to, yeah, go ahead. So you mentioned D-I-Ds, which is decentralized identifiers. Tell people what that is, and maybe we should even pull out more to kind of describe what this whole effort is, because even though he's trolling and doing those types of things, there's something here. And I think there's something here really important that he's going after. But let's have you describe overall what he's trying to do. And then we can drill into D-I-D-D-W-Ns, the SSIS, like all.

all this stuff that kind of popped out of this. The basic idea of DADs, which is a super old concept, it predates Bitcoin by decades. The basic idea is that you have sort of like issuers of an identity where you, say you create an account with your bank, right? Your bank has a relationship with you. And they might say Preston has X amount. of Fiat on his bank account.

Up till now, without D.I.D., that's a one-to-one relationship. It's you and your bank. With D.I.D., you would be the one owning this relationship, this identity that you present to your bank, right? So you would be able to get this, even though your bank has your assets, you would be the one owning the credentials that allow you to go to your bank. could basically reuse those credentials and say, this entity, this bank knows that I am Preston, that I have X amount of money, my date of birth is X. And you can take the data because

that data is you own that data and you keep that data yourself. So you can take that data. And with like they can prove this with a hash. They're basically pinging your whatever your IP address or whatever they have on record. And they know that in order for you to send them, cryptographically send them this identifying data that's your information, you basically provide them some type of hash that says, all right, I'm the only person that could possibly know this, here's the proof, and here's all the encrypted data, and then they ingest that, and then they do what they do with it. Is that a correct? Yeah, that's correct. So a really good example of using a D-A-D that might resonate with people that have signed up for

an exchange or for multiple exchanges is you K. YC with one exchange and then you take that KWC data and you take it somewhere else. So there's all kinds of interesting stuff that you can do with a zero proof, zero knowledge proof where you can take that data and without revealing that your actual KYC, your passport, picture, your proof of address, all that stuff. Without revealing it, you can say, oh, I've been KYC'd by BitStamp and here's certificate. that I've been K-Y-Ced by BitStamp, and you can take that and use it for Coinbase, and then Coinbase would be basically trusting that you've been K-YCed by BitTstab,

but without actually getting the documentation. Now, there's more in this. They said that they're also going to have decentralized web nodes. Is this just the data that I'm storing, like more from like a server standpoint, but on my just like maybe a Raspberry Pi or whatever I'm using as my own node. Yeah. So one important caveat that I think we need to keep in mind is that all of this is just an announcement and a website explaining on the paper explaining what it is.

There is no code available. So the form that this is going to take is a bit of an speculation at the time. If I had to speculate, I think the shape that it will. will take. Are you familiar with Start 9 and embassy? Not really, no. So there's a company called Start 9 Labs and they're making what they're calling, I forgot what they're calling it, but the name of the device is Embassy. So it's basically just a Raspberry pie or a Rock Pro, a small piece of hardware. And you can think about it as your router, basically,

you have your router at home, you use it to access the internet. You probably don't know what else you can do with it. So the idea of the embassy is that it's going to be like a router, but with added functionality. So it will just be this piece of hardware without a screen, without anything. It's just in your home. But it has a bunch of other things. One of the things, and there's a marketplace around it. So one of the things that you can do with it is you can have your cloud storage.

You can have your Bitcoin node. You can have your lightning node. What I think might happen is the centralized web node is going to be something like your embassy. It's just this hardware sitting in your apartment, in your home, that is doing something for you. Because the key is that the data that you're keeping for the Web 5 thing is not hosted on, you know, Amazon Web Services, on your banks database, on your, like, You have to possess the data. You have to actually keep the data yourself somewhere. So that needs to be solved.

They are calling that decentralized web nodes. I think that's the shape it's going to take. So it's almost like the umbral. Yeah, it's exactly like the umbrella. Yes, that's another example of the embassy. Yeah. Okay. That helps me out a lot.

So, yeah, and you know what's crazy about the umbril is how much it is like Apple, like just using your iPhone, like they got. their own app store. You go in there. You're downloading whatever application. You can then use that specific application. And it's just crazy that I'm running it right off of my, you know, little Raspberry Pi node. So that, that's perfect. So anybody who sees DWN or decentralized web node that think of your umbrella. That's a good example. Yeah, that's a good one. Yeah. So here's another one that this one's kind of confusing me. S-S-S-S-S-S-S-S-S. Self-Sol. Sovereign identity service.

Now, when I think service, I think I've got to go to somebody else to provide a service to me. So what are they talking about here? And then it also says that they're going to wrap it in an SDK self-sovereign identity. That one I would need to look into. I don't think I read that one. I'm just trying to wrap my head around some of this. But yeah, and so then they're saying that what's going to pop out of all of this is a decentralized web node messaging. verifiable credentials, decentralized identifiers, credential manifests,

like so many different things that is bringing decentralization. And there was a quote here that somebody wrote. I don't know who wrote this, but they said, Web5 uses just one blockchain, Bitcoin, for one specific use case, identity. And then it's made up of all those components that we just talked about. Right. Yeah, I think that's just ion. Like the DID part is ion, which is a project that predates all this.

It's been running for quite a while. And that's a protocol. This ion that you're talking about is a protocol. Yeah, that's right. Yeah, it's just hushes into the Bitcoin blockchain. Yeah. Wow. Do you see this as being in competition with, you know, all this,

I'll be kind stuff that's happening on Web 3? No, I don't think so. I mean, clearly, I mean, it's super obvious that the only purpose of Web3 is just to create tokens to sell them to retail with different type of narratives. But there's absolutely nothing there. When you look at what Web 3 means, it can mean nothing. It can mean whatever you want. It's like a mirror. Like you standing from the Web 3, you issue tokens.

I like that. You damp it on. Example. It's like a mirror. I think what Dave announced, the closest it competes with, it's synonym. Are you familiar with what John Carvalho?

So, John announced synonym in the conference back in, back in El Salvador in November 2021. And they had been working in stealth mode for, I think, close to two years. And it's pretty much from a value prop perspective, it's pretty much what Jack announced, the idea of having D IDs, the idea of owning your data, the idea of hashing and presenting basically certificates to, for example, reuse KYC or showing that you

are, you know, you go to a bar and you want to show that you're older than 21 without revealing your picture, your address, your actual birthday. So, yeah, Jean presented a bunch of different projects they've been working on. And yeah, it's basically, again, from a value prop perspective, they take a different approaches, but from a value prop perspective, is the same idea. And they've been working on this for a couple of years. So they do have a lot of code ready that you can use, that you can, that you can, the chicken run. They've already run into a bunch of different issues and unsolved them. So,

yeah, I mean. It sounds like the whole identity piece is getting mature and probably going to be a big deal in the coming, what, three years? The identity piece is crucial. And the identity piece will be solved because I think even the Web 3 gang agrees that the identity issue were, you know, your Twitter handle is not owned by you. It's owned by Twitter. Your Instagram, your Facebook page, your whatever identity you own, you use is not owned by you. So the identity piece will absolutely be solved. And if you think about it, when you keep, when you own Bitcoin, if you actually own Bitcoin, you, in some way, you must keep private keys, right? So it doesn't make sense to have to keep all these different.

logins, all these different identities to your bank, when you already have a private key that you can derive other keys from and use that as authentication and as identity proof. So the DID piece is absolutely essential and it will be solved for sure. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year, bringing together activists, technologists, journalists, investors, and builders from all over the world,

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Go to Shopify.com slash WSB. That's Shopify.com slash WSB. All right. Back to the show. So let's walk through a use case with something like this. And if I have my own node and maybe I have a pretty substantial amount of memory that's associated with my node. Basically, Twitter could become, I could own all those tweets, whereas nobody could come in and delete me, right?

Like, Twitter is basically just housing this interface where these IDs are being plugged into their platform. And there's no, like, that platform isn't able to delete or prevent me because it's a decentralized kind of system at that point where IDs are able to plug in and then all their, their previous tweets and everything that they've ever commented on and liked and whatever. and they have absolute control over that, I guess. Is that it? That's absolutely, that's definitely one of the use cases. And yeah, if you think about it, it's super important because you will, so for example, with the way synonym works, synonym uses something that is sort of like a blockchain without a blockchain.

It's what's called an append only log where you can only add information, sort of like a blockchain, right? You can only add information to a database, but without being able to rewrite what has been written before, right? And the way it works is you can, so for example, my website, I host it on what synonym uses underlying synonym. It's called Hyperdrive. And the basic idea is that you know how BitTorrent works? Well, I would like to think I know. I'll be sorry.

You know how to, yeah, but you get the basic idea that there was. So Hyperdrive works in the same way where I have my website. I write information on my website and then I see my website, right? And then you could, if you wanted to, you could connect basically to my node and download that same data and start seeding that data as well. So if I went in and deleted my website, you could still keep a copy of my website all the time, right? And you could do that with Twitter. So for example, if I decide to delete my Twitter account or Trump's Twitter account, you could still get all that data, all those tweets because you have a local copy of every single tweet that you want to keep.

So you can basically, you can still scrape the web and take whatever data that used to be presented. Yeah, absolutely. But as far as whatever digital ID that's plugged into one of these platforms, as long as I am the owner of basically signing into that platform as the owner, I'm controlling what's being presented under that identification. Even if I want to go back and try to rewrite history, which I can do, anybody still has the opportunity to scrape the data real time and run background copies of all of that. Yeah, absolutely. And it's not even scraping. It's fetching the actual source of data, right?

So it's have a copy of the database. Instead of just going in and saving the HTML or whatever representation of the data, you have the actual database yourself. All right. Well, that's fascinating stuff. And I'm just kind of curious to see what the heck evolves out of this. It seems like Jack sees this as being a very big deal. It seems like you would agree with that.

I totally agree with that. Oh, crazy. Yeah, it's a bit of a change of power thing, basically. Yeah. Because nobody has control of anything right now. It's crazy. It is. And I mean, you have a large Twitter follower.

and if you were to get your tour account nooked tomorrow, it has an impact. I mean, this is work that you've been doing for a really long time and it can be taken at a whim out of you, right? Yeah, the time and energy that people pour into some of these accounts. Yeah, absolutely. I mean, it's time and effort that you're investing

and that it can be just deleted away from you. So that's an interesting thing that I see with coins where they often get part of the narrative, right? It's just that they never actually build anything because the incentives aren't there. And when the incentive is to create an asset and just dump it on someone else, why actually make the effort of building a real business,

building real value? It's just not compatible. But the narrative that they've been complaining about, you don't own your Twitter, you don't tell your Facebook, all that stuff. It's valid. The complaint is valid.

The solution is not. But yeah, with Web 5, we, yeah, there is a path towards solving some of those problems. What are your thoughts on Lightning in general? I'm super bullish on Lightning. I think it's a beautiful, for solution. Yeah, I think Lightning is going to become the de facto way of onboarding most. people where it's coming into Bitcoin lightning first and maybe never touching on chain. I think there is a lot to be done on lightning.

There is a lot of value to be done on to be gotten from lightning. I think there is a lot of hype as with everything smart contracts on lightning. You know, what is that? You're not seeing that. You're not seeing that part of it, huh? No, no. I mean, there is stuff that can be done. leveraging the idea of lightning or the capabilities of lightning, but there is no real value

out of, say, for example, getting phone calls over the lightning. Like, okay, it's interesting to be able to have a phone call where one of the parties is sending sets, say so like a consulting or something like that. That's valuable. The actual data doesn't need to go over the lightning. It can just go out of band. Because you can Because you can encrypt the line and it doesn't have to happen over that. Yeah. Yeah, I'm with you. Yeah, I'm doing it overlining. It's it has such a large overhead for no value other than being able to say that it's phone call over lightning. It doesn't make much sense. And I think in the same way, there are many narratives that sound nice because Bitcoin, Jason, it's saying,

oh, this is onlining. It sounds very nice. But it doesn't actually do anything or it doesn't doesn't add any value. It's marketing. It's just a world. It is marketing. It's marketing. Yes. It's Ethereum, Mb, seeping into, leaking into Bitcoin. I think when I'm thinking about lightning, I'm just, you don't have an incentive structure yet for people to go out and spend in large quantities relative to maybe a few spots in the

world that are out there using it in the day today. And the use case there is amazing. You're just not going to get on a net global basis. I think we're still very, very early for the use cases to kind of pop out of it. You look here in the U.S., we've got capital gains laws. And so to use it in any kind of way, it's restrictive a little bit where, you know, am I going to go out there? If I get a 10% discount, I think Chipotle here in the U.S. is doing this, where if you pay

in Bitcoin, you get a 10% discount at Chipotle, or at least that's a 10% discount. at Chipotle, or at least that's what I had heard. But for me, I'm looking at that and I'm saying, all right, so I love the fact that Chipotle is trying to do this. But at the same time, I'm saying to myself, why would they offer a 10% discount when they could just, you know, not do that and take whatever free cash flows they're getting in cash and immediately convert whatever free cash flows they got into Bitcoin. If that's a 10% margin on average for the company, they collect a $10 purchase and they immediately convert $1 in the Bitcoin and they put it on their treasury.

So I'm trying to- Then they wouldn't be talked about in your podcast. You're right. From a marketing standpoint, it's great. And I don't suspect there's a whole lot of people exercising it. So from a marketing standpoint, it's great. But I think from an incentive on a real large scale, you're just not there yet with people seeing the Fiat melting down.

Now, give it another three to five. years and who knows what'll pop out of this. But I love the fact that the, that the plumbing is there. It's in place from developers like yourself that are working hard to make all of this accessible. And the user, the UX is something I want to talk to you about maybe a little bit later. But it's getting there, right? And it's getting exciting. It was just, I think we got to wait for the macro backdrop to kind of play out for everybody to really see the use case. Yeah, absolutely. I don't think this kind of activity where people choose to pay with lining or choose to pay with Bitcoin will happen because of volunteerism or because it's a marketing campaign.

I think they will happen because it's the path that makes the most sense for each individual person. So it's all marginal decisions, right? So for example, I do use lightning very regularly only when it makes more sense for me to pay with lightning than with Fiat. whenever I pay with Bitcoin and when I pay with Bitcoin, I'll say that 95% of my transactions are with lining. It always every single time, it is because it's so much easier to use lining than to use than to use Fiat. But I don't pay with Bitcoin because I'm an activist, you know? If that's what the movement, if that's what hypervictonization requires, it will never

happen. But the closer, each individual. person gets to hyper-bitconization. So, for example, for myself, I live a life of hyper-bitconization, if you will. My accounting is in Bitcoin. That's the only number that I keep track of with regards to my net worth. For me, getting closer and closer and closer, actually paying with Bitcoin makes a lot of sense because that means that I have to keep less and less Fiat. If I want to make sure that I end the month with zero Fiat, it means that sometimes I will miscalculate. and I will have to pay with Bitcoin because that's the only way I can pay.

But yeah, it's not something that will happen because I'm doing a marketing campaign for Bitcoin. The central bankers are doing all the marketing here. There's no need. We have such good allies. Yeah. I'm Argentinian and I grew up in Argentina and for myself like when I first got into, when I first understood Bitcoin, I mentioned it to my family from Argentina, who we've experienced the Corralito back in 2001, and we've experienced so many different

super high or hyperinflationary events in our lives that pitching Bitcoin is like, yeah, there's this thing. They will not be able to print more. Okay, all right. It takes like seven seconds to Orangefield people in Argentina. I orange build my 103 year old grandfather in like 10 minutes. They will fix, they will find a way to do lightning. They will find a way to K.YC. They will find a way to do whatever they need to do. You don't have to convince them. Wow. That's some powerful stuff. And it makes sense, right? Once you live that and you've experienced that environment that pops out of that situation. It's something that will never be something that you can unsee. Do you see a world where most people are running their own node at their house and

doing this decentralized web nodes and things like that? Do you think that that's become standard, almost like you were saying earlier, like a router? Yeah, I think that that is the path. I don't think there's a different path than that one. But if you, if I were to travel in time 50 years, and tell you, yes, every single person in their home is going to be running this little device that will connect them to a global network where they be able to use that device to exchange messages, it will be like, okay, yes, that's not happening, right? But every single home has a router. And in that same way, yes, I do think that people, they will not directly interface with

the device in the same way that how many people actually log into the router and make sure that they have the right set, no one, not a single, I mean, maybe 0.1% of the nomination. Not many, not many. And I think it will be the same case for these devices. It's just going to be another part of your router. Yeah. Hey, what misunderstandings do you think a lot of people have in this space that maybe have just arrived in the past year and are just getting familiar with it? Like, what are some of the talking, like the big points that you think people misunderstand? Everything. There's a lot to cover there.

There is a lot to cover. Yeah, I think one of the main points that people tend to misunderstand is that I think people see Bitcoin as something that needs to be. So for example, hyper-bitconization is a good one because I think people are saying, oh, when hyper-Bitconization comes, or when state X legalizes, has a legal tender with Bitcoin, I think what's missing is that all of these are decisions made at the margins. And Bitcoin is something that you choose to use yourself, and it doesn't require anyone else to act on your behalf. it's not a system where you need to wait for permission to be hyper-bitconized.

It's not a system where you need to ask for permission, right? It's a system that's permissionless. It's 100% opt-in all the way, all the way. So I got a tattoo, a Bitcoin tattoo on my shoulder. And when I showed that to many people, they were like, oh, what if Bitcoin changes? and you stop liking Bitcoin. And now you're like, say, for example, back in the 2017 fork, and I was a big blocker. And oh, what if now you have the Bitcoin instead of the Bitcoin cash tattoo?

But the definition of Bitcoin itself is my own understanding. Right. So by definition, the Bitcoin that I have tattooed is the Bitcoin that I agree with. And I define what Bitcoin means for me and as long as I respect the consensus rules, of course. But I think this idea of not understanding Bitcoin as complete control of your decisions, this idea of having to wait for some kind of bill to pass or some kind of regulatory standpoint to change. I think that's the source of a lot of confusion. What else do you think on the misunderstandings?

How about like a pet peeve or something that you hear and just immediately it just kind of set you off? Well, one thing that I dislike quite a bit is this idea that whenever someone is new to Bitcoin, they are pushed down the, oh, and now you need to run your own Bitcoin node and you need to run your lightning node. And this whole idea that there is this large effort that needs to be made in order to be a bitcoiner and pass the purity test. I think it's very off-putting. I think the umbrella and raspy blades and all these different projects are absolutely amazing and really, really good. But it's become a de facto that if someone wants to get into Bitcoin and actually run the software, they need to buy a raspberry pie and they need to assemble it. and they need to flash this macro SD and put it here and do this and do that. And it's very daunting.

And it used to be that running Bitcoin was you download Bitcoin Core and you run it on your computer and that's it. It could take five seconds. And people can still do that. But now when they look into how can I run a node, the first thing they see is, oh, you need to go by a raspberry pie. And I think that's absolutely the wrong path because it's too big of an ask. If it's someone that is new, maybe they don't want to buy something, a new device. Maybe they can just running on their computer. Most people don't know that they can just run Bitcoin Core on their computer.

And it takes nothing. I mean, if you can run in a Raspberry Pi is because it's pretty mild with regards to requirements. It's very lean, yeah. My first notes, all were just on my computer, like the same computer. I was listening to write code on. Hey, so you and I had talked before we started recording about this idea of some of the people out there like to suggest that lightning is not decentralized or that maybe it's not decentralized enough.

And you had a take on this. Go ahead and tell us what your opinion is. Yeah, I actually agree with that. I think where things will converge is that lightning will not be decentralized. And I think that's an okay thing to happen. I think what's important about lighting and decentralization is to have the optionality of decentralization. Yes. Yeah.

The ability of being decentralized because the idea is why do you want lighting to be decentralized? You want it for fees to remain relatively low and you want it for censorship resistance, right? Because you don't have consensus rules on lightning. The consensus rules are inherited from Bitcoin. So you don't need to guard against decentralization. You don't need to guard yourself from just consensus rules being dictated by five nodes. You only need it for censorship resistance and fees. So in that way, the idea that you are able to create a channel and go around sensors,

if there were sensors in the network, is all you really need. So the benefits of a centralized lightning network are pretty large. I mean, the user experience will be better. Fees will be kept on check. But if you don't have to route through 10 different notes whenever you're doing a payment, the experience is going to be so much better. The experience is going to be cheaper. And it's okay for multiple companies to offer really good.

And one important thing is that keeping a lightning node, it's not easy. It's not the same as running a Bitcoin node. Running a real lining router node, it's a lot of work. It requires deep understanding of how to manage liquidity. It requires CSOPs, system operations experience. it requires all these different skill sets that most people are not going to be able to do it. So I do think that lighting has deep centralizing tendencies. And I used to think for a really long time, I used to think that that was an issue to be solved.

And I actually spent a lot of time working on solving that issue. Like when I first realized that lightning had these tendencies, I was living in Costa Rica. And my power, I had daily power outages. daily. Every single day for five, 10 minutes, power would just go down. For a lightning node, that's absolutely terrible. So I started working with this idea of having sort of like a trusted copy of the keys so that a different node that I assign is able to take my identity from a lightning node and is able to sign for me. And then when I go back online, I take those keys away. and I'm able to keep operating.

So for someone that is routing through me, they wouldn't see me go offline unless there was a pending H-TLC, but normally they wouldn't see me going offline. That was one of the problems that I thought, okay, this must be solved because otherwise there is no way that anyone in the developing world

is going to be able to operate a routing lightning node. And then I actually talked about this with John Carvalho in El Salvador, And he said, he told me, yes, and what's wrong with centralization? And then I realized that I was just inheriting the conceptions of the risks of centralization from Bitcoin. Yeah. From layer one. Yes.

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back to the show. Do you think this would be for framing here? I love your point about you just have to have the option to do these things as far as run your own node and route your own lightning payments, but it doesn't require it. So would this be the way that you would phrase it as you just expect as things evolve and as the world starts using more of this, that in application, a lot of people are going to be paying for centralized services on layer two, but they don't have to if they don't want to. And because of that optionality to run it themselves, that's what keeps everything still in

check, even though you might, let's just say you do have a bad actor that's a centralized service that takes care of 100,000 people or that services 100,000 people. If those people, if that's a bad actor or they do anything, it's not going to crash the network. It's not going to destroy Bitcoin and all of those people probably would then take their layer to transactions a whole lot more serious and you'll probably see a bunch of them go run their own full node. Absolutely. There is an effort being done by Blockstream that I am over the moon bullish on, which is called Green Light. I don't know if you've heard of it. So the basic idea of Greenlight is that running, again, running at letting you know this very hard. It's, it's,

It requires a lot of knowledge and infrastructure and this and that. And the idea of Rinalight is that the Blockstream runs the lining infrastructure for you, but the keys are on your devices. So even though it's, you could think about it as custodial because it's someone else's node, they are not able to sign any transaction for you. So they are not able to use your channels. They are not able to take your. your money, they are able to censor you, and they are able to say, I will not allow this

transaction to be paid, but they are not able to steal your money. Because the keys and the state of your lightning node is in your device, you are always able to take that state, take those keys, and just run your own green light copy, and just continue operating as if nothing had happen. So in the case that they were going to censor you, you could just run it yourself without anyone knowing. Like, no one would know that instead of running on green light, now you're running on your own computer. And I'm absolutely bullish on this because this idea is that you can have your channels on this one node. And then you could put your keys on your phone app, on your wallets of Satoshi, on your mood.

on whatever. And each single lining app would be using the same channels, the same keys, the same state. So you wouldn't have to have, I don't know if you used Value for Value Podcasts, but I use a lot of different

value for value applications. And in each single one of them, I need to keep a balance. That balance is specific for each app with a green light model. Each app is using the exact same channels is using the exact same balance. It's absolutely mind-blowing because you could issue keys for each app that are using the same balance. Yeah. So when I hear things like that, I'm thinking,

okay, so user experience is huge for people to not even know they're doing these things and for them that be happening in the background. So what grade would you give the community at large A, B, C, D, E, F for the existing user experience on layer two right now. Are you a tough grader? We're about to find out. A for effort. No, I think it's super, super early. I'll say probably maybe an E.

Yes, something around there. I mean, clearly where we have the potential to go, right? Absolutely. And I know how many different companies are integrating with Greenlight and the experience is going to be at least 10x better than the previous model. Greenlight in one year, this model is going to be common. And again, 10x better. So I think it's still too early. For me, the idea that I'm not able to onboard someone into lightning that is not technical and onboard them in a sovereign way, it's sort of we're failing until we're able to do that.

On board someone into a sovereign lightning wallet without them having to do pretty much anything. I think Brise has been the closest to that model where it is actual a lightning node running on your phone. and it's not custodial whatsoever. I think that's the closest we've gotten to the right UX. I know Brice, they are using green light and we're going to be working with Roy to make that happen and to make that better. So yeah, give us one year and we'll review that great. That's exciting.

And I kind of suspected that's what you were going to say. And I guess what I'm really trying to get out is just really the operational. opportunity for growth here where people are just going to be able to download an app and they're going to be dealing with these Satoshi units and it's going to be seamless. It's going to start to get integrated. When do you think that it'll start getting integrated into Apple Pay and stuff like that? Is that closer than people realize or where, what do you think? I think for something like that, the blockers that we have on the way are not related to tech. are related to economic incentives.

Yeah, I wouldn't hold my breath on that one. Yeah. So what you're getting at is they want the data. And so in all of this, it's not really the best source of data relative to the existing model that they're dealing with. And so they're going to be kind of late to jump on board with a lot of this because it cuts into margins for them? I think so.

I think it's a bit of the innovator's dilemma where it's going to be hard for them to cannibalize their own business in this way. And it's such a large source of revenue. It's such a such and the Fiat game itself, it's such an important part of the of the game they're playing. So I think it's going to be really, really hard. But see, we go back to the hyper-conization thing. We don't have to wait for them.

We don't have to ask for their permission to do all these things. We can build around it. And they are welcome to run their business. own Bitcoin node and start plugging into the Bitcoin economy. But what we're building here is just a parallel economy. I think very soon, these two economies, the Fiat economy and the Bitcoin economy, are not going to be compatible anymore. But I see money as a language. And up till now, we've had a translation layer between Fiat and Bitcoin. And I think that translation layer is going to be broken apart with the introduction of CVDCs.

That's why I'm super bullish on CVDCs. I can't wait for them to happen. So this is a contrarian take. Aren't you worried about the privacy? Because, I mean, that's the thing that everybody really... I think it's great. I think it's great. I think the privacy issues are beautiful.

I think they play right into our hand. Because it causes hyperbequinization. Yes, yes, yes. It will perfectly fragment. And it will perfectly, so I think one of the main confusions people have with Bitcoin is thinking of Bitcoin as a chart. Remember walking into Bitcoin 2022, you walk down, you walk into the main entrance. And the first thing you see at a Bitcoin conference is the Bitcoin Fiat price.

And you see a chart. That was the main thing right after the crypto bull. The first thing you'll see is the Bitcoin chart. and people get hung up. I did every single person I meet, other than maybe Bitstein, people like Illuminati like that. They all see Bitcoin as a chart for a really, really long time.

And the moment we are able to break that link, and the central banks are going to do that for us, the moment we're able to break that link, Bitcoin will stand on its own as a different system. So they're going to overreach, So this is me summarizing what I think you're saying here. They're going to overreach by so much and so aggressively that it's going to be so obvious for the rest of the world to know that that's not what they want and to turn to Bitcoin

is the answer. Is that what you're saying? Not quite. So here's my experience as an Argentinean. Throughout all the different issues we've had in Argentina, the government in Argentina has always, always, always tried to prevent people from seeking refuge in the dollar. For Argentinians are just dollar crazy. Like they love the USD.

So every single time there are issues in Argentina, which is always, the government puts in regulations preventing people from being able to access dollars as a escape off. So back in 2005, I think they started with this regulation where you, you're going to access dollars, You couldn't buy more than, I think it was like 10,000 K a month per person. So in order to buy dollars, you would need to K.YC. And then they will register how much you were buying at each different exchange and physical exchanges. So you wouldn't go over the limit. Then they started lowering that limit to 1,000 and then to 200, which is the current limit.

If I'm not mistaken, 200 is the current limit. Then they added a 30% tax over the 200. So even when you buy 200, you are not actually getting 200. And then it's theoretically possible to buy the 200, but there is no bank that will serve you, the 200 bucks. So they are applying. And then, of course, a dark market emerges because of these regulations. And then the government cracks down on the dark markets and there are arrests all the time. So the government is working as hard as it can to prevent people from doing it.

this? What if there was this magical button that they can tap and they say no one is physically able to trade Fiat tokens for Fiat dollars? CVDCs allow you to do that. CBDCs allow you to say no one is able to spend pesos for dollars. They can perfectly do that and it takes no effort. It just takes one button. If the Argentinian government had that power, they would do it in a split second. But this isn't good, but you're saying because they are being tempted by such a button and you think they'll probably hit the button that it's just going to cause mass hyper-biquinization, everybody's going to run the Bitcoin because of it. I think it's going to create a natural split on the society between people that produce and people that only consume. If you look at

If you look at Argentina, the producers, the business people, the people that are the entrepreneurs, the people that are running companies, they've done everything in their power to escape being silo into the Argentinian peso economy. So, for example, Mercado Libre, one of the biggest companies in Latin America, they move their offices across the pond to U to Y and they are operating from U to Y because they don't have this type of regulation. The only businesses that weren't able to do this are the people that worked on the fields, the companies that work on the fields. But every single producer has found a way within the realms of possibility to escape this type of regulations. And I think if producers see themselves being tied to remaining on Fiat rails, and like Lagarde said that we need to plug every. every escape ball because she said something. I don't know if you remember maybe like a year ago she said something around. We need to prevent people from escaping, something like that.

If they don't plug every single hole, the producers will escape. And as people see this type of action and this type of powers, I think the people that are producing and are using their energy and their effort to create wealth. and they see themselves being cornered in a way that they are not able to protect their wealth, they will increasingly seek to escape into something. And that's something I think it's Bitcoin. This is a really profound thought right here.

This idea that the money itself is going to separate the consumers, which when you look around the world right now, they are professional consumers that are just waiting for the next, the next government check. The next QE, the next QI. The next QE. And I like how you throw that in there because some of these consumers are effectively Wall Street itself.

They're just waiting for the next QE dump so that they can then splurge it into the market as a consumer. And if you think about it, if you think about it, one of the issues of the existence of this link, between fiat and bitcoin is that all that liquidity being just created out of thin air

and pumped into wall street or through wall street some of that liquidity is going into bitcoin and that value that was not created because of economic creation of oh sorry for work that from work is going into the Bitcoin network. So there is misallocation. There's a distortion that is coming from Fiat and it's leaking into Bitcoin. And there are non-economical, non-producers who are playing really well the Fiat game, who are doing really well on the Bitcoin game. So we have like this leaking of misallocation.

So the moment we break that, the only way to get Bitcoin is from creating actual value that someone is willing to do away with their Bitcoin for that value. My Lord, that is a profound thought. And that is something that I have to chew on. And I'll tell you what, your experience from what you're talking about in Argentina and how that plays out is something that I've really never thought about how this is going to just drive a wedge between people. producers and consumers, net producers, net consumers in a society. And I mean, we're not just talking to society. We're talking on a global level here. Boy, I just can't imagine the social unrest and the things that this is going to create because you're going to have basically people who have performed work for the goods and services that they're selling. And they're just not going

to accept the CBDC. They're going to refuse to accept it, right? That's where this is going, is what are saying. Yes, 100%. Who is somebody? I'm going to have to chew on that one myself, and I'm sure many people listening to this are going to be like, my God, what a profound thought. Who is someone that has really inspired you or shaped you in your life? And what is it about them that had this impact on you? Oh, out of the field. I don't want to go philosophical on you, but you ask the question. I guess I've been way before Bitcoin, I've been into Stoicism for a really long time.

And I think it's one of the tools that has helped me the most in my life. So I would probably have to go with Seneca. Okay. That's awesome. Yeah, either Seneca or EpicTetus. Yeah, Epicitus is a very interesting character because he was a slave. and out of being a slave, he created a school of thought. And while being a slave, he had students whom he would teach what came to be stoicism.

This idea of you are not a victim, a prisoner of your circumstances. I think it's such a powerful idea that it's not like what harms you is not what someone else is or what someone else is doing is your interpretation of what they're saying or what they're doing. And it gives you full serenity over your behavior. So yeah, I'll have to go with big details. It also helps you try to define what it is you actually control. Because when you approach an environment with this positive mindset that you are on the controls, you just got to figure out what those controls are. It forces you to find them in your environment. And I think when a person doesn't, when they look at maybe I'm a victim, they don't even believe that there's controls at their disposal.

And they're just saying, here I am, you know, out here on a boat just blowing in the wind. And they don't even try to find the rudder or try to figure out how the sales work. One time I was, I went for a weekend to visit Francis Pugliot. I don't know if you know, the guy from Bull Bitcoin is a friend of mine. And on the way back, we spent a weekend with him and with my wife. And on the way back, we were talking, what makes someone more likely to understand Bitcoin and to understand acting in a way that doesn't depend on what others are thinking? And what makes the difference between someone that will remain a victim and someone that will see the circumstances

and act regardless of those circumstances. And one of the things we thought was this idea of learned helplessness, which is the concept of you learn as a child, maybe, that regardless of what you do, your circumstances don't change. And this is something that can be triggered by something super small. but if you see that you are acting on your environment and your environment is not changing in any way, you learn that your behavior is irrelevant.

And that's one of the things that I think it's so important realizing, which is sort of like the idea of why someone would become an entrepreneur, right? Like why would you do all this effort just without being directed in any way? Why would you think you can change the world, even if it's just a dent? And I think this idea of I'm going to remain a, it's not that they're choosing, people are choosing to remain victims, is they think there is no other option. The only option is, well, this is my circumstance. I'm just going to absorb them and I'm just going to suffer through them. Yeah, I think that's such a powerful tool being able to realize that you can affect change.

So you're working on a book. and there's a lot of people in this space that have either written a book working on writing a book and almost all of them are Bitcoin 101 or Bitcoin for Dummies. And you've taken a different approach to this and I really like your title and your idea for this. So tell people about your book. Okay, so the book title is Bitcoin 201. one. And the idea came to me in Bitcoin during Bitcoin 2020.

Because I orange peeled a good friend of mine from Canada, he's living in Costa Rica. And he came from Costa Rica to Miami for the conference. And he's super new to Bitcoin. He bought his first stash maybe a few months ago or maybe a year ago or so. and he's gone down the rabbit hole hard, like real, real hard. He's done a lot of changes personally, and like he gets it. Like the guy gets it. And he's actually writing fiction on Bitcoin for teenagers.

And he came to me and he said, Pablo, should I coin join? And that was such a funny question because this guy had, he's never thought about conjuring his bank count. know his fiat. He started looking into, should I run a node? He started having all these different questions. Like, he understood that he needed to buy Bitcoin. He understood the benefits. He understands like all the Austrian perspective, the monetary, like all the reason why it's, it might be a good investment, all that stuff he gets. The 101, he's got it. The 101, he's got it.

He understands it perfectly. But the part where he needs to use Bitcoin, he bought a ticket for, we threw a dinner with Alex Spetskyy, the Remnant Dinner, and the only way to buy a ticket to the dinner was to pay with Bitcoin. There was no other way. And he did his first Bitcoin transaction

to pay for that dinner. And he didn't know how to do it. He understood the concept of a hardware wallet and how to keep the cold story. All that part, yes. But how to actually pay with Bitcoin, how to, all those next level questions, blank. He had no idea. So I started writing, I explained to him about coin joining, but then I started thinking that he very often comes with this type of question.

I said, okay, we need to have something for these kind of people. Because one other thing that I think is that the more you use Bitcoin, the more your confidence with having all your assets or most of your assets in Bitcoin, where you see that it's not just like this one number on the screen. So yeah, I started on the way back from that trip. I wrote a table of contents on, yeah, misconceptions on Bitcoin, Lightning Network, Layer 2, Layer 3. why you run a note, what is Bitcoin, where are my Bitcons? Like all these, like, what is a UTXO, for example? I wrote a glossary for like all these different terms, but in a way that is more entertaining than just like a dictionary,

like a Wikipedia entry. And yeah, actually, the first part of the book, I wrote, why I'm writing this book. And I described this scene with my friend. And he's saying, should I conjure my coins? Should I use wasabi? Should I use samurai? I think that's great.

I mean, and you're going to have a lot of people that are in a very similar space. They're using it as savings. And if they do want to go down that path where they do want to learn more about this second layer and how to do immediate transactions and you can go on and on, this sounds like an awesome resource. I know you're not finished with the book yet, but a lot of our listeners will listen to this in six months from now or whatever and give them a web page where they can either go sign up or they can learn more about the project. And then also give them a hand off to your Twitter profile

or anything else you want to highlight. Yeah, my Twitter profile is Pablo F7D. It's a very different. It's a very hard to say name. We'll have a link. We'll have a link. Yes, we'll have a link. It's an engineering thing where for some words,

like long words, you leave the first character and the last character. And all the letters that you take out, you're replaced by the number of letters that you took out. So F7C is Fernandez, which is my last name. It's mainly used for internationalization. For example, when you write on programming, you write internationalization, you write I-18N. So it's that 80. So yeah, that's my truttle handle.

For the book, I'm going to have it on Bitcoin 201 book.com. Like you said, it's not done yet. But I'm moving at a really rapid pace because I've been explaining this kind of thing to people for many years. I helped people run their first node and validate their transactions and all this kind of thing for the very first time. And it's, man, it's such a beautiful experience helping people with that kind of thing because you realize I bought some stock maybe two or three years ago. And I realized that I couldn't actually withdraw the stock, the equity that I bought.

And it was like, oh, my God, this is it. It's custodial all the way down. And the idea that you can validate for transactions and you can validate from the Genesis blog and you can validate that everything is as it's supposed to be and you don't have to ask for anyone to, oh, is this transaction valid? Man, it's so, so powerful. Helping people unlock that mindset, it's absolutely beautiful. It truly shows you how antiquated traditional finance is after you start digging into some of the stuff and you're running your own node and peering into every single transaction and just, I mean, it's just crazy to think that the rest of the world's not even close to where this is at right now.

So, Pablo, this was a blast. We will have links in the show notes to everything that he highlighted there. And thank you so much for making time to come on this show and explain some of this stuff to us. Thank you, Preston. I had a lot of fun. It was awesome. You've been a super important part of my actual Bitcoin journey as well. I actually went back and I listened to your first episode when you first talked about Bitcoin for the first time. The 2015 one. That was, it's a hilarious episode. People should totally listen to that. I mean, everybody, like you said when we started, everybody kind of arrives at this from a different angle and you're just kind of like you arrive and you're like, you arrive and you're like, you're like, you're like, well, what the heck is this? Come on. Give me a break. Like, there's no way. But yeah, and you also, most people, we use the lenses that we, that we currently have to try to understand Bitcoin, right? Which I think that's also why metaphors are so widely used

to understand Bitcoin, like Bitcoin is digital gold, Bitcoin is this, Bitcoin is that. But in the same way, like the other side of the coin is that those metaphors represent your lack of understanding of Bitcoin. So, for example, when you start with Bitcoin is digital gold, man, you've missed like 98% of what Bitcoin is. It's demonstrating you, you, when you step into the space and you start pontificating on what you think you know. Amen to that, man. But Pablo, thank you so much for making time. This was a blast. Thank you, Preston. If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use, just search for We Study Billionaires.

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