A Friendly Debate About Bitcoin Scaling

Transcript

GM welcome to another episode of the rollup today we are speaking with two projects that are innovating in the Bitcoin ecosystem we're speaking with Reena from stacks and Rich Rin of cow these two projects are both Pioneers in the Bitcoin scaling space they have very similar and very different technical designs as well as philosophies for how they build their Projects please enjoy this episode first a word from our sponsors [Music]

cartey is your home for app specific rollups at the Forefront of developing new tools and platforms that enhance the capabilities of blockchain Technology cartei enables applications that are flexible and built to scale build on a full Linux environment and use traditional software libraries but in blockchain development go to cy. that's cy. to learn more about building your own app chain today welcome back to the rollup following our Bitcoin and Beyond series that we did a couple months back we had the pleasure to meet up with Rena at Moder Summit and obviously Rich a longtime uh Joiner of the rollup podcast today we're gonna be talking about a ton

of this of the happenings in the Bitcoin ecosystem some of the changes to the Bas layer bit vm2 paper the wbtc push what stacks and cord are doing so lot to cover Rob GM let's get right into it yeah GM uh good to have uh friendly faces here no I'll keep it pretty brief like Bitcoin and Beyond was super fun learned a ton and uh it's really cool that there's more activity happening on bitcoin both the chain and the the protocol itself getting built so two leaders in that space here Reena good uh good to meet you and welcome to the channel GM GM and uh Rich welcome back GM great to be

back awesome well I feel like this one's going to get pretty spicy so um Reno why don't you start give us like give us the state of Bitcoin as as you see it the Bitcoin state is evolving and it's a little bit like ephemeral for like what side of Bitcoin you're on they're are bitcoiners in the state of this is the best time to be in Bitcoin we're we're growing we're creative there's new blood new energy back into Bitcoin of hey we're actually using the chain we're making transactions unlike a decade ago and then you have the other side that is really sad that there are activity on bitcoin and they just want to use it as money and that's what I'm trying to like kind of understand like how you guys are

thinking about this Paradox of like Okay so we've got some camps that are like keep Bitcoin aifi keep this hard money properties keep this digital store of value and then you've got the other Camp that's like well guys like if we can't keep up with like technological innovation speec specifically at the Bas layer as well as scaling then like how are we going to even keep this network something that people want to use and keep value here and so like yeah definitely curious to understand your perspectives on like keeping Bitcoin immutable and like a strong Bas layer um but also like tweaking it a little bit to kind of keep it more competitive like what's the mental model that you both are approaching this current state with for me it's pretty simple but I think Bitcoin needs a few minor changes to

kind of stay in the running game if you think about it from like this perspective we only hit what's it um a million uh a billion transactions on bitcoin this year in 2024 but you hit a billion transactions on salana and E well before um before it existed but Bitcoin is a long the longest Runing chain if I think about going further bitcoin's can continue to go through having cycle so mining subsidies are going to go down so what is the incentive for miners to continue to run and operate the network you need transaction activity and without having some of these new meta protocols no one was using Bitcoin for like daily transaction activity and like that's

what miners need to keep the incentive to continue to validate for the network so I'm team look the base layer is great but it could be a little bit better so let's do a few subtle changes so that Builders actually want to build depb so that transaction activity occurs otherwise in 20 like maybe 50 the mining subsidy is obsolete so it is economically not incentive for people to mine so I think just to add on to reena's point which I I I largely uh agree with I think we have a problem with the Bitcoin security budget probably in eight years like two happenings from now I'm actually really worried about it and I'm pretty bearish that even if we get more meta protocols and that sort of thing you know actually

contributing to bitcoin transaction volue shortterm that that's enough and I think this is where you know exogenous block reward systems like merge mining or you know cor Satoshi plus are actually super relevant right because they're trying to help keep mining more profitable for the long term which is so critical to keeping Bitcoin secure and decentralized and that's why we're seeing folks like Marathon Etc experiment mining uh chains like Caspa right like is a lot of incentive to go figure out how to solve this problem I do think it's a a tight rope to walk though because Bitcoin one of the reasons it has been so successful is because it is so simple and and that is always been a a challenge with Bitcoin is how much Innovation is okay and I

think we're we're seeing some of this with like the opcat you know versus CTV debates right now right and and I I for one am like pretty ambivalent to see one of these get merged and it's just what timeline is that going to H happen on right is that two years is that five years like that sort of challenge is really hard and and I think this is also why these you know other scaling Solutions can be so critical to this story because it can help while Bitcoin is figuring out what Bitcoin wants to be but I do think there's a danger path here and and the danger path I think is losing a little bit of bitcoin's narrative and also it's potential to generate long-term transaction fees a great example of this is ethereum post 4844

right like if you look at ethereum as a business after you know these changes it's actually significantly decreased and ethereum to some degree has has lost its narrative and like those are you know existential problems if it makes sense but interesting things to to chat about do you think we're losing our Bitcoin narrative right now because I feel like we're we're redefining the Bitcoin narrative right now when I like think about what brought me into this industry like 10 years ago is I thought Bitcoin was money like magical internet money and like that's what actually brought me in because I was a minor literally a petroleum engineer so like straight up creating the energy used for mining at that point in time like you don't go more Farm to Table than that but now when I think about Bitcoin my

relationship has changed that Bitcoin can be money but Bitcoin can be something else and like I gravitate towards the AR the kind of the narrative mind shift of Bitcoin might be the only chain that I can build on that full truly is decentralized and has the ability to be fully permissionless and I don't actually think other chains give me that level of comfort to experiment on like Bitcoin it's an interesting kind of hypothesis I'm I'm not sure that Bitcoin is losing its narrative like I'm more pointing that out as one possible like yeah eventuality that that we could get into and one of the reasons that you

know minimizing some of the changes to the base layer are likely a good idea but I think we've actually already seen bitcoin's narrative change many times to your point right like I remember in 2013 when I first got involved in Bitcoin it was all about this unse uncensorable money and I was like so stoked to pay for Bitcoin with pay for to pay for coffee with Bitcoin right like that was like the coolest thing in the world right and since then we've actually moved into no it's a store of value and like the store of value digital gold narrative and and I think it's important to you know allow Bitcoin to be what Bitcoin wants to be and we've already started to expand the Overton window over the last let's call it 18 months with ordinals BRC 20s runes like we've already started to see all those things

shift but I think it's important that Bitcoin remains this global settlement layer for high value transa like that that is very critical to the story and it's a little bit of playing like Devil's Advocate right where it's important to have as much activity as as possible but also to be aware of maybe some of the lessons that have come before us you've heard a lot of the like ethereum is a Bitcoin test net uh over like the last you know and and and I think it's true in some ways right like we can as bitcoiners take some of these learnings and then use it to lay our own path on a Bitcoin time scale it's like if you want to do like small small value experiments do it on any other chain when you're ready to play with big money you have to come to bitcoin because

there's no there's no one who has the settlement and brand value like Bitcoin ethereum is an L2 on bitcoin is is one or best net for Bitcoin is one of my favorite memes um when I first got into Bitcoin it was like the verifiable money I was excited to use money that I actually knew was there both my parents they met at at a bank that doesn't exist anymore and both of them got laid off in the financial crisis and so it was like when money's moving around and there's Black Swan events it's like well where's the money Bitcoin you can actually see where the money is at all times and you know anyone can see it at any given time on The Ledger and so yeah I was really excited to to use money that I knew was

real because I could I could see it I could almost touch it with my own hands in a in like this not a tangible physical sense but like I knew it was there um and so I I I think that narrative still exists today but like whether or not we use that money to like reserve money and collateralized currencies that we that are a little bit easier to as a medium of exchange or actually use that Bitcoin on a daily basis to exchange I was almost a little bit more detached from that as long as I knew that the money was there like to me that was That's What mattered I mean that was actually one of the classic Arguments for small blocks right like if we go back to the the block size War right the

idea was that if you had really small blocks it would be able everyone in the world would practically be able to to verify the chain and that was always you know one of like the straw man arguments as part of that story if you will but it is a really important property when we think about you know blockchains generally is Bitcoin is Max decentralization right and like that is part of its product Market fit it always stands out to me like it's Max decentralization you don't you know who some Bitcoin cevs are but there's still no like governance Foundation or CEO or anything that you can like necessarily point to and that's the beauty of it will always be permissionless that that might be changing though like the it's also like the downfall of the uh of the

of these networks too ethereum's going through this like phase against Salo where salana is much more kind of top down oriented and gets things done and has these conferences and do does these marketing things and has a much more cohesive feeli and ethereum is kind of like all over this like this non for-profit organization and and so bitcoin's even almost like further down the line where it's almost like there's not a lot of leadership if you will and which is kind of like delaying some of these upgrad and R you were you were kind of hinting at a couple uh small tweaks or upgrades that you think that that that the Bas layer should consider that the community should be considering and I think uh to put you on the spot one in particular with regards to what

Rich was saying was this increasing of the block size I think that you have a a a take on that or um kind of perhaps a contrary view as well um based on these kind of verifiable properties maybe you could um illuminate some of the the changes and specifically onto the onto your ideas behind the block size uh conversation I think we're fundamentally limited by the block sizes is like yes you have a limit and I understand like why we have it for security architecture and like incentives enough but if people truly want to do something more with their Bitcoin and build complex deps defi protocols things like that or um even go further in like the ordinal

space of Bitcoin Bitcoin art could be the next Costo or whatever it may be or you want these like massively successful collections that increase value to the Bitcoin Network because it is backed by BTC I truly think that the block size could stand to have some improvements on increasement and I think the challenge with like increasing the block space size is the kind of data and kind of complexity needed to maintain that from like a hash power perspective from the miners and such like we're already in a state where it is difficult to bring in new miners into Bitcoin because the rewards are diminishing return over time unless the value of Bitcoin goes up and

everyone knows here Bitcoin value will always be cyclical you don't really you don't really know if it's ever going to hit that kind of um economic return that it makes sense to continue to mine but I just feel like we're stuck in this infinite Loop just this current state of Bitcoin that we haven't done a major Improvement since 20 20 21 or 2017 like those are the two last improvements and if we want Bitcoin to fundamentally be around a 100 years from now we can't stay in this limited State and I know the perspective we're seeing is that we we operate a Bitcoin wallet called leather and we primarily are served by folks creating ordinals or runes so like that's the perspective in

bringing they can do collections on you can do a collection under the four the four limmit like you can still make it but it will never be as metadata or complexity rich like what you can do on another chain but if you fundamentally believe that um let's say an art piece or a doesn't even have to be an art piece to be an ordinal it can be any sort of inscription of data should have the ability to be immutable then increase the block space and just make people pay for it because people are willing to pay for it that's the funny thing I think people are very much concerned that fees will rise transaction fees but let it be competitive yeah I think um

I'll take the I'll take the other side for for like the the sake of the uh the sake of the podcast and I think there's like there's there's merits to to all these different views right like I think even if you look at a lot of people that were on one side of the block siiz war many people you know have actually changed their mind as time has gone on like Matt from thesis is a great example he was like very Pro Big Blocks and then now much more like in the small block Camp so I think all of that is a Continuum there's always you know arguments you know kind of for against I think my my my current view on this is mainly that full expensive Bitcoin blocks are good and I think we have this security budget problem that that we have to solve and I I see the argument

for having more and more of this economic activity on the Bitcoin base layer but I also think that much of this activity can be on l2s or it can be on side chains like core stacks and and I think that that is how many of these things will likely evolve is you have a expensive mint process on bitcoin that is like Max security Max decentralization and probably Max expense to a degree and then a lot of the follow-on activity actually takes place off of Bitcoin L1 and I actually see that as a success case because ultimately like a lot of Bitcoin season two is faster cheaper higher throughput you know uh Bitcoin transactions on these you know additional scaling Solutions it and that to me is just further the separation of Bitcoin asset

from the Bitcoin rails but you still have this really slow expensive um Bitcoin settlement layer so I think it's really tough because there are these like competing views and you're never going to get to full alignment on bitcoin but I think also if we kind of go from a user experience perspective ordinals minting runes mint like all that sort of stuff actually isn't that bad at this point like you have wallets like leather and groups that like have actually like tamed the Beast if you will right like they've made it much simpler and easier to use I think when you take that to defy it gets really clunky really fast and and and I think that's where if we want to have user experience that's competitive with many of these you know evm solutions that are out there or you know just general

salana Etc it'll have to be on on different blockchains you just won't be on bitcoin all one I think that's a great point because when you think about Bitcoin you want something that's simple to use but when I want to do complex activity on bitcoin it's just it's not going to be on the L1 like that's the fundamental truth like I I'm going to have to use an L2 because Bitcoin doesn't have Smart contracts it doesn't have just the native functionality of what we need to create something that could be a new Financial system or whatever it may be you're kind of limited on the finiteness of 21 million and no smart contracts so like you're kind of on that like there's no other way to put it but l2s that reh harness the hash power or security of

Bitcoin so you get that kind of immutability factor to the best of Both Worlds is really where it's going to be and so I mean it's no secret that I contribute to Stacks like I am one of the core contributors to Stacks as while working on a wallet and such but that's I think where all of this L2 kind of season two movement has been is everyone is in a rush to create their L2 to ultimately use the security of Bitcoin but a lot of these l2s like really did it wrong because they're building evm like let's not like do we even go into that like the entire point of Bitcoin was to be using proof of work because that was hard concrete and we know what the money going in and the security aspect of it when you go the L2 route to

use evm I feel like you've already lost the argument because you're no longer using the beauty of Bitcoin which is the Lindy effect for 15 years and so anytime I look at l2s whether it be Stacks or even other ones that we may integrate in leather as a wallet I actually look from that lens so I think let me take the other side of that as well so core is is evm and I think it's the the fastest growing Bitcoin scaling solution from like an ecosystem perspective I think the evm has 10 years of institutional knowledge Network effects tooling and and I think like virtual machines many things can go multi VM at some point as well like I don't think you're necessarily just fully locked in example Stax is also looking into wasm right

like not just not just Clarity and and again developer adoption really matters I I think the proof of work evm argument like is is totally orthogonal I I I don't think those are are related you could in in theory have you know whatever VM you want there and still write you know data back to bitcoin there's some svm Bitcoin al2s as an example right I agree to your point I think it's the run times to giving developers the Comfort to to code in a language that they know and they know well just to bring the activity back like I totally agree partially why Stacks is doing W and looking at Russ maybe there will be a solidity runtime in the future because like totally see developers know what they know and some are willing to learn new languages but a

lot are not so I get that totally and I think it's all about meeting people where they're at today right because it's really important if we build you know everything net new but can't actually attract Builders or or tvl or transaction volume that's not a success in in my opinion and I think there's one other kind of meta point that that you mentioned and this is something that both court and stacks do in in different ways both are actually trying to add economic value to bitcoin miners they just do it in different ways so with core again we give part of our block reward to the 55% of the Bitcoin hash that's currently securing the network that serves as this you know exogenous blw for Bitcoin stack with its Nakamoto upgrade if understand it correctly will also write State back to to bitcoin

which will also help on some level with transaction fees and I think that's the other meta piece here that there is like a Bitcoin alignment if you will with the Bitcoin main chain that is very critical and I think that's part of the differentiation from like random Bitcoin l2s with wrapped Bitcoin versus these Bitcoin scaling Solutions right there is actually a deeper economic tie and this is also why core introduced Bitcoin staking and it's the first of its kind protocol where Bitcoin holders actually receive rewards for them to secure the core chain those same rewards that miners do and with dual staking you're actually ex sentifi to participate in both the core Network and the Bitcoin Network as a Staker and I think this is really like the long-term future is how

do we build POS layers or dpos layers in court case on top of Bitcoin and it's a multifaceted problem some of its yield some of its ecosystem and and I think it's being reality of what can we do to make the biggest impact to help move Bitcoin forward I tend to agree I think users want more expressivity um and miners need incentives sooner rather than later and so it seems like there's a match here where this can be a win-win um but it might take some BAS layer changes in order to bring that about like the best way we we spoke about Bas layer changes a bit and so everyone I we actually had Tyler Whittle from Tapo Wizards come come on the show and talk to us about op cat opat you know is one of those Bas layer changes maybe there's

more talked about block size a bit which is it wasn't as radical before but maybe it's more radical than opcat in terms of Bas layer changes now um and everyone I talk to is pro op cat like I moderated a Bitcoin panel everyone's Pro op cat Tyler Whittle explained the case like the one argument against it I've heard is that it brings me to bitcoin but ordinals and runes created me on bitcoin anyway and we didn't even need to make a a change to the Bas layer and so I'm curious from like can either of you guys articulate an argument against opcat I don't actually have one because I think opcat like honestly is like quite sensible there's only a very few set of

commands that you can issue with opcat and like what we like about it from like the stack side is that it gives us a little bit more functionality to continue to develop um even more complex commands on the L2 side but ultimately we can Bridge back or tie back to the L1 commands like that's the true goal like any Bitcoin L2 ultimately wants to benefit the L1 or we wouldn't be in this game to start and so I have no negative detractors for say on opcat so I I think like I'm Pro opcat generally but think they're the argument that people make is it's similar to like tap rot or something else where like we don't know what that complexity will eventually like kind of do to bitcoin but I don't

think that's a bad thing and I think that's like the one of the big struggles in the Bitcoin Community right now is with the aifi right and like there's always going to be that tension to aify because like Bitcoin has trillion dollars plus today in assets it's got you know so much of that in these major you know ETF products there's always going to be attention but I think if we get to a point where we can't change Bitcoin that is also really dangerous right and maybe the time scales you know get longer and longer but I think some of these arguments into like well opcat will allow some sort of like crazy recursive dos that like destroys the network what like I haven't found anything that is actually convincing me of that right like but but I think

there'll always be those arguments uh that will just be really challenging to to kind of get through my biggest you know issue with OP cat is actually just the timeline and and it's like I have no idea what timeline that will take is that two like I've heard optimistically it's like you know a year worst case maybe like five years but that's a fairly large you know like set of time where that could happen and my biggest message to you know the the l2s out there is hey how do we build stuff that isn't Reliant upon these things that may or may not come in the future it's my same thing that I talk about with BBM is super bullish on bit BM like we would love to create a BBM Bridge it's just when is it ready when is it practical and like until we get there building or

or saying that you're using these things I think is a little disingenuous because I just don't think you're you're being reasonable or like operating on practical time scales and I think at worse it's deceptive right and it's just that that balance is really tricky but but I think it's like how do we push these things forward and ultimately that will probably take to you you know as a pun like a bridge to the Bitcoin Community right like like how do we actually get enough momentum to bring one of these things forward welcome aboard on our journey into the singularity this is the endgame road map for fra and fraxel the new L2 out of the fra ecosystem that is totally based on fractal scaling fractal is a modular L2 blockchain built by fra with modular and

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of different apps some of your favorite reaking protocols and defi protocols and earn yields in the form of powder which will eventually be turning into a governance token Mantle's been around for a while we like them because they use their own form of Ian da uh they have a good ecosystem and they're growing so check out this 100 day metamorphosis campaign and hope you guys enjoy the rest of this video I actually love that you brought up um brought up the ETF point because I might be one of the really few who like absolutely hates that there's a spot ETF for Bitcoin like I understand for markets and all these things but it breaks my heart that so much of Bitcoin is going to be locked in Bank custody staying in the black rocks or like like what we what what the

entire point of Bitcoin was be money or an asset that is with you at all times and you don't need a lock in custody and so every time I see the inflows going into ETFs I'm like great that's less free Bitcoin for people to use on onchain activity whatever they want to do with it or not do with it I just feel like if we kind of leave Bitcoin in the state that it is the future of Bitcoin looks slightly Bleak that one there will be less miners but two all our all the world's Bitcoin will be and some black rock some custody and such and like that's partially why I'm like a little bit more bullish on the bit PMS or the opats or some of these small tweaks

because I think that's the only way that Bitcoin stays out of um 50% of the supply is locked in custody like we already have like supply issues as is with so much Bitcoin just in Cold Storage just across the board that no one's willing to use or deploy their Bitcoin but if we continue on this Bitcoin stays in this like very naret mindset I don't really know what the Vitality of like Bitcoin markets for activity and transactions will look like like a hundred years from now yeah a lot to unpack there so kind of starting from the jump like like the key thing that you guys were kind of going back and forth about with regards to like the evm chains as well was about this kind of economic alignment back to the L1 and so I think that like tying in the the the

ETF and this kind of centralization of custody uh coins there's no economic value being redistributed back to miners being distributed back to apps on stacks on core uh contributing to the security of the network as a as a you know as a network itself and then kind of like the only push back on on opcat is that it's you know this this time frame idea and I put out a tweet that was like I think that Bitcoin scaling space is going to shock a lot of people because I truly think that the amount of value that can be in these l2s and in these chains in on bitcoin itself is exponentially higher than any other rollup or you know ecosystem or ecosystem of chains out there ethereum salana l1s but it's going

to take longer than I think a lot of us expect or a lot of us hope for um which I think is so you know I agree with you there rich and I kind of want to bring this back to this ETF to this kind of evm conversation with regards to this recent wbtc happenings where bitgo is now transferring its its basically ownership of wbtc and the whole processes of managing it to a Justin Sun Associated entity uh of which maker DA has already taken away the ability to open up a CDP on ethereum using wbtc the government's proposal passed relatively quickly and then just shortly after coinbase puts out a tweet that goes viral millions of views just see CB BTC

and so like how are we thinking about CB BTC this wbtc shift and the question for for you guys is is stacks and core are those are those important do we need stacks and core in a world where all of the Bitcoin is just going to go onto CB BTC on base and it's going to be the biggest Bitcoin holder Bitcoin L2 like how are you guys approaching this and why is it still so important you know that that these solutions that you guys have built remain rather than just kind of all this Bitcoin going into an ethereum rollup or into some of these ETF providers so I'm happy to to field this to start um disclosure I worked at coinbase for a long time I was super

excited about CBBC coming out I think it's like natural business for them that they should have been in a very long time ago like sometimes you get so big that just takes a long time to do like these obvious businesses if that makes sense and from what I've learned about cbtc it's an ex in product and I think it's good to have rival risk products when it comes to other centralized Bitcoin derivatives right like WTC has kind of been allowed to operate in in isolation for a long time we haven't seen a lot of credible Bitcoin fully custody derivatives come on chain and in terms of core we welcome all of these Bitcoin derivatives like it's one of the reasons that core has 250 million plus in Bitcoin tvl some of it is you know

core derivatives like core BTC others are solv BTC and some these other groups we welcome them all and it's not going to be one Bitcoin derivative that sucks up a hundred billion dollars like anytime soon right it's going to be a diverse group of folks that build these different products but that's where the the devil lies in the details and my guess is this is something that that Reno will will also be aligned with is it's also important that we have decentralized Bitcoin derivatives that is critical to the story of Bitcoin and I probably talk to somewhere around a billion dollars of Bitcoin every week every other mostly in the context of core is Bitcoin staking but when we talk about Bitcoin staking or even core BTC the first question that comes up with

real Bitcoin holders is what are the trust assumptions I know XYZ friend that lost a ton of money at blockfi or Genesis or Celsius and I'm just never doing that again like I've SE I know I have too many battle scars from those sorts of stories and with so many of these these conversations like you start to learn more and more that unlike ethereum maybe Bitcoin really cares about trust assumptions like it's a very different ethos because most bitcoiners like key Drive in life is to earn more Bitcoin like that's it right and that's a very unique spot for many ethereum folks where if they just want to earn more dollars more e like just a different proct you're optimizing for for different things and that's also one of the reasons that you know folks like

like core need to exist it's we need to have these opportunities for Bitcoin natives to go earn safe yields on their Bitcoin to go and enable these higher faster cheaper throughput use cases and I don't think that will just be done with fully custody stable coins on ethereum rollups I think there's also one other piece is we haven't seen the killer app yet of Bitcoin def5 but we will and I think it will be done with decentralized Bitcoin derivatives because ultimately that's how you're going to unlock the largest piece of that 21 million it's not going to be just like a a simple Plain Jane I think that we've seen in other spots using custody disabl coins otherwise wbtc would be a lot bigger than N9 billion similar viewpoints look wbtc has existed

for Years yet only 1 to 2% is like bridged or wrapped in like that's just the fundamental issue of no one wanted to trust a kyc Bitcoin no one wanted to move their precious Bitcoin to accept another chains risk because you have Smart contract risk like no matter what you no matter how you see it with CB Bitcoin what I welcome is that look they have all the infrastructure Tools in place whether it be getting to stable coins access points uh smart wallets embedded wallets everything under the sun to actually make using Bitcoin a viable category which is awesome I think anyone who's in Bitcoin has to be happy about that like if you aren't that's

just like an move to not be happy about that but kind of going back to how much trust will I use with Bitcoin with a single custodian or a single party like that trust assumption is key what I like about some of the other Alternatives is that a decentralized signer or validator set is critical that is open that anyone can use there has been others who have kind of attempted this through Federated models but you cannot enter like there is no means to enter the Federated model unless you are a Federated entity or a party that can participate and that fundamentally goes against the ethos of Bitcoin that anybody should be able to mine or particip and such and so Stacks

obviously is launching their asset um towards the end of the year called sbtc that is using a open decentralized signer set to validate Bitcoin it will it will be alongside the cbit CB Bitcoins or the wbcs in the world but I think the most important aspect is will people use this in defi related activity kind of to Rich this point no one wants to get wrecked by block fire cses again so will a open source known decentralized validator set be a step in the right direction as opposed to trust me bro I'm a custodian or trust me bro I'm coinbase like I think there has to

be that distinction of some of these entities are almost too big so do you want to give an alternative approach or try yeah I think it's helpful to look at ethereum like there's Lio steak teeth has a strong dominance and that's more of like the decentralized kind of like crypto native if you will and then like coinbase eth CB eth is like shortly right behind it so I think it's like a spectrum of people that will like want to choose both but I imagine rich in this crypto K in this bitcoin's defi um killer app it's probably going to be some sort of like CDP Market with some like uh intricate yield designs and perhaps some sort of way to really get a lot of efficiency for your for your BTC I think that they'll be the two biggest

uh kind of uh deposits in this will be a decentralized version so Stacks BTC core BTC f one of these and then CB BTC will probably be right there and I think different spectrums of people will have uh a a kind of different risk tolerance or taste um but I think generally what you guys are more so getting at is that the Bitcoin Community specifically is not just going to be okay with coinbase BTC like it's similar in the sense that like the ethereum community shouldn't just be okay with usdc and usdt you know we we have die we have others and so that's kind of like where we're trending towards I think it's like as simple as thinking of look one of the core kind of premises of Bitcoin defi I should be able to get liquidity out for my Bitcoin

because Bitcoin is a great like asset to use as collateral am I going to wrap it into wbtc and then go on a and take out a loan or am I going to wrap it into or Bridge it into a non-custodial kind of Bitcoin derivative asset and then take liquidity against my loan like I think there's like two other ways to look at it and then like one that has always stood out to me on the wbdc thing is I believe there is a tax consequence for it so like because it is a rapper like you have to go through a wrapping there is a tax event whereas when you use some of the other assets like sbdc or kbdc because it is a locking mechanism and then you're going to withdraw it I

believe that stays as a tax minimized um event for let's say American so I I believe Reena is correct in the tax consequences but I do not play a tax professional so do not take advice for us like at least from like the moving from one to yeah to to totally agree but I think that actually really does matter to bitcoiners like I I I like I'm making a joke about the tax piece but I actually do think that's really relevant because people are sitting on bags from 2012 right and if you're going to wrap it and it's going to cost you the cap gains on that that's crazy right like that that is important 100 well it's net negative right like it's actually that's a really point scario and and then I think on top of

that I I think the S point is really really critical here and core has its own LST BTC coming out and there's a bunch of lsts getting built on top of core's yield and I think this is what we've seen is yield is actually the killer app but it needs to be safe and it needs to be secure it needs to be decentralized it needs to be non-custodial and this is part of the missing ingredient from from Bitcoin defi today is we have a lack of actual sustainable trustless yield sources and I think that's what will really help unlock a bunch of these Bitcoin defi use cases and I don't think CBBC at least to start will have a yield bearing aspect and I think over time maybe they'll add it like you'll get into these other you know scenarios over time but it opens up

the opportunity for many of these lsts to actually grow and get a bunch of market share to eventually get to some of these you know yield stacking components that we all would love to get to as long as it's safe like you mentioned the CDP protocol I can't think of a better CDP protocol than one that would take lsts so you get to have you know trustless yield and that is an additional booster on top of the leverage you're getting from the stable coins while maintaining your upside exposure to bitcoin that's kind of like the killer Trio and and this is it's like Rich for you it's like the perfect type of product right you have a bunch of Bitcoin or like that's what you like denominate your net worth in right so it's like being able to borrow against that is like that's the yeah sorry to

interrupt but that just seems like if you have a yield bearing asset you can borrow against that just seems like bitcoin's biggest unlock for the coming you know 18 months totally and I've been we so there's several CDP products that are close to launching on core hopefully in the next like month or so so we're really excited about this I've been trying to get CDP protocols like like begging on podcasts for like I don't know nine months 12 months uh it's been a really long time and and people laugh at me when I say it and I think the reason that it hasn't been popular is many of the haven't been in Bitcoin for a long time and don't realize that like this is the killer use case of Bitcoin like it's really simple it doesn't need to be over engineered and complex the other piece that I think turns off to

some folks and again core is you know trying to find people when you know it be comes to the ecosystem as much as we can be who are really aligned with the long-term vision of core but it's finding people who want to build real businesses and what I mean by that is CDP protocol might not need its own native token for like a long time right it can actually just generate tons of fees and those are interesting kind of things for people to think through because so much of the meta in crypto has been like when token right and it's like that leads to these bad incentives where the tvl or like AUM game really in Bitcoin is a much longer time frame it's probably five plus years but one of these cdps is going to get decillion

dollars in AUM and it's going to be this fee generating Ma machine because it's giving so much utility to bitcoin holders and I know that's something that probably Reena struggles with as well when you're you know trying to work with teams it's finding folks that you know really see the opportunity in Bitcoin Beyond just the The Tam of like what bitcoin's worth today because you need to see on a longer time scale how it can grow and how much utility you can actually bring I I tend to agree with you guys that the yield is the killer app and Bitcoin is the Best Collateral asset in the world but do you think the the ETF issuers that custody all of this Bitcoin now are going to collateralize it on chain and take the smart contract risk to generate that yield arena is

shaking her head it just seems more likely that they engage in some offchain agreement to like if they're going to generate any kind of yield they do it off offchain with their other counterparties in a legal document yeah it's gonna be the same as like the earn fiascos or things like that like I just don't I don't fundamentally think they are going to get it right whereas Builders like in St and core and whomever are actually trying to build just a better way to do this transparent on chain like things that I would love to see kind of like coming in is I don't think a lot of Bitcoin related products or protocols need a token too I'm actually with Rich on this one like I actually think creating a sustainable business with Bitcoin is more important

to the Vitality of Bitcoin than when token when this when that so like actually is like I see a lot of this dissent in the C20 or runes community that they rush to create these assets because they have um let's say Bitcoin denominations or Bitcoin backed yet they can't sustain their business whatsoever because they're fully wholly dependent on price goes up and like that is the wrong mentality for anyone who's operating this space of it shouldn't be can I build something that generates uh that is dependent on markets it should be can I build a business that actually can sustain itself and so like we're just B on on this like a um CDP Protocols are like one really amazing

way to do this like we've seen this play out in like Athena on the E side and such and like why isn't this kind of a core premise of Bitcoin is beyond me I say just just one quick thing on on on Robbie's Point around yield is I do not think that these ETF issuers will come on chain and I think that's a very good thing like like like do not get me wrong I think what use is non-custodial staking protocols like core right where you don't have to on chain and I think that's a fine stopping point and that's why there's actually you know these yield bearing etps that are currently powered by cores yield in Europe and will come to the Middle East and Asia you know later this year because you don't need to make that choice but I think yield bearing Bitcoin inside of

these custodi uh custody Solutions big ETFs will be a very big use case one like loose thought that I've had like in the back of my mind is with so much Bitcoin going into custody do you guys actually think Bitcoin that's liquid whether it's on chain whether on like BDC just like haul in your own wallet or BDC bridged into let's say an L2 will trade at a premium because it's free liquid and available like it's something I've wondered of is there a market to have a slight premium of onchain Bitcoin versus custody Bitcoin I think it'll probably offset like because there is depending on the L2 that it's locked in you can relate that to like smart SM

contract risk and so again like related back to like the Stak e thing a lot of times it was trading at a discount or a premium depending on the smart contract risk or if it was on Peg or off- Peg and so I I think like yes it may be a premium because it is liquid but you are taking smart contract risk which is gonna dilute that premium kind of back be at a discount it's typically discount could be at a premium depends how you how you price the risk and how you price how the market prices the liquidity of the Bitcoin yeah it's something I'm always thinking about because I know a black rock is about to the biggest bag holder of all yeah they're on P ex satoshi's coins like by the end of the

year or next year maybe next year but they'll add redemptions at some point and and that's like much needed like don't get me wrong like I I think for like the centralization risk of Bitcoin if we can't eventually get them to add redemptions it is just a one-way black hole to reena's point right like it will only grow and that is you know that that is an existential threat look maybe this is a necessary evil that we have to take as a stepping stone for like more municipalities and like government and Country National like treasuries in order like first it goes through the ETFs then the US government like then every country in the world has a uh uh you know whatever you call it War

Bitcoin Reserve right Bitcoin Reserve is that any different you know if it's that was always the dream too but like the way that we're kind of understanding it now from your perspective is like that's also paradoxical like that's also not the ideal basically we need them to be all on chain basically we need them to be degenerate they need to like GM and be an enjoyer just like the rest of us coent is solving the longterm data availability problem where a lot of the data availability providers to in the Moder space when you post data to them they actually only hold that data for about 12 to 16 days and then it's basically they can go into archive note or often times it's just kind of put

away into the abyss and what coin's try to do is build this long-term data availability solution which can plung into some of these modular data availability providers and provide this longer term Perpetual data solution so what we try to think of this as is when you post transaction data onto Celestial or Vil or any of these moderate da Solutions or even ethereum Coan is able to provide a longterm data storage and data availability platform for that data after the time period blockchains are Billboards not databases and you know we need these providers in the space to be able to kind of hold on to the longterm data that is provided from these providers and these blockchain State

this is where coent comes in they just had a nice Rebrand check them out on Twitter as well as the website thank you for being here hope you enjoy the rest of the show Everclear is pioneering the clearing layer the clearing layer can almost be thought of as splitwise when you go on a trip with friends but for the blockchain what I mean by that is when users are sending cross chain messages there's often times fillers and solvers who have balances left on different chains that they need to rebalance and reset their positions this is where Everclear comes in everle is pioneering a collaborative approach to the chain abstraction future and they are willing to work with interoperability Partners solvers and other providers in the space to build a

interoperable and chain abstraction future check out Everclear ever clear.org and welcome back to the L up I was just gonna say I really hope that ETFs don't become the killer app for Bitcoin right like and we all can leave the industry there's no hope I think one last thing to mention then we'll wrap up here we got a bounce is that you guys mentioned about the like the way that some of the builders are approaching like the core and stacks ecosystem as well as just like Bitcoin scaling in general with regards to tokens I think like the the one really big Advantage um from the mindset and kind of community perspective that Bitcoin has is that some of the ogs are like kind of anti- altcoins kind of like anti all coins and there just this like meme around oh none

of this is is needed which I kind of find foolish in a sense because I think ethereum is extremely provable experiment that's gone very well and that has kind of fostered innovation it just goes down the line surely there's a lot of shitcoins but I think keeping that culture within the space of building actual um sustainable uh business businesses and applications that aren't just like here to kind of like pump tokens out is going to be something that's going to keep the culture and community of the of those applications actually reach real product Market fit and the The Innovation Cycles will be less kind of slowed down because in ethereum the Innovation Cycles are always like funding apps for tokens and I think that'll still happen but it should if this is if this is the way

that you guys are approaching and that you're influencing your communities then that idea should be able to permeate into Builders and have actual ideas be built based on real you know forecasting of Revenue and real kind of product Market fit unless just for the sake of of kind of launching tokens and things and so I think that that mental model while dangerous to Bitcoin in the early days because a uh you know ultimately bitcoiners were wrong about that and they'll still continue to be wrong about kind of like needing other other other networks I think keeping that part of that inside of the Bitcoin scaling Solutions is going to be uh super important for the app the actual use and sustainability of stacks core and these other chains so just wanted to throw

that in there and uh yeah it's been a great pod awesome but yeah I think I Echo your your thoughts Andy is the idea of like these projects just being token factories and like the whole business of web 3 being launch token and Torina is really a point of like when go up being your business model hopefully that dies right like that that is like the worst part of of the web 3ace and people need to be thinking about cash flows transaction fees like you should be able to run a model and say hey if this network grows 10x five whatever that is what does this actually look like from a business because I think we've all seen over like the last several cycles that if you don't have longer term plans you

just burn out right like you you fly too close to the Sun that there's nothing there it's not sustainable and I think it's like a healthy calling of the herd in some ways right where it's either you want to participate or not and like some of the conversations that that I have it's funny because people will mention they'll be like well core is a multicycle project or or Stacks is a multicycle project and you're like that's such a terrible way to look at things where like the expectation of your business is like under four years like what is that right like it's just totally crazy to me and and and I think that's where like the other thing that we're seeing in you know in Bitcoin space and the ethereum space as well is this wave of Builders has done things previously and sometimes that's good

sometimes that's bad but when you bring some of the you know institutional knowledge of you know 10 plus years of operating whatever you realize that these time Horizons are a lot longer and the incentives really matter so I think you characterized it really well and hopefully that you know when token Viewpoint you know slowly dis SP I mean to at the end of the day tokens have to have utility Bitcoin has utility eth has utility like that's that's one way otherwise it's it's just gas bro like that's otherwise what a token should be used for I'm sorry coming from a petroleum engineer wouldn't expect anything less thank you so much guys been a pleasure and uh rock on great work in the Bitcoin space thank you

thanks H cheers