Bitcoin and Beyond EP6: How Stacks Is Scaling Bitcoin with Muneeb Ali

Transcript

[Music] [Music] [Music] welcome back to bitcoin and Beyond today we have mun from Stacks one of the oggs in Bitcoin scaling uh to talk about basically the state of things now I mean you guys have kind of pioneered this

idea it almost feels like we are seeing the ecosystem grow so I'm sure that you've got a lot of opinions as well as updates on what's going on at stack so welcome in MIM it's a pleasure to have you awesome thanks thanks so much for having me yeah man I was just saying with Rob like Stacks was just listed on grce Skil you're just saying yeah man I found out on Twitter as well yeah yeah I just found out on Twitter myself so I had I had no idea it was happening stf coming next what's the reaction to that I think the reaction is obviously exciting but frankly I um I personally I think enjoy this decentralized ecosystem

a lot where where stuff is happening and you know I would have like no idea happening and then suddenly someone comes in and says oh did you know that this happened so I think I'm personally enjoying that a lot because um a lot of a lot of the ecosystems aren't that decentralized like there's usually a single company that is you know trying to do stuff but this this aspect of stacks is is a something PR un think so what what's the what's the mission like it and and also how what's the organizational structure for Stacks is it is it a da is it a company like is it you know H how are you guys organized and and generally what's the mission yeah so I think it's a open source project right and I think because we did the SEC qualified offering back in the

day the flip side of that was before the mainnet launched um we really had to Des right so imagine the original Labs company that was sort of like building the core protocol it it sort of like was dismantled in in in many ways I mean it still exists uh technically as a as a company but all the early team members are like left off independently doing their own things in the ecosystem and and similarly like you know stack also doesn't have a large treasury U like the initial distribution is like pretty decentralized and no one has like access to a large trial of stacks which is again again good in some ways like it sometimes it's challenging as well

because a lot of these projects typically have you know one or two very large companies with pretty large treasuries as well and they they use those treas IES in the ecosystem which can be helpful in in certain ways I think stack has a has a sort of like a different path so I think it's best to think of that is it's an open source project um many different companies and developers contribute to it and the overall and because it's it's like so decentralized I don't think it h even has a mission statement but I think the way I perceive it is that the idea the goal here is to build the best Bitcoin out right because we believe you know Bitcoin is Bitcoin at the L1 can't scale to a billion people even hundreds of

millions of people would be very hard at the L1 level um so it's it's like hey how do we take Bitcoin to a billion people it has to be like you know fast cheap and and uh secure and at the same time uh we want to make Bitcoin programmable as well like you know all the interesting applications people are building in the rest of crypto I think that can be done with BTC as well and that's a pretty exciting idea that idea has been around for a very long time but I think the execution of it and actually making it a reality is where all the all the challenges are all right yes so Stax is a Bitcoin L2 as you describe it um and we've been kind of on a mission here to like bring the the ethereum culture Vibe almost of like okay we need to

Define things we need to understand trust assumptions we need to figure out what's happening and we need to like educate people on like what is going on in the space to like make sure people basically don't get wrecked um and you guys are an L2 so so what from a technical architecture what is a Bitcoin L2 in your mind and uh perhaps we can even get into kind of the differentiation between that and just a normal rollup or a side chain and this kind of conversation here yes so I think I think terminology is important and I think sometimes people can have very very strong opinions about this but I fundamentally am off the view that Bitcoin l2s are going to look different

from ethereum l2s like ethereum is a different base layer it is more programmable and in some ways um uh I think the the property that people uh focus a lot on is uni unilateral withdrawal basically saying that a user at the L1 can ask for their funds out right uh and and doesn't need to depend on any anything that's happening at the L2 I think that's a very very strong very nice property on the Bitcoin side lightning sort of has that property no nobody else has it lightning is probably the only one that has it but the flip side of that is uh because Bitcoin script is so limited

that means that your L if your L2 is fully contained fully described by Bitcoin script uh then it's by definition going to be a pretty limited L2 and that's that's the case with with lightning it it from a trust assumption perspective again there are certain type of attacks that are still possible but you know by and large people have unilateral withdrawal which is which is a great property to have for lightning but I I I feel that that applying that definition from ethereum because ethereum is teing complete at the L1 level sorts of like apples and oranges right like because there can be other types of l2s that can exist that can that explore different design points and that can be very useful in their own

ways and I I don't I don't think we can take those definitions from ethereum and try to apply them directly on bitcoin especially when the term L2 actually started on bitcoin right this this was before ethereum uh even if you go back and look at you know the blockstream work or liquid liquid is a is a federation but has been called the Bitcoin L2 for the longest time so I think even culturally historically the term l2s have been used differently um but but that also means that you know we should be very clear about the trust assumptions and and explain to people like what those trust assumptions are and what are the things that sort of like make to so let me let me comment on both of those things so I think in terms of trust assumptions um on the Bitcoin side you're typically are putting in

more trust in some sort of a bridge uh that is going from L1 to L2 right so on one side you can have uh federations like liquid where there's clearly a multis uh you're fully trusting these people there are no economic incentives right like nobody's putting up any collateral or any Capital you're completely trusting whoever controls the mul for moving the Bitcoin there there are things like rootstock that try to you know have more sort of like clever designs where they have these like hardware multis and you other protocols around it but at the end of the day it looks still closer to a m than than anything else um on on on the new sack system after the upcoming Nakamoto

upgrade uh we are basically looking at a threshold wallet system so these signers are can come and go which is an interesting property right so you don't have to pre-select who the signers are and then just sort of like depend on them uh it's open network where the signers can come and go so I think that that itself is a good property and the second thing is that these people have U like skin in the game so they do put up collateral uh that if they if they misbehave their capital is sort of like locked until they they can actually process that so there's some skin in the game and economic incentives that these people have but we like but that's not the only thing we're sort of relying on in the in in the stack nak release

because there is a very sort of like explicit effort in the ecosystem to bring on a lot of institutional signers I think so far maybe 20 of them have been announced and these are large institutions like know block Damon or figment and and others imagine like large custody providers and that's like a very practical sort of decentralization and security because if you get you know the top 30 40 large institutions and custodians and exchanges as signers then it's not just Economic Security but it's a very decentralized network of people who have reputational risk at all so I think until Bitcoin can uh have certain op codes this is sort of like the best you can do and that's that's my view right

like so we're not going to just like sit there and wait for Bitcoin to have op codes we all know that you know that can take years but we can try to deliver a system that is very sort of like you know pragmatic commercial works today has very high levels of security and decentralization and then prove to people like look how useful Bitcoin l2s can be uh and and use that data to maybe uh upgrade Bitcoin with new OP codes at some point and once we can get those OP codes things uh the trust assumptions can can be reled the other other side which I don't think gets enough uh attention in the definition of l2s is the concept of economic alignment with which I think is a very very important

thing so to me at L2 is a place where primarily the asset that is being used is actually BTC so if BTC is used for paying gas fees if BDC is the the asset that is being deployed in smart contracts and the economy is sort of like running on on BDC like that to me is actually a much more important thing uh practically than anything else because users like at the end of the day they don't care about the technology uh it's sort of like you know working under the hood for them but uh the economic alignment with Bitcoin if the ux feels like hey I'm just using BTC on a different sort of like rails that is going to feel more more like an al2 to

the user than than anything else got it yeah that that makes a lot of sense from the alignment perspective uh you know we see and and like we're coming from the ethereum space A lot of times where we see this uh economic alignment to try to you know both align the community as well as the incentives to bring liquidity over and make sure that everything is familiar you know adding in another gas token that is unfamiliar is just going to you know add an extra step um and so it makes a lot of sense to have economic alignment when it comes to this unilateral withdrawal uh it's something that I think a lot of people want uh it makes sense from like a you user experience perspective and a safety perspective for the conversation around

op codes is very contentious but so is the conversation around multisig you know that that's contentious too from a security perspective and so I think a lot of people are are okay and fine with the multisig setup that we have right now but would like to see op codes in the future why do you think op codes are so contentious on bitcoin why don't you think that you know they are more widely accepted to enable some more of these programmability and and the unilateral withdrawal feature from l2s yeah so I think um Bitcoin basically has this culture to resisting change and in in many ways uh it's it's a feature not a right like so Bitcoin is very durable like one of the I think value props of

Bitcoin is that for example you can take you can take like a a Bitcoin software from like 2013 for example and run it today and it will catch up to the current block right which is amazing to have right like uh imagine doing that on ethereum eum has gone through proof of work to proof of stake and completely sort of like different uh clients uh in in like since launch so it doesn't have that sort of like you know durability and stability that a lot of people would want to have uh from a store of value from from like you know base money because you don't want that to change that much and I think this is also to reduce the security attack Vector of

Bitcoin as well like there's a reason why you know Satoshi had certain off codes but disable them because the more sort of like complexity you add to the base layer the larger the attack Vector becomes and and and and these things are pretty real like imagine tap r which in the grand scheme of things was a pretty small change right but tap r enabled ordinals and you know runes and all of these like new things on bitcoin um that people sort of like didn't think about right so even a very small change at the base layer could add a lot of complexity that you never you know thought of before so that's why I think people are sort of like hesitant about about these things but that doesn't mean like

Bitcoin is never going to change and Evol like I think it will but in a more slow steady sort of like very high bar to uh security testing and thinking through all all of the different scenarios and so on I I love Bitcoin history because tap rout is great example um and I remember Bitcoin cash and how the the change from 2 megabyte blocks to 8 megab blocks was such a such an important issue that it ended up Fork hard forking creating Bitcoin cash which is still above a billion dollars in economic value sitting there on chain um and and speaking of Bitcoin cash they have an OP code they have op cat on bitcoin cash and I think that's pretty pretty interesting because it hasn't

been exploited over there when theoretically there is this giant honey poot of incentives to go and and poke and prod and see if there's a way to to circumvent that cat and and exploit it for economic gain do you think that is at all like kind of taking taken notice by the Bitcoin developers that are kind of working on this these op op codes I think it's helpful like you know uh networks like Bitcoin cash can act as sort of like a more realistic you know testm for for Bitcoin but we should also keep in mind that they're all of Bitcoin Forks combined are probably less than 1% of economic uh economic power of Bitcoin itself right

so the the stakes aren't the same right like like they're barely the at the same level of magnitude so I think when doing something on on bitcoin it's always sort of like a much bigger deal and sometimes you know people don't really pay attention like I for example haven't P attention to bitcoin cash for the longest time um so that's that's sort of like yes it's helpful but it's I think it's only helpful if if uh the economic is incentives are large enough and some of the the C devs and other people are actually paying attention right but if it's something that's happening at a much smaller scale not really in the spotlight not not the best sort of like hackers and developers are paying attention to it then we don't really

know that what could have been done that hasn't been done yet totally makes sense wild to think that you know a billion dollars in economic value is still less than 1% of of bitcoin's economic value and I I only just came to fat realized that opat was uh implemented over there when we were having another one of these Bitcoin and Beyond conversations um don't pay too much attention of Bitcoin SV or cash or plus you know all the Bitcoin Forks that are out there now um let's let's like dive a little bit more into stacks and then and then generalize like these Bitcoin l2s a as a whole you know you guys have a very clear first mover Advantage here you know one of the first Bitcoin l2s that that has been

around I I'm curious first why did you choose to build a Bitcoin L2 rather than going like the ethereum L2 route and then second question somewhat related is like why do you think all these bit Bitcoin l2s are coming online now yeah so I think for the for the first question I know this was almost like a little bit contrarian a couple of years ago but now I think more people are sort of like coming around and seeing the value of it but I would I would call that like first principles think more than anything else if you if you think about it uh if you look at all these digital assets um and even compare to you know how gold versus silver or anything else work

right gold is far more precious than even silver and after silver there's a long draw right like this like a long tail of other other things that never really gained any any any value as a as a store value so on so I think if you take that model and there's like thousands of years of history of human behavior that's captured in that model and you try to apply that to digital assets I think a lot of people would agree that you know one asset is going to become the primary store of value and sort of like the reserve Reserve currency or at least the reserve digital currency and I think all signs right now point to the fact that that's going to be Bitcoin like nothing else is even coming close but nothing else is even

trying to compete there I think the only real competition Bitcoin has really faced is in in in the the recent years when ethereum was trying to be ultrasound money and ethereum was actually getting used as Internet money for example people are trading nfts with it they were trading stable coins with it more the volumes were much more than Bitcoin and I think that even even that has lost momentum recently right like like people aren't treating eth as ultrasound money and even even some of the sort of like you know Die Hard fans of ethereum are sort of like backing backing off from that and and no one else is really even competing with Bitcoin for so if we sort of like all agree that Bitcoin is on track for being

sort like you know the digital money uh the the next question then is you know what type of Technology are you going to build around because when I look at other networks like a Solana or you know something else what I see is like much better uh technology rails but BTC is the better asset right so can we so if you ask the reverse question that would you bring like there are only sort of like two scenarios right like either the either the best form of money would end up going to these better networks or these types of networks would get built on top of the best am of money right so those are sort of like the two models people who are building

kind like these separate netbooks they sort of like you know believe that Bitcoin can easily brought to these networks and the Bitcoin network will become less relevant and that was like sort of like the thing in the last couple of years that Bitcoin is just a pet rock you know people going to forget about it because there were even memes like you know Bitcoin is going to live as a erc20 asset on ethereum like that's one extreme end of that and I have always been a Believer on the other side because I think the uh the network effects on bitcoin is so strong that and technology is easy to replicate right like if someone someone comes up with a faster consensus algorithm I think it's it's much easier to implement on top of Bitcoin then breaking the netbook X of

Bitcoin and and and sort of like going going the other way makes a ton of yeah I mean like we tried that like you said we we brought you know WAP Bitcoin to these other networks and it worked it worked to the extent that we had Bitcoin at least something that you know we called and priced like Bitcoin on these other networks but we didn't quite have we we didn't reverse uh the flow and bring the technology closer to bitcoin and I think again that like Bitcoin cash and these hard Force were attempts to try to adapt the network to scale but we didn't ultimately have this this technological like uh uh atmosphere around Bitcoin that allowed it to scale

and and allow the the native asset to to flourish um in a in a very trustless way and so now we're we're seeing the reverse we're you know you guys are are leading the charge you guys were one of the first Bitcoin l2s that brought the technology to Bitcoin now we're now we have a lot more l2s that are joining that charge you know I do you think more people are kind of recognizing look you know we tried taking the the Bitcoin asset off of the L1 moving it onto ethereum and these other these other chains and interacting with it there um why do you think that didn't work and now we're seeing a lot of a lot of technology companies bring their technology closer to bitcoin yeah so I think for one point to know

about these networks is um how I was saying that Bitcoin not a lot of um other projects are even trying to compete with Bitcoin for being money like I think most of the new projects are basically better sort of like crypto rails uh they they're like Tech platforms really and I think that that place is a lot more competitive if you look at ethereum as a smart contract platform there very strong competitors to that like salana comes to mind or you know Avalanche or other other types of project it's a pretty competitive space and we have sort of seen that um there's there's no clear winners that are

emerging yes ethereum continues to have like a large market share but we've seen how much traction salana got just in the last one year and how much developer momentum they're getting so I view that as a very competitive space and by analogy um I do think Bitcoin l2s itself could be a pretty competitive space because again the these are technology platform these are just like saxs is a smart contract L2 I think there are other people coming in with with different types of smart contract l2s mostly evm at this point so I think stack sort of like stands out in terms of our focus on a safe programming language but also I think we're potentially opening up to vasm and and Russ type languages as well so I think

there would be some differentiation obviously uh you know EVMS are sort of like the most popular thing so there will be a lot of evm clones as Bitcoin l2s and they would sort of like compete with each other but I think there's a opportunity for saxs to stand out uh in attracting sort of like you know high quality developers to more modern technology Stacks than the evm evm is pretty old at this point and people you know it's it's like a double Ed sword like yes it's a great it's a very widely accepted standard but at the same time you know we know the the downsides so I think there's an opportunity here for for stocks sort of like stand out and and show the world that hey there's there are better ways of you know

building the technology stack on top of Bitcoin than just copy pasting EV um so so I think that's how I see the landscape will evolve I don't think that the alt L1 Market is going to disappear I think there's something very interesting there it's already a pretty competitive market and it will I think continue to be competitive but the three big areas that I see are one is sort of like these all l1s uh the second is actually e2s they continue to be a large market like 80 billion or so market and then Bitcoin l2s are probably the third largest category but they're at the most early stage and I think that's it's a very interesting place to be because in terms of like their potential I would

argue that it's potentially a larger market than eel 2s or even the all ones and it is because Bitcoin is a trillion dollar asset like just moving one or two% of Bitcoin into these things means like you know tens of billions of dollars or more and that capital is already there you know it's already sort of like sitting there and and can easily be made productive so that market is at a very very early stage and I think that's why we're seeing so much interest because so many projects are starting in it's finally clicking to people that hey this this is a very uh interesting area to come and build in and it's very fundamental like Bitcoin is just not going away someone's going to do it at some point like that that a lot of people would just agree with you that someone will figure out how to have a

really good you know fast L2 that has a great ux on bitcoin and they will be able to move a lot of easy capit so a lot of competitions are like coming in right now trying to trying to kind like take take their attempt at that and when we're moving that Capital we're moving Bitcoin do you do you think the primary use case for that that Bitcoin transaction that movement is going to be payments Merchants using Bitcoin to pay for a cup of coffee or do you think it's going to be like higher value types of transactions more like Wall Street sque types of defi lending and borrowing money market types of transactions yeah I think I think Bitcoin as collateral my guess is would be the initial use cases because people don't

want to sell their Bitcoin uh but Bitcoin doesn't uh give you any yields right now and compared to every other digital asset right like if you hold ethereum uh it's very are like easy to deploy it and and earn yields on that same with salana and other assets as well so Bitcoin is like obviously the the number one digital asset people still gravitate towards it but they do feel if you talk to anyone who owns like large amounts of Bitcoin the the number one thing that's on their mind is uh okay I have like a like you know Bitcoin but how do I earn any any yield which is which is very natural like like imagine anyone who has Fiat money as well sort of like the first thing that you want to

do is okay how do I how do I make it productive or earn some sort of a monthly income on it instead of just keeping it where it's not earning earning anything at all so I think that's a very fundamental problem for Bitcoin it's a pretty good use case for Bitcoin as well like Bitcoin uh as collateral for other things for defi actually makes a lot of sense and I think with these l2s I do think some of the base um use cases for Bitcoin as like you know a better payment rails because lightning was really the only project attempting that and lightning has has has seen some traction but some routing and liquidity issues sort of like continue to be there or the

lightning now so I think with all all these different l2s coming in and exploring different designs I think it's entirely possible that the Bitcoin has base payments use case uh Cesar Revival and people are able to just do Bitcoin payments or different l2s and I think we'll we'll see like you know which ones actually uh start getting more traction and so on but in general I think it's a very very healthy thing for the Bitcoin system yeah it uh it makes sense now why lightning didn't really work because it didn't quite get at the number one use case that that you talk about with collateralizing Bitcoin the asset it you know lightning allows us to make payment channels transfer Bitcoin relatively

seamlessly but we can't collateralize we can't earn yield and that is sort of like the number one thing that people want to do with their Bitcoin now and as you were talking I was starting to draw some parallels between between Bitcoin and gold as I think it is pretty typical to do but like some some things that came to mind is that you know when we when when we have some gold now um I think it is pretty typical to collateralize it right I think that's there is a market for that um but then the other thing that people like to do with gold is they like to to wear it as jewelry it's like more more functional and now we're starting to see some of these Bitcoin l2s incorporate Bitcoin as a collateral asset that's uh like crypto

economically secures their rollup or their Network um there it's a pretty rough analogy to to equate that to how like people wear gold There is almost like a collateral for their status but for the most part you know H how do you see that playing out with these Bitcoin l2s that have more of a proof of stake mechanism and use Bitcoin as their uh as their Economic Security so I think the the the Bitcoin analogy with gold is actually pretty pretty accurate uh in in in many ways right so for example uh if Bitcoin starts becoming uh sort of like the collateral or even stable coins that would be a situation that is very

similar to how you know our currencies is used to be backed by gold and I think that's a very sort of like a natural thing that that might happen and then uh in terms of you know other other purposes of go like let's say people you know create jewelry out of it I think the reason why that jewelry is sort of like perceived as valuable or is more expensive is because gold itself is precious right and I think that makes a lot of sense when we talk about Bitcoin NS where you're are taking something precious and actually are using that to inscribe some uh some so I think Bitcoin nfts are sort of like that like it's it's like a art form uh you're using a something that is very precious and you

are then inscribing other other things with it and I think that has value versus taking an asset that has no value out in the market or very little value and trying to do the same thing with it I think people are always going to perceive uh the the Bitcoin based nfts to be more Val like that's that's sort of like my theory I think so Bitcoin as gold s of makes a lot of sense the difference here is that you know uh it's very hard to use very small amounts of gold and gold is not programmable right so that's why I think Bitcoin is actually far superior asset than gold because people can program it people can actually use very very small amounts of it which means that Bitcoin does have a shot of doing payments as well whereas gold never had

shot doing that and and I think that that's that's a very sort of like exciting place to be and in terms of like sometimes people ask me about you know uh do you think Bitcoin is undervalued or what's going to happen and I think the simplest model is that right now Bitcoin is barely like 10% of gold market and if you truly believe that this is this is a better collateral this is a better sort of like you know store of value uh then that that means we're very very early Bitcoin should at least we more more than gold yeah and that's always the thing that that that gets me and my friends is like you know you can just kind of jump on a plane with the stick in your uh luggage and sometimes they ask you like hey are you traveling with more than $10,000 in

international flights and just check the the box that says no maybe we won't post that but I think that we just will because well this is the way and like I mean that's kind of like the mindset right of just like Bitcoin the transferability and it brings that that that level of of um kind of like asset class which isn't really seen in Gold but like when I think of gold I just think of like having this this kind of hard asset that I just want to ever touch it just kind of Buri it away in a safe or something and and I tend to think that like Bitcoin a lot of a lot of people think of Bitcoin like that as well and so I kind of like pushed back on the idea that people would want Bitcoin for yield the other idea of just

kind of like Bitcoin users wanted to take more risk so like with with that perspective kind of being shared and that's kind of like where I stand but I've been provenly wrong on this now because like we just had a conversation with cordal they've got thousands of Bitcoin Stakes you've got Stacks you got all these L2 with people kind of bringing Bitcoin in but I still think there's at least a a majority population of Bitcoin holders who are like no just like hard no so like the question that I'm getting to is like what do you think the the user like subsets are of Bitcoin holders and when it comes like their I their desire for risk or their desire to like go do things like you know like what kind of percentages maybe or or kind of how do you look at like the the

entire holder base and be like okay with Stacks here here's kind of who we're going after here's who we we may never be able to on board or kind of like how do you how do you approach this yeah so I think the the first thing about you know people not wanting to risk their Bitcoin I think yes it is true but I would divide that as um you know a lot of early bitcoiners for example they would use this 80 20% that you know put take 80% of your Bitcoin put it in Cold Storage forget about it and and you know now touch it but have some for for experimentation go and play around and you know throw it at things and see how it works interestingly even if you apply

that rule to the Bitcoin market cap like if Bitcoin is north of a trillion dollars even 20% of capcal is a lot it's hundreds of billions of dollars that's there and I think we have real data that Bitcoins do participate in things I I'll give you some examples people forgot like you know the ethereum original ethereum Ico I participated in it it was 100% Bitcoin based like bitcoiners actually funded ethereum back in the day it was 100% BTC based U fundraise I think tesos was the same I think it was mostly mostly Bitcoin back in the day and root stock which happened you know some years ago people forget that I think there's something like 35,000 BDC came into the initial funding of root stock uh and

that's that's a lot of lot of capital and we have seen this with nfts as well like you know Bitcoin like ordinals all all people are using BTC to buy these things right so we have real onchain data that says that you know bitcoiners spend money on things when there is an opportunity to do it and yes that doesn't mean they're spending all of their money I think the risk appetite might be different um I think people do keep a bunch of their Bitcoin and Cold Storage um me included and I think uh that's how I see L1 and l2s as well right like I do think most of the Bitcoin L1 would be cold storage type type uh Bitcoin and then whenever you want to do something productive you want to earn yields uh you would go to L2 but that's like a different it's coming from

a different pocket right like it's sort of like you're checking account and not not sort of like your savings account yeah it's kind of how I'm looking at it as well and and I think that that the that this that this movement has has probably while those who choose not to participate from the L1 level who are just kind of that that core like 80% if you will or at least within their their own personal uh Holdings that the 8020 rule you know you ought to think that they are probably maybe a little bit upset when they go to send transactions and the fees are a little bit higher but you you ought to think that they're probably pretty happy about these developments given the the uh extensiveness of the longevity of

bitcoin's basically security model from you know what you guys are doing at stacks and all these different l2s and um just basically contributing to the fees on the on the L1 yeah I think I think Bitcoin fees were I was actually I always thought that they were surprisingly low like given you know how precious Bitcoins block space is and I'm mentally prepared for even much higher fee environments in the future and that's going to be in some ways like I think earlier you guys asked the question that why are The l2s Happening Now I think it's a combination of a few things one of them is the uh the increase in fees due to ordinals and and and activity on chain because before

that I think l2s were sort of like a nice to have that hey why don't we go to an L2 and and go and use it when Bitcoin fees starts spiking like imagine you want to do like $100 worth of BTC transfer and now the fee is4 to $50 right uh that at that point it becomes a pain point when when l2s become almost like a medicine to a real pain that a lot of people are feeling and it becomes very clear that hey you we have to go and and build these things so I think that some of some of those factors also contributed to uh just becoming like very very clear to everyone that L1 is not going to scale it's going to be very painful to do transactions on the L1 and we really badly need the l2s yeah at

what point is it contradictory though like at what point is is is ensuring the longevity of Bitcoin and making sure miners are profitable and sticking around and keeping the hash rate uh you know steadily increasing or at a a solid uh amount like at what point is that contradictory to like too many fees l1's unusable and you can't you know it doesn't make sense to like keep increasing the amount of fees on the network yeah I think I I didn't to think of these things as like free markets doing their thing right like if the fees become so like too much people will try to figure out other Solutions right so it's like the demand might might adjust in certain ways and it might come back

to a level U that is sort of like sustainable and we've seen that right like fuse aren't like they they're higher than before but they're not consistently higher right and so they sort of like U fluctuate a little bit but we I also think that we are in very very early days as well so I tell most people that you should be mentally prepared that most of the time you will be transacting on l2s and those l2s might settle back on bitcoin so that's that's another uh thing that we were talking about earlier about definition of l2s where a lot of emphasis in ethereum for example is is on you know the unilateral withdrawal uh one property that I personally find very interesting

is uh basically the the reorg resistance which means that if you have an L2 stack has that with the upcoming Nakamoto upgrade so let's say you do a transaction on the L2 uh let's say you were transferring BTC L2 BDC on the L2 once once a Bitcoin blockes comes Stacks will have 100% of Bitcoin finality meaning that if someone wants to reverse that transaction they have to go and actually reor the Bitcoin which I think is a huge huge benefit because uh there's no opt-in from miners there are no changes to bitcoin but now 100% of Bitcoin hash power is being used to secure a additional almost for free right and I think that's a very powerful

thing because um it it it helps sort of like scale bit coin security like you're reusing Bitcoin security but you're reusing it in a way that's like very practical and no minor opin is required and users are just like benefiting from from that level of security by default so and that I think is a very strong property for the security of an L2 you are now secured by 100% of Bitcoin has gotcha okay so okay so so that makes it more like it makes it more it makes Stacks more equivalent to like the one almost in terms of like like the rules of the reorg like it becomes like equivalent yes so I think I think if if Bitcoin is

the gas asset if your reor resistance is 100% of Bitcoin right then the ux that the users are having is that instead of doing a L1 BTC transfer they can actually try to do a L2 transfer where it's cheaper it's faster they get fast confirmations which are L2 internal right and that has its own security budget let's say you know 1.2 billion was loged in Stacks recently so that $1.2 billion is signing off on the fast transaction but as soon as a Bitcoin block comes now you are at 100% of Bitcoin U Bitcoin hash power security which is which is really interesting so yes the trust assumption is that when I moved my BTC in I'm sort of trusting this decentralized network of signers to

do the right thing but if you squin your eyes what are you trusting when you're transacting on ethereum or Solana you are trusting it decently group of signers right who have economic incentives to do the right thing and that's exactly uh the the thing over here as well that you're trusting a decentralized group of signers who have an economic incentive to do the right thing if you want to bring your L2 BDC back to L1 gotcha yeah it's like it's like the closest thing that we've heard so far basically to like secure scaling of Bitcoin um so great work two things left from me I don't know if Rob's got more um we saw you at the modular versus

monolithic one last debate I think you were representing Bitcoin which is like inherently monolithic as an L1 but that's like ironic that you're building Stacks which is like modularizing Bitcoin and scaling it so like what is your what what is your stance on on bitcoin being like monolithic or and trending towards modular is is that like an accurate statement as to like what's what's kind of going down yeah so I think on that on that sort of like debate um I am off the view that there are certain things that will become modular for sure and they make a lot of sense like like we just talked about Bitcoin security like if let's say all Bitcoin l2s start using a stack like

security model that means that someone can launch a new network and be secured by 100% of Bitcoin hash and that's amazing right like imagine the other l1s when they launch even if they launch at like a very high 10 billion market cap it's it's sort of like nothing compared to bitcoin security right so uh in some ways like that's that's making Bitcoin security reusable in a very modular way and I think that's that that's great to have I think the the the place where I feel like the more monolithic designs like salana have an advantage is really about the ux and in the end I think ux really matters for users so if you have fragmentation of liquidity if you have

fragmentation uh of like all these Bridges and and it's like a ux nightmare to move things around I do think it makes things worse so I wouldn't be surprised that if in the short term more monolithic designs that are heavily focused on the ux actually gain some traction while certain modules mature more and they become almost like seamless to integrate right so I I I guess what I'm saying is short term I might see more monolithic designs actually getting more TR traction and in the long term I do think that um the the modules will become seamless enough and mature enough that people would be able to sort of like remix them in ways that

are sort of like less visible to the user and until we can get there uh I think it remains a challenge for for how to have these modular things uh and not impact the ux yeah yeah I agree and then there was a statement at the um at the event as well it was like all the monolithic people were shifting towards the modular camp and all the modular Camp people were shifting towards monolithic it was too diplomatic we needed some more uh some more spiciness there but yeah man it's been a pleasure man thank you for coming on and joining us I uh really appreciate your insights absolutely no thanks thanks for having me it's it's a great time to talk about Bitcoin

yeah it is I got I got one more question for you more of like an economics question we we talked about the relationship between Bitcoin and gold and and the gold standard that you know the US dollar was on for a while um there's a website called like what the [ __ ] happened in 1971 I don't know if you're familiar with it but it it talks about like you know why why did we like go off the gold standard at that time and so I'm actually toying with this idea now like do you think we will end up hard hardening the currency that's out there and kind of returning to a standard on bitcoin at all or do you think like the current economic situation is almost like spiraling out of control with debt and what is the end

result of that I think my my sort of like most optimistic view is that um if you look at you know the reserve currency status of the US it's entirely possible that's not threatened for a very long time but if it is threatened I I think the sort of like more rational thing to do would be to jump to something that is more neutral than to to try to switch to a currency of another country like China or or or something else right so it's very interesting that Bitcoin might feel initially more threatening but in the end it's actually not that threatening because it's a very neutral place and you know a lot of minors for example now

Bitcoin miners are in the US the US government actually already has owns a lot of Bitcoin through various historical reasons and whatnot and I think recently we've started seeing some shift um in the attit the attitude towards the crypto industry as well so I think if we uh if that Trend continues Bitcoin as a neutral technology just like the internet was a neutral technology is a much better fit into the US economy um than a foreign currency which is almost like impossible to imagine that there is a foreign s of like reserve currency other than the dollar and then the US is trying to play in that market whereas with a neutral sort of like technology like Bitcoin I think that's much more likely awesome

that's an interesting take and I think even even more so than ever we're seeing that neutrality come into play politically and and geopolitically all around the world awesome M thank thanks for coming on very insightful appreciate it all right awesome thanks so much take care