The Future of Bitcoin Smart Contracts | Matt & Amine of Arch Network

Transcript

hey everyone if you have been listening to Empire you know that Santi and I are fed up with unaffordable fees and frustrating transaction speeds that make the onchain experience basically unusable so the arbitrum team reached out and they showed us the platform they showed us what you can do on arbitrum whatever you're doing you can experience frictionless transactions at lightning speed on arbitrum so head over to portal. arbitrum doio and check it out this episode is brought to you by moned which has not only the highest performance evm L1 architecture ever built but also the wildest and craziest community in crypto mad's internal devet is live and public testet comes out soon so make sure you join the monad community today at

discord.gg monad m o n a d monad tired of high gas fees I'm excited to let you know about our newest sponsor scale a zero gas Fe modular blockchain that's become a perfect fit for both gaming and AI apps because of their instant finality and lack of me bridge to scale today via their portal it's portal. scale. space and follow their Journey on X at scale Network you'll hear more about scale later in the show all right everyone welcome back to another episode of Empire uh very excited for this one we've got a special I would I would call it a Bitcoin L2 podcast but it's not actually going to

be as you will find out a Bitcoin L2 show but really just talking uh with Matt and Amin the CEO and CTO and the two co-founders of arch um many of you might know them many of you might not know them and we're here to both share the story but also talk about what's happening on bitcoin right now um Matt I think I'd pick on you to like at least personally I need some context because I've seen at least in the private markets just this explosion of funding and activity happening on bitcoin it feels like defi is finally coming to bitcoin lending and borrowing is happening on bitcoin and there's this explosion and I don't fully understand it so I'm gonna pick on you to kind of tee up like how did we get here and what's like maybe what happened with the

tap rout upgrade in November 2021 and how did that lead into like this Cambrian explosion of activity that we're seeing on Bitcoin today yeah I I think that it was it really represented a watershed moment for Bitcoin because like you mentioned the the combination of tap rots enhanced programmability and the data inscription capabilities that are introduced by ordinals really marked a foundational shift in bitcoin's evolution uh it really signaled the beginning of a new era where Bitcoin could serve as a base layer for more complex protocols Paving the way for Innovations like Arch that could seek to harness bitcoin's inherent security and most importantly the liquidity for a broader range of applications uh so so that's ultimately what Arch set out to do which is unlock

and extend the capabilities of Bitcoin and and bring programmability to the base chain nice say say more like why why was this so important I don't I know if this is a question for Matt or for a mean but like what what was it about Tapo that was so important for Bitcoin it it it it was significant because For the First Time Ever you could put arbitrary data on bitcoin right and that's important for uh the modular stack and and creating uh the the potential for uh Native programmability via Smart contract and execution uh so so that was what initially made it possible and so that so for all the people out there that are wondering you know bitcoin's been around forever it's never been possible before

why is this happening now why is everybody like all of a sudden interested in building on Bitcoin now and that's the answer right is is ordinals and the tap rout upgrade really made that possible and paved the way for Builders to come in and take advantage of uh take advantage of bitcoin's uh absolute security and liquidity that is you know U you best Best in Class okay so we get we get tap r right we get this upgrade in November 2021 it gives us programmability on bitcoin and then after tap rout this thing called ordinal starts happening right so walk us through like what happened here is kind of the first VOR into like building things on bitcoin yeah I think like last year early last year it was it was very

exciting to see you had a bunch of different uh programmers Builders all excited with this new found uh uh you know capability of putting data on bitcoin and at first you saw everyone inscribing jpegs audio files and and that whole ordinal movement really took took on which was a phenomenal thing to see and and I think that uh that was you know an elegant proof of concept but we're we're heading into the most exciting piece now where it's a it's a watershed moment for Bitcoin where uh you'll see developers and Builders actually building intuitive applications like you've seen over the last six years on ethereum and and I think it's an incredibly bullish uh situation for bitcoiners altogether you there I I saw in your on that notion page you had this

like so you've got tap rout plus ordinals equals like foundational shift basically what is this as you guys call it like what is the foundational shift yeah me you want to take this one yeah so uh ordinal ordinal became huge uh a lot of developers came from uh from ethereum and Sol and they saw the potential of uh being able to store data on bitcoin and do more stuff than just payments and I think this is what uh this is is what propelled people to start building on top of Bitcoin instead of just going for all the other shs yeah can we go uh maybe a little bit more specific into arc Arc itself and

canvasing you know ASO alluded to there's been sort of an explosion of let's build an L2 on bitcoin I have my reservations on that and that's how I got to know you guys um because I think you guys are quite different in that approach so let's maybe just start venturing into how you guys are approaching this and how you see the kind of the current landscape uh evolving yeah I think like our our you know when we when we were am mean and I really came up with the idea for Arch we were you know grinding every single day around Thanksgiving in the Bitcoin startup lab day and night we were interviewing uh developers various customer interviews um interviewing other builders in the space that were all in in one form or another trying to

address some type of of a native application or protocol that they wanted to bring to bitcoin take advantage of this you know giant movement um but in in interviewing all of these people we realized that they were all trying to figure out which L2 they wanted to build on and that was kind of our aha moment for am me and I as we we said why is everybody giving up on bitcoin why is everyone uh like going down to the layer two in order to achieve this native programability uh or you know native um and uh air quotes for the listeners at home um but you know we we realize that we this is already played out on ethereum there's you know many many many different l2s in the ethereum ecosystem

that offer different things like uh scalability speed low fees but the majority of the liquidity is going to stay on the layer one network where you aren't sacrificing or trading off in your trust assumptions and and security principles and and we think uh we're pretty we feel pretty strongly about this that Bitcoin is going to be the same way like you're going to have the majority of the liquidity sitting in the on on the base chain where uh where you have more principled um features and and security uh and and we we realize that even bitcoiners are even more so this way where they uh they care about their sovereignty they care about keeping um ownership of their keys and not necessarily you know bridging their assets to a completely different chain

um so so that's what we you know we we set out to do we we um we created a novel solution to to bring native programmability to and to to basically Foster Bitcoin native applications as opposed to bridging those assets down to a layer Layer Two or a layer three for that matter which are seem to to come about nowadays um but uh yeah like you don't have to give up on bitcoin you can achieve that programmability on bitcoin without I mean now now that this this uh this tap rot and ordinals upgrade are available to Foster this uh this this level of innovation the first uh as I'm hearing this it makes a lot of sense the first question that comes to my mind or

to our concerns I'd say are scalability and cost when whenever you're trying to do something natively in the L1 at least in ethereum it's been the challenge has been to your point scalability and cost so uh is that an issue for for your approach and if so kind of how do you mitigate that or work around that I I'd say that we're still definitely confined to limitations of Bitcoin in in Block size and block times um but we were extremely explicit in the tradeoffs that we were making um when addressing the design principles of arch and and and the main trade-off is is we're willing to deal with with uh the block fees and block times in order to not give up the the security principles and sovereignty of of of the users's uh

you know coins and keys these other l2s they they may focus on scalability and low fees but they certainly are trading off uh more of the principled security that is is more accustomed and accepted by uh by native Bitcoin users I just have one question about like how does so so you are basically saying we we're we're fine with these like long transaction times and and the reason we're fine with that is because we don't want to compromise on the security how does this like impact actually how the ecosystem develops like Defi and all these kind of things like if I'm if I was playing on Solano or playing on like a arbitrum or Optimus or an L2 like I

would not be okay with like hourong wait times or whatever 30 minute wait times but maybe your vision is like okay well our ecosystem is just going to develop very differently than salana but maybe you could paint a picture of what you you know Envision this looking like I I think like uh for Bitcoin the main use case for defi is uh high volume transactions people that are not willing to make uh the tradeoff of bridging and the Trad of security and also uh luxury jpegs which we' we've seen like just have this massive boom on on with ordinal yeah also I would say that you

know our design is massively inspired by the salon VM we store States independently inside of utxo so that we can run them in in parallel um which actually increases it its efficiency um for processing uh transactions and execution um if we did this the evm way it would be much slower and much more inefficient so we were very intentional in the way that we created our design to to to create for this efficiency but that being said 10-minute block times are reality of Bitcoin so in order to do Native Bitcoin transactions you have to submit to the m poool and and actually be included into the block and that takes 10 minutes and that's until a soft Fork capens into Bitcoin that's not we can't do anything about that um but that

was an intentional design Choice by Bitcoin back in the day to to to Really prioritize security over speed of execution so um I would say that we're we're right there in the middle of it you know I don't think that um you know these these faster transactions on the l2s are necessarily worthy of bridging your assets at the end of the day yeah I mean I I go back to you know most l2s remind me of just you know either Badger or like rap Bitcoin like you could if you're a bitcoiner and you were willing to accept these security tradeoffs you would have bridged over to ethereum Defi and started playing around there and a lot of the current L2 designs on bitcoin kind of are that uh

so I'm a bit not very impressed and I passed on most of those rounds because it's like well why is this different and it's like it's not um let's go back to Yan's question around like def5 for instance in how you're you know what kind of applications do you think are really going to thrive in your ecosystem um you know when you think about as as you alluded to payments or you know defi fast settlement times are pretty critical like composability is a thing that keeps coming over and over again so um do you have a view there what kind of applications or developers are really interested in building um on the

network yeah we have about 20 different projects who are currently building on Arch and and on top of Bitcoin um mostly Defi and and and things of that nature some of some have come from other chains like ethereum and salana to come build but before we unpack that actually I'd like to go back to the previous Point real quick that we're talking about um these these evm l2s and and am means got some great insight into why these developers are actually choosing to go this route and why we think that this is not the way to go yeah uh I think I think most of the developers just came uh straight from E with all their baggage and uh just started the making the same stuff that's already existed on ethereum so since

ethereum already had had program programmability they just started making l2s on bitcoin which we think uh isn't isn't the good way to do it you need to to wait and see what Bitcoin has and when it what it lacks so you can uh make the best uh the best execution layer for it which is which is what we're making yeah I would say in addition to that that uh you know there's there's a lot of different design choices that these these massive amounts of layer twos that are coming into the picture are choosing some of them more evm copy paste some of them more novel and design like like stacks for example um and and and at the

end of the day what we want to see for Bitcoin in the long term is is continue development Innovation directly into it right we don't want to see this activity being uh traversed away from Bitcoin and more importantly we don't want to see the evm taking the majority of the activity and fees that otherwise the miners could be generating uh which ultimately is securing the blockchain for the Long Haul right as the the happing are these built-in mechanisms to try to get us as a community or as a developer Community I should say more more specifically to create these types of innovations that can secure the network for the long long haul and I think that that's what we're mainly addressing is we want to keep as much of the activity um in for Defi and other uh

consumer applications on bitcoin itself so that not only it it secures the the future of of Bitcoin and and crypto as a whole but also um continues to allow native Bitcoin users to tap into you know secure yield opportunities which is what they want to do we're seeing this every day you can look at applications like liquidum who is you know doing borrowing and lending against ordinals on on bitcoin's layer one and they're growing at a phenomenal Pace because this is this is an accepted thing that now bitcoiners want to engage and they want negative yields for their assets I want to um that's good point I want to double click on what you just said which is you're inspired by the SPM design and parallelization and of course

the evm is a single threaded and how does that play into the security how like when you when you think about paralyzation but also the constraint of like EX ution of the L1 like how does how do you introduce that into like natively um I would assume that there's some security like you are making a minor trade-off maybe it's not as much as an L2 but I am curious if if you're free to push back on that I'm I'm just trying to understand how that fits into like natively into the L1 yeah so the way we uh the way AR works is uh we store States inside UT exos so for for nonoverlapping States

you can basically run transactions in parallel instead of doing it the evm way if you did that will do uh like one transaction per block and then need to wait for it to confirm to process other transactions which uh which should be like a very bad user experience imagine waiting 10 minutes just uh just for someone else to process another transaction on a DEX but yeah uh we do store we do store state inside utxos which gives us this ability without even trading off anything and and let's I guess maybe talk a little bit more I mean about the actual architecture of um Arch is and how the the VM and the verifier Network

ultimately plays into this execution in state change yeah for sure so uh R starts with a invocation transactions invocation transaction with which contains all the relevant information for execution uh the last state you can pass psbt some other smart contracts calling for and then you go ahead and run the execution inside the zkv the the smart contract needs to Output an unsigned transaction which reflects the asset change that happened during execution uh the uh resulting states which reflect the state change that happened during execution as well as a proof for that execution and then everything is then sent to to a verifier

Network which basically run appr proof of stake mechanism using thresholded signature schemes where each node in the verifier Network votes on the validity of the proof before sending the transaction to bitcoin I see so so so there there you are trusting this verified Network that is sufficiently decentralized distributed so so as a skeptical bitcoiner that is you know let's just assume that that's your like your Market they would probably be most interested in understanding how is this verified Network composed of who's actually running it because if that were a break uh and maybe we can talk about

scenarios where that may or may not then then you might have an issue right yeah this the set of trust assumptions we picked is is actually very interesting uh it makes it so that uh the makers who are providing liquidity take on additional trust assumption but the takers don't so let's take uh for example an am at Dax the the people who will be providing liquidity inside the liquidity pools would be taking additional trust assumptions and sending their bison to to this uh smart contract controlled wallet but the takers of that liquidity uh will be taking that liquidity uh in one transaction

transaction would be automic so they wouldn't be taking any additional trust assumptions and that doesn't happen on any L2 uh you need to bridge to the L2 to use like anything and from a from a uh maker perspective um like so in the scenario you just described so I'm providing liquidity to an amm that is built on an arc what um what is the most important thing there like what would be the worst case scenario for a liquidity provider in this case yeah so uh to participate in the the ver far Network you need to put up

stake and uh anyone who who is uh who has done anything considered malicious gets slashed in this St yeah so uh as long as uh what you're putting in is uh uh is below what's St inside the network you're good there is no reason for the for the for the participator in the network to to steal your funds this might be a really stupid question but what is the requirement to participate in the validator net like the verifier network is that just you're just a liquidity Provider by default you're staking and but who's like doing the verification and what are perhaps the requirements to do that yeah so to participate in the in the verifier

Network you need to put up stake of course and then run an AR no run a what sorry AR node okay and what are the who would be doing that yeah so uh while we're boot shopping the network we're uh we're limiting it to a a set of trusted uh trusted people our Network Partners people who have stake in the protocol as it launches but after that as the network is bootstrapped we'll make it open and permissionless so anyone can run naal we're also working with quite a few commercial validators as well um that are interested in participating in the in the verifier

Network yeah um got it and so this would uh that is perhaps the when you think about um maybe a Bitcoin or saying wait a minute but like I really want to understand who these folks are from a censorship resistance perspective which you know that's been the biggest criticism if you talk to a Bitcoin Max you'd be like why look at e the prove a stake generally like most of these nodes are in jurisdictions where censorship resistance can be an issue um is this perhaps going to be an issue or just a concern for a subset of the bitcoiners that have been historically critical of just ethereum and its current architecture uh I don't think so uh like

as the network uh decentralizes and more nodes join the network it should be uh it would be fairly decentralized to to secure the the whole stake that's inside our the whole liquidity is inside our yeah so you plan um just give us a sense of just how you envision the sequence um initially you'll have a curated list of um a validator so to speak and then like what would you need to see to get comfortable to open it up to other people yeah we just need to see more uh more uh more people participate in the network uh at first we're going to we're going to curate people who join the

network to not do anything malicious but uh as the stake gets uh big uh and uh overtaking the network gets harder uh will make it more and more permissionless got it and so just around out this discussion of the architecture you're still in the L1 for for like just trying to like simplify for folks you're still in the L1 but within a particular block you are using like paralyzation uh and that allows you to process many many more transactions within a block you are you are kind of offloading some trust assumptions onto a validator network a lot of that um security lays on the liquidity providers um um and then a subset of people that are running

validation initially you know curated by you guys over time open it up and then that should um that should is what you guys are saying be a much um easier or perhaps uh jump from a security standpoint than an L2 that is currently built you know some of the other ones that are being built on that you have to bridge you have to trust a lot of their kind of setup and whatnot um but uh maybe we can okay so so I wasn't far off the mark there uh maybe we can start uh perhaps talking more from a consumer standpoint how you a lot of folks um when they may be

hearing this you be like well how is this going to be any different like look at ethereum people have just accepted some l2s some which don't even have fraud proofs which are just basically multi sigs and you know people time and time again in crypto have I guess uh put Security on the back back seat and just Chase yield do some of these things it matters what how much is at stake it matters perhaps the type of application right if you're doing gaming versus you know a high value defi transaction um who from a consumer stand Point like how how would interacting in your network contrast to maybe some of the 10 other Bitcoin l2s that are cropping up in terms of fees in terms of speed in terms of variety of

applications I know it's a difficult question but I'm just kind of curious if you have a view there yeah I think I'll take this one uh I think that first and foremost we're not here to say that you know the the L2 world is never is not going to exist if flat it won't exist we think there are some use cas cases that um may be fair to to some l2s and it's still going to be you know a couple hundred billion dollar opportunity but by comparison to all the liquidity that's stand sitting on the layer one network uh it's it it pales in comparison right um and the major major uh you know difference from a user standpoint is that you don't need an additional wallet or you don't need to bridge those assets in order to

participate in defi or programmability on bitcoin right the first step for all of these l2s is you first have to bridge with Arch you don't need to to bridge anything you you simply can sign a Bitcoin transaction on whichever Dapper protocol that's integrated with us or built on top of our VM and you can sign a Bitcoin transaction through your xers or your unisat or your magic eaten wallet it doesn't matter you don't need anything custom um and you can participate and that's that's the major major um differentiator for us is is in addition to builders being able to tap into the 1.3 in today's liquidity um that's on bitcoin but from a user experience standpoint it it is so much more of a of a better experience and and if you ask a native user of liquidum you

know why they why they participate in ordinal borrowing and lending on liquidum versus another project on nl2 it's because they don't want to bridge their expensive and premium assets to these new side chains or or Layer Two Chains in order to achieve that yield um it's just something that they don't want to do but you know I think that as we we've seen this play out on ethereum time and time again there's going to be some liquidity that gets bridged down there to participate in these lowy environments because it's just not going to make sense to pay $20 in Bitcoin fees for a for a $10 transaction of of a shitcoin or something like yeah uh maybe I mean I'll throw it over to you can you um comment a little bit on the on this point on the perhaps the fees and the

speed of transactions how may how might those compare your network versus another Bitcoin L2 yes so uh for us we are confined by uh the block size and block items so we can uh like assuming all all transactions in the block our transactions coming from arsh we can do about like 3,000 to to 4,000 depending on the on the Block and uh for the L2 of course it's going to be like uh it's going to be a 20 uh round about if if they actually uh Implement everything right using ZK and

stuff so so say that again so it's be like three thou did I hear you 3,000 6,000 like yeah 4,000 uh if if like all uh transactions in the block are transactions that are coming from our since since we do like uh par execution with right the evm way it would be one transaction per block be yeah yeah yeah it would be be just incredibly slow and expensive um The One Last Thing Before we just move on in terms of what is the mechanism for like when you're running paralyzation like a where there's like um I guess like in the salon like the svm kind of way like there are different

types of parallelization not to like make this a podcast about parallelization itself it is an interesting topic I think how can you just comment on like how the parall is as I understand it like if you compare like sui say Aptos salana some of them use deterministic some use Pro like probalistic I believe like how do you guys um what was your thinking in terms of which one to implement or what type of mechanism to implement maybe it's a different one yeah so uh all of all of the chains that you mentioned uh have an account model in mind so it's it's really hard to different yeah it's it's really hard to implement uh uh paring there since uh you still need to to access the kind of a global

state of uh how much each account has in in so or or say but uh but with Bitcoin we have UT exos so there isn't that uh there isn't that problem it's actually Bitcoin was made in a way that's paralyzation fits in very well can you for maybe most listeners may not have appreciated that but can you go deeper into that just so so Bitcoin uses the the utxo model where basically you lock your Bitcoin inside a script that can be only unlocked using like a pub key or or like multi6 script so this makes it so a lot of people can look Bitcoin independently and all of

those transactions can be run in parallel right because you're very clearly defining what is spent what is not unspent and so that allows you to very quickly order the transactions very efficiently um and then run so presumably your the way you run paralyzation does that make it way more efficient just higher throughput relative to traditional paralyzation techniques that we've seen in other chains is that a fair yeah if you're if you're doing paralyzation with the utxo model since every utxo is loged independently you don't need to go through the global global state of accounts which makes it like way way easier to to use right okay that's really interesting also from the standpoint we uh we we do

use validity proofs which is is fairly different than what other layer tws uh rely on um in a more optimistic setup so maybe am me can share a little bit about why that matters and also how it plays into the requirements for node operators um as well yeah yeah that's a great Point man okay yeah so a lot of l2s right now are using uh bit VM claiming to use BVM which is not out yet BVM uses fraud proofs which require this uh challenge period to to to settle execution for for uh the L1 Bitcoin that's that's that's not possible to run smart contract transactions there uh

imagine a DEX where people wait for a challenge period to use it uh so the only option for us was using validity proofs and uh instead of assuming something is correct and trying for and waiting for someone to to invalidate it we just prove it's valid which which makes the the user experience way way better it also makes the requirements for the node um to run the node much much lighter as well yeah that seems to be a common mid curve uh skepticism or criticism right all right I mentioned them in the pre-roll now I'm going to bring them up again it's arbitrum Santi and I are really fed up with these high fees and we're really excited to have teamed up

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big thanks again to scale for sponsoring Empire what guys um what is the reason why someone would build on Arch like when you're sitting down with a Founder why are what is the pitch here the pitch is is is quite simple it's look there's there's all this liquidity sitting on layer one looking for something to do with their Bitcoin to find safe and secure yield um are you going to build somewhere where the liquidity already is are you going to build somewhere where you're going to wait for that liquidity to arrive and then address address those users once they once they come um but you know it is it is our strong belief and conviction that while the majority of the liquidity is going to remain on the layer one that gives us a total

Advantage when speaking to these developers and daps and protocols who want to tap into that liquidity and bring defi in a meaningful way um you know as we like I said before we've seen this play out on ethereum we don't we don't feel that uh that that much liquidity in comparison to the total amount of Bitcoin liquidity is is ultimately going to bridge um and and that's where we have that that that Advantage so we're speaking to you know and working with uh many many different daps and protocols who want to bring these these various ideas that are proven Concepts on other chains but now trying to take advantage of the security principles and the liquidity that Bitcoin can offer cool on this point because I asked it before but it wasn't

clear in my mind like we we definitely talked about the security assumptions we talked about like the transaction you know speed or throughput on the fee side um because I think it matters in terms of the type of users um and the type of trans actions that you might see on the network initially do you have a sense of how that you know how expensive or not it's going to be to interact in the network I when you go on liquidum right now for and I'm just using them as an example because there's as of as of this moment there isn't a lot of defi applications on bitcoin for obvious reasons right the only thing that's before Arch that was available for pseudo programmable solutions would be dlc's discret log contracts which effectively require you to predetermine two transaction Pathways two parties and

what those the conditions of those transaction Pathways ultimately um are going to set in and and then you and then you require an oracle to ultimately determine which transaction pathway should be um a centralized Oracle at that which transaction pathway will ultimately take effect um but uh as as you see this this uh these transactions ultimately play out on on bitcoin you're you know users are technically paying anywhere from like8 to $15 per transaction in order to participate in this type of programmability and you know we've seen this type of stuff play out on eth again where gas fees um you know can can can be expensive but not a detriment to the the the the protocol or the T yeah I have a go to market

question actually so you guys have um the benefit of having like you know dozens if not actually probably hundreds of like rollups and you've seen the whole monolithic vers modular thing play out and all these l2s like what are your takeaways in terms of when you look at like the different go to market strategies and and I guess I guess honestly techstack strategies that you've seen you know over the last let's call it three to five years like what do you want to what do you want to do like what do you what have you learned that you want to kind of lean into and who have you learned from and maybe the flip side of that is like who have you seen maybe not do this in the right way yeah uh this this has I think this has already played out and uh monolithic

versus like uh model there is different things that you can do for both different use cases but I think here the the clear win winner is the the monolithic uh Solana Solana's been doing great and although these l2s had a lot of time to experiment during the last W markets and bare markets uh they haven't achieved the uh the speeds nor the nor the reliability to to for M adoption while while s has so I think I definitely think the the winner is is Solana but for app chains and stuff uh for specific applications I think there is a merit for for uh for uh

layers what's your maybe F like if you guys are successful I mean what is the fiveyear vision here of arch or 10 year like what does this start to look like if you guys are wildly successful with everything yeah so uh first of all I would like to see the the pillars of defy like lending and borrowing liquidity pools on bitcoin uh stable coin which which there is a team we're working on uh stable coin I think stable coins is pretty much the the biggest uh crypto use case and it's it hasn't been possible on on bitcoin uh in a decentralized fashion so yeah pretty excited about that as well

uh I would like to see like a a defi boom on B coin that that should be awesome like uh similar to to what happened on ethereum uh on uh 2016 2017 and leading into the bull markets of uh of 2020 I think you could you could draw comparisons to the emergence of the the whole ethereum ecosystem from 2016 all the way to 2020 and today where you have a whole vibrant ecosystem of of daps and protocols and composability and money Legos all these that can ultimately contributed to the the surging uh value of of ethereum and you can really draw that back to uh you know programmability

via Smart contracts um that's what all made that that all possible so what I think that you're going to ultimately see on bitcoin is you're going to see at least um everything that was once tried and proven on ethereum and salana at the very least is going to be tried on bitcoin some will some will take take uh effect and and maybe not like ticketing daps and things of that nature will never make sense on bitco point but I think I think there's a there's a lot of D5 pillars and and protocols that have um have proven them themselves to to work and and be something that Traders want to trade on top of and and ARB and and and participate in all these different forms of speculation and and decentralized finance I think you're going to see that on bitcoin over the

next year and a half and then then the sky the limit then you can start to bring various institutional products into into light that um that allows you to to to leverage the native yield that's of these D5 protocols ultimately um you know create there the possibility for so um in a scenario where we're going to my working assumption is we have a proliferation of l2s on bitcoin we may have also proliferation of ordinal activity on the native chain uh just going back to fees like we've seen a pretty substantial spike in fees um in the Bitcoin Network which candidly from my standpoint it's really good you know you have to at some point work the security budget for Bitcoin uh

and you know miners are really incentivized miners have always had the final say but um how do you think about the viability of your architecture in a world where you know transaction fees on the L1 might just really Skyrocket make it pro what would be prohibited expensive where it's only a very narrow subset of users is that market large enough um how do you think about by the way may not play out exactly as ethereum but like ethereum L1 feeds are continue to go up right yeah of course you can offload a lot of stuff with modularity Y yada yada but the reality is L1 is for very sub very small Subs of users that are willing to accept that right um how

do you how do you think about because while you're running paralyzation you are competing right um for in that block with other folks um that might want to do a million other things um how do you think about that thought it's a really good question um you know I think am has something to say about it but I I would say that you know block inclusion is going to be a major factor and a major commodity um black space being a major commodity in the next year and a half as everyone is going to be fighting for that distribution so I think it's going to be very inter interesting to see how it plays out um but we are making a lot of uh considerations for exactly that future speaking with miners working with them to to make sure that we are

included in these blocks versus other other chains that are trying to um you know compress that data and bring it back to bitcoin um so I think that we're in a good position to address this but am me might have some some comments yeah uh I do think I do think there'll be uh in the next bull market there'll be a big fight for uh for Block inclusion from from all the l2s and uh also the me scene will pick up like quite a lot yeah can do that on bitcoin I'll fund that yeah it's gonna gets crazy man uh like we've seen people do private me pools now and like it's it's gonna get quite

hectic in the next B market but that's good that's goodco like do you ultimately think I mean doing upgrades like the to R upgrade was like a Herculean effort uh you still have many people in the Bitcoin core kind of just being really skeptical of it and I hate ordinals and whatever at the end of the day like the market always wins I think um but I'm curious like uh do you think that there may be a future where fee markets in Bitcoin like there's a modification to where you can have I don't know like an EIP this might be again stupid analogy but like an EIP EIP 1559 type of mechanism in Bitcoin and

this is where I'm tipping my hand because I I've actually haven't really paid much attention to how fees actually work on Bitcoin like you can you can WR proba mles you can probably pay higher fee but I'm curious like is there a version where you think that there could be an upgrade to the L1 where fees become uh there's just a fee upgrade to make it you know to to work around this problem the the only way to to make Fe cheaper on on bitcoin is to increase the the block size which which is a big yeah good Lu with that the BR Wars that's was quite traumatic for a lot of people gladly I wasn't there but yeah I don't think that would happen but like anything can happen at

at the end of the time uh we just need to to see to see it play out yeah um maybe I'm curious you guys have been around you've paid attention to the space for a long time I think everyone like is salivating over this idea that like there's all this un you unproductive capital in Bitcoin still largest Network you why wouldn't you build there why wouldn't you facilitate more you know more utility but it is quite hard to build there I think but like you guys could be doing million other things why why figure why build here why like did you explore other possibilities

build your own chain build on ethereum build on salana like I'm curious why why are you doing this yeah I think I mean we we both am and I come from extensive backgrounds in in you know chain agnostic whether building um on top of ethereum salana Bitcoin itself or investing passively from the sidelines over the last you know decade it feels like um you know my time in in Bitcoin has really dated back to my time in Tallahasse at Florida State where someone told me that Bitcoin was going to be $100,000 one day and at the time it was less than 10 so naturally was incredibly excited to to immerse myself in the culture and learn as much as I could which led me down the the rabbit

hole of learning to mine in my dorm room and and day trade those coins on bit instant like a long time ago if you even remember what bit instant is um but uh but I think the like the main reason for us and why we why we reached this conclusion was like no one else is doing it everyone is giving up on bitcoin even though we all agree that this this radical shift just happened creating a new possibility and we knew that this this opportunity was going to be absolutely massive because it while it it it it offered that the the you know the the functionality that people absolutely desire uh you know and and you see this with the programmable daps and protocols that they're already starting to build on stacks and and even Bitcoin today like with liquidum as I

keep mentioning but uh there just there just wasn't the the the picks and shovels available for these Builders to actually build what they wanted to build so we viewed that as just an absolute massive opportunity and and I think that you know our investors and and advisers would agree from that standpoint and and also just the extraordinary amount of interest that we've been getting from the developer Community to want to come and build something on Arch has been extremely encouraging incredible amount of interest from from people who want to build natively on bitcoin as opposed to um you know trading off security principles and putting their users into the position of having to decide that I think that that's been extremely encouraging and we knew that this was a massive massive opportunity so that um

it was just we there was no interest from us to build anything else yeah I I I do want to go back to this thing and I want to make sure I get it right uh there is it is certainly like your setup is more I guess you give up Less on security relative to an L2 you are still making some Mar what you're saying is a marginal tradeoff where you need to get comfortable with this um network of participants that are doing the validation as you're running parallel transactions in that block right that's right yeah you as a as a market maker or or maker in in depending on the use case that we're talking about here um you

will be engaging in some limited trust assumptions and putting that trust on the network of notes on the network yeah uh on that point and I I keep going back to this because I think it's the most important thing because um when what is the mechanism for dispute and resolution um and to roll it like I don't want to say roll it back but like in an instance where the like I guess you can you're slashed but as a user can you contest that can you like in a in an L2 as an example an L2 without fraud proofs it's like you're gone right there's an L2 that has fraud proofs but um has a centralized sequencer they can

ultimately like withhold the transaction they can stall it but you can always settle it back to the L1 and I think a lot of people have that confusion right they they criticize like the centralized sequencer I'm like that's not a security tradeoff you're making that's because ultimately you can always bring it back to the L1 and claim your assets it might take some time you might be liquidated whatever but if you don't have fraud proofs in an L2 you're kind of hosed in in a in that scenario like that's a very big jump where are you guys in that Continuum like in a scenario where you might want to contest that you might want to challenge that you get slashed whatever how do is there a mechanism to dispute that to ultimately settle like

um I don't know if the question makes sense yeah so so uh within the network we have a vote program where each node votes on the validity of the the transaction that's being settled and uh once that uh transaction gets the majority of the votes uh that set and that's program handles like slashing and which knows got it right which ones didn't and what's considered malicious or not God and that's uh there's a I guess aover and then there's like a observers that are just voting on it and then once that's done it's done right there's no like period where you can contest that I

guess once it's settled it's settled you're confined by that block time yeah we are we are we are committing uh we are committing the the settlement to to bitcoin so you really can't change it once it goes to bitcoin it's fine yeah yeah s you you brought up a a great point that a lot of these l2s are just very like thinly veiled multisig at the end of the day that as a user you have absolutely no recourse if anything goes ay and you know that's that's what we're strongly counterposing against like we feel that even though that you know um there is a A multisig in the in the in the loop of of what Arch and tail you know there's no bridging of those assets everything is proven to be correct and and the execution actually

did happen in a in a secure way and and that's the main difference and you can draw assumptions to like program der derived addresses on salana or or smart contract controlled Wallets on ethereum we're doing something similar with multisig but at the end of the day there's no bridging that happens of this asset and the verifier network is what keeps those wallets and those smart contracts um and the and these applications in check right yeah yeah how much disclosure will there be I assume pretty transparent on the on who is part of this network or would you for security reasons not really make it as public uh I I would make it public like who is participating in the network at

at like every stage uh on the way that uh we make everything decentralized information L yeah everyone wants to chase yield it is important anyone that tells you it's not is kidding themselves uh we are rational economic people what is a type of like inflation curve what is a fee like incentive for these people um maybe we just touch a little bit on tokenomics and how that plays in and how that's important to kind of bootstrap yes so the we we we do operate sort of on a gas model similar to that of ethereum where uh in order to in in addition to the Bitcoin fees that you'll pay which is which is going to be standard and required to to post the

transactions back to bitcoin can't get around that um but we we mark up the network resources of the VM um which is extremely um you know small compared to what what what the the Bitcoin fees um turn out to be and we share those those uh those fees with the validator network who are running the notes got it but initially is it like most networks you have like a high inflation curve and then it kind of decays over time there's like a in terms of like the the ROI for these for the people putting up stake yeah yeah I would say that running a note is going to be one of the you know the best opportunities in our ecosystem and

initially the you know the apy or Roi of of providing stake is going to be an enormous opportunity for those who want to get involved early so yeah I would say that that's definitely going to be um an attractive scenario for people who want to participate and support the network and then of course as time goes on in the the token reward start to to Plateau a bit you know then it's going we'll be fully decentralized by then in permission list to the point where um we no longer need to to prove um the efficacy or the the the um the uh the attractive attractiveness or lure of of wanting to supply stake to to secure the network right um two questions as we just kind of sort round round it out um

one is uh how easy is it for developers to build what's the tooling um you know the the developer experience so that's we've put a huge emphasis on on onboarding developers and their experience to make it as elegant as possible um we're completely built in Rust so anybody who knows um rust they can come in and deploy in our test net um and maybe just a little bit of Bitcoin knowledge but you don't need to know any Bitcoin script or any additional programming language in order to to deploy which is um you know easy from the standpoint of onboarding developers and projects uh we're working with several projects coming from the salana ecosystem who are obviously um already built mainly in Rust so porting

over their their smart contracts that they've already worked on or built or their Frameworks is is an easy lift for them right also like it's also very similar to the Sol programming model since we're still doing paralyzation so right uh for for senena developers it's it's really easy you don't uh even need to change the way you think but it's for other people it's still easy you just trust some high level RIS on knowledge yeah you should go talk to tensor guys you know or some of the apps in salana because magic Eden is kind of eating a lunch of Bitcoin I would assume that they might be interested in deploying an arc might be talking to them I I can't confirm I can't confirm or deny but uh

but you know if I was if I was a tensor i' would definitely be looking at the ordinals ecosystem for coming into to play around there very nice um maybe let's just talk about uh the road map from here I know you guys are coming out of stealth what do the next six 12 months look like and I mean don't kill me for asking the questions because I know developers hate when they get uh deadlines set on on the development road map yeah so uh I mentioned our devet has been live now in private beta for about six weeks um so we've been working with about 20 different projects who are all uh currently built build and integrating into our stack or or our our solution

into their stack I should say so we're we in the coming weeks we'll definitely be uh launching our um public devet which will be inviting anybody who wants to come in and build into Bitcoin on top of arch um to come in and deploy daps or protocols um shortly after that we'll roll out our incentivized test net so the builders who who have been building on Arch can actually deploy uh their applications and and in a way where now the consumers can participate in those in those test net environments and and come see what smart contracts on bitcoin and smart applications on bitcoin ultimately look like uh and then shortly followed after that it's May net release so we're looking at May um as as our yeah

yeah W uh well this is fasinating discussion guys um yeah yeah know this is this is good uh What uh anything else we we haven't discussed that you guys want to touch on um while we're here uh no I think I we literally just hit on it I think that stay tuned for the roll out of the public uh test net because that's going to be uh you know an exciting moment for Arch and and the the Bitcoin ecosystem as a whole where we can see now what programmability actually looks like because for most people who um you know are are knowledgeable in the space but maybe not knowledgeable with with with respect to Arch they're kind of convinced already that programmability is is out of bounds for for um Native Bitcoin so we're here

today to share that that's not the case it's coming and pretty and pretty soon um you'll be able to participate in what that programmability is ultimately going to look like and maybe Farm some points on Arch Farm some points on on these uh these applications who are also going to be launching their own um incentivized uh programs and uh and it's going to be an exciting time defi summer 2.0 that's awesome uh really cool guys thanks for coming on sharing the story what's the best resource to for developers and users and other folks in the community to learn about uh you know dive into documentation but also it maybe your hiring and other stuff uh first I'd say follow our our

Twitter that's where we're going to be extremely active on comms in the coming weeks um Arch network with uh no no vowels on the network ntwrk um and you can go to our website Arch network. XYZ or arch. network and uh you can apply if you're a developer to be uh given access to our devet um as well as you know dive deep into the docs which there are links as well there on the website really cool folks uh well it's great we always like to bring on teams that are coming out of stealth uh I think we've had a pretty good track record yo so uh thanks for uh coming on and sharing the story very exciting uh Yano and I both had Bitcoin um l2s or

Bitcoin more programmability and Bitcoin utility as a key theme uh and I we still certainly believe that so it's great to hear the story and how you guys are positioning and differentiating so best of luck and we'll certainly be following your progress and maybe we can have you guys on later on this year as you as you roll out mainten it and start seeing more traction absolutely you guys had Kathy Wood on before right we did last week I think I think her base case for Bitcoin is starting to sound less and less kooky uh as defi summer rolls out so maybe uh maybe we could do a show with her sometime when when this whole thing plays out yeah I love it co I mean thank you Matt thank you this is this is great guys nice J cheers everyone Jason here thank you so much for watching

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