ZK Technology to Boost Bitcoin's Growth

Transcript

it has distribution across the globe it has recognition it is mainstream they're selling it to my grandmother now institutions already control most of the Bitcoin by them so what's the point of offat right one point to add is let's all remind ourselves that liquidity is keing in defi do I retain custody over my coins even when my Bitcoin is deposited into a defi protocol we are very very very close to entering a geopolitical Bitcoin race welcome back to the rollup your home for technical talks and open conversations that shape the modular future nothing on today's show is to be construed as Financial advice you can see our full disclosures list at tholl up.co ventures sit back relax and enjoy today's episode after a quick word from some of our awesome

Partners Redstone is def's modular Oracle supporting over 100 clients on over 50 chains offering 1,000 assets Redstone is the leader for Bitcoin staking and yield bearing assets they offer the most robust customizable price feeds available in any model join the Redstone exhibition [Music] today what's going on guys welcome back to the rollup today we have an episode on the future of Bitcoin the largest crypto asset the asset in many minds of new high net worth individuals family offices institutions and more

um it is our job to convince them that we need to scale Bitcoin and create a Everlasting ecosystem outside of just what many people consider a well-designed L1 chain or L1 Bas layer um so we'll hear the opinions and thoughts of Alexi ylla and Jacob today welcome on guys Alexi ylla first time on um and Jacob of course welcome in guys maybe we can start yll and Alexi with a little bit of an intro uh since it is your first time and we'll hear from Jacob on uh the way his ZK brain looks at Bitcoin but y uh you like to introduce yourself yeah so I briefly introduce myself hello everyone I'm ylla

and I'm the co-founder of vama so we are um quite known for our bitm uh development so so far uh we are having we are building two infrastructures including F bridge aan bridge and also f layer a ZK verification layer that Implement bitm two so these two will be the foundational infrastructure to further scale Bitcoin and enable Bitcoin to interoperate um in trust minimized manner with all the other ecosystems yeah that's that that's pretty much I guess I go next um say everyone I'm Alex say I'm the co-founder of Bob uh been in the space for 10 years

now which is is quite scary um so I got into bitcom research uh during my studies and did a bit of a random walk from merch mining to payment channels and then really got hooked on side chains Bridges and spent a lot of time trying to build trust minimized Bitcoin and general cross chain Bridges naturally got very very excited when um Robin came up with a concept of bit VM and started working um with him and others on how to build a trust minimized Bitcoin Bridge using bit VM and uh qu the bit vm2 paper that is now essentially the standard that is kind of being built upon and researched upon by the researchers um and at Bob we're building a layer two that's a hybrid

that is not only a Bitcoin Layer Two but is also connecting two other ecosystems aiming to leverage both Bitcoin security but also the versatility and The Innovation and the network effects that we see on the likes of ethereum and in the future also perhaps Solana and other ecosystems awesome and Jacob uh quick intro from the cabin H how are you man good man good man um and quick reminder I'm Jacob I work at risio right now um and I think we're most well known for um inventing the RIS 5 zbm but currently I'm helping lead the project boundless which is really meant to take us to the the next generation of ZK so not only write you know in a high level language and get

zkps but write in a high Lev language and deploy production ready ZK applications and we're super excited about Bitcoin this year getting to work with teams like fyama and Bob um has been really great and bringing this programmability that we know from Smart contract platforms to uh the world's largest crypto asset that's right that's right and I kind of started this with the design philosophy of Bitcoin which I think truly embarks on this vision and mission of being purpose-built and we continue to harp on this every single podcast it feels like where we are extremely excited about purpose-built chains in the future and we can talk about Bob and kind of like what how you see your Niche

but Bitcoin was kind of like this OG purpose built chain it's very clearly not trying to do anything else other than just be very secure be meant for payments and now it's kind of kind of grown into like this purpose built chain for store value for BTC the asset um and since then we've kind of progressed into the ethereum land into smart contracts and all the way forward into where we are today um skipping a lot of steps there but what I'd like to aim to do to lay the foundation for this technical conversation is to understand a bit about the why before we get into the how and so Alexa you mentioned that you've been in the space for some time and actually remember our panel together I think it was last year sometime in the

summer um where you kind of laid out the the why for this entire movement for uh build on bitcoin for scaling Bitcoin so maybe you could help us speedrun through kind of why you believe that this is such an important mission for the Bitcoin Community um and why this is something that you're basically dedicating your entire early career to absolutely um I mean if why why do we spend so much time on bitcoin Bitcoin is the largest most decentralized digital asset um it's the most secure network that we have uh it's basically the fundamental system that backs the entire crypto industry everything else is buil on top of Bitcoin even if you know from

time to time people will go claim that oh something else is going to replace Bitcoin we're very far from this ever happening uh I like to try to to draw a comparison here between Apples you know the the logo of apple and when you see the Bitcoin orange B it has a similar status at this point and apple spent billions of dollars to reach that level of recognition and just everybody knows Bitcoin when media talks about the crypto world it's Bitcoin prices have changes are happening it's Bitcoin right and the issue that I've always had with Bitcoin in its current state is that look we we started to offer an alternative to the financial system but if you want to do anything else with Bitcoin them payments you have

to go to centralized provider you have to go to centralized exchange and as defi emerged on ethereum salani and all these other ecosystems Bitcoin stay behind and so everybody who wanted to embrace crypto had to leave and that is very controversial is it not and so as we now embark on this new era in my opinion for Bitcoin we call it the Bitcoin Renaissance and we are coming out of the Dark Ages right ever since the Block siiz Wars people were very I guess traumatized about talk to talk about changes and you know new ideas were shunned I would get Uninvited from conferences like some of the more Bitcoin cult based conferences because I talked about let's Bridge Bitcoin to

other ecosystems but now since tap was introduced the third Fork to bitcoin That was supposed to fix lightning and it kind of backfired because it enabled all sorts of new things that were not accounted for starting with ordinals and ultimately culminating in bit VM we actually have the blueprint to go and create better ways to use Bitcoin and def5 for the first time ever we can create a system that allows us to bridge Bitcoin or deposit Bitcoin into systems in a trust minimized manner where you actually can argue that yes it is safe it fits and matches the ethers of Bitcoin and it is I think not just about the

tech in this case we also need to think about what can we build and how do we actually make sure that Builders can on board and build on bitcoin again how do we make Bitcoin the place for Builders uh when they start new new projects in the space because right now it was ethereum up until six months ago it was always ethereum right every new startup would go to eth specifically on the application layer now we have Solana challenging ethereum uh which creates this interesting Dynamic where Bitcoin has the chance to come in and say look yes in defi ethereum is leading in mecoin Sal is leading but what does Bitcoin have Bitcoin has 100 200 300 million depending how you count plus

users it has distribution across the globe it has recognition it is mainstream they're selling it to my grandmother now and the one thing I'll end uh kind of this monologue here on is why do we need defi why do we need bit VM because bit VM allows us to create Bitcoin defi so why do we need Bitcoin defi well look yes it's great that we're getting the ETF but are we not simply plugging Bitcoin into the old Financial system and if at the end of the day 10 years in the future to use Bitcoin you have to go to your bank and ask them for permission is it still really Bitcoin and argu no and defy and bit VM are right now key

components to enabling us to fulfill bitcoin's vision and to allow people to transact but not only for payments but to actually build an alternative Financial system in a way that is permissionless neutral and accessible and that's why this conversation is so so important appreciate that then ylla kind of building on that um with the understanding that you're building a bit VM Bridge here um right now only about 1.5% of bitcoin's market cap is used at all in Defi and some of that is actually used in R Bitcoin um on ethereum um or coin based Bitcoin right which I think Alexi May argue is not exactly what his

endgame vision is um so I'm curious what are the core barriers preventing broader Bitcoin adoption using defi um and then how significant are bridge security risks in these barriers and in these adoption hurdles so I think that definitely um the security risk is a big you know concern for a lot of Bitcoin holders because you can for most people who hold Bitcoin they have maybe it's well the amount relatively speaking would be more than meme coins right so that they will be extra careful with with the money so most people would just put uh in co-

storage or like um or just centralized exchange but the the thing is that um there are like a lot of you opportunities out there in different ecosystem and people want that ELD opportunities and now the only way to get to those you opportunities is through very risky centralized Pathways so which mean that you know when you try to bridge a Bitcoin to ethereum or other ecosystem you have to basically give your Bitcoin to other people and trust that they would not steal it then I yeah I mean if you trust a company who hold custody of your Bitcoin then that's fine

but for a lot of people um who are holding crypto like a lot of especially Bitcoin holders I I don't think that they would they they they would think that's okay so that's a big you know that's a big reason why a lot of people are just doing nothing with their Bitcoin yeah and then also for a lot of like um you know like the people who are not like Bitcoin wealth uh they're putting it you know at ex Exchange in exchange and I think that that's also not like the most secure method um so and then it's very hard for them to generate any youth opportunities but however we know that Bitcoin is a one of

the most or we can say the most valuable uh crypto you know and also it's one of the most valuable asset uh in the world among various asset classes um so you it's like it's it's well known for like being like a store of value then you can actually you know uh mean stable coins you know out of it you can know lend it to others to earn interest you can do a lot of like strategy around it right to to increase your wealth basically and also can kind of defend yourself from the inflation and so there are a lot of um you know things that we can do around

Bitcoin but now the limit is like the bottleneck is just like the lack of the trust minimized pathway so that's why you know we fi are very focusing on you know developing the bitm technology and also uh helping you know Bob to build bitan bridge and also Babylon and also other ecosystems as well so that you know all the Bitcoin holders can earn yeld in the most secure and trustless Manner and then all the other ecosystem can get you know the I think it's the the greatest liquidity that they can yeah yeah and uh couple things here on

on the why and on the speculative side and then I'll let take us into the technicals um first is the ETFs are quite a bit of a paradox where it's great that we have the BTC ETFs like yes come on allow access to Mom and Pop to Everyday people to come and purchase Bitcoin and preserve their wealth and have an inflation hedge and all the things you just mentioned yel as well as you Alexi however it is also a paradox because we are just putting the coins the percentages of our Network that we value into the hands of of large institutions and so it's quite quite a bit of a paradox second thing is we are very very very close to entering a

geopolitical Bitcoin race uh we are within I think six months to a year from it could be Austria it could be Hong Kong it could be the states could be Canada Switzerland Ukraine Russia uh Brazil South Africa somebody's gonna come out and say hey guys we're allocating 500 you know billion million whatever the number is to our strategic reserve and then it's going to happen again and again and again and so like while again that's also a paradox that we want these things to occur we we we want nation state adoption um in the same way that nation states hoard gold but it's it really feels like this entire concept that we're talking about

today is coming at a very very crucial time in history where there's kind of a a Divergence in the paths um of the way that that that the Bitcoin network will be owned in the future and how you can use your coins so two points that I wanted to add in there if you guys have anything else to to kind of chime in on this y side or any thoughts on on on those points otherwise we can jump into some of the tech I just said one point to add is let's all remind ourselves that liquidity is King in Defi and currently 60% of it just lies on bitcoin I think you know Andy you stated a number like 1 to 2% is actually used um like bridge to the centralized exchanges and I truly believe that you know with a truly

trustless Bridge coming from Bitcoin where people from Bitcoin actually um you know that meets their security requirements uh very understandably um it sort of not only launches the Bitcoin Renaissance but can take defi to a whole another level regardless of what ecosystem you're on um you know with liquidity you get tighter spreads tighter spreads provide better user experience more people will come and use it and currently like on any given day if you're trying to trade Bitcoin you might find a better spread or or deal on a centralized exchange but once we can finally untap that liquidity um it could just make defy a better trading menu for everyone yeah like not just you don't just have to care about the the ethos

it's like no this is a better spot to trade BL like obviously I think one one thing I'd add here and this is again more of a personal wish and and Mission is that what we really want to achieve in the future I mean that's what we all should be aiming for is that the amount of Bitcoin that is in ETFs is lower than the amount of Bitcoin that is in def2 or vice versa there should be more Bitcoin used in defi than sitting in custodial services in ETFs and I think that is the ultimate goal if we achieve that then we win if we fail then we're back on the track of well is Bitcoin going to be Bitcoin in 10 years

where is fully dominated by institutions and Banks and if they position themselves as the main way for retail users to access Bitcoin then I'd say we've lost and then Bitcoin will lose it its core values yeah definitely agree also if you can meet the security requirements of like these Banks and super large institutions with like you know truly permissionless systems I think they'll also be interested in taking that like you know big tranch of money they've invested into Bitcoin and putting it in Def for you know additional opportunities yes so if it's permissionless and Trust minimized right then and with great you opportunities I believe they would be

interested okay so on that point yll maybe you can take us through the uh brief history speedrun of how of bit VM kind of starting with Robin's paper all the way to where we are now um and then let's address some of the core uh challenges and speak on on on what you guys are building with fiama and I'm sure I'm sure the other two guys are going to have a lot to say as well so feel free to get your peace out because I know when these guys start talking technicals it'll go let's go yeah so I start so basically uh I think a lot of people will understand a bit of History so that the bitm concept uh was raised in Robin L's paper issue in 2023 and then um and then between

there's a right up about bitm two that came out like in around April 2024 and so the key difference is that in bitm to uh we would use DK proof to kind of you know to kind of prove or represent a lot of uh complicated computations so that we only need you know Bitcoin to verify um the ZK proof optimistically and there's like a challenge so that's how we can uh make it more practical um and more efficient so that's like a pretty high level overview of the the bitm and then specifically uh what we're doing uh I can also talk a

little bit about the history of f um so we actually um I uh we have um a CK expert on our team Simo so who have like seven years of experience in building like DK VM and DK related stuff um so actually when he read you know the bitm paper uh the first version in 2023 then uh he he just thought about that what if we can combine it with ZK technology right it can solve a lot of issues and then 20 uh in 2024 then Robin Robin just you know come up with this you know great idea and then and then

yeah and then he just became even more excited you know because finally because he he's been building ZK for so long and then and then you can imagine that that you know DK we believe that Bitcoin could be the paradise for uh for DK so that's like a a great thing so so we have discussion around it so when I first heard about it I I just I just believe that you know it's like a zero to one breakthrough for the uh entire Bitcoin ecosystem and all Al the entire crypto uh because the a lot of the limit in Bitcoin so why Bitcoin is idle and then why we have like ethereum so not a

lot of ecos system it's because of the limited programmability on bitcoin but with bitm so basically we can for instance of just take the bridge uh as an example you can basically um use a TK proof to represent uh you know the burn transaction and execution validity on ethereum or Bob or any ecosystem and then uh you can let Bitcoin to verify it right when there's a challenge so if this is like a optimistic mod um model uh just because Bitcoin is more is expensive and also like slower um so that there's a way that you can you know

enable Bitcoin to make a judgment so that's why the whole bitm thing make Bitcoin more expressive um so it's kind of like uh you know open a door for the future of Bitcoin so we so we've been um um uh working very hard on you know first writing the ZK verifiers uh in Bitcoin script so in the first version is actually pretty large it's around like 7 gigabytes for both flong and gross 16 so which are two common like uh verifiers and then um and then the second step is that uh that definitely

we have to optimize the entire script so that it can be smaller so now for the G tting it's it's slightly over 1 gigabytes and FL it's 08 gigabytes but we still need to definitely do further optimization and also uh here we also need like a CR critical step which is called fragmentation so we need to fragment those you know for instance 1 gigabytes or8 gigaby script into around a thousand or a couple hundred chunks um so that Bitcoin can be able to execute it within its four megabytes block so we we can so when so for instance when the bridge operator act maliciously so we

only need one on this Challenger to identify this issue and initiate a challenge um so that we can uh so that the Bitcoin can verify only one specific chunk of the entire script which could be like around so far it will be around like 900 kilobytes or something um so that it's doable But but so far this size is still larger than you know the typical transaction so that's why we're actually upgrading know the protocol to to allow you know so so there are like I I think Alexa maybe can go over like uh the the more because I've already talked too much so basically uh there are like

three trans key transaction here uh the second one is aert transaction the secondment is AER transaction so which means that the operator need to post all the input and output data of those verifier Chunk on bitcoin so that Bitcoin can uh can you know can find people can find an issue you know and and raise a challenge right um so um for that uh we we would need to uh so that would be a super big uh transaction which would be around 4 megabytes so we would you know split it up so that Bitcoin can um actually execute it smooth smoothly without without us needing to you know work with minor yeah

I guess to to add on to this that's I think a very good explanation um I think the the the way I I try to to visualize this is like so there's one thing that that I think many people do know is that in Bitcoin script you can actually write Universal programs right it is capable of doing that the problem is that the program these programs become very very large and I'm really oversimplifying here so please like if like Jacob don't don't kind of tear me apart for like really oversimplifying this here but the idea is that think of it this way right you have like you know on ethereum you have things like if you want to multiply to numbers you just like a times B that's it you just call the multiply function it's available it's a higher um or the programming language it's just

there like another familiar concept for like ethereum uh developers is like pre-c compiles right so you have like promos which more contracts that you just can call into now bcoin has very little of that so you have to really use barebone tools like think of like logical Gates and I'm exaggerating but it's kind of that to build your multiplication function each time for each contract that means that these things blow up in size so as a result when ubella was saying right the initial fire was like seven gigabytes and now I think it's like much much small I think it's a gigabyte if I heard if I recall correctly or maybe even below it's so big because it's written in script and the problem is that it doesn't fit into a block right and just to kind of also bring in the whole debate about op cat

like that's where opcat and bit VM kind of that's the two directions we kind of currently see um in the Bitcoin Community with opcat that year is and like other covenants let's add more functionality so we can use more functions when writing the very so it just becomes smaller so you're effectively reducing the lines of code again oversimplified and bitm says well let's chunk it up into smaller sizes as as yella explains so that each of these could be executed um in a block and the idea is again visualizing multiplication right in so in ignoring that you know the actual program is a snark verifier let's assume it's a multiplication so you're multiplying two numbers now when

we actually put this into bitm and chunk it up you think of it again as now your multiplication is many many many additions so if you're multiplying 2 * 10 you're actually adding two plus two plus two plus two and then when the operator um commits the program they commit to this whole program right so it's the same chunked up as the original same result if you run them all one after the other you get the same result now if I'm the operator and I misbehaved I claiming that 2 * 10 is 19 everybody will see well that's wrong right and then youve will challenge me or anyone and I'll be forced to reveal the intermediary steps so the results like 0 2 4 6 7 which is clearly wrong and then it goes 910 and 911 and so on now

everybody will see that wait a second that step here is wrong so that must be where Alexa modified his program because we know he committed to this program we know what it looks like and that's again as as you well explained that's where this trick comes in where you would say well let's run this one 14 megabyte chunk and show that Alexa is lying because we can prove like in Bitcoin script that that part is where uh his commitment is not wrong and that's where the bit commitments come in in uh in Lampard signature specifically and that's essentially the magic behind it so it's a very simple concept and basically how how FR proofs work on ethereum but hacked into pcoin script and that's what makes us hacky but also actually quite

brilliant awesome that that is a super helpful explanation CU as as we were kind of unpacking this I was thinking to myself you know like I remember back in 2017 when we had segwit right and the the size of a Bitcoin first we had the the block size debate and people wanted it all the way up to a gigabyte size blocks or eight megabyte blocks is where the the large the big blockers ended up and then the small blockers wanted to just keep everything the same ultimately you know we kind of went through that that hard fork in 2016 bit cash became a thing ultimately we we compromised and so to kind of like Trace through the history of Bitcoin a little bit for the audience uh Bitcoin started out with one

one megabyte blocks in kind of like modern era then block size debate we ended up compromising with segwit in 2017 which increased this the potential size of a Bitcoin block to four megabytes and that was a lot bigger than one megabyte but it still couldn't encapsulate this script that could verify uh uh ZK proof because like yo ylla said these verifiers are like a gigabyte in size because you have to trace through all of these like extraneous pieces of logic you can't just multiply two times five you need to go two plus two plus two five times and that takes up a lot of space and so what Alexi what what you you kind of Illustrated is very helpful because what

it says is that we can kind of scrap away all of the extraneous pieces and we can just we can focus on just the one part where there was a mistake or a malicious intent that was implemented where 2+ 2 equal five and not four we can kind of scrape away all the other plus tws and reduce the size of this verification to just that one particular piece and that ultimately by scrapping all the way all all of the extraneous Parts away we can focus on a part that is uh small enough to fit in a Bitcoin block and so this is this is how we're able to verify challenges in the optimistic bit VM right and so we don't need to go into a full op cat in order

to arrive at some cryptographic security we can combine cryptoeconomic Security in this optimistic path with the challenge piece being a ZK proof no I'm just echoing back to what you like what you said and what Alex said earlier like well for upcat I mean definitely it can make Bitcoin more expressive and makes things easier but the thing is that we cannot really wait right we don't know when this would be activated but we have to you know fight for our defi word and fight for the decentralized ethos of Bitcoin so what if the institutional like institutions already control most of the Bitcoin by

them so what's the point of offat no you it's Trump it's Trump who's controlling it it's not just the institutions you oh yeah it can get worse I would argue nation state leaders could be quite worse than institutions yeah yeah institutions include Trump and so I think the US government or maybe micro strategy at this point is one of the biggest holders of Bitcoin but they haven't really use that centralization power to any detriment like I think we can imagine a world where if if America did follow through with their Bitcoin strategic Reserve yeah great they're buying a bunch of Bitcoin putting a bunch of money into price goes up people are happy but that poses a centralization risk to the

entire Bitcoin economy where they could then maybe not even take 51% of the network but they could implement this this strategic Reserve in such a way that uh would demonstrate control over the network potentially Blacklist people or users addresses uh foreign actors from participating in this economy and and take away the the credible neutrality so there's a lot of potentially counterintuitive uh or counterproductive uh aspects to this strategic Reserve um now even in that case if there was like some centralization that was you know that was in effect how does like

extending this into a defi World on bitcoin rollups take place like I guess to boil down this question a little bit more you know if I'm bridging to a Bitcoin rollup and depositing into some you know Bitcoin dii protocol am I kind of is it then like not my keys not my coins like am I kind of giving up the custody of my Bitcoin such that someone else can kind of you know go and do something with it or is that not the case do I do I retain custody over my coins even when my Bitcoin is deposited into a D5 protocol because right now that's not happening right on on defi on ethereum R Bitcoin

CB Bitcoin I I literally you know my Bitcoin is just some paper representation held by coinbase imagine if the world's GDP moved on chain guys say GM to safet the newest protocol by safe isn't a blockchain and it's not a new layer to it's a transaction processing Network built to send money anywhere and swap anything on thousands of layer twos from a single Universal balance in sub 500 milliseconds it's fast it's smooth and it's simple and it's built with safe multisig level security in mind safet unlocks smart accounts across multiple chains allowing users to supercharge security scalability and speed so get started

today at net. safe. Global and remember to follow at safe onx I think we have to be transparent here right um and I I I I I think like I read a Twitter post where you know we should be not we should not be using the word Bridge because it's misleading and new users are confused because ultimately bridging is the same thing so bridging into from Bitcoin into eth Bitcoin into Bob no matter what you use is the same process as depositing Bitcoin into an exchange the only difference or the big question of bridging is actually who has control over the Bitcoin while I'm using it and how do I get it back and how do I make sure that I or whoever bought the rap Bitcoin can actually withdraw

and you're right with rapc cbtc you're trusting a third party provider now BVM doesn't completely solve that problem right it's impossible to solve in fact um I spent my PhD trying to solve that and the result was quite sad we prove that it's impossible so kind of disappointing but at least it gives us like the basis okay there will always be someone that you have to trust in the case of bit VM we have operators you know the bit VM goes the BDC goes into this deposit this instance of bit VM and the trust assumptions that we get in bit VM are that one of these operators will be online and that there's someone in the network that will be online and if the operator that is currently active and

you know trying to sell money if they misbehave that they will be challenged and that someone in the Bitcoin Network which could be you me anyone will perform that challenge so it's this existential honesty assumption but that's what all bridges have but this is as good as it can get right even with like ZK like fra proes are of course slightly worse than ZK proofs but at the end of the day you still need someone in in in the ZK BAS system to submit the proof so you always have someone somewhere that needs to take action just because smart contracts are reactive so the the contract has to react to giving it an input um and with bit VM you still have custody right bit VM at its core the bridge is just a way to secur the custody Bitcoin under certain conditions

and the cool thing with bit VM that we do is we in build in these conditions into the logic of the of actually bit frame so we can enforce more conditions that are validated by all Bitcoin full notes in our case if there's a frog proof and these conditions are okay alexe was burning rap ATC to withdraw it to bitcoin he should be the one who gets the Bitcoin and that's a bitv forces under this assumption that well somebody will be that to challenge and this is a big distinction to multisig whether it's bitco CBBC or tbtc V2 which is a big open multisig where you know you have rotating signers all of these systems

today have this honest majority assumption if the majority decides to steal your Bitcoin is gone whether it's three out of five 10 out of 15 doesn't matter with bit VM the the the trust assumptions are quite different let's say you have 50 operators even if all of them collude they cannot steal as long as there's someone in the network that is online to make a challenge but the worst case that can happen is that all of them collude and they all get kicked out and your Bitcoin is frozen so that is still a bad scenario but in game theoretical sense there is no incentive for all these operators to collude because if you start like you know they have this fit

sent in or like the prisoners dilemma like if orbit in general is problem basically if we start coordinating I might get challenged if I'm telling you oh I'm going to you know I'm going to try to steal this and you're like ha sure I'm going to help you and then you challenge me the next second you kick me out so in bit VM we have you need at least one honest Operator onine Operator for liveness to actually process the withdrawals eventually but for safety of funds anyone any one person in the network is sufficient and that's a very very strong model and it's a zero to one step from multi signatures to this new model this is this existential honesty design you still give up custody that however must be clear there is always

risk involved if you're using Bitcoin somewhere else but this allows us to really minimize it as much as we possibly can with the tools we have today and that's the same level of trust you have when you're bridging eth from eth L1 to arbitr and then Alexi for Bob specifically uh I would assume right now you guys are in your most centralized stage that you that you'll ever be and that's for a good reason but then in the future you're obviously aiming to cater to bitcoin holders which means your your hands going to be forced to to decentralize things like your sequencer your exit window your data availability those types of things where you're going to be extremely I assume you'll be very proactive otherwise will suffer from

people not wanting your core target market will won't want to really participate that is true um I mean Bob is rolling out in but we're a hybrid Alta right so we're slightly different to bitcoin layer 2s I'm sure there was been Bitcoin L2 teams on the podcast as well the difference with Bob is that we envision to be connected to multiple networks um so yes we use bit we we inherit Bitcoin security and we roll this out in three phases in phase one we don't have it right we e roll up today as you said most centralized State we're very transparent about it it's just what we can do today um we're working on adding ZK proofs so we cannot we're actually going to be ZK roll up on eth um because it fits nicely also with bit

design but in phase two and that's what we're actually working on right now we're adding Bitcoin finality through Bitcoin staking and we're working with Babylon we're currently the biggest um Bitcoin secure network that's kind of using this Bitcoin St or will be using this Bitcoin staking security um and in our case it adds an level of of kind of validation on top of the sequencer so the sequencer produces blocks and then you in e r up you post the commitments and then if you're not challenged great in our case you first give the data the states to the Bitcoin stakers they have to sign off and only if the majority of the Bitcoin stake has signed off can we proceed to submit this to eth and on the ethereum side we modify the eth L1

contract to not only look for oh you know the commitments are there there's no fra proofs but check if Bob has finalized on bitcoin specifically we look at Bitcoin where a transaction is posted and after 100 blocks we know this thing is final and then we check the signature of the stakers and their Bitcoin stake locked on bitcoin and only then we say okay we're good um now this happens within 18 hours which is already much faster than the 7-Day challenge window that you have on Ethel 2 so that's already quite a big Improvement and now you have essentially an eth user who's bridging over to Bob you're not only trusting that there will be eventually potentially be fra proof but you actually have a faster finality mechanism where you can trust that the

Bitcoin stakers have signed off and this these this Bitcoin staking mechanism we then use for the bit VM Bridge because bit VM works best for things that are built with Bitcoin so things that we can check on bitcoin which in this case is the there's a commitment to bitcoin where the stakers have locked their stake and you can verify that just by looking at the Bitcoin blockchain with ethereum it's if you want to run an eth Cline in bitm that's much much more difficult in arguably with e s clim designed currently not possible without additional trust or not yet at least so the cool thing is that bitum works best with Bitcoin secured networks and that's our phase two and that's what where we're working with fiama and Babylon to roll this out and and I think that design is

probably going to be the first to go to market because in phase three that's what everybody else is also sprinting towards ultimately we want the fra proofs to be fully executed on bitcoin so just like arbitra but you have fra proofs on bitcoin and the problem there is that if you really want to inherit Max and Bitcoin security you have to continuously post the data and Ella is going to jump in and say ha but we because I know fi is working on solutions that actually offer a middle ground here that balances security and risk using Bitcoin staking and Bitcoin security networks as Bob will be and F will be which is a cool cool kind of uh solution but if you really are want to go the maximum route of security and only have Bitcoin then you have to post

the data there and that is very expensive and there's a very good report by Galaxy that just highlights that if multiple rollups are doing that prices will explode and let's be honest yes our target market are long-term Bitcoin holders but will they pay a hundred to a thousand times more for fees than on salana or ethereum or base they will not and that is I think the level of pragmatism that we need to have and that's why Bob's phase two is rolling out now and then hopefully we can get to phase three but then Fama is working on very cool Solutions which kind of offer you middle grounds where you can get somewhere very close to phase three um but still actually be efficient Alexi I have a maybe a dumb question around the settlement uh to

multiple chains um like if you're using Bitcoin as a fast finality mechanism and suppose the Bitcoin signer sign off on the transaction everything looks good from the Bitcoin perspective so it goes to eth and then on eth they find something they find something malicious or you know right but Bitcoin Network is already finalized it's already reached finality what do you do with the eth challenge once you know even after Bitcoin has reached finality I mean realistically speaking this this is where fa this is like the weakness of this phase two design right so that's why we have this phase three step or we

basically say okay it's Bitcoin in in our case you have to basically balance who do you trust more and for what for erc20 deposits things that affect ethereum I mean you can start to BCT this right and kind of look where where's the issue where it becomes quite difficult I mean in the ideal case in the in the ideal scenario you'll be able to say look if it's if it's an eth asset that came from ethereum okay eth has a final say if it's related to the bit and bitcom Bridge well okay then it's the stakers because that's what the bridge is actually using um in practice what will happen is that you'll have to either have a manual governance intervention or you just say that okay one of these two mechanisms basically wins but the thing is for eth FR proofs right who cares about the eth FR proofs

it's the users who deposited from ethereum so for them having eth as a final line of defense is important for the Bitcoin holder when you bridge in Bitcoin through bit you trust the stakers so for you actually even if there's a fra proof like the question is are you being rolled back and and that is then of course a nasty thing but to be fair it's a very good question but in all fairness roll backs and something happens with any prop an arbitrum or somewhere else it's nasty and then all of us will have to go through the same annoying and very very nasty process of recovering from that which is why it's so important to kind of decentralize sequences but also as you decentralize them you actually incur a higher risk I think of this happening so I I am very

scared but also curious to see which L2 actually first gets a real fra prooof and how they handle it because we don't have precedence yela Jacob anything to add there guys yeah I I mean just connecting uh just uh back to the bit Bridge right so for the even though we use this is optimistic like when there's a challenge then we would you know let Bitcoin to do the verification the complicated things um but for the user the user experience is actually quite good because we have the operator who can pay the user in advance so user can only user only need to wait for like maybe six four confirmations

and if if you can you know lower the security requirement for smaller amount maybe shorter amount of time maybe like 30 minutes to like an hours so user can just get their funds back right so it's the operators who need to go through the challenge period and then which is like seven days to 14 days but we we are um actually building like a quite active and um en large like monitor node group so that we can find the issue when there when right after it happened so that which means that we can even shorten uh the change period for the operator so actually we don't have that kind of user

experience uh issue that a lot of optimistic grow up that on ethereum that face yep uh Jacob I got a ZK maybe a couple of ZK questions because optimistic rollups on ethereum right now use some form of fraud proofs uh if you know they're decentralized and and they reach a challenge in their optimistic uh their optimistic settlement um but ZK rollups use validity proofs right so if we have a ZK rollup that is submitting proofs uh to bitcoin Andor ethereum in this case do we still need fraud proofs

or is the validity proof sufficient yeah my personal take is once ZK rollups become economically feasible everyone will switch um they provide just they will provide a better user experience rollups will not be fragmented anymore um I guess a more precise thing would be once subslot proving is viable on your choice of settlement layer um so that's 10 minutes on a Bitcoin it's 12 seconds on ethereum um once that becomes economically viable you sort of get this AC synchronous composability between all rollups and a lot of the fragmentation starts to go away and once that happens I I believe wallet providers will start to just blur all chains um sort of how

you sometimes RC like when using like Phantom or Rabbi between like you know salana or ethereum um for the time being um it's not economically feasible for some teams um and you can still reduce um optimistic rollups cost a lot with ZK um we have this op integration called kyua um which allows like one shot fraud proof mechanism so instead of having to play this really long interactive game on ethereum which can cost north of tens of thousands of dollars um you just submit a single ZK proof that cost less than $15 to generate um and I think people are being really attractive to that right now um additionally I wanted

to touch on Alexi made a really uh he like glossed over really cool point I think um that refers to ZK a little bit is traditionally in like proof of State networks and even in Bitcoin mining um you sort of have to have this Assumption of an honest majority or sometimes in proof of State networks it's like an honest third or honest two-thirds and with CK um assuming we have no bugs in the proof system we no longer have any worry of uh you know need any honest actors to maintain safety of our funds and you only need one honest party to um have liveness with your protocol and that's really how we've designed boundless from the ground up with those assumptions um additionally he made a

really good point about incentivizing provs which is something we we thought a long heart of and I think a lot of people have sort of glossed over is it's really critical to align um the people generating the proofs and the people that need the proofs with the proper incentives in fees to be paid properly could you elaborate a bit on that Jacob on that incentive design what that looks like in you know in in Bob's example or in uh a Bitcoin L2 example yeah so you know a lot of the time these proofs require your sophisticated Hardware um you can do smaller proofs like maybe for a single transaction locally on your laptop before you know in general a lot of the provs I'm working with boundless are

very sophisticated parties um you know think the biggest Bitcoin miners uh the biggest proof of State Network validators um we currently or we recently on board its improver store Network and they represent billions of dollars um of Mining and securing um Pro St networks every year so how do you correctly reward um them for their work additionally how do you make sure as a protocol um you're like you know sort of collecting a feed of pay for those proofs um and that's exactly what we've done with kyua which I think is a little unique currently in the space so making sure the money is there when you actually need it um and then we'll be talking more about how to uh you know reward provs proportionally to the work

they've actually done uh in boundless uh q1 this year awesome okay guys as we kind of come to a close uh one more kind of existential question for all three of you guys uh should Bitcoin continue on the road map similar to ethereum of a rollup Centric road map or should the Bitcoin Community rally around a different scaling model why or why not like whoever answers the question first the others won't be able to say much I guess there is no other option what what else is there I mean rollups it doesn't matter if you call them rollups or validium or side chains like ultimately if we want to like the

the deeper question here is do you want defi do you want people to use Bitcoin in a secure way and not go to exchange the answer is yes okay there is no other option we can add opcat I know there's a many many teams exploring like oh can we do L1 computation it's 10 minutes block times Bitcoin is not meant for like it just doesn't scale there's not enough throughput you have ordinals clogging the network now imagine you're building a DEX on this like imagine you put uni swap on bitcoin clog dead that's it it it doesn't work that way um so I think it's the it's the only way the question is whether you know do we introduce a fork or do we not that is much more open for a debate but do we up well then how do we deal with the the

data availability data publishing problem then I know that you touched on it a bit Alexi but do we use like Celestia Avil I do we use ethereum blobs do we do some like ZK data compression maybe to like enable us to post into Bitcoin right because as you said Alexi practically speaking it doesn't doesn't make sense to post all this to to bitcoin so like what's the solution there that's why we has the answer okay s this is the entire conversation we've been having yep there it is that's why we build a s layer so we will first ver verify you know the CK proof and then we

would store it you know it could be on the settlement layer or we could store it in another you know Bitcoin secure uh network but the key it is that we so so for us we really care about network security value right so that's why we uh Implement bm2 also in the settlement layer so which mean that the validator the NOS that of the the settlement Network um if they act maliciously they could be slashed directly on bitcoin and this is all powered by bit M2 yeah so that's that's how you can do it chly yeah I mean look at the end of

the day the whole bit the whole data availability question is kind of a bit of a fugazi thing right because ultimately if you post like what you're doing is introduce like if you don't post it to the L1 right you have to introduce another layer another set of another comedy something where you post it and that thing has to be honest now ideally in practice that thing is independent of your sequencers okay so so that already in practice that separation if you have like because again with da doesn't have to be fast it doesn't have to be super efficient the sequencer needs to be fast it's sequencer are always better centralized or a small group rotating but you pick like a slot and you operate da can be slow you can have many people participating so you can just distribute it much more reducing the chance of

corruption and that this one l two that is being attacked by someone also is being attacked by attacking like that you have an attack on both which in Bitcoin is almost impossible and what what uel is is suggesting is well basically you could use like if you're using Bitcoin staking for Bob let's say as a finality kind of Gadget you could also post the data to another chain that is independent of Bob maybe has much more signers much more distributed Network where maybe it's not a sequencer and then you know the final providers sign off but it's only finale providers many many many of them and that's just the storage layer and it has Bitcoin security Bitcoin St security so it's kind of you know the same level for Bob

and that layer so we're okay to posted there and it's cheaper so that's I think a very cool idea and whether you use Bitcoin staking or merge money there's different designs but it has to be cheap um and I that's why I'm I'm very excited for these kind of solutions because like thinking practically like I'm not I don't want our users to pay so many more fees and I only think a f fraction like sure a few big whales will care but the majority of our users will not and if you find Solutions like this you actually have a good middle ground and ultimately I think it's about being pragmatic so maybe Alexi is not as Bitcoin as lined as we once thought maybe he is there's a reason why he was

getting kicked out of these Bitcoin Maxi clubs back in the day I mean one thing to be said in my defense right if we grow to a size that we can afford to post the data then we should do it right if you have so many users that the cost per user is a scent fine then it's then it makes sense so it's a question of engineering figuring out if we can compress the DAT da and make it more efficient or maybe Bitcoin decides not to add opcat but you know if feral storage where you temporarily just store some data on the nodes and you can access it from within script which I really doubt or we're just so big that the cost doesn't matter anymore but how many rollups can then be so big right

that is again the question but looking at bitcoin's user size I do think that midterm long-term that this could be a VI option but it won't be possible for everyone and if we imagine a multi of ecosystem where new projects launch their app chains they won't be able to afford that that I think Bitcoin is in a really really nice spot right now um ethereum just spent billions of dollars funding ZK research going through many different iterations of rollup designs um I think we all remember like the op code Wars um and the compatibility um Wars of like two three years ago between different rollups um and we're really settling on a standard um you know most people are trending towards full ZK rollups um on top of for ZK we're seeing the mass adoption of the risk 5 zbm I

think one validation of this is the EF is now spending tens of millions of dollars to formally verify uh a RIS 5 CBM and it just provides a yeah you know there's the beam chain as well um which I I'm excited about um and it's just now you get to learn all those lessons you get to learn all these things not to do with rollups and you sort of just get this final product to now bring this just amazing opportunity to unlock that large amount of liquidity we talked about earlier you know vitalic was originally a Bitcoin Maxi writing blogs for Bitcoin magazine right and I think he got a lot of hate when he went and started ethereum but maybe this was

in the back of his mind the whole time was uh Bitcoin was able to now Leap Frog forward because ethereum provided a testing environment so ethereum's got a lot more a lot more going for it than just a testing environment for Bitcoin but original L2 to win win ethereum is the original Bitcoin L2 eh I want to add like um another final thought here so I believe that the whole uh Bitcoin Co system that the landscape would be quite inclusive and diverse creative because you know in ethereum ecosystem um like all the row up natural is evm right but here in Bitcoin you can have EVN svm move EV or whatever and the

Alex right so it doesn't really matter so as long as you can get you know Bitcoin you know in the most trustless way to your network and then get secured by the Bitcoin Network yeah I have actually been going a bit at war with the ethereum community recently uh and I'm finding myself much more aligning back to the Bitcoin community um ethereum is just all caught up in different ways of just different there's just a lot of nuance in the discussion but I think what you said matters right it's like okay what Alexi is harping on is just practicality using the cheap solution even if there's a tradeoff on decentralization right we're we already laring about sequencers on l2s not just being Bridges and multisig right like

we're already kind of LARPing that l2s are safe so we might as well just build an ecosystem that has very very cheap fees and has a lot of performance regardless of the execution environment regardless of you know who you're using for da and ZK at all and just we have pieces of State floating around in the abyss l1s and l2s are kind of whatever and we just ZK proof them all and we have a really high performing ecosystem with very little ideological tribalism outside of just the core ethos of crypto and I know that we can't all agree on everything all the time but uh it does feel like the ethereum community is shooting themselves in the foot but in some ways currently so to be determined it is the beautiful time will tell of

all Industries ladies and gentlemen watching the rollup today probably mostly gentlemen uh we have a lovely lady here with us today though so thank you so much guys for joining Alexi Jacob ylla I'm glad that that was funny to you yill thank you and Robbie of course thanks guys bye have a nice one byebye