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A

That's kind of how I feel about this whole broader, like, l two renaissance and what's possible in the bitcoin world. Like, I don't care if it sinks or swims, I'm pretty sure it's going to be very successful. But even if it's not, like, this is ideas worth pursuing, you know, like, we are freaking missionaries, not mercenaries. And if people disagree with it, it's like, bring it on.

B

Welcome to Banklist, where we explore the frontier of Internet money and Internet finance. This is Ryan. Sean Adams. I'm here with David Hoffman, and we're here to help you become more bitcoiners. Oh, oh. Is that what we're doing, David?

C

Yeah, it's a bitcoin episode.

B

This is a really simple premise for today's episode. We brought on somebody who could answer the question for us. For me, I had more of the questions, actually, than you, David, coming into this episode. Are bitcoin layer twos real?

C

What do you mean by. What do you mean by that question? What does that mean?

B

That's kind of what I was going to ask our guests and did ask our guests, but what I sort of mean is I was under the impression that bitcoin did not have the expressivity, did not have the virtual machine, was more like a calculator and not a computer at its base layer, and therefore had a very difficult, if impossible, probably impossible time launching what Ethereum calls a roll up, which is, you know, some sort of chain that is secured by the base chain. And this next guest says, actually, layer twos are possible on bitcoin with an asterisk.

C

With an asterisk?

B

With an asterisk. And he explains why. So I thought it was a brilliant episode and it doesn't answer all of my questions, but opens the door to possibility that I didn't know fully existed. And so I've still some research to do on this. This is probably the first episode of several in the future where we explore this topic in more depth. But I don't know, this guest has some legitimacy on this topic. And actually, you know this person, right? And so he came in my Twitter DM's, I was. Or my tweets, and I was just like, David, who is this? This is a good answer. You had already met him in person.

C

Yeah. This is basically how your. My relationships is. Like, who is this person? Oh, yeah, I met this person that one time. Yeah. We'll talk about a little bit of the intro, like how we met David in the show. Shout out Steven from Alfalfa. One thing I want to say before we go into this episode is that when we talk about, like, the differences between layer ones, usually there are things that get lost in translation. Especially when I do some of these Solana episodes, I have to stop and just translate for the listeners who I know are thinking in Ethereum terms, but across smart contract platforms, that's actually pretty easy to do and not all that complicated. It's just usually swap out one word, replace it with a different word. Then there's the conversation of learning about bitcoin versus ethereum. And if, like, learning about Solana to ethereum is like English to Spanish or something, learning about, like, ethereum to bitcoin is like English to Chinese. Like, you can translate. It does work, but it's entirely different. And so when we talk about layer twos on bitcoin and we talk about fraud proofs and we talk about different things, like, yes, we are close, but like, we need to actually, some things don't always carry over. And so I think that's important context for listeners to go in. It's like you don't just swap one thing out with a one word and place it with a bitcoin word. That's not how it works. And so like, like layer twos and fraud proofs and ZK rollups and like, expressivity on bitcoin will look different. It's like same, same but different. And so you can't perfectly translate these things. And you'll listen to me and Ryan, like, stumble our way into that realization once again as we have this conversation with bitcoin Dave.

B

Yeah, there were, there were some stumblings in this episode, but it's a pretty, like, we didn't have an agenda going in. We just wanted to pick David Searoy, who's our guest. We call him bitcoin David. Cause we have two davids in this episode. Pick his brain. I think hopefully the result is something that can further your knowledge on what bitcoin is building. Cause there's kind of a renaissance going on. A little bit like some glimmers of it.

C

Dave. Bitcoin Dave. Bitcoin David presents a zero to one moment in bitcoin building that is potentially ahead to us.

B

Super exciting. So guys, stay tuned for that. But before we get into this episode, we want to thank the sponsors that made it possible, including bankless nation. We are super excited to introduce you to David Seroy. Yes, we have a second David on the podcast today. This is the bitcoin David.

C

Bitcoin Dave.

B

I guess my co host maybe David. David Hoffman. I should refer to you as Ethereum David. So we got bitcoin David here, and he is a bitcoin wizard, I would say. What does that mean? He is definitely an armchair researcher in the bitcoin roll up ecosystem. He loves bitcoin and loves projects that are building on bitcoin. He actually had probably the best answer I received to a question about the bitcoin roll up community and l two community I put out and is part of the reason for this podcast. Bitcoin David, welcome to Bankless.

A

Yeah, thanks for having me. I'm excited. I can't believe you guys let a bitcoiner on here.

B

Oh, we do that.

C

We bring bitcoin.

B

Just had.

C

Nick Carter is our number one most true. Yeah.

A

Who else?

C

Who else who is after Vitalik? After Vitalik Buterin, then Nick Carter.

B

David, who am I forgetting being in the spot?

C

We've got got Eric Wall. Eric wall, like on four or five times. We had Lynn Alden on like five times. We just had Robert Breedlove on. That's why. Robert Breedlove, of course, bitcoin represents at least two to 3% of all bankless podcasts.

B

When you put it like that, that's very small.

A

We got to pump those numbers up.

B

Yeah, it's undersized as far as mark. Yeah, well, that's what we're doing today. So bitcoin David, I understand, actually, you guys have met in person.

C

Yes.

B

So this isn't your first meeting.

C

We were introduced by Steven Cesaro of the Alfalfa podcast fame, and David was introduced to me as bitcoin Dave. And that's how his name is stuck in my brain. And once again, entering this recording room, I was like, wait, David, are you called Bitcoin Dave, or is that just how Steven introduced you? And apparently that's just what Steven introduces him.

A

Yeah.

C

Now it sucks.

A

We actually played pickleball the next day. And.

C

Yes, then we played pickleball David.

A

David told me about a really cool idea. He said he wants to put pickleballs on. The blockchain is under direct. Yeah, it needs ethereum.

C

Yeah, but which we're track. Track points. So no one can cheat with points.

B

Well, but isn't that the broader question, like which blockchain? Because now bitcoin can support some tokens, I'm hopeful. Bitcoin Dave, you'll. You'll tell us a little bit about this because maybe I'll start the conversation. We're going to talk about the broader bitcoin ecosystem, but my base question in that tweet that you helped answer for me was, was this okay, a question for the unbiased big brains. That's how I couch this. Can bitcoin have an l two roll up that satisfies the five slices of the decentralized. Decentralization pie? I was referring to the l two beat pie, where there's like kind of five slices that demarcate decentralization. I mean, is there an exit window? Do you have some sort of decentralized sequencer, a few other things, or does it lack expressivity? And so, David, I want to throw that, that question to you, basically. So can bitcoin now support l two roll ups? And like, what does, what does that even mean in the context of bitcoin?

A

Yeah, well, I'm going to give a really clear answer here and say yes, but it depends. And really it kind of depends on, I'd say, three general things. First is like, what flavor of roll up are we talking about? Are we talking about like a fully validating ZK roll up, a sovereign roll up that has no proving system, or an optimistic roll up? The second question is, are we saying with the soft fork or without soft fork? And then the third question is, what level of trust is acceptable? And if we jump all the way to the answer that people probably care about is no, we want no soft forks. We want fully trustless. And it needs to be a fully validating ZK or validity roll up. If that's the exact criteria we need, then technically no, bitcoin cannot do that. And that is because bitcoin does not have the ability to natively verify zero knowledge or validity proofs. On the base layer where this gets a little bit interesting is bitVm. And BitVM potentially allows us to hack in a ZKP verifier into the bitcoin l one without a soft fork. And so BitVM was this white paper that Robin Linus, a developer, an amazing researcher in the bitcoin community, wrote back in mid December, and that was about six weeks ago. And so the claim with BitVM is that we can now compute anything on bitcoin, and we can express Turing complete smart contracts on bitcoin. And so if this is true, which it appears to be, then this is kind of the fundamental breakthrough that really changes the paradigm for what is possible on bitcoin. The caveat with BitVM is that its a little bit clunky and it has a trust assumption of one of NDE, meaning that you can perform this computation where we could have a ZKP verifier on the bitcoin l one. But the people that are performing that computation could be a group of ten, 101,000 people. You only need one of them, to be honest, in order to get the crypto economic security there. Some people would say, well, that's not good enough, but if we can essentially optimistically create a validity prover, then maybe that's good enough to build the bridge. And I mean that technically building a bridge, but also metaphorically building a bridge to cross that chasm that bitcoin typically can't cross. And if you can cross that chasm, then you get into the whole world that ethereum is in. You get into this idea of shared sequencers and cross composability and pre conformations and tons of different execution environments, like some really truly amazing stuff. So BitVM is the real innovation that this could possibly happen without a software in a little bit of a hacky way, and that may be good enough to build up the rest of this. And maybe down the line we say, okay, we want the fully trustless version. We're going to softwork in a dedicated ZKP verifier.

B

Okay, so I want to get back to BitVM as maybe part of the final destination here, but could we zoom out for just a minute before we get into some of these more technical details? Where's this innovation coming from in bitcoin? Like, why has bitcoin just discovered that, oh, wow, we can launch roll ups and layer twos on top of bitcoin? Is this some kind of a builder renaissance? Has this always been possible? It's just there wasn't the funding or the projects, or is this just kind of new novel experimentation? Are they seeing the success of ethereum? They're just like, hey, we could just do that here. Where's this renaissance coming from?

A

Yeah, I mean, there's a bunch of moving puzzle pieces here, to be clear. Like. Like, a lot of this stuff was kind of discussed, like, early on in bitcoin talk forums. Like, there was a post from Greg Macwell, who's like, kind of this, like, og, just like, amazing bitcoin developer, where he. He talks about bringing, you know, zkps, uh, to bitcoin. And he specifically references Eli Ben Sassan, who is now, like, you know, who was the founder and is now the CEO of, like, starkware. So. So this has always kind of been on. On Bitcoin's radar, and there's even quotes from Satoshi where he. He talks about you know, like, like, if the technology has caught up, like, this would be, you know, the best way to improve and kind of like scale bitcoin. All the evidence is there. Where this really starts, in my opinion, is back in 20 or not starts, but it was back in 2014 where blockstream released their white paper for side chains. And this was the scaling vision for bitcoin, where it's like you're going to have the bitcoin base layer and then you're going to have all these side chains. Maybe you have a big block side chain, maybe you have a privacy side chain, maybe you have whatever other specialties. Everybody loved this vision, but it was the one problem is the blockstream white paper said, oh, by the way, we haven't solved this trustless two way peg, so for now, you're just going to have this federated model where you bridge your bitcoin into these other ecosystems. You'll trust us with a multisig, we'll solve the trustless two way peg later. That never happened. And in the interim, bitcoin went down the path of, like, lightning network. They got Segwit in it, fixed the transaction, malleability, which was an issue that prevented lightning from occurring. All that happened with the block size wars in 2017. And then we said, we're going to go all in on essentially lightning. While that was happening, as you guys know, like, the Ethereum community went down this other path where you said, we're going to pursue plasma and then state channels, and then you eventually settled on rollups. What we're now seeing in the bitcoin community, in my opinion, is that lightning is massively hindered, and I think people drastically overestimate essentially what it can do. And don't get me wrong, I love the lightning community. I support the builders, but there are some systemic issues which, in my opinion, are probably going to be insurmountable for it to truly scale bitcoin. And Ben Carmen, he goes by Ben the Carmen on Twitter really wrote like this, this very nice post where he kind of said, he's like, I'm a lightning lover. He's like, I am one of the developers. He goes, but sometimes I look around and be like, what are we doing? Is this really the right path for bitcoin to scale? And he laid out all these reasons why lightning, it has some issues. I think a lot of those issues are going to be tough to get past. And even if we do get past them, it's just like it doesn't have a global state. You're going to have the inbound liquidity issues. It doesn't have very good privacy. It requires massive footprints on the l. One is an issue if Ryan and I want to open up a channel that requires an on chain transaction, if you want to add more liquidity in this channel that requires an on chain transaction.

B

So, David, just to get up to this point, and it sounds like there's been some eras of bitcoin development, right? So bitcoin had kind of its side chain era, let's say. And that never manifested into kind of like a true trustless bridge and something that, like, in theory, would call more like a roll up. And that was one area. And then lightning was kind of the thing. I mean, Ethereum, you rightly pointed out, very much had its kind of state channel era where we thought that would be like the holy grail for Ethereum. And we tried a lot in that era. I mean, like, Amin Soleimani built his entire company's bank chain on, like, on top of that, and we had raiden, and that was sort of like this. And it never achieved product market fit. It never got the traction, I think for the same reasons that the bitcoin communities is seeing a. Its endeavor inside of state channels through lightning, some of the same things still applied. And then we entered this roll up era of Ethereum. And then so much so that Ethereum essentially pivoted its entire roadmap to be like Vitalik called it, the roll up centric roadmap. Right? So you're saying the similar trajectory, the similar path, is happening just like slower and a little delayed, but it's happening in the same way in the bitcoin community? Or is that, you know, is there something I'm missing here?

A

No, I mean, that's exactly right. I think one of the things that was the breaking point was a lot of the ordinals and inscription stuff, because inscriptions, they post arbitrary data on chain, and some people will call that spam, and it's not monetary use cases and all of that. But bottom line, they are fee paying customers. And so they are kind of pushing up fees on the bitcoin l one chain. And the same way that Ethereum kind of had their fee crisis and fees were booming. Fees on bitcoin, theyre not absurd, but theyre creeping up. And what people are finding is that the lightning network really suffers in a high fee environment. And people are sitting there and looking and saying, wait, this security budget that bitcoin has were relying on fees to be higher long term. But our long term scaling solution. Lightning doesnt really work in a high fee environment. I think that was the catalyst that was making people question, okay, is this the long term solution? And we have other things like Ark, which is very cool, people are working on things like RGB as well, and space chains and all this stuff. But at the end of the day, nothing has solved the trustless two way peg, but rollups potentially do.

C

I want to present actually slightly a different characterization of the progress of ethereum scalability as it compares to the bitcoin story? Because we had the Ethereum layer one, but we knew it was always needing to scale beyond that. And so we started with state channels, which then grew into generalized state channels, which then grew into plasma for hyperscale. And we were doing these plasma thing for a really long time. We had these plasma implementers calls, and then there was this aha. Eureka moment, which morphed into optimistic roll ups, and we had the uni pig demo, and then that's how we got to optimistic rollups. And then also we knew that ZK rollups would ultimately manifest as a result of that. And it was a very logical progression of thought of like, research and development, and direction and iteration. And until, like, it actually landed on where we are today, would you say.

B

David, it's kind of like an idea maze, like, kind of quest. Like, we hit some dead ends, and we're like, oh, like back up and like.

C

But smaller dead ends, right? And like. And then we kept on progressing, each one built on the history of the other. And what I'm seeing in bitcoin is actually people going down the lightning idea maze, realizing that it's a pretty strong, pretty far log, tons of investment into lightning network, and realizing it's a pretty strong dead end. And now we're actually going very far back and picking an entirely new strategy for bitcoin expressivity and bitcoin scalability. David, would you. How would you. That's kind of my. How I would kind of change that characterization. Would you agree?

A

I do want to somewhat defend the lightning community. Like, I don't think it's, it's, it's a dead end, but I think that it has, like, significant limitations that can't be overcome by just, like, just give it enough dev time. People are like, oh, the builders are building. It's like, no, like, and Vitalik pointed this out, it's like the layer two. Like, lightning is essentially bound by essentially what the l one is capable of. And so there's just systemic limitations that lightning is going to have. Like, could it be something that kind of like, connects all these different layers, like if you have a bunch of roll ups or, you know, like something like fetiments. And can it connect these fetiments? Like, yes, but is it going to be this grand vision that everybody hopes for? Like, no, that doesn't mean we abandon it. It just means like, let's let 1000 flowers bloom.

B

David or bitcoin. David, I should say so. I'm wondering if the bitcoin community has felt this, because I'm not sure if you would represent yourself as a minority of folks. I know there's been the Nick Carter Udy wizards side of things, and there's almost been this forking in the social layer of bitcoin, of builders and those who just want just the pure gold store of value use case. But it also seems to me like some of the people who were embracing of like some sort of scale scaling of trustless transactions per second, and they were formerly bitcoiners. Like, I count myself among those already moved to the Ethereum community. I'm wondering if you think that effect is in play too. So, like, I consider myself a bitcoiner. I love bitcoin. I still own bitcoin. I don't know if some bitcoiners in kind of like the bitcoin tribe would acknowledge me as a bitcoiner, but I consider myself a bitcoiner. That said, I moved over to Ethereum because they had a roadmap that was actually trying to scale this whole trustless compute piece of it. And yes, in the early days, the monetary properties weren't quite as pristine. It doesn't have the anonymous faceless founder, but I saw this potential to build a bankless money system. And that's why I moved over into the Ethereum community, because they were pursuing that most aggressively. But you're saying. I think what you're saying is there are still some bitcoiners out there who are trying to build this vision on top of bitcoin. And one of my basic questions is like, but why not just, why not do it on ethereum? Or like, why have you stayed? You seem like you're very much the builder mindset. Why have you stayed inside of the bitcoin community? And why do you still have hopes and aspirations there?

A

When I talked to a lot of bitcoin, I was like, and it kind of gets into this implicit discussion of bitcoin versus Ethereum. They're like, they're like, well, this is a monetary revolution, not a technology revolution. And that used to bother me so much because I'm like, yes, it's a monetary revolution, but damn it, the tech matters. There were many times where I would listen to bankless episodes and I'm like, man, this stuff is fricking exciting and it's cool, but I always had this spot in my heart for bitcoin, because that is the use case. It is all about the money. And if we can kind of merge these two worlds, that is the best case scenario. Now that we see some of this technical stuff that Ethereum has pioneered and we could potentially bring it to bitcoin, that is the vision that I want. I do not think that Ethereum is as good of money as bitcoin. I could sit here and stay silent and be like, but damn, Ethereum has legit scaling solutions. I can honestly say that I do not think is as good of money. I think what you guys are starting to realize right now is that scaling, block space, composability, all that stuff is going to be solved. But where are the apps? Where are the fricking apps? What is going to be the use? The use. It's been the same since day one. It's money. It's payments. It's payments to each other. It's payments in privates. It's payments to a loan contract. It's payments against collateral. It's payments if you want to send it using face id on Apple Pay. It's always been payments. And it's always been money. Bitcoin Maximus, for all of their flaws, for all the frankly dumb things they say, what they got right is the monetary revolution. And even after this episode, I think so many of them, I hope, will listen to this, and they'll probably still be blind to roll ups and the power of them. But them holding their ground and having that anchor and understanding that the tech, in my opinion, is kind of irrelevant unless you have the money. That part they got right, and that's why I'm sympathetic to the bitcoin camp. That, in my opinion, is the true revolution. But ultimately, if you want that revolution, you need to have the technical side. Bitcoin, in its current condition, you really can only scale to less than 1% of the world in self custody. That is not viable. We need to increase the scaling of self custody. We need to bring some form of expressivity so people can borrow against their bitcoin. They don't have to sell it so that people can have private transactions. We need it.

B

So, David, I'm going to ask you, because we've certainly made the case for bankless money systems built on top of bitcoin. And it seemed to be a roadblock in the past. I'm wondering if you could, what would you say to the bitcoin community? I mean, you sell them, sell them, pitch them on roll ups. Why should the bitcoin community get excited about rollups?

A

This whole vision that we have about like 21 million, 21 million is thrown out the window. If anybody cant have the optionality to self custody right now, theres only a certain allotment of block space every single ten minutes. If bitcoin gets any modicum of scale, those blocks are essentially going to be full and its going to price out every single other person from having self custody. If everyone is using these custodial solutions, they dont have the option to go into layer one. Then that in and of itself leads to massive attack surface for fractional reserve lending, for rehypothecation to basically the blockfis.

B

And celsius of the world.

A

Yeah, I mean, just anything, even putting your funds into a custodial lightning node, it gives this attack vector to implicitly break the 21 million. And that's what essentially people care about. And seeing the decentralized finance movement, like the DeFi movement in Ethereum, I think bitcoin is like massively underestimate this. Even if you think finance is the scum of the earth and you're this kind of rothbardian, austrian economist, finance is the anchor that money must carry. If we want this perfect world, you need the ability to audit these kind of contracts. People are going to borrow, they're going to lend, there's going to be all this stuff. If you can audit all of that, and you can cryptographically enforce this set of rules, all of that contributes to this trustless, hard money world.

B

Okay, so in the beginning of this episode, I started with kind of like a question that brought us into the weeds really quick. And you started talking about BiTVM, right, which is the question of, like, can bitcoin really launch roll ups, completely decentralized, ethereum style roll ups? And you throw out kind of a few categories and definitions there. But before the bitVM thing that you're talking about, which we can still get into a little bit more what has traditionally been possible on top of bitcoin. Because where I sort of last left things, it seemed to me that bitcoin did not have the expressivity to sort of do much more than some sort of a side chain, multisig side chain. Right. And yeah, it was kind of like the early days where, where things maybe left off. But you mentioned sovereign roll ups. You know, to me, that's kind of like, I think that's sort of a side chain type of thing. So what sort of thing has been possible when bitcoin talks about layer twos or the community talks about roll ups, what are they describing? I guess outside of BitVM, which is maybe a special case that well get into in a minute.

A

I mean, the main problem with bitcoin is that it has no concept of the outside world, right? Like if you are on a side chain, like the side chain can run a bitcoin node, it can interpret essentially what's happening on the, on bitcoin, but bitcoin cannot interpret it whats happening on these other side chains. So you can bridge bitcoin out of the ecosystem, because those other chains, those other ecosystems can read bitcoin. But if youre trying to bring bitcoin back into the ecosystem, bitcoin has no idea what happened in that outside world. Thats the main problem. Its essentially just a trustless two way peg. If you want to peg your bitcoin outside into a side chain, you cant do it. Because of that. Zero knowledge proofs could potentially solve that. What I could do is give an overview of how bitcoin rollups would work from a bitcoin perspective. But I can start using some Ethereum vernacular and vocabulary.

B

Very helpful. That would be very helpful. As far as I understand, an optimistic roll up would not be possible on bitcoin because we dont have a smart contract that can enforce the fraud proof type of game. But maybe there's hope for some sort of a ZK rollup, is that what you're saying?

A

Well, BitVM potentially could enable both of those in a kind of quasi trust minimized way. And I'll get to that. But let me describe the roles first, that we're all on the same page. So in the Ethereum world, you guys have talked a lot about this modular thesis, how you have the data, the computation and the settlement. And bitcoin is really no different. When a user submits a bitcoin transaction like Alice sends one bitcoin to Bob, that is data that goes up into the mempool, which is like the waiting room. The miners mine the block, and then they go up into the waiting room, up into the mempool, they pull it down, they collect the transaction fee, and then they create the block. They package all of those transactions, that data into the block. That block then gets propagated out to the rest of the network gets sent to all the nodes. And if you're being a good little bitcoiner, you're running your node, you receive that block, and you're going through, and you're essentially performing the computation. You're validating all those transactions. You're saying, does Alice actually have one bitcoin? Is this a valid signature? Okay. Yes. And then they append that block to the rest of the prior blocks in the blockchain. And then now you've essentially audited everything up into that date, and then you settle the transaction. You say, all right, Alice no longer has one bitcoin. Bob has it. With a roll up in a bitcoin world similar to Ethereum, you're abstracting that computation part. That kind of incrementing and decrementing of the balances is no longer being done by your nodes. It's being done in this off chain environment. Right? And I think an astute bitcoiner at this point will say, well, hold on a second. Actually, let me back up really quick, because you're not doing the computation on bitcoin anymore. You're doing this off chain environment. You can use any custom execution environment you want. You're no longer bound by what is called bitcoin script, which is kind of like the EVM equivalent in the bitcoin world. You can now use EVM in this off chain computation world. You could use Cairo, you could use rust, you could use clarity. You could use whatever language you want. At this point, a bitcoiner would say, well, hold on a second. If this computation, this incrementing of decrementing of these balances is happening off chain and my node is not validating all of that, then doesn't that defeat the whole purpose of bitcoin? This is where, as you guys know, the zero knowledge proof comes in, where all of that computation, which it could have been smart contracts and DeFi and NFts, you know, fast transactions, small transactions, all of that is essentially compressed into a singular zero knowledge proof, which is like an unforgeable digital receipt. That unforgeable digital receipt is pushed back to bitcoin l one, along with the updated state saying, hey, you know, Alice no longer has that one bitcoin. Now Bob has it. Here's the unforgeable digital proof that this actually occurred. And from bitcoin's perspective, it's essentially saying, well, I have no idea what happened off chain, but just prove to me, mathematically, prove to me, me, that you followed the rules of my consensus that no more than 21 million coins were created that Alice actually did have the funds, that all of the signatures were valid. And if you can mathematically prove that to me, then I will allow you to update the state on the l one, meaning I will allow the kind of. Now Bob has the one bitcoin and Alice no longer does. Functionally, the way this works on bitcoin is on the l one, you would have what's called a shared Utxo. This is essentially the roll up contract in Ethereum world where users can pool their funds into the shared Utxo, and then those funds are represented in the l two, where all this computation and the zero knowledge proof and everything is essentially completed. It was typically assumed that in order to create some sort of shared Utxo structure, you would need a software called recursive covenants. However, there are proposals to potentially create something like this. If you had a ZKP verifier with bit vm, we now potentially have the ZkP verifier. So hopefully that's making sense, where we could potentially create these shared utxos on the l one, we can perform all the computation in the ZK proof and submit it back to the l one, and then you can use bitvm to verify that Zk proof. If you have that, then you can build a roll up.

B

All right, so before we get to bitVm, could you just, like. So I'm not as familiar with the kind of the, the bitcoin, I'll call it generally layer two community, but, like, I don't know if these are legit layer twos or not. Right. And what, what you would say, and I will say first, like, we run across the same problem, of course, in all of crypto and in ethereum, where everybody wants to be a layer two, but oftentimes they're just side chains with multi sigs. And so it's hard to, like, get past the marketing speak and get to actually the technical details of, is this really a layer two? And then that's even more obscured by the fact that some legitimate layer two projects are still not fully layer two, if that makes sense. They still have some training wheels on, some guardrails on, and they're working to decentralize over time, but the technology is such that they can become kind of fully decentralized or much more decentralized layer twos in the future. So I'm just trying to find out what's real in the bitcoin layer two community. So something like stacks, is that a layer two something like rootstock. Is that a layer two? Are these kind of like more like side chain types of networks?

A

I mean, they're more like side chains. There's kind of multi sigs or they don't necessarily anchor to bitcoin. Do quasi call them layer twos? And I guess they are. But for me personally, it's like, no, I want this path towards fully trustless ZK roll ups. And the closest thing we possibly get there is some sort of integration with BitVM.

B

Okay, so aside from BitVM, are there any sort of layer twos? And the ethereum definition of a layer two is basically it has to be secured, settled by the base layer, or be on a trajectory towards being fully decentralized. Is there anything else besides Bitvm?

A

Yeah, I mean, in terms of the level of trust that you guys would want, the only thing is lightning network. Lightning network, from a security assumption standpoint is very, very strong, but it just comes with so many other pitfalls.

B

Okay, okay, so we've been talking so much like you've been alluding to this BitVM project. Like, what is it? Where did it come from? Like, why are you so excited about it? You don't work for the project. So I think you're looking at this from a bitcoiner that's very excited about this building renaissance, and you're just kind of evaluating this, and you're like, this is the future. But, yeah, give us some context for this. What is it?

A

Yeah, so BitVM is a way to verify any arbitrarily complex Turing complete contract on bitcoin. And the keyword there is verify, not necessarily execute. And so if you read the bit vm white paper, there are two key references in there. The first is optimistic rollups, and the second is taproot, which was the last bitcoin soft fork. So, as you guys know, an optimistic roll up performs this computation off chain, and then it submits the results of that computation back on chain along with the data. And you optimistically assume that it is valid. If somebody says, hey, I do not believe this is valid, I believe that you lied, then they can use the data that was posted on l one to create a fraud proof and say, hey, this is incorrect. And then the transactions are essentially rewound. So worst case, the transaction get rewound, the fraud gets discovered, but because of the game theory, you assume that it's going to work correctly. BitVM is similar, except it's not actually posting transaction data on l one. Instead, what it's doing is it's committing on chain in a bitcoin transaction to perform a certain set of computations, and it will do this off chain, and it says, I will perform all this computation, and then it will do it off chain in a prover verify setup, where there is a prover that's performing this off chain, then if they do not perform that computation, then the verifier can take a piece of that and submit it to the bitcoin l one and say, hey, here is fraud. They didn't follow this computation, and the prover, just like an optimistic roll up, essentially gets slashed. The way that this works, because bitcoin doesn't have any sort of scripting language, and it can't, like, verify these kind of, like, complex programming languages is interesting. So most programming languages, I think pretty much all of them. Like, for example, like, take Python is built in a hierarchical manner where Python was built on top of C, which was an extension of C, which was built on assembly. And it goes all the way down to the circuits or the binary bits, where literally, if you have two wires and they're going into what's called a gateway, if two of those wires have electricity pulsing through them, maybe the gateway lights up. Maybe for other types of gateways, if one wire is on, one wire is off, the gateway lights up. The point is that these small little electrical signals in these gateways create the basis for, like, zeros and ones in binary language. And then that binary language, it becomes the basis for letters and further numbers and then all these codes. So what BitVM is doing is it could take some sort of code, say, like a ZKP verifier, and it will break it down to its fundamental components, down to those little binary gates, and then it will commit all those binary gates into what's called, like, a taproot tree, which this is a merkle tree. So if you imagine, like an upside down. Yeah. Or just kind of like a pyramid structure where you have, like, the root, and then you have all the binary trees, like, you would have this massive tree that has all the different chunks of this essentially code, and you can embed that into a bitcoin transaction. And so in this situation, again, like, the prover is putting money at stake, and they're saying, I will compute all of this like this ZKP verifier off chain. And if you feel that I am lying, then you can submit a single small transaction as part of one of these taproot trees or part of this merkle tree, and you can identify that as fraud. And if I'm found to be fraudulent, then you can slash and take my funds. So you could have a situation where you have one prover, you have 1000 different verifiers and you yourself could be one of the verifiers. And what this essentially allows is you're optimistically creating a ZK verifier, if that makes sense.

B

I think it does. I think it does. I'm going to have to do some more research on this myself and ask some other folks. Let me ask you, the BitVM project, how close is it to Mainnet? Is this kind of, this is beyond the white paper, but is that even.

C

The right question to ask?

A

Yeah, I mean, I follow a lot of the telegram chats pretty closely. It seems like they're making progress. I don't want to hold them to anything, but I think we could be looking at this stuff within a year or less.

C

Is mainnet the right phrasing for this or is there a more precise word?

A

I'm not sure. I'm not sure. What would we call it?

B

Well, there would have to be some chain that I can interact with that is some sort of virtual machine type chain, whether it's EVM or something else that ultimately settles to bitcoin or is that not what like you're describing here, David?

A

So I mean, all of this computation for BITBM, it's happening off chain. It's happening just like on a server or a computer or anything. You don't need any sort of blockchain because again, you're optimistically assuming that this stuff is being done. So you're saying, look, here's, how do I want to say this? Here's all this code that I'm essentially going to run. Before you run it, you say, here's all this code that I am promising you I'm going to run. And youre breaking that down all into the binary parts and youre submitting that into the bitcoin blockchain. Youre committing to it. Youre basically saying I am committing ten bitcoin that im going to run and operate this code off chain. And so whats happening off chain is the prover is running it and the verifier is simultaneously verifying all this is outside of a blockchain. This little game that theyre playing. Theres a lot of interactivity thats happening between these parties. But if the verifier discovers and says, hey, you're being dishonest, they can go through and they can arbitrate that on the bitcoin chain and be like, hey, do you remember you committed ten bitcoin to execute this? You committed and you promised that you would execute it this way. And I'm now providing a fraud proof to the bitcoin chain, proving that you did not follow the code. And that's how they essentially punish or slash the off chain computation.

B

David, does this sound a little bit like Niebuhr to you? I'm not sure what Nibra project that we've talked about.

C

It's a proof aggregation layer. No, I don't think so. I think what I'm trying to get my head wrapped around is because with arbitrum and optimism, you and I are very used to alternative blockchain networks that are blockchains that settle down to Ethereum and it's another entire parallel system. And I don't think that's what's going on here. It's not a blockchain. Right. It's like exploring the world of expressive layers on top of bitcoin. You can't really take your Ethereum frame of mind and apply it to bitcoin. You can start there, but the outcome is completely different. And so there's just some things that don't cross over the chasm in terms of what they look like on Ethereum when they're applied to bitcoin. It's just like a different construction. For example, David, the nature of the computation that would occur in a bit vm, like layer two, it's not going to be NFT trading on a layer two. Or maybe it is, but even if it is, it's going to look different. Maybe you can help continue this conversation. How is the different nature of layer two computation going to be on bitcoin?

A

Well, I guess I just want to maybe help this. I think Ryan's having trouble thinking that this is this off chain computation on a blockchain. And I'm thinking in the context of roll ups, a prover is not a blockchain. You have this blockchain, but then you're taking all that and you're putting in this hyper centralized just prover computer. That's what's happening on the BitVM side. It's not a blockchain whatsoever. You're performing it all off chain, which just means on a separate computer.

B

Okay, so BitVM is more approver. It's not an entire chain, but like, you just use the prover to validate the entire chain. Right.

C

Are layer twos on bitcoins blockchains?

A

Yes. Yes. So what BitVM is really focuses on is the bridge to get you to this l two blockchain. So like there'd really be two different ways that I think people envision using BitVM. One is like that traditional roll up setup that we talked about where you have the l one contract, you have the l two blockchain, it compresses the computation of ZK proof and then there has to be something to receive and verify that ZK proof. So that little bridge component right there that exists or can be arbitrated by the l one to verify the ZK proof. That is one use case of bit vm. And you could build a true or kind of like a more traditional ZK roll up that way. The other way that people could use BitVM is just to build like a bitcoin bridge. Like instead of using WBTC or federation like, you could bridge bitcoin, say into some sort of wrapped ethereum ecosystem where you could bridge it into another side chain. And it has that same trust assumptions where you only need to trust one honest party out of say 1000 as opposed to a federation, and you can bridge it into another chain and maybe that chain. You then build rollups. On top of that you have a settlement layer, you have 20 different rollups, they're all using the same ZK circuit. You're getting the cross composability, all the advanced topics that you guys are talking about. That's the potential for it to recap that you could create a ZKP verifier that's arbitrated by bitcoin and just have a roll up that settles directly onto the bitcoin l one. Or you can create a pegged version of bitcoin with the same trust assumptions. And then in that new ecosystem you could build roll ups on top of that.

C

Okay, so it sounds like the emphasis that you're trying to place on is that this is a bridge primitive. But what is on the other side of that bridge? You know, bitcoins on one side of the bridge. What's on the other side of the bridge? What's on the other side of the bridge could be a whole like open field of innovation where it could be a blockchain, it could be like a tokenized implementation of bitcoin elsewhere. It sounds like, like it's up to developers to imagine what could be once on the other side of that bridge, once we have that bridge standard developed by the bit vm team. Is that, is that fair?

A

Yeah, exactly. And that's why I think, you know, I started off this conversation describing that. That idea of, like, the chasm. Right? Like, you're crossing the chasm, and where I mentioned that, like, bridge that we're building both, like, a technical bridge and, like, a metaphorical bridge. And if you. If you're willing to. To trust that bridge, this one of n trust assumption, this kind of, like, optimistic as opposed to validity proof type type setup. And if you can cross that bridge and you can cross that chasm, then you are into the new frontier. Could you build a bridge to ethereum? And everybody's like, well, hey, we don't want any of this stuff on bitcoin. We just want a trust minimized way to use bitcoin on ethereum. Maybe that's the route some people go. Maybe some people say, no, I want true roll up where you're posting the data directly on bitcoin. Maybe other people say, we want this settlement layer where we have this world of different roll ups that are all cross composing with each other. Yeah. Like, BitVM enables this kind of design flexibility. Again, with that caveat of the one of n trust assumption.

B

Yeah, I guess more my question was, why don't they just attach a chain to it? Then they're doing the work of creating the bridge. This is essentially what arbitrum or optimism have done, is they've done the kind of the bridge piece, but then they've also just slapped a chain on it, too. Is that out of scope for BitVM?

A

I think for the BitVM team, it's probably out of scope, but there are a lot of people who are very excited about using BitVM for that exact use case where they want to use it as a bridge to their chain. And there are some people that are doing the traditional roll up path, and there are the people that are using it for side chains. But, yeah, I don't think Robin in the BitVM team is building a chain themselves. They kind of want to let 1000 flowers bloom. Robin is on record saying a world of, like, you know, an arbitrary amount of, like, side chains, all with different experimentations. Like, a free market of side chains is kind of his vision, right?

C

Yes. Okay. The. The bridge. The metaphorical bridge you're talking about is landing way harder for me now. It's like, once you get over this, this the literal. Once you build a literal bridge, you get into the land of just like, hey, what's on the other side of that bridge? What's on that destination is like a startup that can actually raise a, uh, to build something that they see as like cool and unique and that something that they want to see for bitcoin, maybe that's not your vibe, but maybe market forces are asking for like a different product or solution on the other side of that potential bridge implementation. Like well, we can go build that too. I think maybe on net, what's on the other side of this bridge that is being built by the bit VM primitive is expressivity. So like you can have expressivity on the other side and it's up to the bitcoin builders to like decide what they want to build, either by market forces or their own intrinsic curiosity or whatever.

A

Yeah, and there, there are, to be clear, there are teams building all the stuff that you're talking about. Like there are built teams like building these other environments and these different like design trade offs. But like once we get over that, that, that bridge, then we get into all the fun stuff that you guys are talking about. Like we talked about data availability layers, you talk about like what different type of execution environment you want. Like maybe somebody wants to build like a proof of stake style bitcoin chain that specializes in NDA. Like all that stuff. You can have one thing that we didnt mention, just so the audience knows its a roll up in and of itself is not a magic bullet because you still have to post that data in theory onto the bitcoin l one, because the blocks, theyre not 1 mb, theyre technically four megabyte. A pure roll up could probably still only get, I mean, a guess, anywhere from ten to maybe 50 x. Improvement in scaling if youre posting all of the data on the l one. So that's still pretty good. It's not bad. It can expand self custody, it can make things a lot cheaper. But eventually bitcoin is going to have to go down the same path that ethereum is going down, where it's like you're going to have these dedicated data availability layers and that gets a little more advanced, a little more nuanced.

C

Okay, so David, you presented this as if people are willing to accept the end of one trust assumption, then we can eventually get to this world of expressivity on bitcoin. Um, do you think the bitcoin set of people is that, that's a, that's a pill to swallow? How big is that pill to swallow? Will people swallow that pill?

A

Yeah, I do. I think it's going to be absolutely massive.

C

I think you think, you think people are going to, largely as a whole, like the laser eyed maxis aside, bitcoin is going to accept this nf one trust assumption.

A

Yeah, I mean, I think it's good enough to get us there again to cross that chasm. And then you can get the fully ZK verified, cross composable chains with the beautiful UX and the forked Ethereum smart contracts. I think that's going to be good enough. And I think that there are beginning to be use cases that even the most ardent bitcoin is like, that's kind of dope. I think that's one of the criticisms of side chains, is side chains were a little bit ahead of their time. None of the good applications really came out until Defi summer. And yeah, there was so much fricking grift and so much scam and so many shitty products. But the idea of being able to borrow against your bitcoin at 0% interest in a liquidity style with a very small origination fee, provably over collateralized, that is badass account abstraction. Wallets is another great one, obviously sending private payments, being able to earn yield. There are teams, I'll give a shout out to botanics. They're doing this thing where you can stake bitcoin, you can earn yield on it, and it would create a two way peg to another chain. And so they were thinking about building an EVM chain. I was like, guys, look at what Eigenva is doing. You could stake your bitcoin, you could create this separate layer. You could have a dedicated data availability layer that all of the roll ups use and settle to. It's earning real fees because people are paying to use that blob space and all the ropes can be built on it. You can have a decentralized Amen perpetuals platform that is going long the proof of stake bitcoin and shorten the perpetuals. And you can create the inverse perpetual stablecoin. This whole world, it really gives new life to the bitcoin monetary maximalist. Right now all of these people are complaining about ordinals, inscriptions, and it's taken away from the spam is increasing fees, and it's like pricing out monetary use cases. It's like, well, you need a scaling solution that aligns with the hierarchy environment, where we can create economic density, where you could have dedicated roll ups that do tons of transactions and tons of defi and tons of privacy, and you could batch all of that and you're willing to bid way more than any of the inscription people in order to place your roll up transactions onto the l one. That's how you beat out all this arbitrary data on the l one, I think so many bitcoiners are just missing that. It's like, all right, guys, chill. Like, we're going to build it and you're going to be happy, okay?

C

So the world that you're describing, kind of. I've always thought that building on bitcoin is like building in a wasteland, just because the whole entire construction of bitcoin is just, like, optimizing for simplicity. You know, it's a philosophy of subtraction rather than addition. Make bitcoin simpler, make it harder to build. Build on bitcoin. Just have BTC the asset. Um, that's always been, like, my kind of, like, philosophy is like, how bitcoin has grown. But what you're showing me is that, like, well, maybe that was true with, like, the bitcoin base layer, but once you build this bitcoin vm thing, it goes from, like, building in a wasteland to just, like, fish in a barrel. Whereas, like, well, there's all this other innovation that so many other ecosystems have already built. So we already have, like, a lot of the ideas and the research and development, like, out of the way. Now we just have to build it. So it's just like, you can't.

B

You.

C

At that some point, you just can't miss, like, da on bitcoin, somebody's got to go build that, right? Like, I don't know, optimistic roll up or zk. Roll up on bitcoin, somebody just go. Goes and builds that, right? I. So a bitcoin builders renaissance. We've already seen the culture started to shift this way. What are some of the ideas that are super hot right now? What are people building that's very hyped in bitcoin world? If Ryan and I were big bitcoiners, what would we be excited about?

B

Give us the next five episodes. Bitcoin episode.

A

Yeah, well, I'm a bit biased here. I wrote an article on Bitcoin magazine where I talked about bitcoin backed stable coins and I referenced liquidy. That is when I even. I talk to my most, like, you know, hardcore bitcoin Maximus friends. I'm like, I'm like, oh, like, you call yourself a bitcoiner, like. Like, you're never going to sell your. Your bitcoin until you have to. I'm like, you're selling your bitcoin. I'm borrowing against it, and I'm doing it, like, without a custodian. And I'm doing a 0% interest. Like, I'm more of a bitcoiner than you, you know, I'm holding longer than you. You know, just like, just, you know, like poke at them, of course, of course. And then, you know, even if you get into this world, like inevitably there are going to people who like, they're just not ready for bitcoin. They're like, they're like, I'm living in frickin Argentina off of like $5. I can't sit here and be having a crazy volatile asset. They're like, I need stable coins. And if you can say, well, hey, look, here's this stable coin. It's decentralized, it's provably backed by bitcoin. It can't be censored. That is a nice little ramp for them to get into this world. And then as they get savings, they can invest into bitcoin. It's like all this stuff that you guys have been talking about, I just think it's a better fit on bitcoin and we're going to bring it, but that's cool.

B

Yeah. Is there anything else? I've heard of restaking protocols on bitcoins, one's called Babylon that's crossed my desk before. Obviously there's everything that's going on with ordinals and BRC twenties and that kind of thing. Anything else that we should keep our eyes open to?

A

I mean, yeah, pretty much just take off your guys prior podcasts and things that you're excited about and say we can bring them on bitcoin, I think account abstraction wallets I'm very excited about. I'm also really excited about the prospect. I mentioned this in the tweet. This is pretty far future facing, but if you could use something like storage proofs to trustlessly given attestation from a data availability layer, you could use something like Celestia or a dedicated bitcoin da layer, and you could relay that information trustlessly to the bitcoin l one. And that just eliminates the risk of some of these data availability layers.

B

David, this has been a fascinating conversation. This is exactly what I hoped for when I opened up that tweet, and I didn't expect you to reply. And I just want to thank you for replying. I mean, from my perspective, bitcoin is maybe starting to get interesting again. I sort of left it off as a store of value, and it's a uncensorable store of value, and that's great. One part of the bankless journey, but it was missing Defi, it was missing expressivity, it was missing all of the potential that Ethereum is unleashed. And if you're telling me that it's starting to get that back again and there are some ways where it can start to follow more closely something, its own version, but something closer to the Ethereum roadmap, that to me is very exciting and leads to a more bankless future, I guess. I got to ask though, David, are there, are there more of you out there? Because I think the overwhelming message from what the social layer at least that is loudest in bitcoin, does not talk in the way that you are talking, is not a listener to the bankless podcast necessarily, is not focused on building, is very focused on kind of like monetary properties and like Robert Breedlove style, which is fantastic, right? But just like not talking about this sort of thing and is thinking, still thinking that lightning is going to solve everything, all of the bitcoin scalability problems and yeah, are there more people like you actually like digging in and coming up with these new roll up style solutions on bitcoin? How many of you are there?

A

I mean, you could probably count it on one hand, but no, I mean, in all seriousness, it's a small but growing movement. The problem is there are some projects out there that are trying to hijack this narrative that really are not the true builders. It's for sure grifting. It's for sure scams. And I think people need to really have their guard up not to go full on bitcoin maximalist. Yeah, this stuff is real, but a lot of the stuff you will end up seeing on Twitter is definitely not. And Ryan, kind of what you were saying, I remember, I forget it was a podcast you guys had many years ago, and somebody came on and just really applauded you guys and said when you guys were getting into it, nobody gave a shit about ethereum. It wasn't even like, hey, that was a bad idea. It's like, dude, we don't even want to talk about Ethereum. Why are you guys doing this right now? You stuck to your guns because, like, you understood the potential and the revolution and you said, I don't care. Like, like, I, you know, Will. Will die on this hill because I essentially believe in it. And there is that small contingent of us that feel the same way about what is potentially happening in bitcoin. And sometimes I look back and I'm like, oh, man. Like, if I found bitcoin in like, you know, in like, 2011 or whatever, like, like what? I have had the conviction to, like, stay on, stay in it. And the answer is probably not. Who knows? But back then, you don't have the foresight of all of this development work that's already been done, of all of the podcasts, of all of the articles. But that's how I feel about this whole broader l two renaissance and what's possible in the bitcoin world. I don't care if it sinks or swims. I'm pretty sure it's going to be very successful. But even if it's not, this is ideas worth pursuing. You know, like, we are freaking, you know, missionaries, not mercenaries. And if people disagree with it, it's like, bring it on, you know, I'm on Twitter all day, you know.

B

Well, I love that that level of conviction is going to get you into the small but growing tribe quite far and totally applaud it. I mean, this is very much, you know, bankless aligned, I would say very, very excited to have more bankless money systems built on top of bitcoin. So, David, I'm going to ask people, including the show notes, a link to your Twitter account, because I was not following you before this. My mistake. But I am now following you, and you, my friend, are going to be my bitcoin signal. I hope. So I can start to parse out what's going on. Bitcoin Dave, you're the go to now. Bitcoin Dave. So, like, with that power comes great responsibility. Please do not lead us astray. You know, show us where the true decentralized roll ups are building on bitcoin. And thank you so much for your time today.

A

Yeah, thanks, guys. I do want to give a quick shout out to people like John Light, Robin Linus, Alexi Orkin. These are the true builders and people. If they follow me and see their names, those are real deal people.

B

There you go. Of course, Satoshi, who started it? All right, bitcoin Dave or them. Yeah, the Twitter handle is David Croy, so d a v I D, underscore. See, Roy, gotta end with this. Of course, crypto is risky. You could lose what you put in. But we are headed west. Frontiers, not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.