Exploring Liquid with Byron Hambly

Sponsor: Bitcoin Only - Bitcoin consulting service

Byron on Twitter: @byronhambly
Liquid on Twitter: @Liquid_BTC
Blockstream on Twitter: @Blockstream
Blockstream Jade Hardware Wallet

Curious about how Liquid, a Bitcoin sidechain, can revolutionize your crypto transactions? Join us as we host Byron Hambly, a Liquid developer at Blockstream, who unpacks the technical marvels and practical benefits of Liquid. Byron delves into how this federated sidechain offers faster, cheaper, and more private transactions, while also exploring the role of the Blockstream Jade hardware wallet in enhancing self-custody for the Lightning Network. Gain insights into Byron's journey into the crypto world, his professional background in Rust development, and the pivotal moments that led him to become a key Liquid developer at Blockstream.

Boldly navigating the complexities of Bitcoin's design, we tackle incentive compatibility and the inherent trade-offs that shape the ecosystem. Byron explains Liquid's unique approach, relying on a federation of companies to manage a multisig wallet, rather than traditional mining. This setup allows for confidential and cost-effective transactions, but it comes with its own set of challenges. We also dive into Liquid's security features, its resilience against hostile jurisdictions, and future developments like enabling Lightning over Liquid.

Looking towards the horizon, Byron shares exciting innovations such as atomic swaps, channel rebalancing, and trustless pegging to the main chain. Discover how companies are leveraging Liquid for advanced functionalities, including the issuance of new assets like stablecoins and securities. We also touch on the importance of user experience in the Bitcoin and Lightning ecosystem, the balance between convenience and security, and the advantages of using multiple hardware wallets like SeedSigner and Jade. Prepare to envision a future where Liquid plays a crucial role in the financialization of Bitcoin, facilitating the road to hyperbitcoinization.

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Transcript

Speaker 1: 0:12

Hello and welcome to another episode of by the Horns. Today I spoke to Byron Hambly, liquid Developer for Blockstream. We spoke about how Liquid functions under the hood and all the technical details you might want to know about it. Tradeoffs involved with Liquid in terms of sovereignty, speed, privacy and cost of transactions. How the Blockstream Jade interacts with Liquid and the suite of features that this powerful little hardware wallet packs, even allowing you to self-custody your lightning on it. Now it's great to have such a knowledgeable and skilled dev here in South Africa working for a powerhouse like Blockstream, and I think you guys are really going to enjoy this one and find it really interesting.

Speaker 1: 0:44

But before we start the interview, a quick word from our sponsors. If you got your bitcoin sitting on an exchange and don't quite know how to get your own hardware wallet set up, are you concerned that if you die, your family won't be able to get your bitcoin? Then bitcoin only has a solution for you. Sit down with a bitcoin professional who will tailor a solution just for you, ensuring that your bitcoin is safely stored off the exchange and set up with the Bitcoin will so that your family can access your Bitcoin in the event of your death. Head over to BitcoinOnlyio today and set up a free 20-minute discovery call with them to see how they can help you. Alright, guys, over to another episode of by the Horns, a Bitcoin podcast about South Africa. Today, I'm joined by Byron Hambly, a liquid developer from Blockstream who's living in South Africa. Byron, welcome to the show. Good to have you here.

Speaker 2: 1:55

Hey, ricky, thanks a lot for having me.

Speaker 1: 1:57

My pleasure, man, my pleasure. So you work for Blockstream as a liquid developer, am I right?

Speaker 2: 2:02

Yeah, that's right. Currently the only Blockstreamer in South Africa, although my colleague, philip, used to live in South Africa, also got hired on the Liquid team, but then he since moved to the UK. I started at Blockstream two years ago, about April 22, on the Liquid team. So I work on the open source code base for Elements, which is in C++. It's a software fork of Bitcoin Core with additional features, and so Elements can run any sidechain. We use it to run the Liquid sidechain and we also work on a lot of Rust code for the Liquid functionaries of the Federation. Awesome, yeah, so before we dive into the detailed workaries of the federation, Awesome, yeah.

Speaker 1: 2:46

so before we dive into the detailed workings of Liquid, do you mind just telling us a bit about you and your background?

Speaker 2: 2:52

how you came to be in.

Speaker 2: 2:53

Liquid Sure. I studied computer science and maths. After high school, I went to Wits University and I've been working as a software developer since then sort know sort of for the last 15 years, mostly on web related technologies. And then back in 2020, I started working on Rust, on some typical blockchain projects, and actually had a recruiter from Blockstream reach out to me and started their interview process and managed to run that gauntlet and got hired back in 2022. So, yeah, I've been working on the Liquid team since then, probably the last two years or so.

Speaker 1: 3:38

Okay, awesome. So were you just contributing to open source projects before then? Was that kind of like the recruitment process?

Speaker 2: 3:44

they were just looking, I mean yeah, they were specifically looking for russ developers because they were looking to hire for the liquid team and, um, I suppose they just went, uh, uh, shout out to david doh um, he went looking around a bunch of rust repositories with, uh, blockchain related stuff and and I think they reached out to a number of people because this was just after Blockstream had raised their Series B round, which I think was $200 million a couple of years back, and so they were looking to hire for the Liquid team and they picked up Philip and myself back then.

Speaker 1: 4:25

And so what's your origin story in Bitcoin? How did you come to Bitcoin?

Speaker 2: 4:30

Oh man, I wish I could say I got in super early. Unfortunately, I had heard about it back in as early as 2012, I would say, and sort of wrote it off because of negative comments on Hacker News. And I'm convinced the real reason I didn't get in back then is because, yes, I had some technical ability and development experience, but I just knew absolutely nothing about money, and so it took a couple of cycles. You know, lynn Alden says it sort of takes two or three cycles for people to watch it happen, to reach new, higher highs and higher lows, and then it doesn't die and then it comes back and um.

Speaker 2: 5:09

So so 2017, I fomoed in and um and got some, but then the the crash in 2018, I sold everything because I was like no, you know, this is not for me, it's too volatile, I don't understand it. And um, I mean it wasn, wasn't a huge position, but I just didn't understand what it was. And so when it came around to 2020 and I was actually working on learning more about it, and then, once you actually learn stuff about the fixed supply, the decentralization, and more about how money works and how central banks and governments create and control your money and intentionally inflate it away. It starts to make a lot more sense and you know, as your conviction grows, I think the size of your position grows and the number of boating accidents you have just grows.

Speaker 1: 6:02

So yeah, look, boats are unreliable these days. They keep sinking um. But you know, for anyone listening like who feels disparaged because they didn't get into bitcoin early enough guys, there's block stream devs out here who only who only got this in 2018, so there's hope for everyone, you know even then, I mean in 20, in 2018, I got scared and sold at a loss.

Speaker 2: 6:27

So that says a lot. In 2020, I started just buying a bit, getting my toe in the water and, yeah, I think, as your conviction grows, you start to realize, man, if I'm not long bitcoin, if I need to be short fiat, because, uh, it's if you have any savings, um, it's being inflated away. And so, uh, there's three simple steps is uh, spend less than you earn, save the rest in bitcoin and wait five years see how it goes that's exactly it, man.

Speaker 1: 7:03

Do you think that we haven't ever like a competitive advantage in south africa being south africans? Because our government is so shit and like they're, like our currency is inflating at 10 plus percent per year for our entire lives, you know like? Do you think that is actually like an advantage for us? Because we get to see like the hype, like hyper inflation unfolding and like how cocky it can be, more than like the hype, like hyperinflation unfolding and like how cocky it can be more than like the europeans and americans can it's a tough one.

Speaker 2: 7:30

I think, um, it's an advantage because, as you say, you're much more aware of the corruption, the inflation, how useless the currency is compared to if you, if you actually use and earn dollars all the time, it's not quite as bad right, it's the least crap one. But I also think it's a con, because each month we have less money to stack stats with, so our high rates of inflation is killing us in that way as well.

Speaker 1: 8:04

Yeah, look, I mean you, you got to play the hand. You dealt right like so, on one hand, um, we don't get to stack as many sets as as europeans and americans do, because our money doesn't buy that many sets, but our cost of living is way lower. So I guess it's like all relative like you need far fewer sets in south africa to survive than you need in america or europe, so like I don't, man, it goes both ways.

Speaker 2: 8:26

Yeah, it's a toss up and sort of just bringing it back to the point of even block streamers got in late. You know, our CEO, adam Back, has a couple of tweets out about how you know Satoshi had emailed him before the release of Bitcoin even, and he didn't get into it until 2013. And he felt ridiculously late to Bitcoin in 2013. So I think if there's two things that are true about Bitcoin, it's that it always feels expensive when you buy it and you always feel terribly late when you got in. When, when you got in, but you know we're still incredibly early. It's, it's a meme at this point. But, um, you know how? How long does it take for a new asset to monetize from zero? We're 15 years in and holding steady at 70 000 for one coin and, uh, you know, I think we're, we're on the way up for the next year or two, I hope think we're.

Speaker 1: 9:28

We're on the way up for the next year or two, I hope. Yeah, look, if anyone needed any more evidence that adam back is not satoshi, it's the fact that he only got it in 2013. Um, after so, she directly dm'd him. He was like yo, you get in early on this. I'm quoting you in the white paper, I'm citing you, adam.

Speaker 2: 9:43

So and, yeah, he spent a long time. He spent a year or two uh trying to figure out ways to improve bitcoin, you know, and and what he found was that it's it's in a very tight design space where any what you may think are obvious improvements in one direction are trade-offs in another direction. So, yeah, I mean, when someone that smart spends a long time trying to improve a system and comes to the conclusion that it's in a perfect equilibrium where it is, that says a lot.

Speaker 1: 10:20

So you're telling me that even Adam Beck had the. I'm new to Bitcoin and I'm here to fix it.

Speaker 2: 10:27

Well, I think he's got a PhD in distributed systems and so he figured there's got to be something we can improve. And yeah, it's just a very tight design space. I think, more than anything technical, it's the incentive compatibility, it's the incentive-driven approach that has really made a chime. Everyone is going to act in their own self-interest and it relies on that, and all the trade-offs work around that.

Speaker 1: 11:01

Yeah, absolutely, and this is the thing that took me the longest to understand about Bitcoin was like the trade-off, like what, like you're mentioning, is like every design you try to implement has a has a trade-off. There's no like clear advantages, there's only trade-offs. Right, and so, like everyone's saying, we need privacy on chain yeah, we do need privacy on chain, but like, what are the trade-offs of that if, if the trade-off is uh negatively impacts, uh decentralization, you know, increases the cost of running a node, then you know, is that really better for bitcoin because it can be captured in the long run?

Speaker 2: 11:31

um, so this is it's hard it's hard absolutely the yeah, the privacy story is, um, problematic. I would say you know it's uh, it's not. Maybe that all of the transactions are so transparent At the same time, that means you can always perfectly validate the issuance and yeah, as you say, the tradeoffs with privacy mean a larger chain. If it's any sort of hard fork, it's an immediate no from me even, and you know, as a developer, we're much more likely to be willing to change things and try new things.

Speaker 2: 12:14

Um, so I think I think for decentralization, it's going to have to be soft forks only and you know we do scale in layers and maybe that's where we can bring it back to liquid, where you know, as we're using a side chain, we do have confidential transactions and we've got a cryptographically verifiable peg that Bitcoin held by the federation is one to one for the liquid Bitcoin on the side chain and you know we can have faster blocks and cheaper fees because it's not on the side chain. And we can have faster blocks and cheaper fees because it's not on the base layer and we can have hard forks if absolutely necessary for scaling, because it's not on the base layer and we don't require any consensus changes on the base layer.

Speaker 1: 13:01

Okay, so explain this to me like I think Craig writes to Satoshi um, like what liquid, what liquid actually is and what it does right, um, liquid is a side chain to bitcoin, um, and, as I mentioned, it's uh, it's pegged one-to-one.

Speaker 2: 13:20

So what does that mean? That means that we run the Liquid Federation. There's a federation of companies. There's over 60 of these companies that form the Liquid Federation and 15 of them run what we call the functionary, which is a server with a hardware security module for the private keys, and those 15 functionaries make up the block signers for the liquid side chain and they're all running elements, which is our fork of Bitcoin Core, and they're running the liquid chain. So each now, besides the signing of the blocks so the blocks are deterministically once per minute because they don't use proof of work they're signed blocks because you have this trust in the federation model and so you don't require the random proof of work mining element for the side chain. So blocks are one minute apart and they when.

Speaker 2: 14:24

So sorry, besides signing the blocks, those 15 functionaries also control the federation multi-sig wallet, and this Bitcoin wallet is where Bitcoin is pegged into the federation and it then becomes unlocked on the sidechain network in the form of liquid Bitcoin network, in the form of liquid Bitcoin and, as we say, that's cryptographically verified, that any Bitcoin that's pegged in and deposited is unlocked on the side chain and when it is pegged out from the side chain back to the main chain, it is provably burnt on liquid. That liquid Bitcoin is burnt and the Bitcoin is then withdrawn from the Federation wallet. It's sent as a transaction from that 11 of 15 multi-sig wallet.

Speaker 1: 15:13

Okay. So in summary, for, like a non-technical person, liquid is like a layer on top of Bitcoin that doesn't use mining. You've got a multi-sig that bitcoin is, is, is paid into or sent into, and then for every one bitcoin that goes in, one liquid bitcoin is created that then exists on the side chain and then when you want to remove that liquid bitcoin, that that token is burnt and the bitcoin gets paid back out to main chain again. Right?

Speaker 2: 15:39

exactly right. Yes, that's, that's a summary. Sorry if it went a bit technical.

Speaker 1: 15:43

No, no, no, it's absolutely perfect, and so the upside of this is that, once you're in liquid, you don't have on-chain fees that are determined by miners. You've got on-chain fees that go to the functionaries right to the sidechain the sidechain.

Speaker 2: 16:09

Exactly so, uh, just like lightning, it's um one. Once the funds are locked up on the base layer, you can spend them many times on the on the second layer. And, uh, that obviously helps with scaling because, as you say, not every transaction then has to be a Bitcoin transaction on the main chain, and so your Bitcoin can be pegged in once and then transacted multiple times before pegging out if necessary.

Speaker 1: 16:34

And my experience with using Liquid has been that the fees are typically you know worst case about 10 times cheaper than on-chain fees for spending right.

Speaker 2: 16:43

Right.

Speaker 2: 16:44

So because Liquid can independently set its own fee rate it's already set at the minimum fee rate is one-tenth of what the Bitcoin minimum fee rate is.

Speaker 2: 17:00

So the Bitcoin minimum fee rate is one sat per virtual byte and Liquid starts from 0.1 sats per virtual byte, so you do have much cheaper transactions. Now the tradeoff there is that the transactions are slightly larger because, as I mentioned, we do have confidential transactions on Liquid, so that means the amount and the asset type are cryptographically blinded and so you can't tell the amount or asset type of the transaction. You pay for that in the size of the transaction, in that it's about 10 times bigger than a Bitcoin transaction, but the lowest fee rates start from 10 times smaller than Bitcoin, and so you largely have basically any minimum fee rate transaction on Liquid will always get in, because the blocks are also 10 times as frequent, so the transaction sizes are 10 times larger. As I say, fees are 10 times lower than Bitcoin and because there's plenty of block space still to go around, there's no high demand on the fee market and so minimum fee rates still get into the next block.

Speaker 1: 18:07

Essentially, Right, and so, all things being equal, you end up with like 10 times cheaper fees, and as block space becomes more in high demand, you'll still have lower fees as it scales until you've got like a really full chain. Then you can start approaching similar fees to to bitcoin exactly so 10 times more transactions per block um it.

Speaker 2: 18:33

So that's a bit of a wash because, um, the the blocks are 10 times more frequent and but transactions are also 10 times as large. So you roughly will get the same kind of throughput as Bitcoin but, as you say, the minimum fee rate is much lower and I think because the blocks are regular, deterministically regular. I think a lot of the times the fees on Bitcoin, when they get high, is because there's a surge in demand, is because there's a surge in demand, and then the random process of mining means that sometimes you'll go 10, 20, 30, 40 minutes without a block and in the meantime that's like four blocks worth of transactions that are trying to get into the next block and that's when you see the fees sort of skyrocket on Bitcoin. But I mean, they've come down a lot lately and what's really interesting is that we found, you know, the fee spikes in the last year. They did drive some liquid adoption.

Speaker 2: 19:32

We saw increased usage, but now that the fees have gone down, we're still seeing that increased usage of liquid. So it's not immediately apparent that or maybe I should say it this way is that that adoption seems to be organic and it's happening in a way that once people are forced to get off chain, then they become more comfortable with it and they're like you know what actually. This is really convenient and Liquid's in a great place for rebalancing Lightning channels, using bolts to swap from Lightning to liquid and if you're stacking smaller amounts from a lightning exchange or something like that, super convenient to stack it to liquid until you have a certain threshold and then pegging out to the main chain when you're ready for your cold storage there.

Speaker 1: 20:19

Yeah, yeah, exactly. And the beauty of liquid is that it functions, from a user perspective, exactly the same way as Bitcoin, so it's very familiar. Like you, know exactly how it works. It's not like Lightning, which is like quite a foreign. I mean, I've been using Lightning for a few years and it still confuses me. But like Liquid, its full intent and purpose is like it's a fork of Bitcoin, right? So it works in the same way.

Speaker 2: 20:41

Right, it uses the same UTXO model, you know, as far as coins go, the same BIP32 mnemonics for your wallets, and it's also convenient with something like a Blockstream Jade where you can have your liquid keys offline, you know, whereas with Lightning you do need much harder keys to keep those sets updated and, as you say, lightning is a little bit tricky to um. Well, it's some different concepts to learn in terms of the channels and inbound liquidity and, uh, it's just a slightly different system, although it has better trust trade-offs than liquid and you know nobody's disputing that um, the, the, the bitcoin locked in your lightning channels. Um, it's easier to uh, to get back to main chain bitcoin, you know there's, uh, whether it's a force close or a collaborative close, that that's just a two-party channel. Um, whereas with bitcoin, you, you are relying on one of the federation members to authorize your peg out back to the main chain. So there is more of a trust assumption in Liquid and nobody's disputing that to completely custodial lightning.

Speaker 2: 22:03

Liquid falls much nearer to the trustless side because it's a far more decentralized federation. It's not one custodian, they're not in one jurisdiction and personally I feel like the history of Liquid speaks for itself. It's been going for six years already with barely an issue. The only time there was an issue was during the dynafed hard fork and there was just a tricky bug, whereas you know nobody's been censored on liquid and trying to get out and uh that you know, I personally have never had any issues pegging out from from liquid back to the main chain yeah, you know, in terms of, in terms of like, if you're using custodial lightning versus, uh, self custodial liquid.

Speaker 1: 22:47

Like self custodial liquid is a far more sovereign tool.

Speaker 1: 22:49

Like custodial lightning, you're trusting, you know your custodian completely, you get the absolutely yeah, you get a great use experience until you don't um, so, yeah, it's a nice, it's just a nice tool to have in your toolbox, and especially so, obviously, I'm a distributor for Blockstream in South Africa and I pushed the Jade because it's just so cost effective and the tools on it make it really easy to use.

Speaker 1: 23:13

And being able to store self-custodial liquid on a hardware device is a great intermediary, like you say, for stacking Bitcoin. But you can now stack in small amounts and you don't have to trust like a custodial lighting provider, um, lighting wallets. You can just stack in liquid and then and then peg out back to main chain when you have enough. So, especially in the south african context, um, where on-chain bitcoin fees can really really get you, um, if you can't afford to stack like 10 000 rand and up to with a Bitcoin per transaction, it's like a nice. It's nice intermediary layer to use. Say, the customer, the, the, the confidential transaction part of it gets really interesting as well when you, in lieu of coin, joins. If you want to like, mask your on-chain activity, you can do all kinds of cool things combining liquid and lightning together as well.

Speaker 2: 24:03

Absolutely. It definitely helps for, you know, not tying your transaction history so strongly between addresses. You can still follow addresses on the liquid chain, but the amounts and asset types are blinded and so it's much more difficult for chain analysis type stuff to keep track of. Although you know that's not the real reason, we don't recommend using Liquid for that, because chain analysis companies will still have ways of de-anonymizing your peg ins and peg outs. You know, if you're not really good with randomizing the amount sizes that you're pegging out or the timing, it's not really what the tool was created for. I would say that the liquid privacy guarantees are more for your everyday financial privacy. Most people would expect that your amounts are not known and that nobody knows how much was in the address I sent you the transaction from and stuff like that. But I wouldn't rely on it for CoinJoin type stuff. Those kind of privacy guarantees, yeah, I think we're still going to need to figure that out and sort of bringing it back to the point about custodial versus federated custody, you know, versus trustlessness.

Speaker 2: 25:29

I'm quite a big fan of Fediment and the e-cash scaling proposals that are happening as well. You know e-cash mints. But what I do find very interesting is that you know people are now going to trust these guardians, these community federations, with their Bitcoin and they may not have the same kind of track record that Liquid has. You know you may now be trusting a two of three multisig with you know, your two or three uncles, and do they have backup keys? Do they have? Is there a time lock? Is there some way to rotate in and out these keys? Are they even using hardware security modules? You know, I feel like the Liquid Federation trust model will come into a sort of sharper focus as we see a lot of new eCash mints spring up, which I'm a huge fan of and I'm really looking forward to trying them out.

Speaker 2: 26:26

I'm a big fan of 30 mints, but I also know there's going to be mints that rug and disappear or lose their keys and now you can't withdraw from that mint anymore, whereas Liquid has a federation of professional bitcoin companies that you know rely on it running very smoothly for their day-to-day business.

Speaker 2: 26:52

Um it, it has thought through a lot of these things in terms of you know if, if the functionary is hacked, the hardware security module is a physically separate device that you know, if you don't have physical access to, you can't even get to it from the server. Um so, uh, and besides that you know at least now you need um 11 out of 15 to sign your transaction to get out of there and if, if, something goes horribly wrong with the chain and we can't withdraw for four weeks, then there's a set of backup keys that are unlocked and everyone can be made whole with their Bitcoin that was locked into the Liquid Federation, where these community federations are still going to have to learn all of these lessons that Liquid's been running reliably for six years without fail yeah, this is a very valid point.

Speaker 1: 27:44

Um, I'm a big fan of what I see happening with fediment and fedi and uh, with now with with cashier and charming e-cash. Like it's great to see these, like the plurality of of e-cash solutions popping up, but it just in terms of what liquid is working on. Have you guys got any plans to work with with federations using liquid as the, as the pagan asset, instead of using lightning, for example? Because that would be a pretty interesting one, right?

Speaker 2: 28:10

Yeah, absolutely. There's a couple of cool things in the pipeline, one of which is we are working to enable lightning over liquid as well. So, because liquid and elements use the same system as Bitcoin, it's also possible to have lightning channels on liquid. And so now if you have channels on Liquid and you have channels on Bitcoin with a specific type of bridge node, you could have one end of your Bitcoin channels arriving there and opening up to the other side of your Liquid lightning channels, and so soon we'll have interoperable lightning across Liquid and Bitcoin.

Speaker 2: 28:49

Besides that, I also feel like Liquid would be the perfect federation to run an e-cashment, because they already have this excellent reputation and model for running a federation, and if you're going to trust a federation with your e-cash, it may as well be liquid, because they have these reliability guarantees. You know um, and then, as you said, the. It would be very cool to be able to um deposit into that e-cash mint from bitcoin, from liquid, from lightning, all to the same, and get your eCash notes out of there and, you know, potentially even paying from your eCash directly to any of those or Tether. You know Stablecoin, something like that. So there's a lot of cool ideas happening there.

Speaker 2: 29:40

We're also working on reducing fees even more so, even though fee rates are low. On reducing fees even more so, even though fee rates are low, the difference between explicit and confidential transactions on Liquid is still an order of magnitude about. So, on a similar transaction, one which is confidential and one without, you're looking at the difference between 30 SATs and 300 SATs, which is still incredibly low. But we've just merged a PR that I worked on, where confidential transactions will get even more of a discount, and so they will be in the same magnitude. You'll be looking at maybe a few more sats than an explicit transaction instead of an order of magnitude difference.

Speaker 1: 30:25

That's amazing.

Speaker 2: 30:26

That's great. A couple of cool things on the technical front.

Speaker 1: 30:29

Yeah, because, in my personal opinion, if a confidential transaction is available to me, I'm going to use it. That's just me, and if it becomes cheaper, great, yes, that's awesome. So the one concern I have with with bitcoin and with, you know, this space in general, is just that, like we, at the level where nation states are going to start attacking bitcoin, um, those you know there's gonna be a bifurcation between those who adopt bitcoin, um, you know, the first they fight you and then you win. We have to. They fight you stage and so, like, the threat model is now becoming nation states. So the solution to that obviously, is decentralization, um, across various jurisdictions. So does. How does, how does block stream and the liquid federation defend against like hostile jurisdictions? Like, are the federated members geographically distributed enough, you know, like, for example, are there some running, or some of them running, in Russia, for example? Like, or some of them like? How do you defend against this?

Speaker 2: 31:29

Yeah, it's a great question. I could not say whether some of them run in OFAC-sanctioned countries. I certainly don't think so, just because you know US companies can't do business with them and it would be a disaster if they did. That being said, you know the Liquid Federation is globally distributed and so they fall under many, many different jurisdictions and, specifically for the 15 functionary operators of the chain, they you know they are not all beholden to the US and you know, that being said, even if they were, blockstream can't unilaterally change anything about the Liquid network.

Speaker 2: 32:17

The 60 federation members have to vote on any big changes. The operators themselves have to physically enable any updates to their functionary, and so I would say it's as trust minimized as a global federation could be, while still being the federated custody model, which is not perfect, trustless Bitcoin, but if there were a way to do a perfectly trustless sidechain, that would already be done. Be incorporated in Bitcoin. Those improvements, and yeah, so I think the point is that, as you say, the fight you stage is getting harder and, given the choice between a globally distributed federation or one US company that's custodying funds or a money services business is transmitting those funds on users' behalves or custodial lightning, those targets are going to be much lower hanging fruit than than something like the liquid federation.

Speaker 1: 33:38

Yeah, absolutely, and like, I appreciate your candor on this Like it's, it's not. It's obviously not easy trying to create like a side chain that is sufficiently distributed that you can defend against all these things. But but I think, in a lot of bitcoiners well, not a lot of us, um, but many of us we saw what happened in covid and just how like there can be uniformity, um of action across jurisdictions or like this. You know, all governments moved in lockstep during covid, um, which is terrifying for a lot of us to see. So like it could be quite you could see that kind of crackdown happening um against bitcoin, for example, and then obviously bitcoin would be way harder, so they'd go for the fruits first.

Speaker 1: 34:18

So, like you know, custodial lightning, while it's first obviously, um, but they just took down samurai. You know the department of justice took down samurai. Guys were in portugal, servers were in iceland. You know there was like there was distribution of of resources and assets and samurai got taken down. Um, so I mean that's a, that's a big red flag that people are obviously concerned about. Um, yeah, I mean you, you've given your answer on that and obviously people can understand the trade-offs. You're working with different layers here and there are trade-offs, and it's very good to be aware of those.

Speaker 2: 34:55

Yeah, absolutely. Look, I think the Samurai news was very shocking to a lot of folks. And, look, they may have been slightly more distributed around the world, but their coordinating CoinJoin server was centralized. There was one location. You know. One versus 15 is quite a trade-off, you know. You know. That being said, with enough government resources and any type of cust in terms of locking these things down and yeah, there's not too much you can do about that I personally would rely on Liquid before a lot of other options. But, at the end of the day, completely trustless bitcoin is the way it is, because that's the zero to one innovation and, as you say, when it comes to scaling bitcoin, there are trade-offs that have to be made. You, uh, in any kind of um, uh, trade-off that you didn't have to or that could be incorporated into Bitcoin, would be incorporated there.

Speaker 1: 36:29

Yeah, no, I agree, and I mean that's just something people need to be aware of. But in terms of the federation growing, is the number of federation members set in stone or can the liquid federation grow and can it be further decentralized?

Speaker 2: 36:43

So the federation of members is actually growing. All the time it's um. There there was new members applying and getting added. As far as the the functionaries go, and that 11 or 15 setup, I think is what you're referring to that can be increased as well. The reason it's been at 15 historically it was really just because of limits in Bitcoin scripting, limits in the size of transactions, and you're going to pay a lot more when that number goes up for the on-chain transactions. That being said, we're also working on Taproot-related stuff to improve that setup and the goal is always to make that functionary setup more robust and more decentralized. So, as you say, hopefully eventually it's, you know, a 22 out of 30 functionary sets and with increasing numbers there, and, as we see, efficiency gains on the base layer, like soft forks, like taproot, where you can do more interesting cryptographic things to reduce size and you know, to have script parts that are only visible once you spend down them then, yeah, we'll be able to decentralize the functioning network further.

Speaker 1: 38:08

Yeah, so that's a great answer that illustrates a lot there. What I'm getting at actually is both sides of it. So in terms of federation members, it's like those are the node runners, effectively, right. Those are the guys who enforce the rules of the protocol, and then having your signers where the key holders. So if both of those are increasing in size, that's exponentially decentralizing the network, right, because you need to have those running nodes agree on consensus changes so that you don't have a hard fork of liquid, right.

Speaker 2: 38:38

Yeah, so interestingly it's more than just the federation members that run liquid nodes. Anyone can run a liquid node. You can spin one up and you can do your own private pegins on your liquid node yourself. Your node also validates all of those pegins against a Bitcoin node and, as you say, your node also validates the consensus rules of the liquid network. So anyone can actually join the network of nodes and you know it's open source software that can be vetted and audited and anyone can run it.

Speaker 2: 39:16

The 60 plus federation members are actually the ones who control the liquid network, so to speak. So they have a governance board, a technology board and an oversight board. Each year there's voting amongst those members about which members are on which board, and those boards also control which new members can join the Liquid Federation. So, as opposed to the Liquid Network, we're the Liquid Federation, and those are all the companies that have a say in the future of the Liquid Network. And then, of those federation members, they choose the set of functionary operators who may or may not be publicly claiming to run a functionary node. Most of the functionary operators choose to remain private and the Liquid Federation respects that. Recently we had a new federation member come on board, which is Nim, and they put out a blog post about how they are now one of the functionary operators from I don't want to get it wrong. I believe it's Switzerland, but I might be wrong and they've got a bunch of very cool tech that they're using and getting into liquid with as well sorry, I lost you there.

Speaker 1: 40:41

For a second I'll south african internet gremlins, but so, if I understand it, no no, it's all good. So you're saying that a new federation members Lost you there for a second. Oh, south African internet gremlins. Sorry about that, but so as if I understand it no, no, it's all good. So you were saying that a new federation members come aboard and they're a functionary as well as they're holding a set of keys in the multiseg right yeah.

Speaker 1: 40:57

Yeah, that's right. Do these key holders rotate out? So are the 11 and 15 quorum that's required. Do these guys rotate out on an annual basis, or how does it work?

Speaker 2: 41:10

It's not set in stone, there's no schedule to it, but, you know, over years things do change. Some companies are not quite as successful as they were, some move countries, some don't want to run a function area anymore and some have lost keys, and you know. But there't want to run a functionary anymore and some have lost keys, but there's backups to those keys which have also been affected, and so once in a while, we do have a change in those functionary operators as necessary. The quorum always remains 11 out of 15, or historically, that's what it's been and what it's been at.

Speaker 2: 41:46

For now and when it's necessary, we have dynamic federations, as it's called, and what then happens is that, let's say, one of the functioning operators goes offline completely and can no longer be contacted, so now you only have 14 functionaries online. Those 14 block signers can propose a new federation, and they do that by, in the header of their blocks, proposing the new federated peg script, which includes the identifiers of the new sets of 15 nodes and over a two-week period, which is the, the epoch, just like bitcoin, um, those if, if, um, a certain percentage of those nodes over the, the majority of the epoch. All agree on what the new federation would. Be so if the current sitting federation agrees in the block headers of that epoch on who the new federation should be, then when that epoch comes to an end, that proposed federation becomes the current enforcing federation.

Speaker 1: 43:02

Okay, great, all right. So shifting gears out of the nuts and bolts and nitty grgritty of how liquid works, um, just about the about the future of liquid atomic swaps with what bolts is doing, uh? Or for channel rebalancing and now for like, um, like trustless pegas. I think it's the latest thing they're they're doing back to main chain, like what's the? What does the future hold for Liquid?

Speaker 2: 43:27

So a lot more of that kind of cool stuff is in the pipeline. Bull Bitcoin is a Canadian exchange. They're also creating a new Liquid wallet now also doing cool Lightning swap stuff. Boltz has been very successful with their lightning swaps. There's a tool called PeerSwap which you can use to rebalance your lightning channels from a liquid node, which means that, especially in times of the high fee environment, you can be rebalancing and changing your lightning channels at much lower fee rates to anyone doing it on Bitcoin, which is cool.

Speaker 2: 44:05

In general, the sort of goal for Liquid is to, as you say, further decentralize the network and the federation, as well as to onboard many new asset issuers. So what we haven't really discussed yet is that on the Liquid sidechain, any issuer can create new assets that are not just liquid Bitcoin. So, as you mentioned earlier, usd Tether USDT is on liquid already, as well as a number of other stable coins. There's a Canadian and European stable coin already, and just recently there's a Mexican stable coin that's been launched on um, on liquid, and uh, anybody can launch and issue that more stable.

Speaker 1: 44:54

Is that more stable?

Speaker 2: 45:00

at the moment, bitcoin's a stable coin. It just stays at 69 000, so yeah, yeah, exactly, yeah.

Speaker 1: 45:08

So basically you can go and issue an asset on on liquid, so exactly, and, and you've got a network with a track record, or you've got a chain with a track record of like, reliable, reliability and stable governance etc. With lower fees, um, and so you can issue. Let's say, we're going to do a rand stable coin, right, you can issue a rand stable coin on liquid um and have it run on the network and then it becomes fairly cheap to use um and uh, you get all the all the, you know the guarantees that come with liquid um. Have you guys seen an uptick in that recently with the implosion of other shitcoins where people are finally realizing like your network matters.

Speaker 2: 45:54

I'm a big fan of what Aqua is doing because, you know, tether has been on Liquid for years and years, but it's obviously on a number of other chains as well, you know Tron being the most used one in Latin America and the global south because of historically cheap fees, which I understand are not that cheap anymore, and so I love what Aquiz is doing.

Speaker 2: 46:16

Yeah, aquiz is now. You know, because your Lightning invoices immediately get swapped into Liquid Bitcoin. Then it's very easy to convert that to Tether on Liquid, and they also have a bridge between paying your Tether to the other chains, should you want to or need to do that. Back to issuances. Yeah, I mean, there's always people issuing new assets on Liquid and what it really comes down to is who is the issuer and can you trust them, and do they have the funds and the processes in place to back up their issuance? So, with someone like Tether, you know they have a billion dollars worth of Bitcoin and US bonds and treasuries backing their issuance, and so somebody could issue RANDs on the Liquid network, but I don't know who would be a trustworthy issuer to do that. But, as I said, mexas is a new Mexican stable coin on Liquid and besides that there's also.

Speaker 2: 47:26

So, besides stablecoins, there's also a huge market for securities and tokenized assets being issued on liquid, and there was a recent post we put out from Blockstream, where a Mexican company called Mifil is.

Speaker 2: 47:42

They're up to a billion dollars worth of promissory notes in Mexico, and these promissory notes are bearer assets which already have a huge market there and so, for example, it's like you give me a loan and now I owe you, so you give me this, I give you the promissory note.

Speaker 2: 48:29

I can always redeem it or sell it on or send it on, as it may be. So we're seeing a lot of these securities starting to be is issued on Liquid. And, yeah, liquid also has an authorization layer called AMP, and so if companies have securities that they want to issue but they require authorization to say who can and can't buy and sell those securities, they can use the liquid AMP layer as a way of authorizing those products. So, for example, there was also the Blockstream ASIC note the basic note and the Blockstream mining note, which is it's like a bond on the Bitcoin mining issuance over a couple of years. So this is a security that's issued that entitles you to some of that yield if you buy those shares and those are AMP restricted assets on Liquid because of the jurisdictions they're in requiring securities authorization to do those things right.

Speaker 1: 49:48

So so this is critical for people to understand that liquid is not just a a side chain to bitcoin. Liquid is an asset issuance layer that uses bitcoin as the underlying mechanism for for storing value and for and for moving ownership around, cryptographically secure on the on the chain, secure right yeah, exactly that.

Speaker 2: 50:10

Um liquid is positioned itself as the financialization layer for bitcoin. You know all of these tradfi concepts that you know we we need to have these on bitcoin to to really get to a state of hyper bitcoinization. It's going to require a lot of these um concepts to be on Bitcoin and Liquid is already providing a way to do that on the side chain.

Speaker 1: 50:42

And tell me it must be difficult in the Blockstream offices being so early on this stuff. Like you guys know, you've got a good product, you know it works, you know there's a demand coming down the pike for it, but it's still early and looking at that liquid block explorer and seeing how full the blocks are or not full they are. You've built a great product here, pretty empty, but build it and they will come right. It's a chicken and egg thing. It's got to be done first before it can happen.

Speaker 2: 51:13

I think that's a great point. It is largely a chicken and egg problem, because when the fees are low on Bitcoin, it's easy to justify a $5 fee. You know, for some of us, luckier individuals, you're like okay, well, I need to move a significant amount of Bitcoin and $5 is nothing for that. But you know, when it starts to go up to $10, $20, $50, and this was what my presentation was about at Adopting Bitcoin in January is that for people in the global South, you know, the median income is $5,000 per year. So, if you, when the fee rates get really high and it's $10 for a transaction that sometimes is multiple days of someone's wage, and I think it's very easy for privileged Westerners who already earn in dollars and don't have such high rates of inflation, to be able to justify fees like that, whereas there's a reason that in the global South, you know, people are not using Bitcoin as as much as we would like it to be because they they need to send anything that will hold value more than their currency at a fee that's much, much cheaper than than you can even get like even $1 for them on Bitcoin. I mean, it's 20 Rand, like I don't even know what you can get, get Like even $1 for them on Bitcoin, I mean, it's 20 Rand, like I don't even know what you can get for 20 Rand anymore, but for a lot of people that's their taxis for the entire day or two days. So I think it's very easy to sit from a place of privilege and to say I'll never use something like Liquid because it's partly a federated custodial model. Whereas for someone who's just getting into it like they've just been paid their first SATs on Lightning, let's say, should they have to pay the incoming fee to set up their first channel on lightning? Like? Like, let's say, let's say it's an extremely um, poor person who's being paid saying that they're willing to accept lightning, but now they can't afford the fees to create an inbound channel. What? What's the solution there? Well, on something like Aqua, they can accept that Lightning payment, pay a tiny fee to get it stored on Liquid, sit there comfortably while they stack and collect. If they need to pay a Lightning fee, a very easy swap back on Aqua to pay Lightning again. But if they can stay and stack, then they can get to a place where it makes sense to go to main chain to store their wealth, their newfound wealth. Or it makes sense to switch to non-custodial Lightning on something like Phoenix and pay that opening channel fee, because you've now given them the time, you have the tool to wait until fee rates are a bit lower, but eventually we know that fee rates are going to be consistently high.

Speaker 2: 54:16

The Bitcoin security model the reason it's called the block subsidy is because it's subsidizing the network until the fees can cover all of the security for the miners or all of the income for the miners. That continues to happen. I mean, year over year we see massive increases in mining power and that's an incredibly ruthless business to be in. I mean, every four years your income is just halved. It's absolutely brutal. But because of the decentralization of the network and the fiat inflation that's going on across the world and every other currency, its first principle is to know that Bitcoin will continue to rise in purchasing power and value and eventually it will be the global settlement layer, whereas now you have FedWire or whatever central banks use to settle with each other in US dollars. They will use the base chain and pay $50 or $100 fees and it's nothing for them because they're settling millions and billions of dollars in value, whereas for my coffee, I'll just use Aqua and spend a lightning invoice and if it's my spending money, I'm fine with it being on Liquid because they have a great track record there's been nothing that has gone wrong with it ever and as people have the need to use a lower fee environment, they will migrate to Liquid and all of the new tools coming out are going to help with that, and I think even eCash is going to help in a lot of ways. It's a really exciting time.

Speaker 2: 56:03

I see that ARK is another type of Layer 2 solution that's coming out now and they've already launched their wallet and they're using Liquid. Because Liquid already has a covenant opcode. It's already got some introspection opcodes. Stuff which is going to require soft forks on Bitcoin is already live on Liquid. So that's another place that Liquid is really great is for the development of these new things, is for the development of these new things where application developers can already prove concepts on Liquid and build on Liquid stuff.

Speaker 2: 56:39

That will take time. It's still going to take years to get the great script restoration or any covenant opcodes on Bitcoin. I think everyone has so much PTSD from the block size war that forks on Bitcoin are a very, very tenuous subject and there's a lot of fighting back and forth, but I believe that script will be restored to its greatness and that we will get covenants on Bitcoin. We need better efficiency gains on the base layer and we need better locking ability on the base there, and we need government covenant type ability on the base layer to enable things like arc and whatever all the brilliant developers are going to come up with. We just need to give them the tools to do that. So, yeah, that's my rant about changes to the base layer. They're going to have to happen.

Speaker 1: 57:40

But, we're going to have to find rough consensus for them, obviously first, and it's going to be uncomfortable, and that's what it's got to be like. It's like you're right, absolutely right, if people have got PTSD as they should have because people gotta hijack bitcoin, so like well, that was a narrow miss there, um, but uh, we have to, we have to have changes on the base chain, and that's just got to be done in a manner that doesn't like destroy bitcoin, right. So it has to be this like slow, methodical approach. That's the way it is, and we've got the other layers now to to innovate on and like shit's gonna go south on those, on those other layers, like it's gonna happen, things are gonna not go as according to plan, and that's why you do this stuff on the on, on further layers, like third, second and third layers. So it is what it is.

Speaker 1: 58:26

But just to circle back to something you said, like I haven't given enough of a shout out to aqua. What aqua has done with their wallets, I think, is a very, very cool approach. Um, especially for like storing and spending like medium amounts of of bitcoin. Like if you, if you're paying for, like you know, 100 to 500, around a thousand rounds worth of stuff, you know like spending in liquid is great. And then you've got the ability to just store it in liquid directly and then do an atomic swap to lightning if you need to pay lightning inwards great, and you can swap out usdt if you want. It's got bridges to other chains super cool what they've done. I really like how rapidly they're iterating on the product.

Speaker 1: 59:05

Um managed to have a chat with ben at adopting bitcoin about it. Um, yeah, I think it's super cool what they're doing. Um, and like they're listening to the community. You know, you go into that liquid telegram group, you go into that aqua telegram group and there's just people throwing their their opinions and the product managers are listening. You know they. They've implemented dark mode. They've got the got the bible. Finally, they've got the biometrics in there, um, and. But what I really like is the stuff that's happening on the technical level, like they've oh, we got a phone coming in sorry about that, no worries, they.

Speaker 1: 59:38

They've dropped the cost of atomic swaps dramatically, um, so it's cheaper now to do the swaps, which is super cool, like the. The wallet's just more functional, and for me it's like a it's. It's a great wallet. I use it all the time. Um, and the other thing that you you didn't mention you referred to phoenix, but but what I really love that blockstreams brought is green light, like I can now secure my on-chain bitcoin, my liquid bitcoin and my lightning sats through my private key store, my jade. I can do that all through jade, so you can manage like three layers or two layers, depends. I look it on one hardware device, which is super cool and it's self-custodial lightning, right, and it's abstracted away the difficulties that we've faced with, just general self-custodial lightning. So, yeah, I mean I don't know if you're working on that project or free to speak about Greenlight yet, but from what I've seen so far, it's pretty cool.

Speaker 2: 1:00:32

I'm not personally involved in Greenlight, but I did see they recently announced they've hit 100,000 nodes, so that's really incredible and you know part of that is the cool thing about it is how Greenlight is powering all of these other companies and, you know, allowing all these other Bitcoin wallets to become Lightning-enabled without actually having to do such hard work, because running Lightning nodes is hard work, balancing channel liquidity is hard work, and so Greenlight has really made that process great.

Speaker 2: 1:01:09

There was a recent integration with Relay, which is a Swiss Bitcoin wallet, and thanks to Greenlight, they've been able to integrate Lightning very easily into their wallets. And, yeah, it's just a massive, massive win for any Bitcoin companies that want to become Lightning-enabled to jump on the Greenlight service provider and the keys are still self-custodial, as you say, you can use it from Jade, from your green, and yeah, I totally agree with the Aqua stuff. By the way, they're killing it Very love to see it and they're just doing such a great job. Listening to the community iterating, improving Dark mode is a huge win. Developers celebrate around the world and yeah, they you know and I love their focus on Latin America and you know, the Global South and lower income regions, because with that kind of adoption we're really going to take off on Bitcoin circular economies. And yeah, I think the biggest win on Aqua for me personally is not having to manage lightning liquidity, not having to manage channels. It's really good for that.

Speaker 1: 1:02:30

Who wants to do that? No normal user wants to do that. It's cock and user experience is what it's really good for that. Who wants to do that? No, no normal user wants to do that. It's cock and like. User experience is what it's about. Unfortunately, like I get it, you know, people want to be self-custodial.

Speaker 1: 1:02:40

Um, phoenix made a vast improvement in that space. Like phoenix really pushed the envelope on that. It's cool. But uh, yeah, green light feels like a even simpler. It's still in experimental features in green, um, you know, but the beauty is it's backed up with your, with your seed, from your standard. Yeah, your jade like private key, so like, if things go south, you can recover your sets, like you know. That's good to know.

Speaker 1: 1:03:03

And and it's interesting also, like with lightning, especially like there's been various different approaches to how how lightning is implemented. Um, with different fee environments. As we all learned from moon wallets. Moon was like the poster child for like it's like combining by a bitcoin and on-chain and off-chain balances worked really well, and so we had that massive fee spike, like two years ago. And then moon was like unusable. Um, and it sucks for them because they built like a nice footprint, a great user experience, but then it just became really expensive. So we live and learn. I guess People are implementing different ways of using Lightning and this combined approach of being able to swap between Liquid and Lightning with atomic swaps what Boltz is doing it's phenomenal, it's great, it's really really very useful. I use it all the time.

Speaker 2: 1:03:53

Yeah, as you say, the user experience is so important and and that's where you have this friction and this trade-off between convenience and security, right and the the user experience who wants it to be convenience as possible. But there's so many different concepts to know and learn about, just in Bitcoin, when you start to add lightning and liquid and all of these various things. Again, we're still so early that it's very difficult to onboard people. Or if I were trying to onboard someone, I'd want to send them lightning stats just to show them how quick it is. Trying to onboard someone, I'd want to send them lightning stats just to show them how quick it is. But then if you have to start explaining things and describe how it works and tell them about I don't know seed phrases and just all of the technical minutiae that you eventually need to know, but I think this is part of the cost of self-custody, right. It's like you have to learn how to drive a car. You know it's not a right for anyone. You have to learn. So the cost of having decentralized, true bearer money is learning these things, and I think eventually these companies are going to nail the UX and the security at the same time. I think Aqua is doing a phenomenal job. I think eventually these companies are going to nail the UX and the security At the same time. I think Aqua is doing a phenomenal job. I think Boltz is doing a phenomenal job and you know, the green wallet is getting better all the time. Like I love it. It's great.

Speaker 2: 1:05:26

But, yeah, the user experience, you know, is still being worked on and I think for a lot of people, holding your own keys is a scary concept actually. Like you really have to trust yourself and take responsibility if you're going to hold your own keys. But the trade-off is nobody can spend your money. Nobody can confiscate your money. Only you can spend it. And if you loseate your money, Only you can spend it. And if you lose those keys, I hope you have a backup. Like you, you need to get a blockchain metal and you need to bury it in your garden or something, so you need to memorize 12 words.

Speaker 1: 1:06:06

I am a huge advocate of burying shit in your garden, like make pirates Right Again, like it is the ultimate fallback. Also like I love block stream, but guys get my seed backup kits way cheaper than block stream you should get it on africa backups. Gotta import those things from america. You want to know what the customs duties on 304?

Speaker 2: 1:06:29

oh, no, oh no, oh no. Diy. You know what you got a DIY. You just go to the hardware store. You buy some washers, you get a stamp kit. You stamp your own washers. That's my kit, yeah there you go.

Speaker 1: 1:06:41

That's my kit.

Speaker 2: 1:06:41

I'm talking about.

Speaker 1: 1:06:43

There you go.

Speaker 2: 1:06:44

I think I got some relatively cheap metal backup from Amazon. It was only like 15 or something and I just did it the hard way with the, the titanium pen they gave me, just scraped it in there. Um, and that's why you choose 12 words instead of 24.

Speaker 1: 1:07:03

Yeah, literally when I started making steel backups, I moved away from 24 words. I was like but so there's a couple of things there.

Speaker 2: 1:07:12

There's a couple of reasons. 12 words are better, I think you know. Describing it as a medal is one, or stamping it as a medal that's, you know, half your work there. It's at least as secure as Bitcoin private keys themselves. So, you know, on the SecP curve, it's 128-bit security, which is a 256-bit key, which is what your 12 words uh boil down to. Yes, 24 words does have a little bit of added security, but you already, with 12 words, have enough that it's the same as a bitcoin private key. And, um, yeah, truly, if you need to move countries, if you're an authoritarian regime, you can memorize 12 words. Memorizing 24 words is much harder task yeah, yeah, and and and.

Speaker 1: 1:07:58

So this is why another reason why I'm a big proponent of the jade right, so you can secure your sats on lightning, you can secure your sats on liquid and you can see your sats on bitcoin with the same private key, the same 12 words, um, and like. You can memorize that. You can go and build yourself your new open source jade if you want to, and reconstitute all your funds on the other side, like it's. It's that easy and no one can stop you from doing it and what I. So I'm a huge fan of seed signer. Massive seeds on a fan. I love it. The ux.

Speaker 1: 1:08:26

The ux on that thing is unmatched, really it blows all it blows all of the other expensive hardware wallets out the water. The issue, the only issue with seed sign is like it's just bitcoin only, right, um, yeah. And the other issue with seed sign is use the pi zero, and the pi zero is quite an expensive board actually. So the board that you use in jade, if you buy, if you're building the open source one, is way cheaper. So you can literally build yourself an open source jade for maybe like 20 max, yeah, probably less, yeah, um, so what's that? Around like 400 rands. So for like 400 rand, probably less, probably closer to 300 you can build yourself your own open source um jade, where's the seed signer you're going to look at about 2000 Rand, yeah, so yeah, yeah, as you say, for lower income markets, building your own Jade is such a huge win.

Speaker 2: 1:09:20

You know, it's a really great piece of software, a great piece of DIY. And yeah, there's nothing more cypherpunk than making your own signing device. That's super cool. As soon as I saw a seed signer, I had to get it. I bought the components. I had my friend 3D print me the little case Just as a backup device. A seed signer is really, really cool. Also, there we go, the seed QR standard. Now that all the other signers are implementing seed QR, it's really cool to have backup options. Ricky, are you there? I'm going to reload this page quick. Hey, welcome back. Sorry, I thought that was me and then I realized it was you.

Speaker 1: 1:10:08

If there ever was a case of big hardware wallet not wanting us to disseminate our open source cats, uh, that was ledger. That was ledger shutting us down.

Speaker 2: 1:10:18

Cut my access right there, uh, cold card, heard you mention a raspberry pi and they were like this cannot, this cannot go on we, we need secure elements.

Speaker 1: 1:10:33

We cannot abide by this.

Speaker 2: 1:10:37

Yeah, as we were saying, having a, having a backup signer uh, especially a diy one that you can build from um easily available parts is such a huge win man it's.

Speaker 1: 1:10:50

It's such a huge, huge win because, like I use my seed signer for clients all the time just to spin up new wallets for them, and because the seed signer doesn't store anything it's stateless you can spin up a wallet, generate private keys, draw the qr code for them and then give it to them in a you know tampa evident bag. There's your cqr with your 12 words backed up and then unplug that thing. It forgets everything. I don't have their private keys anymore. So, just as a tool to help clients spin up completely cold storage wallets, it's great. So shout out to the SeedSigner guys. I absolutely love their product and it's definitely something people should use. But they started a revolution, right? Because that QR standard, jade implemented it and now the wallets are implementing it too and now should use. But they started like a revolution, right? Because, like that qr standard and jade implemented it and other wallets were implementing it too, and now they're interoperable and this is why, like seed, sign and jade are interoperable with each other.

Speaker 2: 1:11:40

It's great it's so cool. I think it's very, very promising to have one standard that that all the signers can use and that if your signer bugs out or just completely stops working, you can still just use a backup to scan it in, sign your transaction if you need to do that. Whatever it may be, it's very cool. And now that we're getting more into the era of multi-sig custody, having something like a seed signer and a jade and a cold card, or having a bunch of different devices, just reduces your attack surface somewhat, or it just yeah, if one thing is compromised, it won't ruin your two or three setup. You could still use your other two devices to sign to a new setup, as ledger users found out recently.

Speaker 1: 1:12:38

You know, like next minute you got a backdoor into your hardware. You plug in your ledger and it says this thing won't work. You need to update your firmware. You have to update your firmware Like what are you going to do If you want to sign a transaction? Or you need to update your firmware? What you have to update your firmware, like what are you going to do if you want to, if you want to sign a transaction, or you need to import those, those seeds onto a different device. That's not a ledger. You're buying your device. This is why seed signer wins. Um, but yeah, I mean, you're absolutely correct. Like, having multiple devices is is essential, so you're not relying on one manufacturer.

Speaker 2: 1:13:10

Absolutely. Yeah, that was a huge disaster for them to initially say there's no way to ever get your keys off the device to be like oh no, actually we now have a Shamira backup mechanism that you can use to get your keys Like what? Yeah?

Speaker 1: 1:13:27

what I was just chatting to the Trezor guys at the at the Cape Town conference in January. I was like so how, what happened to your sales after Ledger announced that they're like okay next, yeah?

Speaker 2: 1:13:40

thank you, ledger, as well.

Speaker 1: 1:13:43

Oh yeah, yeah, absolutely through the roof, and and so what I spend my time doing here with with wallet hardware, wallet distribution is just replacing people's ledgers with jades and c-signers.

Speaker 2: 1:13:55

Yeah, people are aware.

Speaker 1: 1:13:56

That's cool. People are aware they're like no, these ledgers are like they've shot themselves in the, not in the foot. They shot themselves in the head. It's crazy to see what can happen. It's such a lead and they just wonder that.

Speaker 2: 1:14:08

I'll drop the bag. But yeah, let's show Jade some more, because it's just such a cool device and the price point is so perfect. I mean for people wanting to get a hardware signing device. Jade is such a great place to start as well, as you know, with the blind Oracle pin setup that it's encrypted on device. So even if someone got the device without your PIN, they can never get in there. And then you also get the duress PIN. So if you're under duress and you give them the wrong PIN and they type that in, then it wipes the device completely. So there's just so many wins on the Jade, and rumor has it the V2 is coming out later this year.

Speaker 1: 1:14:51

Yeah, man, that's exciting, and also I retail them for 1,800 Rand in South Africa. It is the single cheapest hardware device you can get and with great features on it. The only gripe I have with Jade and I've got to take this up with Drew, or actually the devs on that side is why the camera to pick up QR codes just is nowhere near as good as the seed signer. And is that a software issue or is that a hardware issue?

Speaker 2: 1:15:15

Yeah, I think it's probably a hardware issue. You know, those devices are a bit older, which is why I'm mentioning the V2 that's coming out later this year. It's got an improved screen, it's got an improved camera, it's got improved buttons, it's just it's going to be a much nicer device. So it's something to look forward to. But, man, that's wild to think that it's 1800 rand, because it's, you know, 60 dollars doesn't sound like a lot. But yeah, but one eight sounds like a lot, so that's right, yeah, it's, it's, it's.

Speaker 1: 1:15:45

You know, it's custom duties, shipping and cash for sure, yeah for sure, and yeah, I actually didn't even consider that.

Speaker 2: 1:15:56

And then you think about something like a cold card at $150, before all the customs and stuff. I mean, they're gorgeous devices but for someone's first kit or someone that you know, to spend that many sats on a signing device is difficult for a lot of people, I think.

Speaker 1: 1:16:15

Well, for me to sell a cold card Mark IV in South Africa is 5,100 Rand. That's what it brought to me at the beginning of the year. So compare that 1,800 to 5,100. So you know, and to be honest with you, the user experience on the Jade is probably, in my opinion, better than the cold card because you can use the seed QR so you can use it in stateless mode. I know that the Mark IV cold card has got the NFC so you can tap it and all that. Most computers, like all the computers, haven't got NFC enabled, so you have to use it with your mobile device. Yeah, I mean cold cards. It's great, I love what they're doing, hyper secure, but, like user experience has got a way to go.

Speaker 2: 1:17:00

Yeah, and I actually really need to get one because it's a beautiful device, but until then, my Jaden seats are on. I have to do the trick.

Speaker 1: 1:17:08

Yeah, exactly. No, they work really well, Byron. On that note, we've been going for an hour and 17 here, so thank you very much for your time. I really appreciate it. And yeah, thank you for just like going deep on Liquid and acknowledging all the trade-offs you know, and people can get a very clear understanding of what they're getting into when they use Liquid.

Speaker 2: 1:17:29

Hey, it's a great pleasure. Thanks for having me, Ricky. I look forward to doing it again sometime and hopefully catch you in person soon.

Speaker 1: 1:17:36

Yeah, definitely, man. Now, just before we wrap, where can people follow you if they want to follow you on social?

Speaker 2: 1:17:43

media and find out more about Liquid. Yeah, so I'm on Twitter at Byron Hambly and you can find out more about Liquid. The Twitter handle is at Liquid underscore BTC. Otherwise, just go to Liquidnet and you can find all more about Liquid. The Twitter handle is at liquid underscore BTC. Otherwise, just go to liquidnet and you can find all the links from there. Thank you.