podcasts
This podcast highlights Ark as a solution to Lightning Network's challenges, using transaction batching to streamline operations, reduce costs, and improve Bitcoin's scalability.
This episode of TFTC examines the limitations of Bitcoin's Lightning Network, such as costly channel rebalancing and liquidity issues, and highlights the Ark protocol as a promising scalability solution. Ark uses transaction batching to improve efficiency and preserve Bitcoin's security, enabling off-chain swaps and reducing operational costs for services like Lightning. While covenants could enhance Ark's usability, the protocol functions effectively without them, offering future applications in payment channels and decentralized finance. The Ark team focuses on seamless integration and scalability without requiring protocol changes.
This episode offers a comprehensive overview of how Ark could resolve key limitations of the Lightning Network and expand Bitcoin’s scalability. By introducing innovative transaction batching and off-chain solutions, Ark is poised to tackle the inefficiencies that currently hinder broader adoption of Bitcoin-based financial systems. The conversation also reflects on Bitcoin’s maturation and the evolving dynamics within its community. As Ark gains traction, it may redefine how Bitcoin integrates with diverse applications.
0:00 - Intro
0:51 - Will the strategic reserve stop soft forks?
16:05 - Unchained
17:05 - Ark
25:25 - Zaprite & SOTE
26:58 - How Ark works
1:04:12 - Product market fit
1:13:46 - Things take time to build
1:20:46 - Meta protocols
1:26:50 - Wrap up
(00:00) Arc is simply transaction batching technology rather than putting transactions in to block in in the way that Bitcoin does Arc is almost kind of like a utxo chain where we have those onchain outputs and we Nest a bunch of transactions into it the economics of lightning right now are kind of like a little muddy I think there's a lot of things that are being subsidized I think a lot of the lightning infrastructure is kind of like being run as sort of like a lost leader this is why ethereum is lagging behind the scaling model that
(00:30) they've decided of rollup has created this complete fragmentation in their ecosystem where the incentives of everyone else are not aligned with the main chain anymore we think payments are so like really the tip of the iceberg here Bitcoin or is your favorite band has gone mainstream hburg will we ever get away from the drama around Bitcoin can we can we accept success I guess that's the big it will come to uh bite Us in the ass every cycle it looks like um but I think the drama we're seeing right now is I I liked I very
(01:13) very much liked uh David Bailey's tweet um just yesterday I believe which was like um bitcoiners is your favorite band has gone mainstream uh you need to start coping with it because this is way this is the way things are going to be going forward and I think it puts a lot of people into kind of like this very uncomfortable um situation with regards to their you know their their their identity and and the fact that they've branded themselves as bitcoiners and and considered themselves part of this sort of poliy of of Renegades and and
(01:52) Outsiders and and the fact that it is indeed going mainstream is sort of like uh is is having them reconsider uh their role in all of this and I think they're kind like seems that a lot of them are trying to clutch to relevance by grasping onto drama as a way to uh find any place where their voices can be heard really because you're not going to I mean going around promoting Bitcoin is not really something that uh the average Bitcoin or or telling people to buy Bitcoin is just like well you just one of a thousand people uh that everyone's
(02:32) heard say uh or heard uh heard that so it's like you're not special anymore and uh I think people are still longing for the times when uh yeah they felt they felt special being part of the Bitcoin Community people warned people about this for for many years I remember vividly like 2017 to 20201 era everybody who's bullish on bitcoin is like it's going to get to a point where everybody has Bitcoin in the concept of quote unquote Bitcoin Community or just a bitcoiner generally is going to fall to the Wayside because everybody's going to
(03:14) get Bitcoin everybody's going to or many people are going to adopt it was going to go up in price and that's what you want yeah it's happening it's I mean it's happening um I think it's you can already see it like the the places where it's more so kind inter groups or just subcultures uh that are a little more relevant nowadays uh if you look on socials and Twitter and whatnot where going to have the ordinal people you know and then there's some more technically inclined people just the sort of like just the
(03:46) general Bitcoin let's pump our bags uh and we have something unique to offer and you know we we understand something that others don't um is just not the case anymore so if you're trying to stand out um gonna have to bring a little more to the table than just preaching to the chir yeah bitcoin's growing up freaks get used to it don't cling drop your ego it's funny everybody warned like uh bitcoin's bigger than you ego at the door yeah it is fun to watch though that's what we were discussing right before we hit record I saw you Tweeting
(04:24) this morning a lot of worry in the broader Bitcoin Community about or not in the broader Bitcoin Community some members and I'm funny I'm saying the Bitcoin Community some bitcoiners are worried that if the United States comes out and explicitly states that they want to acquire strategic Bitcoin Reserve that that could prevent the protocol from upgrading the way in which many would believe is advantageous in the future and I I think you were making some good points that this doesn't make much sense the government is just another user
(05:00) in the network well I mean it's it's like when you ask when you ask people to actually break it's easy to make sort of like those overarching statements uh so like paint is like very broad statement or you know it's going to aify bitcoin but when you ask people to kind of like lay down the actual process of like what would happen um you find a lot less answers than uh people that are willing to make not about it uh because realistically um I mean you know there there are some cases to be made about changes to
(05:36) bitcoin that would maybe improve privacy um I don't think there's ever going to be consideration for something that you know necessarily improve privacy at the protocol level in a way that uh you know a zcash has or or something like that um I I don't I don't think that most I personally wouldn't support something where uh you know every transaction would be shielded uh in a way that zcash is so I I I think you'll never really find consensus even if you ignore the presence of a of a US Government there um so what else are we
(06:17) looking at well we're looking at improving the security of Bitcoin improving the scalability of Bitcoin here um and I think if an idea comes around you know if we somehow find a silver bullet to bitcoin's scal ility or something that uh significantly improve the security for users for um self and that's that's the other concept right is this this idea that the power thatb will not allow for the Improvement for example of self- custody technology um and I think the issue here is just really that this it's it's really just a
(06:56) US Centric point of view where they ignore that uh Bitcoin is on a global stage um there's this perception almost there's been kind this perception almost that um only institutions have large sums of money and oh you know the idea that uh you know in the scaling conversation that Bitcoin will become too expensive and therefore will be captured by governments and and Banks uh it still ignores the fact that largely wealth creation and and you know it happens I mean we're talking about individuals that have large amounts of
(07:32) wealth the capitalists in in the world are remain corporations and individuals and I think in in in the prospect of allowing them to secure um especially in in different places in the world where perhaps the rule of law is not as strong as um it is in the US um they'll certainly look towards Solutions that'll improve the ability for them to remain Sovereign Sovereign and preserve um access access to their to their capital and uh so if if if there is a silver bullet and I don't think there'll be Silver Bullet but let's pretend for
(08:09) for for a second that there is and uh everyone in the industry um seems to agree that it's a good idea and there's some sort of rough consensus around this I find the notion that the US government would somehow you know some people have been have made the argument that they would just threaten to sell their Bitcoins which seems like a very weak hand uh it see it appears to me to be a very weak hand to play um in the context where you know we're talking about like post strategic Bitcoin Reserve right so the the government is already um openly
(08:46) admitted that there's some sort of value to uh to bitcoin and uh proclaimed on the world St stage that they're going to accumulate uh Bitcoins which I mean it seems inevitable and apparently I mean the rumor seems to be that it is already the case that other uh nations are perhaps even ahead of the game and so the notion that the US would threaten uh a soft Fork by saying well if you guys do that we're just going to sell which is going to dump our back seems like a very weak hand to play because um anyone else that is a competitor to the US or
(09:24) any other large entity is going to be I think very willing to come and sort of like pick up this uh glut in Supply that just showed up on on the market especially if it comes at a discount and therefore kind of like weakening the you know Financial I think position of uh you know you could see a Chinese govern government or Russia anyone else that has access uh to the capital to scoop up those Bitcoin to uh really jump in that opportunity and so what else uh what else could they do I think I think the argument comes
(10:00) from the fact that okay well they might like muddy the water in terms of like actually trying to reach a rough consensus um but I think there's only so much you can do there depending on like what uh proposal you're talking about so it seems a little shortsighted to me um but then again then again I think you know the runway for it seems certainly that uh the scale bit Bitcoin I think it's not so much a matter of who is adopting Bitcoin whether or not it's the US government I think it's simply the scale of coordination required uh for Bitcoin at
(10:40) this stage is making it so that yes even if you have a very solid proposal U and something that seems you know simple think A CTV or something like that um it's becoming very hard to just coordinate all of these stakeholders and uh making it so that um everyone agrees on on the way forward there and so I think it'll require and we can we can we can get into that uh but you know I think it'll require something that is a little more compelling uh than what's been put on the table um at the moment um I was actually listening to a an excerpt of uh
(11:22) a Bitcoin optech U I don't know if it's a podcast or just a space that it recorded just this week or something like that where they commented commented on the uh you know the chart that's been going around where developers are basically uh practically voting or just giving their opinion and and and rational on uh prospective op code and there were a couple of comments made by um by Gloria uh and who's the other guy uh another core developer who just forgetting the name uh right now at chain code um anyways the the I I think the the gist of what
(12:08) they were saying is that well you know I think people have a an idea of what they want to use those OP codes for they you know everyone is propping up Covenant Covenant as a potential solution to um a sort of like future scaling improvements Bitcoin but there hasn't really been a very compelling um story about how exactly this is going to be executed um and I think the counterargument to that is well we just you know well the classic counter argument to that is just we we just want those Primitives because we think that you know we should have
(12:46) those Primitives available with in Bitcoin therefore we'll find out along the way um how exactly we're going to be using it they're just kind like adding uh one Tool uh a couple of tools uh toward toolbox but while I mean I I mean I empathize with this argument but I think if you trying to Rally an entire ecosystem and an entire industry um you got to you you kind of like have to add a little bit more uh meet to um to to the storytelling that you're uh that that you're doing here um and I think this is why you know like you know opcat
(13:27) and uh what the Wizards are doing they've had some success success there cuz they they were able to kind of create a narrative around it create a story around uh what they were trying to do and I don't think that this has been really the case for a lot of the uh proposals um I used to be you know I'm still supportive of something like CTV for example um but revisiting some of the quote unquote use cases that were that that that have been promoted throughout the years around CT um I'm increasingly of the opinion that
(14:04) they're they're just not very compelling um I think you know uh another core developer antoan was uh commenting on this I think at this point like the most compelling use case for CTV is actually improving Arc um and some of the other stuff around you know lightning and and non-interactive channel uh it used to sound to me like a very like it used to sound to me like a brilliant idea uh but talking to people that are you you looking at that lightning a little more talking to people that are actually running lightning infrastructure you
(14:36) know um it's it's it has never been something that you know and they're the ones that are actually dealing with thousands of lightning users and whatnot and providing services to them um there's a point where it's like well if that hasn't compelled them to kind of like champion this and be like yeah this is this is exactly what we need to bring our services and our applications to the next level well you got to kind of like ask yourself okay well uh it seems like a direction that we want to take you know it seems like something like CTV
(15:09) and Covenant is the direction that is going to improve things but you know the other I think the the other side of the argument is kind of like a more like a Rusty Russell thing where it's like okay if we're trying to do um those things where we want to really be able to leverage Bitcoin script uh to make it flexible and and powerful enough to achieve all that we think will be necessary in the future to build uh more self- Sovereign use cases and applications and services let's go about it the right way and and do a
(15:45) comprehensive review of like what we'll need and um you know obviously that's going to take more time so some people are a little more eager to do something now um so those are kind of like the two uh the different uh the the different uh sort of like factions I guess uh in this conversation sup freaks this rip of tftc was brought to you by our good friends at bit key bit key makes Bitcoin easy to use and hard to lose it is a hardware wallet that natively embeds into a 23 multisig you have one key on the hardware wallet one key on your mobile
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(16:47) on the exchanges who haven't moved it off tell them to pick up a big key go to bit keyworld use the key tftc 20 at checkout for 20% off your order that's bit keyworld code tfc2 I was telling you I had a conversation with John Calo about some of the stuff yesterday and I think for me personally I'm more of the let's just wait and see uh we got tappered in and so anybody's like new to bitcoin listening to this we're talking about like upgrading Bitcoin and um there are many ideas around how we can better scale and add better security in
(17:24) assurances to the protocol um but we've done some soft Forks in the last s years segwit and then tap Roo I think for me personally as somebody who onon this podcast and rabbit hole recap was championing tap rot um after it got uh merged into the protocol and started to get adopted you you saw things that I did not foresee was not even aware of happening on the network like ordinals and inscriptions which I'm okay with but I think the emergence of of that caused me to pause in terms of of championing any future software cuz like Bitcoin is
(18:03) arguably the most important distributed software protocol on the planet at the moment and I do not feel comfortable pushing for things that I don't understand the full ramifications of and have really over the last couple years come to the conclusion that we should just try to do as much as we can with the tools at our fingertips right now that already exist in the protocol and see how far we can take that and then if we hit limit ations and you find compelling use cases that a new soft Fork would enable and it's very clear
(18:37) what that soft Fork would enable in terms of everything it can do and um the edge cases that it would enable then yeah we can have that discussion but until then I think we push the limits on on how we scale this in layers and that's part of the reason why I brought you on and why I'm excited about Arc cuz I think Arc is an incredible example of something that only two years ago wasn't wasn't even a part of the the Mind space within Bitcoin and rather quickly um the idea was brought to market now you've got two um implementations of Arc trying
(19:14) to to prove that um it can add to what we're doing as it pertains to scaling Bitcoin and scaling payments and there are these unknown unknowns that can arise with the protocol and it's current State I think we should just need to be patient and I'm not too worried about like you said the government preventing soft fors in the future like we should do the most with what we have yeah yeah I mean you know it's not I mean I would say I'm not one of the person that's overly worried about like potentially what could
(19:48) happen um what negative impact the softwork would have I think I think most of the up codes that are being proposed are rather harmless I would even you I've been on the record for saying that like the whole conversation about mvv is kind of uh honestly not not in at least in in Bitcoin or Circle uh not very impressive uh I think it's just bitcoiners really uh just haven't really caught up with the uh state of I I don't want to say state-ofthe-art cuz it's it's a weird thing to say but um you know this is why I think I've been
(20:30) fortunate to kind like follow ethereum and all of this and I think I've I've managed to get a a bit of a of an edge in terms of understanding those issues so anyways all that to say is like I'm not really overly worried I don't think that anything I I I'd be fine with having opcat on the network um for me it's more so about just the fact that you know we're seeing it right now that coordinating of softwork is a grueling thing and I don't think the I I I really don't buy this notion that this is it's kind of like a muscle that we
(21:01) can work right and that if we get good at like you know doing those soft works then we'll just be able to have them more regularly um I totally don't buy that I think it's very very unlikely and and so I for me it's like well if we're going to go through that gring like consensus building um exercise let's just make sure that we get the most bang for our buck right so yeah using ations and uh this it's it's very clear that the the Covenant conversation to me hasn't even really matured yet um it you know every other
(21:40) month we're seeing sort of like new twists and turns uh there's kind of like a an accumulated knowledge of people that are there's certainly been you know in terms of Mind share a massive uptake in terms of comprehension of what covenants even are and what they can bring to the table but it still feels like even uh from in technical circles like we haven't really brought everyone up to speed and so it feels to me like unwarranted to start making decisions about this um at the moment uh but anyways you know I agree
(22:17) like uh I think you know with regards to Ark um it's unfortunate because a lot of the people that are having those conversation uh it seems to me have just simply not uh taken the uh the time to properly understand uh what's what's on the table here um in terms of the art protocol I think one of the reason why that is so is that there's a bit of a baggage with the way that uh the protocol was originally communicated you know it was originally pitched as the thing that would need covenants and so I think that led to a
(22:54) lot of people kind of like filing that in some place in their cabinet and be like you know I'll I'll just ignore this I'll re revisit whenever we get Covenant really right now because it it seems like it's it's just not possible uh until then and uh yeah I mean the progress over the understanding of what exactly Ark is and the challenge in communicating exactly what Ark is cuz it's such a novel concept um certainly it hasn't uh contributed to the fact well it's it's it's been like a it it's been kind of a grind to get
(23:32) people to really wrap them their head around it even very technical people you know I I've met uh this year at conferences or at least ever since I've joined the arc Labs team I've I've met countless very very competent Bitcoin developers who thought they understood how uh Arc works and uh they just did not and it's it's not because you know um it obviously they're just wied smart people far far more intelligent than I than I am but uh I mean I think just the the you know documentation has been spars uh we're ourselves trying to put
(24:09) together better documentation uh the the approach of you know shared utxo the notion of shared utxo it was originally pitched as um I think led to a bit of confusion so we've got a lot to work to do but yeah I'm hely I'm hugely bullish on the prospect of AR sort of massively uh contributing to the the near-term and long-term uh scaling capabilities of of Bitcoin even without uh Covenant um and Covenant really Covenant would help Arc uh to scale uh only uh and and and when I'm talking about scaling I mean okay well
(24:56) if we get to a point where we have like hundreds and thousands of users of Arc um then yeah uh it'll make things a little easier in terms of protocol sort of like overhead and uh and how perhaps Improvement to the ux but those are not things that uh we need right now to be able to ship um the protocol and put it in production this rip was also brought to you by our good friends at salt of the earth you got to be hydrating Freaks and while you're hydrating you got to be getting your electrolytes this is the best electrolytes mix that I've ever
(25:29) come into contact with uh Pink Himalayan salt with calcium magnesium potassium sodium no sugar it taste incredible my favorite is the orange and the pink lemonade go to drink.com it's drinks.com use the code tftc when you make your purchase and you'll get 15% off I'm telling you get on it freaks you're going to love this stuff we hung out in Ria at the Baltic Honeybadger earlier this year and I got excited with how excited you are by by Arc and the potential that it provides the network and you're somebody I've been following on Twitter for um
(26:07) probably almost 10 years now at this point I've always respected your your views on bitcoin and to see you this excited about this project um peque my interest and to be honest I think this is the first episode we've done a deep dive on Arc and until you explained it to me I I did the um the the first transactions on the second Arc protocol the AR it's confusing because it's called second but um uh second the company building their Arc implementation that was pretty mind-blowing it just worked and it was really cool to see we were able to do in
(26:44) round payments um move Bitcoin from onchain into the arc from The Arc back onchain and it it worked and it was somewhat magical um but for the benefit of of the listeners who may be curious what Arc is and building off what you just described is the fact that many people are confused about what Arc is even highly intelligent core core developers and developers in the space why don't we take this opportunity to reset the stage and give an arc 101 highlevel explanation from your perspective um yeah yeah um let's try U let's try that
(27:27) I mean you know I I will say ever since since I saw you in Ria um my my own understanding and I think or even our common understanding of the protocol internally has evolved uh at a very fast pace um and so we've been kind of like struggling even ourselves internally and how do we talk about those things uh but I think fundamentally what we've landed on is that just AR is simply uh a like transaction batching uh technology um what it allows you to do is that you know think of batching in a way that uh exchanges uh do transaction
(28:10) batching when uh their withdrawals um from exchanges on chain um right they'll just get um bunch of withdrawal requests and instead of doing a single one for one transaction for every user they'll uh create create a transaction where they distribute uh to their users a bunch of different outputs going to different addresses in a single Bitcoin transaction so that's a form of batching um what we do with Arc though is that rather than kind of unfolding all of those outputs all those transactions going to individual
(28:52) users um on chain into different outputs we batch them into a single output um and so we have a one out one input one output transaction but within that single output you have what we call those virtual utxos that are going to their individual owners and are just as legitimate as a Bitcoin onchain utxo so you can think of it as well rather than putting transactions in in into Block in in the way that Bitcoin does Arc is almost kind of like a it's almost like a utxo chain where we have those um onchain outputs and we Nest a
(29:43) bunch of transactions into it and and then you use and and then from that point on it's a it's a it's a client server um relationship right you have this relationship with an arc server this Arc server allows you to batch your Bitcoin operation into those outputs that it creates and you can use the server to make offchain swaps which are again advertised into those single outputs so that can be used for payments obviously um but we think payments are so like really the tip of the iceberg here um and you know a sing
(30:27) very easy example uh that we can use which is our upcoming Arc node uh product is something that allows you to basically rebalance your lightning channels without having to do onchain transactions every single time right so we you can imagine having a bunch of lightning operators they uh join an arc they basically uh receive Arc virtual utxos and whenever they need to rebalance uh their lightning Channel get inbound liquidity for example uh for uh for them to to manage their operations they will use a swap service um so we
(31:13) know we we're working with bolts bolts is one of the most popular um and honestly one of the rising Bitcoin company in the space uh who have a killer product uh have actually never taken VC money uh and are just and not that I have anything against VCS but they' just been just like killing it honestly um and so you know they've and bolts I think one of the most popular product lately has been doing exactly this this rebalancing of of lightning um wallets basically using uh liquid right so how would that how would that work is that
(31:51) you'd have Bitcoins on liquid uh within the secured by the bit or you know by the by the liquid Federation um and whenever you'd want to have inbound liquidity you just basically do a swap so you send uh bolts uh some of your liquid Bitcoin and in exchange they would provide you with liquidity on lightning and what what happens there is that obviously you're skipping the Bitcoin onchain transaction uh which allows you to so liquid has very cheap transaction cost um BS being a member of the liquid Federation is
(32:30) able to accept the risk of receiving liquid Bitcoin and that exchange that that that swap of your Bitcoins against their lightning liquidity happens in an atomic way so it's completely trustless uh you don't have to trust bolts again uh for for anything either it works it goes true or it doesn't um and so we're doing the exact same thing uh but with with Arc and so you can imagine just just uh really sending again in the same way having those virtual ETO sending them to uh bolts on uh Arc swapping them uh to to bolts on Arc and and give them
(33:12) uh and and for them to give you more more liquidity on Lightning so I think what happens there is that well you know this is not a pure Bitcoin payment use case right uh what we're doing is we're bolstering the lightning infrastructure and allowing lightning operators to better manage the liquidity and and probably in the long run I think is going to have a massive impact on uh on the lightning infrastructure because you know we've seen it you know completely practically fail earlier this year when uh the fees
(33:45) on uh Bitcoin were extremely high and you know the the cost of uh purchasing inbound liquidity um was just it was unsustainable uh and a lot of the infrastructure right now on on on liquid uh sorry on Lightning was built around the fact that well you can rebalance your channel cheaply splice in and out uh on chain but you know we know that this is not going to be the case in the future so uh this is a use case that we think is going to be one of the killer use case probably of of Ark um and we think that this
(34:23) whole sort of like Paradigm of being able to swap uh offchain and basically batch all of those swaps into single Bitcoin outputs on chain um is going to have consequence for every sort of layer that comes around uh that is not lightning uh that is a side chain perhaps or um if some of those bid VM rollups pan out regardless of what uh comes out in the future that sticks and that gains Market traction um the main way for people to access those different services and those different applications will be uh through swaps uh
(35:06) there you know BVM for example has been you know I think a lot of the BVM Builders uh have been very explicit in saying that the actual BVM Bridge uh will not be something that's sort of accessible approachable for the average retail user they expect large sort of like Market maker and liquidity provider to go through through that bridge but the average user to kind of like move in and out of for example a rollup that might be built on top of that bridge to move in and up uh in and out of that uh that roll up using swaps um and the
(35:44) prospect of using swaps I mean it's it's a good idea but again if you're going to be moving out of of a roll up um into onto Bitcoin by doing a swap that involves a Bitcoin transaction action and so that's going to be that's going to be prohibitive so you might end up in a situation where people are you know you my my concern and the reason why I'm so optimistic about this use case is that up until now we didn't have a good solution for people to you know move out of of lightning or move out of of liquid without having to incur the onchain cost
(36:27) of bitcoin and that would have resulted in scenarios if we project oursel in the future where people have access to those scaling solution but you know the moment that they use one they they they Peg their Bitcoin into one they kind of like almost like locked in because well if they cannot afford to swap out if they cannot afford to you know get out or close the channel or whatever well they kind of perpetually locked in and and so you create those and you start fragmenting the liquidity you start fragmenting the the network effect of
(37:03) Bitcoin and so the way that I'm looking at this now the vision that I have is that Ark um becomes sort of a s like a buffer layer in between uh the main chain and every other application Services side chain layers whatever you want to call it that people are going to be using um Arc is this way for remember how people used to say that that well you know your your Bitcoins in the lightning channel are not really locked into the channel they're actually the most liquid or whatever it's like that that's actually true of Arc it's like if
(37:38) if you're not if you don't if you have coins that you're going to be deploying in some way whatever it is to use a payment service a payment application the payment layer or to do some more Advanced Financial stuff trading whatever it may be you know unless your Bitcoin are going to Cold Storage cuz you're not going to touch on uh you're not going to touch them for for a year 2 years or a decade um then most likely you want to have your Bitcoins uh setting into um Arc outputs uh to have virtual utxos because those virtual
(38:12) utxos are kind of like almost they're they're just much more liquid I I've been calling it kind like this unified liquidity layer that allows people to be able to tap into all of the cool infrastructure that people will be building on top of Bitcoin you know that Financial system that we're trying to build on top of Bitcoin whether it's DLC based again whether it's more trust uh base even if it's side chains multi- signature schemes and whatever you need a way for users to um jump in and out of those Services
(38:47) if they want to and not be locked in and I think Arc is the perfect uh tool for us to be able to do that and um so you know I I'm trying to avoid uh bringing in all of the technical details and then technical nitty-gritty of like how exactly like Arc works and like what is an arc around and because I I think people this is where people start getting uh very um confused uh about uh they they they start thinking of it as kind of like this monolithic construct where every Arc is going to operate in the same way you know Arc is
(39:27) not it it's not something like lightning where there's a spec that uh everyone every implementation needs to follow um you know you talk you've been talking about second and it's very likely that the arc servers uh the arc implementation that second builds is going to be different it is different than the one that we're working on um in terms of different parameters and and all of that stuff in terms of the use cases that targets and that's the cool thing about it because uh it creates this very versatile you know it's just
(40:02) this this client server uh relationship and and then the server has different features that it can Implement that are going to be best suited for different use cases and uh the beauty of that obviously is that well I mean if it needs to be stressed out our virtual utxos are unilaterally controlled by their you uh by by the users uh in the same way that a lightning um you know your money and lightning is uh controlled solely by yourself you can always uh withdraw your uh Arc uh virtual ET XO unilaterally on chain if the server uh for whatever
(40:42) reason goes away um and so you preserved most of the you know security properties of Bitcoin but uh you you make your assets you make your capital a lot more uh almost fungible and sort like Deployable and I think you know one of the one of the thing that we hope to achieve really is to contribute to moving Bitcoin towards an asset that is not solely you know the store of value um and I we respect uh and I I respect the the store of value use case and I think it'll Remain the prevalent use case for Bitcoin uh for for a number of
(41:25) years but I do see an opportunity now with Arc to create things like Bitcoin Capital Bitcoin native Capital markets um where we're going to have tools to be able to build uh the type of stuff that perhaps people have looked um you know at other chains that uh might have been able to implement um you know sort like more permissionless without it necessarily being completely decentralized or completely trustless more permissionless applications uh that you know will compete on the market they might require uh trust in you know a threshold of
(42:07) different validators and that might be fine I increasingly of the opinion that this is perfectly fine this is actually what the market is demanding um I think one of the it it it's been I think it's it's becoming very risky for uh I think teams that are trying to pigeonhole themselves into building perfectly trustless protocols um I mean those are very unlikely to pan out P pan out in the first place and you know when we look at the state of the market what people are doing outside of you know holding Bitcoin and uh
(42:45) preserving it as a store of value um there are a lot of use cases where people are fine making trust trade-offs and I think that that's that's okay um so you know going a bit of of a tangent here obviously uh we're quite um uh far apart from from the actual explainer of Arc but uh this is kind of like my vision if you have specific questions I'm kind of happy to answer them but uh again I think it's important to for people to understand what the protocol can achieve uh and the details of how exactly it works uh I think once they're really
(43:24) once people are really interested in this idea that we can now B Bitcoin transaction in a way that's much more efficient than it ever has been possible and we can do that today without any softwork um I think when you hook people with that kind of story uh then they'll be able to figure out for themselves down the line and I'm happy to help anyone that's willing to kind of get into the details about how all of this stuff works um but you know I I think this has been kind a more success uh full way for me to hook
(43:56) people into Arc H than than just giving a complete breakdown of uh the technicals because uh yeah it can get a little overwhelming uh unless you're kind of like very deep in the weeds of of Bitcoin technical stuff yeah and I think to to try to succinctly reiterate what you just said it's just like you view Arc as this buffer layer that is many to one or excuse me one to many to all the other protocols being built on top of Bitcoin and because of the way that the virtual utxos work and the the vxo batching works like that batching is
(44:37) dynamic and where it can be somewhat um stationary you can switch VTX o in and out before ever needing to make an onchain transaction so you have this sort of dynamic ability to use switch VTX o in and out between Arc and different protocols well the VTX won't go to the different protocols but they'll change balances commensurate between the protocols without having to make an onchain transaction so it's similar to lightning in the sense that you lock utxos up and you can move STS around but it makes everything more Dynamic and helps glue
(45:14) everything else that's being created on top of Bitcoin together exactly I mean you know lightning is a it's it's just a way for people to it's just a way for us to coordinate on chain activity between Bitcoin users um and you know you look at the very first sort of like implementation almost of of of of a system like that and not that this is very much what we're building I think you know uh it it has it had a different uh uh purpose but coin join is is is you know naturally a way for people to coordinate over their onchain activity
(45:54) using a server right and uh that was that coin joint is designed to improve privacy um Arc is a way for Bitcoin users to coordinate over their onchain activity using a server to improve scalability um because we're just you know we're again we're uh we're batching all of our transaction by putting them into an output and then you know that output well well what is this output okay well it's a tap rot tree and in that Tap Root fruit tree well you have what is effectively a covenant right what is a covenant a covenant is a way
(46:34) to specify how Bitcoins within a Bitcoin output is going to be able to be spent uh and so you can say you can put uh 10 Bitcoin into a Bitcoin output and say well one Bitcoin is going to go to Marty one to Alex and one to Alice and one to Bob right this is what a covenant is you can you you can say like the only way that you can spend those coin is by having those coin go to the these these people and uh so this is a way for us to to be able to to batch those uh those transactions right because instead of having the full outputs as I was saying
(47:16) earlier when coinbase makes that batch withdrawal they put the full outputs on chain and say okay at the coin one one to Mari one output to already one output to Alex well this is very inefficient how about we just put them into a single output and the distribution we have it nested by having this this Covenant within the the spending condition of of this certain output right instead of having the outputs on chain what we do is we restrict the way that a single output can be spent and then it goes to individual people so this is really like
(47:53) how it works fundamentally and um yes this can obviously you know the first use case was for payments um we've done a lot of work on proof of doing proof of concept around uh payments with Arc and what this might look like um and what the user experience might be like because we want to be sure that uh Ark does not suffer the same fate that lightning uh did in the sense that you know the original picture on Lightning was well you know we've solved retail payment we have this perfect system it's going to be amazing uh it's going to be
(48:30) fast cheap and uh no pain um you know we know now that it's it's not exactly the case uh we know that there's a lot of challenges in terms of soothing lightning to uh consumer mobile wallets and so we want to make sure that we don't pigeon a whole uh Arc in and and make sure that the pitch around Arc in terms of payment um is not exaggerated in the sense that there are uh ux challenges also to uh being able to achieve great U uh payment ux with Arc um you know you did a couple of uh you know transactions yourself some
(49:17) attempts as you said with the second team and um you know for transaction to be um to be fast you need some trust tradeoffs right this kind of like new this this idea of the out of round uh transaction uh the out ofr transaction until the recipient has fully settled the money that they received into um a new virtual utxo that they unilaterally control um you know there's there's some trust relationship here with the server um and so how do you deal with uh all of that stuff how do you present you know we had a we have a an app that's called
(50:03) arcade where we've proof of concept uh the whole thing and you realize that well I mean it's going to be a challenge we I I think personally I think that payments um because you're dealing with consumers because you're dealing with mobile uh S mobile wallets uh cell phones and whatnot payments is probably the hardest uh um you know use case to really nail in terms of like what Arc can do uh we think it can be it can be done uh but it's going to require careful really considerations and and and uh ux research uh because you know
(50:44) we didn't even get into the fact that well those outputs those virtual utxos they expire at one point right uh and so how how do you present that to users OB obviously you're not going to tell them hey your money is going to expire you know like better re refresh it or whatever so you got to create those uh yeah I mean you can kind of like have it done in the background and whatnot but okay if you have it done in the background it needs to be done when the wallet is uh not sleeping or whatever or can it be done when the wallet's
(51:14) sleeping in the same way that you know lightning is trying to do this uh offline receive where you know there's some background process so you know those are still question marks um and it's going to be interesting to find out how we can uh tackle those those issues um but as far as as far as we're concerned um you know we think that in the meantime there are things like this lightning rebalancing use case where you're kind of routing around a lot of the issues because you're not dealing with cell phones you're dealing with
(51:48) servers lightning node operators have servers that are online 24/7 so all the interactivity requirements it's not a big deal anymore right uh the rotation the refreshing of the virtual utxo um you know how you know the original pitch was well the virtual utxo is going to last like four weeks a month and then you you need to rotate it you need to send it to yourself basically right uh so that you you get a fresh uh virtual utxo um and then you get into the liquidity implications of that and whatnot if you're dealing with servers
(52:27) you can have a virtual etx that expires in 24 hour and a server at the 24 at at the 23rd hour is going to is going to uh is going to rotate it automatically because the server is always online you don't have to worry about the server going offline and so you you can solve a lot of the liquidity implications right by shortening the VTX so the virtual etx lifetime so that's what I mean when I say like you know in terms of how arc Arc is is Arc is an idea of how you can use basically servers and uh Tap Root trees and
(53:11) batching basically to be able to perform different operations and everything else every other parameter around the implementation is subject to what exactly what use case you're trying uh you're trying to nail and uh you know one of the thing that we've explored uh that I think a lot of people felt really uh I think I mean it had pretty big impact in good reception is this idea of okay well how about we revisit uh payment channels I'm not talking about lightning channels I'm talking about strictly unidirectional payment channels right
(53:50) and this is something that you know came about even before lightning was a thing this is something that kind like even Satoshi himself had kind of like written uh as this this this not a spec but he had some code on how you could execute those offchain transaction between two parties by exchanging uh pre-signed you know transactions um and it was eventually implemented in Bitcoin J by uh Matt carallo and and um and Mike er um 20 I want to say 2014 or something like that I don't recall and and you know payment channel is very simple you
(54:29) know you don't have the routing you don't have the liquidity issue of lightning because it's just like I you know I have a merchant or I open a Channel with you Marty and I say I'm going to put like one Bitcoin into that channel and it's only going one way it's only going towards uh in your direction and so I'm just handing you pre-sign transa uh assigned transaction of the updates of the channel and then whenever you know we want to close it uh you take whatever is the updated balance on your end and we close the channel and if if I
(55:01) have some money left on my end I I get the money and you you know those payment channels they were never really considered I think because well they happened to come just before the whole conversation around uh Bitcoin scaling block size War where everything was precipitated into us having to find this solution and then you know lightning came about and everyone was like okay we need to focus on 100% on on lightning and um but they also from the fact that well you know um payment channels they're not they're not interconnected you know like
(55:40) lightning channels are right so it's only one channel between uh me and Marty one channel between me and bit rui and and so on and on right and so obviously um there's kind of like a if if you're going to if if you're having to open those channels on chain there's a limit to that scales right because those are all onchain transactions but if you can open those channels within an arc if you can open because Arc virtual utxos are just like onchain utxos so every script capability that is available with onchain utxo you can do
(56:19) with virtual utxos so what we demonstrated what we did a proof of concept is that you can actually open a unilateral channel uh with someone an un unidirectional sorry uh payment Channel with someone on Ark and therefore you start thinking about all of those use cases of lightning where you know payments are only always going into One Direction this is a big problem for lightning this is something that regardless of all of the improvements that we do to the protocol and all of the you know the great research uh that
(56:55) is being done about improving liquidity flows and whatnot I think if we insist on having those use cases where you know I open uh a Channel with uh whatever say like a service provider and I'm just sending money one way and there's never money going back my way well what you end up creating is those liquidity uh hogs around the network right those liquidity syns all of the liquidity is going one way and then they have to rebalance however they see fit a lot of that rebalancing happens you know off chain or whatever do doing this circular
(57:35) stuff but it it never addresses really the problem that the underlying issue is that the flow of those lightning Channel where lightning should be a b directional channel right it should be ideally what's the ideal lightning channel is one where I send you money you send me money in a way that basically we don't have to rebalance like we have this like business economic relationship where uh we're trading back and forth uh and you know we don't have because every time that you're hitting the chain every time that you're doing
(58:10) those rebalancing operation you're creating a cost and that cost uh you know is has an impact on the entire lightning Network so if we're insisting on using lightning for all of these unidirectional use cases um and creating those liquidity syns and those entities that always have to rebalance one way or another or actually just increasing the cost of lightning really because the the rebalancing eventually has a direct impact on the cost of lightning lightning transactions right now it's not so clear that you know this is light
(58:44) I think the economics of lightning right now are kind of like a little muddy I think there's a lot of things that are being subsidized I think a lot of the lightning infrastructure is kind of like being run as sort of like a loss leader uh by different business businesses uh as a way to you know benefit their users uh say like a river who has a brokerage service they don't really care if they make money or if they lose a little bit of money uh running their lightning infrastructure at the end of the day they're they're providing a service to
(59:10) their users that they believe that they believe is valuable right um but you know I think this is not sustainable at scale so we need to find ways to optimize how we use those system and those scaling protocols and so you know one of the things we've been thinking is what well what if you just have like a unidirectional Channel going to uh someone like bit refill right I spend $100 at bit refill buying gift cards every month I open a channel that lasts uh a month with bit refill on Arc and whenever I need to buy
(59:44) gift cards I just spend it directly it's instant settlement uh unlike unlike regular Arc transactions right regular Arc transactions are not instant settlement uh until you've rolled that into to your own virtual utxo again you have kind of like a it's trust minimize you could say but you you have this this this trust implication with The Arc server and so if you're dealing with digital Goods instant settlement is important right if you if you're selling gift cards you kind like really want to have instant settlement that that confirmation and so
(1:00:16) I could open channels you know and I I don't have to have a lightning wallet to do I don't have to uh have concern about uh you know liquidity and whatnot and and liveness and all those things so you know again this is just exploration this is proof of concept but uh we think that just generally speaking the ability to do Bitcoin operations Bitcoin transactions Bitcoin swaps in a way that is much much cheaper than on chain especially you know in a way it kind of grows cheaper the more people are using it right because you're advertizing the
(1:00:51) cost of these operations uh across the number of people that are basically participating in your in in your batch output right so the more people in your batch output the cheaper it becomes so we think that this allows us to completely it reopens The Playbook of like okay well what are the things that we dismissed before in terms of Bitcoin operation Bitcoin Financial applications that we thought well it's going to be too expensive we can possibly do that on chain well well now we can do it relying on the same Bitcoin security the the
(1:01:30) same Bitcoin consensus security but you know by sharing the cost with uh everyone that's kind of like in the same batches as us right um dlc's um you know a bunch of uh meta protocol stuff um you know it's it's going to be interesting we're going to continue to push uh I think think that are going to be very eye openening for people and ultimately again it's just this ability this excitement that I have to be able to build things that yes do not require permission or do not require uh having to fight it out on Twitter
(1:02:09) about which softwork we need to get because you know I cannot achieve what I'm trying to achieve without uh Improvement to the Bitcoin protocol like no we can do it today uh so that's extremely extremely exciting and I we think that yeah next year is going to be a big one uh for Ark and I think people are going to start rallying around it and you know perhaps at least the last point for this is just like Arc certainly benefits from covenants so an arc is the one thing that people can focus on right now that is tangible uh that can get to
(1:02:44) production and if we make arkc successful and grow the adoption and attraction of Arc it's then going to be a no-brainer to say like everyone's going to be like oh well obviously Ark has product Market Market fit and Arc can be vastly improved uh if we have covenants so let's do covenants now now we have a solid case for Covenant a more compelling story for covenants and if I understand correctly what would lead to like AR's product Market fit it's helping people managing lightning channels uh do their Channel balancing
(1:03:18) more seamlessly and less costly uh you have these unilateral payment channels that that materialize and people are using it's saving them money from what I understand and I believe it's after a conversation with you may have been somebody else but the if Arc gets product Market fit and widespread adoption the there scaling limitations within rounds within a singular Arc service provider correct I mean there is a bit of an overhead in terms of the information that needs to be passed between uh Arc users and the server right uh when
(1:04:03) you're coordinating those batches um the server is going to say okay I'm creating a batch who wants to join this batch and then a bunch of users are going to say I want to register for this batch I I have a I have a virtual utxo yeah it's a bunch of signatures it's a lot of data right yeah exactly it's a lot of data and in indeed if you have something like covenants then you don't have to mind so [Music] much what else is it's it's like there to put it shortly it's just like there's a lot less data that you need to sign uh
(1:04:43) to bble so the process is much more quicker um and and but honestly this this this mostly helps things like consumer wallets um because in terms of dealing with server like servers are built for interactivity and and you know passing information quickly and and reliably uh so the bottleneck is not there the bottleneck is really like yes when you want to involve uh consumer applications and and consumer wallets and into your mobile phone uh yes are uh then then covenants are are going to make a big difference to um to
(1:05:24) the to the user experience there's a couple of other things you know uh maybe in terms of improving um the liquidity requirements of Arc and whatnot but it's not it's it's not like um it's not going to be a GameChanger uh for uh for Ark to to get Covenant and and I I would you know I've been kind of like almost making a point to kind of dissociate Ark from from covenants altogether um because Arc can be built today and uh and and every every use case that is pre-signed transaction in Bitcoin can be improved by covenants Arc is a
(1:06:07) pre-signed transaction protocol so obviously it can be improved by covenants uh but it's it's it's not something that um you know if we don't get covenants ever I think Ark is going to be still a f foundational piece of the the Bitcoin infrastructure um you know maybe we need to find different ways to improve the user experience and maybe it'll come through some some trust minimization some trust trade-offs and it's not such a bad um you know it's it's not such a bad uh deal you know you look at what's uh Light spark is doing
(1:06:42) with uh with the state chain model and this is effectively the the the trust model that uh Arc is with out of round transaction right you you're trusting that the server is not going to double spend uh in uh the server and the sender of the transaction is not going to collaborate to double span you and you know in the context of using those servers that are service providers that are building a business around you know facilitating those batches of transaction and and making money out of it um you know it's it's kind of
(1:07:15) like of them colluding is very low well I mean are they going to ruin because all of this you know this collusion is provable uh and so the moment that they uh that they they try to double spend someone uh and that's the thing right it's it's kind of like the risk model is isolated it's not it's not like a bridge where if the keys are compromised everyone in the bridge gets rck you know all of the funds get stolen with Arc it's kind of like isolated to a specific transaction uh State chain is the same you know the the risk is isolated to
(1:07:52) specific transactions it's more targeted right and so the risk reward for a malicious actor is very diminished uh in and and so the return on uh their Roi on on trying to cheat with those kinds of protocol um you know the incentives are are are are very well aligned and so I think for things like payments you know um I think most people will have to settle on on kind like out of round style models because uh yeah like like doing the full uh uh settlement is is going to it's going to be hard to uh to create create user
(1:08:33) experience around this but that's fine and that that's completely fine and uh you know there are ways different ways to improve this uh you can potentially involve other actors than the uh than than the arc servers who could potentially you know be used as an escrow maybe to cosign even um it's it's a you know it's a blank sheet in in terms of like the design space uh we're continuously exploring um how this can be leveraged and um yeah I think I I I think people will be um I think I think some bitcoiners are going to kind of scoff at
(1:09:14) the idea that you know some of the things that are going to be built on Ark are not perfectly trustless uh but regardless uh I think that people in the market that are demanding specific thing and are willing to make certain trade-offs are going to be very happy that uh you know we're be creating this infrastructure that allows certain applications to be built that are much more Bitcoin native do not require Bridges do not require you know getting stuck into this Silo that fractures the network effect and all of that so it's
(1:09:48) going to be very very interesting yeah I think leading and leaning into to the channel management problem that exists on lightning is a very smart idea cuz to me that makes intuitive sense it's a massive problem uh lightning usability over the years has gotten better but you've talked to lightning developers and channel liquidity is a pain in the ass for everybody so if you can create a way to create interactivity with Arc to easily rebalance channels you can imagine a scenario again since lightning nodes are online all the time and you had that
(1:10:29) interactivity um out of the box um you can just create apis that automatically rebalance channels once they hit a certain threshold and it just works and that makes everything way better it's going to make the the ux the cost we're not going to run into those you know we're not and you're seeing it already right it's it's again it's the same you know the breezes uh nodeless implementation which leverages liquid right has create it has created kind of like uh lightning wallets that inherently have kind like better user
(1:11:04) experience uh you don't necessarily need to deal with all like like the channel management and and for the infrastructure the service provider the rebalancing is a lot cheaper and all of this but obviously it comes with the trust trade-offs of having to trust a liquid Federation and I think a lot of people at scale are not necessarily going to be uh neily willing to do that and so Arc it really becomes sort of like this this perfect complement to uh uh to to to to lightning um because I think ultimately for me in the end you're going to see
(1:11:42) wallets that are Arc based where you're going to be able to do lightning payments but in the same kind of like nodelist way where what you're going to do what you know the way I see it is you're just going to be swapping in and out of lightning you know you want to pay someone a merchant that accepts lightning you're going to have Arc VT EXO and you're just going to swap with bolts who's our infrastructure partner right and you you not you don't have to have channels open you're receiving a lightning payment it's going to go
(1:12:12) through bolts they're going to credit you in in art vxo and so you're going to be in yeah I was going to say is this similar to what we're seeing materialized with ecash lightning connectivity where you sort of have like a lightning gate way between the yeah yeah exactly it's the same exact same thing exact same thing yeah exact same thing but obviously without the the trust trade offs of of ecash yeah it's fascinating you can and that's and going back to what I said earlier I think a lot of bitcoiners I think a lot fall
(1:12:47) prey to what you described earlier is this um existential moment of I'm not that important anymore and then there's others who uh expect that Bitcoin needs to be all the things all at once but Rome wasn't built in the day it's going to take time to build all this and as we hit the the edge cases of the design space you you go back to the table and you think creatively like all right how do we solve this and something like Ark merges and you plug it in it's it's going to take time and um if you have I will say yeah I mean I I will say like I
(1:13:25) I don't like I mean I empathize with a lot of these people because if I would still be on the sideline uh as I have been you know I I I have not been throughout my Bitcoin career too much in this Builder seat um and I think it has had a massive impact on my perception of things because you know you this this I I think this insecurity that you feel is is when you don't feel in control of your own destiny right is when you you don't you you kind of like it's it's up in the air uh you know you're looking at the developers fighting it out on
(1:14:07) Twitter you you don't know what's happening you'd like to have some kind of like positive impact and whatnot uh but you know your options are limited uh you don't know how to go about it and so yeah it's easy it's very easy then to get jaded uh and and to start going down this downward spiral of like just do something right you guys figure it out or whatever do something uh and that is often just because the fact that you're not in a position where you feel like you know you can do something and for so that's why I've been like you know I've
(1:14:41) been encouraging people like a lot of again a lot of the people I think that are having those conversations right now they would be well served to take a double uh take a look again at at what Ark is uh doing and what the potential of it might be because you know all this conversation around well you know we're not going our Bitcoin is going to fail because you know self- custody is going to be unaccessible to uh most people on the planet it's like well if that's your concern you know again Ark is the one material uh Avenue that
(1:15:27) is that it's it's just tangible it it feels like it's it's there there is code it's being built there's two teams working on it and you know everyone is like oh well we need covenants to do all of that utxo sharing stuff and channel factories and it's like while you have the literal first protocol that is actually achieving those things you don't need soft Forks you don't need Covenant like why aren't you like paying more attention to it why why aren't you trying to find ways to contribute to it offering help in terms of testing it and
(1:16:00) whatnot um so obviously you know I'm saying all that at the same time you know we still have yet to put all of that stuff in production it's going to um it's going to happen sooner than later but um we're we're super excited about this um we're the I think the ark node is is going to again uh come pretty quickly my understanding is we're pretty much finalizing the integration with uh with bolts right now and the moment that this is done um it's going to uh the pace is going to pick up significantly and so I I'm looking forward to um what
(1:16:39) happens there next year I'm looking forward to there's even another I mean we said there's two teams there's another guy um in I think a CH in China uh there's a guy Ben I don't know if you've seen him to disco collabs or something like that um he's apparently working on an arc implementation uh I think he has a team they're working on something and so I think people are starting to see uh the value there and I I would hope that um you know there's some of the people that are making a lot of noise uh on socials yeah would just take a step back
(1:17:17) and and look at what's being built because it's the white for me it's the white peel it has been the white peel I feel so bullish on on on uh on the prospect of of of Bitcoin right now of scaling Bitcoin and of creating an entire Financial infrastructure on bitcoin that's going to be so much better than everything that exists in the industry uh at the moment um I think everything that's valuable that might have found product Market fit on every other chain and whatnot I think we can do it on Arc in a way that's a lot
(1:17:50) better and that is sitting on top of the most liquid asset on the planet um and so I'm just like you know we're we're picking it apart right now and and still creating our mental model for all of this stuff but we have some crazy wild idea uh on um on the way forward and um yeah we need we're going to have to you know pick up some others uh people I mean if if there are developers out there um that are interested in contributing to it please reach out because uh we're we're definitely going to be U opening up uh the team and and
(1:18:29) and looking for more talent because we're going to need more people to be able to build all of that stuff and also other people that are building different products where if you think that you're able to uh leverage Arc in some way um we're going to start putting together um some kind of outlet for us and the entire team to be able to provide so like resources however we can to uh smaller teams and smaller project to try and integrate them within the arc ecosystem because we we think that it this can help it's not again it's it's
(1:19:03) not only about payments it really is all about like every financial application of Bitcoin you know dlc's um you know DLCs DLCs are not going to scale on chain you want to build the derivatives Market using dlc's it's not going to happen on chain but it's going to happen on Arc and so um we're we're pretty bullish about this and uh we're looking forward to collaborating with the rest of the U the industry um around this yeah no like I said your excitement was palpable in Ria when we last saw each other in person and that got me excited
(1:19:37) so I'm happy we're finally able to hop on here and I know I've only got seven minutes left but mentioned Arc node coming out next year what do you think people are going to see that's going to be an immediate like aha holy this is something that we need to begin implementing widely you mean specifically for the arc node or uh or it's your implementation like or Arc arc Arc in general yeah um listen uh I I don't have I think the holy moment is not going to necessarily come from um the usual Bitcoin a craft but I think
(1:20:22) the the holy moment and kind of like my wild card right now and something I've been really obsessed with is uh is meta protocols um and I don't know if there's going to be something in production early next year um but I think we're going to be doing a little bit of forr into um what uh the implications of Arc might be for uh for meta protocols because you know fundamentally meta Protocols are not you know they they're not a terrible idea um you know cuz they're they're they what they try metol well a meta protocol in the sense
(1:21:02) like something like uh RGB or uh you know Omni or um well obviously runes and ordinals and all that stuff um but a meta protocol is just something that uses the Bitcoin blockchain right as a way to store some data and creates sort of like a an adjacent uh consensus uh protocol of like you know a a a different protocol that looks at this uh data that's indexed on onto Bitcoin and deres uh you know and is able to execute higher level uh applications and services and contracts on top of it right um Omni uh counterparty is another
(1:21:42) example right and and and the problem with those meta protocols has always been while you know they're putting they're putting into uh onto onto the Bitcoin chain that we don't really want it to be there it's kind of you know some people have been considering considering it spam um but really uh you know I this is an intuition that I have and we haven't really uh you know spent too much time internally uh looking at this but I think that when you consider uh the intersection of Arc and meta protocols you start looking at something
(1:22:19) where you can build Financial Primitives uh Financial systems that are much more Bitcoin in line uh and that certainly are not as trustless as onchain operations and whatnot but the cool thing with meta protocols really is that they avoid having to build additional blockchains to do something else with Bitcoin right because when you look at every other scaling Solutions or every other solution that claims to be able to bring more utility to bitcoin they're just creating other blockchains a side chain is another blockchain a rollup is
(1:22:58) another blockchain it's all just other blockchains and you connecting those blockchains through Bridges and whatever and all of that right and then and then you're creating also all these issues with the fragmentation of the network effect and this is something that you know I've been very vocal about I want us to avoid taking this path because has been an absolute disaster in the ethereum ecosystem um in terms of that in terms of network effect this is why this is why ethereum is lagging behind is the the the scaling model that
(1:23:29) they've decided to roll up has created this complete fragmentation in their ecosystem where the incentives of everyone else are not aligned of of the different parts of the ecosis are not aligned with the main chain anymore you know coinbase at at this point the base roll up they practically could not care less about uh ethereum you know um and so this is a path that I want us to avoid and I think that uh there's something about meta protocol where like they're kind of like the underdog here um and I there's I'm looking forward to continue
(1:24:03) exploring what this might look like again I don't know if it's going to be um if it's going to be early next year because otherwise you know like okay well you have the payment use case you have the chall Channel rebalancing what can you do well you can scale uh DLCs for sure I think this is a uh but again you need DLCs to pick up in the first place so uh what my buddy shazan at lavvo is building I think is a good step forward you know like he's finally kind like really hitting the market in stride and and and trying to scale uh this
(1:24:37) technology and so once he once he gets to a point where okay maybe it starts being expensive to create and settle those DLCs on chain and we can talk about moving them to uh to to to to Arc but that's not going to happen overnight right and so what are the other use cases well you know it's like uh the the the the set of unless you're you're going really full Financial uh Services trading per derivatives and all of that that can happen but that's going to require a bit more creativity and Imagination and it's never going to
(1:25:11) happen in a trustless it's never going to happen in a trustless way um and but but it it can happen in ways that are trust minimized and that are in my opinion perfectly fine um and so so uh I'm I'm I'm really really really curious to see what we can do there um and and we'll we'll probably be sharing some stuff uh pretty soon in terms of like proof of concept of like what uh what this might look like yeah well I'm excited for you I'm excited for Bitcoin and uh we'll have to keep this conversation going because I'm sure a
(1:25:47) lot is going to not unravel but um A lot's going to be be happening over the next couple years and so I think once people yeah I I think I think just like the most exciting thing is yes is just like when the arc no gets released and people can finally put this because I think people still have this idea that Arc is kind of like a some sort of uh vaporware almost right they they're not going to say it explicitly but they're kind of like yeah like you know like I we'll see it you know when it's there it's it's kind of like well
(1:26:21) maybe we'll pay attention to it when it's there because they they they feel like it's a it's a very complex system you know I I think John carvalo has been on record saying that you know shared utxos are more complex than lightning which is like really not the case at all um and so so you know people are kind of like still skeptical because of it's It's a new novel concept new novel technology once either te or once we release a production implementation people are going to be like oh okay you know it's not necess going to be about
(1:26:54) the The Arc node and the actual use case of the rebalancing all all of this I think it's going to be more like oh like this thing is real and like okay maybe we need to pay attention to it because yes it is one of the answer to the Bitcoin scalability concern that we have and we finally have something to hold on to that we can try and see how it fits and it applies to other use cases that we're interested about you know we're not going to be the ones or at least we hope that we're not the ones dictating what Arc needs to be used for
(1:27:26) we want to provide the infrastructure for all Builders to come to us and be like hey can I do this with Ark yes you can do that with you can do this with Arc let's work together to make it happen yeah hell yeah all right this has been great thank you for taking some time to to walk us through this this is the first Arc Deep dive we've done on tftc long time coming but uh excited to see everything that you do uh at ARK labs second's doing um I do think what you guys are doing can push the conversation into a better place you got
(1:28:01) to stop complaining about what isn't happening and start focus on things that are actually happening and see what you can do there that's right all right all right well I appreciate your time Marty always a good time to uh catch up always peace and love freaks
