Enhancing Bitcoin: A Rising Tide Lifts All Bags - Fireside Chat

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1. 0:06

   hey everyone hey uh I hope no one's sick of hearing about chain abstraction yet because uh it's been a few hours we're going to keep going yeah we we'll we'll uh talk about chain abstraction in a new light uh according to bitcoin and Bitcoin l2s so just to introduce myself quickly uh hi I'm David I uh run the emerging Technologies team in and we're really focusing on chain signatures which is the ability to put um signatures inside of a smart

2. 0:37

   contract all right I'll I'll do the same uh I'm W I'm the co-creator of stacks which is a Bitcoin L2 and we' have been building in the Bitcoin ecosystem over the last four or five years and I think recently especially with the launch of ardal last year you've seen a ton of like developer activity coming back to bitcoin both to the L1 and to the some of the new layers like the l2s that are launching so it's a pretty pretty exciting time to be building in Bitcoin

3. 1:03

   right now so I'm going to jump right in and just sort of explain what Pagoda is doing inside the chain abstraction space um now chain abstraction you've heard a lot about it and it's all about people not caring about where they're doing the things they're doing what we're doing is we're building a suite of technologies that makes that super easy and I'm really going to dive into the Technologies now the most important one is something called chain signatures and chain signatures is the ability to hold

4. 1:28

   a secret inside of a smart contract what this allows you to do is um when you sign into a new account which is terrifically easy using stuff like fast or you have the ability to encrypt stuff and to sign stuff now all smart contracts are is code you can't tamper with and all chain chain signatures are is Keys you can't tamper with and this allows you to promise that you'll do certain things with kyss which sounds very boring but actually allows a huge set of new use cases uh so for example

5. 1:59

   if you have an nft that holds a key inside of it you can exchange those nfts very easily so you could have one key that holds a large amount of etherum and another key that holds Bitcoin and you can swap the nfts that hold those keys on the near blockchain and effectively trade ethereum and Bitcoin instantly uh without any transaction fees on either chain another thing we can do with that is once you're signed in we can trust

6. 2:25

   that you're not going to drain our faucet of ethereum so we can fund your ethereum transaction before you before you do any payments without you having to understand that you are in fact transacting on ethereum so you could pay in usdc on near and do a transaction in the um and the reason this is important in Bitcoin is that first of all Bitcoin geys are terrifically hard to hold um it's terrifically hard to on board um and

7. 2:49

   stuff like ordinals is actually very very inaccessible unless you already hold Bitcoin so all we want to do for Bitcoin is allow people to have easy to access gas easy to hold keys and easy easy on boarding all together awesome actually can I can I ask you a question sure all right could you dive a little bit deeper into uh like I think we were having a conversation backstage about MPC and how

8. 3:13

   you're using that to actually control the the access and the smart contracts like I would love to learn more sure of course um each smart each uh each smart contract in the near blockchain holds a private key inside of it the way we do that so holding a private key inside of a smart contract is terrifically easy uh but keeping it secret is much harder um so what we do is every single node we have nodes on the near blockchain and they watch as a transactions go along

9. 3:38

   now if the smart contract calls a special method those nodes Each of which have a key share will start a protocol and generate a signature for that key so it's super secure the key is spread across a bunch of different nodes um and the user can use it the same way they program a smart contract which is just calling a single system call uh and then you have the ability to sign any arbitrary Bitcoin ethereum uh we have Dogecoin working at the moment and then

10. 4:02

    you can have Smart contract controlled uh external access external accounts on any chain you want is it is it correct for me to almost like as a user imagine that I have some sort of a Access Control let's call it like you know my Google Au token or something like that and the near validator nodes are collaborating with each other to actually store my private key like I don't I don't have the private key in some ways the near validators have it on my behalf and

11. 4:35

    these validators need to collaborate with each other to produce signatures but they will do it only if I ask them to and they're not going to do it um on their own that's exactly right if you have uh say an O token from Google you can prove you hold that o token to the near Network once you prove that correctly um the nodes will know you are who you say you are and then from there you have access to your Bitcoin gear

12. 4:59

    your ethereum key and what this does is whilst preserving privacy gives you the ability to do anything you like for your Bitcoin account without having to memorize a seed phrase or even really understand that using the Bitcoin Network to control your ordinals or your nfts or anything like that right and is the security model that this is honest majority or is a model that this is enforced at the consensus level like it would be a consensus failure if they try

13. 5:22

    to do something else is so it's honest super majority so if there is an honest super majority you get to retain your keys and we have some we have some economics which we've designed called the narc protocol which is a form of identifiable abort and what happens is um it gives you the ability to do quadratic staking of um any assets you hold so conceptually if you have 10 validators and each validator holds one

14. 5:46

    Bitcoin um it would seem that you'd only be able to secure 10 Bitcoin worth of value but using our identify abort system any individual who is collaborating to behave badly can go on chain and EXP explain what's happening and slash all the other notes and what this means is if if someone asks me in to collaborate to try and steal some assets I can turn around and take all of their stake away meaning that

15. 6:10

    economically it doesn't make sense for me to collaborate toway people's assets so so you can effectively punish um all of the participants of the honest majority dishonest yeah because to take the action they were the majority right exactly anyone who's you can take take action against anyone dishonest before they've done any harm um and it leads to this very sort of interesting game

16. 6:34

    theoretical problem where someone comes to you and says hey I want to Rob someone but you can trust me because you have to trust anyone you collaborate with to do bad bad things which leads to very tricky situations awesome um yeah and we I'd love to hear about what you guys are doing on Stacks with your new uh Nakamoto release yeah so I think I'll I'll give everyone um a little bit of background on the work

17. 6:58

    that that we've been doing basically think of this as Bitcoin is the sort of like the OG chain right like it it's u in the last cycle or even the one before it it uh sort of you know established itself as a store of value as digital gold but developers aren't like building like a lot of things on bitcoin still it's you know north of a trillion dollars of capital it's the largest brand name largest community largest number of users as well so uh a small good of developers in Bitcoin including

18. 7:27

    us have been trying to figure out out that how do we make Bitcoin more programmable how how do we make Bitcoin sort of like scale out as you know potentially hundreds of millions of users are going to come to bitcoin because they wouldn't be able to use Bitcoin on the L1 level like Bitcoin is very very hard to change by by Design almost right so the the same properties that make Bitcoin valuable uh Bitcoin is valuable because people know that it's not going to change it's very durable

19. 7:52

    right like it's not like there are crazy consensus upgrades happening or someone is going to change the supply like one fun fact is that can actually download a Bitcoin software all the way from 2013 so almost like 11 years from from now and run it and it will still boot up to the to the current version of the block which is an amazing property to have right like imagine um even on the second largest Network like ethereum you can't

20. 8:17

    even imagine it ethereum has gone from proof of work to proof of stake to maybe you know some other large changes happening so these networks are much more experimental than Bitcoin but the flip side of that is if have something that durable and something that is very very resistant to change then how do you sort of innovate on it how do you scale it how do you bring new applications to it so that challenge effectively uh we've taken it over in what we call

21. 8:43

    Bitcoin l2s and they're different definitions of it you know we can slice and dice them what really is an L2 what what is not the definition that I follow is that most normal users they think of anything built on top of Bitcoin as an L2 right and then you can sort of classify them like how trustless they are or not but at a high level what I would encourage people to do is like think of Bitcoin the asset meaning BTC

22. 9:06

    separate from Bitcoin the rails like the technology the network that it runs on so we can upgrade the rails meaning we can have built different types of l2s stacks is building one there are a bunch of like other other l2s that are launching as well and your BTC can go from the L1 to the L2 where it's cheaper and faser and and you can use it there right and obviously it comes with certain trade-offs like when when for example uh with Stacks the way the

23. 9:31

    security works and that's why I was asking about honest majority so that's a similar type of a security model when you take your BDC from L1 to L2 you're are now trusting these tax validators that a honest majority of these people would allow for my withdrawal of Bitcoin from L2 back to the L1 right but we could probably do better than that there are some some new sort of like projects and breakthroughs happening one of them

24. 9:53

    is bit VM which enables uh basically much less trust in this L1 to L2 movement instead of an honest majority you just need one honest party in in your set which is which is actually pretty pretty pretty big jump in terms of like uh reducing the amount of you know trust assumptions that are going on U so I think what a user experience looks like is like imagine if I'm doing a Bitcoin L1 transaction and you're doing a L2 transaction after the Nakamoto release um on bitcoin I will have to wait something like I don't know

25. 10:25

    10 to 40 minutes for a confirmation and with a ton of traffic and Cardinals which are these Bitcoin nfts Bitcoin fees are going up a lot as well right so I might be paying like $40 to100 in fees for doing my L1 transaction which is slow like 10 to 40 minutes to even wait for a single confirmation but on the L2 on on stack stack amoto you'll get like 5 second or whatever the initial block

26. 10:48

    time might be like the actual one uh you'll get a confirmation it's cheap it's fast and as soon as a Bitcoin block arrives all of the L2 blocks settle on bitcoin with a 100% of Bitcoin finality what that means is like in terms of security at the L1 what we care about is reor protection meaning that once a Bitcoin transaction gets in how much sort of like you know hash power or economic power would it take for someone to reverse that transaction or reorg the block the way you have designed Nakamoto

27. 11:18

    L2 is it's the the exact same thing once a Bitcoin block arrives so to reorg any L2 transaction someone will have to attack the L1 and reorg the L1 which is a pretty property you have so now you have fast and cheap transactions on the L2 but the security property is basically 100% of Bitcoin finality when when a Bitcoin block arrives so the way we see this is Bitcoin can remain Bitcoin L1 can remain what it is but the

28. 11:43

    L2 can keep upgrading can keep becoming faster can keep having more network capacity can keep onboarding more and more users maybe a billion users at some point and we can still benefit from Bitcoin L1 security so that's sort of like the vision that we think that um Bitcoin is never going to scale to billion users this way but with l2s they will be the default way that new users are going to experience like BTC transactions because at the end of the

29. 12:06

    day users don't really care you know in their wallet what they care about is like is it cheap is it fast is it sort of like secure enough and obviously it will become more secure with bit VM and some of the other things that are launching well what do you think the biggest challenges are when sort of getting people into that sort of stacks and Bitcoin ecosystem I think basically there I would say there are two types of

30. 12:30

    challenges uh one is that there are the existing crypto native users and the way historically things work is so I considered like the time between 2017 and let's call it 2022 as quote unquote dark ages of Bitcoin like there was a lot of like you know in even in like Innovation or Dev activity in Bitcoin tree 2017 this is like pre ethereum uh you know colored coins were invented of Bitcoin nfts counterparty was invented of Bitcoin stable coin started on bitcoin with Omni lay uh but a lot of

31. 13:02

    sort of like that intellectual capital and Dev sort of like mind share moved to ethereum and then other chains like near salana Avalanche later on so Bitcoin became like sort of like this you know like dead town in a way uh so the crypto native people that currently are in in in in the in the industry they're more used to using other netbooks right and the ux is better on those other netbooks

32. 13:25

    as well and I think they're slowly sort of like rediscovering Bitcoin so if you go and look at at the ordinals community they're getting a lot of users they're getting a lot of trading volumes like ordinals trade as much as like eth or salana nfts for example but the ux is still pretty bad right like it's slow it's sort of like you know pretty pretty expensive so that's one part like the industry rediscovering Bitcoin and then the second part is the new users like what we are all looking looking towards

33. 13:49

    so I think because um Bitcoin l2s like stable high quality l2s don't exist today like I know lightning has been around it has its own internal in and liquidity issues STX has been around but it's been slow like Bitcoin doesn't have a lot of network capacity so I think the next generation of l2s like stack Nakamoto and some of the newer ones that are being built and some upgrades to lightning through Light spark and others

34. 14:13

    I think when people start having with a really good L2 experience and that's their first onboarding to bitcoin versus Bitcoin L1 I think that's going to be a massive difference because I think it's it's a night and day difference between the ux our feeling with the chain abstraction is there's a huge number of Bitcoin L2 out there they all have sort of varying strengths um and users shouldn't be making a decision about which one they're using they should use the application the way the application

35. 14:36

    developer meant for it to be used without thinking about it too much um and I think a real strength of what we're doing here is that we can send users to Stacks without them needing to get a Stacks token or understand it and they can be in the best place for Bitcoin um smart contracts which is maybe not near because we're not sort of you know running on the Bitcoin uh consensus layer we're not running with the same guarantee

36. 15:00

    um and we don't have you know uh necessarily such a good name with Bitcoin Community um so can you see any ways that we could work together and any interesting things we could build there yeah absolutely so I think one model that I tell um you know other ecosystems like like near or others is that whenever you're thinking of stacks you should think of stacks as the middleware to bitcoin L1 right because Bitcoin L1

37. 15:23

    has a very limited you know scripting language um and and Stax has a pretty expressive scripting language which by the way we were talking about how ofer Nakamoto Stacks is upgrading to wasm as well so near runs on WM Stacks going to run on WM as well it will make developers life really easy if they want to if they want to do any cross chain stuff and so on but if you think of that as a middleware that is more expressive

38. 15:47

    like pretty much anything that you want to do you can do it and then we are focused on bitcoin security or Bitcoin sort of like you know trustless Bridges like especially with bitm and and others then you leave that work to the people who are sort of like specializing in that work and stack becomes like a Gateway or middleware to everything else if you want to go connect to salana connect to near sort of like take BDC

39. 16:11

    like stack would focus more on like bringing Bitcoin liquidity from the L1 to the L2 and then you can connect to that liquidity or take it to near or or other places I'm really excited for in the not too distant future when we can compile a smart contract deploy it on near deploy it on uh stacks and have the near contract talking to the stacks half of the contract and having sort of Aer

40. 16:32

    an application that really does span lots of different chains without thinking about it too much yep that that's that exactly what I'm excited about and I think one way to think about this is the Bitcoin L1 is so limited by design that doing that exact thing with the L1 would have been extremely hard if not impossible right so the the role that Stacks L2 is over or playing is that we have figured out how to build

41. 16:56

    like a good L2 and that's a great interface to have with with with something like there well thanks so much for your time it's great to learn about how stack Works awesome great to be here