WEBVTT - Automatic transcript; recognition may contain errors. Reviewed for technical wording and speaker labels. Times match the published episode. 00:00:10.700 --> 00:00:16.120 This is Bitcoin Explained, the podcast with the most boring name in Bitcoin. Hey, Sjors. 00:00:16.560 --> 00:00:17.040 What's up? 00:00:17.500 --> 00:00:18.540 Where are you? In Utrecht? 00:00:18.920 --> 00:00:19.580 That's right. 00:00:19.960 --> 00:00:23.960 All right. I'm still in San Salvador, El Salvador. This is my last week here. 00:00:24.280 --> 00:00:26.500 Oh, you're coming back? Or are you going somewhere else? 00:00:26.620 --> 00:00:31.340 It's going to be a little bit of a detour, but I'm basically heading back to the 00:00:31.340 --> 00:00:34.920 Netherlands. Yeah, through Miami, Nashville, then the Netherlands. 00:00:35.480 --> 00:00:37.700 Sounds fun. Fair warning, it's raining here. 00:00:38.180 --> 00:00:43.220 Yeah, not looking forward to that. So in my last week here, I think we're going 00:00:43.220 --> 00:00:48.200 to do another on-topic episode. We're going to discuss the Chivo wallet. 00:00:48.580 --> 00:00:50.360 Yes. Tell me about it. 00:00:50.700 --> 00:00:54.580 Yes, this episode will be a little bit different than others in a way. And that's 00:00:54.580 --> 00:00:59.100 also something we discuss because essentially we're talking about something that 00:00:59.100 --> 00:01:01.200 we have no idea how it actually works. 00:01:01.660 --> 00:01:05.860 Yes, but we have you in the field. You're able to try things and you've talked to 00:01:05.860 --> 00:01:11.640 people. So we can learn by observing a system. But we've talked previously 00:01:11.640 --> 00:01:16.200 that it's nice when a system is open source and transparent. The Chivo system is 00:01:16.200 --> 00:01:17.100 not really that. 00:01:17.510 --> 00:01:22.330 Yeah, so we're just kind of based on my personal observations, we're sort of 00:01:22.330 --> 00:01:27.950 going to try and explain how the wallet probably works and how it doesn't work 00:01:27.950 --> 00:01:33.910 and the good things and the bad things. And then I'm going to inquire your expert 00:01:33.910 --> 00:01:35.750 opinion on all of that, Sjors. 00:01:36.170 --> 00:01:36.470 Okay. 00:01:36.870 --> 00:01:41.270 So yeah, let's start at the beginning. First of all, everything about the Chivo 00:01:41.270 --> 00:01:44.910 app. Let me first explain what the Chivo app is, in case people don't know this. 00:01:45.390 --> 00:01:50.290 So Bitcoin became a legal tender in El Salvador a couple weeks ago. In fact, it 00:01:50.290 --> 00:01:56.210 became a mandatory tender, which means that merchants are obligated to accept it. 00:01:57.070 --> 00:02:01.710 I think that's what legal tender means, by the way. I know you could implement it 00:02:01.710 --> 00:02:02.730 differently, but... 00:02:02.710 --> 00:02:06.950 Maybe that's a whole different debate. Well, but I want to address that because 00:02:06.950 --> 00:02:11.770 it's not what legal tender means. What legal tender means is that if the legal 00:02:11.770 --> 00:02:17.350 system comes into play, essentially, then any debts incurred can be repaid in 00:02:17.350 --> 00:02:21.930 legal tender. So whether that's a credit card debt or any other, like if the 00:02:21.930 --> 00:02:27.370 judge says you need to repay this person, then that's where legal tender comes 00:02:27.370 --> 00:02:27.950 in, essentially. 00:02:28.390 --> 00:02:31.740 Okay, so it doesn't come in for every payment. It only comes in for like... if 00:02:31.740 --> 00:02:32.460 there's a dispute. 00:02:32.880 --> 00:02:37.780 Exactly. Usually, well, I mean, you can extend that a little bit and then the 00:02:37.780 --> 00:02:42.340 logic becomes any debt essentially can be repaid in legal tender because 00:02:42.340 --> 00:02:46.380 otherwise you just ask the judge and then the judge says, yep, you can repay in 00:02:46.380 --> 00:02:52.160 legal tender. But the point is that at first, before we even establish a contract 00:02:52.160 --> 00:02:57.930 or before you walk into my store, I'm not obligated to accept. a particular type 00:02:57.930 --> 00:03:02.930 of money from you it's only after the fact so to say that debts can be repaid in 00:03:02.930 --> 00:03:07.340 legal tender that's what legal tender means However, there are a few countries, 00:03:07.500 --> 00:03:11.760 and now El Salvador is one of them, where they go further than that and where 00:03:11.760 --> 00:03:16.120 they say legal tender also means that you are obligated to actually accept 00:03:16.120 --> 00:03:19.020 payments in this currency in the first place. 00:03:19.240 --> 00:03:23.600 Yeah, in other words, if you offer a product at all, then whoever pays it has to 00:03:23.600 --> 00:03:27.120 be able to do that using either Bitcoin or the US dollars. 00:03:27.600 --> 00:03:33.560 No, it doesn't even apply to US dollars. It's only applying to Bitcoin in El Salvador. 00:03:34.210 --> 00:03:37.570 That's fascinating. So you're not obligated to accept dollars. 00:03:37.970 --> 00:03:38.350 Exactly. 00:03:38.590 --> 00:03:38.690 Yeah. 00:03:39.150 --> 00:03:44.290 Interesting, right? Now I can go on a whole detour explaining all the pros and 00:03:44.290 --> 00:03:47.370 cons, but I'm not going to do that because we're going to focus on the more 00:03:47.370 --> 00:03:51.490 technical aspects of it. However, I will say that because of this mandatory 00:03:51.490 --> 00:03:57.210 aspect of the law, the government also apparently felt that they needed to 00:03:57.210 --> 00:04:03.160 apply a wallet that will allow merchants to accept payments in Bitcoin. but then 00:04:03.160 --> 00:04:07.780 have them automatically convert into US dollars. So that way no one is obligated 00:04:07.780 --> 00:04:12.140 to really accept Bitcoin or at least not to hold Bitcoin because the government 00:04:12.140 --> 00:04:15.700 says you just need to accept it, but then it's automatically transferred to 00:04:15.700 --> 00:04:18.800 dollars if that's what you prefer. Does that make sense? 00:04:19.200 --> 00:04:23.280 Yeah, you're avoiding as a merchant, you're not getting the exchange rate risk 00:04:23.280 --> 00:04:28.040 because the government is taking that away from you and they're even giving you 00:04:28.040 --> 00:04:32.500 at least some practical way to actually accept it. Like a tool, like a wallet. 00:04:32.920 --> 00:04:38.420 Yeah. So to summarize it, because it's made a mandatory tender, the government 00:04:38.420 --> 00:04:43.180 also deployed this app to tell people, look, it's mandated to accept it, but you 00:04:43.180 --> 00:04:46.300 don't have to hold it. And we're going to make sure you don't have to hold it 00:04:46.300 --> 00:04:49.600 because you can just use this app and have it converted to dollars automatically. 00:04:50.000 --> 00:04:54.400 So that's sort of, if I would have to say why this app is even a thing, why there 00:04:54.400 --> 00:04:59.840 even is this app, it's because there was this aspect of the lawmaking. Bitcoin 00:04:59.840 --> 00:05:00.700 mandatory tender. 00:05:00.980 --> 00:05:05.800 And that is also a way to say that this app probably originally was more of a 00:05:05.800 --> 00:05:10.220 merchant app. Like that was the focus of it. But then due to some other pivots, 00:05:10.440 --> 00:05:12.780 it's now also very much a consumer app. 00:05:13.360 --> 00:05:13.800 Possibly. 00:05:14.100 --> 00:05:17.540 Or was that already the... Maybe not. But anyway, in any case, what we're talking 00:05:17.540 --> 00:05:21.060 about is essentially two apps, even though they might physically be one app. We 00:05:21.060 --> 00:05:23.780 have a merchant app that allows stores to accept Bitcoin. 00:05:24.310 --> 00:05:25.070 Or dollars. 00:05:25.390 --> 00:05:30.390 Well, I guess just Bitcoin. And we have a consumer app that lets people pay with Bitcoin. 00:05:30.750 --> 00:05:31.970 Dollars as well, actually. 00:05:32.330 --> 00:05:33.510 And dollars. You mentioned that. 00:05:34.150 --> 00:05:40.010 You can also pay dollar to dollar with Chivo to a merchant Chivo. That's also 00:05:40.010 --> 00:05:45.840 possible. First, let me finish some of the basics. So this law was announced 00:05:45.840 --> 00:05:50.920 about three months before it went into effect. And that meant apparently or 00:05:50.920 --> 00:05:55.900 seemingly that the app also had to be developed within three months, which is not 00:05:55.900 --> 00:05:59.900 a lot of time to develop a wallet or a merchant app or anything like this is a 00:05:59.900 --> 00:06:04.940 short amount of time. I think you would agree. Who or what's developed it is a 00:06:04.940 --> 00:06:10.240 bit of a mystery. The government is not really giving any info. So the only info 00:06:10.240 --> 00:06:16.020 we have is sort of indirect or, you know, leaks or journalists that 00:06:16.020 --> 00:06:21.140 discovered things. It seems like the political lead, both the political lead and 00:06:21.140 --> 00:06:26.940 the technical lead are actually Venezuelans. And the technical lead has some 00:06:26.940 --> 00:06:32.910 background as a founder of like a Dash help desk company that's one of 00:06:32.910 --> 00:06:37.190 the things that has been reported on what i just mentioned was El Faro and then 00:06:37.190 --> 00:06:41.630 there's a forbes article that suggests that bitgo has had a big part of it 00:06:41.630 --> 00:06:47.450 there's also been leaked documents that suggested Athena the atm company had a 00:06:47.450 --> 00:06:53.310 big part of it i had Sergey from Bitrefill on the podcast a while ago no 00:06:53.310 --> 00:06:58.610 on the twitter spaces stream he said that there was probably several companies 00:06:58.610 --> 00:07:03.840 involved three, four, maybe five. So that all seems to sort of add up. There's 00:07:03.840 --> 00:07:07.640 different aspects of the wallet developed by different companies. And it's all 00:07:07.640 --> 00:07:11.920 sort of been glued together. And now we have the Chivo app. That's sort of what 00:07:11.920 --> 00:07:17.700 it looks like to me and what I'm hearing indirectly. Yeah. So 00:07:17.700 --> 00:07:19.520 that's what the Chivo app is. 00:07:19.760 --> 00:07:24.020 And maybe another piece of context that's useful to point out before we go deeper 00:07:24.020 --> 00:07:28.530 into the app is that people don't have to use this app. You know, especially for 00:07:28.530 --> 00:07:32.670 the Bitcoin things, of course, it is actually Bitcoin that people are using or 00:07:32.670 --> 00:07:38.570 can use. So as a customer, in principle, you can use your own Bitcoin wallet. And 00:07:38.570 --> 00:07:42.690 as a merchant, in principle, you can use your own Bitcoin wallet. And in fact, 00:07:42.790 --> 00:07:46.970 you've demonstrated this at McDonald's where you used, I think, your own or you 00:07:46.970 --> 00:07:50.470 used the Bitcoin Beach wallet and you paid McDonald's, which was using OpenNode. 00:07:50.730 --> 00:07:55.450 So you were not using Chivo on any side of that McDonald's transaction you did, 00:07:55.610 --> 00:07:56.950 which became very famous. 00:07:57.150 --> 00:08:01.930 That is correct. I will say two things. There are two things to incentivize the 00:08:01.930 --> 00:08:06.070 use of the Chivo app. So you're right that it's not obligated to use Chivo app. 00:08:06.110 --> 00:08:10.430 You can use any Bitcoin wallet you want. There are two things that incentivize 00:08:10.430 --> 00:08:15.270 use of the Chivo app. First is that any Salvadoran who downloads and starts using 00:08:15.270 --> 00:08:20.480 the Chivo app gets... $30 worth of Bitcoin for free. So there's a monetary 00:08:20.480 --> 00:08:25.240 incentive directly to use the Chivo app, to download it, to register an account. 00:08:25.520 --> 00:08:29.600 And then the second one is that the conversion that I mentioned from dollars to 00:08:29.600 --> 00:08:34.300 Bitcoin or Bitcoin to dollars, I think it works both way, is free if you use the 00:08:34.300 --> 00:08:37.700 Chivo app. While, you know, if you use any other merchant service, then usually 00:08:37.700 --> 00:08:41.720 there's a cost involved, there's fees for conversion. And with the Chivo, that's 00:08:41.720 --> 00:08:45.940 free. So merchants are incentivized to use Chivo as well. I would say. 00:08:46.140 --> 00:08:50.000 Yeah. And there may also be some slightly different counterparty risk when you're 00:08:50.000 --> 00:08:53.400 dealing with a sovereign government versus a private enterprise. 00:08:53.620 --> 00:08:59.080 Of course, I will say that. So the Chivo app is actually... So there's a Chivo 00:08:59.080 --> 00:09:03.620 company and it's like a subsidiary of the government that's maintaining the 00:09:03.620 --> 00:09:08.660 wallet. It's called Chivo. I think the company is just called Chivo, but it's not 00:09:08.660 --> 00:09:14.080 clear who actually owns the company or operates it. Again, there is a lot of... I 00:09:14.080 --> 00:09:18.340 mean, I consider it a lack of transparency. Maybe that's a colored way of putting 00:09:18.340 --> 00:09:24.220 it, objective, more facts. Let's just say there's a lot we don't know. 00:09:25.060 --> 00:09:26.800 There's a lot we don't know. 00:09:27.280 --> 00:09:30.640 Yeah, so even the counterparty risk is literally unknown, right? Because we're 00:09:30.640 --> 00:09:33.160 assuming that this is a government thing and that the government is your 00:09:33.160 --> 00:09:36.940 counterparty, but it may actually turn out that, no, the government is not your 00:09:36.940 --> 00:09:41.460 counterparty. But at least, you know, you get the vote a little bit about this 00:09:41.460 --> 00:09:41.940 sort of stuff. 00:09:42.260 --> 00:09:47.120 Okay, so I think I've now said four times that these were the basics and now get 00:09:47.120 --> 00:09:50.580 into the technicals, but I lied all four times because there's one more basic 00:09:50.580 --> 00:09:55.840 thing I want to mention. There's also the Chivo ATM, which, you know, it's 00:09:55.840 --> 00:10:01.560 branded similarly. What we know for a fact is that these are being deployed by 00:10:01.560 --> 00:10:07.460 Athena, Athena, the ATM producer. And I understand there are two types of this. 00:10:07.700 --> 00:10:11.190 We're not going to get into this in detail in this episode, I think. But there 00:10:11.190 --> 00:10:15.250 are two types, essentially, or two types of backends or two types of software 00:10:15.250 --> 00:10:19.390 developed by two different companies. But it's basically Athena that got the 00:10:19.390 --> 00:10:23.410 contract for the ATMs and there are 200 ATMs in the country now. 00:10:23.590 --> 00:10:28.810 But it does mean that rather than the 10% or whatever or 5% that you used to pay 00:10:28.810 --> 00:10:33.550 for a commercially run Bitcoin ATM to buy and sell, now you're suddenly getting 00:10:33.550 --> 00:10:35.730 it for free or at least subsidized by the government. 00:10:36.030 --> 00:10:41.400 Correct. You can use the ATMs for free. There's no conversion fee. And yes, of 00:10:41.400 --> 00:10:45.980 course, that means that it's still not free to ship cash to and from these 00:10:45.980 --> 00:10:49.780 machines and operate them and blah, blah, blah. So that's essentially subsidized 00:10:49.780 --> 00:10:54.990 by the government. In other words, it's subsidized by the taxpayer. Another basic 00:10:54.990 --> 00:10:59.150 thing, I guess I keep coming up with new basic things. Sjors, how do you like that? 00:10:59.430 --> 00:10:59.950 That's good. 00:11:00.410 --> 00:11:04.550 One more basic thing is that apparently the wallet has been downloaded. At the 00:11:04.550 --> 00:11:08.950 time of recording, the wallet has been downloaded over 2 million times. Of 00:11:08.950 --> 00:11:12.750 course, we have no way to verify that, but that's the numbers that have been published. 00:11:13.210 --> 00:11:15.250 Doesn't the Android Play Store publish some of that? 00:11:15.430 --> 00:11:16.450 Oh, I don't know. Does it? 00:11:16.670 --> 00:11:19.810 That could still be like a million Chinese clones. But let's assume the numbers 00:11:19.810 --> 00:11:21.270 true. How many people live in El Salvador? 00:11:21.800 --> 00:11:26.280 Yes, somewhere between 6 and 7 million people. So it's like one third of the 00:11:26.280 --> 00:11:28.060 country has downloaded this wallet. 00:11:28.540 --> 00:11:33.100 Yeah, and obviously, at least I think a reasonable guess is to say that the $30 00:11:33.100 --> 00:11:35.580 airdrop, you know, is an incentive to do that. 00:11:35.840 --> 00:11:41.560 Oh, I mean, I can basically confirm that a lot of people, it's become a whole 00:11:41.560 --> 00:11:45.560 thing where a lot of people... We're skipping ahead a little bit, but since I 00:11:45.560 --> 00:11:49.880 started my sentence, I'll finish it. So a lot of people are downloading the 00:11:49.880 --> 00:11:55.640 wallet and then essentially selling their $30 to some friend or 00:11:55.640 --> 00:12:01.500 someone on Facebook or whatever for $25 in cash. And then they just 00:12:01.500 --> 00:12:07.400 get $25 cash in hand and then they're happy. And then whoever bought the $30 of 00:12:07.400 --> 00:12:12.220 Bitcoin for $25 of cash, he's going to collect it from like 10 people and then... 00:12:12.340 --> 00:12:16.780 stand in line at one of the atms to get the money out and he made you know 50 00:12:16.780 --> 00:12:18.940 bucks if he did that with 10 people 00:12:18.940 --> 00:12:21.560 yeah or sell it to somebody else in the line and yeah 00:12:21.560 --> 00:12:24.880 yeah so there's definitely a lot of people that are downloading the wallet is 00:12:24.880 --> 00:12:30.820 basically just to cash out the funds for dollars bukele published some stats 00:12:30.820 --> 00:12:36.660 the other days which suggests that there's quite a few transactions happening but 00:12:36.660 --> 00:12:41.000 i i don't know what to think of that we definitely can't verify these stats I 00:12:41.000 --> 00:12:44.940 also don't know, is this one guy playing around doing like a thousand 00:12:44.940 --> 00:12:48.940 transactions back and forth from Bitcoin to dollar because it's free anyways? Or 00:12:48.940 --> 00:12:52.720 are there really thousand people paying for something in a shop? I doubt the 00:12:52.720 --> 00:12:57.100 latter because I just don't really see people using it a lot. I mean, my 00:12:57.100 --> 00:13:01.380 perspective is limited, obviously. I'm one guy just sort of walking around and 00:13:01.380 --> 00:13:04.860 half of the day I'm in my hotel room anyways. It's not like I'm doing research on 00:13:04.860 --> 00:13:10.120 the street every day, all day. But just from sort of looking around and... Or 00:13:10.120 --> 00:13:14.460 asking if I can pay with Bitcoin and then sort of based on the response, I can 00:13:14.460 --> 00:13:18.660 tell that I'm the first person to ask that that day, or at least it doesn't 00:13:18.660 --> 00:13:22.480 happen very often. So just based on my personal experience, I don't think people 00:13:22.480 --> 00:13:24.380 are really using it a lot. 00:13:24.680 --> 00:13:27.880 Yeah, if they still have to charge an iPad, then that's usually a sign they 00:13:27.880 --> 00:13:28.740 haven't done it for a while. 00:13:29.180 --> 00:13:30.080 Right, yeah. 00:13:30.220 --> 00:13:33.560 That's my experience in other cities, in other countries. Okay, so maybe we 00:13:33.560 --> 00:13:36.140 should start with the user-facing app. 00:13:36.340 --> 00:13:40.620 and talk about that a bit let's start actually discussing the app as far as we 00:13:40.620 --> 00:13:45.820 can actually do that so yeah there is the chivo application the wallet which i 00:13:45.820 --> 00:13:51.600 have on my phone now actually some local was friendly enough to give me her 00:13:51.600 --> 00:13:55.940 app essentially access to her app so i can sort of play around with it and see 00:13:55.940 --> 00:14:01.580 how it works and see what can be done with it so Let me open it right now while 00:14:01.580 --> 00:14:06.760 we are recording this podcast so I can sort of give a very short overview of it. 00:14:07.580 --> 00:14:11.400 It's loading, Sjors. I should have opened this before we started [unclear] 00:14:11.880 --> 00:14:13.240 Well, here's the magic of editors. 00:14:14.460 --> 00:14:20.000 Yeah, good point. All right. So it's a pretty basic app. There's nothing too 00:14:20.000 --> 00:14:23.600 interesting, I would say. But it has a home screen where you can see the history 00:14:23.600 --> 00:14:28.740 of transactions. It has a conversion screen, like I mentioned, where it converts 00:14:28.740 --> 00:14:34.680 USD to BTC and back. And then it has an options screen with 00:14:34.680 --> 00:14:39.480 options. All right. The first thing to note is that there are two ways of 00:14:39.480 --> 00:14:44.980 receiving money. So one is in dollars, one is in Bitcoin, and the dollar option 00:14:44.980 --> 00:14:49.960 is basically for other Chivo apps. So that is, if I have a dollar account and 00:14:49.960 --> 00:14:53.360 someone else has a dollar account, then you use the dollar option and then the 00:14:53.360 --> 00:14:55.080 dollars go from my wallet to your wallet. 00:14:55.600 --> 00:14:57.080 Right, so that's essentially PayPal. 00:14:57.420 --> 00:15:02.980 That's essentially PayPal, yeah, or Venmo or one of these. And we can safely 00:15:02.980 --> 00:15:07.210 assume that... Hopefully the money is in a bank account somewhere and there's 00:15:07.210 --> 00:15:10.690 just a ledger entry. This obviously has nothing to do with Bitcoin or Lightning. 00:15:10.930 --> 00:15:13.790 There's no Lightning transaction. I think that's safe to assume. 00:15:13.870 --> 00:15:17.030 We can know for sure that these dollars do not exist in the app itself. They 00:15:17.030 --> 00:15:22.850 exist in a database on a server and they may or may not be backed by US 00:15:22.850 --> 00:15:26.670 dollars in a bank account to the full extent or some partial extent. 00:15:27.050 --> 00:15:27.290 Right. 00:15:32.930 --> 00:15:37.390 Now, then there's a Bitcoin option. And if you open that, you get just a Bitcoin 00:15:37.390 --> 00:15:42.950 address, just an on-chain address. Now, there is also, it's really hidden in the 00:15:42.950 --> 00:15:48.310 app. You need to go to like other payments methods, other wallets, actually. And 00:15:48.310 --> 00:15:52.890 then if you go there, so you sort of dig in the receive page, then you actually 00:15:52.890 --> 00:15:54.810 find a Lightning option. 00:15:55.310 --> 00:15:56.070 Very cool. 00:15:56.570 --> 00:16:00.790 So it works with Lightning as well. And then you can send sort of same idea. 00:16:01.230 --> 00:16:06.730 dollars of bitcoin and if you choose bitcoin then you can scan a qr code which 00:16:06.730 --> 00:16:11.830 can be either bitcoin qr code or lightning qr code now the first thing i'll say 00:16:11.830 --> 00:16:16.690 so far so good right i will say however that every time i've tried to accept 00:16:16.690 --> 00:16:22.330 funds receive funds that works every time i've tried to send funds it did not work 00:16:22.330 --> 00:16:23.010 okay 00:16:23.540 --> 00:16:29.160 Is that because this wallet now exists on two phones and that's causing 00:16:29.160 --> 00:16:35.100 some kind of error? Is it because the wallet itself is buggy? Is it because some 00:16:35.100 --> 00:16:39.920 other reason? I don't know. All I know is I have literally not been able to send 00:16:39.920 --> 00:16:45.000 any funds either on-chain Bitcoin or over Lightning. The only thing that has 00:16:45.000 --> 00:16:50.160 worked for me is sending funds to other Chivo wallets. That actually worked when 00:16:50.160 --> 00:16:54.200 we were at the merchant and we wanted to send funds. That works, but sending 00:16:54.200 --> 00:16:58.420 Bitcoin either on Chain or on Lightning, literally every time I tried it, it just 00:16:58.420 --> 00:16:58.880 didn't work. 00:16:59.380 --> 00:17:00.380 Okay, so that's interesting. 00:17:00.580 --> 00:17:04.020 I would personally argue, but this is a personal opinion, that for a Bitcoin 00:17:04.020 --> 00:17:08.600 wallet, that's sub-ideal. If you can't make any transactions... 00:17:08.600 --> 00:17:09.840 Well, you can, you can receive. 00:17:10.160 --> 00:17:10.560 Right. 00:17:10.880 --> 00:17:14.120 And we'll get back to that for why that's interesting. So when you installed this 00:17:14.120 --> 00:17:17.660 app, did you get a 24-word or 12-word mnemonic that you had to write down? 00:17:18.360 --> 00:17:20.960 Excellent question, Sjors. I did not. No. 00:17:21.120 --> 00:17:25.460 Okay, so then my guess is going to be that these coins are not really on your 00:17:25.460 --> 00:17:27.240 phone either, just like the dollars. 00:17:27.790 --> 00:17:33.690 I am basically 100% sure that you are right. And this, I mean, 00:17:33.830 --> 00:17:37.670 we don't even have to guess. Like, yes, this is obviously a custodial. 00:17:37.850 --> 00:17:40.810 For the lightning node, you can find out very easily. If you make a lightning 00:17:40.810 --> 00:17:46.150 invoice and your phone does not get screaming hot, then it's probably not running 00:17:46.150 --> 00:17:49.350 on your phone. But yeah, so it sounds like just like the dollars, there is a 00:17:49.350 --> 00:17:54.010 database somewhere in El Salvador or some other place in the world that is 00:17:54.010 --> 00:17:58.970 creating Bitcoin addresses and telling the app. Show this address or show the QR 00:17:58.970 --> 00:18:03.130 code. And then whenever somebody sends Bitcoin to that place, those Bitcoins go 00:18:03.130 --> 00:18:08.350 to some wallet somewhere in the world. And the number on your account goes up. 00:18:08.430 --> 00:18:12.570 And that's just the number in the database. But that means that somebody's 00:18:12.570 --> 00:18:16.650 hopefully taking care of these coins. But of course, you don't know. Again, you 00:18:16.650 --> 00:18:20.030 have no idea whether that's fractional or not. 00:18:20.460 --> 00:18:25.900 Yes, exactly. So the Bitcoin in your wallet are, I would argue, better 00:18:25.900 --> 00:18:31.740 described as Bitcoin IOUs in your wallet. You're essentially getting a promise 00:18:31.740 --> 00:18:37.380 of Bitcoin. You should be able to withdraw them to your own wallet eventually, if 00:18:37.380 --> 00:18:42.720 it works at all. But you're not controlling your own keys. You're not controlling 00:18:42.720 --> 00:18:46.720 your own coins. In that sense, it has very little to do with Bitcoin. 00:18:46.900 --> 00:18:51.320 Yeah, it's like Coinbase. But with Lightning, some Lightning support and you 00:18:51.320 --> 00:18:52.240 can't pay anyone. 00:18:52.360 --> 00:18:53.420 You can't pay anyone. 00:18:53.580 --> 00:18:57.000 But I assume you've talked to at least some people who have been able to use the 00:18:57.000 --> 00:18:58.700 Chivo wallet to send money out. 00:18:59.160 --> 00:19:02.860 Yes, I have heard of examples where it actually did work. Correct. 00:19:03.440 --> 00:19:06.760 Right. Because a general pattern that would have me very worried would be where 00:19:06.760 --> 00:19:12.520 lots of people are able to send Bitcoin to this wherever Chivo is. And nobody's 00:19:12.520 --> 00:19:16.480 able to send Bitcoin away from whatever this Chivo is. That would suggest that, 00:19:16.480 --> 00:19:20.680 you know, Bitcoins are accumulating somewhere. No, I mean, it's more like a 00:19:20.680 --> 00:19:24.060 usability problem. Your wallet doesn't work well, but other people's wallets work 00:19:24.060 --> 00:19:25.360 better or it's just luck. 00:19:25.860 --> 00:19:30.740 Yeah, I mean, I think it's just buggy. And because it's closed source, which you 00:19:30.740 --> 00:19:35.180 mentioned, we can't figure out what the bug is. And people like you can't help 00:19:35.180 --> 00:19:39.420 solve it either. It's just a black box. And all I know is that it doesn't work 00:19:39.420 --> 00:19:45.240 for me. Yeah. What I'm also pretty sure of, but again, who knows, but I 00:19:45.240 --> 00:19:49.640 think it's probably safe to assume that Bitcoin transactions from Chivo to Chivo 00:19:49.640 --> 00:19:55.420 are also just custodial ledger entries. It's not like, because why would you make it? 00:19:55.660 --> 00:19:59.760 Well, that is something you can find out, right? So you can send, say, $10 of 00:19:59.760 --> 00:20:02.920 Bitcoin to this address that the app is showing, and then you look at a block 00:20:02.920 --> 00:20:07.680 explorer. And you start just toggling it between dollars and Bitcoin or sending 00:20:07.680 --> 00:20:12.360 it to somebody else. And if that doesn't correlate with actual transactions on 00:20:12.360 --> 00:20:15.680 the chain, then you know something is in the database. My guess would be that the 00:20:15.680 --> 00:20:19.540 money stays in that address until some point their server is sweeping a bunch of 00:20:19.540 --> 00:20:23.420 addresses at the same time, unrelated to when you're making payments. Because 00:20:23.420 --> 00:20:27.590 they'll probably treat it as one big account. Although that depends, and this 00:20:27.590 --> 00:20:31.690 ties into your news article, I think there was mention of BitGo being involved. 00:20:31.870 --> 00:20:36.250 And I think BitGo at least offers services where every customer has a unique, 00:20:36.530 --> 00:20:41.090 like has a segregated account, but they may not be using that. I think the 00:20:41.090 --> 00:20:44.690 technical term is omnibus account versus individual accounts. 00:20:45.170 --> 00:20:49.670 Right. So insofar that I've been able to test this, I have made one Bitcoin 00:20:49.670 --> 00:20:54.930 transaction to a merchant that used Chivo. Now, if I go into my transaction 00:20:54.930 --> 00:20:59.390 history and if I click at it, I don't see any Bitcoin address that it has been 00:20:59.390 --> 00:21:05.070 sent to. It just says an amount. For other transactions, I am seeing Bitcoin addresses. 00:21:05.570 --> 00:21:07.230 But that's inside your wallet, right? 00:21:07.290 --> 00:21:08.830 Inside my own wallet, yes, correct. 00:21:09.250 --> 00:21:12.290 But if you look at that address on a Wallet Explorer, Bitcoin Explorer, you might 00:21:12.290 --> 00:21:14.230 see something moving, but probably you will not. 00:21:14.650 --> 00:21:18.530 Yes, well, I might. But at this point, I don't know what address it originally 00:21:18.530 --> 00:21:22.530 was or how that originally... There's no way for me to figure it out. Now, my 00:21:22.530 --> 00:21:26.870 history does not show an address that it would have been sent to. It just shows 00:21:26.870 --> 00:21:30.050 there was a payment made to a Chivo app. So my... 00:21:30.050 --> 00:21:33.510 Yeah, but then on the blockchain, you would see a transaction around the same 00:21:33.510 --> 00:21:34.960 time. Or you don't. 00:21:35.280 --> 00:21:39.240 No, I get that. It's just, we have no way of verifying that right now. 00:21:39.580 --> 00:21:40.040 That's true. 00:21:40.620 --> 00:21:46.300 One thing I'll note is that, so I mentioned the free $30 that people got when 00:21:46.300 --> 00:21:51.700 they registered their wallet for the first time. First of all, this does require 00:21:51.700 --> 00:21:56.960 that you include all your personal info. So obviously there's no privacy involved 00:21:56.960 --> 00:22:01.160 at all. The government knows, or at least whoever is operating a Chivo wallet 00:22:01.160 --> 00:22:05.800 knows who's paying who, when, how much. The second thing is that these first $30 00:22:05.800 --> 00:22:11.720 were actually locked. They had a restriction on it. These first $30 could only 00:22:11.720 --> 00:22:17.000 be spent to other Chivo wallets. So the idea here is to incentivize that people 00:22:17.000 --> 00:22:22.860 would actually use these $30 to buy something, to walk in a store and to buy. 00:22:23.530 --> 00:22:25.530 whatever it is people are buying here. 00:22:25.830 --> 00:22:29.850 And this was $30 in dollars or $30 in Bitcoin? 00:22:30.190 --> 00:22:31.410 $30 in Bitcoin. 00:22:31.710 --> 00:22:36.950 So if they kept it, then the price would start fluctuating. So it becomes Bitcoin 00:22:36.950 --> 00:22:39.370 the second you register the app, I guess. 00:22:39.650 --> 00:22:44.910 Yes, I think that's right. At the time you register, that's when you get $30 and 00:22:44.910 --> 00:22:50.270 it becomes Bitcoin essentially. So these first $30 were restricted, 00:22:50.270 --> 00:22:54.760 like I explained. I personally think that was a big mistake. I think it goes 00:22:54.760 --> 00:22:59.140 against the whole philosophy of Bitcoin where you can send your money anywhere 00:22:59.140 --> 00:23:03.700 you want. Second of all, it gave a lot of people bad experience because anyone 00:23:03.700 --> 00:23:07.980 who walked into a McDonald's found out that they couldn't actually pay for the 00:23:07.980 --> 00:23:10.840 Big Mac that they thought they were going to be able to pay for with a free $30. 00:23:11.640 --> 00:23:16.700 Plus, a company like a McDonald's and a bunch of others, they actually went the 00:23:16.700 --> 00:23:21.300 extra mile to make sure that they could accept Bitcoin on day one. They didn't 00:23:21.300 --> 00:23:25.720 wait for the Chivo app. They made sure like they want to be ready. They want to 00:23:25.720 --> 00:23:28.860 make sure that all these people can walk into the McDonald's and spend their 00:23:28.860 --> 00:23:33.360 coins. And then they didn't. So the companies that went the extra mile actually 00:23:33.360 --> 00:23:37.000 were punished for that. So that was another bad thing. And third of all, I 00:23:37.000 --> 00:23:40.480 already mentioned this. It didn't even work because most people just figured out 00:23:40.480 --> 00:23:45.040 how to cash it out after all. And they did cash it out. So the $30 restriction 00:23:45.040 --> 00:23:47.180 was a big mistake if you ask me. 00:23:47.570 --> 00:23:51.950 So the $30, you could send it to another Chivo wallet, but not to an external 00:23:51.950 --> 00:23:56.330 wallet, right? So any merchant using Chivo would be able to accept it, but any 00:23:56.330 --> 00:24:00.110 merchant not using Chivo would not be able to accept it, which is exactly the 00:24:00.110 --> 00:24:02.630 opposite of the point of being interoperable. 00:24:03.070 --> 00:24:08.210 Yeah, that's not ideal. After it was spent, so once these $30 were spent once to 00:24:08.210 --> 00:24:13.650 another Chivo app, Then they became freely spendable anywhere. But it was this 00:24:13.650 --> 00:24:15.990 first hop that was restricted to other Chivo apps. 00:24:16.490 --> 00:24:19.870 Yeah, I guess we're going to have to do another episode about Covenants, which 00:24:19.870 --> 00:24:21.310 covers this phenomena. 00:24:21.730 --> 00:24:25.430 Right, right. Yeah, so what else about the app? I mean... 00:24:25.430 --> 00:24:28.230 We've talked about it. It's closed source. It's custodial. 00:24:28.430 --> 00:24:28.830 Yes. 00:24:28.930 --> 00:24:33.170 So the money is not in the thing itself. There appear to be some bugs. I think 00:24:33.170 --> 00:24:38.310 you've mentioned a few. that you're unable to pay and we talked about the airdrop 00:24:38.310 --> 00:24:40.490 so maybe we can talk about the merchant app 00:24:40.850 --> 00:24:45.670 Yeah. Okay. So let's move to the merchant app. I want to clarify one thing. I've 00:24:45.670 --> 00:24:50.690 so far sounded very negative about the wallet. That's because I am. I think it's 00:24:50.690 --> 00:24:54.070 a piece of shit. I think they shouldn't have released something that's clearly 00:24:54.070 --> 00:24:59.550 not finished. And I don't feel like defending this at all. I've seen some people 00:24:59.550 --> 00:25:03.630 defend it with arguments like, well, they're trying something new and they rolled 00:25:03.630 --> 00:25:08.460 it out in. you know, record time and give them a slack. I think, no, you're 00:25:08.460 --> 00:25:12.240 dealing with financial software. This is other people's money. There was no real 00:25:12.240 --> 00:25:17.040 reason to necessarily release it on September 7th. They could have just said, 00:25:17.180 --> 00:25:20.880 okay, look, Bitcoin is legal tender now, but the wallet is not finished. We're 00:25:20.880 --> 00:25:23.580 not going to enforce the mandatory part of the law. We're going to keep 00:25:23.580 --> 00:25:27.410 developing the wallet; we're going to roll it out as a pilot. We're going to 00:25:27.410 --> 00:25:30.690 first roll it out to a thousand people, let them experiment. Blah, blah, blah. 00:25:30.770 --> 00:25:34.970 They could have done so many things, but instead they felt the need to, for 00:25:34.970 --> 00:25:38.810 whatever reason, roll it out to millions of people at the same time. And millions 00:25:38.810 --> 00:25:42.150 of people had a bad experience. I think it was a bad mistake. And I don't really 00:25:42.150 --> 00:25:45.970 see why we shouldn't be allowed to criticize that. I'm definitely not going to 00:25:45.970 --> 00:25:49.650 bite my tongue because I like the project or anything like that. 00:25:49.930 --> 00:25:51.930 Well, you're still in El Salvador. I'm not. 00:25:52.210 --> 00:25:53.350 Yes, as well. 00:25:53.590 --> 00:25:57.930 But yeah, no, I agree with, this sounds like a reasonable assessment. This, I 00:25:57.930 --> 00:26:01.550 think, could have been predicted in advance that when you tried something this 00:26:01.550 --> 00:26:05.330 ambitious, because I do think it's very ambitious, it's better to roll it out 00:26:05.330 --> 00:26:06.410 more carefully. 00:26:06.710 --> 00:26:10.790 It was predicted in advance. That's the other thing. It was predicted in advance. 00:26:10.990 --> 00:26:15.990 I know for a fact that several people and several companies literally told the 00:26:15.990 --> 00:26:19.790 El Salvadoran government that three months is a crazy timeline for something like 00:26:19.790 --> 00:26:25.470 this. They decided to push through with it anyways. It backfired, or at least it 00:26:25.470 --> 00:26:31.110 didn't go well, as predicted. I think at this point, it's completely fair to 00:26:31.110 --> 00:26:34.530 criticize the failure that this launch has been. 00:26:35.090 --> 00:26:41.030 Essentially, you're launching PayPal plus Coinbase, the whole 00:26:41.030 --> 00:26:44.910 exchange mechanism, and you're doing Lightning, which is all the work that Jack 00:26:44.910 --> 00:26:49.010 Mallers and other people have done, and you're trying to explain that to a whole 00:26:49.010 --> 00:26:53.390 population. Then you're doing an airdrop, which itself is very complicated. Yeah, 00:26:53.490 --> 00:26:57.770 this is very ambitious and not something you can do in three months. Maybe 00:26:57.770 --> 00:27:02.170 Singapore could have done it, but... I don't think it was a realistic plan. 00:27:02.430 --> 00:27:05.310 Anyhow, we'll see how that evolves. Moving on to the merchant app. 00:27:05.410 --> 00:27:09.790 Oh yeah, I will. Okay, so if I do want to end on a positive note on the wallet 00:27:09.790 --> 00:27:14.890 part, I do think it is being improved. It is getting better from what I 00:27:14.890 --> 00:27:18.810 understand. Even though my transactions are still not coming through, I am 00:27:18.810 --> 00:27:23.530