WEBVTT - Automatic transcript; recognition may contain errors. Reviewed for technical wording and speaker labels. Times match the published episode.

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<v Aaron van Wirdum>Live from Utrecht, this is the Van Wirdum Sjorsnado.

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<v Sjors Provoost>Hello.

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<v Aaron van Wirdum>Sjors, I have another announcement to make.

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<v Sjors Provoost>Exciting, tell me.

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<v Aaron van Wirdum>Did you know you can find the Van Wirdum Sjorsnado on its own RSS feed?

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<v Sjors Provoost>I did, yes. And this is actually a new recording of that announcement. This is

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<v Sjors Provoost>not spliced in by the editor.

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<v Aaron van Wirdum>The thing is, the existing Bitcoin Magazine RSS feed also has the

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<v Aaron van Wirdum>Van Wirdum Sjorsnado on it. But that feed is going to be broken up. And

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<v Aaron van Wirdum>all podcasts are going to have their own feed, and then there's going to be an

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<v Aaron van Wirdum>other aggregated feed. But the point is, our listeners that are listening to

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<v Aaron van Wirdum>the Bitcoin Magazine main feed, and they want to keep listening to us, now they

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<v Aaron van Wirdum>really need to switch to the Van Wirdum Sjorsnado RSS feed, or the

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<v Aaron van Wirdum>Van Wirdum Sjorsnado

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<v Aaron van Wirdum>podcast thingy in their app. Or maybe they can switch to the new aggregated feed

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<v Aaron van Wirdum>when it's there, but it's going to take a month.

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<v Sjors Provoost>No, you should switch immediately.

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<v Aaron van Wirdum>Yes, switch now. Switch now.

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<v Sjors Provoost>Cool. I always listen to dedicated podcast feeds, but it's just my own listening habit.

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<v Aaron van Wirdum>Especially [unclear].

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<v Sjors Provoost>Yes.

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<v Aaron van Wirdum>Sjors, what do you think of Ethereum?

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<v Sjors Provoost>It exists.

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<v Aaron van Wirdum>Yes. What do you think of DeFi?

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<v Sjors Provoost>I've heard of it.

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<v Aaron van Wirdum>Wouldn't you love it if you could use DeFi on Bitcoin?

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<v Sjors Provoost>No.

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<v Aaron van Wirdum>No.

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<v Aaron van Wirdum>Good. That's a great start of this podcast, because we're we're gonna explain how

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<v Aaron van Wirdum>to do that.

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<v Sjors Provoost>Exactly.

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<v Aaron van Wirdum>Here's the thing, oh wait, have you ever been to the…

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<v Sjors Provoost>I'm always in favor of explaining how one might do something even if it's not

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<v Sjors Provoost>something I want to do. For example, I can… we can explain how to burn coins you

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<v Sjors Provoost>know, yeah, chain, we've done that with Ruben too.

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<v Aaron van Wirdum>You don't have to do that. You don't have to… have to actually burn coins. Well

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<v Aaron van Wirdum>the other thing I want to ask, have you ever been to the… laBITconf, I think

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<v Aaron van Wirdum>that's what it's called the… the Latin American one?

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<v Sjors Provoost>No, I heard it's great fun but unfortunately not. Yeah, [unclear] in Latin

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<v Sjors Provoost>America period.

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<v Aaron van Wirdum>So I've been in Suriname for a while. Unless you count Mexico, I've been there as

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<v Aaron van Wirdum>well. Anyway this is getting off the rails. Okay so here's the point. I'll get to

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<v Aaron van Wirdum>the point, dear listeners, I'm gonna get to the point right now.

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<v Sjors Provoost>This is actually take four.

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<v Aaron van Wirdum>RSK, you know about RSK?

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<v Sjors Provoost>Yeah.

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<v Aaron van Wirdum>Okay, so RSK is a Ethereum-like sidechain for Bitcoin. And on laBITconf,

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<v Aaron van Wirdum>they announced a new pegging system. Do you know what pegging means?

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<v Sjors Provoost>Well, yeah, it means trying to keep the exchange rate the same, right? Central

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<v Sjors Provoost>banks are very good at that.

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<v Aaron van Wirdum>Apparently, it's slang for fornicating. But that's not what we're talking about.

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<v Sjors Provoost>Exactly.

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<v Aaron van Wirdum>We're talking about a different kind of pegging where you… like, Sjors said, you

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<v Aaron van Wirdum>peg coins to other coins. Okay, so RSK does this. We're gonna explain how the new

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<v Aaron van Wirdum>pegging… peg in and peg out mechanism works. Okay, first of all let's start at

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<v Aaron van Wirdum>the start RSK is a sidechain.

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<v Sjors Provoost>What are sidechains?

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<v Aaron van Wirdum>Great question. So a sidechain is a blockchain, it's a separate

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<v Aaron van Wirdum>blockchain from the Bitcoin blockchain but in some way or another you can

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<v Aaron van Wirdum>essentially move bitcoins to the sidechain and then move them back to Bitcoin.

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<v Aaron van Wirdum>Slightly more technical there are different tokens on the sidechain so there is a

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<v Aaron van Wirdum>different blockchain with different tokens, but somehow you can always exchange

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<v Aaron van Wirdum>one of the tokens on the other blockchain for a Bitcoin. Therefore, they should

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<v Aaron van Wirdum>be worth the same because if you get one of these other tokens, you can always

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<v Aaron van Wirdum>just get a Bitcoin. So, you know, they should be valued the same. And as long as

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<v Aaron van Wirdum>you have a system where you can do that both ways, so you have a Bitcoin and you

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<v Aaron van Wirdum>can exchange it for a token or you have a token you can exchange for a Bitcoin,

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<v Aaron van Wirdum>then that's what we would call a sidechain, I think. There's some discussion

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<v Aaron van Wirdum>about the definition. That's my definition of a sidechain. I call that a

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<v Aaron van Wirdum>sidechain if it does that.

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<v Sjors Provoost>I think that's fine. I mean, others might have all sorts of arguments why maybe

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<v Sjors Provoost>the thing on the side is not a chain, or maybe… the thing on this… or maybe… you

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<v Sjors Provoost>know it… because it involves more trust on the other side, it's not like the

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<v Sjors Provoost>original Satoshi's vision of a sidechain, even though I don't think Satoshi was

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<v Sjors Provoost>the one envisioning the sidechain.

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<v Aaron van Wirdum>No, that was like the original Blockstream vision, I guess.

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<v Sjors Provoost>Right. I mean, there was an original vision where the sidechain would almost be

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<v Sjors Provoost>an equal partner. And, there are variations on it where the sidechain is less and

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<v Sjors Provoost>less that. I mean, PayPal could be a sidechain, too, if they wanted to, right?

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<v Aaron van Wirdum>Yeah, well, according to my definition, they would definitely need some sort of

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<v Aaron van Wirdum>token that's pegged with Bitcoin in one way or another. And I think there needs

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<v Aaron van Wirdum>to be something. There needs to be a blockchain as well.

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<v Sjors Provoost>So what I would imagine is PayPal could say, well, you send us some Bitcoin to

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<v Sjors Provoost>this address, and now it's on the PayPal sidechain, and you can send it between

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<v Sjors Provoost>PayPal users. And then if you want to redeem it, we'll send it back to you, and

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<v Sjors Provoost>we'll do that according to our database.

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<v Aaron van Wirdum>Yeah, I still think there needs to be something of a blockchain, and I guess we

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<v Aaron van Wirdum>get into the definition of a blockchain.

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<v Sjors Provoost>I agree. I tend to agree, because otherwise, why not just call it the custodial wallet?

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<v Aaron van Wirdum>Yeah.

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<v Sjors Provoost>So then, you know, are you building… I… think some of the solutions to this

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<v Sjors Provoost>problem are… what's it called? It's called a Rube Goldberg machine.

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<v Aaron van Wirdum>Right.

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<v Sjors Provoost>So it's one of those super complicated machine where you can move all sorts of

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<v Sjors Provoost>objects around and they fall and then something rolls and a rabbit comes out of

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<v Sjors Provoost>the hole and then all of a sudden, look, it's a sidechain. So, you know, I'm not

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<v Sjors Provoost>saying that RSK is that, but I am saying that's why you can have very long

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<v Sjors Provoost>discussions about whether something is a true sidechain or not.

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<v Aaron van Wirdum>Yeah, I think it was Jorge Stolfi or however I announced that, who argued that

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<v Aaron van Wirdum>his couch was a sidechain.

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<v Sjors Provoost>Like I said, you can probably argue anything is anything.

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<v Aaron van Wirdum>Okay, let's get to RSK.

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<v Sjors Provoost>The principle here, yeah, is you put something into RSK, you park some Bitcoin,

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<v Sjors Provoost>you're going to explain it.

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<v Aaron van Wirdum>I'm going to try to explain how RSK works, roughly. Okay, first of all, RSK is a

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<v Aaron van Wirdum>merged mined sidechain. So in RSK's case, that means

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<v Aaron van Wirdum>that, well, I guess, well, there are different ways of doing merge mining, but in

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<v Aaron van Wirdum>RSK's case, I didn't know this I thought it was kind of interesting it's that it

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<v Aaron van Wirdum>works sort of similar as mining or I should say pools mining where all

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<v Aaron van Wirdum>miners in the pool they are sort of trying to find the next block and now every

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<v Aaron van Wirdum>block they try is going to be a valid block but there's sort of a subset of

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<v Aaron van Wirdum>blocks that are kind of almost valid and then they're still sort of valid within

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<v Aaron van Wirdum>the pool to determine who gets the rewards and RSK is sort of a similar thing

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<v Aaron van Wirdum>where not all blocks that are valid for Bitcoin are valid for RSK but there are

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<v Aaron van Wirdum>like a bunch of sort of blocks that are almost valid for Bitcoin that are still

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<v Aaron van Wirdum>valid for RSK so there's more…

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<v Sjors Provoost>Based on proof of work?

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<v Aaron van Wirdum>Right, it's based on… it's just Bitcoin miners who are mining this.

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<v Sjors Provoost>Yeah, because with Bitcoin indeed if you're a pool you produce a proof of work

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<v Sjors Provoost>and in order to get accepted by Bitcoin nodes the proof of work has to be for

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<v Sjors Provoost>example 100. But miners can say, well, as long as you produce 10, then we know

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<v Sjors Provoost>that you're actually mining and not cheating. And so we're going to allocate you

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<v Sjors Provoost>10% of whatever the next block is.

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<v Aaron van Wirdum>Yeah. So RSK is sort of a similar thing where they have more blocks than Bitcoin

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<v Aaron van Wirdum>and they sort of use the same trick. Okay.

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<v Sjors Provoost>But they're actually mining blocks in between then as well.

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<v Aaron van Wirdum>Yes.

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<v Sjors Provoost>Okay, so that's different. Yeah, there are some proposals for Bitcoin too to do

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<v Sjors Provoost>that where you would have intermediate blocks.

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<v Aaron van Wirdum>Yeah, so RSK has that. So they have a block like Ethereum every 15 seconds or

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<v Aaron van Wirdum>something like that. And this is how they do it. So these miners are just Bitcoin

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<v Aaron van Wirdum>miners and they are producing valid RSK blocks. And these include transactions

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<v Aaron van Wirdum>and they're doing whatever miners are doing. And they're doing whatever miners

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<v Aaron van Wirdum>are doing on Ethereum, apparently. But they're producing blocks anyways.

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<v Sjors Provoost>And they're also putting these blocks, they're referencing these blocks in the

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<v Sjors Provoost>Bitcoin blockchain, right?

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<v Aaron van Wirdum>Yes. Every time a Bitcoin block is mined, it's also an RSK block. So yes.

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<v Sjors Provoost>But not every Bitcoin block.

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<v Aaron van Wirdum>No, every Bitcoin block.

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<v Sjors Provoost>I mean, not every RSK block is referenced in a Bitcoin block.

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<v Aaron van Wirdum>Correct.

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<v Sjors Provoost>Because there would be gaps.

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<v Aaron van Wirdum>Yes.

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<v Sjors Provoost>But that's fine. Yeah.

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<v Aaron van Wirdum>Okay, is that part sort of clear?

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<v Sjors Provoost>Yeah, it is. And if people want to learn more about merge mining in general, I

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<v Sjors Provoost>think they should also listen to our episode with Ruben, where we kind of talk

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<v Sjors Provoost>about another way to do this merge mining that does not need the help of Bitcoin miners.

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<v Aaron van Wirdum>Exactly. Okay, so this is part one. Okay, then we get to how do you actually get

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<v Aaron van Wirdum>Bitcoin onto RSK? And then after that, how do you get RSK coin back to

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<v Aaron van Wirdum>Bitcoin? By the way, RSK coin is called Bitcoin on RSK.

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<v Aaron van Wirdum>Or RBTC, RBTC, is not… not a subreddit.

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<v Sjors Provoost>So much censorship.

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<v Aaron van Wirdum>Yes, they pick the same name for their coin RBTC, but that in this in this

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<v Aaron van Wirdum>context of today's podcast that means this token okay now we want to send

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<v Aaron van Wirdum>Bitcoin to RSK so okay so this is what we're doing right now

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<v Aaron van Wirdum>and then we'll get to the new change right now you send a Bitcoin to a multisig

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<v Aaron van Wirdum>address and this multisig is controlled by a group of Bitcoin companies or

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<v Aaron van Wirdum>cryptocurrency companies. Once the coins are sent to the multisig, these

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<v Aaron van Wirdum>companies control it by majority. They control the coins. There's a smart

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<v Aaron van Wirdum>contract on the RSK chain that keeps an eye on this multisig. And once

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<v Aaron van Wirdum>coins are sent to the multisig, the smart contract on the RSK chain knows, okay,

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<v Aaron van Wirdum>time to issue that amount of new coins. And they are issued to the person that

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<v Aaron van Wirdum>sent the money, the Bitcoin, to the… multisig. And then they have RSK coins from

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<v Aaron van Wirdum>that point on.

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<v Sjors Provoost>Yeah.

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<v Aaron van Wirdum>That part is pretty clear, right?

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<v Sjors Provoost>Yeah. And I think we also talked about that with Ruben, right? You can do that.

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<v Sjors Provoost>And on the Bitcoin side, it just looks like money going into a multisig. Nobody

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<v Sjors Provoost>cares. That's fine.

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<v Aaron van Wirdum>Yeah.

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<v Sjors Provoost>The question is how to get it out.

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<v Aaron van Wirdum>Yeah. Okay. So how to get it out: right now, the way to get it out is you send…

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<v Aaron van Wirdum>while these coins, while the RBTC are on RSK, the coins in the multisig

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<v Aaron van Wirdum>cannot move… or shouldn't move. You know, the companies that are controlling this

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<v Aaron van Wirdum>multisig should not move the coins until the RBTC are sent back

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<v Aaron van Wirdum>to the smart contracts. And at this point, these companies know, okay,

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<v Aaron van Wirdum>now these coins are locked in the smart contracts. Now we're going to release

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<v Aaron van Wirdum>them from the multisig. So then they're sent back to whoever wants the coins on

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<v Aaron van Wirdum>Bitcoin's main chain.

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<v Sjors Provoost>Right. So it's kind of similar to like they would get burned and created out of

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<v Sjors Provoost>thin air. Just a slightly different…

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<v Aaron van Wirdum>Yeah, a slightly different way of doing it. Slightly different terms. But it's

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<v Aaron van Wirdum>sort of the same.

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<v Sjors Provoost>So the key is that it has to stay in balance. Because you do not want a situation

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<v Sjors Provoost>where, you know, less RSK, where there is more RSK… than… The amount of Bitcoin

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<v Sjors Provoost>in a multisig contract because then you get a game of musical chairs. So how do

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<v Sjors Provoost>we prevent or how do they prevent the game of musical chairs? Because the Bitcoin

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<v Sjors Provoost>side doesn't care, right? When the multisig address is empty, Bitcoin just keeps

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<v Sjors Provoost>going. But some people may be very upset.

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<v Aaron van Wirdum>So right now there's no real way of preventing that. It's trusting that these

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<v Aaron van Wirdum>companies aren't going to cheat on the RSK users. That's how it currently works.

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<v Aaron van Wirdum>You just got to trust that they're not going to collude against you, essentially.

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<v Sjors Provoost>And I think it's also that there has to be a threshold, right? Because it's a

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<v Sjors Provoost>multisig that has a certain threshold.

00:11:33.150 --> 00:11:33.890
<v Aaron van Wirdum>Yeah, it's a majority.

00:11:34.350 --> 00:11:38.270
<v Sjors Provoost>Right, so you want to make sure the majority doesn't collude against you.

00:11:38.410 --> 00:11:39.610
<v Aaron van Wirdum>Yes, exactly, right.

00:11:39.970 --> 00:11:41.370
<v Sjors Provoost>Or is forced to, or is hacked.

00:11:42.210 --> 00:11:46.570
<v Aaron van Wirdum>Yeah, also possible. But, you know, and the theory is, like, these are sort of

00:11:46.570 --> 00:11:52.510
<v Aaron van Wirdum>well-known companies, so you could probably trust that they're not all

00:11:52.510 --> 00:11:53.950
<v Aaron van Wirdum>going to collude against you, hopefully.

00:11:54.460 --> 00:11:58.280
<v Sjors Provoost>Yes, but you understand why I might make an analogy with a custodial wallet?

00:11:59.310 --> 00:12:02.130
<v Aaron van Wirdum>For sure, yes. I get why it's not ideal.

00:12:02.270 --> 00:12:04.630
<v Sjors Provoost>Not a legal analogy, but a physical analogy.

00:12:05.090 --> 00:12:10.870
<v Aaron van Wirdum>Yeah. Okay, but RSK is upgrading. So now they're going for a new solution.

00:12:11.130 --> 00:12:12.890
<v Aaron van Wirdum>The new solution is this.

00:12:14.150 --> 00:12:18.810
<v Aaron van Wirdum>The pegging in part is still the same. You still send coins to a multisig address

00:12:18.810 --> 00:12:24.210
<v Aaron van Wirdum>and the smart contract issued… now you're sending back coins to the smart contract…

00:12:25.870 --> 00:12:30.330
<v Aaron van Wirdum>well, the pegging in part is not exactly the same either. But here's the change.

00:12:31.230 --> 00:12:36.470
<v Aaron van Wirdum>All of these companies that are controlling the multisig, from now on, they are

00:12:36.470 --> 00:12:42.010
<v Aaron van Wirdum>using special hardware modules that have private keys embedded in them.

00:12:42.210 --> 00:12:46.670
<v Aaron van Wirdum>And these companies shouldn't even themselves be able to extract these private

00:12:46.670 --> 00:12:52.540
<v Aaron van Wirdum>keys. Okay, these modules, they are programmed in a certain way, namely, they are

00:12:52.540 --> 00:12:58.140
<v Aaron van Wirdum>programmed to only ever release coins from the multisig, still by majority,

00:12:58.420 --> 00:13:04.260
<v Aaron van Wirdum>but only do it if the coins are sent to that smart contract. That's the only

00:13:04.260 --> 00:13:09.040
<v Aaron van Wirdum>way they could possibly send the coins from the multisig, if they are in fact

00:13:09.040 --> 00:13:14.420
<v Aaron van Wirdum>sent to the smart contract. And they have 4,000 RSK block

00:13:14.420 --> 00:13:19.720
<v Aaron van Wirdum>confirmations, which is equivalent to, I think, 200 Bitcoin blocks.

00:13:19.940 --> 00:13:20.380
<v Sjors Provoost>Okay.

00:13:21.880 --> 00:13:27.850
<v Aaron van Wirdum>So now you're not just trusting these companies not to collude against you.

00:13:28.070 --> 00:13:29.150
<v Aaron van Wirdum>You are…

00:13:31.180 --> 00:13:36.240
<v Aaron van Wirdum>Trusting the hardware modules I would argue and then also these miners if you are

00:13:36.240 --> 00:13:40.900
<v Aaron van Wirdum>trusting the modules then there are actually blocks being mined that are actually

00:13:40.900 --> 00:13:46.080
<v Aaron van Wirdum>confirming that the coins have been locked back into the smart contract which

00:13:46.080 --> 00:13:50.560
<v Aaron van Wirdum>requires energy and you know hash power so it's not something they can do for

00:13:50.560 --> 00:13:51.860
<v Aaron van Wirdum>free there needs to be actual

00:13:53.800 --> 00:13:59.600
<v Aaron van Wirdum>energy expenses plus if someone would try to cheat on you somehow it would

00:13:59.600 --> 00:14:04.640
<v Aaron van Wirdum>be obvious because everyone can see what's happening on the blockchain. Does that make sense?

00:14:04.710 --> 00:14:10.110
<v Sjors Provoost>Yes, I mean you know hardware modules are pretty cool, but they are not

00:14:10.110 --> 00:14:15.210
<v Sjors Provoost>infallible. So I very briefly read on their own blog post, they were talking

00:14:15.210 --> 00:14:20.110
<v Sjors Provoost>about the problems with the Intel SGX system which was a sort of a secure

00:14:20.110 --> 00:14:25.330
<v Sjors Provoost>hardware module on site inside the Intel chips. And there have been lots of

00:14:25.330 --> 00:14:30.590
<v Sjors Provoost>scandals. But in 2015, Intel was saying, oh, my god, we have this amazing secure

00:14:30.590 --> 00:14:35.770
<v Sjors Provoost>enclave thing where, you know, you can put trusted code and the whole world can

00:14:35.770 --> 00:14:39.990
<v Sjors Provoost>trust it. And there were proposals to put Bitcoin private keys inside of those

00:14:39.990 --> 00:14:43.270
<v Sjors Provoost>hardware modules. And basically, you wouldn't need lightning anymore. And it was

00:14:43.270 --> 00:14:45.310
<v Sjors Provoost>just, you know, it was going to be amazing.

00:14:45.490 --> 00:14:47.670
<v Aaron van Wirdum>That's Teechan. You're referencing Teechan.

00:14:47.810 --> 00:14:49.190
<v Sjors Provoost>Yes, I'm referencing Teechan.

00:14:50.910 --> 00:14:55.150
<v Sjors Provoost>And it was already at that point clear, there were books written about that Intel

00:14:55.150 --> 00:14:59.350
<v Sjors Provoost>module. People spent, I don't know, some PhD spent lots of time reverse

00:14:59.350 --> 00:15:02.870
<v Sjors Provoost>engineering how the Intel stuff works in the inside because it wasn't very well

00:15:02.870 --> 00:15:07.290
<v Sjors Provoost>documented. And basically the introduction said something along the lines of like

00:15:07.290 --> 00:15:13.170
<v Sjors Provoost>no self-respecting security conscious engineer should ever use this. And then a

00:15:13.170 --> 00:15:16.250
<v Sjors Provoost>couple of years later, there are all sorts of massive vulnerabilities with it.

00:15:16.390 --> 00:15:22.070
<v Sjors Provoost>The risk with these systems in general, I think, is that they can have serious

00:15:22.070 --> 00:15:27.370
<v Sjors Provoost>bugs in them or backdoors. Now, in this case, the RSK team, we're not using that

00:15:27.370 --> 00:15:31.970
<v Sjors Provoost>particular system. I don't know what they are using. I mean, there are devices

00:15:31.970 --> 00:15:36.090
<v Sjors Provoost>out there, right? Like hardware wallets, the Ledger wallet that has one of those

00:15:36.090 --> 00:15:40.130
<v Sjors Provoost>modules in it, the COLDCARD too. It's a very cool concept. I mean, in principle,

00:15:40.270 --> 00:15:45.240
<v Sjors Provoost>the chips are designed in a way that… you need very sophisticated equipment to

00:15:45.240 --> 00:15:48.900
<v Sjors Provoost>get into them. And as long as you really can't get into them, they can hold on to

00:15:48.900 --> 00:15:51.460
<v Sjors Provoost>a secret for you. That's why they're great for hardware wallets, because they can

00:15:51.460 --> 00:15:55.740
<v Sjors Provoost>hold on to a secret. But they can do more. They can be given instructions. You

00:15:55.740 --> 00:15:59.360
<v Sjors Provoost>can give them a piece of code and say, the only way you're going to sign this

00:15:59.360 --> 00:16:02.280
<v Sjors Provoost>thing is if these conditions are met. And then you can never change the

00:16:02.280 --> 00:16:06.680
<v Sjors Provoost>conditions again, in theory, unless you have… well, here's where the gotchas come

00:16:06.680 --> 00:16:10.340
<v Sjors Provoost>in, right? Unless you have an upgrade mechanism where some arbitrary person can

00:16:10.340 --> 00:16:15.150
<v Sjors Provoost>sign a software upgrade. Oh, but the firmware upgrade. Okay, who can sign the

00:16:15.150 --> 00:16:18.970
<v Sjors Provoost>firmware upgrade? Okay, now that's the guy the government goes after. So there

00:16:18.970 --> 00:16:22.990
<v Sjors Provoost>are the gotchas. There could be a backdoor in it. There was, I think, the crypto

00:16:22.990 --> 00:16:28.150
<v Sjors Provoost>company in Switzerland that was backdoored by the NSA, and they were happily

00:16:28.150 --> 00:16:30.330
<v Sjors Provoost>eavesdropping on their own allies.

00:16:31.080 --> 00:16:31.560
<v Aaron van Wirdum>Right.

00:16:31.720 --> 00:16:34.980
<v Sjors Provoost>For a very, very long time because there were just a couple of engineers that

00:16:34.980 --> 00:16:38.760
<v Sjors Provoost>they were corrupt enough or patriotic enough, I don't know, depends on your

00:16:38.760 --> 00:16:42.860
<v Sjors Provoost>perspective, to cooperate with that. So there's that risk.

00:16:43.260 --> 00:16:48.400
<v Aaron van Wirdum>So you're making it sound like a… bad idea. Is that your intention or how do you…

00:16:48.360 --> 00:16:51.880
<v Sjors Provoost>No, no, I mean, you could… you could argue that it's a strict improvement over

00:16:51.880 --> 00:16:55.300
<v Sjors Provoost>just trusting the companies right you could say well you're already trusting the

00:16:55.300 --> 00:16:59.520
<v Sjors Provoost>companies now at least the companies have to put in significantly more effort to

00:16:59.520 --> 00:17:03.700
<v Sjors Provoost>run off with the coins so I'd say that's good as long as you're honest about how

00:17:03.700 --> 00:17:09.000
<v Sjors Provoost>you present it the other problem would be a denial of service okay so if I am a

00:17:09.000 --> 00:17:12.820
<v Sjors Provoost>government and I don't like this project I walk into these companies, I tell them

00:17:12.820 --> 00:17:17.260
<v Sjors Provoost>to turn off the machines or I shoot the machines physically. Now the private keys

00:17:17.260 --> 00:17:21.800
<v Sjors Provoost>are physically gone. Does that mean the coins are really gone? Or is there some

00:17:21.800 --> 00:17:26.480
<v Sjors Provoost>backup system that now becomes alive? I think there was something like that with Liquid.

00:17:26.960 --> 00:17:31.420
<v Aaron van Wirdum>Yeah, Liquid has some sort of backup. I didn't read that for RSK.

00:17:31.900 --> 00:17:35.580
<v Sjors Provoost>Yeah, but then you can choose to make that backup happen and then go after the

00:17:35.580 --> 00:17:41.000
<v Sjors Provoost>backup. And of course, RSK itself. As far as I know, I could be wrong here,

00:17:41.240 --> 00:17:46.720
<v Sjors Provoost>relies on node software that honors certain private keys and certain behavior. So

00:17:46.720 --> 00:17:50.840
<v Sjors Provoost>you could issue a hard fork. But then, of course, it depends on how many people

00:17:50.840 --> 00:17:55.440
<v Sjors Provoost>run their own node and whether they'd go along with that. Similar discussion is

00:17:55.440 --> 00:17:59.100
<v Sjors Provoost>with Bitcoin. I don't know how the incentives are in that system, so I don't want

00:17:59.100 --> 00:18:03.040
<v Sjors Provoost>to comment on that. So there are all sorts of risks, but I think it's reasonable

00:18:03.040 --> 00:18:08.290
<v Sjors Provoost>to argue that it's better to have the modules. Than not to have them.

00:18:08.610 --> 00:18:13.910
<v Sjors Provoost>Maybe. Maybe not, because that backdoor could actually be worse than not having

00:18:13.910 --> 00:18:18.420
<v Sjors Provoost>the modules. And just using the old laptop as someone likes to say.

00:18:18.420 --> 00:18:24.340
<v Aaron van Wirdum>But, um, yeah, well, in either case, I mean, RSK is a work in progress

00:18:24.340 --> 00:18:27.080
<v Aaron van Wirdum>they would still like it to become a drivechain.

00:18:27.080 --> 00:18:30.440
<v Sjors Provoost>Yeah, so that's an interesting topic that we should dedicate a podcast to.

00:18:30.440 --> 00:18:34.940
<v Aaron van Wirdum>Yeah, we'll discuss drivechain in an episode one time but… but the… essence the

00:18:34.940 --> 00:18:39.730
<v Aaron van Wirdum>essence in one sentence is that in that case it would well, can I summarize it in

00:18:39.730 --> 00:18:45.170
<v Aaron van Wirdum>one sentence? It would just be hash power that controls the pegs, pegging in and

00:18:45.170 --> 00:18:45.770
<v Aaron van Wirdum>pegging out.

00:18:46.490 --> 00:18:50.570
<v Sjors Provoost>The drivechain is not the end-all, be-all either. There are still sort of

00:18:50.570 --> 00:18:52.690
<v Sjors Provoost>caveats. I think we should discuss that in another podcast.

00:18:53.010 --> 00:18:54.530
<v Aaron van Wirdum>That's for another episode, yes.

00:18:54.930 --> 00:19:00.070
<v Sjors Provoost>But it could be arguably maybe a nicer solution than hardware modules because

00:19:00.070 --> 00:19:03.470
<v Sjors Provoost>you're really moving away from these companies completely. You're saying we're

00:19:03.470 --> 00:19:06.310
<v Sjors Provoost>going to just integrate this with the Bitcoin protocol in general. Now we have

00:19:06.310 --> 00:19:10.610
<v Sjors Provoost>all these Bitcoin miners that you don't have to trust. That's the idea, but that

00:19:10.610 --> 00:19:12.450
<v Sjors Provoost>might not be possible either, but we'll find out.

00:19:12.670 --> 00:19:17.940
<v Aaron van Wirdum>Yeah. Then again, I mean, at this point, you kind of… well, is that right? but

00:19:17.940 --> 00:19:21.560
<v Aaron van Wirdum>how are they… there's sort of… there's sort of different levels of trust, like

00:19:21.560 --> 00:19:26.750
<v Aaron van Wirdum>you're sort of trusting the hardware, but then… like the miners can't cheat on

00:19:26.750 --> 00:19:30.370
<v Aaron van Wirdum>their own and the hardware… well, the hardware [unclear] cheat on its own I guess.

00:19:30.370 --> 00:19:33.250
<v Sjors Provoost>Well I guess, if they want to move to drivechain they'd move away from the hardware.

00:19:33.250 --> 00:19:35.490
<v Aaron van Wirdum>Sure, sure, I know, I'm saying… right now…

00:19:35.490 --> 00:19:39.290
<v Sjors Provoost>[unclear] different security trade-offs that you can make I think the most

00:19:39.290 --> 00:19:43.050
<v Sjors Provoost>important thing is to be honest about them. Yeah but what I was asking is how are

00:19:43.050 --> 00:19:46.190
<v Sjors Provoost>they going to make money because it sounds like if you peg a currency you can't

00:19:46.190 --> 00:19:49.330
<v Sjors Provoost>pump it so is there a pre-mine? Or are they like honest people?

00:19:49.330 --> 00:19:52.770
<v Aaron van Wirdum>The company? Yeah, IOV Labs, I don't know.

00:19:53.240 --> 00:19:56.880
<v Sjors Provoost>Okay. Because one of the things, of course, that is nice about currencies that

00:19:56.880 --> 00:20:00.600
<v Sjors Provoost>are pegged to Bitcoin is you can say, well, there's no speculative value in the

00:20:00.600 --> 00:20:03.660
<v Sjors Provoost>exchange rate, so you can focus a little bit more on the merits of the project

00:20:03.660 --> 00:20:08.370
<v Sjors Provoost>itself. That was one of the ideals behind a sidechain. And the other might be to

00:20:08.370 --> 00:20:13.510
<v Sjors Provoost>sort of try and piggyback on the proof-of-work security of Bitcoin somehow. Well,

00:20:13.630 --> 00:20:14.970
<v Sjors Provoost>that turns out to be complicated.

00:20:15.310 --> 00:20:20.760
<v Aaron van Wirdum>Yeah. Well, one of the nice things about a sidechain like this, arguably, is that

00:20:20.760 --> 00:20:26.360
<v Aaron van Wirdum>it allows Bitcoin miners to earn more fees, which improves Bitcoin security. Even

00:20:26.360 --> 00:20:30.540
<v Aaron van Wirdum>for those of us that aren't using the sidechain. I guess the counter argument

00:20:30.540 --> 00:20:35.550
<v Aaron van Wirdum>would be that running a mining pool or being a miner…

00:20:36.190 --> 00:20:39.370
<v Aaron van Wirdum>Probably would come with a little bit more [unclear] because you could be

00:20:39.370 --> 00:20:40.030
<v Aaron van Wirdum>outcompeted.

00:20:40.470 --> 00:20:44.590
<v Sjors Provoost>Yeah, so there could be a centralization problem there. If the miners have to run

00:20:44.590 --> 00:20:48.230
<v Sjors Provoost>all these sidechains in order to still have a good margin, now one of the

00:20:48.230 --> 00:20:53.310
<v Sjors Provoost>sidechains turns out to be Ethereum 2.0 and you have to process terabytes of data

00:20:53.310 --> 00:20:57.330
<v Sjors Provoost>and you have to do it in a big data centrum. You can't do it hidden away behind a

00:20:57.330 --> 00:21:02.570
<v Sjors Provoost>Tor connection. That could actually be bad. Right? Another problem. I forgot what

00:21:02.570 --> 00:21:03.350
<v Sjors Provoost>the other problem is.

00:21:03.510 --> 00:21:04.110
<v Aaron van Wirdum>In general?

00:21:04.430 --> 00:21:08.370
<v Sjors Provoost>Yeah, yeah. Another problem is if there is more value in one of these sidechains

00:21:08.370 --> 00:21:13.010
<v Sjors Provoost>or smart contracts or whatever it is, if, say, the entire, let's say the gold

00:21:13.010 --> 00:21:16.230
<v Sjors Provoost>bugs say, hey, you know what? We kind of like this blockchain technology. We're

00:21:16.230 --> 00:21:21.330
<v Sjors Provoost>going to put the entire ownership record of gold on the planet on the blockchain

00:21:21.330 --> 00:21:25.150
<v Sjors Provoost>and protect it with Bitcoin's proof of work. Well, now you have a tiny thing,

00:21:25.310 --> 00:21:29.790
<v Sjors Provoost>Bitcoin, protecting a very large thing. Because probably most of the… I don't

00:21:29.790 --> 00:21:34.070
<v Sjors Provoost>know, but my guess is there's more custodial gold out there than Bitcoin.

00:21:36.110 --> 00:21:36.970
<v Aaron van Wirdum>Is that bad?

00:21:37.490 --> 00:21:42.490
<v Sjors Provoost>If all the custodial gold in the world is backed by a sidechain on Bitcoin, then

00:21:42.490 --> 00:21:47.090
<v Sjors Provoost>creating a reorg on the physical gold chain could be worth a very, very expensive

00:21:47.090 --> 00:21:50.430
<v Sjors Provoost>51% attack on the Bitcoin chain. You don't care about the Bitcoin chain. You care

00:21:50.430 --> 00:21:53.950
<v Sjors Provoost>about the gold sidechain. So yeah, that would be very bad. That would be like

00:21:53.950 --> 00:21:59.030
<v Sjors Provoost>being the minority hash power. Maybe not that bad because, I'm a guess is… if you

00:21:59.030 --> 00:22:04.130
<v Sjors Provoost>do this custodial gold sidechain, there's going to be some boss because you're

00:22:04.130 --> 00:22:07.850
<v Sjors Provoost>still protecting a physical asset. So you could just ignore shenanigans on the

00:22:07.850 --> 00:22:11.970
<v Sjors Provoost>chain. And so the attack might not be worth it because of something I would like

00:22:11.970 --> 00:22:12.890
<v Sjors Provoost>to call proof of prison.

00:22:15.670 --> 00:22:21.450
<v Aaron van Wirdum>Do you think something like RSK could obliterate Ethereum? That wasn't the word I

00:22:21.450 --> 00:22:22.890
<v Aaron van Wirdum>was looking for. Replace Ethereum?

00:22:23.210 --> 00:22:23.790
<v Sjors Provoost>Does it pump?

00:22:25.040 --> 00:22:26.080
<v Aaron van Wirdum>It doesn't pump.

00:22:26.200 --> 00:22:27.640
<v Sjors Provoost>And how is it going to replace Ethereum?

00:22:27.780 --> 00:22:28.220
<v Aaron van Wirdum>I agree.

00:22:29.440 --> 00:22:32.680
<v Aaron van Wirdum>That's probably the main use case for Ethereum and it doesn't have that.

00:22:32.820 --> 00:22:33.880
<v Sjors Provoost>I don't want to say that.

00:22:33.840 --> 00:22:34.280
<v Aaron van Wirdum>[unclear]…

00:22:34.280 --> 00:22:37.760
<v Sjors Provoost>If it doesn't pump, it's not going to replace a thing that at least has pumping

00:22:37.760 --> 00:22:42.000
<v Sjors Provoost>as a feature. Ethereum may have other features and maybe it can compete on that one.

00:22:42.100 --> 00:22:42.500
<v Aaron van Wirdum>Yes.

00:22:42.640 --> 00:22:43.540
<v Sjors Provoost>But so do spreadsheets.

00:22:43.860 --> 00:22:44.260
<v Aaron van Wirdum>Yes.

00:22:44.420 --> 00:22:44.960
<v Sjors Provoost>I don't know.

00:22:46.520 --> 00:22:50.810
<v Aaron van Wirdum>I don't know either. I don't know. I think if something like Ethereum needs to

00:22:50.810 --> 00:22:53.630
<v Aaron van Wirdum>exist, I'd prefer to see it as a Bitcoin sidechain.

00:22:53.810 --> 00:22:57.910
<v Sjors Provoost>That's not how the world works. The world doesn't say something needs to exist

00:22:57.910 --> 00:22:59.650
<v Sjors Provoost>and therefore we get to decide what it is.

00:22:59.730 --> 00:23:01.030
<v Aaron van Wirdum>The world doesn't form around me?

00:23:01.430 --> 00:23:01.730
<v Sjors Provoost>No.

00:23:02.520 --> 00:23:02.960
<v Aaron van Wirdum>Well, damn.

00:23:03.440 --> 00:23:04.840
<v Sjors Provoost>All right. Anything else?

00:23:05.040 --> 00:23:06.200
<v Aaron van Wirdum>No, I think that was the podcast.

00:23:06.440 --> 00:23:08.980
<v Sjors Provoost>Okay. Thank you for listening to the Van Wirdum Sjorsnado.

00:23:09.340 --> 00:23:09.700
<v Aaron van Wirdum>There you go.