WEBVTT - Automatic transcript; recognition may contain errors. Reviewed for technical wording and speaker labels. Times match the published episode. 00:00:07.950 --> 00:00:12.810 Live from El Zonte, El Salvador, a.k.a. Bitcoin Beach, this is the 00:00:12.810 --> 00:00:17.840 Van Wirdum Sjorsnado. Today we're doing a special episode. I think I'm going to 00:00:17.840 --> 00:00:22.440 call it the Bitcoin Beach special or something. I'm doing this episode without 00:00:22.440 --> 00:00:27.320 Sjors. Instead, I have Nicolas Burtey, right? 00:00:27.840 --> 00:00:28.060 Yes. 00:00:28.460 --> 00:00:30.860 Welcome, Nicolas. So you're going to be my Sjors today. 00:00:31.500 --> 00:00:32.660 Yes, thank you for having me. 00:00:33.620 --> 00:00:36.740 Nicolas, can you introduce... Yeah, so that means, by the way, we're going to 00:00:36.740 --> 00:00:41.430 need you to do the puns, because usually Sjors does the puns. So I hope you 00:00:41.430 --> 00:00:43.030 brought some good puns for this episode. 00:00:44.500 --> 00:00:46.780 I'm not sure what puns means, but I will try. 00:00:48.020 --> 00:00:49.280 Like the words jokes? 00:00:49.840 --> 00:00:53.540 Okay, okay. I'm not the best at, you know, words jokes. 00:00:53.760 --> 00:00:56.500 You got it, Nicolas. I have faith in you. 00:00:57.740 --> 00:01:01.500 All right, let's, yeah, first of all, Nicolas, for our listeners, explain who you 00:01:01.500 --> 00:01:02.960 are. Please, introduce yourself. 00:01:03.360 --> 00:01:09.340 Hi, so you will guess with my accent, I'm a French guy. I 00:01:09.340 --> 00:01:15.160 have lived a couple of years in the US, and I'm currently, I have become a 00:01:15.160 --> 00:01:20.480 nomad last year, and I've been working on open source software. And I've been 00:01:20.480 --> 00:01:24.760 building a wallet that is called the Bitcoin Beach wallet that is used by the 00:01:24.760 --> 00:01:29.340 community here in El Zonte. I'm currently living in El Zonte as of now. 00:01:31.380 --> 00:01:35.180 Maybe really quickly, you know, we don't need to dwell on this. There's other 00:01:35.180 --> 00:01:38.940 podcasts on this specific topic. But maybe, you know, explain real quick what El 00:01:38.940 --> 00:01:40.760 Zonte is and what's going on here. 00:01:41.180 --> 00:01:46.840 Yeah, so El Zonte is a small village in El Salvador. There is about 3,000 people 00:01:46.840 --> 00:01:52.680 here. And it's overall a poor village, right? The average salary here 00:01:52.680 --> 00:01:54.380 is about $400 per month. 00:01:56.460 --> 00:02:01.520 And what makes Zonte quite special is that it's the 00:02:01.590 --> 00:02:07.250 project where Bitcoin Beach started. And Bitcoin Beach is an initiative that 00:02:07.540 --> 00:02:13.280 involves Bitcoin, as the name suggests, and how to use maybe Bitcoin in 00:02:13.280 --> 00:02:17.540 a local community and to get those people out of poverty. 00:02:19.230 --> 00:02:23.370 challenge with El Salvador in general is that there is a lot of requirement to 00:02:23.370 --> 00:02:28.070 open a bank account. And so if you're not wealthy enough, basically, you know, 00:02:28.210 --> 00:02:32.410 banks are not very interested in providing banking services to you. And so here, 00:02:32.730 --> 00:02:37.430 you know, people typically don't have a bank account. And on average, 70% of the 00:02:37.430 --> 00:02:42.370 population in El Salvador don't have a bank account. And so what we are doing 00:02:42.370 --> 00:02:48.260 here is that… So first, there has been a donor that have 00:02:48.260 --> 00:02:52.380 contributed some Bitcoin like two years ago. And, you know, this is how the 00:02:52.380 --> 00:02:57.800 initiative gets really started. On our side, what we have been doing is a wallet 00:02:57.800 --> 00:03:02.160 to help, you know, the adoption of Bitcoin. And I guess this is what we'll be 00:03:02.160 --> 00:03:03.100 discussing more today. 00:03:03.460 --> 00:03:08.540 Yeah, so you're the developer and... You run a company as well, right? 00:03:08.980 --> 00:03:09.030 Yeah. 00:03:09.120 --> 00:03:11.580 The wallet is developed by your company, essentially. 00:03:11.860 --> 00:03:14.860 Yeah, yeah. So we have a company called GaloyMoney. 00:03:16.530 --> 00:03:22.170 We are developing open source software and the idea that we think there is a type 00:03:22.170 --> 00:03:25.790 of wallet that we can bring to the market, which is like what we call shared 00:03:25.790 --> 00:03:29.790 custody wallet and that use Lightning for payment. And our goal is to develop 00:03:29.790 --> 00:03:34.190 open source software for the community. This is what we are doing. 00:03:34.430 --> 00:03:38.130 Yeah. So the interesting thing about it is you came to El Zonte or did you 00:03:38.130 --> 00:03:43.030 already start working on the wallets before you came here or what was the order 00:03:43.030 --> 00:03:44.270 of things there? 00:03:44.440 --> 00:03:48.280 Yeah, yeah. So I started working on the wallet initially, like late 2019, you 00:03:48.280 --> 00:03:54.240 know, initially as a non-custodial wallet, and after I 00:03:54.240 --> 00:03:59.780 moved to the shared custody model, I decided to dedicate my time to 00:03:59.780 --> 00:04:05.220 the Bitcoin Beach community as a proof of concept early 2020. And I came here 00:04:05.220 --> 00:04:10.140 about seven, eight months ago for the first time. So the [unclear] was already 00:04:10.140 --> 00:04:15.740 starting to be here when I came here. But yeah, I really wanted to come here to 00:04:15.740 --> 00:04:17.220 see the people using the wallet on the ground. 00:04:17.520 --> 00:04:21.260 Yeah, exactly. That's sort of one of the interesting things about... this wallet 00:04:21.260 --> 00:04:26.080 and your efforts I think is that first of all like you mentioned people here for 00:04:26.590 --> 00:04:31.170 them it's not even really a luxury it's kind of a necessity or at least you know 00:04:31.170 --> 00:04:34.710 they can't get a bank account and this is actually like a digital solution for 00:04:34.710 --> 00:04:40.490 them first of all and second of all you you came here personally to meet these 00:04:40.490 --> 00:04:45.430 people and speak with these people and see what they actually needed what's you 00:04:45.430 --> 00:04:49.410 know what their experience was with using Lightning and how you could improve 00:04:49.410 --> 00:04:53.170 that experience for the people in this actual village right 00:04:53.610 --> 00:04:58.010 Yeah, correct. I believe it's important to meet the people that use your product 00:04:58.010 --> 00:04:59.690 generally, right? Whatever you're doing. 00:05:00.270 --> 00:05:05.990 Yeah, so I think, so one of the things you discovered 00:05:05.990 --> 00:05:11.470 while you were here was that, correct me if I'm wrong, but is that the 00:05:11.470 --> 00:05:17.410 existing Lightning solutions, the existing wallets, Lightning wallets, excuse 00:05:17.410 --> 00:05:21.790 me, let's say just the non-custodial Lightning wallets, they had their 00:05:21.790 --> 00:05:24.440 limitations. Is that right? 00:05:24.820 --> 00:05:30.300 So when I was coming here, the people were using wallet of Satoshi. So it was a 00:05:30.300 --> 00:05:36.280 custodial wallet. But I believe the way on our side, we start thinking about 00:05:36.280 --> 00:05:39.720 the wallet initially, like close to two years ago. 00:05:41.710 --> 00:05:46.250 Is that on my side, I start, you know, with a non-custodial wallet and I was 00:05:46.250 --> 00:05:50.430 trying to experiment with it. And I had the model of like open the channel of the 00:05:50.430 --> 00:05:56.290 fly where like maybe you, you know, as a user, you download this app and maybe 00:05:56.290 --> 00:06:01.610 you don't have yet any UTXO in your on-chain or off-chain balance. But like the 00:06:01.610 --> 00:06:05.350 first time you receive your off-chain payment, your Lightning payment. 00:06:07.170 --> 00:06:11.090 Basically, the wallet provider will open a channel on the fly to you. And so I 00:06:11.090 --> 00:06:13.850 experimented with it for a couple of months. 00:06:15.250 --> 00:06:20.330 Then my thinking was like, it's hard to scale because from the wallet provider 00:06:20.330 --> 00:06:24.570 standpoint, each time there is a new user, you need to provide liquidity to this user. 00:06:27.620 --> 00:06:30.860 And so you need to have this upfront liquidity to provide. And the more you grow, 00:06:30.980 --> 00:06:35.100 the faster you grow, the harder the liquidity challenge, which is difficult. 00:06:36.480 --> 00:06:42.480 You don't need to, right? You can also open channels just where the channels are 00:06:42.480 --> 00:06:46.400 funded only on the side of the user. So they can't receive payments in that case 00:06:46.400 --> 00:06:49.880 unless... and until they've made payments themselves. 00:06:50.180 --> 00:06:50.400 Yeah. 00:06:50.520 --> 00:06:52.020 Which is another limitation, of course. 00:06:52.160 --> 00:06:55.640 Yeah. So this would be maybe, you know, the way if you have a LND, you know, 00:06:55.980 --> 00:06:59.720 node. And so this is how it will typically work is that, okay, you need to open a 00:06:59.720 --> 00:07:02.980 channel and then all the liquidity is on your side. And then when you, after you 00:07:02.980 --> 00:07:08.540 spend some money on this channel, then, you know, you can receive payment 00:07:08.570 --> 00:07:13.350 afterwards. So, you know, this is a vanilla Lightning node, how this works. An 00:07:13.350 --> 00:07:18.760 improvement based on that is the idea that, hey, maybe... you will be connected 00:07:18.760 --> 00:07:24.600 to a wallet provider like a node or LSP. And 00:07:24.600 --> 00:07:28.860 basically to make the experience better, you know, like the first time you see a 00:07:28.860 --> 00:07:32.240 Lightning payment, you know, this is the time a channel is being opened and the 00:07:32.240 --> 00:07:35.300 channel is not opened by you because you don't have [unclear] yet. The channel is 00:07:35.300 --> 00:07:40.740 being opened by the other party of the channel that, you know, will send you the 00:07:40.740 --> 00:07:45.000 money that, you know, they receive from the channel and maybe they will retain 00:07:45.000 --> 00:07:50.820 some, you know, sats as a payment to open the channel. But they 00:07:50.820 --> 00:07:55.840 still need to provide a lot of liquidity, basically. And this is a model that I think... 00:07:55.840 --> 00:08:01.580 So that are sort of the two options, I guess. Either you allow anyone 00:08:01.580 --> 00:08:06.010 to open a channel... but it's only funded on their end, so they can't receive 00:08:06.010 --> 00:08:11.210 payments at first. Or you can offer the liquidity, but that's hard to scale 00:08:11.210 --> 00:08:16.190 because then you need a lot of liquidity to offer all across all of your user bases. 00:08:16.430 --> 00:08:20.530 Yeah, yeah. And there is like, to my knowledge, three wallets that are doing 00:08:20.530 --> 00:08:25.510 this, Muun Wallet and [unclear] and Phoenix. And I think they have, you know, 00:08:26.830 --> 00:08:31.670 Éclair, to my knowledge, Phoenix have a lot of success, right? I still see this 00:08:31.670 --> 00:08:36.310 as something that would be hard to scale, especially in an area like El Zonte. 00:08:37.190 --> 00:08:42.510 And the reason is, so on average, the median balance, 00:08:42.790 --> 00:08:46.230 not on average, the median balance, I believe in a wallet is about $10. 00:08:47.910 --> 00:08:49.250 So, you know, it's really like... 00:08:49.250 --> 00:08:51.110 Do you mean here or do you mean in general? 00:08:51.630 --> 00:08:56.430 In here, like, you know, the people that have been using the Bitcoin Beach 00:08:56.430 --> 00:09:02.230 wallet. And so $10 is like, you know, it depends on what are the 00:09:02.230 --> 00:09:07.490 fees on chain, but, you know, it's often, you know, above the 00:09:07.490 --> 00:09:12.870 price you will pay to open a chain, right? And so this is the limitation, basically. 00:09:14.530 --> 00:09:18.230 Right. What you're saying is that opening, 00:09:19.720 --> 00:09:23.440 wait, I think you're saying two different things. First of all, there's a 00:09:23.440 --> 00:09:29.220 challenge on how to start. start an account, start a wallet. That's one challenge 00:09:29.220 --> 00:09:33.840 because you have two choices that both aren't ideal. And then the second 00:09:33.840 --> 00:09:38.420 challenge is that if people really don't have a lot of money, then even opening 00:09:38.420 --> 00:09:43.680 one Lightning channel is a lot of money. If you only have $10 and fees are $2, 00:09:44.260 --> 00:09:48.480 then opening a Lightning channel is still a lot of money, essentially. So there's 00:09:48.480 --> 00:09:49.640 two problems there, right? 00:09:49.840 --> 00:09:52.240 Yeah, that's correct. And those problem compound, right? 00:09:54.430 --> 00:09:55.410 But that's great. 00:09:57.540 --> 00:10:02.860 And then the other option, if we go to the other end of the spectrum, so to say, 00:10:03.000 --> 00:10:06.830 is to have custodial wallets. And these also exist. 00:10:07.530 --> 00:10:11.090 Yeah, and so probably the first wallet that is known in the space is the wallet 00:10:11.090 --> 00:10:15.930 of Satoshi. And this is the wallet that was being used as the main wallet until 00:10:15.930 --> 00:10:21.850 we started working on the Bitcoin Beach wallet here. And Custodial Wallet, 00:10:21.870 --> 00:10:25.990 you know, have the benefits of, like, it's probably the best UX today and 00:10:25.990 --> 00:10:31.610 probably also the ones that have, I wouldn't say the lowest fees, but, like, 00:10:31.990 --> 00:10:37.610 a lot of the on-chain management, you know, like, you can share the capital that 00:10:37.610 --> 00:10:43.370 is required to open a channel and close a channel, you know, if you have like a 00:10:43.370 --> 00:10:47.370 thousand users and you have one channel, then basically the cost of creating a 00:10:47.370 --> 00:10:51.010 channel and closing a channel is shared across, you know, a thousand users. So 00:10:51.010 --> 00:10:55.030 obviously the cost per user is very, is greatly reduced. 00:10:55.350 --> 00:11:01.040 Yeah, just for listeners that don't, that might not know this. Non-custodial, 00:11:01.140 --> 00:11:06.820 what we were just discussing a minute ago, simply means that you can always 00:11:06.820 --> 00:11:11.260 claim the funds in your Lightning wallet on-chain if you want. At any point, you 00:11:11.260 --> 00:11:15.620 can just say, okay, I want my funds now, and then you're getting it to your own 00:11:15.620 --> 00:11:20.880 on-chain address. Custodial, this is powered by 00:11:20.880 --> 00:11:25.700 the cryptography and the technology of Lightning itself. Custodial means you're 00:11:25.700 --> 00:11:31.530 essentially giving up that control to the wallets provider or whoever, 00:11:31.670 --> 00:11:35.930 because, you know, if you want to withdraw your funds, they're still going to 00:11:35.930 --> 00:11:39.230 have to actually give you the funds. They're going to have to cooperate with 00:11:39.230 --> 00:11:44.110 that. They are actually controlling the keys. So the problem in that sense is, 00:11:44.250 --> 00:11:47.910 you know, it's not, it's, it sort of goes against the Bitcoin mantra of not your 00:11:47.910 --> 00:11:53.310 keys, not your coins, but it offers these benefits that, um… So 00:11:53.310 --> 00:11:58.910 the liquidity problem we just mentioned is immediately solved. Essentially, you 00:11:58.910 --> 00:12:04.430 kind of just create an account at the wallet provider and the fee problem is 00:12:04.430 --> 00:12:09.150 solved because you don't need any on-chain fee to get started. Is that right? 00:12:09.530 --> 00:12:10.110 That is correct. 00:12:10.370 --> 00:12:14.830 Right. And then, like I mentioned, the downside is you're actually trusting the 00:12:14.830 --> 00:12:15.630 wallet provider a bit. 00:12:16.070 --> 00:12:16.550 Yeah, correct. 00:12:16.810 --> 00:12:22.700 So you have with... the Beach wallet you're going for some kind 00:12:22.700 --> 00:12:28.260 of what you're calling it shared custody right so it's still custodial but you're 00:12:28.260 --> 00:12:32.840 trying to limit the risk a little bit is that right so maybe you can explain what 00:12:32.840 --> 00:12:33.300 that means? 00:12:33.300 --> 00:12:37.660 Yeah so from the user perspective the wallet is custodial so they will open a 00:12:37.660 --> 00:12:41.460 wallet the same way they will do with a custodial wallet and they will have an 00:12:41.460 --> 00:12:47.000 account. The reason we talk about shared custody is because so the wallet there 00:12:47.000 --> 00:12:48.600 is two parts to the wallet there is a 00:12:50.030 --> 00:12:55.940 There is a cold storage and hot storage. And so the hot storage is basically a 00:12:55.940 --> 00:12:59.970 Lightning node, an LND node. When there is a single key for it, this is how 00:12:59.970 --> 00:13:05.430 Lightning works today. But there is only a tiny portion of the fund in this hot 00:13:05.430 --> 00:13:10.810 wallet. The major party of the fund are in a cold storage, which 00:13:10.810 --> 00:13:16.260 is good for security reasons. But there is something quite unique with Bitcoin 00:13:16.260 --> 00:13:19.400 that, you know, maybe doesn't exist with like the fiat system, for instance, 00:13:19.760 --> 00:13:23.640 where you could have a multi-sig and you could have different members of the 00:13:23.640 --> 00:13:28.720 community that have, you know, the signature. So here's the idea that you, 00:13:29.020 --> 00:13:34.380 instead of like trusting maybe a company when you use like a custodial product, 00:13:34.780 --> 00:13:40.180 here you could trust the member of your community, you know, to maintain the key 00:13:40.180 --> 00:13:46.160 and to make sure they keep the, you know, key in a good shape and say don't lose 00:13:46.160 --> 00:13:51.260 it and um and so here you you're basically not 00:13:51.840 --> 00:13:55.500 trusting a company you're trusting you know people in your community basically 00:13:55.500 --> 00:14:00.440 Yeah although this is not I understand this is not something you can actually 00:14:00.440 --> 00:14:04.960 verify in the wallet or there's no way to make sure that this is actually 00:14:04.960 --> 00:14:09.740 happening so in that sense you're still you are still trusting the words of you 00:14:09.740 --> 00:14:13.020 that It is being held by multiple people. Is that right? 00:14:13.460 --> 00:14:17.900 Correct. And we're actually thinking about this, how to... There is a question, 00:14:18.140 --> 00:14:21.200 should the people that hold the key be known or not? 00:14:22.000 --> 00:14:22.280 Right. 00:14:22.520 --> 00:14:27.970 And it's... interesting to think about it. Like, if you think about, okay, you 00:14:27.970 --> 00:14:31.650 want to bring the trust, you know, to the system, then you will publish, you 00:14:31.650 --> 00:14:35.930 know, who owns the key, basically. And then you can, and maybe, you know, those 00:14:35.930 --> 00:14:40.430 members can publish, you know, the public key, you know, and then you can verify 00:14:40.430 --> 00:14:42.350 the fund, you know, available. 00:14:44.050 --> 00:14:47.670 But if you publish who on the key, it's also like, it creates a new security 00:14:47.670 --> 00:14:51.070 risk. We're like, okay, you know, there are different people that have the key of 00:14:51.070 --> 00:14:53.070 this wallet, you know, this and this and this. 00:14:53.370 --> 00:14:58.350 Yeah. Even if it's a three out of five or a six out of ten or whatever it is, if 00:14:58.350 --> 00:15:02.940 you publish who they are, then... you know, now you know exactly which three or 00:15:02.940 --> 00:15:08.940 which people you need to extort. So there's benefit in not sharing that 00:15:08.940 --> 00:15:14.640 information, but that does increase the trust in, that's the trade-off, now 00:15:14.640 --> 00:15:18.160 you're trusting that there are actually three out of five people that are holding 00:15:18.160 --> 00:15:22.180 the keys and you don't know who they are. So just a promise in that sense. 00:15:22.640 --> 00:15:26.720 Exactly. And so far, this is, we go for the, you know, it's not published on the 00:15:26.720 --> 00:15:31.280 key. But yeah, it's something we are thinking about. 00:15:31.780 --> 00:15:37.640 Yeah. Yeah, I will say before we move on. So I've used the 00:15:37.640 --> 00:15:42.740 Bitcoin Beach wallet while I'm here. I've also used other wallets. And I will say 00:15:43.250 --> 00:15:49.030 I personally like it a lot. There is the trust trade-off. And, 00:15:49.030 --> 00:15:54.970 you know, it does go against the mantra of Bitcoin. But I've used other 00:15:54.970 --> 00:15:57.910 Lightning wallets and I like other Lightning wallets as well. 00:15:59.200 --> 00:16:04.900 But, you know, I make a payment and I'm standing there at the merchant waiting to 00:16:04.900 --> 00:16:10.380 get my bottle of water or whatever it is. And it can take half a minute or longer 00:16:10.380 --> 00:16:15.520 for a payment route to be found. While with Bitcoin Beach Wallet, if they use the 00:16:15.520 --> 00:16:19.180 same wallet, oh, we'll get into it in a bit, actually. I'm sort of jumping the 00:16:19.180 --> 00:16:24.560 gun here. But it does work so much faster. You really are done within three 00:16:24.560 --> 00:16:25.600 seconds, which is nice. 00:16:27.460 --> 00:16:32.120 And I guess the other thing that it makes sense in a community like this, I 00:16:32.120 --> 00:16:36.360 think, to use a setup like we were just describing, especially because it's 00:16:36.360 --> 00:16:42.340 small. If there's 10 million users, maybe, and there's a lot of money involved, 00:16:42.380 --> 00:16:47.960 and out of these 10 million users, almost no one knows the actual owner of the 00:16:47.960 --> 00:16:53.800 wallet, at that point, it's starting to sound less smart to me. But 00:16:53.800 --> 00:16:55.520 here in a village of 3,000 people, 00:16:56.910 --> 00:17:02.270 And even though you don't know exactly who owns the public keys, there's not that 00:17:02.270 --> 00:17:08.020 much money involved all in all. And people know to find you, probably, 00:17:08.380 --> 00:17:13.480 and we're recording this in the Hope House. You know, something goes, which is 00:17:13.480 --> 00:17:18.820 like a community house for the Bitcoin community here. You know, people can at 00:17:18.820 --> 00:17:23.180 least come here and ask what's going on. It's a more, you know, on a small scale, 00:17:23.500 --> 00:17:28.280 it probably makes, it kind of makes sense to do this way, I think. Or at least 00:17:28.280 --> 00:17:32.320 the trade-off is acceptable in my personal view. 00:17:33.900 --> 00:17:38.840 One other solution to mitigate this problem of... 00:17:39.930 --> 00:17:45.930 the custodial solution is to have proof of reserves. Is this something the 00:17:45.930 --> 00:17:46.770 Bitcoin [unclear] has? 00:17:47.610 --> 00:17:52.790 So we don't have proof of reserve today, but it's something that is high on our 00:17:52.790 --> 00:17:53.470 priority list. 00:17:53.710 --> 00:17:53.910 Right. 00:17:55.150 --> 00:18:00.950 And I think it's very complementary to the fact that multiple people in the 00:18:00.950 --> 00:18:06.240 community have keys for the multi-sig wallet, for the cold storage. Proof of 00:18:06.240 --> 00:18:10.740 reserve, you know. is aiming to solve a different issue. 00:18:12.040 --> 00:18:14.900 If you think about Mt. Gox for instance, 00:18:16.320 --> 00:18:22.190 what we, I believe, now know is that the, over time, you know, fund 00:18:22.190 --> 00:18:25.870 has been drained from the wallet, you know, for like a year or so. It has been a 00:18:25.870 --> 00:18:31.850 slow process of like depleting the current wallet of, you know, these exchanges. 00:18:32.700 --> 00:18:36.140 And if they had something like a proof of reserve, you know, the day, like, 00:18:36.320 --> 00:18:39.920 suddenly there was a fund missing, the [unclear] would be [unclear], right? And 00:18:39.920 --> 00:18:44.400 there would not be the wallet or the exchange that would continue to operate if 00:18:44.400 --> 00:18:48.160 proof of reserve was here. So it doesn't mean that if you have proof of reserve, 00:18:48.300 --> 00:18:51.240 suddenly, you know, one day from the next, you know, the [unclear] will disappear 00:18:51.240 --> 00:18:55.700 and people who have the key, you know, will take away the money. 00:18:57.080 --> 00:19:01.520 But it means that, you know, if something bad were happening, you would know it 00:19:01.520 --> 00:19:05.560 right away and you will not end up in a situation where maybe, hey, there was 00:19:05.560 --> 00:19:09.960 like some money left, but, you know, maybe there is enough money to keep it 00:19:09.960 --> 00:19:15.560 going, which is a bad, you know, a bad thing eventually, because then maybe the 00:19:15.560 --> 00:19:18.500 people at the end, which is the case for the Mt. Gox it has been ongoing for 00:19:18.500 --> 00:19:19.140 months. 00:19:19.960 --> 00:19:25.760 Yeah, essentially it's true that... Whoever is holding the keys for the Bitcoin 00:19:25.760 --> 00:19:29.780 Beach Wallet right now, they could get into a collective boating accident still 00:19:29.780 --> 00:19:33.440 and the money would be gone. That's still true even with proof of reserves. 00:19:33.780 --> 00:19:38.400 What's not true with proof of reserves is that they could run a fractional 00:19:38.400 --> 00:19:43.940 reserve banking type of system for months or years. That would be impossible, 00:19:43.940 --> 00:19:49.220 ideally at least. So maybe... So how you say it's high on your priority list. 00:19:49.700 --> 00:19:54.360 Can you explain as simple as possible how that would work or what it would look like? 00:19:55.290 --> 00:20:00.170 Yeah. So the idea of proof of reserve is when you have a wallet, you have assets 00:20:00.170 --> 00:20:06.080 and liability. So your assets are your UTXO and maybe the fund you have 00:20:06.080 --> 00:20:12.060 in your Lightning wallet. So you have a channel and you have money on your 00:20:12.060 --> 00:20:16.380 side of the channel. So all this constitutes your assets. And you have the 00:20:16.380 --> 00:20:22.330 liability, which is how much money you owe to each user of your wallet. And 00:20:22.330 --> 00:20:25.930 basically, proof of reserve is you try to prove that you have enough money in 00:20:25.930 --> 00:20:27.610 your assets to cover your liability. 00:20:29.130 --> 00:20:34.890 And so on the asset side, the way you can prove you have some assets is you have 00:20:34.890 --> 00:20:39.590 one UTXO or, you know, a couple of UTXO. And for each UTXO, you should have 00:20:39.590 --> 00:20:44.300 private key associated with this UTXO. And you can send a message, hey, you know, 00:20:44.820 --> 00:20:49.880 out of today, you know, this UTXO belongs to this wallet. And like this, you can 00:20:49.880 --> 00:20:55.360 sum, you can do it for each UTXO. You can sum how much money you have for your 00:20:55.360 --> 00:20:55.760 assets. 00:20:57.010 --> 00:20:58.910 And the way you prove on the label... 00:20:58.910 --> 00:21:04.070 So in that way, it would be publicly known which... UTXOs, which Bitcoins 00:21:04.070 --> 00:21:06.710 belong to the Bitcoin Beach Wallet in this case. 00:21:07.050 --> 00:21:07.510 Yes, correct. 00:21:08.790 --> 00:21:11.270 On the Bitcoin blockchain itself, yeah. 00:21:12.030 --> 00:21:16.170 And I believe there will be improvements to that with some zero-knowledge proof 00:21:16.170 --> 00:21:20.850 scheme, which I'm not deep into it, but I think there is a solution for that, to 00:21:20.850 --> 00:21:26.090 try to prove that you have enough reserve without showing how much... 00:21:26.700 --> 00:21:32.060 you know, money you owe. Because the reason I believe one, why a lot of, you 00:21:32.060 --> 00:21:35.780 know, no one, so far, really no one have really adopted proof of reserve is 00:21:35.780 --> 00:21:40.400 because, you know, no exchange wants really to publicly state, you know, which 00:21:40.400 --> 00:21:41.960 [unclear] they own basically. 00:21:43.780 --> 00:21:49.080 Coinfloor, I think, does it. They have the proof reserve check regularly. 00:21:49.420 --> 00:21:49.620 Okay. 00:21:51.270 --> 00:21:52.930 Okay, so... 00:21:52.930 --> 00:21:58.890 But this is zero-knowledge proof. That's maybe even further into the 00:21:58.890 --> 00:22:04.250 future. Let's stick with just the basics of proof reserves. 00:22:04.570 --> 00:22:10.350 And so... You know, you prove how much assets you have, you know, it can become, 00:22:10.630 --> 00:22:11.770 in that case, public information. 00:22:13.190 --> 00:22:18.510 On the liability side, the way it works is, okay, let's say you have five users 00:22:18.510 --> 00:22:24.380 in your wallet and each of them have 0.1 BTC. And so you want 00:22:24.380 --> 00:22:30.150 to construct a Merkle tree where at the top you will 00:22:30.150 --> 00:22:35.430 have 0.5 BTC. And you want to show that on the leaves of the tree, 00:22:35.790 --> 00:22:41.630 each user, their balance has been accounted into 00:22:41.630 --> 00:22:47.650 the total that is shown at the root of the Merkle tree. 00:22:48.950 --> 00:22:53.270 And so, yeah, you can construct this, you know, Merkle tree and basically every 00:22:53.270 --> 00:22:57.070 user will be able, maybe using the mobile app, will be able to log in and say, 00:22:57.190 --> 00:23:01.410 hey, is my balance, you know, in this total? And so there is a cryptographic 00:23:01.410 --> 00:23:05.770 proof to show that, yes, you know, this balance, which is 0.5, you know, my 00:23:05.770 --> 00:23:10.630 balance, which is 0.1, has been included in this total. And the general idea here 00:23:10.630 --> 00:23:15.010 is that if enough people check it, you know, statistically, you will have a very 00:23:15.010 --> 00:23:17.010 high likelihood of yes, you know, like... 00:23:18.630 --> 00:23:24.310 There has been no check that has not been verified. Therefore, it's very 00:23:24.310 --> 00:23:27.550 likely it's a fully reserved operation. 00:23:28.150 --> 00:23:31.710 Yeah, these are these kinds of things that are much easier to explain with a 00:23:31.710 --> 00:23:35.670 little bit of a drawing, which you just made for me half an hour ago. But yeah, 00:23:35.750 --> 00:23:41.560 the basic idea is that you're sharing the Merkle Path. Hopefully, listeners will 00:23:41.560 --> 00:23:44.340 know what the Merkle tree is. If not, this is going to be over their head 00:23:44.340 --> 00:23:49.620 anyways. So yeah, you give every user the Merkle path. And the Merkle path 00:23:49.620 --> 00:23:55.000 doesn't only include the hashes, which any Merkle path does, but it also includes 00:23:55.000 --> 00:24:00.830 the amounts. And therefore, you can sort of add up that your amount 00:24:00.830 --> 00:24:02.130 was included in total. 00:24:04.420 --> 00:24:09.640 If enough users do that, then like you said, statistically, if you're trying to 00:24:09.640 --> 00:24:14.660 cheat, someone will figure it out. Someone will find out that their total, that 00:24:14.660 --> 00:24:20.600 their amount wasn't in the total. So it's not a hard proof for any individual 00:24:20.600 --> 00:24:25.340 user. But collectively, if enough people do it, I don't know, maybe 10% is 00:24:25.340 --> 00:24:29.980 enough. Or I have no idea. There's probably statistics wizards out there that 00:24:29.980 --> 00:24:33.260 would have a better grip on that. But if enough people do it, then you get them. 00:24:33.870 --> 00:24:39.770 they know pretty sure that the proof of reserves proves that 00:24:39.770 --> 00:24:42.290 the reserves are there. Right? 00:24:42.610 --> 00:24:42.710 Yeah. 00:24:42.970 --> 00:24:45.730 All right. So, but this is not in the Bitcoin Beach wallet yet. 00:24:46.030 --> 00:24:46.170 No. 00:24:46.270 --> 00:24:49.630 This is part of the long priority list. 00:24:49.910 --> 00:24:50.070 Yeah. 00:24:51.130 --> 00:24:53.010 As every wallet has, so I know. 00:24:53.290 --> 00:24:53.390 Yeah. 00:24:56.680 --> 00:25:02.540 Okay, yeah, so let's get to more the user experience side of things. 00:25:03.440 --> 00:25:08.180 I already mentioned that I actually really like using the Bitcoin Beach Wallet 00:25:08.180 --> 00:25:13.900 here because it's just fast. And this is part of the custodial thing, I think, 00:25:14.200 --> 00:25:15.200 where... 00:25:17.100 --> 00:25:21.260 all of these merchants in this town and there are a lot of merchants in this town 00:25:21.260 --> 00:25:26.440 you know a lot of pupusa shops which is like the local dish or uh just these tiny 00:25:26.440 --> 00:25:32.400 corner shops or restaurants or lots of people are actually accepting Bitcoin 00:25:32.400 --> 00:25:38.280 and they have this QR code out and this QR code essentially just um if you scan 00:25:38.280 --> 00:25:43.480 it a username comes up, right? Well, it says the username and letters as well. 00:25:43.620 --> 00:25:47.100 And if you scan the QR code, what does the QR code say? Is it the username 00:25:47.100 --> 00:25:48.260 specifically? 00:25:48.660 --> 00:25:51.860 So the QR code is a link to a webpage. 00:25:52.060 --> 00:25:57.440 Okay, yes, you're right. So let's, one thing at a time. So everyone here or a lot 00:25:57.440 --> 00:26:02.280 of people have a username. So if you have someone's username, you can very easily 00:26:02.280 --> 00:26:08.170 pay that person because it is custodial. It's just, you know, The wallet 00:26:08.170 --> 00:26:13.950 has a ledger and it just changes the ledger from me if I'm buying a pupusa 00:26:13.950 --> 00:26:19.030 to the pupusa shop lady. And that's why, you know, it happens within three 00:26:19.030 --> 00:26:24.550 seconds, which is kind of nice when you, you know, when you're on the go. And 00:26:24.550 --> 00:26:27.530 even if you're not on the go, it's just a little bit awkward to stand in front of 00:26:27.530 --> 00:26:31.470 a shop for a minute or a half minute finding a path. 00:26:31.590 --> 00:26:35.970 I would also say that if you use, you know, Wallet of Satoshi or Strike Wallet, 00:26:37.130 --> 00:26:40.750 We're connecting with those wallets, right? We're connecting with other wallets 00:26:40.750 --> 00:26:46.750 that are often used here. In a way that the transaction will be the fastest if it 00:26:46.750 --> 00:26:51.060 is from Bitcoin Beach Wallet to Bitcoin Beach Wallet. But Bitcoin Beach Wallet to 00:26:51.060 --> 00:26:55.160 Wallet of Satoshi should also be very fast because basically the server of, you 00:26:55.160 --> 00:26:58.280 know, the Bitcoin Beach Wallet and the server of Wallet of Satoshi have, you 00:26:58.280 --> 00:27:01.580 know, the Lightning have a direct channel. And so it will also be fast. 00:27:01.720 --> 00:27:05.360 Right. Yeah. So in that case, pathfinding isn't a big deal. It's just right there. 00:27:05.560 --> 00:27:09.500 There is no pathfinding, basically. It's like, you know, immediate payment. And 00:27:09.500 --> 00:27:12.860 so maybe if you add some experience where the, you know, payment was much lower, 00:27:13.100 --> 00:27:17.150 it's probably that. Yeah, the node was not directly connected to us, and this is 00:27:17.150 --> 00:27:19.050 where things can take a bit more time. 00:27:19.430 --> 00:27:24.250 Yeah, so let's get back into the trade-off side of things. The trade-off here, 00:27:24.530 --> 00:27:29.370 besides the trade-off we mentioned, the fact that it's custodial and you're 00:27:29.370 --> 00:27:33.130 trusting whoever's holding the keys, the other trade-off here would be privacy. 00:27:34.520 --> 00:27:39.900 Whoever's running... the wallet or I guess, yeah, I guess that would be whoever's 00:27:39.900 --> 00:27:43.600 running the wallet server, right? They could tell that I just ate a pupusa. 00:27:44.120 --> 00:27:44.280 Yeah. 00:27:44.480 --> 00:27:49.060 Right. So that's another trade-off that you're making for convenience sake in 00:27:49.060 --> 00:27:54.870 this case. And I'm sure you've had a lot of complaints about this 00:27:54.870 --> 00:27:57.230 in El Zonte. There's a lot of privacy activists. 00:27:59.750 --> 00:28:04.330 Yeah. So, yeah. I'll share a funny story about this. 00:28:05.920 --> 00:28:10.900 So when you make a payment, you can add a memo to the payment, like, hey, I'm 00:28:10.900 --> 00:28:14.160 pupusa, and I like the pupusa, thank you. 00:28:15.950 --> 00:28:17.050 And the 00:28:18.300 --> 00:28:24.160 way we've been thinking about it when we start the memo feature is 00:28:24.160 --> 00:28:30.070 that, okay, memo should be private. So if I say, hey, I 00:28:30.070 --> 00:28:35.010 have pupusa for the memo, it's just to remind me that I am this… 00:28:35.840 --> 00:28:38.220 $2 or $5 payment is for pupusa, right? 00:28:39.640 --> 00:28:44.020 But basically, we had some actually feedback that, hey, you know, the memo is not 00:28:44.020 --> 00:28:47.880 shared. Like, we want the memo to be shared because I want to send a payment to 00:28:47.880 --> 00:28:53.760 someone and tell him, hey, I sent you $10 for, you know, for the pizza that 00:28:53.760 --> 00:28:58.560 we ate yesterday. And today, they don't like the fact that it's not been shared, 00:28:58.860 --> 00:28:59.860 which is interesting, right? 00:29:01.120 --> 00:29:06.540 And probably the reason why they don't... you know, think about privacy too much, 00:29:06.540 --> 00:29:12.530 it's important to imagine that most of the users today, 00:29:12.730 --> 00:29:17.660 like this is their first, you know, bank account, if I can call it that way. And, 00:29:17.660 --> 00:29:20.820 you know, like they're discovering, you know, internet money for them, it's 00:29:20.820 --> 00:29:25.620 magic, right? Like the notion of privacy is not the top of their mind, actually. 00:29:26.330 --> 00:29:32.050 The utility function is much higher on their mind. And therefore, privacy, 00:29:32.190 --> 00:29:36.110 they don't really care so far. They actually prefer to share information when 00:29:36.110 --> 00:29:37.970 they send a payment, for instance. 00:29:38.370 --> 00:29:41.850 Right, yeah. Well, I mean, I do think privacy is very important. Don't get me 00:29:41.850 --> 00:29:46.310 wrong. It's just also clear to me that people here are probably fine with 00:29:46.310 --> 00:29:52.170 whatever can help them at this point. And this seems to help them. But do you 00:29:52.170 --> 00:29:55.840 have any idea of how that... Do you have any plans to improve that somewhere on 00:29:55.840 --> 00:30:00.160