CD194: SIDESWAP - LIQUID PREDICTION MARKETS

Happy Bitcoin Monday, freaks. It's your host, Odell, here for another Citadel Dispatch. The show focused on actual Bitcoin and Freedom Tech discussion. The current block height is nine four zero zero one one. That brings us into fiat time. Fiat time, it's Monday, March 9. I just did the time zone change on me. At seventeen Sixteen hundred UTC. You guys will probably be listening to this in a couple of hours. I don't like sitting on it. I like to get to you ASAP.

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Anyway, we have a great show lined up today. I have Scott here. He is the cofounder of Sideswap. Sideswap

has just been grinding along, great product in the liquid ecosystem, something we haven't talked about for a while on the show. How's it going, Scott? Hey, Matt. Thanks for inviting me. Yeah. Everything's been going very well. SideSport's been growing very nicely these past few years. It started out quite slow, but we're growing organically and cash flow positive and very happy with where we are. We we focus much on the tech and building out what we hope is a

great product like by users. We're focused much on marketing, which is why you may not have heard of us much. Yeah. So, I mean, I was not really familiar with you guys. I, like, kind of a little bit couple years back. And then I started playing with Samson's Aqua Wallet, which more people might be familiar with, which is tries to do lightning and Bitcoin with with liquid as the

base at rest. So it sits in liquid, and then he does swaps for receiving and sending, which we've seen a couple wallets do that. But BullWallet has been doing it recently. Breeze has their own SDK that uses it as well. Breeze has, like, two rival SDKs in house. One does liquid and one does spark. But I was playing around with AquaWallet, and then I saw on the back end, they were using you as a provider, which was cool. And then I was like, okay. Well, let me see what they're doing directly.

And that's that's kinda how I was reintroduced to you guys. And we had a mutual friend put us in touch and I it's just it's impressive what you guys have been quietly building with, like you said, very little fanfare. So I mean, to the freaks to our audience here, what is sideswap? How should they think about sideswap? Well, Sideswap

at its base is really a non custodial wallet, and it's based on the Bitcoin premise that your keys, your coins. So when we built the swap market, since Bitcoin doesn't have other assets other than Bitcoin on chain, we started looking at the layer twos. And since Tether was issued on Liquid,

we figured we could build swap markets. We effectively have atomic swaps between two parties. So you can create a bulletin board type of system, and you create a swap between the two parties so that settlement happens atomically and instantaneously, real time between the two counterparties to the trade. So, we're never a custodian of anything, really. And that's the model that we're very much looking for, and a model we think everyone should really aim for and not go for the custodian models.

So direct yeah. Go on. No. No. Continue, please. Sorry. I mean, so the way I look at it is for the average person, at least on the surface, SideSwap is an app that you can download on your phone that lets you easily go from regular Bitcoin to liquid Bitcoin and vice versa. And then if you want access to Tether, you can then easily swap between liquid Bitcoin and liquid Tether. Correct? Correct.

So one one of the first big hurdles that we encountered was obviously getting people to move between the main chain and the liquid side chain. So we effectively built one of these peg in, peg out services since very few people can be they don't wanna sit there and sink a full node on both the Bitcoin side and the liquid side in order to be able to create the claim scripts and issue coins on liquid. And many of the services at the time had a very high fee.

So so we cut that down to 0.1% and had effectively a bridging service, which anyone can use, which I I also use this. So it's a fifty fifty revenue split on anyone who's a partner and just uses our infrastructure so they don't need to build it up themselves. And with that done, we started focusing on swaps on liquid so that two participants can trade between themselves without having any intermediary.

So we effectively just offer a bulletin board system so that users can find each other, we help make sure that the swap has integrity so that one party can't cheat the other one by effectively saving half signed UTXOs, which they could theoretically broadcast at a later date.

And so, the way we've built it, we also offer instant swaps, but way it's built, we actually offer order books where anyone can come in and improve prices within the order books, and any instant swap is a technically a market order into the order book. So dealers compete on pricing. So, hopefully, we get spreads which become a lot tighter. Right now, I think the spreads are about 0.2, 0.3% away from, shall we say, the midpoint price many times. And, yeah, so there's

lots of trading opportunities and lots of liquidity. The areas that we've really seen grow, initially, was

a loss around USDT, but lately, it's been DeepPicks. It's really, really grown in the Brazilian market. What is DeepX? I saw it in the wallet. DeepX is a Brazilian stablecoin issued by a company, I believe, called Ulan. So so they have been behind much of the, increase in adoption within liquid lately. That's a good Yeah. So if we're looking at our swap market just in terms of trades and transactions, I'd say DeepX is probably the biggest market right now.

Not in terms of more, but in terms of transaction counts. In transaction count, DeepX is the biggest, but in terms of total amount Yeah. Tether is still bigger? Much bigger. So, yeah, go on. People are lot more comfortable holding Tether, obviously. Yeah. They've been around for, I mean, Tether's bread and butter is a high net worth, right? They've been around for a decade plus. Exactly. Whereas,

I think, Depix's many local payments within the Brazilian ecosystem. But it brings in a lot of users even if the transaction volumes aren't that large. How do I spell Depix? D e p I x. Depix stablecoin. Interesting. So so okay. There's a couple of things here. First of all, the order book thing is fascinating.

It's like, in general, a lot of these quote, unquote instant swap services you see are, first of all, custodial. And second of all, they're kind of like a black box in terms of pricing. So it's cool that you actually have, like, a proper order book that basically anyone can participate in and become market makers. And as a result, it's more transparent pricing. And, theoretically, I guess, it should be better pricing.

I think it's pretty cool that you can actually participate in the order book on mobile, which makes accessibility good. But I assume it's quite obvious if you look at the order book for a little bit, like, there's at least there's, like, one or two, like, real market makers there that are putting up more size than others.

Are they using they're not using, a mobile wallet. Right? Like, they is there, like, a CLI or something that they're accessing the order book with? We've built quite a suite of tools. So in our GitHub repo, anyone can download the dealing software. Anyone needs help setting things up, everything's available, you can write your own frontline code. So, I think we had a bit of an issue with that at one point since people were flooding the system with lots of quotes.

You know, growing pains are good pains. Yeah. I agree with that. Okay. Fascinating. I mean, before we continue on, I mean, I think the big question that we've been asking on this show for years now, and I think Bitcoiners have been asking for a while, is ironically, the lack of liquidity on liquid and the lack of users using liquid seems like cautiously optimistic in terms of adoption increasing lately. And I would say partially, it's probably these wallets that are using

Liquid at rest for Lightning payments, specifically bull and Aqua Wallet. I mean, the fact that liquid has confidential assets, which incorporates confidential transactions. So each transaction, you can't see the amount or the asset that's being sent, whether that's Bitcoin or Tether or whatever, means that people that, you know, maybe are in the developing world that are sending 20¢ worth of Bitcoin, you can't tell if that's $2,000 worth of Bitcoin or 20¢ per Bitcoin. So it actually

compounds kind of beautifully in terms of adding, I guess, anonymity set to to liquid. Anyway, this is kind of a long winded question. But where do you see liquid adoption? Have you been frustrated with the lack of adoption? Do you are you still? I mean, I assume you're still optimistic on adoption. And how can that be accelerated? Because it kinda feels like liquid has always been like the ugly stepchild of Bitcoin that just hasn't really found its wings.

No. Correct. I think it much has to do really with Bitcoin being a one asset chain. It didn't really have any scripting abilities or or ability to issue other assets so that you can trade things, like, atomically. So so so there was no real layer two which could really scale Bitcoin. So I think when all of these other chains came around and they offered all the smart contracts, etcetera, very easy for anyone to get involved. I think that took

off a lot. And many of the exchanges, I think, focused on offering products and development within that area since there's a lot of money flowing in and promise. But I think as time goes on, I think Bitcoin, which is like the settlement layer developed properly in financial markets, it may have taken a bit more time. But I think liquid is a step in the right direction in terms of how you build secondary layers. There's lots of questions around making

the two way bank trustless and how you can go about that and the federation model. But if we skip that side of the discussion, it's very nice to have an asset layer, which is like Bitcoin based, UTXO based, that can hold multiple assets so that you can have these financial transactions and swaps and everything else around it. So I just think that side has taken a lot of time to get going, especially since it requires you to manage your own keys.

I think none of the big wallet custodians like Fireblocks or anyone else has integrated Liquid, so it hasn't been very easy for any exchange to offer it. So, basically, onboarding one by one, people are comfortable holding their own keys.

But going forward, I think now that simplicity is live on Liquid, I think there's a lot of things that can be done and will offer a lot of fantastic features to users, such as being able to create prediction markets in a Bitcoin native type of ecosystem. Yeah. I mean, I wanna jump in there specifically on the prediction market stuff. But before we do, just real quick, I mean, like, my fascination with liquid has always been on the privacy side, specifically confidential transactions.

You know, a lot of the probability analysis that Bitcoin chain surveillance firms do is based on amount correlation. And once you remove those amounts from being visible, it makes their job of detecting when ownership has changed hands much more difficult. On the asset side, let's be frank. I think most tokens that have been launched in crypto are just straight up scams, and the ones that aren't are also just probably horrible investments except for the undeniable USD tokens,

specifically Tether. Right? And we've seen a massive market for Tether on Tron specifically to a lesser extent on Solana and Ethereum. And it's fascinating to me because if you use those ecosystems, it's even worse than Bitcoin privacy. It's like you have a fixed address that is literally your entire transaction history. And so where I'm going with this is right now, it seems like

I'm cautiously optimistic that financial privacy in, quote, unquote, broader crypto space seems to be having a moment. First, we saw it kinda with the Zcash pump and dump. And then recently, Ray Dalio and Chamath both mentioned financial privacy as a concern. And I think part of it is because of the of of not even Bitcoin. Like, Bitcoin could have better privacy, but it's still relatively accessible. But the privacy situation on the Tron or Solana is absolutely abysmal. It's horrible.

So I'm surprised that there hasn't been more uptick on just the Tethr use case. Like, if you want to use Tethr, which obviously has a trusted third party, and I've never advocated for people to use Tethr, but there's plenty of demand for people that want Tethr and want access to US dollars where they can't get it otherwise. The most private way to access Tether is through liquid and specifically through sideswap because you make peg in so easy

and peg out so easy and you make the ecosystem much easier, much more accessible. Why do you think we haven't really seen like, let's nail down specifically on Tethr. Like, why haven't we seen specifically massive Tethr adoption on Liquid? It's like, oh, it's pretty much negligible compared to the other chains. Well, it's absolutely nothing. I I think there was about $35,000,000 of tethers circulating on Liquid up until

a few months ago when it was increased to 90 something million. So if you compare that to the other chains, it's a drop in the bucket. I think also much of the liquidity on the other chains is not really held in private wallets. It's held with custodians in one shape or form. With liquids, as there are no custodians, By definition, people who are comfortable holding their own keys on on assets that affects the balances

for you. But something that's very interesting, which few people might have considered, is that USDT on liquid, it's the only due to the confidential transaction nature of it, the issuer cannot confiscate the balance. They don't know which UTXOs are USDT. Yeah. They'd have to confiscate it, basically. They'd they'd have to confiscate all of it. Right? They'd have to, like, basically shut down Tether on liquid is what they could do.

But they can't do their, like, pick and choose, unblocking this Tron address or whatever. Not like they can do all the other chains.

Yeah. That's why it's wild to me that just the Tethr use case alone. And so they have a website, usdt.network, that tracks all of their usage across the different chains. Just just for reference for the freaks. I mean, Scott said, what'd you say? You said 95,000,000 Tether on liquid? Yeah. I I believe it's About that? 100 that ballpark area. Okay. Well, anyway, it's completely negligible. The there's $92,000,000,000 worth of Tether on Ethereum, $85,000,000,000 on Tron.

Yeah. Just with a b. Just just to show the discrepancy. On the privacy side, I think it's also pretty cool that basically in practice, am I correct in saying that anyone who's doing a swap between Tether and Bitcoin, Lightning Liquid Bitcoin and Liquid Tether is basically a pay join transaction. And pay join works even better on liquid because of confidential transactions than it does on Bitcoin in terms of breaking probability analysis.

I think there's a few different aspects to that. Pay join is something that we offer for people who have wallets where they don't have liquid Bitcoin and needs paid network fee. So so so we do lots of pay join transactions every day. I think there's about 2 or 3¢ fee which covers includes the network fee. So it's very cheap to do these page on transactions. And when we have swap markets where you have two assets traded against each other,

where you don't have liquid Bitcoin as one of the assets, we actually pay the network fee on behalf of the users in a pay join with the swap. And since the swap, there's two different assets being exchanged, there's very, very little the heuristics become very difficult to Yeah. It's pretty wild. And particularly at a small user base, which is obviously the single biggest thing holding back liquid as a as a more robust privacy tool.

But it's impressive that it breaks. It already breaks even at a smaller usage. It's still breaking a lot of heuristics. It makes it quite difficult. Yeah. And especially with a peg in, peg out process when you peg in and then you peg out, the federation also selects the UTXOs that you get when you peg out, so there's no correlation between the two. Right. They just know it came from the liquid network.

Yes. Like, if you pegged out and then sent to strike, they would know that those are liquid affiliated transactions, but there wouldn't be a direct connection between peg in and peg out. We but mind you, this was, like, two, three years ago. We we ran the UTXO sets of liquid through one of the chain analysis tools. And the UTXO sets is effectively pristine since is responsible for, I'd say, a decent chunk of it. Fascinating. Oh, yeah. Mean, yeah, let's talk about

I mean, you mentioned it. Let's talk about prediction markets.

I mean, to me, one of the big shames is that we I mean, Bitcoiners have been talking about prediction markets for over ten years now, and they finally hit critical mass. And the biggest one is on Polygon and uses USDC as its primary base asset, that being Polymarket. Obviously, like, the functionality specifically with something like prediction markets, you need it to be self custody. You need to not have liquidity concerns. These things

make it very difficult to run any kind of prediction market on Lightning. We've seen a competitor pop up called Predix. That's basically just a custodial wallet, you know, with managed payouts, which I think is just not sustainable or scalable and has massive, you know, regulatory exposure. Liquid seems like it could be ideal for a Bitcoin native prediction market because it has simplicity,

because you can do self custody type smart contracts, because you have privacy. I mean, we're seeing on the poly market side, people's wallets are being tracked. They're like, this person

was successful on these six different military markets. Like, they must be an insider with the Israelis or an insider with The US or like, it's getting arguably is it's made it more obvious why financial privacy is important on blockchains than actual financial transactions themselves, because a lot of these markets are quite sensitive. So how are you thinking about prediction markets liquid? What kind of opportunities are there?

Well, I think there's many aspects to your question. The first point, Anne, we consider those aspects. I think they're raised now with the insider trading ahead of the Iran, where someone seemingly made quite a bit of money betting on the twenty eighth, I believe. Terms of prediction markets being built on the next quarter, I think it's still

a bit out. We've done so much work in the background because there's so many building blocks that need to come into place before you actually build it. So, what we've been building in the background is effectively a liquid connect type of function so that anyone can plug their wallets into a web page or that the web page can connect with a wallet so that you can send these transactions to the wallet directly. Because these swap transactions, especially with simplistic contracts,

can become, shall we say, fairly messy, nonstandard, not super easy to do. So it requires a bit of work in that regard, a bit of meta mask type of features, but for Liquin. So we've done much of that work. It hopefully should be I mean, we have it ready in introduction, but it should be a lot more useful, I think, next week. And we should release a public API so that anyone can integrate.

So so that was the first step. And then the second step is how do you build these prediction markets? So so with Simplicity, you can build these binary contracts. And we've started playing around with it. I I I'm still not entirely sure all the limitations. You can create these binary contracts between two people, and you have an oracle that determines the outcome of the contract. So as long as the two parties trust the oracle, you can effectively bet on anything.

But then the question becomes also, how do you get people to fund the contract at the same time? Because if you create markets where someone needs to fund the contracts initially and then someone funds the contract as a later date, you need to create some sort of market structure that allows for that. What we've done is we've applied our order book and our swap market to it.

So we're looking at trading markets where you have a instead of an order book that goes from with a Bitcoin price, say, from wherever it is now, 70,000. So you have an order book that goes from zero to a 100, effectively. And so the bid will be the yes outcome, and the offer will be the no outcome. And wherever you bid within that order book is the prediction rate. So whoever's on, shall we say, the yes side, it bids 30. They fund the contract with 30¢,

and the offer will need to fund it with 70¢ so that there's 1 full dollar in the contract. And once the contract once the prediction either comes true or false, when the Oracle has a definite outcome, it's a winner take all type of situation where everything goes to one of the two parties. And that's effectively how you price it.

Our order book structure, we can create that so that two parties enter into a swap at the same time and that the contract is funded with the swap at once so that you don't have the issues of who goes first, etc, funding a contract and creating an order book with resting orders and people having locked up funds waiting for other users to come in, etc, etc. To be honest, I'm not sure how Polymarket's

done it. I know their order book's quite efficient, but the question is, how does it actually work under the hood? I'm pretty sure they're basically trading yes and no tokens on each market has their own tokens. I mean, the user doesn't see it. That's one option going about it, but the other option is creating the contract directly, and you have the two users fund the contract.

Yeah. There's a couple of different things. Right? Because it's like, okay. With prediction markets for prediction markets to work at scale, you need a couple of things. You need you need the ability for people to participate anonymously.

Because the whole idea is trading prediction markets benefits insiders, Tracking and watching prediction markets benefits outsiders because you're giving insiders an incentive, a financial incentive to effectively tip their hand and and trade a market, which then exposes

which exposes their belief on how that market will what the outcome will be. So they need to be able to do it anonymously because if they work for Intel or if they work for a government or something, they're not gonna do it unless they can do it anonymously. So with that understanding, then it needs to be at least relatively decentralized and self custodial because if there's a single company that is controlling funds and controlling payouts,

then they're ultimately gonna be pressured by a government to docs all users. So you're never gonna have permissionless participation unless it's relatively decentralized. And then the last piece is the Oracle problem, which is how do you how do you determine in a robust and objective way what actually happened to settle the contracts afterwards? And so Polymarket, like, kind of made it there on all of those pieces, but they kind of hand waved a bunch of stuff away, like Polygon itself,

you know, I think could be argued that it's still pretty centralized. Ethereum, very centralized. USDC, obviously, is completely centralized and can be frozen at will. The Oracle problem, they haven't actually solved. They just offload it. It's like they don't make the decision. They have like for each market, there's a designated quote unquote on contract Oracles. So there's it's still

crypto native, if you will, but it's still ultimately, you know, centralized entities saying ESPN reported that the game was, you know, the Clippers won the basketball game or whatever. So they didn't solve the Oracle problem, and they're, like, kind of, quote, unquote, decentralized enough to not have to do KYC and block people's access to markets.

And I think this is just something interesting, by the way, for Bitcoiners and Liquid, where the shit corners have done a really good job of kind of being pragmatic about trade off balance when it comes to censorship resistance and decentralization that Bitcoiners have not been. I mean, I we haven't really touched on it, but there's a lot of controversy, for instance, around

the liquid federation model and whether or not it is technically self custody or not. But if you which is something that's, I think, unique to the Bitcoin community. Because if you look at something like Tron, it's pretty much the same trust model as liquid. But Tron has gotten a pass from regulators, they consider it decentralized enough. And Tron, like I said earlier, has $85,000,000,000

of Tether volume alone on it, which is a wild stat. So to me, liquid could be this middle ground for Bitcoiners. And we could actually I mean, there could actually be a trust model set up on a liquid style prediction market that is significantly better than Polymarket, which is right now operating at scale with very sensitive markets at a 10,000,000,000 plus valuation with many, many users. And it seems like

too good of an opportunity to to miss out. So, I mean, on that point, that was very long winded. But you more than anyone, know, mean, you've been quietly bootstrapping and building a business on liquid. How do you think about that trust model in terms of the federated model? Because I mean, it could kill your business if it wasn't

sufficient enough, let me put it that way. Of course. And that's also one of the growing pains that we'll need to encounter at some point. But right now, while we're so small, I think no one's looked deeply enough at all all of these questions in terms of liquid, the federation, how it's structured, set up, is it decentralized enough, etcetera, etcetera. Right now, we're very much just focused on getting the market model correctly, get everything easier

for users to access, make it easy to trade. Since everything's non custodial, you hold your own wallet, you hold your own keys, the contracts are on chain, swap into it, it can be verified within the wallet by the users prior to executing the swap. But then there's all the questions. So the question is, is that decentralized enough? It's very difficult to say. Different regulators may take a different view given the government's model. Very

unclear. Then there's, I think, all the questions around how the oracle is constructed, etcetera. We're not trying to solve all of these, should we say, philosophical or mathematical questions. Right now, we're just focusing on trying to get the market structure correct. Once we have that in place, we can start tinkering around the edges with everything else. I think the Oracle like that. Super easy to solve. Blockstream's working on it. They have a model that they proposed.

Is that good enough? Not sure. I mean, it's like I said, it's not like Polymarket has solved it. It just needs to be robust enough. It's never gonna be we're not gonna I'm convinced that the Oracle problem is is unsolvable. So you can mitigate it. You can create a a relatively usable and decent and robust solution, but actually, quote, unquote, solving the Oracle problem, solving something happening in the real world and then being able to

cryptographically prove it on chain is gonna require some trusted third parties that are cryptographically proving it on chain. Those trusted parties, you can reduce their influence or risk by combining multiple of them, by adding reputation systems. I think DLCs are interesting where they're providing Oracles, but they don't know which market they're providing Oracles for. There's different ways you can do that. But at the end of the day,

for someone on chain to know what the weather was in Chicago yesterday, like, there's gonna be trusted third parties. There's I I don't think is solvable in that regard. There's no way around it, I think. Yeah. Exactly. And on the on the point of liquid, I mean, would you agree with me? Like,

custody, if you consider Tron self custody, I think you have to consider liquid self custody. I mean, Justin Sun is basically arguably the model for Tron is worse than liquid in terms of censorship resistance and trusted third parties. I mean, I would say so that obviously, I'm biased. I mean, my hope as well is in that direction. So take it from what it is. I will say that I think

where we're seeing I mean, the big one that everyone is I mean, anyone who's actually building in the space has been paying attention to is Spark. And there's a lot out of Light Spark, which is David Marcus's a 16 z funded company after he was formerly working for Facebook for Meta. And I'm already seeing like the Bitcoin culture fights over whether or not that is considered self custody.

And it's a similar idea of a pragmatic approach that is maybe more similar to what we see in shitcoin land, but I think could be very useful for Bitcoiners. No. And I wonder if that will bring more attention to liquid because I mean, if you mono a mono it out, I think the liquid model is more robust than the spark model. And then you have other things. Like, I love the Phoenix team with async. Like,

the trust model for that is not as clear cut as you hold your keys, you have self custody. On chain is very clean. On chain Bitcoin is very clean. It's either self custody or it isn't. Once you start playing with the trade off balances across the stack, things get a little bit more definitionally messy. And I think the Bitcoin community specifically has been wrestling with that for many years now.

But but, I mean, it's a I mean, if you look at how the financial system is built, you take the a central bank, They operate one ledger. But then you have all the commercial banks below. They each operate their own ledger. So if you wanna move cash from one one bank to another, it's actually the the bank's accounts at the central bank that need to update before the banks themselves update their own accounts.

So the whole financial system is built on lots of different ledgers, and all these clearing houses are effectively the ones managing the risks between the different ledgers and, should we say, the net deferred settlement between ledgers. So so for Bitcoin to scale, given that it's one asset chain, you need these secondary layers somehow. Since there's no solution yet exactly of how to create these exact or trustless two two way pace between the Bitcoin main chain and the side chain.

There's always gonna be these different trade offs and discussion around how decentralized is it, at what point do the regulators consider it being decentralized or not. So, there's always these questions. Yeah. Of course. It's just interesting. It's an interesting interesting thoughts to go down. I mean, I'm sure we're gonna get comments about it too, which is why it's it's incredibly important to talk about it. Pretty much they come up anytime liquid is brought up. I wanna talk about

and I think rightfully so. I think it's good that the community is at least a subset of the community, which percentage wise is getting smaller by the day, but absolute numbers wise has never been higher, cares so much about these hard questions and sovereignty and and using these things in freedom oriented way as well. Like I was like I said, like, shit corners kinda just

throw it out the window and think of it as an afterthought. You guys recently launched a new product. Are you at liberty to talk about it right now? Or

Yeah. So this is, like, our first dipping our toes into the Simplicity, should we say, pool, if we're in the liquid space. Look, what we've effectively we have this website or sister website called Swaption, where we've climbed this Liquid Connect, which is a bit of a privacy docs since this if you do connect, you share the watching only wallet with Liquid Connect because otherwise, it wouldn't be able to help you create the transactions and

everything within your wallet and send the transaction signing to your wallet. So there is that aspect to consider. Would you similar to the trade off with using, like, an Electrum server, right, on chain Bitcoin? Yeah. No. No. Exactly. Right. Okay. Continue. There is that trade off. I mean, we never data mine our users or anything else. So,

I mean, there's no way for users to verify that. But in terms of Swaption, so with the Liquid Connect function that we've developed with the wallet, if you visit the Swaption webpage, what we've built is the first binary outcome contracts, which is the first step in the direction towards prediction markets effectively. So, we have two different products. One is,

will the Bitcoin price be higher or lower in, should we say, two, five, or ten minutes than it is now? And then the other product is, will the price of Bitcoin go up or down like one, two, three, four, or ten percent first? So it's binary outcome, does it go up or down 10%? So people can make bets in terms of direction, etcetera, hedge positions

with leverage. So the idea is also here is to open up so that anyone can trade in the order book and provide liquidity and improve pricing, etcetera. So right now, there's not fantastic payouts, but we're working very hard in that direction to create these order book type of markets so that anyone can come in and provide liquidity. So, I mean, your main website is sideswap. Correct. That's that's you download the app, and

web page is being reworked as well. Soon, you'll be able to use the Liquid Connect and trade via the web page as well. And then Swaption, is is it swaption.com? I swaption.io. And then that's swaption. I'll put all these links in the show notes. And then liquid wallet connect is basically I have the sideswap app on my phone or another compatible liquid wallet, which I don't think there are any right now. Yeah. Not that like, scanning a QR code on the website to sign in, basically. Right?

Correct. So if you have a desktop wallet, it will detect the desktop wallet with with the browser. Do you have a desk sideswap has a desktop wallet too? Yeah. So we build everything in Faster, so it's very easy to go across platform. And then so you were saying this is kind of, in a lot of ways, it's kind of a proof of concept because it's a relatively simple type of market that you could have

compared to a prediction market. Exactly. So so so we're dipping our toes. This is like the first MVP that we push out. There's only one dealer we don't allow yet, but but that's coming that anyone can compete and improve pricing.

And then, the next steps are obviously developing these open order books so that anyone can come in, maybe add functions such as auto signing, etcetera, and the Liquid Connect so that users don't need to sign every transaction so it becomes a bit more polymarket, if you will. So there's lots of new thoughts in terms of different directions we can go, but we'd love for Acquan, other wallet, obviously, to integrate so that it becomes ubiquitous within the Liquid ecosystem. Liquid Wallet Connect.

That makes sense to me. But it's developed by us. So, I mean, it's Conlec would connect, but let's see if others pick it up or if it's actually SiteSwap Connect.

Fair enough. I mean, we kinda have a similar situation in the Nastra ecosystem where we have an open standard called NSEC bunker that uses either paste either paste a code or or use a QR code scan. I think QR code scan makes a lot of sense. Like, the user has a mobile phone. They're, like, scanning with QR code. But the reason I bring it up is because we integrated into Primal. So it works with any

Nostra website that has the standard setup. But we are seeing people like add, like, some people frame it as sign in with Primal, even though it's an open standard and technically, anyone else can have NSEC bunker support, which is important, I think. I mean, you want

you know, I think part of the challenge you guys have had is it seems like you've been building quality product, but you need other people to also be building around you. You need more wallets. You need more hardware wallets. It's just Jade right now. Right? You need more use cases. There's quite a few others you have integrated, like different types of service providers, different wallets, mainly actually in the Brazilian ecosystem around deep picks.

And anyone who integrates with us, we offer a split on any volumes they drive our way. So it's a very easy way for them to build wallets, not have to develop all the swap market infrastructure, etcetera. They just plug our stack, and then we split the web of trading fees fiftyfifty. So so it makes a lot of sense for for them as well, and it helps us build network effects around our markets so that we get deep liquidity.

Yeah. I mean, liquidity begets liquidity. It's, the hardest network effect to tackle, but once you get it Yeah. What like, where did the DPX guys come from? Was that a why'd they choose liquid? That's pretty That's a very good question.

I'm not quite sure. I actually think one of the aspects was that one of the premises of the size swap market is that any asset you hold in your wallets, you you can post on the bulletin board and create markets for. And we have all this dealing software that we offer for free so that anyone can create liquidity in whatever asset they have. So did they start using you without even talking to you, or was there a conversation?

There was no conversation until they were not. Which is so cool. That's super cyberpunk. And but but moreover, since we don't charge any listing fees or anything else, so if they went, like, in the Tron ecosystem, if they wanna get listed with Bonnie now, what would that cost to list their coin? Right. Millions of dollars. It it it it it worked. So so the barriers to entry, I think, in liquid are so low because anyone can issue assets.

And if you trade through sites, well, there's absolutely no gatekeeping asshole. Anyone can create order books for whatever product they have. That's pretty cool.

So, I mean, you mentioned Simplicity, and Simplicity is a smart contract language that Blockstream championed for liquid with the, like, the hope, I think, that one day it could be used on Bitcoin on chain as well. Ironically, given the name, it's actually not that simple to get your head around. Do you have a high level explanation of why Bitcoin should care about simplicity?

Well, I I think high level abilities for Bitcoin to have different types of scripting options were, like, limited to, like, time locked contracts, hash lock, etcetera. There wasn't much functionality around building financial markets. So with simplicity, you have something where you have contracts which can be mathematically proven ahead of time so you actually know what you're signing when you get yourself into it. But moreover, you can also create these binary outcome type of situations,

such as prediction markets. You can create these financial derivatives. There's a lot more scripting opportunities since you can have these external articles that determine the outcome, etcetera, etcetera. So so with that, you have a lot more opportunities to build financial products which are Bitcoin native. So so I think it's very early days. It went live on liquid. It's not live on Bitcoin, as you said. I think there's a lot to play around with to test, and it becomes

possible to create these, like, hodl hodl type of structures, etcetera. You can create options, futures, binary outcome contracts, etcetera, etcetera. So I think it's super, super valuable, but but we're so early days. I think Swaption is the first one to go live with anything with simplicity. We have maybe 10 trades a day. Most of the trades are, I should say, very low value at this stage. People are just dipping their toes to try and understand the product, I think.

So if anyone's out there and wants to play around with it, feel free to go ahead. There's no KYC or AML to get involved. Yeah. I mean, and the key there is you can set up these types of p to p exchanges and whatnot without giving up custody using something like simplicity. Right? Correct.

And I guess it's kind of been pitched to me as like a competitor to how Ethereum does things that is more conservative and safety oriented, more robust coming out of it from a bit corner mindset rather than a shit corner mindset. But offering a lot of the same potential, I guess, if used appropriately. Exactly. The contract is mathematically verifiable

ahead of time. Whereas, think on Ethereum, many times when a developer creates these smart contracts or vaults, there's a lot of how skilled is the developer behind it. Right. And very easy to verify. Fair enough. Fascinating.

Yeah. So I'll put links to all this stuff in the show notes. I mean, to the to the audience, like, do you how can they be helpful? What are you what are you looking for? I mean, obviously yeah. Well, what is it? Do you have a call to action for them or

how you think about it? I mean, I'd love for people to just download the app and send them to shrapnel amounts of Bitcoin into liquid and just play around with swaps. Just see what's possible, what what's out there, how far it's come. Just do a few swaps back and forth. Try the order books. Go to SwapShare, just try these Simplicity contracts and just see where things are heading.

And I think things will clear up for a lot of people because it's one thing to for us to discuss back and forth, but once you get your hands on something and actually start playing around with it, trying it out, it just resonates so much more with you, if that's what you believe where things should be heading. And hopefully, more eyeballs will start looking at this and start developing these simplistic products and building a lot more financial products around Liquid.

Yeah. What I would say is just on in terms of low level playing around with liquid, I mean, if you install BullWallet by Bull Bitcoin so that's not their exchange service. I think people get confused by it, but this is their self custody wallet that offers on chain liquid and lightning. Aqua Wallet, which is Samson's wallet, which offers

on chain lightning liquid, and then also Tether support. And then the side swap app, you can peg in a very small amount for a very small fee from regular Bitcoin into a liquid Bitcoin on SideSwap. Then you can easily send it between the three wallets. And then if you go to liquid.network, which is mempoolmempool.spaces, liquid instance, It shows all the transactions that are happening on liquid.network,

and do a little blockchain analysis on yourself. Look at the transactions as they're happening. You can check mempool.space for your peg in transaction. You can look at liquid.network for your transactions in between wallets. Look at what the on chain footprint looks like. I think it's if you care about Bitcoin privacy, it's pretty impressive.

If you do a couple small swaps with Tether or whatnot, you can also see what the privacy situation is in that regard, and I think that's pretty fascinating. I think if you even if you're not interested in, I remain convinced that the Tether use case is absolutely massive.

Maybe not for this audience. I think a lot of us don't have a need for Tether. I mean, I have the traditional US banking system. I keep the majority of my family's savings in on chain Bitcoin and self custody. But there's a huge demand for Tether out there. But even if even if you're not interested in that aspect, the settling between lightning focused wallets. Like, you have a large amount of funds in bull wallet, and you wanna move them over to Aqua,

it's way easier to send a native liquid transaction. You don't have to deal with liquidity. You have pretty good privacy guarantees. You have very low fees. It's way easier to send using liquid than sending through lightning.

And I have noticed as someone who's been using BullWallet more often, it's a bit of a breath of fresh air versus having funds, you know, stuck in Phoenix wallet, for instance, and knowing that every time you make a transaction, you're gonna get charged a 1% fee and you have liquidity constraints and channel management and all that to deal with. So I think that's an interesting way to get your feet wet. I think the sideswap app in general is

you should be very proud of it. It's it feels like a very robust app that is performance, you know, like, I I don't feel like it's like lagging when I'm clicking buttons and whatnot. Like, I have confidence in it, which is not no easy feat as someone who's been heavily involved in building out multiple apps now at this point. So you deserve a lot of credit there. But you know, people should just

it'd be great if people play around with it. And then the last thing I would say is, I don't know, have you been playing around with, like, any of this AI stuff? I mean, in certain aspects, we've played around quite a bit. But if you mean in terms of

developing things within the liquid ecosystem or side swapping, done very little, helping write press releases, etcetera. Yes. But in terms of code I mean, everyone is the the newest thing to hit the block was this open call idea, which is, you know, I think directionally fascinating and probably still pretty early. But this idea of like having a self hosted robot that has its own memory and can access any apps, ideally CLI apps, it's works better with, but it can actually like navigate

a GUI, which is crazy. It can navigate like a graphical user interface or like a website or stuff if there's no API or no CLI. And you basically just have like this robot butler.

And there's I think as a result of it, there's been a a renewed focus on the concept of agentic payments, like how would the agents pay each other. I think what a lot of people miss there is also the agents also have to be able to receive and send payments from humans too. So when you say agentic payments, it's actually not just agent to agent, it's human to agent and agent to human and agent to agent. And liquid could be interesting there. There's

obviously demand for people to have USD token support on these things. USDC has become very common, at least in the Silicon Valley world of AI stuff. But the combination of liquid Tether support and liquid Bitcoin support on the same chain in a way that is as simple as just holding keys. They could just generate a wallet. They don't have to deal with

having the node have uptime, dealing with channel management, dealing with all these other stuff. There there is an interesting opportunity there in terms of liquid being used by the robots. And that, of course, is just leaving out the vibe coded apps or whatever building on top of liquid, which is presumably much easier than on Lightning as well. So that's what I was thinking.

And there's so many opportunities in all these areas. Whereas super small team, I mean, we're trying to just be laser focused in a small area, and many times, it's probably a bit bit like a horse walking around with blinders. There's so many things happening around you all the time when you're too laser focused in one area. So right now, we're just focused on building these simplistic products, getting more acquainted with all limitation of

these binary products. Like, how do you have many parties to trade? Can you, like, hand over your position in one in one binary market to someone else if you need to hold to maturity? Can you have netting, etcetera? But there's Love it. So many things to figure out. Well, I really wanna see they're freaks now. I just wanna see native Bitcoin prediction markets with decent privacy guarantees. Think liquid could be the holy grail for it. We'll see. Cautiously optimistic.

I've been wrong about liquid adoption multiple times, both on the bear side and the bull side. I think was probably too bullish at one point, then I was a little bit too bearish. We recently seen more of an uptick in usage. Maybe the reality is somewhere in the middle, but I applaud you guys for continuing to build it out and see what works and see what doesn't and try and build out that key infrastructure

to to help everything else grow. I would love if we can we do like a update show in like six months or something to see where we stand on all this stuff? I'd love that. I'd love that. Awesome. Okay. Scott. Yeah. Go on. Let's do something funnier. So if we have this updates in six months, prediction wise, where are we? I'm I'm you're gonna in six months, you're gonna have a full fledged poly market competitor for me. Let's make MVP of it anyway.

I mean, where do you think I'm obviously half joking. It's a big undertaking. Where do where do you think liquid and sideswap will be in six months?

I think we'll have the POC for it. That's awesome. That's exciting. We're not very far we're we're actually doing in the background a Satoshi dice type of structure. So we're building out a few, like, more betting type style of markets

just to figure out what all the edge cases around simplicity and just get the market mechanics correct. So we're heading in that direction towards the prediction market model, but right now, we're just doing the binary outcome type of contracts. So, we need to get the order book correct, where the order book is zero to 100 instead of whatever the price of Bitcoin is. Right.

And then, we need to so, we have Liquid Connect, but there's still a bit more work in that area. And then we need to figure out the whole Oracle aspect to make that have integrity in some shape, form, regard, which we don't have any clarity over just yet. Right now, we just have a super simple Oracle that's basically just signing the Bitcoin price so that the contract can determine outcomes. There might be something there.

First of all, that makes sense to me. I mean, you know, you do the little things to get comfortable and improve your understanding and your execution before you actually go for the the big one. You know, Polymarket is using something called UMA. I don't know. It's, like, so hard to keep track of all the shitcoin stuff. They're using something called UMA's optimistic Oracle, where there's like a whole process on chain of an Oracle determining the result of markets.

And that's all on chain on something. It's on Polygon or a different shit chain. But because it's all on chain, you might actually be able to just piggyback their oracles in the beginning because that's a hard thing. It's hard to get people to step up and be the Oracles is like just a people problem in the beginning. So you might actually be able to just hijack their Oracles and just use the same

resolution mechanism that they're using in terms of source of truth. If they're already signing cryptographic attestations on some chain out there of ton of markets, right? Like from weather to missile strikes to basketball games, then you could potentially just piggyback them until you have a, you know, liquid native alternative

out there on the Oracle side. Look into it. I know blockchain putting a lot of work now into the Oracle because they're obviously having a big team now, laser focused on simplicity. So they're also doing a lot of work around integrating everything. I think they're looking at some Model Connect feature. Interesting. Fascinating. Scott, this has been great. Do you have any final thoughts for the Freaks before we wrap here?

Not much. Just super happy if anyone's made it this far. I'm listening to us going about liquid as investors. My favorite project, SideSwap. Love it. Freaks, I'll have links to everything we've discussed in the show notes. Like I said, you'll probably be listening to this in a couple hours. Best way to support the show is sharing with friends and family. All relevant links at cieldispeche.com. Reminder to check out citadelwire.com.

I have already next week, have lined up on the calendar, a conversation with Leah, who is a cofounder of Vexel. They do p to p Bitcoin exchanges without KYC. So that'd be a great conversation. Keep an eye out for that and play around with liquid. Scott is looking for feedback. He's looking for more users, more people playing around with these things. I think all of it can be helpful.

While we are in these bear market, it's always great to just dive into the tech and get your feet wet. And there's no better time than today. Thank you, Scott. Thanks, Matt. Thank you, Freaks. Stay humble, StackSats. Peace.