This Is the Vision for DeFi Built on Bitcoin

financial journalism. We're talking with people who are in the financial industry quite a lot. But it feels like the enthusiasm from traditional financial players, you know, I'm thinking bankers and traders that has squarely moved on to defy two things like a theory um to places where there seems to be a lot of innovation and a lot of changes happening around what you can actually do with the

technology and with a wider pool of crypto. Whereas, like I gotta say, the bitcoin maximalist, sorry you got me going now, but the become maximalists are sort of like they've turned into the like the gold bugs of the traditional market, right, Like everyone kind of makes fun of them a little bit. Um. They seem a little bit old fashioned and they're kind of just like watching while all this new stuff happens around them. Yeah, that define

that definitely seems like the popular narrative. You know, obviously there's a lot of adoption overall or interest in Wall Street, and I think the story is like, yeah, bitcoin is cool and it's a good like you know, it's a store of value and if you worry about inflation, then buy it, or if you're an emerging market, it will

hedge against currency collapse or something like that. But if you want to do anything that's sort of like very familiar or two people on Law Street, like trade derivatives or create things that resemble equity or debt or anything like that, then they're all like super hyped on building on like ethereum or Salona or something like that. Like that is sort of like where the zeitgeist is right now.

I would say, yeah, absolutely. I guess you could boil it down to an open question of whether or not crypto is sort of outgrowing bitcoin, and whether or not you can have this massive crypto slash finance ecosystem that's built on an asset that's ultimately supposed to be relatively

static and in limited supply. Right, And I think there's actually two things, and we're going to explore them today, But there's two things that I think, Like one is there's a perception that it's harder to build on bitcoin debt, Like it's not, you know, because it's designed to like do one thing it seems very very well, which is be this like secure store of value. It's not easy

to build on That's one perception. And then I think there's like a question of like do people want to build on bitcoin or do people want to trade on So like it's not obvious to me that a lot of the DeFi stuff and you know, earlier in the week we talked to Tom Schmidt about you know, yield firming and all that stuff and you know, automated market makers, it's not obvious to me that like the people in

the bitcoin world like want those things. Whether there's really an appetite or an interest for all that speculation and trading, Yeah, totally. I mean it goes back to the sort of goldbug analogy that I was just using, right, but I think like it's also about who those people are and this idea that bitcoin is very very decentralized. It's not led

by any single person. So even if bitcoiners decided to make changes to the overall structure of bitcoin, which they've done previously, but it becomes very very difficult to reach agreement, and then it becomes very very difficult to actually do, whereas with something like ethereum, you kind of have you know, um, a figurehead in the form of Vitalic, you like can how put some changes and help the thing actually adapt and get to the place where people agree that it

wants to be. It just feels like two very different communities, definitely. So so that is the sort of perfect set up to our guest, because we're actually going to be speaking to a bitcoin maximalist, Bitcoin not crypto, and she's also a believer that all of these things, all this defied stuff that people are hyped about, that it will eventually all be built on top of bitcoin, and that it is more than just a digital rock, or that it's

more than just digital gold. And so we're going to sort of like get this perspective, like what is like Okay, like we sort of a lot of people accept that bitcoin has the store of value properties, is there more that can really be built on it? I'm very excited to learn about where that is going and to hear sort of like the counter narrative of what's going on. So I want to bring in our guest today at

least Kaleen. She is the founder and managing partner at the VC firm still Mark, which is only bitcoin focused. They buy equity take equity stakes in bitcoin related companies. She is on the board of Blockstream, which is one of the sort of like biggest builders of bitcoin applications. Man, we have it's employees contribute substantially to the bitcoin code base, to its uh the project. So at least, thank you so much for coming out. O lots great, thank you

for having me. There'll be a fun conversation, I hope. Yeah, I'm really I'm really excited about this because you know, you know, we set it up, we know what the narrative is. You know. Actually before we sort of like get it into like the defy stuff, I mean, we sort of um talked about how development on bitcoin is perceived to be difficult and or slow it's conservative, but actually bitcoin did just have a pretty substantial update to

the technology of the network, something called tap root. Can you sort of describe, like, what is this new thing that's going to be that's being implemented. I guess it's gonna be implemented in November, But what is this new thing? What's it going to enable us to do with a bitcoin? Well,

tap it does quite a bit. But one of the things that it does that's most topical for where the cryptocurrency you know, sort of memes have emerged in this market cycle, is that it creates efficiencies that are relevant for smart contracting, both at the base layer and at higher layers in payment channels for instance, like Lightning network.

UM So that's exciting. Tap root is will activate in November, and not only will it have an impact on privacy scalability of the um core protocol, but it will also impact, like I said, opportunities in smart contracting, and it will allow us it'll sort of set the stage for future upgrades like any prevout which has relevancy for other sorts

of increased functionality at the Lightning network level. And that's quite important because when we're thinking about defy in the bitcoin space, we're thinking not just about how that's relevant to traders, but really how it's relevant very broadly to billions of people, not hundreds of thousands of people. UM. Taking a quick step back to set context for the conversation, all to defy. So what we see happening in the ethereum or all coined space, UM, what's been called defy

now participants. There's about a hundred thousand participants in this space, and those are highly engaged participants, sure, but it's quite small and in terms of cultural relevancy or impact that

will be very limited. What has been frustrating, I think for folks operating in the bitcoin space is that I suppose it feels like it's in the background, um, but in fact it should be, in my mind, in the foreground, which is that bitcoin has been building a breadth of decentralized finance tools that are relevant not just to traders but to folks in emerging markets like El Salvador and just to folks very broadly. And so we you know,

we're not we're really not limited um. And also not prioritizing Bitcoin's relevance to traders, were thinking more broadly than that. So I, Joe, I want to um. You know, maybe kind of push bath about one of the ways you characterized me at the top. So you said you called me a bitcoin maximalist, which I think, um is a compliment, but probably not I did. I meant it as a compliment.

I meant it as a compliment, I understand, So I I appreciate the compliment, but you know, it's not where I think of myself more as a sound tech maximalist than as a bitcoin maximalist. And what I mean by that is I'm really looking at protocol level, at relevant infrastructure and what that means for sort of the security and stability of technologies as a platform. So my background inventor.

I started Inventor about a decade ago, making investments in UM emerging texts at the time like cloud networking, data center software, cybersecurity, foundational sort of technologies and bitcoin. I found Bitcoin in that sort of mind space, and so I saw bitcoin first as a protocol, as a technology that would be a platform for the proliferation of a new sort of app ecosystem. And you know, in that way, I approach it really as a sound tech maximalist, not

as a bitcoin um maximist. Per se. I also spent time in looking at all coins. I I think that I was the second or third maybe VC to do diligence in UM the I c O space. Even so, for example, the second ever I c O was for a company doing decentralized storage, and I know that the firm I was at the time, clear Stone enter Partners UM, and through my leadership, did deep diligence on that opportunity.

And really, UM what I what we found. The conclusion that we came to was that that sort of setup didn't require a token, that there wasn't a need to incentivize use of the software with a token. And you know, I think that generally speaking, I've found that that conclusion holds true across projects. So it's not that there's any

sort of religion against other cryptocurrencies. It just it's just that there would need to be a value proposition in that cryptocurrency of digital asset that goes beyond just its use for trading. Don't feel bad about Joe calling you a bitcoin maximalist, because he calls me a silver bug all the time and it's not true. So he has

he has form in this UM. So I mean, just on that point, I do think there is a perception out there that bitcoin is an old their technology, and I know it feels a little bit crazy to say that because we're, you know, we're still supposed to be

in the early innings of everything crypto. But you know, if you look back, like it is more than a decade old at this point, and you have had newer crypto protocols come on stream since then, so you can see why people would say like, oh, this is maybe technology that is slightly out of date, or it hasn't been purposefully designed for a specific use case like a defie scenario or some sort of other trading or financial use Could you maybe dive into that a little bit more, like,

what is the technological difference between bitcoin and everything else out there, and what is it in your view that makes bitcoin suitable to doing new things when I think other people instinctively will say, well, it's older and it was designed for a very specific use case, right. So most important to note is that bitcoin really is a technology play first, whereas the theorym and other alt coins feel a lot to me like a marketing play, and

so Bitcoin is a technology play. The Bitcoin starts with the presumption that security and stability of the network are the first most importance, and so Bitcoin's history is one of of prioritizing just that, and what that means is that the end result of that is that bitcoin um, the cryptocurrency, can be a store of value. It's the first true digital scarce resource that we have sovereign access to.

A Bitcoin. The protocol, of course, is a public informission list sort of ledger system that operates in a decentralized manner, and all of those things are necessary to establish Bitcoin is a store of value. So bitcoiner's assumption is that that's what's what's most important. And after you've established that and have a history of of that being true, then you can go and add functionality um at the core protocol level and layers built on top of the core protocol.

Now ethereum and alt coins, other all coins were introduced really to sort of propose that novel functionality could be could attract a new audience. And so they start with functionality, and the idea was that they would then migrate to sort of secure, perhaps more decentralized networks, and we see this with ethereum, right. So ethereum is has been for quite a while planning for a state of ethereum two point oh, where the network is secured not by proof

of work but by proof of stake. And you know, I propose that that's sort of almost a wild thing to do when the network has billions of dollars of value on it, to think about then switching what secures that network and that value, you know, to me, feels um sort of risky, and you know, and I suppose that's why I find myself One of the reasons why I find myself in the bitcoin space is because we bitcoiners, or at least the folks developing at the core protocol

level of respects that there's billions of dollars of people's net worth that's secured by this protocol and that comes first. Functionality comes second. So one could argue that it's like, Okay. One thing I don't think anyone doubts about the sort of bitcoin world is that focus on security, and there's probably rightly an extremely conservative development mindset of not rushing

in any changes. Never I can't it's hard to imagine bitcoin ever doing anything radical, such as moving from proof of work to proof of steak any anything like that. But in theory it seems like there could be a spectrum where it's like, Okay, you have like security and stability at one end of it, and you have in a vation and ability to build on something at the other end, and you sort of could in theory move

the dial towards the other end. You know, it seems as though it's not that big from a sort of actual numbers, but it seems as though there is a lot of interest in the type of defy applications that are being built on ethereum. There maybe aren't that many people doing it, but there's clearly a lot of money. Billions are flowing into the space. Just today, you know, you heard that Injuries and Horowitz is has lot raised

a two point two billion dollar fund. I presume a lot of that is going to be in this sort of like defy realm, probably not all of it. So it appears though that there is this sort of like momentum and mind share that Bitcoin is missing right now. So why aren't people being attracted to building on bitcoin, or why are these people so excited about building on a different platform. So I think, you know, it feels like you're repeating back to me um fud spread by

theory or Ripple or other folks and other protocols. Just to be fair, like this is literally, this is I'm not criticizing bitcoin. I'm saying like, this is literally like what I observe, like the Andrews and Horowitz two point two billion dollar fund and so forth. Like my question is not what's wrong with bitcoin or that there's something that is insufficient about bitcoin. The question is what is it that bitcoin is evidently missing that so many people

are looking to build on a different platform. Okay, so a couple of things you said, a couple of things there, I'll try to hit all of them. So you talked a little bit about the attention shifting to defy this space where a hundred thousand traders have permissionless access to trade sort of the long tail of assets that they might not otherwise have access to, and they can do that without having to go through a k y C process.

And you know, it's also interesting to see folks making money in a quick way and it attracts media attention. Now and a bitcoin side, what's been happening is that bitcoin has been declared a legal tender and al Salvador, we've seen the folks in all Salvador use bitcoin on a day to day basis by using the Lightning Network UM, specifically in beach communities in the community called Bitcoin Beach.

We know that bitcoin is held on the balance sheet of multiple public companies, including Tesla, which is on SMP five hundred, and bitcoin has been growing in terms of adoption at a more rapid clip than than Internet did at a comparable time. So there's quite a bit. It's really active time, a really dynamic time in the bitcoin space in two ways. I talked just a moment ago about how active adoption is and the breadth of adoption. So we see enterprise, we see countries, we see municipalities.

For instance, Miami, the mayor of Miami, Francis Sais, has talked a lot about how the city feels it could benefit from the use of bitcoin the asset and bitcoin the technology. There's other cities and other countries that have indicated they want to be second movers, are and are in the planning stages. I'll take a conservative position to propose that that's probably much more importance than the introduction of trading tools for tens of thousands of folks, but

perhaps the media runs behind it. A bit um. At the same time as adoption has picked up in the bitcoin space, we've also seen really an explosion of technical advancement in the bitcoin space. So that's both at the core protocol level, at lightning network level, and in side chains. I don't know, I suppose it's disappointing to me to hear that. It feels like those that sort of work has been overlooked um, you know, as a result of the hype that exists around you know, all coin defy.

All that said, though, there are founders building products that replicate the best of what's found in the quote defy space in Ethereum. Now that will be built in the bitcoin space on side chains, you know, by the end of the year. So there's projects launching by the end of the year, and I want to cover that too. But you also mentioned the funding environment for um, you know, for DeFi, for ethereum, for all coins, and I, you know, I want to acknowledge that as being something that is

certainly true. And I think one of the I don't know, maybe disappointments that I've had and how the cryptocurrency space has matured, I think that there's certainly been UM, there is today, and there historically has been a missed allocation of funds and to venture funds into the space, and I think that's because you know, there's um, of course, an appeal of quicker liquidity, and what we've seen with the introduction of tokens is that you can instead of

there being a standard venture cycle of you know, seven to ten years where funds are waiting to realize returns, that it's just a much quicker cycle where you can get returns in eighteen to twenty four months, maybe shorter than that, and you can get returns that are of equal um you know, magnitude as you see for successful companies that are taking seven to ten years to exit to the public markets or through acquisition. And of course

that's appealing. And what I hope will happen as more time in the space accumulates is that folks will start to ask, really what's producing those returns and be cognizant of um, you know, the dynamics that exists in eighteen

month cycle that we're seeing. So maybe now is your chance to sort of rectify this misallocation of capital, as you put it, But could you maybe talk to us about some of the projects or changes that Bitcoin is currently undertaking, UM, and you know, get us excited about it, Like, what is it that people should be paying attention to when they look in bitcoin other than the store of value proposition which everyone seems to have been focusing on lately, right of course, Um, I'd love to So, so the

bitcoin spit. Everything that's possible in other protocols is possible on bitcoin, but also more. And the reason why there's this also more addendum is because bitcoin is decentralized, which means that things that are built on top of it can also be decentralized. You know, while we can call what's happening on ethereum defied decentralized finance, that sentence should end with the question mark. Because if the base layer itself is not decentralized, I'm not sure that anything built

on top of it can be. And so that's the opportunity for bitcoin and we're seeing that emerge UM and applications be live that represent that opportunity today. So an example including with protocols built on top of bitcoins to

an example of that would be Lightning network. And examples of products being built on Lightning Network are products, financial chat products, for instance, like a sphinx chat, and what sphinx Chat is is sort of a level three technology that a layer three technology excuse me, that takes advantage of the infrastructure of Lightning network to create this Bitcoin native financial chat opportunity in which both messages and sets

the coin sets are sent through Lightning nodes. In this sort of distributed network, you can also make and receive

calls in the same way. And one of the things that we've seen be built on this layer three is communities around content creators and example first example of that are these podcast communities, and so we will see podcaster gather their audience on the sphinx chat, create streaming podcasts that are paid in UM, streaming stats stats back from the audience members, and these sort of affinity groups emerged to take advantage of the opportunities that are unique to

the decentralized network of Lightning network and Bitcoin. That would be a sort of competitor to something like a whee chat, where the opportunities are different than the dynamics of participation are different. It's not permissionless, it can be permission list and Bitcoin. And so we see folks like sphinx Chat

taking advantage of that. Now, to talk about some of the development in the side chain space, we maybe I'll start with STACKS, which is a side chain, a layer one side chain they define it as in the Bitcoin space that has fully functional smart contracts live. As of January of this year, we're seeing contracts of up to a billion dollars in act or get commitments be present in that environment. Recently it was announced that there's an accelerator built to fund companies that are that are building

in the STACKS ecosystem. You know, I think that my expectation is that we will see projects like a unit swap like project be built in a STACKS environment. Joe mentioned that I sit on the board of directors at Blockstream. Blockstream also has a side chain called Liquid Network, and

we're seeing similar sorts of activity there as well. The opportunity of side chains, of course, is that you can leverage the security of the Bitcoin network while also introducing novel functionality, either ahead of its introduction on the Bitcoin network or in lieu of it being present on Bitcoin. And Liquid does that so. As an example, Liquid has smart contracting capability through something called covenants, which just means that you can essentially program the coin. So Bitcoin is

programmable money. It is that at the base layer. That's you know, one of the areas of popular flood that I've seen from this bowl market is you know, saying that Bitcoin doesn't allow for smart contracting. Of course that's not true Bitcoin smart contracting has always existed at the core protocol level, but the sort of smart contracts that you can do on liquid as well as other side chains, take it a step further, and Bitcoin has that with covenants.

Now there are projects building on liquid that will replicate a unit swap like experience. I'll mentioned one specifically that has recently sort of made their R and D work public, and that's a company called bit Matrix. And what the Matrix is do is doing is creating an m M and automated market maker on top of liquid, where your transactions, of course are private, and where you can actually trade

in a gasless sort of state. What that means is that it's a contrast to to the ethereum trading spaces where you have to buy either in order to be able to execute a trade. That's different in a matrix environment on liquid, where you don't need to own the underlying asset in order to execute a trade, because that sort of settlement happens as part of the trading contract

contract and bit matrix. So this gets back to another question when I enter when we started did the introduction, I mean, first there was this question of like, okay, building on bitcoin, and there's this perception that is not as easy, but as you point out side chains such as a liquid or stax um, they do exist. The other question I have is like do bitcoiners actually actually

want this stuff? And you know, I remember like the sort of like the block size fight in Seen, and the question is like, should be the bitcoin base layer be expanded so that it's cheap enough and fast enough to buy a coffee with? And then lightning camera came so that you don't didn't have to expand the base layer. But it's not obvious to me that bitcoiners actually want to buy coffee. So even though maybe a theory that you could, you know, I don't think like lightning is

like that. It's not that big, it's not ubiquitous. So you know, it's been a few years around how much does the bitcoin community care about something resembling unit slop or care about having n f T s on the side chains versus how much is it is it just

to prove that it can theoretically be done. Well, bitcoiners are not a monolith, right, and so it doesn't I'm not sure, you know, I'm not sure frankly, that I care what bitcoin or that we should care about what bitcoiners, which I imagine you're mostly referring to folks that are active on social media. I'm not sure that it matters whats want um. The importance of bitcoins to bitcoin is that they are It's a stakeholder group in a multi stakeholder ecosystem, so you have folks that use the tech,

and that's where being present on social media matters. Having a voice and representing a community during a contentious dialogue or ahead of a proposed change to bitcoin cops, that's important. Other stakeholder groups, of course are miners and then developers, and everyone has, you know, an equally weighted voice. That was actually Satoshi's. I consider Setosia's most important innovation was was the discovery of a way to inline stakeholder incentives

through the introduction of bitcoin. What's more important is making sure that we take advantage of what bitcoin can do as a technology. Now that bitcoin as a currency has been established as a store of value and allowing its full sort of opportunity to be real realized, so that it's not you know, it's not the tens of millions of users that use bitcoin today that are defining what

bitcoin is. But it's much broader than that. And that's why my job is exciting, because I get to meet with founders that are really thinking through what bitcoin means for other communities. And you know, I think that best example of that is what's happened in All Salvador, where Joe people do use bitcoin and Lightning Network to buy coffee. They use it to receive payments for coffee. So I I push back on the assumption that bitcoin is not

being used for payments. It absolutely is. You know, I use sets every day in my messaging at because I use Sphinx Chat, and I think many people do that.

But remember that the activity on Lightning Network is not all public, so we can't to measure actually what's happening on Lightning Network is you know, not possible, and to guess at it is difficult because we're not sort of probably poritizing our ability to report accurate metrics we're prioritizing the value that the system has to offer, and the ability to transact privately is you know, something that the system, the network, Lightning network can provide, and and so for

that reason, it's hard to measure the activity happen now in Lightning network. However, that said, in the communities that have received the most attention in the past couple of months for it, like I mentioned before Bitcoin Beach, we see that Lightning Network is a critical infrastructure to people's everyday lives. I think it starts in All Salvador, and we've already seen countries signal that they want to be

second mover here. I came into the space in in really because I saw a bitcoin as um fintech for the unbanked or underbanked, and so my hypothesis then was that we would see adoption in emerging markets before we saw you know, significant penetration and developed markets, and so you know, I saw, I suppose that I expected to

see countries like El Salvador adopt bitcoin. And I'm happy that there's companies like Gloy or Strike that have made sure to think about how what they've built is relevant to people that are you know, outsiders basically to the traditional financial system. So I don't know if this is

a question that's actually possible to answer. But one thing I was wondering is we've spoken about the perception that it is difficult to affect change on bitcoin um protocol, and secondly, we've also mentioned that despite this perception, there

happen changes in the past. So I'm wondering, could you maybe walk us through, like, exactly how does change happen when it comes to bitcoin, Like how do you build consensus since the aligning of an sentives is one of the big underlying I guess the fundamental things that bitcoin does, Like how does that process actually work in practice? Could you maybe walk us through it? That's important, So thank

you for reminding me to circle back to that. You know, So one of the defining features of bitcoin is how changes are introduced and the fact that it's not there's no sort of leader that can suggest a change that's as executed without community consent. And so what that does is it creates a system that is truly opt in versus something that is um, you know, in any way coercive.

So when bitcoin is introducing changes like a tap root, that happens through something called soft fork, And really all that that means is that you don't need to adopt tap root to continue to hold your bitcoin or to continue to use Bitcoin the network, so you could be and I think that lowers the barriers to entry for who can participate, right because you don't need to be continually paying attention to Bitcoin, what's happening with bitcoin developers

or any of the sort of rigorous debate that occurs in these ecosystems. You can unplug from all of that and know that you can step away from bitcoin for five, six, seven years and when you come back, you're going to find your bitcoin. They're presuming that you've secured it properly and that bitcoin the promises the bitcoin made when you came into the system have been maintained. And so what

are those promises. It's things like that bitcoin is decentralized Bitcoin, how there's twenty one million bitcoin, the ledger is public and changes transactions. New transactions are committed to the ledger through secure mining known as proof of work. Um, that's sort of you know, definitely sal to bitcoin, and that's what makes bitcoin the cryptocurrency as sound money. The fact that those promises are there. It's not what the promises are.

If the toshi had said it's, you know, ten million bitcoin versus twenty one million, it's not the number, it's the fact that it's set and fixed and folks can count on that. So you don't need to be actively engaged. Now. In other spaces, for instance, ethereum, the way that changes are introduced is through a hard work, and the community has been the culture of that has been that the leaders of the community will say, this is a change that we're introducing it. It's happening in you know, in

a few months, it's happening in six months. It will be happening through a hard work, And so folks need to adapt to a new software, and if they don't adapt, they're sort of exibit from the network because a hard work is not compatible with its prior software. These are two completely different pair times, and I hope that the explanation of that sort of presented. Uh, you know why the barrier to entry and to participation in bitcoin is

is much lower. It's just it's, you know, I think it's just fundamentally different, to the extent that I would almost consider bitcoin to be a different class of asset than all coins are. So I want to actually ask you about a controversy in the question of bitcoin development, and there is a view that you're on the board

of Blockstream. There's all these criticisms even among bitcoin as a block stream, that it exerts an extraordinary amount of influence on bitcoin core development, that there are all their other ideas such as drive chains, which is a different idea for scaling bitcoin, that don't get momentum because people who work at Blockstream aren't into it. Blockstream has its own side chain company as you already met, or project

as you already mentioned, called liquid. What do you say to that criticism that there are other sort of visions and that the that the over influence of Blockstream within the bitcoin developer funding a lot of the developers has sort of cut off avenues of potential development in favor of the blockstream business model. Well, I think that that's

another fun meme. Right, So that argument of Blockstream having more influence in this space than other companies that are operating in bitcoin was introduced by the leader of another protocol of the b cash protocol. I believe, and you know, I suppose that it can be sticky, but the fact that I'm encouraged by folks critically reviewing the work of

anyone in the bitcoin space. I actually think that while at times that can be frustrating, including when critiques feel unfounded, like in this case, you know, I think that it's one of Bitcoin's greatest strengths. So when you're in a conversation about development happening in the bitcoin space, whether that be in an open source protocol or in a private company, the conversation is rigorous, and people are expected to be able to defend their positions, their tech, the tradeoffs they've

made in the tech. There's always an ask that you acknowledge both opportunities and sort of the risk that are inherent in what you're doing and how the core value of decentralization is impacted. And so if folks are to criticize block stream on UM, you know, having more influence in the space than they should, you know, I don't UM Well, two things I think we should acknowledge when that's coming from outside the space as a way to attack Bitcoin, and when it's coming from inside the space

as a sincere critique. I think that it's an important UM conversation to engage in. But what I've seen historically is that what people have meant, what the be Casher's meant when they said that blockstream had undue influence, they

were tying that to its influence on core development. And if you look at the number of core developers in bitcoin, you know, it's kind of that critique is sort of laughable because bitcoen small minority of those are folks employed by Blockstream versus folks employed elsewhere, or you know, folks said even are anonymous, that we're studnonymous, that we aren't

sure who they are. So I just want to like sort of go back to like the big picture, and that is, you know, we started this, like the premises, like people for what you know, we could abate the sides.

We can debate the sustainability people are. There are a lot of people who like this sort of like defy stuff, whether it's swapping like a unit swap, whether it's collateralized lending of tokens, dows um perhaps as part of it there it obviously has called a lot of people's attention, and it's captured imagination definitely among a lot of people on Wall Street, Like is in your view the vision to replicate that that all of that will be built or can be built on Bitcoin, or is like, is

the vision of defy on bitcoin fundamentally something different? Well, the answer is um, the Bolt propositions are true. So all of that is being defy the way that you know excites Wall Street. The sort of open nature of being able to trade that's being built on in bitcoin

environments now across multiple side chain products. And my example that earlier as bit Matrix, which will be introducing essentially a unit swap like product on Liquid, and just to take a quick pause to mention other side chains that will see similar activity. We have not just Liquid, but we have r s K, which is an e v

M compatible side chain. All of that, all that means is that the same dynamic of smart contracts that are possible in Ethereum are also possible in r s K with Sovereign, for example, is built on r s K, which has you know, also has automated market maker products you can borrow, you can lend to earn yield. There's liquidity mining on Sovereign. I mentioned stacks earlier. There's also a side chain called gnomic which is a proof of

steak Bitcoin side chain. So that's I believe it's the only proof of steak bitcoin side chain, and this team is arguing that by matching proof of steak and it's trade offs to Bitcoin's proof of work, you can get this nice compliment that is advantageous for a variety of apps. We have our g B and there's just there's a whole list of side chains that are developing and stoe Mark I plan to invest in activity happening across uh

you know, probably multiple side chains, not just Liquid. But then I want to respond to the last part of your question where you asked about how we think about defy and the bitcoin space, and I think it's it's really much much broader than than defy for training. So the bitcoin is defy, and bitcoin is defy regardless of how you're accessing bitcoin, but it's specifically defy if you've

taken control of your own bitcoin. And so that means if you're self customing your bitcoin by holding a ledger or by using a software provider secure software provider like a CAUSA, then you're participating in bitcoin defy. By the way, CAUSA helps secure billions of dollars of bitcoin through their multi sig software and essentially it's almost like it's almost like a banking app on your phone, but it's a banking app where you're in charge of your funds versus

the bank. That's Bitcoin defy. We also see bitcoin defy on lightning. Maybe if I could just run you through a couple of quick ways that bitcoin defy exists on lightning. I want to note that there's multiplex smart contracts on lightning. So what does that mean. We see automated rev share contracts on lightning, so where you can sort of split payments between various recipients and that's part of your the

transactions M contract execution. We see screw contracts. There will be something called DLCs that are available on lightning, and really what what that can do or things that can introduce things like to centralize options trading. But it can

do even more than that. And one of the things that I think, um it's possible through DeFi on lightning that is most you know that piques my curiosity most is the opportunity for things like stable balance channels, and so what that means is that you could have a payments channel, a lightning channel that was denominated in your

regional fiats. So for instance, in us D UM, without ever having to hold us D or to hold you know, a cryptocurrency that was meant to represent us D instead, you could just um, you could just denominate the channel in us D through a smart contract that was fully collateralized by bit coin. You know. So those are the

sorts of things that when introduced, you can there's two things. One, you can understand how that could be relevant to a breadth of people, not just in wealthy countries like the US, but in emerging markets as well, not just for trading, but for things like remittance, for cross border payments, etcetera, etcetera. So there's defy as really broad on bitcoin. It starts with just holding self customing your own bitcoin, and it

goes from there. So we see it at core protocol level, um when your mom or dad is holding bitcoin on their ledger. We see it on lightning, and we see

it on side chains. And so you know, my experience of of one has really been you know, one of sort of profound respect for the entrepreneurs building in the space, because in bitcoin, when you're building, you're normally doing it without fanfare, and you're doing it without seeking you know, this really sort of like hit and run type of exit, right, And so this isn't you know, there's no sort of pump and dump dynamics here. It's really founders that are building,

hoping to build valuable companies. But in order to get there, they need to create valuable products that are of value and sustained value for a broad group, you know, not something that accrues value for just for the length of a bowl market. That's not enough for bitcoin founders. And I think that's why you see really exceptional folks building in the bitcoin space. And on that final note, a couple of times in our conversation you've referenced I think

that it's harder to build in bitcoin. I want to acknowledge that that piece is that's actually true. So that's one of the memes that you see a shot over a Bitcoin from other sorts of environments, is that there's more developers in protocol X or Y versus Bitcoin. But actually there's a sort of missing detail from that that's important, which is that it's you know, it is harder to build in bitcoin. The language required to build in bitcoin is something that's um, you know, kind of like more

exclusive in terms of the skill set required. And so while you can be a JavaScript developer and build a smart contract in the ethereum space, that's not true in the bitcoin space. And I think we're working towards that, towards sort of lowering the bary barrier to entry for development,

but we're not there yet. So what you're seeing is not that there's eighty percent of all developers building and cryptocurrencies present in bitcoin, but you're seeing that maybe of the top decile of developers building in the cryptocurrency ecosystem, they're building on Bitcoin. I have one more question just based on all of that, But like, we're talking a lot about perceptions, and you made the assertion that you know, defy as bitcoin, and yet that doesn't necessarily seem to

be the popular narrative that's out there. Is Bitcoin losing the marketing war on this or is there something that Bitcoin should be doing differently in order to counter a

lot of these perceptions or attitudes. Well, there's something we could probably do differently that might be you know, helpful in catalyzing media interest, which is that you know, bitcoiners are folks that like to under promise and over deliver, So folks folks that are building, whether it be at the protocol level or at the app level or or infrastructure, are wanting to talk a lot about what they've done and less about what they think is possible to do.

And I think in other sorts of spaces, you see, you know, less of that restraint, and so it's you know, it's fun to hear about what can happen in two, three or four or five years. And if we spent more time talking about that in the bitcoin space, I imagine that that would probably be a benefit in terms of accruing you know, like sort of social media or media attention. And I wouldn't mind seeing that myself. I hope that we did a little bit of that today.

I think it's exciting. You know, that's the space that day I live in right and working is thinking about how what's introduced in these open source protocols, and how that's relevant for the business of bitcoin, how that's relevant for entrepreneurs building in the space, and what that means our next sort of like five to ten years will look like. And you know, I'd love to hear sort of more of that at least. Thank you so much for coming on the odd locks that was great. Thanks

for having me. Thanks at Laz. Yeah, that was really appreciate. Its great to finally have you. Likewise, it was it was great, thanks guys. So Tracy, that was a really

interesting conversation. I was thinking back to something, you know, like when we were talking the other day with Tom Schmidt, a defy on ethereum and like the sort of like the eye popping ap wise that they get you get for like yield farming, and it's like get these extra tokens and stuff like that, and you know, it does feel like and at least I think really said it in the last answer to you specifically, but it really does feel like there isn't some level even if technologically

some of these things can be replicated, it feels like there is like a very different cultural attitude towards a lot of this stuff, like this sort of like slower longer. Even in her case she's talking very specifically about like you know, not investing for tokens or anything like that, but like equity and companies, like it definitely feels like philosophically, it's still even even in this sort of like pure like defy replication, like a very different mentality I would

totally agree with that. And again this is something I mentioned at the top of the conversation, but you definitely see a lot more banker and trader and finance industry types gravitating towards defy in its current form, and not necessarily Bitcoin, which still has this overhang of you know, changing the world, challenging the existing financial system and stuff like that, which might not necessarily appeal to that base.

So I totally agree with that, although I will say, like I have a hard time keeping up with the bitcoin narratives because they do seem to change quite often, and clearly bitcoin means different things to different people. But

I would broadly agree that there is a split there. Yeah, I mean I think like that, like, as she pointed out, like these other like chains that are sort of like built off of like bitcoin security, they exist already, so like there're on some level, like you know, if there was if there was a lot of excitement or sort of like interest and like these like eye popping yields and stuff like that, and if you mentioned there's like more of this like being built, like she mentioned that,

think bit Matrix, which is getting launched, like the units wi pon. We'll see how much action there is. Like, I'm not convinced still that a lot of the people who are like into bitcoin are into doing more than holding it, although she said, like, you know, in different contexts, maybe different countries, etcetera, maybe some of the maybe some

of the dynamics will prove to be different. Yeah, And I'm still very, very interested in that sort of consensus building aspect of it and whether or not you can align incentives in such a way as to, I guess

achieve different outcomes in different things. Because it gets back to that split, right, Like, it doesn't feel like no, I mean, there really does seem to be this trade off, and she was obviously at least was you know, like it seems like okay, So like Ethereum, it has like a live, existing founder who is an extraordinary I don't think like the tolic is the dictator, but obviously his extraordinary sway. But so on the one hand, perhaps development is faster on a network in which one person has

a lot of vision. But on the other hand, you know, she would point out, you are you are paying the price of decentralization by having to trust Vitellic, by having to trust his judgment and obviously bitcoiners plays decentralization and store of value properties like clearly above everything else. Right, But then, of course the flip side is it does become more difficult to build that vision and agree on it.

I think, like I think of anything like over the past five years or so, we've sort of like come to appreciate centralized systems, and maybe that's going too far. Okay, can we leave it there. Let's leave it there, all right. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway, and I'm Joe Wisn't Though. You can follow me on Twitter at the Stalwart, And you should follow our guests on Twitter. Elease Colleen. She is at a

Lease Kaleen. Follow our producer Laura Carlson. She's at Laura M. Carlson. Follow the Bloomberg head of podcast Francesca Levi at Francisca Today, and check out all of our podcasts at Bloomberg under the handle at podcasts. Thanks for listening.