Dhruv Bansal, co-founder and CSO of Unchained Capital rejoins me on the show to talk about: 

  • The bear cycle and what happened
  • Leverage and the role of credit
  • Bitcoin and financial planning
  • Inheritance Planning
  • Multisig & Taproot
  • Nostr 
  • Bitcoin and computer security


Previous Episodes:


Stephan Livera links:

Podcast Transcript:

Stephan Livera – 00:00:08:

And now onto the show with Dhruv. Dhruv, welcome back to the Show.

Dhruv Bansal – 00:02:54:

Thank you for having me on again, Stephan. I really appreciate being here.

Stephan Livera – 00:02:56:

Yeah, so, I mean, there’s been so much going on this year and here we are, December 2022. There’s been just a complete blow up of, quote unquote, crypto, right? But there’s obviously been an impact onto us here in the Bitcoin world. So what are some of your reflections on what’s going on in this bear cycle or downturn or whatever we’re calling this?

Dhruv Bansal – 00:03:18:

Yeah, no, it has been a strange few years for so many reasons, right? Like, the macro situation has been crazy, even outside of crypto or Bitcoin. And then, of course, this past year, with the collapse of so many large players in the space, it has been a wild ride. My emotions are mixed, as you may imagine. I think a lot of us Bitcoiners are in a position of feeling a certain degree of vindication and degree of, like, you know, I told you so, like, you should have just not done that thing. But no one likes seeing bitcoin prices at 15, 16, 17K for extended periods. We don’t like seeing our friends and colleagues, despite how wrong they may here have been. No one likes seeing people’s wealth destroyed. No one likes seeing people gained and taken advantage of. And it does erode trust, I think, an experience I have a lot. I’m sure maybe you feel this too, around the holidays and stuff. You’re going back to your family or your friends, your hometown or whatever, and people have no ability to distinguish Bitcoin from this bag of tricks that’s been going on with SBF and, hey man, are you guys doing that SBF thing? Is that affecting you? And part of me wants to shout like, no, absolutely no way is that affecting me. I’m so distant from that. I’m in a completely different industry, I feel, sometimes from that. But of course, from their perspective, it’s the same thing. Right? So it’s a it’s a huge black mark, I think, at the same time. And this is the vind. This is the vindication part. Like, there are definitely folks that I’ve spoken with and encouraged to avoid these kinds of things that now feel like I save them a lot of pain and stress. Unchained has had one of its best months ever in terms of onboarding and activation of new clients. I think there’s a lot of folks for whom the freezing of deposits and sort of the runs on some of these third party custodians really highlighted, like, having meaning to do that collaborative custody thing. I just haven’t done that. Maybe this is a good signal that I need to do it. So it’s been really good for us in that way. But then again, conversely, the prices down that really impacts our business metrics are down as a result, in a lot of other areas of our business, people are scared. There’s not as much top of funnel coming in, I think, for all players in the space. So it is a crazy mixed time period, like almost every quarter. It’s crazy for its own reasons, I suppose. But I feel very optimistic in terms of other downturns that have happened. Like March 2020, beginning of COVID pandemic stuff, there were a lot more object, or even before that when my company was a lot smaller, when things were a lot more uncertain. There were so many more downturns where I felt like I had less control. I felt like we had accomplished less as both an industry as well as my own business Unchained, I actually feel that both Bitcoin Unchained. We’re all in a position of strength right now. I think a lot of Bitcoin companies are in a position of strength. And if we can continue to survive, if we can continue to innovate in our business models and win and make happy clients, I think we can make really big businesses. So I’m feeling very optimistic about both Bitcoin as well as the companies who are helping bring Bitcoin to more and more people.

Stephan Livera – 00:06:18:

Yeah. I’m also curious your thoughts around leverage in the space, right. Obviously connected to what went on with FTX and a lot of the whether they were badly run businesses, whether they were Ponzi’s or frauds, or just fractional reserve, right? Have people learned the lesson or is it just like are we just going to see the cycle play out over and over and over?

Dhruv Bansal – 00:06:40:

I don’t know. It feels like there’s a few big bads right in crypto. We’re in our world. One of them is the getting hacked, right? The other is the ICO speculative mania for like shit coin or that’s not going to amount to much. That’s another way to lose your money. It feels like. The third one is wanton bad risk management across whole linked players in the marketplace and consumers and retail investors and even whales sometimes not being isolated from that, right? So there’s some big bads. And I feel to your point, none of these are new things to crypto necessarily. You know, one of the things I really loved about being a Bitcoin Twitter is you you have so many different kinds of experience. I’ve loved some of the threads from arbed_out on, you know, railroad manias of the 18 hundreds and so on. It’s just like humans are really kind of the same animal in a lot of ways, and we behave the same when predictably similar stimuli are put to us. So I kind of feel like that argues for no, we won’t learn our lesson. That every new cohort that comes in. I’m here to fix Bitcoin. Let me start my own thing. Let me repeat some of these mistakes around, not holding keys, not being transparent about risk and so on. But with that said, again, it does feel like the stuff moves in cohorts, and there’s a cohort that for whom these events were the reason they became real bitcoiners, so to speak. Right? Like, this is what minted a new class of bitcoiners. I’m certainly not the first to say that.

Stephan Livera – 00:08:09:

Yeah, no, and I think that’s absolutely right. I think this is the common experience for those of us who’ve been around for a while. We’ve see people who come in, they’re a little bit newer. Maybe they haven’t spent the time to actually do some learning about what Bitcoin is. Not everybody has to be a developer, but you should try to increase your technical understanding of what’s going on and learn the practical steps of that. Whether that’s setting up multisig, whether that’s learning how to run your Bitcoin node, whether that’s learning how to do privacy stuff. There’s all kinds of things that you can learn and do in these downtimes.

Dhruv Bansal – 00:08:40:

Evaluating financial services providers with a little bit more skepticism and diligence.

Stephan Livera – 00:08:44:

Right? Yeah, exactly. So I think going through a bear cycle, I guess there are challenges around that too, right? Everybody’s trying to cut their burn rate and make sure that we can all survive right through the bear cycle, assuming we’re still in a cyclical sort of environment and eventually the cycle will turn. But it’s about trying to survive, then, isn’t it?

Dhruv Bansal – 00:09:06:

Yeah, surviving. But also, I think, not becoming afraid in a certain way I think is important too, that I think there tends to be at least I noticed this. I’m pretty passive on Bitcoin Twitter, and there are a lot of discussions and stuff, but I do tend to see that there’s a need for scapegoating sometimes in times like this, like when shit is fucking going wrong, it’s like, whose fault is it this time? Who screwed this up for us? It’s, of course, easy to point at FTX and their bad behavior. I actually do believe there’s some credence to notions of, like, rounded tops last year and so on, due to various internal trading things that are very complicated and strange. So I do believe there are some effects like that and things that we can blame if we want to blame something. I’ve noticed another curious trend, though, which maybe we can highlight and talk about it for a second, which is I’ve noticed a trend of, like, blaming the concept of credit itself as somehow like that is the root of the problem, like Bitcoin or shouldn’t be interested in credit, or that credit is an evil thing. Credit is fiat. Borrowing is fiat, lending is fiat. We have a very tribal culture sometimes, especially in Bitcoin and Twitter. But this to me is a very curious reaction because it strikes me as similar to the sort of person who lumps SBF and FTX and altcoins alongside Bitcoin and more secure and more principled projects. Right. You’re so far away from it that you’re not distinguishing good and bad usage. There’s no nuance in that in that statement. So I sometimes think that there’s a lot of ways that you can blow people up with credit in Bitcoin. And credit can be a very dangerous tool, but it can be very powerful and important tool. I know that Unchained we have saved a lot of Bitcoin because we’ve helped people not have to sell their Bitcoin when they didn’t want to. I have seen people get liquidated, though on our platform as well because they took on too much risk. I tend to be of the mind where it’s like, you want to give them the tool and you want to encourage them to use it safely, but sometimes people are going to make bad decisions and it’s going to maybe reform their behavior. Sometimes they’re going to make those bad decisions, they’re going to look for someone to blame. I have found, like, the more time I’ve spent at unchained and thinking about 98 around credit products, I actually think credit is a really powerful construct, like just for the growth of Bitcoin. There’s a lot of reasons why credit is a vehicle that brings Bitcoin closer to dollars, that makes Bitcoin more useful, and this is credit can work in both directions. I feel like part of our challenge when we think about financial services in Bitcoin is like, we want to provide them in a way that is in the spirit of Bitcoin and we want to expose risk and parcel out risk in a way that’s transparent and controllable and meterable by the consumers of those financial services. The reaction that all financial services are bullshit is hoddle and don’t do anything else and the world will change for the better just through that action alone, I think, is a little naive and it lacks some of the nuance of trying to understand why some approaches to financial services can be successful in a Bitcoin based world. And others, I think, should be left by the wayside and thought of as diseases of the old financial world. Right? Like notions of wanton rehypothecation without any kind of accountability or transparency, I think is something you sort of had to, or rather the only protection you had being reputational and diligence based. Like, well, so and so said it was safe, therefore it’s probably safe. Where their brand is so great, therefore it’s probably safe. I think we should dispense as an industry with those kinds of approaches. We should move to a more transparent and accountable model where people don’t have to make that choice at least. So I like to be a little bit more courageous and not get afraid and suddenly turn away from these challenging areas. I want to go dig in, like, this is the time when innovation is almost most calls for.

Stephan Livera – 00:12:52:

Yeah. And I’ve commented on my views on credit. Also, I did an article for Bitcoin magazine talking about why it’s not that all credit, it’s not that we’re against all credit. I think it’s the right way to think of it is commodity credit as opposed to circulation credit. Right. And that’s kind of like a full reserve version of credit versus a fractional reserve version of credit. And Caitlin Long has been very vocal about this and others in the space. Also, I think what might be interesting, especially from your perspective and your viewpoint working at Unchained and being a founder of Unchained, I’m curious if you could spell out maybe in your view. Obviously not doxing individual customers or whatever. But if you could spell out what were the scenarios where people were able to successfully do it and what made it successful for them? Their loan. As opposed to customers who maybe it didn’t work out for them because maybe they got liquidated or maybe they were a little too risky or not conservative enough.

Dhruv Bansal – 00:13:43:

I think it boils down to that boils down to risk management and your ability to swallow large price changes in Bitcoins motion. I think there’s a sense in which Bitcoin volatility can always outpace your collateral if you’re not careful. So it tends to be a little bit of a red flag, I think, for our loan operations team in general. But with someone borrowing with all of their Bitcoin, using all of their Bitcoin as collateral, this is not a good idea. Even if you think we are at the bottom, we can always go lower. Do you have the dollars to back up the change in price? If you don’t, you probably don’t want to borrow against all your Bitcoin. You want to have some dry powder. I mean, unchained allows you to pull Bitcoin out of collateral for loans as prices increase, so you can always get it back. It’s just a matter of if you don’t have any dry reserve left, like, okay, now you’re having to sell Bitcoin, which of course Unchained can do, and sometimes that is the right decision, and that’s perfectly fine. But if you’re forced into that solution, you may not feel very good about borrowing or using leverage in the first place, and maybe that’s the right solution. Maybe you’re not a person that can do that effectively. But for a lot of people, I think we have a great relationship, for example, with miners. A lot of our clients are minors, and they’re dealing with the combined volatility of Bitcoin’s price, but also hash rate and difficulty volatility. And that’s a very hard problem to solve. A lot of miners, I think, understand that if they’re able to hold their coins through these really bad periods, that they get into like an amazing green territory in a year or two. Right. And that selling those coins right now is one of the worst things that they could do for the long term health of their business. And so giving them a tool to manage that is really important. Credit is really powerful, so you got to do it safely and you got to do it in a way that gives as much control to the borrowers as possible.

Stephan Livera – 00:15:29:

Yeah. So I guess the way I’m seeing it is you should be only borrowing against a small portion or a smaller portion of your stack. You should ideally have income that you’re able to be paying that loan down with. You should be quite conservative in how you do these aspects of it. And by the time you’ve crunched out the numbers or looked at this, it may be that maybe you can’t borrow as much as you thought you were going to be able to borrow, or maybe you just shouldn’t be borrowing because it’s not the right decision. But everybody has to make that decision for themselves. Whether you are an individual, whether you are a business, etcetera. But I think it’s just taking that right approach in terms of being fundamentally conservative. And I’m sure there are cases where people can do this and people can have saved themselves in terms of tax obligations, or saved themselves in terms of not having to sell at a very inopportune time from a tax perspective or just from a cycle perspective.

Dhruv Bansal – 00:16:26:

Yeah. Intent time preference is a big part of it too. I think the longer you intend to hold that loan for I think we’ll offer term loans of multiple years at this point, though, I think the most common period for uncharted into leases about a year, but we often do renewals. That’s one of the most common ways that a loan ends its life. It just renews into a new loan for us. But if you can hold that credit for a number of years, it puts you in a much more advantageous position in regards to Bitcoin’s price appreciation. It’s so tremendous over, like the three to five to 6 – 10 year time frame, that it’s a much more reliable bet that your collateral may be worth a lot more over that time frame than necessarily at this point next year, right. Where there’s still a huge amount of volatility present. And so I think there are certain, like, sweet spots for borrowing where it’s like you’re going to collateralize 10 to 20% of your Bitcoin holdings to make a long term investment in dollars. Like you don’t need the cash back, the investment itself is going to pay out over some long period of term. You’ll hold the credit for some long period. This can be a very effective tool because time frames are matched here. I think if you’re borrowing because of some short term thing and you’re hoping at this point there’s so many variables that are coming into play in order for your plan to succeed. Better to not try that, I think.

Stephan Livera – 00:17:40:

Yeah, and I think that’s a good point as well because without attacking individuals in the space or whatever, but I think what happens maybe with this cycle we could say and look, of course this could be 2020 hindsight Monday morning quarterbacking. But I think what happens in some cases is if people are buying too much Bitcoin in that sense of not being able to sustainably hold it for a long period of time, not being able to hold it through a bear cycle. Right. In some cases, I think maybe people will take it too far and thinking, oh, I don’t want my stack, my stack to go down at all. And therefore I’m going to borrow against it and just try to never have to be conservative enough to understand when you can make that work for the long term and when you can’t. Right? And for example, if you are not working anymore, you don’t have any more income, then you need to be extremely conservative about how much you borrow as opposed to somebody who is still working and has income to sort of manage things, pay things off and kind of keep the thing running.

Dhruv Bansal – 00:18:37:

Ultimately, this is a financial planning conversation and I think some people are good at financial planning for themselves and some people are just not. And I think one of the things that is an area of a growth for Unchained that I think we’re excited about is perhaps starting to make a foray into that financial planning space. Because something that we’ve learned is that it’s just very hard to make decisions when you’re a Bitcoiner and you have, let’s admit them, strange views from the perspective of a lot of the traditional financial planning community. But nonetheless, you ultimately need to practice some of the wisdom that that community dispenses. Like you can, if you like, be like the I’m on zero, like zero fiat. I live my life only in Bitcoin and sats and I have some friends and employees that unchained that live this way. And to me it’s crazy. I’m older, I have a mortgage like I have my expenses are in dollars. I need to balance dollars in Bitcoin and I need to do so in a dynamic way over the coming decades of my life as my obligations change, right, as if they hopefully become a father and have to deal with things like inheritance and estate planning and all that. This is very complicated. And we live in a country that has a huge apparatus of rules and systems for this and I don’t understand all that. And so financial planning is a very valuable surface. It’s something that I’ve actually used for a long time, but only with my dollars. I think one of the challenges that I experience personally and I think a lot of Bitcoin owners also experience is as you hold Bitcoin for longer and longer periods. It grows, it becomes a larger portion of your portfolio, and if you’re not selling it, you start to get into these higher and higher ratios of your net worth being in Bitcoin. And then now you’re a Bitcoin, right, exercise in this position. And if you have a financial advisor, almost certainly they’re not going to be able to work with you and talk to you about Bitcoin. So they’re not going to be able to advise you around it, they’re not going to be able to have a real financial planning conversation with you about it. And I think what that sometimes leads to is hiding Bitcoin from your financial advisor and just not talking about it right, because their advice, if they have any, is going to be, well, I can’t talk to you about that and or you should sell it. And so you just don’t bring it up. And as a result, you’re now not getting financial planning advice that you might otherwise eyes have benefited from. And you’re kind of doing it all on your own, which, again, for some people is fine. But I think for other people, they need that helping hand. They need that advisor representing their interests and helping them balance Bitcoin and fiat Holdings over the long term. So I think that’s an area unchanged wants to start playing in and understanding a bit more over the coming years is we have a lot of expertise on the team around that area over the number of years running our business and working with clients on the custody and lending and trading and retirement sides of our business. I think we’re in a good position to offer some kind of financial planning that’s targeted a Bitcoin, right? Like the theme being don’t hide your Bitcoin from your financial advisors, talk about it openly. The reason most financial advisors can’t is because most firms don’t have a thesis around this or they’re timid around having a thesis around Bitcoin holdings long term. I think unchained obviously has a very strong thesis around that. And we could help you do the needful sometimes boring, sometimes repetitive tasks of financial planning, sometimes hard decisions around financial planning, but without defaulting to this status of like, you should probably sell your Bitcoin. No. If you believe Bitcoin is the future of the global economy, if you believe hyper bitcoinization is happening in our lifetimes, probably the last thing you want to do as a productive, working young person is sell your Bitcoin. But how do you preserve your Bitcoin over the long term? How do you not fall into these leverage traps? How do you effectively use tools like credit and tax planning and so on to get the most out of your Bitcoin over that time frame? That’s a harder problem.

Stephan Livera – 00:22:20:

And I think it’s also fair to point out that bitcoin is growing and it’s taken, what are we now, 14 years coming up to Bitcoin and a lot of people, especially people who have been longer time hodlers, like even for me, like when I started, I was a single guy. Now I’m married, I’ve got a kid on the way soon, where you are.

Dhruv Bansal – 00:22:41:


Stephan Livera – 00:22:41:

Thank you. We have to change certain aspects of how we manage our money, how we manage our Bitcoin when our life situation changes. And of course in bitcoin many of us are encouraged. Right. This whole idea of low time preference. And I know people debate this question of the Bitcoin fundamentalists, but the Bitcoin fundamentalists, some of them believe that very much in this idea of having a big family and so on. And that brings in all these other aspects to the conversation. Right. Inheritance planning, what are you doing about that? And so, yeah, do you want to just tell us a little bit about what’s going on there? Because I know unchained, obviously you have the inheritance planning component has become more prominent recently. So can you tell us a little bit about that?

Dhruv Bansal – 00:23:26:

Yeah, we just launched, I think, the first iteration of an inheritance protocol and it’s very much in the spirit of this kind of financial planning discussion that we’re having. Right. It’s all about advising our clients to be in a good position to plan out what would happen in the event of their passing. And I think for us, this is a journey, this is not the final product that we would hope to have in this category. I think there are some very sexy things that I think all bitcoiners can immediately leap to around time locks and more complex structures and processes. I want to get there too, but we’ll get there in time. I think that requires collaboration with everything away from hardware wallet vendors to multisig wallet software and stuff. It’s a place the industry will land at here. We’re just starting that journey and just starting to talk about the planning around it and I actually think this is very much a part of that prior discussion around financial planning inheritance. And I think security is actually a major component of what an investment advisor or a financial planner should do for a client. I think in a hyper bitcoinizing world right, like a big role that financial planners and investment advisors have in the traditional world is investment management. It’s taking the dollars and growing them over time. That’s part of the function that they provide that’s less necessary in a Bitcoin world. Right, so does that mean that the concepts of financial planning and investment management are useless? No, it just means they sort of have to shift to focus on the other areas where you’re going to now need more advice. Especially because of my experience at Unchanged. I really do believe that security and planning your key management strategy and thinking about how inheritance works not just at a legal and a state and taxing level, but also at the. Sort of mechanical cryptographic level of how do keys transfer? Where keys going to live? How are you going to set that up? How are you going to communicate that to the beneficiaries of your estate? Like, people are going to be bereaved and freaking out you just died. Are they going to be able to successfully onboard a wallet and get through a process, especially if there’s a kind of time block involved? Right? Imagine that scenario. So I think your financial advisor really starts to play a very stronger role in these aspects of your financial life in a way that they don’t really have to today, right? Because today everything is handled by the legal system. This person died, there’s a death certificate, we take it to the bank, we trigger processes. There aren’t keys. And so keys, as powerful as they are, as we both know, for maintaining control over one’s finances, for representing one’s interests. And I think the reason Bitcoin even exists is so that we can have keys to Bitcoin. It just complicates the hell out of these kinds of inheritance conversations. I think your financial advisor is a person that can really help give you confidence that you’re not going to be growing the fee outside of your portfolio and helping you be in the most tax advantaged position, but they’re actually helping you preserve your Bitcoin long term. And then should you pass, they’re helping to make sure it goes on to your next of kin, as you specified. I think this is a very cool evolution for that industry, and it’s a set of skills that they’re going to have to learn, which I actually think would be really exciting for a lot of the advisors that at least I speak with.

Stephan Livera – 00:26:35:

Yeah, for sure. And so can you give us some ideas around what is a prudent approach there? What kinds of things should we be doing? Is it an aspect where you have a key that on your death passes to an executor or what’s the approach?

Dhruv Bansal – 00:26:51:

I think it depends so much on who you are and what your situation is. I think that’s one of the generic statements about estate planning, right, is that there are some things that probably everyone should be doing and there’s a lot of very specific things that depend on you and your family situation. Whether you have like, other sort of legal entities or other trusts or other things going on. I’m not trying to avoid the question. I feel like there are some generic things. Like you should make sure that keys don’t need to be transferred necessarily in the ideal scenario. They can be instantiated, let’s say from backups or whatever. You don’t want to have to transfer hot keys with like, pins or other kinds of structures. And I think it’s very complicated thinking about the legal ownership of those keys and who executes that process. There are legal wrinkles here that I don’t really understand, frankly. Around the concepts of probate being public versus not and having estate planning, sort of being able to short circuit the probate process and giving you greater degrees of privacy as your property transfers to your heirs. There’s a lot of complexity in doing that correctly. I think the key management mirrors some of that as well. And there’s, I think, a smart synthesis of bringing that all together and making sure it just gets handled in a smooth way. I don’t think we’re there yet at Unchained, where again, this is a first iteration of this product for us. I think we’re going to learn a lot from folks who are buying into this and helping us gather requirements for a more sophisticated version here. Ultimately. I’ve made this point before and I think I’ve made this point on your show to find, I think where we coined together the concept of collaborative custody. I think in a fun extemporaneous exchange several years ago, it was a great moment for me personally, I felt. But I think our clients are going to help us discover the right shape for a more complex, perhaps on chain, perhaps multiple keys like more complex product. Because that’s the heart of collaborative custody, right? Multisig is the generic built in thing to Bitcoin, collaborative custody is all the permissions management, the identity verification, the notification, the glue to get gleaming to people together on the same platform. It’s just a lot of human complexity in that and that’s where Unchanged, right? So that’s where we want to step in and hopefully serve as advisors to folks service the platform where they’re engaging a lot of their Bitcoin based finances and where they’re ultimately a big part of their inheritance program will ultimately execute.

Stephan Livera – 00:29:10:

Yeah, and it’s such a complicated beast because there’s the legal aspect of it, there’s the financial planning and just what’s prudent aspect of it and there’s even a technological component as well, obviously multi signature, but also even things in Bitcoin like Miniscript. Does Miniscript or does some kind of Taproot multisig form a future part of this, right? That maybe you have some kind of advanced wallet spending conditions where maybe in the standard case it’s two or three, but there’s some extra pathway that is in the case of death here’s how somebody else.

Dhruv Bansal – 00:29:44:

I mean literally a dead man’s switch, right? And I kind of view it as like you can imagine a model where you are engaging in a yearly reset the switch, sort of a cop way to put it. But you’re resetting that switch yearly. So that the contract, smart contract, it’s just a Bitcoin script thing but it’s a smart enough contract, right? You’re just resetting that time lock in some way or you’re moving it to a new moving your inheritance portfolio to a new time lock address for next year. Who is helping you with that yearly very important transaction, right? It’s your financial plan, it’s your advisor, right? They’re the person that’s making sure that you get that done in a way that my advisor is the person that makes sure I do my yearly contributions or whatever that I have to do. Those kinds of, that kind of life cycle and annual management work I think very neatly fits into the advisory role.

Stephan Livera – 00:30:30:

Yeah. And so maybe like an example in that case where it’s now this kind of thing is early yet, and I believe some of the RGB guys had this my Citadel Wallet, you might have seen that. And it had a similar idea where you could do a kind of, you know, it could be a given level of quorum for multisig. Okay, let’s say it’s two or three, but then after a few years, it degrades down into a one of three multisig or something like this. I guess the idea is you could be continually refreshing.

Dhruv Bansal – 00:31:00:

Which could actually be totally separate keys right. So the idea is it’s in your live portfolio and after some time block, if you don’t reset it or change it, it’s going to revert to a totally different multisig forum, which is now your inheritors or your estate planners or your lawyers, so they can now dispense with it and get it to the places where it needs to go. I do think stuff like that is awesome.

Stephan Livera – 00:31:19:

That’s a future thing.

Dhruv Bansal – 00:31:20:

At the same time. Very dangerous. Very dangerous.

Stephan Livera – 00:31:23:

Yeah, 100%. And so I think that’s one aspect where it may be only for the brave hearted people at the start and then over time, after the pioneers have kind of tested out the system and proven out the kinks and ironed out the kinks, then, okay, now it’s kind of more ready for the primetime system. And I think maybe it’s a similar thing even with Taproot multisig and MuSig2. Right. There was a lot of excitement about this maybe a year or so ago when obviously Taproot was coming into Bitcoin and there was discussion about, oh, would it make sense for us to do MuSig2, or things like this. But then I think what happened is people discovered, or maybe not everybody understood, is that there were multiple rounds of interactivity required in a MuSig2 context. And therefore it just made sense for us to just keep doing like the multisig we have today, as opposed to the MuSig2 stuff which maybe will be applicable someday, but maybe is not the right choice just yet and not put into practice yet.

Dhruv Bansal – 00:32:19:

Yeah, no, I don’t know enough about tab partition for criticizing it. But I will say that change in interactivity and the increase in the number of rounds of communication required would, for example, fundamentally change the way the unchanged product is structured right now. Right now there’s a very clean linear flow of transactions are created by those who are authorized to do so. Signatures are accumulated, the transaction is made ready to broadcast. And out it goes. That second round of renegotiation at the end when you’re doing the more complex MuSig, whatever details that looks like it just changes the flow. Could we build that? Yeah, of course we could build that, but it’s a much bigger lift now, right? Because it changes the mechanics, the way our application works. I also think that especially at Unchain where collaborative custody is the practice, we’re super reliant on the ecosystem. It’s a discussion. I’ve actually enjoyed having this discussion with our partners and investors at NYDIG who have a very different custodial model, but they’re also very good technologists and they’re very excited about things like Taproot and actually in some ways able. To make Tap progress faster than we are because they can just decide to do it. And they can start to convert parts of their system over to using more sophisticated Schnorr signatures or whatever they want. Whereas for us this is really a collaborative process. We can’t just decree and decide that we’re going to change how everything works for our vaults. We have to get our clients to participate in the motion of Bitcoin like as we roll that out over some time period. And that of course then requires all the harbor vendors, the treasurers ledgers, cold cards, so on of the world to work in the exact same way that we do, to support all the same things from these new protocols that we need and also overlap with each other. Because we don’t want to create scenarios where you can only do this thing if you have a Coldcard. And if you want to switch to a treasure, then somehow it will be your vault product or your loan is in trouble or needs to be reset, or there’s some complexity. And we want simplicity that we’re trying to drive toward. So we want shared behavior. So now we need an ecosystem of hardware wallet providers to all get on the same page about anything at all is very difficult as I think a lot of us who’ve been around in this industry for a while know they’re competitors. There’s a certain drive towards standard adoptions but even things like PSBT, which are becoming like pretty common standards are not adopted uniformly across all the hardware wallet providers. Yet Standards is a fast moving target in our space.

Stephan Livera – 00:34:42:

Back to the show in a moment. Are you ready for something huge? BTC, Prague is coming in June on the 8th to the 10th of June 2023 in Prague in the Czech Republic. It’s going to be a fantastic event. It’s going to be a three day event with some side events on either side of it and this will be huge. They are looking to bring 10,000 people ranging from fresh newbie people to Bitcoin, whales, Business Insiders, developers, miners and get everyone connected together. It’ll be a unique networking opportunity with more than 60 world class speakers and 100 companies. I’ll be one of the hosts of the show. I’ll be an MC for one of the days on the main stage. It’ll be a relaxed summer atmosphere. For those of you who have never been to Prague, it’s a beautiful city. They’ve got some really cool beer. It’s really affordable also. So this is a great rate, cost effective way to meet a lot of people in the Bitcoin world. Go to btcprague.com. You get a discount for paying with Bitcoin, and there’s also a discount for using the code LIVERA. So when it comes to multisignature and securing your coins for the long term, Unchained Capital can partner with you and help you achieve multisignature and remove single points of failure from your setup. Unchained Capital have a concierge onboarding program where you can sign up. You pay that money up front, they will ship you the hardware if you need it. They’ll do a call with you and teach you how to set up your vault and withdraw from your single signature wallet or out of the exchange. Now, they also have a new Unchained inheritance protocol. So if you buy the concierge onboarding package, you get the inheritance protocol also. So that includes step by step checklists, letters for the Executor, inheritance feed, phrase card, and a tamper proof bag. Go to unchained.com/theconciergepackage and use code LIVERA for a discount there. And finally, when it comes to watching Mempools, mempool.space is the leading Bitcoin Blockchain Explorer. It’s a fully fledged multilayer explorer. You can see the Mempool or wizards. Mempool. You can see the blockchain. You can see second layer networks like the Lightning Network, and you can search Lightning nodes. You can see channels. You can even see the channel outpoint. That’s the actual UTXO relating to that channel. With mempool.space, you don’t even have to trust a third party. It’s free and open source software. You can host it yourself with one click on various full node packages like Umbrel and RaspiBlitz and others. If you’re with an Enterprise mempool.space offers customized Mempool instances. You can have your company’s branding with increased API limits, increased feature priority, and more. Go learn more at mempool.space/enterprise And now back to the show. Yeah, and I think you make a great point, right, because I think we have to there is a balance of what can people practically do as opposed to what is the latest and greatest technology? Because as an example, with MuSig2, and the three rounds of interactivity required, well, that’s going to be a big lift, as you said. And what kind of quick wins or easy gains or low hanging fruit are there that we can just like, for example, there are probably so many people who are just using single signature wallets right now and just getting them into a multi signature context, even if it’s a two or three vault with Unchained or someone that it’s a huge lift, as in for some people, but it would also be a massive improvement in their security. And we see some people debating in the community about this also because I see this and I’m curious to get your thoughts as well, because some people in the community are and of course, everyone has their different view, but some people in the community are commenting and saying, no. Look, I think single signature and just having a passphrase is more practical for people. Stop pushing this idea of Multisign to people, that it’s too complex for people, right? That’s kind of what we’re hearing from people, from some people, to be clear. But on the other hand, there are these big benefits to having multi signature. So I’m curious how you see that.

Dhruv Bansal – 00:38:21:

I’m such a broken record here. Like, of course it depends on the way that you model threat, et cetera, et cetera, et cetera. I think different camps are actually supporting the same argument for different reasons. Sometimes they may not even realize it, not necessarily in the hardcore Bitcoin community. But there’s definitely a singlesig camp that wants singlesig because singlesig is how you generalize to other cryptocurrencies. You don’t get to use multisig in Ethereum the same way or in whatever the fuck other coins are out there these days. But a lot of the coins use BIP-32 type HD wallet architectures. A lot of them use similar compatible public key photography for holding and signing transactions. And so if you stick with singlesig, right, then you stick with a single private key, then you can engage with all that stuff too. So that’s compelling for those who care about that. And that’s why a disincentive to embrace multisig. I think the complexity argument though is a real one too. And I empathize with the idea that, look, at the end of the day, a physical thing is quite easy to protect, especially one that you can copy. So singlesig doesn’t mean necessarily there’s one point of failure, right? Like you can copy your seed phrase and you can sort it in multiple locations. That creates risk of a different kind. If someone discovers it, there’s more places for it to be discovered or whatever, but at least you won’t lose it as easily. And for most people, the chief threat is not being infiltrated by some attacker in the physical world to get at their threats. It’s that they’re going to lose the words or that their house is going to burn down or some other tragedy that’s unrelated is going to prevent them from getting to their Bitcoin in some way. Or honestly, with pass rates, they’re just going to forget the pass rates. For God’s sake, it’s 100% what will happen or they’re going to write it on a post it and keep it somewhere. And I just think about my dad and some of the folks in my family I know and their password management, but I don’t want to deride the practice obviously can be done very safely. I think a lot of people also who criticize multisig as too complex are perhaps conceiving of multisig it’s naked bear, do it on your own sort of implementation, which I agree is more complex. I think part of the reason Unchained exists as a collaborative custody option is because there is this intermediate world where you can get a lot of the benefits of multisig but with a professional keyholder to be in your quorums to bail you out if you lose keys. And with a UI and a UX, it’s well designed and easy to use on the web with support folks you can call get walked through things. This really lowers the barrier to entry. And I know this because we are onboarding not people who aren’t technologists, older people, medical professionals. I say that because my dad is a physician. I know how nontechnical physicians can be, right? Like they’re holding keys and and they’re doing it and and and they’re they’re capable of doing it and we’re walking them through it and we’re making this achievable. So I think I’d encourage those who don’t distinguish between multisig and collaborative custody to sort of realize that there is a pretty meaningful difference between those two ways of doing multisig, quote unquote. And then I think finally, in kind of a fun way, part of the complexity of multisig boils down to just having to do one thing more than once, right? Once you can protect a single key, in theory you can do the same thing more than once, but it’s more complicated, right? So why do you have to do that? Like just the single key is good enough. You can combine these ideas. You can have multisig in which you just have a single key. So the work on you, it’s is pretty similar that you just have to protect that one key. We’re not increasing that part of the cost or mental burden still just protecting that one key. But you can choose to be in a quorum in which that’s just one out of some number of keys, right? So that can be an unchained. Right? Now we offer a multi institution product on our vaulting site. It’s less utilized, but it is something that we have some clients doing. And so that looks like you have one key. Unchained has a second and there’s a third party with a third. This is a good construct for a lot of businesses maybe who don’t actually want to be sovereign for various reasons over the assets that they protect in their treasuries for legal or compliance reasons. Let’s say there are other interesting models to this. I brought my dad a few times because this is something I do with my dad through the Unchained platform. It’s kind of a hidden feature. Again, it’s not something we’re doing very publicly yet, but it is capability within the platform. Internally. We refer to this as key agents. I’m a little bit tall and tails out of school right now, but I feel like this is very relevant for our discussion. So with my dad, we’ve got it set up. So my dad has one key and I’m his second key and Unchained is the third key. So my dad now is in a scenario where he’s still protecting one key, but now he’s in multisig. But also he and I together have control over the wallet. And if either of us loses a key, well, now Unchain can come back us up. I think this is actually a really cool model. Like, number one, I get to unborn my dad. I’m in my dad’s quorums. And obviously I love my dad. I love talking about technology and sharing my business with him and sharing about bitcoin with him. So this is a cool way for us to do stuff together. And then two, my dad is cobbleston. He’s not the greatest investor. Sometimes he will buy and sell Tesla, depending on what article he just read about it, right? So it’s like he can be very emotional about his investments is what I’m trying to say. And so one of the things that’s really nice is, of course the Bitcoin, the way that we’ve implemented here at Unchained, this feature, it’s his bitcoin, it’s in his vault. I’m a key holder in that vault. I have some rights to sign, but ultimately his coins, if he wanted to create a transaction and spend the coins on his own with Unchained, and he could of course do that, but he never will. He’s my dad and he understands this as a thing we’re doing. So it’s like in order for him to sell his Bitcoin now, he’s going to come talk to me. And I love that about it because it means that I’ll get to have that conversation. I get to say, dad, really? Why do you want to do that? What are you worried about? We’ll get to at least have that discussion once before he freaks out and just sells it to buy Ripple or whatever bad advice he got from somewhere, right? So I’m making it sound like my dad is a fool or has no investment sense. But truthfully, I don’t think my dad would hold Bitcoin if he didn’t know me, right? I think bitcoiners talk a lot. We talk a really big game about don’t trust, verify, blah, blah, blah. But if we’re honest with ourselves, right, so many of us in the early parts of our journey didn’t know how to verify. We didn’t know what it meant to verify. We were trusting a friend, a family member, a colleague, someone who got us into Bitcoin, someone who maybe held a key for us in the early stages of our own self custody journeys. And so I think this idea that there’s like a zero to one instant moment where you go and understand everything about Bitcoin and then you can be a bitcoiner and do it on your own. That’s an idealization. That’s not how it is. There’s a curve. There’s a gradient from knowing nothing about it to being a full bitcoiner. And the smaller you can make the steps on that gradient, the more people you can convince to climb that hill, right? It’s now just one step at a time, and my dad doesn’t need to maybe have both keys on his own right now. Like, just protecting that one key is enough for him to experience what it’s like to use a hardware wallet and sort of marvel at how it’s actually kind of cool that we’re doing this just on our own. It doesn’t matter. He’s getting the experiences, he’s getting to hold Bitcoin in a very, very safe way. I have some visibility into his holdings, which he and I are fine with. We have that relationship and he’s really safe and I love this. This is a great way for families and friend groups to protect each other. So this is a feature I think we’re also going to be pushing a lot on an Unchained over the coming year. We’ve had a lot of work to do in other areas, but we’re catching up through that work. And this is something I have talked about in other forums elsewhere, but it’s something we’re going to be pushing on quite a bit more because I think people are ready for. I’ve been doing this with my dad sort of Unchained, sort of quietly on the side for a number of years, but Unchained, I think, wasn’t quite ready to push this more broadly. We’re starting to be there. Enough of our clients are saying, hey, I kind of want to do this thing. When I look at some of our client vault names and stuff like this, because we have some visibility internally into those things, I often see that they’re named in a collaborative way. Like this is the X family vault, right? Or Bob and Joe’s savings vault that we’re doing together. And so I think when bitcoiners are on that journey to building, their ability to verify working with other bitcoiners that they trust and love and that they know will take care of them, is actually a really powerful way to get them to the end of that journey. They don’t have to do it on their own.

Stephan Livera – 00:46:38:

Yeah. And I think maybe there’s a bit of a parallel with this concept of the Uncle Jim idea, right? In a way, you’re sort of being a bit of an Uncle Jim for your dad in that sense that you’re helping hold one of his keys to sort of help smooth him into this process of being a self custody bitcoiner as opposed to a custodial bitcoiner.

Dhruv Bansal – 00:46:58:

Yeah. And I actually think this really connects also back to our inheritance conversation, that this is not an official part of the inheritance protocol Unchained, yet we’re sort of incrementally moving these protocols forward, but God forbid my father were to pass away. I’m in a great position to be able to actually step in and work with the assets that he had on the Unchained platform, serve as one of the signers. And conversely, I haven’t done this, but I could also have him be a key holder in my forum if I wanted to. I don’t have to do it that way in order to do the first thing, but it’s an option for me. So I think these are really powerful structures, not just for onboarding, but long term for inheritance as well.

Stephan Livera – 00:47:37:

Yeah, fascinating. Yeah, it’s such a big topic, and I think people have been speaking about this for years, and I think one of the first well known books was Pamela Morgan’s book, Cryptoasset Inheritance Planning. And I believe off the top of my head, I think it’s 2015 or 2016 book, but things have advanced a little bit since then, and I think there’s still not really any one resource or one way to do this thing. And so there’s a lot of people all trying to figure out what’s the best way to deal with inheritance and Bitcoin, it’s just a hard thing to deal with because if you give somebody the keys, well, then can they spend now versus not making it accessible. There’s almost this balance of how accessible you want the keys to be to the executor or the person inheriting the coins, that it’s just a tricky balance to set. I know you also mentioned offline that you’ve been thinking a bit about layers in Bitcoin. So what were you getting out there?

Dhruv Bansal – 00:48:35:

It’s, again, another theme that I’ve been talking about for years. I feel like I’ve been trying to get some articles out about it, but I’m so excruciatingly slow at writing that I’m having trouble getting out. So maybe I’ll just cheat and we can just talk about some of this stuff. And it’s been exciting, actually, in the last couple of months. It’s come back to the fore for me due to a variety of I think chiefly driven by the Elon Twitter debacle savior, depending on your perspective on it. I guess I tend to be very like my favorite meme about it is like the one where people are drowning in the pool and it’s like Twitter and then Tesla and then like Mars Program, and it’s like, oh, come on, man. Like, you know, that’s the thing I’m most excited about of all Elon’s projects, of course. But to me, there’s this really interesting disconnect I’ve found in some of the discourse that Elon himself puts out about this stuff, which is that Twitter is a town square. It’s a public square, and so it should have these properties. But then I think but Twitter is also a company. Company shouldn’t own town squares. You don’t get the town square effect if the company owns town square. It’s fucking branded. The bricks have the company logo on them. That seems a little weird. The town square is built by the townspeople, but we don’t have that capability on the Internet very well. Right? Because building a complex application as good as Twitter is like, for all its faults, it’s a great tool for disseminating information and ship posting and learning about the world. It’s very complex to build that application just in terms of resources like cost design. And I think we’re starting to see with some of the people who are fleeing Twitter for whatever reasons recently with the Elon stuff, like what are their options to go to? Right. There’s Mastodon, which has its issues. Recently. The big thing I don’t even know how to pronounce this word, but like, Nostr.

Stephan Livera – 00:50:23:


Dhruv Bansal – 00:50:25:

I’ve been reading about that. That’s very cool. Sphinx Chat was there for a little while. I heard a little bit more about it last year, but I know it’s in this category. It’s clear that Bitcoiners, a lot of people have been working on this stuff too. I don’t want to present it. Like, Bitcoins are like, the only people to see or care about these issues. A lot of old coins care about messaging and communication platforms and social networks. In some ways, it’s an animating impulse across a lot of cryptocurrencies. But it’s been really cool to see bitcoiners actually build fucking cool, useful attempts at solving this problem. And to me, these are the beginnings of kind of like that layered thesis, right? Bitcoin is like that layer one kind of hardest money, and then layer two is like payments, but also routing. The Lightning Network is doing two things at once. The thing that’s valuable in Lightning Network is not necessarily a satoshi. It’s a satoshi in the right place in a channel where it can be utilized effectively to route other satoshi’s. Right? So there’s a spatial element to the Lightning Network which is really important. And so it feels like the Lightning Network is beginning to start to address problems of routing and payments. And immediately we’re like, great, let’s use it to build stuff. Right? So cool. I’m glad that we’re showing off and building these apps. I’m a little skeptical that any of these apps are like the final version of anything. Like, Nostra is a really cool and impressive technical achievement and an interesting experiment. But I don’t know if you read about it, there’s deep concerns with how do you scale a system like that? Where’s the data going to come from? Those are layers that have to get built. And I think one of the things I keep harping about and thinking about a lot is what satoshi, I think, taught us is that layers are really markets and that we have to build layers of markets that are doing and providing different kinds of services. But each individual market has to be really fucking simple, I think, in order to be able to become a distributed version of that market. Like the market that’s at the core of Bitcoin at layer one is a market of proof of work in exchange for Bitcoin. Right? That’s the mining process. That’s the market that’s constantly running and there’s an interesting time element in there. Gee’s work on Bitcoin’s time I think is deeply connected to a lot of this. But that’s not a complicated market, right? It’s not selling a good that has all these things hanging off of it, that characterize it like proofs of work are fungible, Bitcoins are fungible. The dynamics of this market might be complicated and volatile over time, but the core services is actually really simple to understand when you open it up. And I think similarly in Lightning. Lightning isn’t trying to be like an app framework for social networks, right? Maybe you would criticize some Lightning companies as overreaching in certain of the things that they’re doing. I don’t know that’s more of I think reasonable people can disagree about that. But Lightning isn’t trying to solve all of computer development icon blockchains or something like that. It’s not taking that all coin big bucket approach. It’s trying to say I want to focus on payment surrounding. I think that’s very powerful. That was a smart boundary that we drew as Bitcoiners to craft the project in that way. And I think I always imagine like if Lightning is more successful and we have these robust systems for routing sats online and routing information accompanying those sats, then we will organically start to see new markets develop for the things that we need to build, like a real distributed Twitter or public town square kind of thing. But again, those markets will have to be extremely small or rather extremely narrow. It’s not a market for social media, it’s not even a market for tweets. It’s a market for fetching. Like give me the asset that has this as its hash, right? That’s the market. And it doesn’t like your file system, doesn’t actually know why you want this file or what the file is. It’s just trying to serve you files, right? And I feel like the market for data online should just be trying to serve you data that you ask for, doesn’t really know why you want it or even what the data is. I think there’s something really smart in the Nostra. Like if you read about on their GitHub page or whatever, they talk about, well, how will this scale when we have huge amounts of data that have to get routed through here? And they make a very good point that ultimately mesh networking can potentially be very efficient if the mesh is smart enough to understand the relationship between data that’s required by nodes and the locality of those nodes. So if we’re all at a Bitcoin conference and we’re all trying to read the same funny viral tweet about our community, you only got to get it to, like, one of us, and then we can feed it to each other in that local environment, right? We don’t have to stream the same tweet from fucking outer space to every person in this 10,000 seat auditorium independently and in parallel. Right? But to me, that’s an optimization problem, which really means that markets have to be brought in order to solve it. And those markets are going to be only capable of solving this one problem. They’re not going to simultaneously be able to solve the problem of how do we index your Twitter feed? How do we surface the content from the marketplace that is best for you? That’s probably a different kind of market. Like, how do we mechanically search through things that are available? That’s probably a different kind of market that is monetizing the notion of search and indices on things that are popular or things that you flag. Even the concept of liking and retweeting, these are reputational signals, right? These are inputs into feed algorithms to better determine for you what should be surfaced based on peer-to-peer, shall we say, ranking of what’s interesting at that moment in real time. This is what makes Twitter powerful in both the good and bad way, right? In the good way that it makes it awesome, but in the bad way that it makes the company of Twitter perhaps too powerful. Right? So I think of these projects are showing us that there are some beginnings to this happening, but I worry that sometimes people feel like, okay, we’re just going to all switch to Nostr. It’s like, I don’t think so. As much as it would be cool that that happened, it’s not going to scale right. For the reasons that we haven’t built these massively horizontal marketplaces for bandwidth and routing and data and algorithms and so on. And of course, I’m talking about the world computer acting on, like, an evad, right? But none of this is happening in a blockchain. These are all localized, perhaps parallel structures. I think that’s a point that Nostr really also embraces very well. So they recognize that they can’t control. Like, there is no blockchain here. There’s no notion of like, putting out a tweet or a statement and having it be forever available at all times. Like always, it could disappear from a given relay. And the solution to that is to make sure you get it to other relays. Right? It’s replication, which I think is ultimately, again, a market effect. Relays should be in a market for wanting to host the data that they feel users will pay them to serve back to them at some subsequent point. And so the idea of there being any the here as compared to a collection of a’s or indefinite articles here, of like, there are multiple copies of a conversation across multiple relays. There’s not just one fucking Twitter.

Stephan Livera – 00:57:19:


Dhruv Bansal – 00:57:19:

And I think this market splitting phenomenon is something that Nostr recognizes is actually a good thing because it means that because there’s no one place to have the conversation, there’s no one place to squash the conversation as well.

Stephan Livera – 00:57:31:

Fascinating. And there’s a few things that come to mind. So at one point I was thinking about this idea people talk about even like in Unix philosophy, this idea of do one thing and do it well. That’s kind of related to what you were saying.

Dhruv Bansal – 00:57:43:

Composability ultimately, I think is where that’s trying to get at. Right. The reason that that’s a mantra in Unix is because if things do one thing well, then we can understand, we can learn how to compose them together. So similarly, we can build a complex application like a Twitter out of markets, if each of the markets does one thing very well, because then we know how to incentivize each where of these markets to provide the total service that is Twitter. And it can be modular and composable in that way. In fact, it’s not really even one Twitter anymore, it’s which service did you do glue together to govern your own personal news feed? Right. It becomes really what it looks like.

Stephan Livera – 00:58:19:

Yeah. And it’s kind of pulling together all parts of aspects of the internet and I guess notably RSS, right? RSS is a very similar kind of concept. It’s this idea that Dhruv Bansal may have an RSS feed and I might be like, oh, I’ve got my RSS client and I’m interested in what Dhruv says. Let me subscribe to Dhruv’s RSS feed. And even podcasts, like we’re talking about on a podcast right now that’s using RSS, right? So it’s kind of interesting where and.

Dhruv Bansal – 00:58:45:

Then when you follow 100 people now you have 100 RSS feeds and then we’ve outsourced to Twitter the responsibility of curating those feeds back to us. And it feels like that’s just another market service. We should just be able to purchase feed curation engines that I’ll tell you the feeds I like here is the way I would like you to process them for me. Here’s the kind of stuff I’m interested in. And then they’re incentivized to give us exactly what we’re looking for, whatever that is. But it’s not exactly what someone else is looking for. Right? They’re not incentivized to give us the content that someone else wants us to see, because advertising isn’t a part of this discourse. They’re only being incentivized to give us what we directly pay them for. So it’s a little bit more self directed, hopefully.

Stephan Livera – 00:59:26:

Yeah. So it’s interesting and there’s all these colliding aspects of it. Obviously we’re talking about Bitcoin a lot, and arguably one of the big enabling pieces behind Bitcoin was BitTorrent, right? This whole idea of distributed hash table, and we’re seeing this even with projects like Keet and Synonym, I think they’re doing a similar kind of idea. So it’s kind of related, which is this idea that you can use other people’s upload bandwidth as well not just have one central server that everyone has to download from each peer can also be uploading things too. And so that’s also getting to this idea. So then I guess maybe the one other aspect that maybe is not so easy to solve, let’s say, is this matter of is it a public record, right? So for example, Australian Parliament has this thing called Handsard and it’s it’s a public available record of what the politicians were saying in the chamber. And I’m sure similar exists in other countries in the US and everywhere. But then I guess.

Dhruv Bansal – 01:00:25:

We have no idea what our dude said at all, right?

Stephan Livera – 01:00:30:

Yeah, but I mean, the point being there’s not and maybe that’s old thinking, right? This idea that there should be one canonical public record to prove. As an example, let’s say I did some dodgy things or whatever, I tweeted out some whatever and then later I try to deny that and say, oh no, I didn’t say that. But if Twitter has like a record of what I tweeted, then you can say, oh no, Stephan, there’s a tweet here on the public record. But is that an old idea? Or maybe it’s some kind of cryptography thing where you can say, look Stephan, I can see you signed this message with your private key.

Dhruv Bansal – 01:01:02:

I think it becomes more of a context based statement, right? Again, it’s replacing the definite article of the record with a set of records. And different people and entities care about different kinds of records, right? So I can easily imagine a really well connected major component of such online data bandwidth, whatever application market. Like there’s a big fat connected component which is like what most people use for most stuff, like most discourse and perhaps is endorsed by governments or large entities or corporations as somewhat official. And if you can find it within this marketplace that is maybe tracked in some ways, I don’t know, depends, then it’s sort of official for their purposes. But there’s unofficial markets, right? There is wildlands, there’s other places that you can go get data. And so you might imagine like and there’s good and bad versions of this as well, right? There’s the notion of I’ve said something powerful but dangerous and it’s been scrubbed from the mainstream, but it’s okay, you can go find it on the fringe and now that’s powerful because I’m hard to silence. But I think conversely, there’s this idea of like I was exploited and fucking naked images of me as a kid are now on the internet and this is really upsetting to me and how do I get rid of that? Well, okay, maybe there is a chance for some kind of moderation or content control because in like the 90% space of most stuff that people are demo that’s controlled by some large players and there’s a mutual incentive and there’s a set of norms and we’re willing to forego revenue on those kinds of things. We don’t care. But conversely, it means that probably on the fringes that things still exist, right? And so I think to me it’s always like about the freedom to be able to choose to go into certain marketplaces to go find certain things. It’s not about things being impossible. It’s about them being harder or potentially more expensive, right? Because they’re either in this case, provocative or dangerous or criminal or sometimes just unpopular, right? They’re esoteric. And so maybe they’re not available at the Barnes and Noble. You have to go to the odd corner bookstore in the Village to go get that particular thing. But that’s not terrible to me. I feel like there’s a lot of ways to approach this issue. But this notion that that convenience of there just being one place to go to get a thing is, like, such a dangerous idea in some ways that we shouldn’t would have to search through a number of different providers and marketplaces and shops in order to find the thing we want. We just must be able to go to Amazon to find it. We must be able to find the tweet on the Twitter. We must be able to find the truth on this page. It’s a very dangerous impulse, I think, because it leads to centralization, right? It leads to well then, now if it’s not there, it basically doesn’t fucking exist anymore. And that can be very dangerous.

Stephan Livera – 01:03:44:

Right, because it allows the whole black holing or memory holing of various ideas. And maybe those ideas are very important, especially over the last few years as we’ve seen people shutting down the anti lockdown people when I believe they were proven to be correct over time. But anyway, I want to also get to one other area where you were mentioning as well about this idea of Bitcoin security and just generalized internet and computer security. And you see that there’s an interaction here. You see there’s some way that they are going to be more related in the future.

Dhruv Bansal – 01:04:16:

I mean, I feel like this it connects to a lot of what we were just talking about. From the perspective of if more and more of the world’s infrastructure online starts to run through Bitcoin in some way because it’s being directly monetized and paid for and metered in some meaningful way, then it just means that so much of what’s digital now becomes connected to money in a way that it isn’t today. I think that’s the root of the argument that I’m going to make. I’ll try to condense the argument into a few brief minutes here, but it kind of looks something like I’ll take this angle on telling the story. Like in my experience at Unchained, I have learned in my experience as a Bitcoiner, right? I have personally become more secure in a digital context because of Bitcoin. I started using a password manager years ago because I first bought Bitcoin and sort of was like, I’m a security, I should care about security now and I’m getting to hardware wall. It’s helped me understand a lot more about my security posture. I use VPNs now, I’m using more open source password managers obviously working at Unchained. My security expertise and requirements for me has really contrary to roof as well. That’s been a huge part of it personally. But it’s not just people who are running Bitcoin banks over here that care about security now, it’s every bitcoin cares about security because Bitcoin forces you to think in those terms. And dentists and politicians and average working people who have bitcoin who are unchanged clients are now using multisig hardcore fucking cryptography. That’s something that was considered a defensive weapon or weapon and I don’t want to explain that whole conversation, but something that was once considered very dangerous now in the hands of average people protecting their resources. This is very cool. Right? So Bitcoin is like in some sense a killer app for security just on that one basis alone. But I think it gets a lot deeper than that and because it turns out, I think a very interesting economic angle to computer security which is not well appreciated. It manifests in two ways. The first is just the idea of like it’s cheaper to get hacked and then pay a fine than it is to build good security and most of the time it doesn’t matter like Equifax or Experian got hacking, remember which one got hacked because we don’t care anymore. They paid the fine and we all moved on. They’re still in a position of power and influence. So the truth is that the economics say that good security is not worth paying for. It’s cheaper to just have bad security and then pay the cost of fucking up. So that’s one of the economic levers here that’s hard to correct, that’s very social and sort of amortized across everyone’s losses and stuff like that. I think there’s another angle though that is much more explicit and that’s like what about people that actually care about security? The truth is they can’t achieve computer security either. Google can’t achieve secure networks, the FBI and NSA can’t achieve secure networks. Their own hacking tools have been hacked and released and sold for Bitcoin on public auctions in the last few years. So it’s not just that average people aren’t good at computer security. Like the people who are professionally supposed to provide computer security can’t really achieve it at scale. And the reason for this is even touches on Ethereum was just computers are impossible to predict. Like deterring the halting problem, like the fact that the only certain way to know what code does is to run it complexity. All these ideas conspire to mean that we just don’t know what bugs exist in the code that we run. We just don’t know. So it’s impossible to make secure software. So now what happens when a bug is found in some secure piece of software. So you might hope for like, okay, the bug report gets filed, they fix it. So maybe that happens for a lot of times. But what about like when a security researcher finds a really powerful bug in like an Apache web server or like Microsoft Word or Windows itself or some fucking tiny thing inside of Windows that lets you get in and be able to do crazy stuff? What do they do with this knowledge, right? They can make no money from it by reporting it and handling it in the usual ways. Maybe they’ll even get ignored and they’ll just feel marginalized. Or they can sell it on a zero day marketplace on the dark web and they can easily get hundreds to thousands to sometimes hundreds of thousands of dollars depending on the nature of the exploit. Now this is super interesting because this creates a time period in the life cycle of this exploit where some people know about the exploit, but not everybody knows about it. And this is what makes computer security impossible, because your system can have a hole in it and you don’t know about that hole. Potentially no one knows about that hole, but potentially someone does know about that hole who isn’t you. And now your system is insecure and you don’t even know that, right? The reason that that hole exists and that economic hole exists is because the average security researcher who discovers a flaw in Microsoft Word or Apache or whatever the tool is, can’t turn that into money directly because what are they going to do? They’re going to steal your Microsoft Word files, but it’s not going to help them. In theory, they could ransomware you, right? And we’re starting to see that the rise of Bitcoin, you can see the economic connection, right, that ransomware is on the rise because Bitcoin and cryptocurrencies are on the rise. Encryption has been around for long enough where you could have been shredding and encrypting people’s files 20 years ago. How would you have benefited? You would send me a check to this address. It’s like there’s no next step there. So on some level you can see that cryptocurrency existing allows ransomware to exist, which increases the threat level of bad actors. The idea that I’m going to kind of try to turn this around and say if it were possible that every security researcher or hacker or whatever, every time they discovered an exploit, if they could immediately use that exploit to make Bitcoin directly, then they would do that, right? My claim is that the more software that runs Bitcoin, the more opportunities sorry, the more software that interacts natively with Bitcoin on the internet, the more opportunities there are for a bug, however shallow or whatever, to cause the discoverer of that bug to be able to earn Bitcoin. So for example, in order like Microsoft Word, how do I get money out of it. If I can just get Microsoft Word to make web requests for me to my server, you’re going to pay me in sats because I’m sending you data. So suddenly every hole can become something that I can immediately exploit to get Bitcoin. So this changes the game theory of the marketplace for exploits. Instead of hoarding an exploit and selling it into this private marketplace, which then is bought and sold by other hackers or oftentimes governments and corporations who are actually just buying zero day exploits about their own software to protect themselves instead of having this crazy marketplace. What happens is, as soon as an exploit is discovered, it starts being exploited, right? And you get into this position where either your software is secure or it’s being actively exploited right now. And I think we’ve already reached that place with certain things in Bitcoin. So, for example, like the Bitcoin core software, would you believe there’s a bug right now that allows someone to steal your UTXOs in bitcoin without having your private keys?

Stephan Livera – 01:10:55:


Dhruv Bansal – 01:10:56:

Maybe that bug exists, maybe it does, I don’t know. But what I can fucking say for sure is there’s no human being who knows about that bug because if they knew about it, they would start to use it. They would start to exploit the bug because they’d be getting Bitcoin out of it immediately without having to do anything else. So the fact that that isn’t happening, that we’re not sitting here talking about the giant Bitcoin bug that exists, that’s causing people to steal UTXOs, means that there is no such bug that anyone knows about. This is a very powerful statement. I’d love to be able to make that statement about Microsoft Word, Apache, Windows, Unix tools, et cetera. And I feel like the only way we get there is by closing that zero day marketplace to nothing, which means that all software has to run Bitcoin, which means that all software is exploitable directly for Bitcoin, which means that all bugs are either being exploited or they don’t exist. I think this is a very powerful new paradigm for how to think about computer security that really hasn’t made it out to like the world of computer security researchers or even bitcoiners yet. Yet we know it, we understand it, because I would say we know Bitcoin is probably the most secure piece of software in the world because of its monetary footprint. And what are the next most secure pieces of software? I’m going to guess bitcoin wallets and things that are already adjacent to Bitcoin because they’re how you steal Bitcoin. And so bugs and those things get found very quickly, exploited and then fixed. So my conjecture is basically the more we Bitcoinize the internet stack, the more we actually achieve potentially real computer security for probably the first time since the Internet began.

Stephan Livera – 01:12:21:

I see. So we can maybe frame it like an advancement of things like having bug bounties and darknet markets for zero days, but taken to more of an extreme or take into a more actualized sense or more popularized in a way. If bug bounties were to get popularized.

Dhruv Bansal – 01:12:41:

I love that, actually, that framing. Every piece of software, once it interacts with Bitcoin, becomes its own bug bounty. Just because if you can exploit the software now, you’re getting Bitcoin. So people are going to do it.

Stephan Livera – 01:12:50:

Yeah, but it could also be scary for some people, right? They could be like, hey, what you mean like, my banking software has all these bugs in it. But I think that’s also the reality is that there are.

Dhruv Bansal – 01:12:58:

That’s true today today, that’s true today today.

Stephan Livera – 01:13:02:

Yeah, exactly. It’s that people were able to live in ignorance for so long, and I think maybe Bitcoin is going to change that, too. So we’ll see.

Dhruv Bansal – 01:13:11:

No, I think that’s right.

Stephan Livera – 01:13:12:

Yeah. All right, well, I think it’s a good spot to wrap up here. Dhruv, where can people find you online and if you have any closing thoughts for people?

Dhruv Bansal – 01:13:18:

Well, I tweet at Dhruv Bansal on Twitter, which I guess will still be around for a while, and I blog sometimes at Unchained. But I recommend for all those that aren’t familiar, do come check out Unchained blog for a lot more crazy ideas from other folks, as well as our product, which I think is one of the safest ways to hold Bitcoin for the long term.

Stephan Livera – 01:13:37:

Fantastic. Thank you, Dhruv.

Dhruv Bansal – 01:13:38:

Thanks, Stephan, for the opportunity.

Stephan Livera – 01:13:39:

I hope you enjoyed the show. Get the show notes at stefanlivera.com/445. Remember to share it if you’re are enjoying it, and I will see you in the Citadels.

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