Join me as I interview some of the leading voices that are building on Bitcoin – Philip Walton Bringing affordable energy to Africa, Value transfer over payments & Time2Build by Roy and how Arkade is enhancing Bitcoin’s layer 2 with Tiero.  

Timestamps:

(00:00) – Intro

(2:37) – Philip’s background and the genesis of Gridless

(4:20) – Why build Gridless in Africa? 

(06:09) – Difference between Energy generation & distribution

(10:24) – Communities affected by Bitcoin mining

(12:45) – Operational challenges for Gridless

(17:23) – Costs for operating Bitcoin mining machines

(21:23) – Mini grids 

(23:00) – Regulatory risks 

(25:07) – Global macro trends that impact Gridless

(27:31) – “Payments are a fiat mindset” Roy Sheinfeld

(30:40) – Value transfers are permissionless & provide optionality

(32:48) – Time2Build by Breez

(39:40) – What are the different forms of Nodeless?; Concerns with Spark transactions

(48:09) – What are the fees associated with Breez? 

(51:30) – What is Arkade? Tiero explains…

(57:00) – How does batching transactions work?; Unilateral exit costs

(1:01:48) – What is Arkade script?

(1:10:00) – Use cases of Arkade and Arkade Script

(1:21:04) – Future of Arkade

Links: 

• https://x.com/LuganoPlanB 
• https://x.com/ouagawalton 
• https://x.com/GridlessCompute 
• https://x.com/roy_breez 
• https://x.com/Breez_Tech
• https://x.com/tierotiero 
• https://x.com/Arkade_OS  

Sponsor:

• CoinKite.com (code LIVERA)

Stephan Livera links:

• Follow me on X: @stephanlivera
• Subscribe to the podcast
• Subscribe to Substack

Transcript:

Speaker 1 (00:05)
All right, I think we are live now. So hello everyone and welcome to the Plan B podcast. I’m your guest host, Stephan Livera, and I’ll be chatting with my guest today.

My guest today is Philip Walton. Philip is the CTO and co-founder of Gridless, a really interesting company and interested to get into this and hear a little bit about Philip’s perspective on building in Africa and Bitcoin mining and all the rest of it. So ⁓ I guess just give us kind of a quick kind of summary, kind of your bio. What have you done before you came to Gridless and Bitcoin mining?

Speaker 2 (00:43)
Sure, so ⁓

my co-founders and I have been building tech businesses in East Africa for 20 years. ⁓ So variety of different sectors. And we started Gridless back in 22. ⁓ And we’re specifically looking at this challenge in Africa where there’s a tremendous amount of energy that has no buyer. So the energy is being produced, the community can’t afford to buy it. And ⁓ so we started thinking about how could we monetize that?

energy and very obviously Bitcoin mining is a great use case. ⁓ We had the background in building you know complex infrastructure in remote parts of Africa ⁓ and so that was really the genesis of Gridless and ⁓ you know for the for the first few years we focused on existing energy sites. ⁓

Speaker 1 (01:33)
And sorry, by the way, what year did you start? 22.

⁓

Speaker 2 (01:37)
⁓

So we started focusing on existing energy sites. ⁓ know, some of these sites were 15 years old and had never sold more than 30 % of their electricity. So their economics were in the toilet, like they could not survive. ⁓ And the fact that we can show up with a container of Bitcoin mining hardware and instantly monetize every electron of electricity that nobody else will buy revolutionizes their economic outlook.

⁓ So we’re currently in six sites in three countries, so Kenya, Malawi, and Zambia. ⁓ And we’re currently on a massive expansion across the continent.

Speaker 1 (02:18)
Now my first topic that I think I’m curious about and probably listeners will be curious about is the why Africa question, right? Because a lot of people might have seen the Bitcoin mining world and thought, but there’s already like very established areas like what about Texas or China, right? What about these other kind of areas where it’s kind of a very well established business as opposed to Africa?

Speaker 2 (02:38)
Yeah, so I think there’s two facets to that. One is why did we do it in Africa? ⁓ Although I don’t look like it or sound like it, I’m from Africa. And so are my co-founders. And so for us, we’re always looking for problems we can solve at home. ⁓ so for us, it was more about what problems can we solve in Africa than necessarily here’s what we want to do, let’s go to Africa. But I think the other side of that coin

is, know, Africa’s, this is a horrible stat. Like it actually makes me sad every time I say it. The International Energy Agency did an assessment 15 years ago and there were 1.2 billion people in the world without access to electricity. 600 million were in Africa. Fast forward to 2024, there are 800 million people in the world without access to electricity. 600 million of them are in Africa. So we have this massive challenge on the continent that

there is half of our population that does not have access to electricity. ⁓ And so then you think about the amazing renewable resources on the continent, which produces very cheap electricity. It means that we can mine Bitcoin in Africa at a fraction of the cost of anybody else in the world. So not only can we drive more Bitcoin mining in a more decentralized fashion, but we can do it better unit economics than anybody else in the world.

Speaker 1 (04:08)
That’s fascinating. so I guess in order to understand this, part of that is understanding there’s a difference between let’s say energy generation and then the transmission component of that. Because in let’s say most of the Western world and the developed, like a highly developed world, people just sort of switch the light and the light turns on. Can you just maybe articulate the difference there for people to understand why this business model works?

Speaker 2 (04:33)
Yeah,

it’s it’s I’d actually explain it a little bit different in in the Western world There is always a buyer for any unit of electricity produced. So ⁓ Most of the Western world has real-time energy markets So if I’m a producer of electricity if there’s a lot of demand I get paid a high price, but if there’s low demand I get paid a low price, but I always can sell my electricity

shift that over to Africa. And one of our sites is in Northwestern Zambia.

If the community’s not buying that electricity, there is no other buyer, zero. So there’s no market for that electricity. ⁓ And so that creates this massive black hole of economic opportunity because that electricity, ⁓ Janet, my co-founder of Gridless says the river doesn’t sleep at night. So the community’s asleep, they’re not using electricity, but the river’s still flowing. And so all of that electricity, in essence, is wasted.

And so it creates this very unique opportunity that we can, because of the geographic agnosticism of Bitcoin mining, we can put Bitcoin mining wherever the energy is being produced. ⁓ And then anything the community doesn’t want, so we always give to the community first, but anything that they don’t want, we can instantly monetize with Bitcoin.

Speaker 1 (05:59)
So we’ve touched on this idea of mining Bitcoin but also advancing energy access. So could you elaborate a little bit on that? How does that process work?

Speaker 2 (06:08)
Yeah, so ⁓ today if you see an opportunity, let’s say you find a community that doesn’t have electricity and you find an energy source, so it could be hydro, could be solar, could be wind, it could be geothermal. ⁓ That requires millions of dollars investment to build that energy.

that community cannot repay you those million dollars of investment. Like there’s not enough economic turnover in those communities to repay that investment. And so what ends up happening is, you know, people with good intention, usually with concessionary funding, will go in and build these energy sites because they’re trying to serve the needs of energy access.

But ultimately, there’s not enough revenue to repay that investment. And they economically fail. I the failure rate of mini-grids in Africa is approaching 100%. It’s a shocking statistic. Like, there’s just not enough.

demand from the community. So think about this, if I were to come to Lugano and build a new energy site, there are a variety of industries and factories and consumer demand. But if I build new energy in a rural African community, people are going to do two things. They’re going to charge their mobile phone and they’re going to run an LED light. It’s just not a massive consumption of electricity. Now over time, they will use that electricity.

In Bitcoin world we talk about low time preference, you know, and so as an energy developer if I’m expecting that community to repay my investment I have a high time preference.

Whereas if I go and build that energy based on knowing that Bitcoin will buy everything that nobody else in the community wants, I now have a low time preference for that community to take up the utilization of that energy. And so I’m not pushing them to buy more. I’m not raising the cost of electricity to try and recoup my investment. I simply can go in there, build the energy, let Bitcoin be the buyer of first resort. And as soon as the community wants a little bit or a lot,

Then I sell it to them instead of selling it to the Bitcoin network

Speaker 1 (08:20)
It’s interesting how the economics of this change the game in a certain way. so I guess, do you have any examples or stories you can share of, let’s say, or communities that have been changed by this kind of model?

Speaker 2 (08:36)
Yeah, listen, it’s an amazing statistic, but ⁓ as I said, we’re at six sites in three countries. In the last two and a half years, 30,000 people have gotten access to electricity because of Bitcoin mining. Now, that’s a great stat.

Speaker 1 (08:51)
Cool stuff.

Speaker 2 (08:53)
⁓ And that’s real impact the reason is not because we enable the energy to be developed the energy was already there The reason is because we made that energy economically viable which meant they could afford to pay their salaries They could afford to run more distribution lines. They could afford to buy more meters to connect more households ⁓ And so it really is one of these things that there’s there’s almost like this economic roadblock that exists

if you get concessionary financing, like from a DFI, to build a power plant.

Speaker 1 (09:29)
Sorry, what’s DFI?

Speaker 2 (09:30)
⁓ direct foreign investment so like national like ⁓ CDC or CETA or ⁓ the old USAID so they get funding from one of those organizations they build a power plant and then the community wouldn’t buy enough then they don’t have cash flow they can’t pay the salaries they can’t maintain their distribution lines and and there’s you know a decline in the quality of service whereas as soon as and when I say as soon as the the site

that we did in Zambia, so they were 15 years old, we took our, ⁓ we build mining containers in Nairobi, we took a mining container from Nairobi, drove it 2,000 kilometers through the African bush, deployed it, installed the miners, the next morning, the energy company got paid.

For them, that was an amazing step change in their economic future because now they have real cash flow that enables them to then focus on the things that actually impact the community. More lines, more meters, more resources. ⁓ And so that’s really, to me, that’s the power of Bitcoin mining ⁓ as an enabler for energy access.

Speaker 1 (10:48)
Now my next question is around technical and logistical challenges. You touched on this in your recent answer where you were saying you had to move this equipment like ⁓ you’ve got to have mining equipment. You need technical expertise. There’s operational challenges. Can you elaborate a bit on that in the African environment?

Speaker 2 (11:06)
Yeah.

It’s hard. ⁓ We often have this conversation, people are like, well, why don’t you have competition? like, because it’s hard. It’s not easy to go deploy technical infrastructure into a very remote, rural location. ⁓ We’re super fortunate that in previous businesses that we’ve built, we’ve done this. We know how to build sophisticated infrastructure that’s remotely managed, that’s deployed in remote locations.

And so, you we’ve been able to take advantage of that experience to be able to do this. But in general, you know, when we deploy a mining container, it is lights out. So the mining container runs completely automated with no human interaction. We use a combination of Starlink and local LTE service to provide the connectivity. But then the administration of that site, like managing the site, monitoring the site, all of that’s actually done

from our office in Nairobi. ⁓ And then we tend to send resources on site maybe once a quarter to go do maintenance to the machines, resolve any issues that have cropped up. ⁓ But I think it’s one of the things that if we hadn’t been able to solve that, there’s no way we could do what we’re doing.

Speaker 1 (12:26)
Right, so guess the answer is it takes technical operational expertise to handle the challenges. Now, I guess the other point people might be thinking about when it comes to this is things like, well, Bitcoin mining machines have a useful life and eventually they, you know, because of the increase in the price, rise in Bitcoin hash rate, difficulty adjustment, etc, etc, the rigs kind of run out of ⁓ useful life. So what’s the plan in that context? Like, how do you, does that mean in the five or six

Well, I guess, can you explain the useful live concept and you do that?

Speaker 2 (13:00)
No, it’s a super important point and ⁓ it’s something that I think that we, like if you look at the Bitcoin mining space, Gridless has a very different view on this than the traditional, you know, industrial Bitcoin miners. ⁓ Most industrial Bitcoin miners are paying a fixed price for electricity. So if you’re paying five and a half cents for electricity, there’s a certain amount of revenue that you have to get or your economics don’t work.

Speaker 1 (13:28)
or

maybe said another way, the price of Bitcoin needs to be above this level.

Speaker 2 (13:32)
This is actually interesting. ⁓

If you look at the economics of Bitcoin mining, it is largely decoupled from the price of Bitcoin. And it really comes back to the cost of energy. So Bitcoin mining is really an energy arbitrage. ⁓ And yes, when there’s a spike in the price of Bitcoin, the revenue for Bitcoin mining will go up, but it quickly adjusts back down to a range.

Speaker 1 (13:58)
because of difficulty adjustment.

Speaker 2 (13:59)
Exactly and and then

conversely if there’s a drop in the price of Bitcoin it adjusts back up So I did this comprehensive analysis over the last eight years and the range so if you just think in energy terms So let’s not don’t care about the price of Bitcoin Bitcoin mining pays between seven and eleven cents per kilowatt hour

adjusted to kind of the current average efficiency of machine. And the peak of that histogram is nine cents. So when you start thinking about it that way, all of a sudden I can take an older machine. So like right now we’re running, you know, kind of some last generation machines. They’re generating seven cents a kilowatt hour revenue.

But here’s the catch, I’m not paying for electricity. So we do a revenue share with the energy company. ⁓ So even if that price per kilowatt hour was to go down dramatically, I can still mine profitably.

Whereas to a Western miner that’s paying 5 and 1 cents, if their revenue drops to 6 cents, they have to turn off their machines. They cannot afford to run them. And so that gives us a huge advantage from a global competitive standpoint that we can run older mining machines longer in Africa because of the economic structure and the cost of our energy.

Speaker 1 (15:26)
Yeah, it’s a fascinating model and so ⁓ can you maybe outline a bit and I guess you’re touching on it in your answer there because I guess a lot of people talk about in terms of the operational cost but there’s also kind of an upfront capital cost if you’re buying a lot of mining rigs but to your point you’re buying the older stuff it’s cheaper.

Speaker 2 (15:43)
No, so this is actually funny. So I ⁓ actually maintain a spreadsheet that looks at ⁓ the cost per tera hash ⁓ versus my gross margin per tera hash. ⁓ And the truth is that buying an older, let’s say 30 joules per tera hash machine at $2 a tera hash is better for me economically than paying $12 per tera hash for an 8-inch

you know, or 16 joules per terahash machine. So the truth is that we actually get, again, a huge competitive advantage that we can buy less expensive older machines, so therefore putting less capex into that site, but if you look at my gross margin per kilowatt hour, it’s as high or higher than the guys running the latest machines in the US. So…

I love Adam Smith, I love the labor theory of value. I think about it as the energy theory of value. Ultimately, this is a globally competitive marketplace and whoever has the best arbitrage, that’s your competitive advantage. And so ⁓ it means as Bitcoin miners in Africa that we can globally compete with everybody else in the world doing Bitcoin mining and we can have an economic advantage ⁓

that allows us to be the cheapest producer ⁓ in that globally competitive marketplace.

Speaker 1 (17:15)
Yeah, I find that fascinating because it’s like you’re, you know, yeah, you’re sort of flipping certain models on their head in a way. You’re sort of saying, well, we don’t need to actually have the latest and greatest mining machines. We can actually work with some of the older ones because…

the cost ⁓ efficiency of it works out better for us theoretically. Well, in practice, sorry. And I guess then the other question people might be thinking is, is it just like a question of scalability? Like it’s hard to go out and make lots of new sites and that’s kind of the challenge for you.

Speaker 2 (17:46)
100 % and like you hit the nail on the head. So the challenge for us is ⁓ the existing energy sites are finite in terms of like an operator that’s already running that has wasted electricity ⁓ and so we recognized about a year ago that we needed to vertically integrate mining and energy generation and so we’re currently in a phase of growth where we are buying existing energy sites integrating Bitcoin mining

and then we’re starting to develop new energy sites. So we’re building new energy sites from scratch based upon this Bitcoin economic model. ⁓ And that, as entrepreneurs, that gives us the control, right? So it’s now all within our control to ⁓ accelerate that expansion. And we’re not dependent upon somebody else that’s like found themselves in a tough spot ⁓ and needs our help. And the truth is, like Africa has,

Africa is insanely rich in energy resources. Like it is shocking that the poorest energy country on the planet is the richest in energy resources, particularly renewable energy resources. So if you look at just hydro alone, there’s 400 gigawatts of untapped hydro on the African continent.

And if you were to bring in solar and wind and geothermal, it’s probably 10 times that. So the truth is that there is an abundance of cheap energy resources on the continent, but there’s never been an economic model to go develop those at scale until now.

Speaker 1 (19:28)
And so you touched on this idea of creating energy grids or mini-grids. How does that balance with, I guess, the cost of getting Bitcoin mining? I guess you just kind of have to factor it all together of like, OK, here’s my plan for this site. This is how much is going to be for the grid, and this is for the mini-grid part of it, and this is how much is going to be for the Bitcoin mining part of it. Is that how you see it?

Speaker 2 (19:47)
No,

it’s interesting. So we actually think of Bitcoin, the Bitcoin network, right? The energy buying side of the network as a market maker for the value of a unit of electricity. So if Bitcoin is paying me seven cents per kilowatt hour and the community will pay me eight cents, I’m going to sell to the community. And if you look historically at mini grids in Africa,

The price for electricity is often close to a dollar per kilowatt hour. So I can go in and say, look, Bitcoin is my market maker. So Bitcoin’s paying me $0.07. I’ll sell to you for $0.08. And that’s going to be the cheapest electricity that anybody in that country has access to. So we really get this unique opportunity that it is both good for the community and it’s in our financial best interest to sell as much as the community

as long as it is just marginally more than what Bitcoin’s paying, but then we can always fall back on Bitcoin buying whatever the community doesn’t want. Yeah, it’s perfect.

Speaker 1 (20:51)
your fallback option.

forgot the other question I had. ⁓ All right. when it comes to ⁓ regulatory risk, do you see that the nation states or the regulators of these areas, whether it’s an energy regulator or otherwise, what view do they have on what you’re doing?

Speaker 2 (21:20)
You know, it’s really funny. ⁓ So one, in terms of Bitcoin mining, ⁓ so far most countries, there’s one exception in Africa, but most countries, even if they’re violently opposed to Bitcoin, the monetary technology, are fine with Bitcoin mining ⁓ because it represents hard capital coming into their country. So the great example is Ethiopia. ⁓

You can come listen to our panel tomorrow. ⁓ Nemo ⁓ from ⁓ QRB Labs in Ethiopia will be on the panel with me. Ethiopia as a country doesn’t allow Bitcoin, but they are now the largest Bitcoin miner on the African continent ⁓ because they embrace that as a distinct.

technology from ⁓ the monetary system itself. But if you think about how the energy regulator views us, and we’ve seen this in Kenya, Malawi, Zambia, Rwanda, Guinea, Uganda, if we go to the energy regulator and we say, look, we’d like to come in and build new energy, and we don’t want you to give us anything in exchange. We’re not asking for anything from you.

They always say yes. Because typically if an energy developer comes, they want the government to promise them something. Promise to buy my electricity, promise to pay me a certain amount. And so when we’re going in there and saying, look, I don’t need anything from you. I’m bringing my marketplace. So.

Speaker 1 (22:53)
that is the win-win everyone

Speaker 2 (22:55)
⁓ I mean in Malawi we we asked the government for a license to build a site We got it in an afternoon like it’s it’s such an easy conversation compared to kind of the traditional mode of energy development

Speaker 1 (23:09)
I guess zooming out a little, are there any kind of global macro trends that impact you at Gridless?

Speaker 2 (23:15)
Well, yeah, so ⁓ when I saw that question, was thinking about it. Like, I think one of the things that impacts us the most right now is ⁓ the push for AI. ⁓ And the reason is… Well, so, yes, but in the future. ⁓ You know, when you look at the demand in the Western context, particularly North America, ⁓ for energy to dedicate to AI and HPC,

Speaker 1 (23:26)
Are you going to pivot to HPC?

Speaker 2 (23:45)
the energy that’s being used for Bitcoin mining is grossly underperforming from an economic standpoint than if that same energy was put to HPC. So you’re seeing the Bitcoin miners start to shift to, they can make a lot more off their energy contract selling to HPC than they can to Bitcoin. And what that means is there’s a lot of equipment that no longer has a home. ⁓ so there’s a lot of that. there’s like a lot of the conversations we’re having right now is,

how do we relocate assets from North American operations to African operations because we can keep those assets productive, in fact, making more money than they were making in the US, and then that energy can go to the HPC.

Speaker 1 (24:34)
That’s really fascinating. it’s like, if I’ve understood you, it’s like some of these big mega miners in the US and other Western countries, they are now kind of pivoting a little to AI HPC compute. That means they may not need some of the Bitcoin mining machines, which they can sell off to you. And you guys can kind of get those a bit cheaper. All right. Well, I think we’re to have to wrap it up now. So just quickly, where can people find you online? And then we’ll wrap it up there.

Speaker 2 (24:57)
So websites

gridlesscompute.com. ⁓

Speaker 1 (25:03)
All right, well I tweeted it out so

people who want to follow can follow Philip there. That’s it. So everyone please put your hands together for Philip Walton. Thank you.

Speaker 2 (25:13)
Thank you.

Speaker 1 (25:20)
So we’re going to keep on going. ⁓ So just a few minutes, we’ll be back on.

Okay, so we’re back on. So we’re back on for the Plan B podcast coming to you live from Lugano. I’m your guest host, Stephan Livera, and I’m joined by my friend Roy Sheinfeld, the CEO and co-founder of Breeze, well known for supporting lightning adoption and Bitcoin adoption around the world. let’s start here, Roy. So you wrote an article recently for Bitcoin Magazine, and I think one concept you were touching on there is around…

value transfer instead of payments. So can you explain a bit, like what are you getting out there? Yeah, that’s my new crusade to try and people always ask me, okay, why would I spend my Bitcoin, right? It’s all about trying to understand what’s the utility behind using Bitcoin as a medium of exchange. And I think what I’m trying to convey is the fact that

we’re all living under a payment mindset. So in my article, I kind of define what payment is. And basically, the definition I came is to say payments are instructions to settle a debt. What does it mean?

So when you pay someone, you’re not actually transferring value to that person. You’re sending an instruction to a third party to send value to the other side. So that’s one aspect where ⁓ payments are different than value transfer. The other aspect is that when you pay someone, there’s always a settlement. It’s always an open debt.

that you need to settle. You buy something for a merchant, you need to pay them. You’re clearing a debt. When you pay your employee, you’re clearing a debt. So value transfer, and that’s a very fiat mindset. Payments are fiat mindset because value can transfer in a very specific path, only when there’s debt, and only…

through third parties that are allowing you to facilitate this value transfer. So what I’m trying to say is that Bitcoin, the Bitcoin mindset is not payments. It’s not about Bitcoin payments. It’s about our ability to transfer value exactly like we would transfer value using cash. So Bitcoin is the…

reimagination of cash in the digital world because when you make a Bitcoin transaction there it’s not an instruction you’re actually sending the value and you’re not relying on any third party to facilitate the value transfer and it can transfer from anyone anywhere

at any time and that’s completely different than payments and the value proposition of Bitcoin what I feel lies on the use cases that value transfer can unlock. So imagine we have a native currency to the internet that can facilitate the value transfer anywhere anytime by anyone how many use cases that can unlock. And you touched on this idea that basically payments require bankers.

Do you want to elaborate a bit on that? guess, let me steal man a little bit because people could challenge us and be like, well, look, you Bitcoin and Lightning guys, you’re making use of things like LSPs or swap services and things like that. So how and why is that different in your view? First, you don’t ask permission. Even if you’re not doing

you’re talking about second layers. let’s talk about kind the value proposition on the first layer. Before we’re talking about optimization and scaling Bitcoin,

People need to use Bitcoin in order to facilitate value transfer. People are actually using Bitcoin in order to facilitate value transfer because no one knows how the Bitcoin flows in layer one. Now, where we come to the scaling issues of Bitcoin and we want to facilitate value transfer for billions of users, then we get into a very complicated discussion and convoluted discussion of trade-offs.

LSP ⁓ is a trade-off the ability to allow end users to connect to the lightning network encapsulate some form of centralization and the decentralization comes in the form of an LSP the way to mitigate that centralization is to allow anyone to run an LSP and to allow anyone to connect to any LSP they choose to so we’re kind of decentralizing the LSP that is

in itself a centralization factor. And the same is true about other layer 2 solutions like Ark and Spark, etc. I actually think that the future of scaling layer 2s is about us having multiple subnetworks, different subnetworks, each is running by…

multiple operators, different jurisdictions, and Lightning is evolving from technical solution to what I call a common language that provides interoperability between all the different subnetworks.

Yeah, I think I’m with you. If I were to look at the fiat system, basically there’s one Federal Reserve and there’s all these tens of thousands of fiat banks around the world, don’t know, call it 30,000, 40,000 fiat banks around the world, and that’s what most people are using today for fiat payments, aren’t they? Now in the Bitcoin and Lightning context, hey, you can run your own Bitcoin node, you can run your own Lightning node, there could be millions of these, now maybe not today. And if someone fails, you can run another. So it’s about the optionality, it’s about our ability to have an alternative.

infrastructure. For example, they always say, okay people ask me, but in Europe we have open banking, so what’s the difference between having a permissionless open decentralized network and having an open banking API? But when you dig into the open banking API, you find out that just 10 operators can operate open banking API and you need to

KYC, AML and go through a rigid process of being approved by this open banking service provider to be able to

integrate with the open banking network and The first thing they ask you when you want to register to this open banking API is okay What’s your volume and and if you’re not like a multi-million? Dollar company you’re excluded from the network. So it’s the fiat is all open banking Fintech all this type of solution is what I call lipstick on the pig. It’s just a digital facade to the same broken permissioned

fiat system. Right and yeah so I think as you said it’s like there’s a big optionality difference in Bitcoin. Of course we encourage people to use self-custody, verify yourself, use their own Bitcoin node, all the normal maxi things that we talk about but the point is it’s an option even if you don’t actually do it. Of course we encourage you to. And everything is open source.

and everyone is free to use the Brie software for example, everyone is free to run their own Ark, everyone is free to run their own Spark.

Yeah, so the freedom is out there. Now the other big topic I know is the time to build. So tell us a little bit about what is this time to build ⁓ developer kind of hackathon competition that you’re running or you’re part of. Yeah, time to build time. The number two, build.dev is something new we’re trying. It’s not a hackathon. It’s a challenge because we don’t want to build hacky stuff. We want to build solution stuff.

Like my thing from the get-go was to bring lightning to applications. ⁓ The last thing the world needs is another lightning wallet. we don’t want to build lightning wallets. We want to meet people where they are, and we want to bring lightning to mainstream applications. So our first attempt in kind of unlocking that is this time to build challenge, where we have a prize pool of 25k.

⁓ for developers to integrate Bitcoin into open source applications using the Breeze SDK. We’re working with over 50 communities all around the globe, Bitcoin developer communities that are taking…

place in this challenge. We have great sponsors that are supporting us with the prizes. We have amazing judges. And everyone is welcome to contribute to an existing open source application.

type of Bitcoin functionality. So it can be, for example, adding Bitcoin to Signal or adding Bitcoin to a crypto wallet like Trust Wallet or adding Bitcoin to an open source social network or adding Bitcoin to any messaging app out there games. The possibilities are really endless. And if you’re doing a good job and convincing the maintainers of the open source repositories to merge

your PR, you’re eligible to participate in Time to Build. Yeah, so it’s putting it into practice and I guess there’s a little bit of a tie-in with Breeze SDK, so maybe some users or some participants in Time to Build may choose to use Breeze SDK. They have to use the Breeze SDK. Yeah. So yeah, I want people to use the Breeze SDK, not because I really, that’s why we also kind of name it Time to Build.

the solutions that are.

We’re building, are really making it super, super easy for developers to integrate lightning. I don’t want them to explore, I love LDK, I love LND, I love core lightning, I love ⁓ both of the exchange, but I think we provide a level of polish and a level of simplicity that is needed for developers that are coming from the generic development space to interface with Bitcoin.

want them to try the Breeze solution as the first interface to Bitcoin. So I’m pushing my own solutions for sure. Fair enough. So now let’s talk a little bit about what exactly that obviates, right? Because if you are coming from the perspective of a non-Bitcoin lightning really deep in the weeds dev,

What are some of the things that might be challenging for them? Obviously in the Lightning context, it’s things like inbound liquidity, which is the big one, then things like monitoring channels, thinking about channel liquidity, how much liquidity do I need in the channel, how am going to fund that, what’s the capital cost, all these things. These days are over. What we’re doing…

with our node-less SDK, we’re elevating the need of running a node, understand the complexities of the underlying implementation. We have partners that from downloading the SDK to production, it’s a matter of days now.

And we have developers that are able to create initial POCs in a matter of hours. So it’s super simple. The days of nodes, channels, liquidity, offline receive are over.

It’s time to build. And any developer can interface with lightning right now. The problems that still remain are not specific to lightning. It’s the seed management issue that is still challenging for mainstream users to interface with. And on ramps and off ramps, think that’s kind of the two biggest challenges. And to some extent, people are going to use like USDT as like an on off ramp. ⁓ Or to kind of smooth that process.

even if it’s you know there are certain trade-offs with these of course. ⁓ So can you just outline the various forms because as I understand like in the early days of Breeze SDK it was the green light style and as I understand now you have the node-less style and that started with a more let’s say liquid Bitcoin LBTC based form but now you also are

Expanding out to other forms. So can you explain a bit about the nodeless like the different forms of nodeless? Yes, so ⁓

The idea with node-less is to have a way to interface with Lightning, use Lightning as the protocol of transferring value without the need of running a Lightning node. And we started with Liquid. ⁓ The node-less underlying implementation is actually a Liquid wallet. And if you wanted to do a Lightning transaction, you did an atomic swap from Liquid to Lightning.

value in in in lightning you actually were swapping lightning to liquid so the funds were held in LBTC and the problems of ⁓ doing that is is the fact that you’re relying on LBTC LBTC is not Bitcoin it’s peg Bitcoin to the liquid network and there’s no unitary exit

And with the latest iteration of our nodeless SDK, we offer Spark.

⁓ integration meaning the underlying implementation by the way developers are kind of completely oblivious to the underlying implementation a Technical user can choose liquid can choose spark But the interface the developer interface is send payment receive payment send and receive that’s kind of what they don’t pick which one they go they can they can’t and we expose the the optionality, but I’m just saying from an interface standpoint liquid and spark aren’t

exposed. It’s the underlying tech that facilitates the transferring of value. So in Spark, the cool thing about Spark is that you have real instant settlement. Spark isn’t a blockchain. It’s a federated state chain technology. the value transfer is instant. There are no minimum amounts. So you can have like one set. One set is perfect for zapping.

and you have Unitarial Exit. So I think this is a huge advancement over what we offered with Liquid. And we’re also integrating, we don’t have that released yet, but we’re also integrating with Arkade, so people will be able to choose Spark versus Arkade versus Alpine versus whatever. Maybe we can just elaborate a little bit on Spark, because I think people haven’t really heard a lot about it. It’s kind one of those things that…

It’s out there, but it’s maybe not as well understood in the Bitcoin world. So my understanding is it’s kind of like taking Ruben Somsen’s idea of state chain and then that was integrated into Mercury layer, which was another kind of project, another wallet, which was a state chain thing. And then now the Spark guys…

have taken that state chain and made certain tweaks to it that allow kind of certain different trade-offs. made it usable basically. with, because I think in the older Mercury layer style, it was like you had to send a set denomination. Yes. Right, whereas in the Spark context, you can actually change that denomination. Yeah, so I think the innovation, the second iteration of the next generation state chain model that the Light Spark and the Sparking were able

to innovate, are two, it’s twofold. One is the ability to use any amount when you do a transfer. You’re right, in the old Mercury model, it’s going to have a fixed amount.

So if you wanted to, if I wanted to send you 1,100 satoshis, I need to send you 1,000 note and 100 notes in order to send you that value. And in the Spark model, the amount is variable because they switch from a fixed UTXOs.

to a tree model where, for example, I have 1,000 satoshis and I want to send you 300 satoshis. I take the 1,000, split it to 700, 300, and then I’ll send you the 700 satoshis. State chain at its core, it’s the ability to switch signature offline. So switching signatures of what?

and the LightSpark and the Spark team figured out a way to dynamically create this artifact of a leaf where I can switch the signature for dynamic amounts. That’s a great innovation on top of the first generation state chains. And I think another important innovation is the federated model of operators. So there’s not only a single operator that you trust.

in order to switch the signature between the sender and the receiver, you’re actually trusting the trust model is one of N operators. it’s enough to have, so they figure out a way to build a state chain with multiple operators, and it’s enough to have one honest operator for the entire thing to be trustless.

Now, probably the more controversial aspect of that, I’m curious to hear what your stance on this is, is the privacy element, because this is something where people have raised that basically people can dock the entire transactional balance once you’ve shown a lightning address in the Spark context. So ⁓ what do you see there? Is that going to improve in future? What do you think? I think that’s part of Bitcoin politics. Basically, people take a look at Spark and they don’t judge Spark by

it’s technological merits, they judge it by some kind of a facade, they don’t like to work with an American company or they think David MArkus is CIA or whatever. I think from a technology standpoint this is BS and I’ll explain why. So the design decision behind Spark is to expose the data of the Spark operator publicly.

So all the data that is exposed to a Spark operator is available to a public indexer. So when you send a Spark transaction, the Spark transaction is, you can see the Spark transaction in an indexer exactly like you see it in a blockchain, like you see an on-chain transaction in a blockchain explorer. The problem.

and it’s a very tactical problem right now, is that some of the Spark SDKs are reusing addresses. So if a Spark address could get leaked, then you can see the entire balance of a user in this public indexer. And there are multiple ways to solve that.

⁓ We already mitigate that in this bridge decay by not exposing spark addresses ⁓ Meaning the spark addresses are not available in lightning invoices. It’s not a good enough solution because it’s prone to Timing attacks I can send you a specific amount and can then see the specific amount in the in the spark explorer So the next mitigation is to hide transactions from public explorers. That’s actually coming out

this week. So you won’t be able, as a user, to see information if I don’t want you to see it. The second mitigation is dynamic addresses. So all the SDK will convert to a dynamic address model. And once that happens, Spark Privacy will be on par with on-chain privacy. And the next iteration will be to do confidential transactions.

interesting. OK, yeah, so it’s interesting. It’s certainly a quickly evolving space. Now, can you touch on, like, I guess the fees?

that end users will pay or the fees that the builders will pay? Can you just explain a bit about that? don’t know if you can touch on that. So Breeze in general, there’s no added cost of using Breeze. You can use the liquid implementation without additional cost. You can use the Spark implementation without an additional cost. It’s a B2B2C model, meaning the end user is paying for the transaction.

and we are doing rev shares either with balls or with light spark. That’s basically our business model. So it doesn’t affect the end user. We’re basically bringing traffic to these networks. The fees are different.

between the implementations. In the liquid implementation, you’re paying 0.1 % to send, 0.25 to receive. In the Spark implementation, you’re paying 0.25 for both. Excellent. Yeah, so look, I’m supportive. think it’s a great idea that you’re out there building and making it easy for other apps and other wallets and other people to integrate Lightning.

⁓ lightning payments.

Under the hood actually there’s liquid and spark and in the future Ark coming there, so I think that’s really interesting Any I guess are there any examples or? ⁓ Interesting ideas people have had on what they could try to integrate with I actually was traveling so much I haven’t had time to see the submissions. I know people are integrating the SDK into Quite popular open source implement implementations ⁓ So we have games we have messaging apps

We have events, platform applications. So really, when you think about the possibility that value transfer can unlock, it really can be integrated into any mainstream application. That’s kind the mindset shift, the paradigm shift that we want people to make. Like any app that brings users together,

can start to facilitate value transfer. So the possibilities are endless. Yeah, I mean, I’m supportive. I think this is really cool. ⁓ Just explain to people, what’s the timing of this time to build? Like, when does it finish? So.

We have until November 16 in order for people to do the integration into open source application. We give them about a month until mid-December to work with the maintainer in order to get the PRs merged. And the winners will be announced on January 8. Fantastic. Well, time to build. It’s time to the number build.dev is the site. So listeners and people go and

check it out and yeah support what Roy’s doing. He’s doing a great job building and expanding Bitcoin. Of course if you’re a Bitcoin maxi you should support him. So thank you Roy. Thank you Stephan.

Hello everyone and welcome back. We are here on the Plan B podcast and I’m your guest host. My name is Stephan Livera. I’m joined today by MArko Argentieri, although I know him as Tiero. Everyone in Bitcoin land knows him as Tiero, so I’m just going to call him Tiero. ⁓

Tiero has done a lot of great work on Ark. He’s the CEO and founder of Ark Labs. And they have recently just ⁓ announced and pushed out the public version of what’s called Arkade. And you guys just had a big Arkade day. So just give us bit of an overview. How did Arkade go?

First of all, greetings and thank you so much for having me. It’s always a pleasure to have a conversation, Stephan. And yeah, Tuesday we had an amazing day. ⁓ I like to call it a family gathering, where we brought on board friends, partners, and yearly startups building on what we are doing all together here in Lugano. And we also announced to the world the public beta. So anyone can use our wallet, can start using API. Developer can start looking into.

integrating Arkade in their application. And it’s been a great day, ⁓ great reception. Everyone was not even expecting ⁓ the amount, not only of vision and mission, which we reiterated with all the participants, but most importantly, ⁓ other company and design partner were able to demo live their application. And everyone was very happy to see that coming live.

Fantastic. let’s just, you know, this is a new concept for a lot of people, so let’s try to take it simple and make sure people understand what this is. Now, I’m going to give the ADIQ my simple understanding and then you correct me or elaborate a bit. So my understanding is with this Ark idea…

It’s like you’re taking ⁓ UTXOs and they become VTXOs, virtual transaction outputs, and these are kind of living on a quote unquote virtual chain and you can transfer them around without hitting the main chain. That’s kind of the idea. And so the idea is, you you could be a merchant and you could be earning and spending, but actually what’s happening in the background is there’s VTXOs and there’s some complicated stuff around like expiries and things like that. But if you, the end user, you just have a wallet and it just looks like, ⁓ I’ve just, I received money or I send money. Actually in the backside, there’s like swaps going on and things like this.

But to you, the end user, it just looks like you just earn and spend. But there’s maybe some additional functionality and features that are being enabled by Arkade Script. And then you have an Ark, I guess, server or operator. So maybe you can elaborate or tell me what am I missing there? So first of all, think.

Arkade operates in a client-server model, which means you as a user, you’re a client, then you have like a set of one server, most likely a set of operators, you connect to, and you push all the complexity of…

Bitcoin transaction or making Bitcoin transaction to the operator, but you retain the simplicity of just having a simple wallet. And just to understand, if you are used to a Bitcoin, normal Bitcoin wallet, you have an address, you give it to someone, anyone can pay to you. This is a very basic one-on-one of how Bitcoin works. And we mirror that in the virtual layer. So you have an Arkade address, anyone can just take it, send it. You don’t need to be online.

which means I’m sleeping and someone sent to my address, I wake up, my client will check the set of indexer and show the balance to the user. So it really, really makes the same ⁓ easy of developing a wallet or developing an application the same way on the Bitcoin blockchain, but you’re doing in this virtual layer that Arkade enables. Now, as we can imagine, ⁓ to make this…

to have better property than the blockchain so we don’t need to wait for the next block so we reduce the block time and block space constraint there is some complexity in doing that and historically how internet scale or I would say how ⁓

The internet and web application flourish is only when you know virtual machine has been introduced which allowed you know Ecommerce and the early website to just focus on their application and not focusing on the real complex Server machinery data center that was being totally delegated to an operator now This is an analogy just to go back to the concept of Bitcoin and this can happen and actually custodial and custodial We’re doing this we’re like giving away all the complexity of Bitcoin, but they were just like trading off

with custody and the beauty of having Arkade is like we try to retain as much as possible without you know degrading trust assumption but we try to allow you know the user to start to retain as much as possible the Bitcoin security when it’s possible we do this thanks to transaction batching and historically you know we needed compression algorithm we needed them mp3 to make sure we could get the iPod right and that’s what we are doing really so we try to make sure the businesses the operator the

startups will think about it, how to take your Bitcoin transaction, batch them, compress them and putting on the Bitcoin blockchain, still giving you as much as possible the Bitcoin security. I see and so as you mentioned, still maintaining Bitcoin security, I think that’s the key point a lot of people want to hear, they want to hear this, I still want unilateral exit, that’s kind of the guess ⁓ key feature that a lot of people are looking for if they want to be able to call it kind of a non-custodial or at least

Yeah, close to self-custodial experience. Now, you touched on this batching thing. So maybe let’s dive in a little bit further into that. Like, how exactly does the batching side of things work? Now, I understand the end user doesn’t think about this. when he, let’s say he scans a, OK, let’s say you have an Arkade wallet, I have an Arkade wallet. I scan your QR, and I want to pay you whatever, 10,000 Sats, whatever. Can you kind of walk us through what the batching looks like there?

Yeah, absolutely. So the idea is I give you an address. You will give you this virtual UTXO, which is like something that at some point anyone, your wallet, can go to the blockchain, broadcast a series of transactions. So it’s not just one, a series of transactions to actually.

Transform that just by by the fact that this is a pre sign chain of transaction in a real utx. but of course We don’t want to do this right because it will always consume the block space You will always need to wait for the next block time So what we do we leverage the operator by taking a VTX. ⁓ attaching that is already owning right the sender already as a VTX. ⁓ ideally batch before ⁓ It will just attach an extra transaction to that and will have a set of inputs which is spending the

VTXO of the sender and then I will attach a set of output. This output is like actually me, the recipient, my own VTXO. Now we call this pre-confirmed just to make really clear that this is like something that the operator is adding a signature so it’s better than zero confirmation, it’s better than unconfirmed.

because it’s putting a signature, it’s actually locking that sequence of transaction, but still you have some trust assumption ⁓ from the previous spender and the set of operator to not collude and double-spend. But this is important because it creates a queue of intent of where you want to go. So as a recipient, I go online, I see, OK, I have a payment to me. I was offline before, so I get that crazy nice user experience. And now it’s on me as a recipient to decide what they want to do. I’m OK to remain what we call the virtual

virtual mempool and I stay there, I can spend it right away, right? So I can send it to someone else and literally like removing my trust assumption or no, I wanna go in a ownership stage but you don’t need to exit from the system. You can stay in the system retaining all the compression advantage and you go to batch in the next block. So in a way you need to wait at least the next block to get this batching aspect and why we say it’s important being batching because no.

many users we get, it will always be better from a cost perspective because more people less the cost of that single Bitcoin transaction that can compress potentially tens of thousands of virtual transactions. Okay and so when we’re talking about the unilateral exit there, does that…

Is that a high cost to exit? So I guess what I’m asking is, do you need to have a big enough balance to make it cost effective for you to do if you really wanted to do the unilateral exit? Or otherwise, if you stay in the VTXO virtual chain, maybe you swap out not with a unilateral exit. Am I understanding you there or what? Yes. As everything in life, there are trade-offs. And sure, you have a cost to exit. So there is what we call a dust amount. In the Bitcoin blockchain, are some amount of you

so they’re not economical to be spent, we retain the same property. That really mimics the same approach and it will always be dependent on the blockchain. The interesting aspect is you can actually make sure…

to use technique like congestion control to potentially make sure it’s predictable your exit costs trading off maybe some time. Maybe I need to wait three, six months. But I know I’m trying to pay the minimum amount possible so we’ll try to be even more efficient in case of a mass exit. And how I see a mass exit is like a class action, right? So if you are a consumer against a big company, you need to.

cooperate with other consumer to get out, right? So to pay the big lawyer fees. And I see in the same way. The other aspect is like, this is a very remote case. Unilateral exit has to be there as incentive to not to happen. So the operator incentivize to you know, to follow the protocol. Because in worst case, they just exit, right? So there’s nothing to gain for the operator, which is, in the end, very similar to even mining, right? So mining has this like economic incentive for us to not

reached at 51%, even though already with the five mining pool that are out there. So it’s really kind of a tricky situation. there is nothing in life which is totally cryptographically trustless. There is a game of incentive. Fair enough. But do you have a rule of thumb for when it makes it above what threshold? Dust amount. Oh, so it’s just literally the dust. OK, right, right. OK, fair enough. Now, I know using

Arkade script, so maybe we can get a bit of an intro on that and then you can do more with Arkade script. can you just maybe give us a bit of an intro, just a basic overview, what is Arkade script? Yes. So.

In our journey, Ark has been formalized this spring. We did a partnership with the University of Vienna with the department of Matteo Maffei, which has been ⁓ leading the Game of Theoretical department of the University of Vienna. And with them, we’ve been spending time having an academic approach to try to formalize what was just a prototype we’ve been building in the last two years. And we came out with the conclusion ⁓ that in the end, what you’re doing is, yes, creating a system on top to not only

just improve payments but most importantly you can take any type of Bitcoin script that you are using on the layer one and in a way lift it in the virtual layer and it came out that like when we wanted to add lining interoperability we need to mimic the same approach of the base layer which is HTLC right so ash locks which are very important to do what we call summary swaps right so I give you a bit so and you pay for me in an atomic way and that’s a very important primitive so we started you know reseArkhing how to do that

And we saw a pattern there. And we saw that in the end, we need an interpreter. The operator needs to run an interpreter, which is what ⁓ any Bitcoin full node does. When you broadcast a transaction to the normal mempool, your full node, to accept the transaction in the mempool, it will execute.

that script, Opcode by opcode to say, yes, it’s valid. Boom. I relay to the other node in the mempool. And we said, OK, there’s a pattern there, right? So since a VTXO is basically, what is a VTXO? It’s like a two of two, right? You and the set of operators. And then you have an unilateral exit, which is just you, but with 24 hour of delay to allow the game of theory to work. And we said, well, an HTLC usually is like three path, right? Cooperative, refund, unilateral, and clear.

the with the pre-image in a virtual way, we just need extra three more paths to mimic this, right? So keep the unilateral HTLC and then the cooperative HTLC to be executed right away. And this is a pattern and it’s applied to multisig so we can do multisig, we can do escrow, right? And they said, okay, this is way bigger than just like, okay, maybe we sold the payment or the onboarding for lining wallets. And when I started meme Bitcoin, I remember I was helping many people to get onboarded via cash, ⁓

Etc people were coming to me with escrow with zero IT knowledge were coming with me with the yearly wallet having a two of three with an escort because they didn’t trust me maybe at the beginning and it’s fun because after 2017 nobody was using any more escrow when is our create great primitive to do many many type of application and that’s why for us is like Okay, wow, if you can scale because great you can do better now We keep going on because we think that pre-confirmation is a good trust trade-off. There is some reputation aspect, but we did a lot of

seArkh to try to use hardware security like secure and clave so then as operator I’m using this hardware cryptographic attestation of what the software is running so this way we can prove that actually the key is generated in the enclave we don’t see the key we can have end-to-end encrypted from the client to the enclave so the operator doesn’t even see the intent so improve also censorship resistance so we did that to improve the security model of pre-confirmation but it also turns out they’re like well we already are an interpreter and people really want covenants what they’re called smart

contracts why we don’t add more, why we don’t extend our own interpreter, we don’t need to ask you know the consensus of the Bitcoin layer one, we just add more of codes which maybe can be a way for developer and startups to see the future of Bitcoin with Covenant so they can come and the other aspect is like even if tomorrow we get Covenant which will make ArkadeScript way more inerits the Bitcoin security, you’re not going to wait 10 minutes you know for a trade.

going to wait for the fee-bidding war in the mempool, you still want to do those smart contracts in a layer 2. So in a way like we’re already doing what even if Bitcoin gets the the governance, you really want to do it on a layer 2. So I think it makes sense to do it now. Of course with the some trust trade-off now because you will not be able to execute those on-chain contracts on-chain because those of code don’t exist. But the security trade-off and the security guarantee that you are doing anyway, even if you’re not adding this extra script, is worth to add extra code.

So developer and startup, can mitigate their own risk, right? So they don’t need to ask permission. They can just experiment, and eventually the market will tell if it’s a good trust rate for them, for their business, and their use case. I see. So as an example, there are other builders in the space, like I’ve seen ⁓ Philip from Lendersat. I was chatting with him earlier today, just briefly. ⁓ And I think they posted something as well. ⁓ Maybe you can explain a little bit about what they’re doing using ArkadeScript, just as an instructive example for us.

Yes, it’s interesting because I mean first of all, Philip is…

is one of the best builder in the space and been working with them in the past on Liquid and many aspects and we always had the nice, you know, we think alike and we think, you we need programmability if you want to create new type of businesses, new type of platforms that make Meecoin more useful in the end. And when we were discussing about, you know, the potential to do much more than just payments, I was very interested to explore and to be one of the first design ⁓ partner and Tuesday,

the other Arkade day, surprised all of us. He was coming from Australia, so very far from here. And he literally coded. It’s a machine. He coded what we demoed, which is like one of the first loan. So we do a simple two of three. So it doesn’t require any Arkade script. So very basic. Just to demonstrate, just simple primitive, but reducing block space and block time constraint is good enough already. It really improves these programmable use cases. And he demoed in front of everyone.

How to get an instant executed loan with sub-second execution and also they want a liquidation happening in a batch way which is the most important thing because if you want really want to have non-custodial Loans and we cannot execute thousands alone like banks they do every second they do thousands alone But the blockchain will not handle that obviously yeah I think was very very interesting and can you just explain the loan part because what’s being used on the is it a stable coin or what’s used on that side Yes, they already run lend us out is

Platform that allow you to lock your Bitcoin in an escrow to off true two of three So there is like the borrower the lender and the mediator an arbitrator, right? So which is only used in case of dispute And the idea is like once you do that doesn’t matter what is what how has been delivered? Like fear literally a fear or a stable coin or whatever and then the idea is that between the borrower the lender and the mediator

at the end of the contract or if the liquidation happens, then…

they’ll kind of resolve it in a two of three style. And so this is an example where it’s making lending, arguably it could make the lending user experience, the Bitcoin collateralized lending user experience very snappy. And so maybe there’s something to that. ⁓ And I don’t know, they also did something around, was it like a USDC swap out, something like this? Yeah, the interesting aspect is like it was so galvanized by the launch, everybody was cheering and…

in the end the infrastructure is already there from their side to deliver stable coin and other chains and they said well if we can do

simple loans, why we can do even swaps cross-chain. So they implemented a little demo, literally the night after the launch, and this just goes to how simple it is. For someone that already is building Bitcoin application or is already using Bitcoin script, is already knowledgeable about Bitcoin UTXO model for him. Having a VTXO is really one on one mirror. And I think I’m very happy that they leverage this. So zooming out a little bit, can you explain for us what are some of the

categories enabled by this Arkade script. So lending is one example, obviously. What are some of the categories that you would…

Of course it’s early days, it’s hard to exactly know where is the product market fit, but can you just explain some of the categories that you see ARK and Arkade scripts ⁓ working with? Yes, of course it’s very hard to predict where the creativity of builders will go, but I really very focused on three ⁓ use cases. First indeed is Bitcoin lending. I think the ability to use Bitcoin is appreciating 30-40 % per ⁓ year to actually get liquidity without selling it. I think it’s a very crucial

use case and right now I do go custodial to get good rates or need to bridge to another chain to use like so-called Lending pool defy somewhere else But again, you’re degrading your security of your Bitcoin, right? So and even most importantly is not only the security of Bitcoin But your own UTXO you want to know where the UTXO history is coming because maybe you took sort of local time Maybe you mind you don’t want to mix with someone else So it’s very important to have that you take so ownership and having this is very important

The second use case I’m very interested in is the concept of non-interactive swaps. So right now, the problem of HTLC swap is not only the free option, but they require some interactivity from the both sides. So I need to fund this contract. And then the other party to go online at same time to complete the swap. And this doesn’t really allow to create very liquid marketplace for trading. So non-interactive swaps means, hey, I’m signing

my UTIC, so I broadcast to the virtual sample. Here’s the price at which a taker, kind of like you’re the maker and let’s say I’m the taker, you can sign this transaction and I can, let’s say there’s a DEX, I guess it’s kind of like a DEX use case, right? And then the idea is that, let’s say I’m the taker, I see that, I’m like, oh I want to accept Tierra Zofia.

and Tiero can be asleep and I can just see that and pick it up and sign it on my side and then etc. Exactly. And that’s very important because if you speak with the ⁓ active market makers, especially with pairs like Bitcoin to stablecoin, which are like pair with a very strong price, they don’t need price discovery, they don’t need an AMM, so they don’t need a pool because in the end as a market maker, I want an active market making strategy. I want to make the quote, but at same time these will improve and will make easy for Bitcoin native

to connect the Intent Solver paradigm, which has been very used a lot in the rest of the lecture ecosystem. One question I have on this, though, is what if you’re a market maker who wants to then, let’s say you put out an offer, but then you want to change it? Because once you’ve signed it, you can’t unsign it, right? How does that work? Yeah, there are many ways. Of course, these are more like a category of non-interactive swaps. It depends on how you implement. We did a prototype, and I think the interesting aspect is to flip the conditions, so to remove the free option this way.

So me as a user will be me to lock.

In our offer, so I will take a quote off chain out of bond. I will go to a market maker Hey, give me a quote and at that moment will say, okay I’m now broadcasting to the virtual mempool right now my my funding and it’s like you don’t need to cancel right? if I need to cancel I will need to pay another transaction to cancel again, okay? We’re not on chain So it there’s no cost or a virtually very little cost to execute the cancel transaction, right? And it will be it will be instant but this way very important because remove the free option problem for the market makers so they can have

Lower spread and most importantly will be better for them to be sort of like a design question of how you structure it from a security and operational standpoint Okay, so number one lending number two non-interactive. I guess swaps or decks. That was the third one I think something I’m very very interested is about synthetic asset

What’s that? Synthetic asset. Okay. So the idea is, know, every now I just want to use my Bitcoin to potentially speculate on anything. I will need to, I don’t know, I want to buy some stocks of some company. I will need to off-ramp my Bitcoin, go to a custodian and basically buy the stocks in any of those platform. And that maybe, of course, user regulated, most likely a platform because that’s how stocks works. And then maybe I sell it, I make my profit.

and then I need to sell it back, go back to my Bitcoin. So this is like my use cases, right? So it goes beyond just payment. But like in the end, I just want to speculate on the price. So why I cannot buy with my Bitcoin a synthetic Tesla or a synthetic Apple, just to speculate on this price or go long or go short. And I think using, and I don’t want to use real world asset, right? Or even just a Bitcoin backed stable coin, which has been a dream for many yearly ⁓ adopter. And I think that will be a new case will allow to make Bitcoin

Bitcoin use more, right? So we don’t need to buy more treasury to maybe create a dollar version denominated, but I can use Bitcoin with an over-collateralization and a set of oracle to basically loosely track the price of that real-world asset, but this way this asset doesn’t go in any regulated platform, but stay in the Bitcoin ecosystem. Interesting, and so that could be… So I guess in that…

I’m trying to understand how that will work. Is that kind of like sort of like a DLC but with an oracle to a stock price as an example? Exactly. The problem with DLC is like you have an idea into an interactive setup and also you need to pre-sign and pre-set up all the exit possible path which you know people like exactly like Landisat they were building 10.1 before and literally was this right going longer short using DLC in a line in channel and you can ask them our nightmare

was in terms of developer UX, but most importantly, the UX that the end user was having. if you can remove that and move it to the virtual machine, the complexity, and you go in a non-interactive setup, they can focus on their business. They can focus on the platform, on the user experience, on the user, and not trying to fix the interactivity problem on that side. Yeah, OK. So I guess we’ve spoken about some of these different uses. But of course, there’s just kind of the vanilla, like just merchant adoption.

or just payments, like this is now also a lot simpler, right?

Yes, it’s interesting because in August we went to Baltic Money Badger, which is one of the most reputable conferences on the block. I’ve been from the early days and they use from the early days to go to all their merchants, the food trucks out of the conference and you can buy with lining. That’s from the early days. And many of these merchants always have many problems and most of the time they need to have a custodial lining payment processor because the merchant just wants to get payment. They don’t care.

much about that, right? So what we did was a little hijacking of the point of sale of the lining and we didn’t set to anyone so we went to them, we put basically BTC Pay Server, we built a BTC Pay Server plugin for Arkade and the idea is like the merchant was accepting lining, everybody paid and for those two days nobody knew it until the very end and everybody was paid with lining to show the interoperability of lining but in the end the merchant were getting

through Bolt’s atomic swap, they were getting a VTXO instead, which means they just had the key, basically. Very easy, no inbound liquidity, no channel, no node. And was very nice, because in a way, we demonstrated how lining and Arkade can actually work together and improve one another. And at the same time, we make, finally, for commerce and retail, we bring lining also at that level. So yeah, so it makes it, as I understand it, it makes it very easy to just have like a just works style.

wallet, you can just earn and spend VTXOs and in the background, yeah there might be lightning swaps and things like that but obviously you the end user, you don’t have to worry about that. all the swaps and things can happen and then…

Theoretically people can even use that VTXO to swap into in and out of like tether or something else. So let’s say it’s a merchant who wants to take Bitcoin, but maybe they only want to hodl let’s say 10 % and they might have to swap some into tether because they’ve got to pay their bills and whatever. So can you just walk us through what that would look like then on like swapping in and out of stable coins using VTXOs? Yes, the interesting aspect of the UTXO model, which also means VTXO model is we can chain transactions. So imagine the linings

is coming in so it’s creating a new VTXO but then the merchant right away at the same moment so it doesn’t want any spread any volatility he want right away swap it with another market maker so in the same moment the plug-in could like contact you know this market maker and say hey they’re like

Let’s say 0-1 BTC coming in, are you giving me now a market rate USDT and you can chain that swap? So that VTXO will right away find a swap and receive also USDT in a VTXO on that side, which will allow again the merchant not have any volatility, simplify the accounting and eventually maybe can also chain again and maybe just with the profit, buy Bitcoin. So the model will be well up to the profit, I will just retain that so you will do three transactions.

which on chain will be expensive, but now you can do it everything in the virtual mempool right away and you execute everything at the same sub-second confirmation. which is again, programmability solves the problem of payment processor, software as a service, which are the one that actually will allow merchant and retail to use Bitcoin because like everybody focus a lot on the payment side, right? So on the sender side, I want to send it, but nobody speak or think how a payment processor want to actually operate those Bitcoin payments.

and I think it’s very important to have this programmable flow to allow even something that I really care about myself to pay with my Bitcoin and live with Bitcoin as much as possible. Yeah, it’s fascinating because I was at the Baltic Honey Badger we were just talking about and I made a Lightning payment.

and didn’t realize there was kind of ARK in the background until I think Giacomo told me and I was like, ⁓ that’s interesting. And then next time I went to pay something, I looked at the terminal I saw and had the Lightning side and an ARK side. So if you wanted to just direct pay with ARK, with an Arkade payment. So I thought that was really cool that it was like just kind of seamless. And I think it leverages a lot of the experience that Mr. Cooks has from Mr. Cooks is on the team with ⁓ ARK Labs and Mr. Cooks has a lot of experience in BTC pay. So for a lot of people who don’t know, he was literally on the

working on these like merchant adoption cases as well as trying to help with a project he had called Transmuter which was a plug-in to try to help swap some Bitcoin into fiat and so on and so it’s kind of funny that things have kind of come around full circle now right that now he’s working with you guys on this startup that helps people do Arkade get VTXOs and if they want they can swap into tether or they can just hold the VTXOs or you exit on chain to Bitcoin on chain like put it in a hardware wallet or of course

Self-custody not your case not your coins all the maxi typical talking points, but it’s just fascinating where this is all gone So any kind of closing thoughts on where you see this going with Ark and Arkade scripting? Yeah, we’re very I mean we are in public beta so we got a great response so far so we are very humble and we thank the community ⁓ on this but it’s just a start right so it’s not the end goal the goal is really like try to

reach a point where we can flip the situation where Bitcoin is seen more than just a static asset, but actually Bitcoin is being used to create potentially a platform for new type of businesses that couldn’t exist nowadays and they will only exist thanks to a Bitcoin being used as a backend. Fantastic, well think that’s a great spot to finish up. So just before we finish up, where can people follow you online and keep up with what the team are doing on ARK? Yes, I’m Tiero Tiero. ⁓

ArkadeOS.com is our website, so you can find documentation if you’re a developer. You can find also our web wallet if you want to experience ⁓ our beta. Leave a comment, help us grow so we can make Bitcoin better. Fantastic. Alright guys, well that’s it. Make sure you check out Tiero and what the team are doing at ARK. Everyone please put your hands together for Tiero. Thank you.