Chat_147 - Insuring the Uninsurable with Rob Hamilton

[00:00:00] Speaker A: One of the founding tenets of like anarcho capitalism, that in a world without a government you would have insurance contracts as the means for negotiating disputing things. This actually goes into like the original fire departments were actually insurance companies. You would purchase fire insurance from a particular purveyor, a fire insurance. And you would actually stamp on the cornerstone of your building the sigil of whatever insurance company was protecting your property. And if the fire burned the building, the insurance company's on the hook. Right. It's the most skin in the game. Risk aligned way to get different parties to align on an outcome is an insurance contract. It's so much cheaper just to have an on call fire bucket brigade team than to rebuild a building. Right. And so this is like in the world without a government you have insurance contracts. [00:01:02] Speaker B: What is up guys? Welcome back to the show. I am Guy Swan, the guy who has read more about Bitcoin than anybody else you know. And we have got Rob Hamilton on the show today and I really wanted to just pick his brain about anchor watch and miniscript and stuff. But we really got into the really hard details about the massive part of the financial stack of the fiat world that can be revolutionized with the design of bitcoin as it is. And how much we lose focus on the hundreds of trillions of dollars worth of capital we can fix with bitcoin before we even have to think about or without even thinking about all of the things that we're doing for commerce and retail and online payments and all of that stuff is that an independent monetary unit and the ability to genuinely spread ownership in a sovereign way in an apolitical non jurisdictional way with cryptography is such a powerful tool. And I think the simple idea that they have taken with anchor watch and then actually getting insurance, building a, working with Lloyds to get an insurance structure for how to measure the risk of like a multi sig setup I think is so, so underrated. And I don't want to lead the conversation too much because I kind of reiterate a lot of this during our conversation and this was just a really fun combo. We, we didn't even really get into filters. We had like a, a little tiny little like, kind of like summation of a few points of the whole filter debate and drama towards the very end. So stay tuned for that. But we get into music and Frost and miniscript and insurance and the history of insurance and the difference between quote unquote fiat insurance and real insurance. Insurance as like a genuine capital innovation and literally just so much stuff. I fantastic conversation and also like so many great recommendations for other episodes and reads actually on the show. So stay tuned. This is you're you're really going to enjoy this one and always good to catch up with Rob, a good friend and I don't get to see him or talk to him very much. We're all, we are both so very busy. So let's go ahead and get into it. A quick shout out to Leden for Bitcoin backed loans, especially if you're on a bitcoin standard. This is an indispensable tool to be able to borrow against your bitcoin without actually selling it, without capital gains, without like this crazy ridiculous credit check. If you've ever done a fiat loan and then done a bitcoin backed loan, you'll never want to do a fiat loan ever again. It just the experience is it's otherworldly. It's like it shouldn't exist. So check it out. You know, read the fine print. But Leden is a, is a great company. I've I've used them for a little while now and they saved me a ton of bitcoin. So also check out Pubkey P u b k y dot app. This is one of part of the showing what's possible with the protocol stack. That synonym is building for re decentralizing the web and I'm looking at it very seriously for Pear drive and the things that we're building. But if you're a builder you really should check it out. That's P u b k y app. Then we have git chroma and a 10% discount for light health for red light therapy. Got my blue light blocking glasses right here. I always put them on at about 7, 8 o' clock at night and it's made a huge difference for me. And there's a 10% discount with code Bitcoin audible and then lastly the HRF, their financial freedom Report, the Oslo Freedom Forum, all the incredible work that they do. I've got a link down if you want to June 1st or 3rd next year. The Oslo Freedom Forum is the center for the stories and the status of the fight for freedom around the world. And their Financial Freedom Report is the best newsletter on the topic that I know of mainstream will make you explicitly ignorant of it and I know of no better resource to stay on top of the whole thing than the Financial Freedom Report. So link down in the show notes and a shout out to HRF for their incredible work. Thank you guys. Don't forget to Check all that out. We've got so many links after this episode in the show Notes. Description of this podcast is full of gold right now, so don't forget to check it out. And that should do us. Let's go ahead and get into today's conversation. This is chat, I think, 147. Hopefully I'm right. But this is a true, true mini script. Financial revolution with Rob Hamilton. Rob, welcome to the show, man. It's been a minute. Are you still. You still make it to the meetup? Because I haven't been in like a year. [00:06:00] Speaker A: Well, that's really funny because I moved to Nashville a good while ago. [00:06:04] Speaker B: Oh, wait a second. That's right. You're totally not in my area anymore. [00:06:08] Speaker A: No, I'd love to find an excuse to come back for a meetup. [00:06:12] Speaker B: Yeah, well, maybe we don't have any conferences here. No, you'll have to. We'll have to schedule something. [00:06:18] Speaker A: Isn't nifty doing a bitcoin plus plus in Raleigh? [00:06:22] Speaker B: Wait, really? [00:06:24] Speaker A: Bitcoin plus plus local? Yeah, she's doing one in Durham November 15th. [00:06:31] Speaker B: What? [00:06:32] Speaker A: Yeah. [00:06:34] Speaker B: Oh, man, I am totally going to that. [00:06:36] Speaker A: You show up. You totally should. [00:06:39] Speaker B: I mean, that's like a zero obligation. There's no flights, no nothing. [00:06:44] Speaker A: Yeah, look at the speaker list. You got our buddy Steve and Evan. Dude, speaking of. [00:06:51] Speaker B: How did I miss this? [00:06:52] Speaker A: Oh, now you know. [00:06:54] Speaker B: Thank you for pointing this out to me. [00:06:55] Speaker A: Of course. [00:06:57] Speaker B: I would absolutely be there. Yeah, it's like down the street. [00:07:01] Speaker A: Yeah. [00:07:01] Speaker B: Oh, okay. Well, Durham. Durham, North Carolina, BTC plus plus. Hell yeah. [00:07:08] Speaker A: And for those that want to know, it is on November 15th. Unofficial plug for. For Nifty. [00:07:14] Speaker B: I was about to say, I will have the link to that in the show notes for sure. And I will be there for sure. Unless, like my schedule is terrible and I've already booked that out. Please, please. No, that would be sad. [00:07:27] Speaker A: Yeah. [00:07:27] Speaker B: 15. That's bitconnect day. [00:07:31] Speaker A: That's right. [00:07:31] Speaker B: That's right on my calendar. Just. Just got. Just got my kids soccer in the morning and that's it. That's it. I think we are good. I am blocking that out. Hell yeah. All right. Cool story. [00:07:48] Speaker A: Awesome. Good stuff. [00:07:49] Speaker B: What a great way to start this off. [00:07:50] Speaker A: Yeah. [00:07:51] Speaker B: If you come back. If you actually come back for that, let me know because that would be pretty good. [00:07:54] Speaker A: I'll let you know. That actually wouldn't be a bad one day event to fly in, see some people fly out. [00:08:00] Speaker B: It's pretty close. [00:08:01] Speaker A: Oh, yeah, yeah, yeah. Absolutely. [00:08:03] Speaker B: And honestly, with the. With the degree or frequency that I actually make it to the meetup. I'll probably be just as likely be in Nashville as at the meetup. I go to those. Both of those places equally about once a year. But. Good to have you on, man. Good to have you. Have we done a show together? [00:08:24] Speaker A: Have we. [00:08:24] Speaker B: Have you been on the show? [00:08:26] Speaker A: I've never been on the show, I don't think. And the last time I was in Raleigh, it was back at Rally Point. I know now it's at Crafty. So there's been a whole venue change since the last time I was there. [00:08:34] Speaker B: Oh, wow, dude, time flies. [00:08:38] Speaker A: It really does. [00:08:39] Speaker B: Time literally flies. Well, dude, it's super dope to have you on the show. I know there's a lot of stuff to unpack. Um, I. I'm very interested in. I have been. I mean, we talked about it many, many times over the years with Anchor Watch miniscript. Love that you represent with the ocean shirt. You gotta show off. You gotta. [00:09:03] Speaker A: Yeah. [00:09:05] Speaker B: But yeah, welcome, welcome officially to the show, my man. [00:09:08] Speaker A: Thanks for having me. Yeah, I mean, we could just kick off and just talk a little bit about the miniscript stuff because I was showing you. Yes. So the story with this is that I started Anchor Watch, which is doing insured custody back in 2022. And about nine months in, I had this realization that like, to actually get large scale insurance, like, like really advanced security, I was going to do something more than just full self custody or two of three to get like $100 million policy. And one day I'm on Clubhouse and I'm talking about like, I may start writing custom bitcoin scripts. Because bitcoin, we use it in a couple narrow ways because they're kind of like standardized practices. But there is an entire programming language that bitcoin has. And I know you could write custom scripts. And I was like, I'm going to write some custom scripts. And then if you know Vic, he used to work at Coinkite and Blockstream was like, rob, you're great, you're smart. You're not that great, you're not that smart. Just check out miniscript. And I was like, I've been in bitcoin for over 10 years. I've never heard of miniscript. What the hell is this thing? And I started going deep into it and I realize that there has been a lot of really great work done between Peter Willa, Andrew Polstra and Sanket Kandahar on leveraging bitcoin. In a way, I call it bowling with bumpers. The base premise is what allows you to do is allows you to employ tools like a time lock as well as Boolean logic, like and, and, or in a really interesting way, kind of like Lego bricks to have more advanced spending policies. And the way a very simple example would be, you could have a 2 of 3 multisig and if the money hasn't moved in a year, it just becomes a one of three or maybe a two of four. And the guys at Wizard, Sardine, Liana Wallet were the only other people working on it at the time. I started poking around into this and we leverage in an interesting way. I kind of call like a joint custody model where you have a one year insurance policy backed by Lloyds of London. But it's. You have a set of two or three keys. We have a set of two or three keys and they both have to sign to move funds. Which instantly from a risk perspective is really powerful because one anchor watch, we're never a unilateral sole custodian. Right. We can't move funds by ourselves. And then additionally the customer can't unilaterally just move funds on their own. We kind of have like a co signing agreement and that allows us to employ features like address white lists and like spending thresholds and velocities and stuff that allow you to keep your coins more safe, which make them insurable. So there's a whole universe we can go down about how time locks work, Bitcoin script, mini script stuff. But I'll leave that open to you. What do you want to talk about? Because this is your show. I'm just here as the dancing monkey. [00:11:49] Speaker B: So that's, that's actually really funny because I didn't realize that it was a double two of three, which is really clever. That's. I'm. Am I, am I thinking now that's actually like a lot better than a four of seven. [00:12:05] Speaker A: Exactly. [00:12:06] Speaker B: Four of six by itself because it's. You're doing a two of two to get like a level of assurance from both organizations or subsets of people and subsets of keys as kind of like the dominant. But you're doing two of three so that nobody's losing their individual key. You're putting in key security at the same time that you put in like an institutional protection. [00:12:33] Speaker A: That's exactly. And the beauty of like doing the, the two of two of two of threes is that you have different organizations holding each set of keys. Yeah, right. You have to have multiple groups of people sign off. And then additionally in the event you as the Customer lose your keys. There's actually a window right before the policy ends where AnchorWatch plus, our recovery partner, who's coincoiner based out of the Isle of Man, are able to move the funds. Right. So you now have a dynamic where you as the customer can lose all of your keys, but you don't lose your bitcoin, which is kind of a new concept that really hasn't been explored a lot in bitcoin. So I view it as kind of like a way of evolving bitcoin custody. And none of this requires a fork. This is all within bitcoin consensus today. Right. So working within the current confines of how Bitcoin operates, how can we expand upon the mission of Bitcoin being programmable money to enable new use cases? [00:13:22] Speaker B: But yeah, I do legit, actually. Really like that. The double two of three. [00:13:28] Speaker A: Yeah. [00:13:28] Speaker B: And that's really interesting. And one thing I want to get into, which actually we might just go ahead and like roll into when we, when we get back connected or when I start this back up, is the Lloyds of London thing. [00:13:39] Speaker A: Yeah, absolutely. [00:13:41] Speaker B: Like, I think people are just drastically, drastically underestimate the importance of having a bitcoin insured custody. Like an insured Bitcoin. [00:13:54] Speaker A: No, it's a fun, interesting story. Just on the insurance capital market side, the story of Lloyds, we can get into all that. Just let me know when you're good to go. [00:14:01] Speaker B: Yeah, yeah. I want to know how y' all convinced somebody. [00:14:07] Speaker A: We'll talk about it. [00:14:09] Speaker B: Financial system. [00:14:10] Speaker A: Yeah, yeah, yeah. I'm happy. [00:14:12] Speaker B: Bitcoin keys. [00:14:13] Speaker A: Sorry. [00:14:14] Speaker B: That's a hell of a educational challenge. Enough for somebody to upfront a lot of money. So one of the things I wanted to get into especially because. Because I thought this was. I don't, I don't even know why. I guess it's probably just because it's like not native. Until nunchuck. Like when I was always setting up a multisig. [00:14:41] Speaker A: Yeah. [00:14:42] Speaker B: I basically just decided how many keys. Right. You know, and there wasn't like a, a hierarchy of like this key. And that's actually like a beautiful system for like an inherit inheritance idea, you know? [00:14:54] Speaker A: Yeah. [00:14:55] Speaker B: Is that you have a two of three or two of two or something where your key is split up into two of three and a lawyer has one of your keys or something and then the other key is set up as. And then the lawyer has a key and then there's another key that's split up with like a five of seven, which is all of your relatives and friends. And so that they can't control or actually take any of the coins until you die and your lawyer signs with them in a. Definitely need one of these keys. And they don't have to worry about you losing your keys when you die because they have a multi sig exactly. To get that extra key. And it's just like, holy shit. Like the. If you have Lego blocks that really put this together in like a easily understandable and easily buildable, like robustly buildable way so that you don't accidentally make mistakes, that's so. It's so powerful. It's so powerful. And I don't know how many times I've said this on the show. Probably 100. But multisig, just basic multisig and what you can do with it is the most underrated thing in Bitcoin. It's just kind of like, okay, well yeah, multisig is cool, but you probably shouldn't use multisig because it's like more complicated and it's like, no, you don't understand. There's a multi deca trillion dollar industry that multisig can absolutely revolutionize. Not like slightly make better revolutionize in an unbelievable sense. There's no such thing as shared custody in fiat land. There's no such thing. [00:16:31] Speaker A: You're not two of three ing your bar of gold, man. [00:16:33] Speaker B: You can't two of three anything. It doesn't exist anywhere in the entire. In a, in a multi hundred trillion dollar financial system, there is no such thing as two institutions actually being sovereignly needed to share to move ownership of funds. That is un fucking heard of. Like, and just the sheer idea that people are worried about like, oh, is bitcoin going to scale to everybody's coffee payment is like, dude, you don't understand how unimportant that is in the grand scheme of how valuable across like imagine 20 small countries having a 15, like an actual like genuine like UN type style agreement with a set of keys are also sub distributed within a bunch of people in their respective regimes or administrations. And they can act, they can actually have real agreements that have real power for every single individual person. And it's not just like the big dog tells everybody what to do and everybody can go fuck themselves, you know, like that is unbelievably revolutionary. And bitcoin can scale to that and fix that level of problem. Just with multisig. Just with multisig it doesn't have to. You don't have to give a shit about transaction scaling. Like it's done on that front but totally. [00:17:59] Speaker A: No, no, it's funny you mentioned it. No, it's very well said. I think it's one of the properties that make Bitcoin a better form of money. The fact that you can two of three, you can time lock it, you can put these encumbrances on how the bitcoin can be spent. That isn't just who has the admin password or API key. Right. You're totally transcending it. I went on the Galaxy Brains podcast with Alex Thorne talking about the strategic Bitcoin reserve. And I was talking about conceptually would be really cool if you had the US government holding coins that you actually could distribute the keys across Congress and the Supreme Court. You literally could map a governance scheme into Bitcoin. And even just basic multisig is such a superpower that I still think is underutilized that what we ultimately like. One of the concepts, beyond time locks that we use with the miniscript stuff is actually this concept of a key hierarchy. Right. So you could have, hypothetically, multiple institutions holding keys, but then you also hold a key and you have to also co sign, which is a really interesting concept. Like, it's not just my key. I could have one key. I could have my cold card, which I was cleaning at my desk, so it's not an arm's reach at the moment, but I got my cold card in my hand. I have my little cold card sticker here, right. I could have my cold card that's holding a key, plus, like an entire network of like, professional institutions. And then the funds can't move unless everyone signs off on it. And I can't get rugged by those institutions. And then you can have it set up to approve. But if the money hasn't moved, maybe in five years, maybe I can just unilaterally move. So the institution could never rug me. And then you could say, you know what, in 10 years, maybe I'm dead. And then the institutions can go do something, but then I have like a long window to be able to interact with it. Right, right. [00:19:36] Speaker B: Yeah. [00:19:37] Speaker A: This idea of not giving because in a multisig, each key has equal weighting. If it's a 2 of 3 or 4 of 7, whatever it is, each key is kind of on equal footing. To push that out further, you could have different pockets of keys, and some quorums of those have to sign off to represent different institutional or personal interests. Right. Having your lawyers, you could have it. So you have three lawyers or an estate attorney, like two lawyers, whoever you want to break it up and that could be like your legal arm of your custody and they have to all agree on it. Plus you. And then maybe family could have their own multisig. Right. And they can all kind of interact. It's a very, I think it's just a massively underexplored concept. Multi sick for sure. But then especially when you go into these deeper layers and key priority. Yeah. [00:20:21] Speaker B: You know. [00:20:21] Speaker A: Yeah, yeah. You want, because you want to have that. Like you don't want to just have it be a two of three. And an institution holds two of the keys. You hold one because you're always concerned about are those two people going to collude against you. Yeah. Right. So this kind of reshifts the balance to not. Because basically if you think about it, multi sig is kind of like a democracy. Majority gets to move the funds and this allows there to be a check and balance of powers. [00:20:41] Speaker B: Yeah. [00:20:42] Speaker A: Where like if it's my money, my key is worth way more than the people helping me hold my money. Right. Because it's my money. Yeah. And so that's, that's like the concept of what's in the opportunity of the art of the possible here. Additionally too, just the idea of like. Again, I'll do a very brief tangent on how time locks work in bitcoin. So Satoshi actually originally encoded the first time locking scheme in the original client. It's called N lock time. And what this is, it doesn't lock the funds at the bitcoin script level. But if you view a bitcoin transaction, kind of like a signed check, you can post date that check in the future. So in theory today. And this is like there's no mini script in this. I could just have say guy, maybe I'm paying you for a podcast sponsorship. Right. And I have an address that's sitting there. But I don't want you to receive the money until a month from now. [00:21:32] Speaker B: A block, a million. [00:21:32] Speaker A: So I just pick a block out in the future and then that you could redeem it then. But if for whatever reason I'm not happy, I can move the funds from that UTXO and it would invalidate your. Your pre signed check. So like that's end lock time. That's been around Since Forever. In 2014 and 2015 we added two time lock opcodes specifically to help with payment channels in the Lightning network. If you've heard of like a hash time lock contract, the whole game theory of Lightning is that if I force close a channel against you, you immediately can redeem the funds, but me as the one who's initiating the Force close, I have to wait a window. And that window allows you to bring the penalty transaction in the case I'm cheating you. So this was all part of the infrastructure of what was required to make the lightning network work. You needed time locks. There's two types of time locks in Bitcoin. There is what's called a relative time lock. And the timer starts the moment the funds hit the chain. Get confirmed in a block and you can do it for how many blocks out you want. And then the other one is like, I use this as a comparison of like, I'll meet you in six hours. That's a very, that's, that's very relative to the moment we're sitting in right now. Another time lock, though. Check lock time verify. The first one is check sequence verify. But check lock time verify is an absolute time unit in the future. So at block height, a million, two million. Interestingly enough, though, I'm not sure if you know this, you can actually do time locks based on the calendar time, not just the block height. [00:23:00] Speaker B: Really? Wait, how does that. How does that really. [00:23:03] Speaker A: This is fascinating. [00:23:04] Speaker B: Does this go with timestamps? [00:23:05] Speaker A: Yeah. So it's BIP113. So Bitcoin is entirely an endogenous system. It's all self referential. You have signatures, you have hashes, you link to the previous hash of the block. That's how the blockchain works. Yeah, yeah. There's one bit of external exogenous information that exists beyond Bitcoin that's in the Bitcoin consensus code. Timestamp, the timestamp the miners put in the block. And that's how the difficulty adjustment works. [00:23:29] Speaker B: Right. [00:23:30] Speaker A: So if you have 144 blocks a day, every 14 blocks, which is 2016 blocks, the network does an evaluation and say, hey, we found what should have been two weeks worth of blocks. How much has the timestamp passed among those miners? And there's two consensus enforcement rules for how miners can put timestamps in the block. The most straightforward one is if a miner produces a valid block, that timestamp has to be at most two hours in the future of each local node's clock. So I can't be like, oh, I found a block and the timestamp for this block is 2028. That would be marked as invalid. [00:24:08] Speaker B: Right. [00:24:08] Speaker A: So you have a two hours in the future is the furthest you can go. And this is because time is roughly a fuzzy concept when you're talking about a Global distributed like system of nodes. So you have some grace period in two hours. I would say is more than generous enough for how computer clocks sync to know that you're not going too far out ahead. Now, for going backwards, you can't backstate your timestamp more than this is in bip113, the median timestamp of the past 11 blocks. So you look at every single block that timestamp that has been found, the past 11 of them. The median of those past 11 blocks. [00:24:41] Speaker B: Is the furthest far is the furthest. [00:24:43] Speaker A: It's the furthest back you go. And that effectively acts as the network time. [00:24:47] Speaker B: Okay, interesting. Okay, so that's. Is that how the time lock works then? Yes, to the 11, 11 previous median. [00:24:55] Speaker A: Yeah, the bip113, the median timestamp for the past 11 blocks. So us at Anchor Watch, we're actually the first to do this. We use an epoch timestamp time lock because if you have an insurance contract and it expires on, let's say today's October 6th, your insurance contract expires October 20th, 2026. I don't want to have to do math and understand like, ooh, like it's the hash rate going to be high or low. Like it gets confusing. But you can do it based on the calendar time. [00:25:21] Speaker B: Oh, so you can like literally pick basically a two hour window in that day. [00:25:26] Speaker A: Yes. [00:25:27] Speaker B: And you just kind of know because anything outside of a two hour time. Because my thinking was that like, okay, how would you set like an explicit time? Because there are literally blocks where, you know, block 800,000 comes in at 230 and then 800,001 comes in at 229. Yeah, like, like the timestamps are not, they're not perfect, you know, exogenous data. Like you said so but just the median of the. My thinking is that what you. I guess you just use the difficulty adjustment because you know, 2016 blocks. But median of the last 11 means that you can literally hit a day midday and you can hit noon and you can basically know it's going to be within 11 o' clock to 1 o'. Clock. Yeah, on that. That actually makes, that makes legal stuff really interesting. [00:26:16] Speaker A: Exactly. Like an insurance contract. [00:26:17] Speaker B: I like an insurance. [00:26:18] Speaker A: That's how we're able to set this up. Right. With like. And this is where I talk about like one of the key ideas we're thinking about at Anchor Watch is how do we take a bitcoin native smart contract and link it to a fiat paper legal Contract, like an insurance contract. Like the first thing we're doing is an insurance contract. But this idea of bitcoin being programmable money and being able to leverage it for things that exist off chain, like an insurance contract, you could marry those things pretty well together. Right. And you can have the legal contract specify out the terms of control and who can do what when, and you anchor that into a bitcoin native smart contract. Right. And so this is I guess to kind of turn it in a little bit with Lloyds of London. One of the questions you were asking before we started was like, how did we convince Lloyds of London to ensure this kind of risk? Now, Lloyd's just in general has a hundreds of year history. I think it was started in the 1600s. [00:27:09] Speaker B: Holy shit. Really? I knew it was old, but no, it. [00:27:13] Speaker A: 1689, it was at Lloyd's coffee shop. [00:27:16] Speaker B: Wow, that's. That's dope. [00:27:19] Speaker A: This is one of these funny things too. As an aside, when people tell me like insurance is fiat, is that insurance predates fiat currency by like literally 300 years. Yeah, yeah. Not only that, but it's one of the founding tenets of like anarcho capitalism, that in a world without a government, you would have insurance contracts as the means for negotiating disputing things. Because the idea is that if I'm providing a security service, this actually goes into like the original fire departments were actually insurance companies. Yeah. You'd have a fire hall. You would purchase fire insurance from a particular purveyor of fire insurance. And you would actually stamp on the cornerstone of your building the sigil of whatever insurance company was protecting your property. [00:28:02] Speaker B: Oh, wow, that's cool. [00:28:04] Speaker A: And you would have market rates based on like, well, if the fire burned the building, the insurance company's on the hook. Right. It's the most skin in the game, risk aligned way to get different parties to align on an outcome as an insurance contract. [00:28:17] Speaker B: And it ensures that they have firefighters ready because they don't want to have to pay. They don't have to rebuild your house. [00:28:24] Speaker A: Exactly. [00:28:24] Speaker B: That's what they agreed to. [00:28:25] Speaker A: It's so much cheaper just to have an on call fire bucket brigade team than to rebuild a building. Yeah, yeah, right. And so this is like in the world without a government, you have insurance contracts. [00:28:34] Speaker B: The idea that insurance is fiat, with such a product of fiat, like the, the concept of thinking that insurance is fiat is an incredibly fiat thinking mode. It's just like. Oh, it's just like anything. Anything that isn't involves any trust whatsoever is fee it's like, what do you think a market is? What do you think society is? [00:28:57] Speaker A: Right, exactly, exactly. [00:28:59] Speaker B: Trust without a government, like that's exactly what it is. [00:29:02] Speaker A: And this is the charitable interpretation is that the way most people interact with insurance is government mandated. [00:29:09] Speaker B: Yeah. [00:29:10] Speaker A: Your homeowner's insurance. Right. If you have a, if you're getting a mortgage on your house, the bank will not close unless there's an insurance policy on it. Right. Because they're not insuring the plot of land, they're ensuring the value of the home. Right. And then additionally you have, you know, government mandated car insurance because the roads are public. Right. So like. And health insurance. Right. Like I, of those, I think actually the most free market one is homeowners insurance. Because if you own the home, you're not required to to have home insurance. It's more of protecting the bank's balance sheet. [00:29:49] Speaker B: It's a product of the debt market. Yeah. [00:29:51] Speaker A: You could say it's a product of the subsidizing of the housing market. And the only way you can ever buy a home is if you take out a 30 year mortgage because most people don't have the liquid wealth to just buy in cash. Right. But and also if you're the bank, if the house burns, then you're just stuck with a smoldering pile of ash. And that isn't what you gave the mortgage for. Right. So you're trying to protect your own balance sheet. So in that sense it makes sense. But like health insurance and car insurance, I think that's why I say charitably. I understand why. [00:30:18] Speaker B: Yeah. Oh yeah. I mean, I mean for, to, to give all credit where credit is due, to recognize how bloated and disastrous our insurance industry is because of its horrific subsidization. The incredible amount. It's like saying that like health care is fiat. It's like, well, no, obviously doctors are not a fiat creation. You must have doctors, you must have healthcare. But our health care system is about as fiat a thing as one could imagine and it is a horrible disaster because of government and because of regulation and everything else. Right. [00:30:52] Speaker A: I actually very recently, for some of my family, I had to make a trip to the emergency room. Everyone's fine. But walking through that whole experience, I was like, who walks into a hospital is like, you know what? We need more government mandates. Like the level of bureaucracy and inefficiency. Like wild, like, it's totally, totally wild. Like, like I, I like, you walk into a hospital and you just do some basic care and you're like, I think the government can fix this. It's like the money, the muscle, just like. Like, it's. It's wild. Anyway, yeah, so the history of Lloyd's of London, though, is actually was at a place called Lloyd's Coffee Shop. And this was in the. [00:31:27] Speaker B: They had just started coffee shop. Sounds such like a 2005. Yeah. Lloyd's Coffee Shop, 1699. Yes. Yeah. [00:31:36] Speaker A: And so basically, they started doing coffee imports in, like, this is, like, when global spice trade's starting to become a thing. Right. The expansion of the British Empire, taking these ships around. And the way it worked was you had these experienced sailors and people who understood proper ways of doing spice exploration and trade. And you would have these new upstart entrepreneurs who wanted. It was a way to make an immense amount of money. Because think about it. We don't have the instant time delivery, like, everything we have today. [00:32:09] Speaker B: Wait, there was no Amazon. [00:32:10] Speaker A: Yeah, exactly. Right, right. It's all right. So you have it where you would have upstart entrepreneurs. It was a way to make a lot of money. But the problem is, if your entire life savings was in this boat, in this ship and it sank, you are ruined. You are at, like, you have to put your life savings to get a shot at this. So the concept of underwriting came in where you would have people that would propose, I want to go to India and I want to get saffron and all of these spices. And they would say, okay, well, like, who's your crew? And they would say, like, okay, that person's an experienced first mate, your quartermaster. And they would look at the leaders of the ship, and they'd be like, okay, well, you're going at this time of year, which means you need to take this route. Like, you can't just, like, you wing it. Like, there's bad storm swells. The Horn of Africa was consuming ships all the time. And they had, like, all this codified list of rules. And if the agreement was. If you qualified this qualified, like, list of rules, we'll get, like, 20% of your cargo. But in the event you sink, we will. We will make you whole. And the capital providers were all of the experienced sailors that were doing merchant ship runs. And you would underwrite the people who agreed to hold the risk would write their name underneath the contract. And that's where, like, the idea of an underwriter comes into being. So it started in the late 1600s, but then it starts to evolve and form over time to handle all types of insurance. And so I've been to the actual Lloyd's of London building in the City of London twice now. I always like to describe it as if you ever think about the New York Stock Exchange and everyone's like sitting around those computer screens and desks, maybe in the 80s, they're holding pieces of paper and like, buy, sell, and they're doing this for all these like equities and securities. Think that, but with everyone wearing way more fashionable because they're British with British accents and a bunch of desks lined up and they're trading risk instead of securities. So you'll just have people who only do property insurance or only do health insurance, only do life insurance, only do car insurance in South America. Right. Like all of these, like all of these different pockets where risk exists in the world, specialized teams come together called syndicates, where you maybe have multiple insurance companies that will back a particular type of risk. Now to fast forward for Anchor Watch, there's only a couple syndicate groups that actually underwrite the general bucket of crypto risk. [00:34:25] Speaker B: Okay? [00:34:26] Speaker A: Now the bucket where that sits within, like within the insurance apparatus is actually specie insurance. So what these guys do is they insure fine art, cigar and wine collections, antique furniture. And Bitcoin. [00:34:40] Speaker B: And Bitcoin. [00:34:41] Speaker A: Yeah, And Bitcoin. Right. And so when it came to like pitching them on this opportunity, the first question I was asked was, are you guys using NPC or Bitcoin native script? And I was like, floored. I was like, how is someone whose career is in insurance underwriting this? And then I realized these are the same people who write the insurance policies for Bitgo, Coinbase, Kraken, whoever have you. And so their money is on the line. So when coinbase has a $300 million policy, it's their money that's going to pay if something goes wrong. They are very motivated to understand the intricacies and nuances. And then the conversation turned to the idea of distributing risk through distributing keys. Whether multisig is a great starting place. But then when we were able to explain that there were multiple groups of people that had a cosign and that because Anchor Watch is a required signer, we can enforce spending policies such as whitelists has to go to your whitelisted addresses, otherwise we won't sign. Now, this isn't something that, like on chain that could be enforced through a covenant, but like we're able to emulate that through us co signing, right? Or Velocity Control. [00:35:51] Speaker B: And just for anybody who gets confused or thinks like, oh, white list, just control, it's like, no, it's about you Making sure that like they're not going to sign it over to a scammer. Because you are saying these are the addresses that this is allowed to send to. And obviously you, as the owner can update this if you make a new key at some point. It's just about making sure that the insurance company is not legally allowed to sign to some address that nobody in the group recognizes. So it's not a, it's not a government white list, it's a. Your white list to make sure that you don't get screwed over. [00:36:26] Speaker A: Absolutely right. And, and so that's the core. Like explain that concept through risk distribution and multiple keys and that using time locks, where you can have a single bitcoin address that across time has multiple ways you can spend it, further distributes the risk. And the best part I haven't even mentioned yet is when your insurance policy expires, we no longer have a contractual relationship with you. You can unilaterally move the funds yourself as a two of three multisig. Right. So unlike most other custodians, you have to get on the phone and be like, hey, Mr. Custodian, I want to withdraw now. And you ask for permission to get your money back. The contract expires, you can just move it. You don't have to talk to us or our servers or anything. Right. And the little fun detail too is when you sign up for a policy, we give you the output descriptor. You can load that on your node, works on Knots, works on Core. You can just load it and you can cross verify the deposit addresses, the transaction history. You can take that output descriptor and take it to a bitcoin wizard to be like, hey, is AnchorWatch lying to me or is it running the way they say it's going to run? Right. It's fully like leveraging Bitcoin as a transparent ledger. And all this information is really powerful. And we put that on your policy too, where the funds are sitting. So it's just like a. It's a direct link between the on chain funds and your insurance contract. [00:37:38] Speaker B: Yeah. Is this something that I can actually import into Nunchuck now because of the. [00:37:42] Speaker A: You should be able to. Yeah, I haven't done it yet. You should be able to import into Nunchuck. I probably, what I'll probably do is I'll. I'll make a script that takes the output descriptor and puts it in a format Nunchuck understands, and then it'll load it up and be good to go. That's something that's been on my to do list to check out. So yeah, that was getting them bought in was once we found the right people was actually and having those conversations, it was much more straightforward. Right. And we were putting a lot of thought first principles thinking about how to like leverage and extend Bitcoin in a way they hadn't seen before. And to be fair to them, no one had really seen before. But once we kind of walked through that they were really interested. And you know, now we are what's called the Lloyds of London cover holder, which means we're direct agents of Lloyd's of London. You get a Lloyds of London insurance policy and you're able to, you know, like have that direct linked to them for the insuring of your bitcoin. [00:38:35] Speaker B: Yeah, that's so crazy. Yeah, that's so dope. Now I'm curious about cost for this. [00:38:41] Speaker A: Sure. [00:38:41] Speaker B: Like what did they end up? Because like you think about it, it's a little bit like Bitcoin backed loans is that right now interest rates are pretty high for the more secure it is for the customer. Basically like, like leaden's is 12ish percent and unchained I think is still 15%. So it's like really good for the investor and the borrower. It's like. [00:39:02] Speaker A: And I think Strike is, Strike's trying to get under 10%. Like I think they're around 10ish right now. [00:39:08] Speaker B: Oh, that's dope. Okay. Yeah. But, but just as a, as a thing like right now it's a it way better for the investor than it is for the borrower. Even though it's good for the borrower just generally because of the incredible protections. But I think in the long run like this is better than a mortgage hands down for the bank, for the institution, for the customer. Like, like across the board. So with, but obviously prices don't go down without competition. Like it literally requires Strike to try to get under 10%. For Unchained to be like maybe we should do 12 and leaden to do like, well I can probably get 10% too, you know. And you need liquidity and in that same context, insurance, you need competition to bring the price down. But also when you lay out a basically a setup like what you've got with Anchor Watch, the risk is so low. Like, like the, the, the system is so unbelievably airtight. [00:40:13] Speaker A: Yeah. [00:40:14] Speaker B: For both losing funds getting scammed or fished and you know, like, like there's so many checks and balances. Like losing funds is going to Be difficult with this structure. [00:40:26] Speaker A: Yeah. [00:40:28] Speaker B: How does Lloyd's of London price it? [00:40:31] Speaker A: So it's like any other risk. [00:40:34] Speaker B: Yeah. [00:40:35] Speaker A: It is a conversation. But we rely on actuarial studies. Right. Like it's not just like, I think it's this. Right. And we just kind of go with it. Right. You get actuaries to find comparable loss rates. The unique thing that's interesting is that this, there isn't like a bunch of insurance history on this kind of risk. Right. So you're trying to find. [00:40:55] Speaker B: Really. [00:40:56] Speaker A: Yeah. Right, Right. Like since we're the first to do it, we try and make an approximation. The, the lowest rate we can bind at is 40 basis points. So for a million dollars. Wow. It's $4,000 a year. Wow. So we think especially compared to uninsured custody. [00:41:13] Speaker B: Wow, that is pretty damn good. [00:41:15] Speaker A: Like there are uninsured custodians today that are charging 36 basis points. Like list rate today to get uninsured custody is 36 basis points. [00:41:24] Speaker B: Wow. [00:41:25] Speaker A: If you're at large institutional scale, maybe you're able to get that to like 20 basis points. Maybe, maybe 10 uninsured though. [00:41:35] Speaker B: Yeah. [00:41:35] Speaker A: Right. [00:41:36] Speaker B: That spread is almost nothing for what you're getting. 36 to 0.36 to 0.4. [00:41:44] Speaker A: Right. And so I'm aware that bitcoiners are sensitive to press. You can self custody buy yourself not pay anyone. And it's what I've done my entire life before starting Anchor Watch. I now have my bitcoin in Anchor Watch because you know, skin in the game. Right. But like I've my entire life have self custody on my own. I started with in 2013 a wallet dat file that I had sit in my, my desk drawer. I moved over to Armory Wallet for a while, used Spectre for a bit and then Sparrow and now this. Right. And so like I get like I've self custody my bitcoin and short of the hardware wallets and the nodes and the time, it hasn't cost me anything. [00:42:30] Speaker B: Yeah. [00:42:31] Speaker A: But for institutions we view it as this concept of like risk of ruin, like fiduciary flight where if you're a fiduciary and your options are I'm going to pay 20 basis points uninsured or I'm going to pay 40 basis points insured. Like it seems pretty straightforward to me now mechanically, just everyone's always interested in understanding how the business model works. Most of that money goes to Lloyds of London. Right. Because it's their capital that is underwriting the risk. If you have a million dollar Policy. And there's a loss. Anchor Watch Inc. Is not paying that out. It is Lloyd's of London, right? That's. It's a reinsurance contract. You can kind of. It's technically not reinsurance. We're just directly distributing the Lloyd's of London policy. So it's just straight to them. But conceptually, that's right there. We also charge like 2 basis points for just a fee for us to. For custody fees. So you could say the blended. All in rating. [00:43:20] Speaker B: Two basis points. [00:43:22] Speaker A: Two basis points a month. Sorry, two basis. So like 24 basis points. [00:43:25] Speaker B: Okay, okay. [00:43:26] Speaker A: That. [00:43:27] Speaker B: I was about to say, how the hell. How the hell do you have a company on two basis points? [00:43:31] Speaker A: No, no. [00:43:31] Speaker B: You gotta have like a hundred trillion dollars in custody, right? [00:43:34] Speaker A: No, no, no, no, no. Not even. Not even the biggest custodians charge two basis points. Okay. [00:43:40] Speaker B: Two a month makes more sense than 24 a year is like nothing. [00:43:43] Speaker A: Still, the psychology of people in Bitcoin is really interesting too, right? Because people will pay 50 basis points points or maybe even 1% for a spread when they buy Bitcoin, but they don't want to pay for custody. And it's because businesses use the custody side as a loss leader. And there's nothing wrong with that. Like, to be like to call, like, I think what river does specifically with their full proof of reserve system is like, I understand, like, why they do that. They don't charge for custody. They don't want to have the friction for people. They have quick access to dollars if they want to sell their Bitcoin. That's on the platform. Like, I understand why many exchanges have come up with this model because you just. You charge on the fees. So it's a bit of like a changed habit to think about paying for custody at scale. But that's why we think like, the bundling of an insurance contract is actually the best way. Because otherwise, if you're paying for uninsured custody, what happens is, is that, you know, I. It's like pennies in front of a steamroller. I get to collect a bunch of fees and then if something goes wrong, I'm like, oops, you're an unsecured creditor. Sorry. Better luck next time, right? Like, an insurance contract is actually the, I think, the e way to align people to have skin in the game as actors, to know that, like, you're paying for custody and if something goes wrong, you will be identified. [00:44:53] Speaker B: Yeah, yeah, yeah. A thousand percent. I think that it makes sense just because, you know, you have operational costs and if you don't have custody, it makes, it makes sense to try to get the security back in an operational sense and in a provenance sense, like what river does or Leaden does or these like the proof of reserves type companies or setups. Whereas if you're actually charging for custody, you need to be able to, you need to be able to offer something else because you're not going to be making, you're not making money off an exchange rate or buying and there's no, there's no flow in and out really. Yeah, like it's, it's there to sit. So you, you might as well offer insurance because then you actually have something that's enticing drastically increased security for the customer by simplifying their setup. And then you've also said, and if anything goes wrong, we are so certain that this setup is going to protect you. That will literally give you your money back if it doesn't, you know. [00:45:55] Speaker A: Right. Yeah, exactly. Yeah. One last like on this insurance point, talking about the future I think is really interesting. So today we work with Lloyd's of London. They don't hold bitcoin on their balance sheet because actually this is a, I, I get really gassed up and excited about bitcoin script and insurance concepts and policy and like economics. Right. [00:46:16] Speaker B: I don't know if it makes me a nerd, but I do too. [00:46:18] Speaker A: Like here's a wild just fact about how the insurance works in the United States. So in the United States it is actually a state regulated endeavor. So in the great New Deal when FDR was basically making everything a federal issue, one of the few things he wasn't able to get through was nationalizing insurance as a federal level thing. It's one of the few things he could not in the great New Deal and all of his political power checks. [00:46:41] Speaker B: And death for the tiny things that you have. [00:46:44] Speaker A: The one little thing because he got, he got almost everything else. [00:46:48] Speaker B: Yeah, right. [00:46:49] Speaker A: He got almost everything else. So insurance is a state level regulated and in the United States and each state has a insurance commissioner. [00:46:58] Speaker B: Okay? [00:46:59] Speaker A: Right. And that insurance commissioner is the head of insurance law. And within their state there is a non governmental like working association called the national association of Insurance Commissioners, the naic. And it's basically appointed from all of the heads of insurance from each state. And they set loose ground rules as a self regulatory body for insurance, importantly capital standards. So as you can imagine, treasury bills, top tier. That's the best quality thing on your balance sheet, baby. [00:47:29] Speaker B: Oh yeah. I mean maybe you lost half of the value in the last four years and just at face value. And you're getting a dog interest rate, but you know where it's, it's gold. [00:47:39] Speaker A: Well, think about it. If you're in a life insurance company, your, your liabilities are decades allowed. Right. I buy a life insurance policy today as someone in their 30s. Like that shouldn't be paying out for 30 to 40 years. [00:47:49] Speaker B: Yeah. [00:47:50] Speaker A: And so like that's a, that's a tough nut to try and crack. You're trying to talk about a 40 year hurdle rate. [00:47:55] Speaker B: Yeah. [00:47:56] Speaker A: Bitcoin is what's called a non admitted asset. And so one step back is the health of an insurance company is how much is their surplus of excess assets. Right. That's kind of the strength of their ability to take volatility. If you took a billion dollars of bitcoin on your insurance company balance sheet and you bought bitcoin, you have to write your insurance balance sheet down a billion dollars. You get zero cents on the dollar credit for bitcoin. [00:48:18] Speaker B: That's retarded. Even if you're insuring bitcoin. That's so stupid. God, that's so stupid. [00:48:25] Speaker A: You get zero cents on the dollar. So all of the insurance companies are not incentivized to hold any bitcoin on their balance sheet. [00:48:30] Speaker B: Yeah. [00:48:31] Speaker A: A funny thing though, anti incentivized. [00:48:33] Speaker B: Not even like not incentivized. [00:48:35] Speaker A: Very strongly penalized. It is a penalty. [00:48:37] Speaker B: Yeah. [00:48:37] Speaker A: Because the way insurance companies work is you have a balance sheet and your leverage is not done through traditional like borrowing, but it's through risk distribution. That's how you get leverage in insurance is that you have a million homes that you insure and you have run actuarial tables and say per year, you know, 50 basis points are going to have a claim. So 50,000 homes are going to have a claim. But the premiums paid by the million can make that hole. Right. Like that risk distribution is really important. [00:49:00] Speaker B: And you're spread out so wide there'll never be a global housing crisis. Like that's never happened. [00:49:06] Speaker A: So like this is the difference between a financial insurance contract and like property insurance. Right. And this is interesting where like insurance policies will not cover nuclear events because if a nuclear event goes off, 100% of the homes are destroyed. So you can't insure events. That would ruin the entire book. That's just how insurance operates. Yeah. Now where was I going with this? Yeah. So you get massively penalized for that. A really interesting fact though. The largest buyer of the convertible debt for microstrategy is Allianz, an insurance company, because since it's corporate debt, it doesn't take the 100% write down. I'm not. I'm not buying bitcoin. [00:49:50] Speaker B: I'm buying equity. [00:49:51] Speaker A: I'm buying convertible debt that can convert to equity. So these convertible debt notes end up becoming rapid. [00:49:57] Speaker B: Oh, my God. The credit for Bitcoin is more valuable to them than the actual bitcoin from a legal standpoint. [00:50:03] Speaker A: Bingo. [00:50:03] Speaker B: That is so stupid. But also kind of clever. [00:50:06] Speaker A: Yeah. Right. So the largest buyer of this convertible debt is Allianz because they're getting bitcoin upside holding the convertible debt without impairing their balance sheet. [00:50:16] Speaker B: Wow. Yeah, wow. [00:50:18] Speaker A: Right? So that's just like an interesting. Like literally the credit is more. And it's not because it actually is. [00:50:23] Speaker B: More valuable, it's because it's legally defined. Yeah, yeah, yeah, yeah. [00:50:27] Speaker A: It's a fiat construction of capitalization rules. Right. I've actually sent emails directly to the NIC asking for them to revisit this. And I was like, oh, the Bitcoin policy summit in D.C. is happening in June. We'd love to have you. I was going to give them a bunch of tickets and I found the exact people who were on the subcommittee for this and they're based out of D.C. and they told me, we're not interested in going and we're not interested in revisiting this. And I was like, thanks, I'll check in in five, 10 years. You know what I mean? [00:50:52] Speaker B: Like, okay, when Bitcoin's $1 million, say this email. Bunch of retards. Right? [00:50:59] Speaker A: Exactly, exactly. So, like everyone gets bitcoin at the price they deserve. So the, like, the interesting point from here I was wanting to jump off on is so today we work with Lloyds of London. They only have dollars. They don't have Bitcoin on their balance sheet. There is an emerging insurance market that is allowing you to do bitcoin denominated stuff. The biggest one being Bermuda, where you actually do a fully bitcoin native balance sheet, which meanwhile life insurance does. If you've heard of Meanwhile. No, you should check out Meanwhile. Meanwhile, Zach Townsend, great guy, the founder. I. He's on the conference story. I always bump into him. [00:51:41] Speaker B: One quick. One quick question. Is Bermuda the A company or is. Are you meaning the country? Bermuda. The country is having Bermuda. [00:51:49] Speaker A: The country. So Bermuda is actually like the third largest reinsurance capital behind New York and London. [00:51:54] Speaker B: Okay. [00:51:54] Speaker A: So it's not like a. It's not like I always compare it to. It's not like FTX when they went. [00:51:58] Speaker B: To the New York, London and Bermuda. I would not. [00:52:00] Speaker A: Yeah, yeah, yeah. It's fascinating. Like the amount of financial services that run through Bermuda is massive. So like wow. I always like want to call that out like so. But meanwhile, does that be interesting for people to talk to? They do bitcoin, whole life insurance. You pay your premiums of bitcoin, you get bitcoin as part of your life insurance policy. Borrow against it. Yeah. So just a quick shout out to them. Meanwhile. Meanwhile BM is the website. Yeah. And Zach's a great dude. [00:52:23] Speaker B: I'm going to switch my life insurance over. That's dope. Because I got a, I got a dog. I mean I got a Fiat ass life insurance policy that just. [00:52:31] Speaker A: I would love calling that out. So Zach would also probably be a good guest for the podcast if you wanted to talk to someone interesting about this stuff. Right. [00:52:38] Speaker B: Zach, hit me up dm if he listens. [00:52:41] Speaker A: Perfect. [00:52:41] Speaker B: Send him, send him a link to this. [00:52:42] Speaker A: I'll link, I'll link you two up after this. Yeah. And so I see a future where inevitably at a certain point the amount of capital traditional insurers are willing to allocate to bitcoin will cap out. I think in aggregate today at most there's maybe, maybe $5 billion of insurance capacity for crypto at large. Most people don't discern between bitcoin and crypto. Right. So. [00:53:09] Speaker B: Yeah, yeah, yeah. [00:53:09] Speaker A: So bitcoin being a 2 point, what, 4 trillion. Like we're hitting all time highs or something at the moment. Right. Like, like, like a 2.3, $2.4 trillion asset has 4, $5 billion of possible insurance coverage. The best way to natively get around this is actually do bitcoin denominated insurance. [00:53:25] Speaker B: Yeah. [00:53:26] Speaker A: And that's something that we've put a lot of thought into Anchor Watch since really near the beginning. I think that's just like a cool part of the possible future where like bitcoin banking, you're going to have these insurance companies that have large bitcoin balance sheets and they're going to be able to offer insurance on your bitcoin in custody or other bitcoin insurance like services. I think like if you're doing a bitcoin backed loan, just like if you want to borrow against a home in Fiat land, a bitcoin backed loan, I see a future where the collateral is insured and it gets rolled into the cost of business. And that further de risks you as the customer and it also further de risks the Capital providers providing the dollars. If you can actually insure against hacks and things that could go wrong, you now actually are making the cost of capital cheaper because in the event something goes wrong, you're not impaired. That's why the rates partially are so high. There's so few capital providers and, and additionally they have to underwrite a certain risk of what if something goes wrong with the keys in custody. They're the ones that if, if, if someone's doing a bitcoin backed loan and the bitcoin moves without their knowing and knowledge and now they don't have their counterparty asset, they're the ones on the hook, not the person who got the dollars right. So I view just like insurance as this like foundational financial infrastructure for bitcoin that will be kind of embedded into many, many products as time goes on. And the way to really hit the big scale for that is having a bitcoin insurance carrier. [00:54:46] Speaker B: You don't actually have to sell your bitcoin to access its value. You can actually borrow against it very easily without selling it. But when you do this, you need to be careful. You need to do this with a company that is trusted, one that has survived a bear market and one that will literally show you that they have the coins, that they have proof of reserves or some mechanism where you can look at your balance and know that it is safe. This is why I've been a huge fan and a customer of Leden for a few years now. So one of the bitcoin backed loans that I got a few years ago to finish renovations and the basement and studio in my house, I would have paid three times as much bitcoin had I just sold it as it now takes me to just pay off the loan. And that's if I sell the bitcoin to pay it off, which I think I'm going to be able to get equity out of the house and pay off the loan and get all of my bitcoin back. This especially makes sense if you're making an investment, if you're doing something that is going to pay you income in the future, or if you're investing in bitcoin mining, it's a whole lot easier to beat the interest rate if you loan against the bitcoin and keep the bitcoin. Leden also makes this like crazy easy. Like if you went to do this right now, you could probably get the money by tomorrow. They do proof of reserves twice a year and I check. It's a very easy process. And you don't have to do monthly payments if you don't want to. You can just accrue the interest and pay off in chunks whenever it makes sense. And best of all, they just recently got rid of all the noise. They had some other features. They had Ethereum loans. They're like, nope, chop it. They had a yield product. Nope, chop it. They had loans where you could get a lower interest rate and they didn't have it on their books. They lent it out. Nope, chop that. Now it's just custodied, fully backed bitcoin loans. It doesn't work for every single situation or every person. But there are some times where this is an incredibly valuable tool to have. Don't overextend. Remember Bitcoin is volatile and read the details. But if you need access to your Bitcoin's value and you just don't want to sell, LEDN is a brilliant and simple tool for doing exactly that. And I've been a happy customer for a couple of years now. You can check out the links right down in the show notes. It's L E D N Ledden IO. It's amazing how much like I'll focus on like ARK and state chains and lightning and we're always having this conversation about scaling and payments and. And then I'll have conversations like this or I'll just have like periods where I'm like kind of like really digging into the weeds of the financial system. And we talked about this on the recent roundtable is how much we're missing the forest for the trees. [00:57:31] Speaker A: Sure. [00:57:32] Speaker B: Is that like that is the end of the road. That is necessarily the end of an insanely long line. Like when we say Bitcoin is fixing Fiat, when we say fix the money, fix the world, there are like 20 stages to this, 20 very unique and very different stages to this problem. This isn't like fixed payments on the Internet and Fiats. Fiat's fixed, you know. [00:57:59] Speaker A: Right. [00:57:59] Speaker B: There's a political layer, there's a trust and shared ownership layer, there's a, there's a global and debt settlement layer, there's a financial agreement and forex, like futures and like time lock style layer. There's shared and insurance. I mean like we're talking about the whole thing. If you think that the financial system and the monetary systems of the world are one thing, like one unit run on like one computer, you just have like an extremely naive view of how big and multifaceted and multilayered this entire like, like it's, it's something like 20% of the whole economy. This is not one apparatus. This is thousands of various apparatuses and variations on those all across the globe. You know, every one of them has to individually be rebuilt with a completely different thinking and a completely different understanding and a completely different model of security and interaction. Like this is going to take 50 years. Like it just is. [00:59:00] Speaker A: The global insurance market is $7 trillion a year in premium and they have no exposure to big. They have zero exposure to bitcoin. [00:59:09] Speaker B: That's so crazy. Yeah. So actually throwing back to Lloyd's real quick. They have zero exposure to bitcoin mostly because they'll be legally punished for it. [00:59:19] Speaker A: Yeah. [00:59:20] Speaker B: But do they want to own bitcoin now having like our. Do they think about it as like we're ensuring a bitcoin custody. It would be nice to have some freaking bitcoin on the balance. [00:59:32] Speaker A: We like to. It's very funny whenever like we were just on a call with them recently as we were hitting all time highs again and we're laughing because the first time we walked into their office the bitcoin price was like $19,000. [00:59:47] Speaker B: Jesus. [00:59:48] Speaker A: Right. So like we have this really funny dynamic being like Ed, did you get any like personally did you get a little bit. And then the. There are some insurance carriers that are open minded about this massmutual actually working with NYDIG bought $100 million and they do life insurance. They bought $100 million of Bitcoin a couple years ago. I could look it up. [01:00:08] Speaker B: Oh shit. That's doing well. That'd be about a billion dollars these. [01:00:11] Speaker A: Days in December of 24. [01:00:16] Speaker B: Okay, okay. So. So not that much. They made like 20 or 30%. [01:00:20] Speaker A: Yeah. I'm looking at this headline though. I think that may be an out of date. August. Yeah, but no, Sorry, it was December 2020. There's a bunch of new articles talking about it. [01:00:31] Speaker B: Oh, okay. No, they. Yeah, they're doing good. They got half a billion. [01:00:34] Speaker A: They back pretty well. [01:00:35] Speaker B: Yeah, they bag great. [01:00:36] Speaker A: So December 2020 they bought. They also invested in NYDIG and bought a hundred million dollars into bitcoin. [01:00:44] Speaker B: Damn. Damn right. [01:00:46] Speaker A: Right. [01:00:48] Speaker B: Way to go guys. [01:00:49] Speaker A: So they all on the books, burned a hundred million dollars, but actually they've made like half a billion dollars. [01:00:56] Speaker B: Yeah. [01:00:56] Speaker A: In games. Right. So it's a very funny like dynamic like that. [01:01:00] Speaker B: Yeah, they're being punished for $100 million worth of lost liquidity because of their $500 million win. So that will be. God, that'll be a game changer. Like as. As the insurance industry starts to recognize this, even if it, even if some of it still remains in kind of like this VC category, which makes sense that that would be where it starts before it becomes normalized and standardized. But dude, when, when they're actually holding, and it obvious, obviously makes zero sense to, to not hold bitcoin for a bitcoin insurance policy because it can only ever work out in your favor. Like, because if you're insuring like a bitcoin balance, like, let's say you've got like somebody, you got a, you know, whale or OG or whatever sitting on 100 Bitcoin and they want to put it in an insurance contract with Lloyds or Anchor Watch or whatever, then if they have 100 bitcoin sitting by to, to ensure, you know, the, the bitcoin balances and that guy loses his funds somehow. [01:02:08] Speaker A: Yep. [01:02:09] Speaker B: Well, then you're only on the hook for 100 bitcoin. Now if you're on the hook for 100 bitcoin and you don't have any bitcoin, you're gonna have to go to the market and buy it, right? And that bitcoin, the bitcoin price might be going up while you're trying to figure out, right. Do you, Are you, are you paying out this insurance contract what actually happened here? Let's investigate. And it goes from 100 to $120,000. Now you're on the hook for 20% loss, right? When if you're just sitting on the bitcoin, you'd. [01:02:33] Speaker A: Right, you want to remove the forex risk of the whole thing. [01:02:36] Speaker B: And then the other side of it is if it falls by 80%, I mean, by 20% during that time, you can go into your dollar balance and buy the bitcoin again at the 20% undercut and still guarantee the, you know, the 100 Bitcoin, give them the 100 Bitcoin at a 20% discount and hang on to your 100 Bitcoin, you know, like, you don't have to. That literally can only work out in your favor. You just have to not be legally punished for, for having 100 bitcoin liability for something that you have liable, that you're liable for bitcoin for, which is so stupid. [01:03:12] Speaker A: It just at a base premise of, like, how insurance companies make money, they put up a pool of capital to underwrite risk, and they get most of the insurance premium. And then after claims and everything, you take the amount of profit they have, and that's their yield on their US dollar balance sheet. If you go to a world where it's bitcoin denominated. This could be a prickly subject at times, but I think conceptually the idea of earning yield on Bitcoin is if you have productive capital, it's unlocking something. You have yield. So this is I think the longer run. We're nowhere near that today, but the very long run vision of this is that you can have pools of capital that are skin in the game aligned to make sure bitcoin is kept very safe. And they are paid for those security services through earning a premium, an insurance premium. And that's bitcoin native yield at the. [01:04:02] Speaker B: End of the day. [01:04:03] Speaker A: So that's kind of like the larger vision. It's not mass rehypothecation, Ponzi trading. It is having productive capital sitting there as. And it's not risk free. It's literally reinsurance. It's risk capital. You're putting this here where if the event something goes wrong, your bitcoin is what goes and pays it. [01:04:20] Speaker B: Oh my God. Wait a second. No, you could actually distribute out of like the financial walls the ability to like you could, you could crowd health the insurance contract and the premium yield. [01:04:38] Speaker A: Yes. [01:04:38] Speaker B: Oh my God. So like somebody with savings could put a portion that's insured and then they could do the other and they could be the insurance and earn a yield on it. Oh my God, that's crazy. So you could literally have bitcoin bonds that are paid for by people who want insured bitcoin and you could actually have it genuine shared ownership where everybody had a provable piece of the pump. Oh my God. You can literally redesign everything. I don't. Fuck. [01:05:12] Speaker A: The one example we've seen this in bitcoin's history is that back in satoshi dice and gambling eras. Uh huh. You could put money in to be the banker of the casino. Right. And you would. It's risky because it's custodial but like the idea is that you're providing the risk capital and assuming the luck runs good, you would actually earn a profit. Yeah, this is that on a distributed scale. It's not just one company running a gambling shop. You're just backstopping with some of your collateral to earn insurance premium. Right. Against if there's a loss. [01:05:41] Speaker B: Dude, that's so crazy. It's basically a similar setup to Lightning network yield for payments. Like you're offering up. You're taking a little bit of risk by offering your money into channels and hosting online and you're getting yield through that. Which the. What was it? Async or whoever posted 9% Jesus with. [01:06:06] Speaker A: Phoenix while Async dab wife. [01:06:08] Speaker B: Absolutely nuts, man. And then you could do the same thing with insurance and rules. And you open this up to people like crowd health that literally change the nature of insurance. That's what's so cool about this. [01:06:20] Speaker A: What I love about this too is eventually with taproot integration with using music and frost and stuff, you could actually do multi sig of lightning. And then we. You could also start, basically. How would I phrase this? You'd be able to start offering insurance. [01:06:34] Speaker B: Insurance on lightning channels. [01:06:36] Speaker A: And so like anywhere there's risk, there's a price. And to figure it out, I think the markets need time to get sophisticated and develop random shout out to Async. One of my favorite blog posts in bitcoin. It'd actually be an interesting like guy reads. [01:06:49] Speaker B: Have I not done it? [01:06:51] Speaker A: Is it the how to secure a hundred million dollars on the Lightning Network? [01:06:55] Speaker B: No. Oh my God. [01:06:57] Speaker A: Dude, let me. Yeah. How to secure 100 million on lightning network. They basically built their own custom like secure enclave online because it has to be online. And then they wrote a custom ledger app that interacts with the secure enclave to do big channel operations. So they have a hardware wallet for their lightning node. [01:07:16] Speaker B: What? [01:07:17] Speaker A: Yeah, yeah, I'm, I'm, I'm, I'm dropping it. [01:07:20] Speaker B: I got it. [01:07:21] Speaker A: You got it? Yep. [01:07:22] Speaker B: Yeah, I got it. Oh my God. [01:07:24] Speaker A: It's an amazing blog post. It's one of my favorite. [01:07:26] Speaker B: Oh man, I'm so behind. Okay. [01:07:28] Speaker A: This is such a great article. If like, if you're a security nerd and Wonka to go read through and do this would be a great summary because it's one of my favorite blog posts in bitcoin. It shows how serious the Async team is. Like, we secure $100 million on the Lightning network. How the hell do you do that with an Internet connected server? They explain how they do it. [01:07:46] Speaker B: This is dope. Yeah, thank you, thank you. [01:07:49] Speaker A: It's such a good contest. Please do. Yeah, yeah. And they go, it goes technical. It's a couple diagrams stuff. But it gets so, but it's so well done. Like you can walk through and just understand light lightning and they'll read through the whole thing to you about like how they do this. [01:08:05] Speaker B: That is so dope. Thank you for that. [01:08:07] Speaker A: Of course. [01:08:08] Speaker B: Any other good reads you got? [01:08:12] Speaker A: Yeah, right, right. This is. Now we're at the crowdsourcing guys stuff. [01:08:18] Speaker B: Literally 80% of my best stuff comes from recommendations. [01:08:21] Speaker A: So yeah, nothing off the top of my Head that I've read a good. [01:08:26] Speaker B: One from Breeze that they just posted that Royal. [01:08:28] Speaker A: Okay. [01:08:29] Speaker B: Recently. [01:08:29] Speaker A: Which is pretty dope. [01:08:30] Speaker B: I'm stoked about that one. Okay. That's dope though. No, I will definitely. I will definitely be digging into that. If it ends up being like too heavily technical, I might just do a guy's take on it. But that's. [01:08:43] Speaker A: That's fine too. But I just think it's. It. It's one of these things that I read it and then like whenever I talk about. About it with people, they've never read it. It's like it's a buried blog post. But it's like it's a lot of alpha, like really cool stuff going on there. Yeah. [01:08:55] Speaker B: So. So how would you even do that with the Lightning network? So you got like your. Your one multisig setup. That's your three branches in Lightning. [01:09:04] Speaker A: Yeah. [01:09:04] Speaker B: Right. [01:09:04] Speaker A: Yeah. [01:09:05] Speaker B: How would you do a secondary setup? [01:09:11] Speaker A: You would. The easiest way to do it is you would use a taproot channel and you would use music where both keys have to sign off on it. So I could have a server with a key and then you have a server with a key and then they have to agree on each channel state update and they would have to co. Sign with music. [01:09:25] Speaker B: Okay. So they basically be there almost like a watchtower type role is kind of their own line and they're just like signing with you every time. Every time. [01:09:34] Speaker A: Yeah, you're co signing and then you can have two different stacks that are validating the state updates and everything. That. That's okay. That's something that I've put some thought into. I just think for. With my limited time and resources, I'm just focusing on the bigger swing of custody. But I think there's definitely a role for that in the future. [01:09:50] Speaker B: No, there's definitely hierarchy there and you got to. If you solve the first one with custody and kind of like the, you know, you. You cascade down to the. [01:09:59] Speaker A: Yeah. [01:09:59] Speaker B: The more like directly connected live update sort of system. Like. [01:10:04] Speaker A: Absolutely. [01:10:05] Speaker B: Definitely a logical process there. Hell yeah. What's been other musings or whatever that you've had? Because I never even thought about the. The fact that you could. You could actually change the nature of insurance specifically because of bitcoin, which is so cool. Capital markets, you can literally have. God, that's so crazy. I hope the audience understands what. What we're saying with that is it's very much like crowd health, except that you can offer up bitcoin and get interest. Like, you know how like you used to in a bank account, you used to actually make yield because when you put something into a savings account, it was for them to judge the, to manage the risk and loan it out to somebody else and then they would share the interest rate. So if they made 7% on the loan, four of it went to the customer, went to the person who's putting up the, the actual capital, and 3% went to the bank for their assessment and operations and all of that stuff and for managing it. So funds got to where they needed to go. Well, there's no reason that you have to have a, A, a specific centralized pool of funds outside of the fact that fiat doesn't have multisig, that there's no way to actually split up ownership and have customers have any real say in the matter. It's all done through legal contracts and you just hope that your government is honest enough to enforce it the way that it's written and supposed to be enforced. You can actually get rid of all of that ambiguity. You can make the legal side a simple technical definition of what is defined in a set of keys and you can literally have thousands of people offer up Bitcoin, make up 24 basis points or whatever it is for insurance, whatever the math works out and you have an income in Bitcoin every single year on genuine yield for taking on a genuine and understandable risk that is actually a lower risk than pretty much anything else you can possibly get. So this is very much like the lightning network reference rate by Nick Bhatia, except that it's like an, an insurance. A risk risk market reference rate is for layer one. For layer one. For layer one, a risk market reference rate in combination with the idea of a lightning network reference rate for payments and fluid or Bitcoin flow in, in markets. [01:12:30] Speaker A: And think about it too. If maybe you were a large enough capital provider, maybe you also hold a key. Yeah, why not like Anchorage holds the key? Because we're orchestrating this entire thing and our entire reputation is tied in our ability. [01:12:42] Speaker B: It'd be better for security because you know, you have, you know, some, some say in the stack or whatever and probably be better for the customer too because they always run the risk losing key. [01:12:52] Speaker A: It also doesn't infinitely scale to like thousands of people cleanly. Technically it does. But you also could have an idea where you could have maybe the top hundred holders, you have a frost key and you just get 60 out of 100 cosigning the transactions of the largest capital holders. Right? And then like everyone is like you put up capital and you have part of the governance and the movement of funds that you're insuring against. And you want that. [01:13:14] Speaker B: You could actually have shareholders that actually hold the key. [01:13:17] Speaker A: So you. [01:13:17] Speaker B: So you have people who are actually staked in the. The operation itself and are actually there to be signers when necessary. Whereas you could also have passive people who, you know, take a. Take a hit on the basis points for the sake of having someone else manage it and not have to think about it and have their hardware wallet ready in case something. Totally, yeah. [01:13:38] Speaker A: Right. Exactly. Yeah. A lot of interest. One thing that's somewhat of a tangent that I've been putting thought into and thinking about it as it relates to like ink watch product roadmap 1. We're buried enough deep in the episode I can say this. We plan on actually also offering uninsured custody by the end of the year. A lot of people are like, hey, I wish. I just want you guys to hold keys. I love the tech. I don't want to do an insurance contract which also lets us go global. Today, we're only available in the US by the end of the year, we'll have uninsured custody as an option. Something I've been putting thought into as well is with the emergence of AI and especially if you've seen the Sora 2 stuff over the past week, like the quality of like video deepfakes. [01:14:16] Speaker B: No, I didn't know. I didn't know. Sora 2 came out. [01:14:19] Speaker A: Sora 2 came out. It's been wild. Like, you literally, people are doing prompts of like, have SpongeBob SquarePants get pulled over for speeding and then speeding away from the cop. And it does it like, like audio and video. The entire thing is like, it's. It's pretty. Like they're really funny memes coming out of here. [01:14:36] Speaker B: I'm such a sucker for AI, Man. I love this shit. So vibe code like an hour a day. [01:14:41] Speaker A: I know I listen to. Listen to the rap table. I listen to your. Your escapades and stuff. And so. But here's. Here's an interesting thing that I've been thinking about. It's not directly Bitcoin as money, but the one thing AI cannot deep fake is a public private key pair. [01:14:55] Speaker B: Yeah. [01:14:56] Speaker A: Yeah. And as it relates to that, I think there's a really strong use case of using Bitcoin cryptography for authentication for like proof of human. And it doesn't have to even move money on chain. If I just know that you are this private key. Think something like A nostr or whatever else, whatever key pair you have. I want to start working on a authentication method where maybe you have a tap signer and to authenticate certain things, maybe you hop on a call with us in anchor watch and you just tap your tap signer and we use that to prove your identity to know that you're not a deep fake. Yeah, like, this is the kind of stuff I've been thinking about for like, product features and roadmaps. We don't have the mobile app yet. [01:15:33] Speaker B: Genius. [01:15:33] Speaker A: Part of the mobile app. [01:15:34] Speaker B: I freaking. Oh, no, here it is right here. Ah. [01:15:37] Speaker A: Oh, no. [01:15:38] Speaker B: If I can do it with all my Jade plus. Oh, my gosh. She's okay. [01:15:41] Speaker A: Yeah. [01:15:41] Speaker B: All right. No scratches, no scratches. [01:15:44] Speaker A: There you go. Beautiful. I have to get a jade. Thank you for reminding me. I'm gonna pick up some Jade pluses. [01:15:48] Speaker B: I think I have a discount code for you. [01:15:50] Speaker A: Okay, what's the discount code? [01:15:52] Speaker B: Probably bitcoin audible. [01:15:53] Speaker A: I think Bitcoin audible. Let's. [01:15:55] Speaker B: It should still work. [01:15:57] Speaker A: Lunar silver. No, I like the Genesis gray. Almost the black one. [01:16:00] Speaker B: Yeah, you gotta do that. You gotta do the Genesis gray. This is, this is my. This is my, like, to go nunchuck card. This is, this is what I do with my, like, business wallet. Man, this is the handiest thing. Like, some people are like, oh, but like, you know, the key, it's not as secure. It's like, use multisig. Like, this is the beauty of multisig is that you can get the convenience and the security at the same time. You distribute how, how keys are managed. Like nobody. This is the God, the, the, the combo of convenience and security that you get with a tap signer, a mobile key and a cold card or, or Jade plus or any, any other like, explicit wallet is just unbelievable. You can't, you can't compare it. And I don't have to care if, like, cold card could. If my PIN number is only nine characters or whatever, whatever. And cold cards, oh, maybe they have like a key to my nunchuck. Who cares? They can't get my coins. Not to mention, like, it's just. It. The key is generated here with that. And I just. People have just lost so many people lose perspective on like, what real security is and like the degree of various risks, you know, like, I don't know a single person who has lost keys or lost Bitcoin on a hardware wallet because someone specifically broke the key mechanism or got into the secure element and found the keys. I don't think that has ever, ever happened. Outside of like pulling something off of RAM off of like a RAM trip in an old Trezor because they physically got the treasure and that's a completely different story. We're talking about something totally different there, you know, like not. That's not a compromising of the cryptography. So anyway, I love tap signers. [01:17:46] Speaker A: Yeah, yeah, tap signers are great. Multi vendor, multi sig. My one little gripe with the tap signer is it can't do Schnorr, so you can't use it for music or frost, which is fine. It's a limitation of the chip. [01:17:54] Speaker B: I didn't realize that. [01:17:55] Speaker A: But yeah, it's okay. [01:17:56] Speaker B: It makes sense. [01:17:57] Speaker A: I rib Rudolpho regularly about that. And importantly, it is code guy, not bitcoin. Audible. I just pull up the checkout. So guy at the Blockstream store and it worked. [01:18:09] Speaker B: How much was it? 10%. [01:18:10] Speaker A: 10%. [01:18:11] Speaker B: Sweet. Sweet. Still got a code. Ba boom. All right. But no, that's a great, That's a great. I want to use keys for everything. Like, I love. This is, this is my thing about like the pub key ring app that I made a little video of that just a. A couple of days ago in reference to like the NPM hack. Because that guy got fished. The guy got fished and he reset his two factor and they got into his account and they got like. Usernames and passwords are so broken. They're so broken. And, and it's. It's literally that we haven't felt the pain of how broken they are so that we haven't like made a change. Like for as much as everybody's like, humans are terrible and they're evil and they're malicious and everything, it is actually a miracle of the unbelievable kindness and mutual respect of humanity that we aren't getting pwned every single day. Because it's all out there, it is all available and it is all easy to do. If somebody, if a malicious actor with dedicated resources and absolutely zero conscience could literally destroy anybody's life financially today in fiat land. Like, it just. It's just not. It's not all the technology is there and it is only because people are good enough that the cost is only like $20 billion a year that we. That we actually continue operating on a very outdated and very non technologically relevant system today. Usernames and passwords, from a security perspective, they're dogshit. They're. They are basically dead in the water. [01:19:50] Speaker A: Baseline at this point. You gotta do two factor authentication. [01:19:53] Speaker B: Yeah. [01:19:53] Speaker A: And if you're using the Google Authenticator app Desync from Google Cloud, because that is like, the worst. By default, Google will sync it to your Google Cloud. So if someone hacks your email, they also get your authentication, which ruins the entire point of 2fa. Yeah, right. [01:20:06] Speaker B: Do free OTP, man. Free OTP is easy. It's a great app. And do like a key pass, a password manager, or something like that. Just to have your own backup and make it a ritual. I'll tell people this all the time. Make it a ritual. Do it religiously. And I don't care what you're doing, how tiny of the wallet that you're setting up, Sit down and do it. It doesn't take that long. It's like five minutes. Write down your keys, put your backup in the right place, back up your two, factor in your. Your key pass or whatever. You know, like, it. [01:20:36] Speaker A: Just. [01:20:36] Speaker B: Just do it. You will. It will save your ass, and there will come a day in three years when you would have lost $15,000 and you're like, oh, my God, thank Jesus, I have this thing backed up. Or this thing ends. [01:20:51] Speaker A: It. [01:20:51] Speaker B: It just. Five minutes. Five minutes will save your ass. [01:20:55] Speaker A: Yep. No, rituals is a great way to describe it when you're dealing key stuff. [01:21:01] Speaker B: I literally. I'm not even. Not even joking. I'm. I'm like this much of a nerd. I literally pretend like I'm like a double oh seven. Like. Like the accountant dude. And I'm like, okay, I'm doing. This is my. This is my extra passport, you know, like my. My get, like, hit the fan sort of process, and I better have my thing, you know, I want somebody to dig up my body and be like, oh, he's got an extra passport. He's got, right, you know, IDs and a gun. And like, I. I want to. I want to think about it systematically like that. And if that means that I have to pretend that I'm 007 for a minute to get myself to write down a fucking set of keys, it's worth it. I am not my own worst enemy in this security setup. Then I'll do it. [01:21:44] Speaker A: Absolutely. Yeah. No. Very well said. Speaking of rituals, I always think about my cryptography shaman would be Jesse Posner. [01:21:55] Speaker B: I know that name. [01:21:56] Speaker A: He used to work at Block. He's one of the lead researchers for Frost, but he also just started Vora. He just started Vora with Eric Kaasen. [01:22:04] Speaker B: Okay. [01:22:05] Speaker A: Have you heard about Vora? [01:22:06] Speaker B: No. What is Vora? There's so much shit happening for. [01:22:09] Speaker A: Yeah, you should get one or both of those guys on. They are basically building case and get. [01:22:15] Speaker B: Get the hell up here. [01:22:16] Speaker A: Yeah. Eric Kiss and Jesse Posner. I was just hanging out with them at the Bitcoin treasury and Custody Summit at Bitcoin park, like three weeks ago. [01:22:23] Speaker B: Yeah. [01:22:24] Speaker A: They're building some really cool stuff. Vora Vora. I think it's Vora IO Vora. [01:22:31] Speaker B: The. [01:22:31] Speaker A: It is Vora IO Vora IO securing. [01:22:34] Speaker B: Your body and Bitcoin. [01:22:37] Speaker A: Yeah. So they're basically building like a secure box to be a key plus a mobile app and using a lot of really cool cryptography for privacy preservation to help you secure your keys. [01:22:46] Speaker B: No, like. Like a. Like a. Like a box. Like a. Like a digital box or like a little physical box. [01:22:52] Speaker A: Like, they're. They're printing silicone. Like they are making a custom secure box. Oh, I'm. I'm being vague because I don't want to misspeak onto the exact mechanics, what they're working on, but you should totally have them on. Like, you have those two guys putting a lot of thought and effort into building out some really cool stuff. [01:23:08] Speaker B: I haven't seen Eric in a while. We should totally. We should totally do that. And I don't know. I don't think I've ever met Jesse Posner. He looks. Or he doesn't look super familiar, but I know the name. He's very probably from Frost. [01:23:20] Speaker A: When I've like, he is the main Frost guy. Building on the applications. That would make sense. He left. He was working. He was a longtime guy at a block working on that kind of stuff and the big key, I think. Yeah. All right. Shit. [01:23:31] Speaker B: Yeah, we're. No, we're totally going to get them on. Oh, this is great. I got so many. I got so many next episodes lined up here. There you go. I'm going to do get. I'm sorry, I'm. I'm writing down this. [01:23:45] Speaker A: No, please, go for it. [01:23:46] Speaker B: Go for it. [01:23:47] Speaker A: I'm. I'm a team player when it comes to podcasting. Yeah. Like, it doesn't have to be about me. I'm here to just help out. [01:23:54] Speaker B: I'm just gonna have you on in, like six months. Be like, what's my next. [01:23:56] Speaker A: Podcasting is a team sport. [01:23:57] Speaker B: What do we got? [01:23:58] Speaker A: Yeah. Yeah. Okay. [01:24:01] Speaker B: Okay, I got it. Got it. But we were. We were on the thread of other things and other ideas I think that we hit. Was the. Was the tap signer for. [01:24:15] Speaker A: Yeah. [01:24:15] Speaker B: Proof that you're me. Because you can just have any sort of video thing. [01:24:19] Speaker A: Yeah. That's cool. Yeah. Trying to think about what else. Yeah, there's always a lot of. I'm. I'm always thinking big picture. Like I think music and Frost are just massively underutilized. I want to be able to start thinking about how to improve like a hot wall experience using Musig and Frost. [01:24:40] Speaker B: Okay, a question. Question about music and Frost. Actually, let's, let's dig into these a little bit because it's a lot of technical nuance. There sure is a. What makes music different from traditional multi sig. [01:24:53] Speaker A: Sure. [01:24:54] Speaker B: And really in operation, I mean obviously it's. It's multi sig with one key. Right. It's taproot for, well, one apparent key online. So that's kind of like the big difference, but really about operation and kind of like the PSBT concept. Like how do you use multi music and then also Frost, Because Frost is kind of at a totally different layer. Maybe give us the simple rundown. [01:25:21] Speaker A: So with Taproot. Well, actually when Bitcoin was first invented or discovered, depending on how you view that question, both Satoshi used what's called ecdsa, Elliptic curve digital signing algorithm. There was a known better way to do signing called Schnorr signatures, but they. [01:25:41] Speaker B: Were patented at the time. Yeah. [01:25:43] Speaker A: And then the patent expired. And then Taproot we soft fork to enable Schnorr. So why. So what are we talking about? These. So these are forms of multi party compute where you're taking different pieces of information. The way it's largely used in industry though is you have a single private key and you shard it to individual pieces and each piece goes together. So you could take a single key and you can break it off into three keys and two of the three shards need to sign to do anything. This is very common at crypto custodians because they can have one signing architecture for dog, coin and litecoin and ETH and everything else. [01:26:21] Speaker B: Right. [01:26:22] Speaker A: So the thing with Schnorr though is it's much simpler technology with way less security assumptions. There's always a implementation, either in theory, conceptually with cryptography, or in the actual code execution that could have issues and problems which regularly occur and they get patched pretty quickly. But like, if you're talking about holding money in a key, you want something that's really robust. So the way Schnorr works is you basically can leverage bitcoin public private keys in a very straightforward, almost like additive sense. I could take my key plus your key, smush them together and we have Robin Guy's key and then the way to sign with Robin guy's key would be I would sign and then you would sign and then on chain you only see one key. It's actually my pin to literally add. [01:27:06] Speaker B: The signatures together in the exact same way that you add the public key. [01:27:09] Speaker A: You just smush them together. And I'm at a high level hand waving across a couple small implementation details. But conceptually that's the idea. You have a 2 of 2. Music 2 is an event. So you have 2 of 2, 3 or 3, 5 of 5, whatever you want. ARC leverages this for basically, since ARC, if you look at the guys are doing at, I mean their second and there's ARC Labs, right with arcade. So the way I know for a fact the way the ARC Labs guys are doing this is they have the ARC signing service provider, the ASP that holds a key and you as the customer hold a key and you each use music to sign. And since the ARC service provider has all of the ARC logic, they're almost acting like a gated signer. Similar to like what anchor watch does. Like oh, you only do these whitelisted addresses or X, Y and Z. They're able to off chain enforce the ARC protocol by just having it be I sign and you sign and then we're all happy and good to go. What's interesting is that Music2 is now actually in the bitcoin core libsec p library, which is the foundational cryptography library. So it's now at a level where the cryptography gray beards have blessed this implementation to use music. The other one is Frost. Frost is T of M a threshold. Right. And that would be like a two of three, three of five, whatever. Have you. The Frost Snap guys would be good people to have on too because they're actually just. Have you heard about the Frost Snap? Frost Snap, Yeah, it's the hardware wallet. It's like the human centipede hardware wallet. Have you seen that? [01:28:45] Speaker B: Oh, the one with the like it snapshot. That's such a cool idea. [01:28:50] Speaker A: No, I love that. Okay, pre orders are just about to come out. I think this time a month from now, I'm actually going to have a set of three for me to start playing around with. And they have their own mobile app. [01:28:58] Speaker B: Who's somebody to talk about? [01:28:59] Speaker A: So there's Nick UTXO club on Twitter. His name's Nick. That's him on Twitter. That's Nick. He's one of the main guys. Lloyd Lloyd four near. I'm looking, I'm trying to find his exact the FrostNav team. Let me just look at their Twitter account. Yeah, yeah, maybe it's on their website. Frostsnap.com is their website. Oh, that's easy. [01:29:25] Speaker B: I can get it there. I can get it there. [01:29:27] Speaker A: Yeah. [01:29:27] Speaker B: I have a producer. I'll make him do work. [01:29:29] Speaker A: Yeah, yeah. So their, their pre orders are just coming out right now. And the way Frost works is a two of three, three of five, whatever have you. There's something really cool about Frost, though, that music can't do. Let's say Guy, Rob and Guy's producer have a two of three multisig together, right? And let's say you fire your producer. You're like, I'm done working with you. You and I can come together any day now. But like, you, Guy and Rob can come together and make a new set of secrets and invalidate and kick out the producer's key. So you can do an off chain rotation of keys without having to move funds on chain with Frost. [01:30:09] Speaker B: Wait, wait, wait, wait, wait. No, explain this. [01:30:11] Speaker A: Okay, so you have a Frost key that's a two of three, right? [01:30:14] Speaker B: Yeah. [01:30:14] Speaker A: So if two of the three signers sign, they are able to move funds. Let's say you want to do a key rotation because one of the three of us is dead or fired or whatever. [01:30:24] Speaker B: Sure. [01:30:25] Speaker A: The. The threshold can come together and create a new set of keys and redistribute that new key shared to a third person. And now you have the key rotation, and all you have to do is you have to delete your old share. So what you do is you have the first set of shares, 1a, 2a, 1a, 1b and 1c, the original set of keys. And let's say the C key is gone. Fire whatever. 1a and 1b can come together and make 2a, 2b and 2c. And you can give the 2c share to someone like an encrypted way so you don't see it. And then you actually have killed the 1C key from being effective to actually do anything. [01:31:09] Speaker B: Wait, so it's like a derivation system, Kind of like HD Wallets is you have the same seed, but you can create an unlimited number of sub keys. So you're actually taking the two of two and creating sub keys of those. So it doesn't matter that that third key is gone, because you can just make sub keys that fulfill the two of the original two of the original. [01:31:31] Speaker A: That's like conceptually crazy. Mathematically all it is is a polynomial. Like it's a mathematical expression for the private key and you just reroll the polynomial using the threshold to make a new polynomial. And that allows you to basically rotate out keys so you can actually change who owns the bitcoin without ever moving funds on chain. [01:31:48] Speaker B: That is wild. [01:31:50] Speaker A: Yeah. [01:31:51] Speaker B: Yeah, that's wild. [01:31:53] Speaker A: Yeah. So that's Frost. Now Frost, I would asterisk and say that the cryptography gray beards. It's so cool though. So fast cool. Like the cryptography gray beards yet have not done the final specification blessing. [01:32:06] Speaker B: Sure. [01:32:06] Speaker A: But something that Jesse Posner is working on is that you can wrap Frost into music. So you could have. Think about the anchor watch ball. You could have the two of three over here and the two of three over here. They're actually just one key on chain. And then you could take those two, like the 2 of 3A and 2 of 3B and smush those together in a music operation. So you can make any configuration of signing into a single sig on chain. And it's like wrapping it. So he's working on the security proof for that right now. But that makes everything a single sig. [01:32:40] Speaker B: That's so crazy. [01:32:41] Speaker A: Which is so cool. Like, you can enforce all this. Government single sick. I think we're a couple of years out from that being final. But like, I'm thinking about the long arc future of bitcoin and custody and key management. I think in the long arc of history, a lot of stuff's going to go here. There's always going to be your single sig passphrase metal seat plate buried under a bunker in a mountain that you're going to want to have, but you're going to be able to leverage and extend bitcoin custody and scaling ultimately through these kind of constructions. [01:33:07] Speaker B: I have two things to ask on this topic, please. [01:33:09] Speaker A: Yes. [01:33:10] Speaker B: One is taproot is one of the least used tools agreed on on chain. And it comes up in the Raleigh bitcoin chat a lot. I'm pretty sure you're still in there. [01:33:23] Speaker A: I am still in there. [01:33:23] Speaker B: Yeah, yeah, yeah. I think we've talked in there. But they talk about how like, you know, it's totally underutilized. It was like, like within a year or whatever. I think it was like Udi and Eric Wall were talking about, like, literally nobody's using Taproot. Yeah. And like, I've always thought about it in the sense that, like, people are like, oh, we should roll it back. And it's like, well, no, like it has genuine utility, but there's no need, you know, like, there's no there's never been any of the pressures necessary and we basically solved all of the core problems that Taproot helps with already. And so we have standards. It's like, it's like making USB3 but everybody's still got USB2. It's like doesn't mean you get rid of USB3, it just means it's going to take a really long time for people to find the thing that needs the bandwidth for USB 3 or whatever. Right? [01:34:10] Speaker A: Yeah. [01:34:11] Speaker B: And so I was just curious your thoughts on that because you seem to be obvious in the like we're going to leverage Taproot and Taproot is going to be like a great thing. What's your view on. It's been here for a while. Why isn't it being used? Was it just a bootstrapping problem? [01:34:29] Speaker A: Yeah. And I think this actually dovetails into Bitcoin software maintainership. The last time we had we had three different soft forks to enable the Lightning network, the two time lock soft forks and Segwit. Those were all needed to make lightning work. And you have this dynamic when you are building software in Bitcoin where you don't want to dedicate a bunch of time and resources building out tooling and architecture if it's an unknown that it's going to even be added. [01:35:03] Speaker B: Right. [01:35:04] Speaker A: My critique would be I think there should be more attention to things like if we're going to activate Muse, like we're activating Tapr because we want to use Musig and Schnorr and Frost. I think there should be way more developer time dedicated to these application level use cases to make it so people like me who run a company or want to build software, I can't be the pioneer who's like, I'm going to go figure out how Frost Signing works now. Like I am not the cryptographer. Right? Yeah, yeah, yeah. You need to have a certain amount of brain trust dev time that I would put in the bucket of like Bitcoin core. Like you ever used a Bitcoin core wallet? It's horrifically rough. [01:35:49] Speaker B: Yeah. [01:35:49] Speaker A: It's not nice, it's not clean. [01:35:51] Speaker B: Basically we need a bridge between the protocol development itself and the usage of. [01:35:56] Speaker A: The protocol and the application devs that that's where application dev, right? Like I run a for profit company, right. Like I am not a knighted like egalitarian helping the bitcoin protocol. But you can't put all of that on me to figure out like okay, hire cryptographers now and do a security proof for Frost it's like, bro, like, if. If the people who are like the actual wizards of this stuff aren't on top of this and like building the infrastructure for it, I'm not going to be the one to stick my neck out on the line and do it. You do get people like, like the Frostnap guys who are willing to take that swing and probably the four guys with Jesse because Jesse's one of like the five people I would trust to figure that stuff out. [01:36:36] Speaker B: Happens to also be part of Frost. [01:36:37] Speaker A: Right, right, right. Like he's like one of the dudes. [01:36:39] Speaker B: Who like, like, so there's five guys that the connection between the protocol and application layer. [01:36:45] Speaker A: Right. [01:36:45] Speaker B: Of the whole world depend on. [01:36:47] Speaker A: Right. And I think that like you would actually. It's a funny. It's related to this like NVK was tweeting about how, like, why do I have to use Electrum to index my node? Why isn't Bitcoin core itself just writing software that makes it easier for me, running my node for different services and running an indexer. Right. These are things that are not literally the consensus code, but they are quality of life things that people have stepped in to fill in gaps because it's not there anywhere else. And if you actually want to help with the adoption and use of bitcoin, those things I think should be more in the bucket of people who have full time grants just to work on this stuff. And I think that's stuff that like Opensats does, funding people to work on things like Utrixo and working on like Bitcoin dev kit and like all of these things, like they're all pieces that are floating around here. I think in general, I think your question was around like the usage of this stuff. For me, I think there was an opportunity in a window to add something that in the long run is going to be net good. In the five years since Taproot activated though, I wish there was a lot more brain power from the bitcoin core. Like the very senior dev network that we're putting into building out the rest of this infrastructure. Yeah, right. [01:37:54] Speaker B: Building the bridge to make it usable. Like there's a ton of user experience stuff that there's just no, like people just aren't filling in the gap for. It's like it technically works. Who cares? [01:38:04] Speaker A: You know, you called out a really good point. How do you even coordinate these like Frost and music stuff? [01:38:08] Speaker B: Yeah. [01:38:08] Speaker A: There is no standard spec and protocol today. In theory, you can use a PSBT and have like the round negotiation for the Signing in a PSBT field that isn't used by normal wallets. But like no one specked and scoped that stuff out. Yeah, right. And so which is super important because. [01:38:25] Speaker B: If you book that out, you screw up everything. [01:38:27] Speaker A: It's money gone. It's money gone. Bugs. This is what's called a non to number only used once. You need this for coordinated signing operations. If you get that number wrong, you can leak a private key. Yeah, that's one of the downsides of the signature aggregation is that you're able to do all this really cool off chain like scaling. But if you mess up the handshake ritual, going back to a ritual, there's a ritual in how you do it. If you mess that up, you leak your private key. [01:38:54] Speaker B: Yeah, right. [01:38:56] Speaker A: And that's something that I would wish in general that like this wasn't seen as something for other people to go pick up and build. If we're going to take on the swing to add it to the protocol, it'd be good to have proper stewardship of the people that are maintaining the protocol and the software of Bitcoin itself into like providing a roadmap. They don't have to literally build the business plan for everyone, but if they're not comfortable in executing and using this stuff in production, it's harder for me to take the first swing and do that. It's actually when we started and because there's downstream consequences, there's many layers and chains to this. Right. So with miniscript is a perfect example. It sat there, it was live, it existed, no one was using it because no one was using it. None of the hardware wallet supported it for the longest time. This is actually a really funny story. When I started going down the miniscript rabbit hole, I cold emailed Andrew Polster. I had talked to him once previously at a conference and I was like, hey Andrew, like this miniscript stuff is really amazing but like, why is no one using it? And he said, oh well, none of the hardware wallets have added support for it yet. And I messaged him, I was like, ledger added support last month. He's like, oh, no one told me. He literally didn't even know that the largest hardware wallet distribution was there. And then once Ledger added it, like haranguing Rodolfo and the Coincide team, they eventually added it too. Right. And that allows me as a business to be able to actually start using it in a product. Yeah, right. Because I'm not going to keep a hot server or build out my old code HSM for like My, my own little thing like Hardware wallet is such an optimal for mass scale user interaction, be able to like have someone trustly and safely interact with private key material. And so that helps with adoption, having more vendors. But like there's a sequence of steps, Bitcoin core interacting and using it and extending the tooling for it. Going into the hardware Wallet signers and then leveraging something like Bitcoin dev kit to actually write the software around it. And then you get a certain chain unlock of, okay, now I can walk in and do this, but until that like bridge is built, I can't meet you halfway if there's no infrastructure and no support. Yeah, it's too much of an execution risk from a time resource thing and also making sure I'm doing it correctly. You need to have set protocol standards for all of this stuff. So I think there's a valid critique in all of that of like we added this thing and then it was like, okay, it's technically possible. Now everyone else, you go figure out how to do this. And like that's not the way to actually get extended support. [01:41:28] Speaker B: Yeah, right. [01:41:28] Speaker A: So that, that would be my nuanced. [01:41:30] Speaker B: Take on the only people who actually used it were spammers. [01:41:34] Speaker A: Yeah. Oh, totally. Right. [01:41:36] Speaker B: Literally the only people. [01:41:38] Speaker A: Because the level of fidelity is just like, I just dump the data. I don't care and I just dump the data. [01:41:42] Speaker B: It's dead data anyways. Like, oh, you're gonna leak. I'm gonna leak my JPEG by accident. It's like, well, totally. Okay, you're doing that. Okay, then the other question is, and I have gone back and forth, I've had Hunter Beast on the show. I've read multiple pieces by Lopp about quantum. And I have had conversations with people who are super like quantum accelerationists and people who are super quantum skeptics. And then recently, in fact, was this you? I don't even remember somebody posted in the Raleigh Bitcoin meetup, I believe about this paper, which I've read almost the whole thing of, but I think I'm reading on the show because it's super entertaining of the replication of quantum factorization with an 8 bit home computer, an abacus and a dog. And that all this, the apparent like massive scaling of like quantum factorization. [01:42:36] Speaker A: Yep. [01:42:36] Speaker B: Has actually been just a series of tricks. And it's almost identical to what it was the state of what it was in like 2014 if you actually dig into it. So and I've literally had like Hunter Beast, like we're three years away From Shaw? Yeah, from ECDSA being bust broken. And I'm like. But then I read something like this and it's like they factored the number 17 because like obviously Taproot. [01:43:04] Speaker A: Would be. [01:43:04] Speaker B: Turbopwned exactly like taproot is, is as public key, like visible. To decrypt as you can get, you. [01:43:12] Speaker A: Must have a public key and attack. [01:43:13] Speaker B: Quantum theory. Yeah, yeah. [01:43:16] Speaker A: So my thought is that I think it's a legitimate consideration when you're thinking about the health and longevity of bitcoin as a multi century project. I'm not sure it's really coming in the next couple of years. There's also an additional game theory thing. Are you familiar when Alan Turing broke Enigma, how they selectively use that in World War II? [01:43:39] Speaker B: Yeah, yeah. [01:43:40] Speaker A: So for those at home who don't know they cracked Enigma and they didn't want to let the Axis powers know they cracked Enigma. So what they did was they intentionally let ship sink planes blow up in. [01:43:52] Speaker B: The sky, let attacks happen. [01:43:54] Speaker A: Let attacks happen because if they were too reactive, they would show their hand. [01:43:59] Speaker B: They were compromised and they would immediately switch the algorithm on Enigma and it would all be. We'd be back to have no visibility. [01:44:06] Speaker A: They would only do it for very specific strategic moments. Moments. So I think when I think about the second third order game theory of if you have the ability to reverse public private key cryptography. Anyone that does that, especially with bitcoin only being a two and a half trillion dollar asset, there's a lot more value in espionage than moving coins on chain. Eventually the game will be up and someone will figure it out and then they're going to make a big swing and just start draining keys, like draining Satoshi's coins to start. Jameson's article is really cool because he actually goes through mechanically. These are the addresses you attack. It's like the Binance cold storage. Since they reuse that address, the public keys are sitting there. So rather than trying to pull a bunch of 50 Bitcoin UTXOs from Satoshi, you're going to go grab the 200,000 Binance coins. Right. Like that's actually what you're going to do if you're actually doing the attack, which I agree with, I think it's conceptually important to think through about like what a future state is. It'd be cool if there was like something in the back pocket that we could just like flip a switch if we need to. I wouldn't urge an activation faster though. Yeah, I think that's something that you, you want to See it actually happening before you did something. Yeah. And have like a standard protocol for like how do you upgrade your security? Right. Like, like could you like have basically like an airlock that you hit the emergency button on and you can Sweep your, your UTXOs into quantum proof addresses. Right. Like have that software available, distributed, kind of like, you know, you just want to have like a shotgun underneath your desk just in case, but you're not just casually walking around with it every day. Right. Like that would be my personal perspective. Like I think it's legitimate, I think it's a real thing. I just don't know the timeline and I don't profess to be knowledgeable enough to speak to what that timeline is. [01:45:42] Speaker B: Yeah, yeah, dude. The. I go back and forth from thinking like the timeline is really soon to like the timeline is so far out. My most recent paper, the three main, like, like these are the ones to be concerned about. Things that, like announcements or whatever that had me like, okay, maybe he basically debunked the hell out of them. Like, like that they weren't like one of them was that like, oh well, somebody. [01:46:13] Speaker A: The. [01:46:13] Speaker B: One of the most recent quantum record breaking things is they factorized a number that was like, like 15 septillion, you know, 1, 3, 7, octillion, whatever it is like you know, just this crazy what looks like a huge number and you're like, oh my God. And you know, still it's such, such, so, so so many orders of magnitude from a SHA256 key or whatever, but it looks like big and scary. And he says but when you put it in binary it suddenly makes sense why this number is the one they picked and then they showed it in binary and the actual number is 0101-0101-0101-0101. Like so they've, they've made a creative little physics experiment that makes it look like they factorize a really big number when really they factored literally 01 that like there was no randomization to it at all. It was built to be an easy to factor thing. [01:47:09] Speaker A: Right. [01:47:10] Speaker B: And so like there's a, there's a bunch of that going on in quantum. And so, and Steve who, you know on the round table genuinely believes it doesn't scale at all. We had a conversation, he went through like you know, 20 different types of computing that were tried out and literally none of them scaled like Moore's Law. Like there was no, there was no way to actually scale them. But we had all two different types of computation out there. But it was only electronic gates, you know, it was only, it was literally only silicon that could actually scale at Moore's law and everything else had something impressive happen and there was this time where there was development on it. It just hit a wall because there was no exponential scale. So I don't know, it just, it's just one of those things that I, I could not. I'm totally against Lopp's proposal of locking coins. [01:48:06] Speaker A: Seizing or freezing? [01:48:07] Speaker B: Yeah, seizing or freezing. Like even, even if quantum is super like a definite risk and we get there, I think I've very solidly landed on. We just don't play that game because there are still unknowns. [01:48:21] Speaker A: Here's the thing, at this point it's a well known risk. So you could mitigate that Rather than having a 1 UTXO with 200,000 coins, you could break that up into a couple thousand, which makes it less of a target for quantum theft. Yeah, you know what I mean? The risk exists at this point. The hypothetical risk. It's not something that no one had ever thought of before. There's multiple people, blogs and podcasts and people working on this problem. You're ultimately on the hook for it. [01:48:46] Speaker B: Yeah, yeah, yeah, yeah. The, the ultra responsibility I feel like is the like give avenues and options optionality for people. But it's on you, you know. [01:48:57] Speaker A: Totally. So I've thought as a small little thing, you could always throw a hash lock into an address to be able to combat it to. This is something miniscript does. It does. You can do a hash lock like you hashlook contract. So there's two things. One, there's Shor's algorithm which reverse engineers private keys and there's Grover's algorithm which, which reverse engineers hashing. They're two distinct things. Yeah, right. They are two distinct like problem sets to go fight. The one thing though to keep in mind is that when you use a hash lock, once you broadcast your transaction, the pre image to that hash is seen by everyone on the network work. So like it's not perfect to be clear, but it's something to. It's something that I think about. Like I like to go out there and think like longer term horizon like security like patches like ways that you can mitigate and go around this stuff. Like it's something that's there but there also aren't really great pre. I'd have to build some pre image tools like for how miniscript leverages hash locks. I've done it as a proof of concept but like I, I'd have to build a bunch of software on top of that. [01:50:00] Speaker B: My, my general conclusion is we have a lot more time than people think. [01:50:03] Speaker A: I think so. [01:50:04] Speaker B: Than people are claiming. [01:50:06] Speaker A: Yeah. [01:50:07] Speaker B: So. Oh, we didn't even get into Ocean and filters and stuff. But I'm actually, I actually have a hard stop because. [01:50:16] Speaker A: No worries. You have a hard stop in three minutes. [01:50:18] Speaker B: Not even trying to put them in the same bucket. Because I think that's actually like a big problem in the conversation is Ocean has nothing to do with filters. Just because like, you know, Mechanic and Luke are the ones who talk about filters. I literally, like right now I am mining with Ocean without running any filters and Ocean can't do anything about it. [01:50:35] Speaker A: You know, like my 30 second synopsis would be. I am fully supportive of everyone running whatever software they want. I'd never make a case that someone. It's your own property that have free open source software works. There are just questionable impacts on the second third order consequences of the efficacy of filters with how the network propagates transactions. But like, we could do a whole dedicated thing at another time about that. Yeah. [01:50:59] Speaker B: I was about to say let's, let's put a pin in that one. Sure. And come back to it. I've got a video that I'm gonna make about most. It's not really about Ocean. It's more about Datum, datum and stratum B2, which will be a short video but I think it'll be really good. And I'm about to have a meeting with Jimmy Song here in like an hour. Something very soon. So we'll have a conversation pretty much all about that. Because he's been kind of like, I'm not going to run 30. And he's been like, kind of talking about like the social and higher layers. And it might be good to have more to actually respond to when we come back around to this. So we'll actually schedule this again. Dude. [01:51:37] Speaker A: Awesome. [01:51:38] Speaker B: Thank you for coming on the show. I have been wanting to dig into the anchor watch the insurance thing because I think is one of the most undersung, like improvement. I. I got just going back to my rant at the beginning. I don't think people realize how big of a deal it is to have a multi sig structure that risk is definable and insurable. [01:52:03] Speaker A: Yeah. [01:52:04] Speaker B: And a company willing to take that risk and potentially even pushing to get it so that bitcoin not only is an insured asset, but it gets out of the specie category and liability can actually be held in bitcoin. And the, the speed that things can take off or change when we have at the exact same time. Banks are able to now basically have the option of holding and custodying and using Bitcoin on behalf of a customer, which has basically been opened up finally in the. Just this year. [01:52:42] Speaker A: Yeah. [01:52:43] Speaker B: And movement on insurance and institutional like capital savings. Like there's, there's a lot of legal framework that needs to get in place. But I think we're actually in a position where a lot of this can happen this year, tomorrow, next year. [01:52:58] Speaker A: Absolutely. [01:52:58] Speaker B: Like very, very soon. And we're talking about huge structural changes. This is like changing in manufacturing processes for metal. [01:53:06] Speaker A: Right. [01:53:07] Speaker B: This is like Carnegie level, like financial infrastructure that would be changing, that has ripple effects at every other layer. And it's a big deal. It's a big deal. And I've wanted to chat about this for a long time since, since literally last time we were sitting in Rally Point that's talking about this before you'd even release the wallet. We bullshitted about this for like 2 hours sitting at the bar. So yeah, yeah, awesome. Shout out anything you want. Follow you software anchor. Watch all that good shit. [01:53:41] Speaker A: My anchorwatch.com if you want to learn more you could shoot me an email. Rob anchorwatch.com if you want to learn more about the product. I'm really quick at responses. My generic shout out I always give to when I go out on a bitcoin podcast is check out the Bitcoin Bugle. I love those guys. The Bitcoin Bugle on Twitter, Google Dot News, Rod Palmer and Dick Greaser are just absolutely hilarious. Like they're one of my favorite people in bitcoin. [01:54:08] Speaker B: They're very fun counterculture dick greaser without laughing. [01:54:11] Speaker A: They have a podcast too. They are fountain only. They are pure value for value. The Bugle Weekly podcast is one of. [01:54:19] Speaker B: The funniest way I didn't. How did I not know this? [01:54:22] Speaker A: The Bugle Weekly podcast, they do AI generated ads. I've made multiple appearances as an AI generated ad. Like it is. It is so good. It's the best like bitcoin culture podcast I've thought of since like Bitcoin Uncensored back in the day with John Seth. Like it is just so good. It's irreverent, it's funny. They make fun of everyone. They have a great sense of humor. [01:54:44] Speaker B: I love the Bugle. Totally behind you on that one. Shout out to shout out to the Bugle Bugle guys. They suck. They suck dick. They're terrible. I hate them. [01:54:52] Speaker A: They do. And I have my PodConf. My PodConf hoodie on. Representing the other side of the culture war. [01:54:56] Speaker B: That's right. Hell yeah. All right, man. [01:54:58] Speaker A: Well, thanks, guys. [01:54:59] Speaker B: Thank you. Good hanging out, man. We'll meet up in Nashville or if you go to bitcoin. [01:55:04] Speaker A: Bitcoin plus plus Durham maybe. [01:55:07] Speaker B: Let's let chat. Dm, Telegram, whatever. I'm up on all the stuff. [01:55:12] Speaker A: Awesome. [01:55:13] Speaker B: And we'll try to coordinate. [01:55:14] Speaker A: Sounds great, man. Take care. [01:55:15] Speaker B: Later, man. All right, guys, I hope you enjoyed that conversation. We're gonna wrap up. I am limited on time, but shout out to Rob. I will have links to all of his stuff in the show notes and to many different reads and things that we're gonna cover on the show. I really think y', all, y' all are gonna like it. I'm, I'm excited about a couple of them. I've already kind of like scanned through and look at some of the stuff and I think they're gonna be great episodes. So thanks to Rob just for that. I'm just gonna have him on the show every six months just for episode ideas. And shout out to Leden for bitcoin backed loans and synonym for pub key. And the incredible work that they're doing on decentralized protocols to HRF and the Financial Freedom Report and the ASSA Freedom Forum and Gitchroma co for red light therapy and light health. These guys have been supporters of the show and they all make great products and do awesome work and they are all based bitcoiners. So shout out to them. Don't forget links, goodies, discount codes, all that stuff in the show notes with tons, tons to check out in today's description and I will catch you on the next episode. Until then, Everybody, that's my two SATs, Sam.