The State of Bitcoin Scaling Solutions and the Future of Bitcoin | European Blockchain Convention

[Music] test test yeah there we go all right uh 40 minutes to discuss the future of Bitcoin um easy I would say right sufficient amount of time um yeah a couple of words from my side I'm David I work for BTC EO we are the largest German crypto media and I'm happy to moderate a panel uh just let me quickly introduce the panelist so on my left side is Julian Duran he's a product lead at Marathon digital he leads andur an Innovative unit building layer 2 Chain and apps to accelerate Bitcoin adoption formerly he leted an education NGO in Latin America worked in US politics and buil fintech products in Southeast Asia then we have to his left adoro contas he is a business developer and strategist with a background in Marine Electronics tell telec energy markets and Bitcoin for the last eight years and also welcome to Scott Miller he is the CEO of sesap and I got his bio like yesterday so I didn't have much more to say but I uh yeah I'm confident we get to know him better in the panel last but not least tobas zidle he is the co-founder of stalk a service that helps issue security token on bitcoin for example stalk works together with blockstream to offer so-called mining nodes and I'm really curious to he about those um to participate in yields generated by Bitcoin mining and I'm sure that's quite interesting all right let's get into it why should we scale Bitcoin and know curious about all of your opinions maybe start with you Julian yeah absolutely so I obviously work for a very large mining company and one that holds a lot of Bitcoin and so for us what scaling Bitcoin is all about is let's drive more value to the asset that we hold so much of let's also Drive New forms of Revenue which the minor business model is all based on the Block reward and so if there are more people using Bitcoin there are more people transacting it then we make more money from it and so fundamentally for us scaling Bitcoin nothing to do with token values nothing to do with press everything to do with transacting volume and activity yeah for for me um I mean I believe uh blockchain have blockchain have trade-offs right which means that the uh if you can if you want to improve some feature it will always be at the expense of uh making another one worse right so since the security of the main token is kind of sacred nobody wants wants to mess with it so the way to scale it to enable faster transaction cheaper ones and advanced functionalities is not to have conflicting interests on on the same chains but but with a layer approach instead so that's why we believe that with a layer two we can enable faster cheaper uh confidential transactions digital asset issu on and all these uh more fancy features that don't compromise the security of the main token you want to go ahead uh so on our part we view Bitcoin as the main Reserve asset out there uh all the other chains um so Bitcoin is the main chain so so if you want to scale Bitcoin so it becomes like part of it you know Capal Market infrastructure Etc since Bitcoin is a one asset only chain it needs different scaling Solutions so that you can issue everything from Securities and build Capital markets and know other tools around it and doing so you need uh side chains around Bitcoin much like central banks have commercial Banks which issue their own uh cash uh Bitcoin needs side chains for asset issuance uh and then you can settle on the main chain uh at the end of the day or whatever cycle so I think um side chains are the crucial component in terms of scaling Bitcoin uh so that it can be used for areas other than just pure Bitcoin payments between users all right as we are like tokenizing actually um financial instruments on bitcoin or better to say like on on a layer two solution like liquid um all for here from blockstream they are crucial in developing like this kind of Technology we see actually Bitcoin is like the backbone the future backbone of the financial industry um and um and that's why um we we believe scaling um will be essential right because obviously like the transactions speed is like to low like the costs are too um too high um when you have like um a layer two solution or maybe like then even like layer three solutions how we um see our platform then obviously um you can um build on bitcoin and why is it important from from my perspective it's very important because like Bitcoin is like the only I consider like the only decentralized um blockchain um truly decentralized and is using proof of work instead of proof of stake and uh when we want to build something for the financial industry you know to replace the financial industry how it is right now um you also need to to to replace actually the way of um how like the whole backbone is actually built and when you when you do proof of stake for example then you just like mirror actually what's happening right now in the in the in the in the Legacy Financial world right so because like then you have like still like the agglomeration of power and so on so in in this sense we believe it's it's essential to have a proof of work protocol um for for the financial industry and that's why scaling is important proof of work is a good segue you work for Marathon Marathon makes a revenue on onchain transaction now I learned that you also developing a second layer solution aren't you stealing your own Revenue why why would you do that that's a good question so as a lot of the other panelists have noted the Bitcoin main chain is designed to be simple you know this is really what I believe drives a lot of the value behind Bitcoin the fact that it has this limited Supply the fact that you have proof of work at the heart of it and the fact that you don't have very complex logic trying to operate at that base chain that then creates security vulnerabilities I think there's a lot of debates within Bitcoin about trying to make it look more like eth make it look more like salana uh my personal opinion is I don't think that makes a lot of sense um there's there's you know halfhazard changing such a valuable protocol could really just you know throw the baby out with the bath water as they say in the US um so when I think of like Layer Two and with Marathon obviously we're doing you know we've launched slipstream we have Mara pool that's getting every single day you know we have a lot of things that are trying to drive us more transaction fees on the main chain but fundamentally the main chain was not designed to do things like tokenizing financial instruments at scale or solving crossb payment problems for people in emerging markets that are sending what $50 $100 um across borders you know these are the sort of problems you need a scalable piece of software a scalable Ledger a more flexible ledger to do and so it made sense that we should go with the second layer to create not cannibalizing um transaction fee Revenue but rather additive so have two sources of revenue as opposed to one or three or four or five Etc and that's a more famous scaling solution liquid um I'm really curious to hear about liquid in general what's the idea behind it what can it do yeah liquid uh yeah as um as um Julian was saying um basically my opinion the the main layer of Bitcoin is I'm a great fan of Nick Sabo right this Cipher Punk and I've read everything from him and one of the things he's been the focus of his work has been basically creating institutions in cyberspace right and to to enable trust in cyber in cyers space you need to do either replacing existing institutions that don't work and one of those institutions is laws and laws don't work in cyers space but the other one is extending the reach of existing reputed institutions and that's what liquid does in an nutshell it it does it with all the let's say philosophical underpinnings of Bitcoin because it uses the otxo model it uses the Bitcoin codebase it uses a number of features that enable financial markets in in a way more efficient and secure way than uh current ones and the problem that in my opinion this solves is that many assets are loged in emerging countries where laws also don't work as well you know as in cyers Space the the the rule of law is poor in those countries so if you want to unlock those assets and connect them with global liquidity you need a a blockchain that is able to substitute the the work of many uh traditional institutions such as National stock exchanges right the the Clearing Houses sorry depositaries even central banks if you have the financial layer on top which is Bitcoin so the the the whole IDE a of replacing many uh federations many uh traditional institutions which are federations for just one computer network that H adds all this logic to the assets it's is fascinating for me and and that's what I see liquid performing and liquid is also used by Sid Swap and stalker um maybe you guys could more get into how you use Liquid maybe Scott you want to start well well from our perspective we've built a wallet as well as a swap Market built into the wallet where we have something we call a swap limit order book so that anyone can trade peer-to-peer with each other uh since there's more than one asset on the uh liquid network uh users are able to swap assets between themselves without having to trust any third party custodian but what what this also does is it allows uh users to build an order book in any asset that they hold within their wallet and any other user can come and pick up that order uh so it's a fully peer-to-peer def I mean it depending on your definition of peerto peer but it's effectively a peer to Pure marketplace where we host the order book where we have utxo commitments where users can trade with each other uh and this includes also um Securities that can be issued on liquid so any Securities that are issued by the issuer uh they're able to create instantaneous liquidity without having to go to an exchange and pay listing fees Etc so that there actually Securities are held by the end users and can be traded peer-to-peer between them uh just for free basically we have a small very small fee of 0.1% on every swap um but but that's effectively what we've built and uh we're you have a fairly dominant position on the liquid Network so all the securities issued on liquid we have them listed in our Marketplace uh I think 70% of the volume that goes in between Bitcoin and liquid goes via the Sid swap function where we help users um move between the two different chains so we have uh an actual Bitcoin side chain with actual businesses up and running uh which work uh and we have functioning swap markets so that we can Envision a a and different type of financial system where users actually hold the assets themselves they're able to treat between themselves without having third party custody and most of our volumes in that regard is actually between tether and um liquid Bitcoin how that's traded between users so that's what we've built uh and yeah so it enables these type of peer-to-peer markets since you have these multi-asset chains and you don't there's no custodian involved so users can swap directly between themselves and that's how we see things moving forward and with assets if you want to go to an exchange and have them listed you're free to do so you can list your asset at multiple different exchanges but users should also have the ability to swap these assets between themselves without having to go to a centralized custodian to rely on them and that's the infrastructure that we're building and hey it's up and running I mean we're continuously developing we're not doing much marketing but everything works so I mean it's an actual live a bit more than proof of concept it's actually in the market we've even issued our own equity and found the legal structures to do so and so we very strongly believe that blockstream is on the right way and hopefully Marathon soon as well uh once they go live but we strongly strongly believe in the concept of side chains around Bitcoin and that's the scaling solution for Bitcoin and that's how we move forward thank you Scott um so basically maybe I will just quickly explain how this tokenization is working on the on the liquid um um blockchain so basically what tokenization means like from PR financial instruments is actually that you have um a investor register which is um held by like the the issue of the financial instrument can be like any um SPV can can be any company right so it's held actually at the the company's office still and what um what the blockchain solution is doing like liquid is doing and it's very beautiful solution is actually constantly updating the investor register 247 right then you might say okay then might also any other blockchain solution do um but liquid has actually built with like the M asset ready made use case for um Financial to financial instrument tokenization so you can really block it in and you tokenize and you and you're like compliant um with for example we are operating out of Luxembourg with Luxemburg with Luxembourg corporate law right um then there's like then there are options like to to to to freeze like the assets um to do Force transactions and the like so you don't have like to always build like your own smart contract you can um immediately use it and I think another beautiful feature of um of liquid is um obviously is it's a little bit complex I will not explain it the homomorphic uh you know it's a confidential transaction so it's very important I think for the financial markets that you cannot see um directly everybody cannot really see there are they can see that there are transactions but they cannot see like their amounts um which are actually transferred so this is like an essential tool um for for financial markets um we believe and um yeah and then it's obviously um for us it's a it's a it's a link to to to bitcoin and um we are building also Bitcoin related um products right like so everybody loves it um and to use it um because it's sometimes pretty hard when you have a Bitcoin maximalist um to use like an evm chain right but that's how we that's how we do it it seems to be the case that liquid is more of an Institutional sort of side chain is that correct or is it also for retail I mean there are uh several use cases uh one of them of course is simply people that find uh fees very expensive on the main chain and we frequently see uh people that when the fees go up in on the main chain because of some uh I don't know ordinals or something like that then we see a wave of companies joining liquid simply because they want to save on fees and then they want faster and cheaper transactions and that's it but the the other use case probably the one I'm most excited about is capital markets the one I just mentioned and liquid has a number of in fact I may add that the total value loged on liquid already exceeded the 1.8 billion recently so and most of it is actually Securities and and most of them are actually H the assets that are loged in some emerging countries where H you know these sometimes non-banking financial institutions have issues have problems to access liquidity so with a secure and Trust minimized blockchain we're enabling the connection between those assets and and Global Investors Global lenders so I find that probably the most interesting use cases but but then of course um liquid is since it uses the utxo model is compatible with lightning Network and we have a solution uh for that to enable as well uh fast and cheap transactions for any liquid asset so that's another use case that uh is in the is not still as big as capital markets but I expect a lot we're going to talk about lightning as well later but I'm curious to hear about andur um is it more retail oriented or institutional that's a great question so when we first started with the whole Enduro project the thesis we approached with that with a year and a half two years ago when it began was the the world of Bitcoin layer 2 is getting completely beat out by the ethereum and the salana worlds and that's Still Remains my conviction and I remember when I started this project and i' go out to the market and talk you know to people that oh and I'm thinking of maybe like investing in a Bitcoin layer 2 that marathon's thinking about it and everybody told me no no no no no the scaling world for Bitcoin is all saturated that's a complete lie and I think now that we've seen there's 100 plus Bitcoin layer twos that have come out in the past 7 months most of these things are just blatantly fraudulent and they are getting a killing amount of Bitcoin from from East Asian companies from wealth Managers from Miners And so going back to your question we need to attack on all fronts there needs to be a retail solution there needs to be an Institutional solution and the way that we designed Enduro is to be multi-chain from the from the get-go we said there's no one development standard there's no one approach to programmability developers there are many different types of developers just like there are many different types of use cases and so we need to provide a technical stack that's flexible to those things we also designed Enduro to kind of take Bitcoin scaling in a New Direction because the lightning narrative has been very often played and having now built and we're building tokenization platforms payment Platforms in Emerging Markets I'm finding that a lot of people a lot of banks a lot of exchanges in these parts of the world feel underserved by the existing array of Bitcoin scaling Solutions and they're literally just going to salana point blank that's the thing and so I think what's at stake for Bitcoin is kind of taking a macro approach and saying all right we are falling behind on the scaling debate from these other ecosystems let's try to create new and Innovative Tech that kind of lets go of these old narratives tries to focus on new ones and most importantly Do Better Business Development because I genuinely believe that's the biggest inhibitor to what is keeping Bitcoin from literally taking out all these other chains I mean it's it's the sleeping Dragon right it's China in the 1970s and we we just need a dung shell ping to come and like open this thing up so yeah anyway that that's kind of how I see it that's interesting let's talk about lightning um you are a bearish on Lightning did I get that right what I'm bearish on is on focusing on the same solutions that have not demonstrated traction so I wouldn't say I'm bearish on Lightning because like as most other people that are using payments that are trying to make payments on blockchains most of them find the user of experience of lightning so difficult that they're going to other chains and so because of that my view on it isn't so much hey lightning doesn't work my view when it is there is no traction behind that and when people talk about oh there's a lot of Bitcoin locked in it that people are using it I've talked to the exchanges in Emerging Market country i' I've went and spoken to these different fexs nobody is taking that solution seriously and so that to me I don't know what the failures due to I don't know why that adoption isn't winning but when you hear about companies like Visa adopting salana for usdc stable coin pilots in kyrgistan I was just inflamed by that like why are why would they use salon for an Emerging Market Banks US dollar settlement that that is a failure on so many fronts and we need to beat them at that yeah um um I mean to to say uh yeah Bitcoin is definitely the dragon the China of the 90s I love that but I also have the opinion that the way the incentives have worked in the crypto industry have totally been a distraction with regards to bitcoin so for us uh you probably have faced this H when when we want to talk to our cust custodian an exchange an issuer and and sometimes developers as well we've noticed that the you know there's a dynamic in the industry that many blockchains have raised money with their native token and with that money is that the way they raise their ecosystems right it is a totally inorganic way of of growing so bit we in Bitcoin don't have that right so we we have really had to focus on solving problems at this point I I used to think it was a disadvantage some years ago but now I think it's an an actual Advantage because it has forced us to really understand what this technology is actually solving huge problems right and and then with regards to H lightning yeah I I I like to find explanations right and and to why it hasn't worked with regard to bitcoin and well I I don't have metrics I know it has been stagnating and lightning again is not my expertise but lightning faces many issues the first one is that it it has been used to pay a very unstable asset so if you're expecting the asset to rise in price you're unlikely to be willing to pay with it if you're expecting to sell something for Bitcoin you're and the price to go down you are unlikely to expect somebody you you are very unwilling to you know to collect money on on with Bitcoin if if that's the case so but there's also other challenges we have been which have been like uh Channel management of liquidity things like the note management and that's why I think that the and also when the fees are high on the main chain the the translation or the the moving of onchain Bitcoin to lightning is very expensive so it to totally defeats the purpose of of lightning in the first place so I think that the that is why I actually think that liquid is the solution because liquid is so cheap and this utxo model that if you want to pay with Bitcoin you will be better off with liquid but still think it will be an issue to pay H with Bitcoin because of this volatility so for a long time at least so I think that's why I'm very excited about the projects we have with stable coins because with stable coins you don't have that issue and and the the the way to translate between liquid Bitcoin and lightning network is super cheap so you don't have the issues that we face when there are the fees are very high on the main chain and so uh but there are other assets other than for payments that require fast and and large throughput but there are other ways as well because liquid is an implementation of the elements codebase it's basically an open source project so anyone can actually go to the website and start their own elements like implementation so we have projects as well that instead of using lighting yet H you just you you can just change the parameters of of liquid and have faster blocks uh for for payments and and other use cases again because it has trade-offs again but these side chains can be again connected to liquid and to bitcoin itself so so you can you know solve for different trade-offs whenever there's a need for it so two lightning Bears what about you Scot I think I understand it but I haven't really heard a coherent argument to for it to work from end to end and I don't think anyone's managed to implement anything yet that could actually scale and um so so the very positive thing about it is that it's Bitcoin native and has all the security aspects which people love and which we should support which side chains do have tradeoffs uh so lightning is very tantalizing in that regard but I I don't think it's been made to work yet and it's not built for asset issuance it's not built for many other things and as soon as Network fees goes up it kind of goes out the window when you need to rebalance and uh so that's why I think it hasn't taken off because it looks fairly good on paper except for the last bit and uh and no one's managed to implement it properly yet may I add something I forgot to mention that the note management and liquidity thing is is we have created a solution which is called green light and it basically like it's like um lightning Network as a service but noncustodial so it enables what I just described this payment with stable coins without the need to understand the protocol itself so that's what I had forgotten to say yeah go ahead so for you saved it right I did not want to further it on lightning um I think like lightning is um has a lot of issues right like the chaning is complex but I think like it's good for smaller transactions um for us as we do asset tokenization um and we have um definitely larger amounts um it's it's not really useful we recently paid out um more than 1,200 um Bitcoin um to our to our investors on the on the platform and I think we would not use lightning um solution um for this one right so I think this is like something to consider and and um and then also like yeah I think um that's probably the one of the main the main points I would I would say about um light lightning for for our our our use case for asset tokenization right are you still bullish on bitcoin being like a transaction medium I'm not sure this was too pessimistic I'm really curious to hear hear your opinion whoever wants to take this definitely very very bullish on that because so taking a step back like you mentioned it in my intro I've worked in fintech before I know the payments landscape and Emerging Markets the most important thing to try to innovate Financial systems in different parts of the world is everyday people need trust in the currency that you're using that full stop that security uh block times wallet U none of that matters the thing that matters is do fundamentally the people believe in the asset that they're being used to get paid in the asset that they're paying others in to people believe and I think no other blockchain has anything that comes close to that even people talk you know usdt and how you know everybody's using that in the emerging world like okay I I come from the emerging world not everybody is using that usct is still a novel phenomenon there are some people that are using it there are some businesses that are into it but I would not say it's mainstream yet so the way that I see it is the only cryptocurrency out there that is mainstream something that if I went to talk to a villager in a random country in the global South and went to talk to a Manhattan investment banker the only crypto curency that if i' mention that both of them would recognize or at least have some opinion over it'd be Bitcoin and so Bitcoin that's why I say the sleeping Dragon because everybody knows that thing is going to wake up at some point salana and all these other you know chains I completely agree with Al I think you have to grow organically and all these other chains are not doing that they're terrified of what's going to happen when the dragon wakes up but I really think that Bitcoin is it's the only one that can be a payment uh a method of payment in these parts of the world because you need a you need an apple Microsoft level brand value in order to be a global payment system and Bitcoin already has that but it's just a matter of the scaling right the fees have to be lower it has to be more stable I don't even think block times is to a certain degree matter people in most parts of the world are used to getting their paychecks after like a week of waiting but it has to be it has to be cheap right it has to that's the that's the number one thing and stable like he mentioned you can't can't be an appreciating asset no one's going to want to pay to be us I mean I mean how how we see how we how we see actually like um I mean the angle here for for for Bitcoin Bitcoin again I'm I'm I'm going like to do like a little advertisement for the block stream mining not because like this is like a project um we were um working together so we so we so we so we also like introduce like different so I think like the idea what what is really important for the financial industries that you also create like a surplus return actually also on bit coin right because like Bitcoin is like something you you mainly huddle right and um and that's what we are trying to provide is like that we say okay we actually buil like a financial instrument where you can actually make money on um Bitcoin and I think we have launched now um the block stream mining note to in the last 21 days it made already more than 9 9% right in total I think on bitcoin return for the block stre mining no note it was more than 35% on bitcoin um average but when you have been early in the in the game you know you you invested like like four Bitcoin and you get like 7.9 Bitcoin back so it's like really R return products I think it's very important also for the Bitcoin world so is so so you to make it also like sort of lively right so the adoption will be more and more also like for the financial industry in my opinion when you create products on top of it and this where we see also the future and then I think things fall into place when you also use um actually the underlying blockchain Bitcoin right um for for for the for the tokenization um as we say yeah all right last five minutes give me your short version of your vision of Bitcoin in the next 10 years global settlement layer payment layer shoot one minute each yeah I think and and in my world and what we try to focus on endur is how can Bitcoin be the technology to revolutionize fintech because Financial technology in today's for is not really te techology it's navigating regulatory parameters it's negotiating with existing Banks you talk to most fintech unicorns they're not tech companies they just have a good preferential deal with Standard Charter to HSBC and so really for me I think the vision for Bitcoin in the next 5 10 years is it solves billion dollar payment problems it solves billion- dollar Financial technology problems and these fintechs that are out there engaging with businesses providing banking services in places that don't have them that those fintechs take Bitcoin seriously or at least find it simple enough to integrate and Empower themselves because that is right now something that I don't think exists and that that's what we're trying to do so whether that's layer 2 technology whether that's more interfaces whether that's liquid whether that's coordinate whether that's whatever whether it's even lightning the most important thing I think for Bitcoin is to focus on those billion dooll technology problems and focus Less on trying to copy what's going on in these other ecosystems we don't need more degens we need more mainstream work yeah I I again I'm a follower a hardcore follower of the NX Sao School of economics and for me H Bitcoin has always been the institution of wealth transfer or in general terms you could call it the institution of private property that means that it can be used as a means of exchange but whether it will be accepted generally as as a means of exchange which would make it turn it into money that's an entirely different H question what is undeniable at this point is that it is that is institution of wealth transfer so for me that means it is an ideal settlement layer just simply as as a any registry handled by any you know law or or current traditional institution in Western countries so for me the problem it solves is that when you have poor rule of law you need to know you own something regardless of whatever the dictator around you is going to say right and that censorship will not work that it will be you as long as you keep your secrets properly etc etc and then the the the the other layers will solve other problems that with with the different trade-offs with regards to Capital markets payments etc etc right and that's that's the way I see it h moving forward thanks thanks I very much agree uh Bitcoin is the settlement layer it's the main chain against which everyone eventually settles around it we will have many different side chains being built where you have all the other issuance where you have all the other payment layers uh where everything else is built around it and you at certain intervals or periods all of these chains will settle against the main settlement layer which will be uh the Bitcoin layer and that's how we build Capital markets around Bitcoin uh if you imagine in the financial system today any payment you make never goes through the Central Bank it always goes through the Commercial Bank layers and then the commercial Banks sess some periodic interval within the central banks and it will very much work the same way with Bitcoin and Bitcoin being the main settlement layer since it has that trust security open access all of these attributes which um make it into the reserved currency basically so the task now is building a full Financial ecosystem around it and I think it's possible and that we will succeed thank you yeah I think we live like in a world is getting more and more controlled right um that's at least like um my point of view and I think like I have I've seen like just like a panel on cbdcs and everybody was so super exciting about it I'm I'm a little bit more skeptical right you know because like um it's programmable money and it they can take it always away from you when you do like something wrong you don't pay your taxes you have reached like your CO2 quarter um and the like nobody T talked about this at this panels that's why I said it and Bitcoin is um and Bitcoin is like the opposite right so so Bitcoin allows you really like to store your own um um value like you like everything what you have earned over over time and um and it's independent from outside control right so I think um this is like what I said in the beginning also like considering the financial markets right um You have proof of proof of stake um proof of work um here we see with Bitcoin Bitcoin has everything what like The Current financial system um is not actually currently providing it's intransparent right there's an aeration of power right um and um and and there's a lot of control also over um your assets and um and and and on the opposite side um Bitcoin um will be like the the future money but also like the holder of the or like the backbone of the financial industry um my believe in 10 years maybe not in every um country but um I I see I see it definitely coming thanks toia Scott Ado Julian for your insights thanks for the audience to stick around for the last panel I hope you learned a lot I certainly did and I would say enjoy the rest of the conference thanks [Applause]