Transcript 0:00 [funky music] Welcome back to Bitcoin Season 2. 0:35 I'm Charlie Spears, host of Bitcoin Season 2, which is produced by Blockspace Media. Bitcoin Season 2 showcases new ideas from new voices on Bitcoin. It's the technical and the cultural smashed together. 0:49 New discussion on the oldest blockchain. Um, Bitcoin Season 2 is produced by Blockspace Media. Make sure to check out our other, uh, content. The Gwart Show, I highly recommend. The Mining Pod. 1:00 We have a newsletter that comes out on Mondays and Fridays. Um, make sure to hit our website and see all things Blockspace content. So, today, I'm talking with Leo Zhang, uh, founder of Alchemia. 1:12 Leo's written some of the foundational pieces on the commoditization of Blockspace, and I'm glad to have him on the show. Welcome, Leo. Thanks for having me. Yeah. 1:25 So, um, we got to hang out a while in Hong Kong last, uh, month, uh, for Bitcoin Asia. It was a lot of fun. We got to go down some rabbit holes. 1:36 Um, but you've been building towards launch, uh, this company, uh, Alchemia. Can you just t- explain to me, talk me through the structure of Alchemia. Um, what is it? What's the vision? How does it work? Certainly. Yeah. 1:54 So, um, I would describe Alchemia as the market of all on-chain markets. Um, so as, as, uh, Blockspace is where everything has, ultimately has to settle on, right? 2:04 And doesn't matter if it's a simple transfer or nowadays these kind of, uh, mempool sniping activities that are getting more sophisticated, crazy RBFs. 2:14 Um, it doesn't matter how complex or simple these transactions are, ul- ultimately, all of them have to settle on-chain. 2:20 And all these surging demands, they compete for finite amount of resources, which is, um, which is the Blockspace. 2:27 And Blockspace, you know, in essence is, is the amount of, like, full node resources you're purchasing to run your, uh, transactions to, uh, purchase, you know, settlement finality. 2:37 Um, and that, that requires, that requires payments, right? That requires cost, and this is something that affects every user who's using Bitcoin. And, uh, it... 2:46 You, you know, you wake up and you want to, uh, just do a very simple regular transfer, but, you know, some, some crazy runes collection's happening. 2:57 You know, OKX is doing UTXO consolidation, and there's a bug, and it has nothing to do with you, right? And you get hit with this impact. 3:04 Your transaction all of a sudden becomes five times more expensive to, to be, uh, completed compared to just, you know, a couple hours ago. 3:12 So this is a very unpleasant experience for, um, for regular users, for service providers who's conducting commerce that's on-chain. 3:20 Um, so a thesis that we have is that, uh, yeah, with Blockspace, it's, it's kind of like the energy, right? 3:27 It is the most fundamental commodity, fun- most fundamental resource that powers the heartbeat of all public blockchains. Um, and given the dynamic of supply and demand, the supply doesn't really scale, right? 3:40 Like, it's once every roughly 10 minutes. It doesn't, it doesn't scale that quickly based on the demand, but demand is very ephemeral. It can increase very, very, uh, quickly in a short amount of time. 3:52 So that pricing of the access to this resource becomes a painful thing to every regular users who gets, uh, this n- negative extern- externalities leaked on them, spilled over to them. Um, 4:06 so this has a lot of, uh, patterns, I guess commonalities with how energies market, you know, commodities market has developed over centuries. 4:15 And in the past, this hasn't really become big enough of a problem because, um, regular users, uh, you know, crypto, uh, and Bitcoin, uh, 4:24 hasn't become mature enough to sustain this, again, to justify this kind of secondary, uh, behavior, right? Uh, people are just using, you know, Bitcoin for fun, uh, for, for, for, uh, very... 4:37 It's, it's a- You could say degens... it's not- There, there are a lot of degens on Bitcoin right now. [laughs] Yeah. So we want to create a market where they can, they can capitalize on this impact, right? 4:48 They can, they can trade transaction fees, um, so that for regular, for commerces, for regular users, they can offset some of their costs incurred on-chain when the volatility of transaction fee is too high. 5:00 Uh, for miners, they can use this to capture some of the premium when transaction fee is, uh, being sought after. So that's the essence of... That's a very long-winded way of, uh, introducing Alchemia, I guess. 5:13 [laughs] Yeah. I mean, you say, you say, um, B- you, you describe, like, Bitcoin's Blockspace and B- Bitcoin's fee market kind of woke up this past year, so it's, like, very well-timed. 5:23 I know you've been building towards, uh, Alchemia for a while, and you're reaching mainnet. It's currently in test, it's currently in testnet. Um, but, uh, 5:33 you know, you, you float, like, this early client type of almost, like, the, the ordinals or runes trader as this near present, like, uh, market participant who right now they need this type of product. Um, 5:49 what is, what does, like, long-term the commoditization of, of Bitcoin Blockspace look like? Who are these clients? Who are the market participants, like, over the next maybe five to 10 years? 6:01 Think long down the road.Yeah, absolutely. 6:05 I think, um, if, if more commercial activities are- were to happen on-chain, right, there would be more service providers, there would be more businesses that are, uh, built upon, that emerge on, on-chain. 6:19 And so for them, this become a very substantial cost of conducting business. Uh, they don't want this volatility. 6:25 It's similarly to, you know, Con Edison, you know, they don't pass the, the fluctuating electricity price on to their end users, right? 6:32 So you locking a contract, uh, to turn on your AC, turn on your light bulb, it doesn't fluctuates with the rest of the globe's usage. 6:39 And these companies, they're, these utility companies are able to do that by, you know, hedging on, uh, uh, energy futures. 6:46 You know, beginning of the month, they lock in the, um, price for, the average price for the next month or three months. 6:52 So, uh, in five to 10 years, we expect this kind of behaviors to happen in crypto as well, where, um, service providers, whether they're, you know, exchanges or, uh, sequencers for the roll-ups or, uh, wallets providers or, you know, platforms that offer collections, right? 7:09 So these, if they want to offer a very pleasant fee experience to their end users, and not to mention if in the future we actually bring like s- social, games, these kind of high- highly, uh, highly active kind of interactions on-chain, these are costly. 7:27 You don't wanna pass that exper- you don't wanna pass that volatility entirely to the end users. So the only way to do that is through, uh, this type of hedging instruments. So that, I expect, is to... 7:37 You know, I don't expect average users, before they send, you know, a wallet transfer, to hedge their transaction fee. I don't think that it's quite the case similarly to, you know, today, uh, average users. 7:50 I, I don't, I don't hedge my electricity price, right? Yeah, you don't, you don't, uh, set up a synthetic h- you know, electricity price contract every time you turn your light bulb on. 8:01 You just expect it to be roughly X cents per kilowatt hour. Um, so, like, right now, the, the current dynamic of Bitcoin's fee market is very interesting. 8:12 It's very- It's really fun to look at 'cause it feels like it's waking up. It operates in these, like, pulse events or, like, event-based fee spikes. Could you talk through this? I've talked a bit about this. 8:25 I know you guys, through your social media, have described, like, almost like post-mortems on, like, here's what the, here's what happened in Bitcoin's fee market right now. 8:34 Could you kinda just describe the current landscape of, like, these pulse-based events, maybe how Alkemia fits into this model or can respond to these, how an, how a user might, like, uh, leverage that? Yeah. 8:50 I think waking up is the right word to use here because these things, they have always been happening, right? They've been happening since, you know, Satoshi Nakamoto. 8:58 It, it's just the kind of spiky behaviors, they were less pro- less pronounced. I mean, they were very pronounced be- for a period of time in the past, the congestions. Th- this is not a new thing, right? 9:07 It, it's, it's, uh, um, we have experienced, like, outage, sorry, uh, uh, congestions multiple times in history, but there was just no good way to deal with it other than, okay, I guess we have to scale the, we have to scale the infrastructure, we have to scale the, uh, the entire network now. 9:23 Uh, and these, these things, they take efforts, right? 9:25 And, and I think, um, I think scaling is something that will always happen, and it always should happen, but scaling efforts, they require a long cycle of investment, a long cycle of, uh, energy and efforts. 9:39 Um, so it doesn't quite necessarily solve the short-term fluctuations, and in fact, I don't think it ever will. Short-term fluctuation is inherently a market-oriented, uh, issue. 9:48 So, um, so I think the reason people start to think, oh, uh, we have, uh, you know, more dynamic fee market now, one with having, um, now that fee is a much greater percentage of miners' revenue, miners are much more sensitive to this. 10:06 So miners are starting to think more about, okay, how do we capture fees more, compared to in the past where they're just, you know, sitting around 'cause, you know, it's not really that big of a deal for them, [laughs] right? 10:16 So, um, now it's critical, it's critical. It's continued to become more critical. So that's why we see, um, some of these out-of-band solutions, right? We see, like, more creative solutions of trying to capture that. 10:27 Um, I definitely think that Ordinals is... It was the, the, it, it changed things. It changed, it changed the Bitcoin culture for, you know, better or worse. Uh, and, but it definitely changed how people, 10:41 h- well, it definitely changed the composition of the mempool. 10:44 It, it definitely changes the weight of transactions that people are, are, are doing, and you can s- uh, definitely mempool is much more full compared to the past. [laughs] Yeah. Um, yeah. 10:54 Well, and it- So- It's like, it's, uh, one other way I put is that, um, previously you had just one type of transaction which users were s- using, uh, you know, creating, which is just, like, a normal financial transaction that wants to be included in a block inclusion in a certain window. 11:09 But now we have, like, a wide range of transactions with different, um, urgencies to them or, you know, a person doesn't ma- d- doesn't mind if their JPEG gets on Bitcoin today. 11:21 They just want it to be on Bitcoin over the next month. So they're, they have an entirely different, like, time profile. So it's really interesting to look at this. Yeah. 11:30 And, um, this, this has, this phenomenon has emerged, uh, you know, on ETH a long time ago, right? And we can talk about ETH here, right? Like, this is not a Matthew- We, oh, yeah... 11:40 podcast- [laughs] This is a conversation on the table. Yeah. Yeah. C- uh, well, well, frankly speaking, we're going to deal with a lot of problems that, you know, other ecosystem, well, mostly ETH, have dealt with. 11:50 So I think, you know, it's very, very important for us to look at, okay, what happened there? What kind of solution worked? What kind of solution, you know, is not quite working? [laughs] So, um, one thing I think 12:02 people who are paying attention to this, uh, clearly feel, right, i- is, is that there are a lot more predatory activities happening on mempool now. 12:10 There's a lot more sniping, there's more RBF, there's, um-I think that generally just creates like very negative externalities leaking and spilling over to regular users who are just doing their thing. 12:21 But back to your point, right, what really triggered this is that now we have different, uh, tiers of, of, of, uh, transaction preferences for transactions, different time preferences for transactions. 12:33 Some are much more urgent because the time value of those transactions, they lose this over time, um, and if I don't capture this, it's gone, right? 12:41 So I'm willing to pay much more, and as a result, the entire, um, the entire network had to suffer. Yeah. And so, um, you... 12:52 Uh, I'm not like really f- myself familiar with conventional, uh, commodities markets outside of oil, and I don't, and I've not really studied derivatives. 13:02 Um, but you know, I, I, you know, ask you some about, about how you're, like how you think about Alchemia. Like are you trying to model this after other like successful like commodities s- uh, structures? 13:18 Like how do you... Do you look at what has worked in history and you just say, "What does this look like in the modern block- blockchain era?" 13:25 Like how, what are, what are similarities between existing commodities markets and Alchemia? Yeah. I, I wouldn't say we're taking, you know, 13:37 some, you know, orange trees playbook exactly here, uh, 'cause I, I think it's, it's quite different, um, especially for, uh, this is inherently digitalized, this is inherently, um... 13:48 There, there's, there's a production schedule, right, uh, of, of, uh, of block space, uh, comparing to, you know, uh, uh, I don't know, orange trees, right? [laughs] Yeah. Yeah. 13:56 It's a great- So- Yeah, it's a great example. Yeah. So it has some, uh, codified, uh, 14:03 not quite schedule, but patterns to it, uh, and these are things that changes how inherently this market work, how the supply and demand, uh, mechanics work, and these are things that we can't really escape from. 14:13 So when we think about, okay, how we're going to design this, this, uh, market, 'cause this is really kind of a secondary market on top of the activities that's happening, you know, on chain like simultaneously. 14:26 So when we think about that, we have to tailor a solution for Bitcoin. We have to tailor something that's like inherently, you know, not too... Uh, like we can't just like put, "Oh, this is what worked for oil. 14:38 This is definitely going to work for Bitcoin." Um, um, in fact, we, we have tried multiple different solutions in the past and arrived at the current, uh, current version, which yeah, we're still experimenting. 14:51 [laughs] Yeah. And so what, uh, it was, it was interesting 'cause I, I've only kind of recently started thinking about these concepts. 15:02 You have different types of like the financialization and commoditization block space. 15:07 You have like physically delivered block space, which would be the block inclus- the transaction inclusion into blocks, and then you can create synthetics from that. Um, 15:19 and I haven't really fully thought through this question here, but what are your thoughts on like the differences between physical delivery and synthetic exposure? Like what is, what does this mean for users? 15:31 What does this look like in the market? Yeah. I think they're very different products in fact. Um, so even though it's... 15:38 So, uh, this is actually a great example of how it differs from traditional commodity markets, right? 15:43 So even, uh, ph- physically delivered oil where, versus paper oil there, you're still trading on the, the price movement of thing. 15:50 Um, and of course there's wide range of, uh, logistics issues that's, that's introduced that make them very, very different, makes one superior to the other. 15:58 Um, I think with Bitcoin, the so-called physic- physically delivered block space is entirely different product that cater to entirely different type of users comparing to, uh, s- uh, you know, paper block space. 16:10 Uh, so first of all, what, who would want to use physical, physically delivered block space? 16:16 What, what does it really mean is that I want my transaction to be included in the first 20 of a specific block height for some reason, right? So for some, for some reason. [laughs] Oh, yeah, like a bitmap. 16:27 That w- that was my favorite example. The, the... Anyway, so yeah. Yeah. So the, the, but the reason is there, there's some like very, uh, uh, exogenous factors, um, that, that have led me to, to want to purchase this. 16:43 Um, so this is more evident on, on, [laughs] on Ethereum again, um, with PBS, right? 16:49 So builders for MEV searchers, they would want to sequence their transaction in, in a specific order, uh, so that they can maximize the value capture. Um, but that is entirely exogenous to like the... 17:03 It, it is, it is a behavior that's introduced like externally. So the reason I wanted it is because I want to capture that external, uh, uh, uh, opportunity, right? 17:14 So, uh, for that, it, it's a very, very specific thing, um, and it has very little to do with like, oh, I want to, uh, earn fee rate, right? Like I think that market activity is going to increase. 17:27 That, that has very little to do with that. It has very little to do with like hedging out my, uh, transaction fee risk. It's more about I want to capture the opportunity. 17:35 My transaction needs to be the first 20 of the block, uh, 146327 or something like that, right? Yeah. Um, whereas for if you're just trading this, if you're trading fee rate, that's entirely different consideration. 17:49 So if I'm, you know, a, a wallets, uh, and I'm trying to compete with my competitors by offering a, a fixed, you know, withdrawal pro- uh, cost, um, well, I think River or S- if I remember correctly s- recently announced something like that, like zero fee- 18:07 Yeah. Yeah... withdrawal per month. Yeah. The integrated- Something like that... thing or something, but yeah. Yeah. No, true. Yeah. Yeah. 18:13 But if, if, you know, let's say I'm a service provider, I want to offer this kind of like superior experience to my users, but I inevitably have to bear some risk. 18:21 Um, so in order for me to feel, feel good about bearing this risk or like have some certainty on how much risk I'm bearing, I want to use these type of like financial instruments to hedge out my risk. 18:32 Um-So that's entirely a very different consideration because it sort of abstract out the whole, uh, you know, seq- the sequence of, of transactions in a block or block height. 18:43 You know, the- these things don't quite matter for the context of trading, uh, synthetics, because all I want is if fee rate is going up, I'm taking a gain, right? That, that's, yeah. Yeah. 18:56 It's interesting you, you brought up the example of wallets, and wallets may be competing on fee rate 'cause they're customers of the end users. 19:05 And I, um, I guess I was comparably recently introduced to the idea of the transaction supply chain, which I guess is a familiar concept in Eth. And in a way, wallets, particularly retail-facing wallets, are the... 19:21 like, are a core part of the transaction supply chain. And a lot of wallet people that I talk to are like, "What it..." [chuckles] You know, maybe coming to terms with the reality that what even is the wallet business? 19:32 How do you make money off of it? Maybe your business model is that you're actually a transaction supplier. Um, I know this may be the MetaMask model or some other, um... 19:44 But I'm glad you brought up, um, block space markets on Eth and Solana. Um, and I'm also glad you brought up PBS, proporter- proposer-builder, uh, separation. Do... Like, 20:00 I don't know if, if I feel that we have found a resolution whether that was good or not. Um, I... What are your thoughts on this, and 20:11 does Bitcoin experience something similar to PBS, or how do we mitigate some of the negative externalities from that? It's a very open question on that topic for you. Yeah. 20:25 I don't think the Eth community, uh, specifically the researchers, have really arrived at a conclusion regarding PBS. Um, 20:32 with, with PBS, a very clear direction, [chuckles] uh, that it's trending towards and, and frankly people have, you know, warned about for, you know, years, is that the builders are highly concentrated. 20:44 And, and, and they're starting to verticalize, right? They're building, uh, their own relays. So 20:50 a- and there, there's just, like, a lot of efficiency you can achieve with centralization, with verticalization, with owning, like, different part of the stack. 20:57 Um, I, I think if we were, if we're, if we're, uh, y- want to be super precise with the technicalities, um, P- like, there is, like, kind of proposer and builder separation. The mining pool is the builder. 21:11 Mining pool blocks- That's... I, I was gonna say, so like, I feel like I'm like- Yeah. [laughs]... currently has PBS in a way. [laughs] Yeah. P- P- PBS was, was, was introduced, like, on Bitcoin first. [laughs] Okay. 21:23 Um, yeah. And, and we see this effect, right? There's a lot, tons of centralized. There's, there's also centralization on mining pool level. So PBS had already happened on Bitcoin, and the builders have... 21:33 The equivalent of builder has already been, uh, uh, you know, ha- centralized. And of course, the exact dynamics doesn't quite in how the transaction flows, uh, from the searcher to builder to proposers. 21:44 Doesn't quite work the same as, um, on Bitcoin. But, but, but, uh, the analogy is not what we're trying to, uh, talk about here, right? 21:51 Uh, but it's more on what is the long-term solution for Bitcoin to combat, uh, MEV and how to prevent that from leaking to average users. Unfortunately, I think, um, in absence of fast iteration, [laughs] 22:08 uh, I, I think this, we- we're going to have to rely a lot on centralized service providers to try to provet- provide a better experience on behalf of the users. 22:21 There's really, I think, short-term, that's the only way for them to do it, right? Um, so you know, like Magic Eden will, uh... 22:30 I don't remember i- if, if it's still the case, but, uh, I, I remember a while ago due to, uh... 22:35 And people, their, their ordinals, they, their transaction's gonna go through because they get sniped left and right- Yeah... so they offer some refund. Uh, is that... Am I remembering this correctly or? Oh. 22:44 Oh, I w- yeah, I don't know about the terms refund, but yeah, there's, there's been people throwing stuff at the wall as far as mitigation or compensation. Yeah. It does- Yeah... 22:52 it, it tends to, like, sniping tends to plague the, the ecosystem when, um, or the users whenever things are going up, 'cause snipers buy, snipe low, sell high. So yeah. Yeah. 23:03 And there's really not, no good way to mitigate that, right? Like a- and, and frankly, you know, looking at some of the s- solution there, like, like Ocean Protocol, like, come on. 23:12 [laughs] Like, how is this, how is this real? Like, uh, it's 2024, uh, a- a- and [laughs] so, so, um, 23:22 it, it, it doesn't sound great, but I think short-term, medium-term, it is really up to centralized service providers to, like, how much of a better experience they want to offer their end users in order to stay competitive, right? 23:36 So if two equivalent services, one is offering some kind of compensation if their, you know, user's transaction get, uh, sniped, uh, the other's, the, the other one doesn't. All right? And it's just like, "All right. 23:47 Okay, I'm, I'm going with this one." [laughs] So- Yeah. And this actually gets into, um, a piece you wrote a while ago, I forget when, but, um, the piece, uh, things hidden since the foundation of block space. 24:03 And, uh, you had a line in there which is something like, "MEV will keep growing in the future." I wrote it down. "In the future, expect the majority of block space will be filled with MEV activities. 24:14 Block space is a new kind of market, a market of constant action, of waves and fades, of tricks and ruses." We're now starting to see this more at scale on Bitcoin. 24:25 It's more of the power user-driven MEV and not as much the block producer MEV. Um, what are your thoughts on... 'Cause you wrote this years before ordinals and years before mempool sniping was-Maybe commonplace. 24:40 What are your thoughts on this now? Does MEV keep growing? Again, it's a broad category, but does toxic MEV increase? Um, yeah, what are your thoughts on this? Yeah, I, I think this is a-- I, I think MEV is, 24:56 is inherent property of how pu-public blockchain works. I, I, I think as long as there's main pool, there will always be MEV. 25:04 Um, and I-- You know, people love to complain [chuckles] about this from a philosophical level, uh, but frankly, I think this is, this is, this is not strictly worse comparing to, you know, how Robinhood sells the transaction flow to a Citadel, and they, 25:21 you know, like, a-and you have nothing to do with it, right? Uh- U-unless you're trying to trade, unless you're trying to trade GameStop, it's a wonderful user experience. 25:30 [laughs] It, it does provide a, a, a much better, you know, user experience, but that's a, a sl- I think that's a slight different thing. Uh, I mean, it, it is the same thing though. 25:39 Like, it does, it does impact user experience. It does impact, you know, Bitcoin user experience. So, like, if you're just trying to do your thing, and then fee rate just goes through the roof, and it's like, "What?" 25:49 Like, "Okay, I, I'm just gonna send someone. I'm just gonna send demo instead." Right? [laughs] You know? Um, so I th- I think it's not something that can be just easily, uh, 26:04 overlooked because like, oh, you know, this, this is some degen shit. Like, it's gonna go away. It's gonna go out of fashion, and, and I'm on my high horse just looking at my, you know, maxi tech, right? 26:19 It's not, it's not going to play out that way. A-and I think it's, it's very obvious, um, yeah, I think it's very obvious given, you know, the kind of shit that we're seeing on the mempool. [laughs] Yeah. 26:33 [laughs] The mempool, the mempool, uh, the-- One of the catchphrases that I've seen is like, "The mempool is a bigger marketplace than Magic Eden," and [chuckles] it's kind of true. 26:40 You just think about the throughput of all of the, the activity and settlement through that. Um, that is the ultimate final boss for, uh, just commoditization of this space. 26:54 Um, I, I-- It kind of brings me to another question, which is, um, you know, even though it feels like Bitcoin's fee market woke up this past year or so, 27:04 if you still look at just the r- the aggregate revenues of fees to Bitcoin, it's still, like, 27:11 not a lot for a, a blockchain which is the oldest, fifteen years out, where, like, the whole point is that this is supposed to, I would hope soon, transition to a fee-driven, uh, revenue towards miners. 27:25 Like, at some point, we- you would hope that fees actually gain a robust, dynamic market to them. But, um, 27:35 you know, I, I look at Ethereum still consistently, like, just, uh, just drama- you know, dramatically generates way more fee revenue than Bitcoin. Um, 27:46 is fee revenue the only way to, um, value block space, or are there other components to this? Um, 'cause I feel intuitively that Bitcoin's block space is, is more valuable, yet it does not generate as many fees as Eth. 28:02 Do you agree with this? What are your thoughts on this? Like, why does Bitcoin's-- why is Bitcoin's fee market still feel relatively immature? Hmm. I, I think-- So for, for this question, uh, I can give a, 28:18 uh, a marketing-oriented- Give me both answers... answer, and I can give, yeah, a more thoughtful answer. I, I think so. 28:25 Uh, I, I think the, the to the moon answer is that, yeah, like Bitcoin has a lot of potential energy, right? Dormant capital. It's been there for years and just waiting for the right people to unlock, and it's there. 28:38 Just look at the second-best. Ugh, right? Like- Yeah... look at that garbage is able to produce so much activities. We can do it too, right? And L2s are coming. Bitcoin Season 2 is coming. 28:51 It's going to unlock so much activities. Bitcoin block space is gonna generate so much revenue. It's just, it's going to happen. 28:59 But I think the more-- The real, the real answer here is that it's very difficult to compare, uh, apples to apples, right? 29:06 It, it's not quite a direct comparison because if, if we, if we-- Looking at it from a pure financial lens, uh, it is 29:14 how much I'm spending to produce, um, a block, uh, from, from a miner's perspective, and how much fee, how much revenue I'm capturing that block in order to, to, to pay for my, to pay for my expense. 29:27 So I think there's, there's-- The, the reason this calculus is so, so, uh, s- because it involves so many moving pieces, because my cost is entirely incurred in the real world. I, I have to pay physical infrastructure. 29:38 I have to pay for electricity, power, uh, labor to maintain the machines. I have to pay, you know, uh, uh, uh, Bitmain, or I have to pay shipping. 29:47 I have to pay custom- And there's just a lot, like physical dollar-denominated cost that's very difficult to eval- an-and evaluate it over a long- longer period of time. 29:55 Whereas for here, right, it's, okay, the probability I'm able to capture the next block or if, you know, FTPS is slightly different, but, uh, the spirit of it is the, is the same. 30:04 Um, and how much, you know, fee is been, uh, inc- is being, you know, packaged into this block. What is the dollar cost of the, this, this, this fee? Like how long-- What is my holding period of, of these Bitcoins? 30:14 Um, and now looking at the comp-composition of the revenue, we start to think, okay, how much of the fee comes from, you know, Ordinals activities? Com- how much of that comes from, you know, runes and all these things? 30:29 Are they, uh, sustainable? Are they going to become lower or higher? 30:34 Um, so I, I think comparing to something like, uh-ETH, where the fee market, fee market has been developed for a much longer period of time, it's really just the sheer amount of, like, activities, and that introduces volatilities and introduces competition for the block space, um, which 30:53 I think we're just beginning to see on Bitcoin. So that's, you know, a very fair thing because fee rate is entirely generated by sort of the kinetic energy, right? Not the potential energy. 31:06 Like, Bitcoin can have a massive market cap, it can be the absolute unchallenged, uh, you know, digital gold, and, and everyone should love it, but it's very different from the kinetic energy, which is, okay, I need to move it. 31:23 I need to, uh, use it to do all these things, right? So that, like, scenario is we're just beginning to see or, or waking up to, to it. Um, I, I think for miners, the... 31:40 This is starting to become less of a, you know, a couple years ago, a philosophical question of, oh, security budget, is it enough to sustain? Now it is a real question. 31:50 Um, miners should have vested interests to invest in things that produce more activities. 31:58 So back to your, um, your, your amazing tweet that summarizes really well, like, miners are investors of ordinals, they just don't know it yet. Yeah. 32:07 In fact, I think miners' survival are, you know, reliant on things that can keep producing activities. They want things to move. They want people to, to move this thing. Uh, that's... Yeah. [laughs] Yeah. 32:21 I'll, uh, I, I... We, we've pulled really far back. I wanna tie it back in and wrap this up with, uh, back to Alchemia and the current testnet phase. Um, you've been demoing some of this tooling. It's pretty cool. 32:36 Uh, I'd like to... I'm looking forward to delivery on mainnet. Um, talk me through the current state of Alchemia and, uh, and, and maybe what the path towards mainnet launch looks like. Yeah. 32:52 So, uh, for, for those who are not familiar, uh, you can, you can, you know, check it out on, uh, alchemia.io. The, um, the bazaar is, is, is live on, on testnet right now. 33:04 Um, so you can long, or you can take a long position or a short position on average transaction fee, uh, average fee rate. 33:11 So if you think that, okay, there's gonna be another wave of, uh, runes activities that's going to push up the fees, if you... 33:17 And, and if you are confident that, oh, this is gonna be huge, then a very, you know, obvious way for you to capture that profit is through, you know, long fee rates. 33:27 Um, or that helps, you know, offset some of your, your cost of, of, uh, of being degen. 33:33 Um, and, you know, if you think that it's over-hyped and if, and, and f- the fee decay is going to happen faster than people think, you can take the op- opposite side. 33:41 If you're a miner, you can take the opposite side to, to locking your, your, uh, your fee revenue. Um, so this is all, these interactions are all, you know, possible now. Um, and, you know, the UI/UX is far from perfect. 33:54 We're making a lot of, you know, rapid [laughs] improvements to it. Uh, and, and hopefully, uh, next time people look at it, it's, it's going to be much, much better, and I'm confident it will be. Um, so 34:05 we are launching in July on mainnet, um, and, uh, uh, I think around the time of Bitcoin Nashville, uh, this will become more well-known. I think so too. You know, I... 34:21 Right now, Bitcoin's, Bitcoin fees are down, but we know if we- you've been here the past year, you know that you can feel it almost brewing, just like another, uh, a- another frenzied activity sometime. 34:34 I don't know if it's runes-driven or ordinals-driven or some other degenerate speculative idea, but, um, I look forward to, uh, getting totally liquidated on Alchemia. I'm, I'm just kidding. 34:46 [laughs] I, I, I look forward to leveraging the product. I think it's really, really cool. It's about damn time we had, uh, options and ways to do this. In the 15th year of Bitcoin, uh, we should have ways to hedge fees. 35:01 So, um, yeah. Anyway, uh, any final thoughts, Leo? Y- yeah, I, I think the... Ultimately, it comes down to, okay, more people are doing stuff with Bitcoin, right? 35:14 A- a- and I think that's undisputed fact, and that's a good thing. That's what we wanted. So more people are doing things on Bitcoin, they're moving Bit- that inevitably leads to Bitcoin getting moved around. 35:24 That creates more kinetic energy. That creates volatility to the fee rate market. That affects everyone. 35:30 Um, so I think this is something that we want to create an experience where people are protected in some ways, or people are able to take advantage of it, uh, in some ways, um, before this becomes, you know, out of control. 35:44 The fee rate itself on Bitcoin becomes out of control. [laughs] All right, you heard it. Thank you so much, Leo. 35:51 Um, I look forward to having you back on Bitcoin Seasons Two once the fee market gets really heated, and we can do maybe some live triage on what it actually looks like and what it's doing. 36:03 So hopef- maybe I, I would love to have that happen sooner rather than later, 'cause it makes for more interesting content. Thank you so much for joining me. Thank you. Thanks for having me. 36:14 [outro music]
