Transcript 0:00 [on-hold music] Welcome back to Bitcoin, season two. 0:16 I am Charlie Spears of the Blockspace Media. Bitcoin, season two is about new topics and new voices on the oldest blockchain, Bitcoin. This is the Monday live stream. 0:26 It's more metrics-heavy and more kind of like contemporary updates, what happened in the past week. We have videos on demand going out every, uh, Wednesday. This next Wednesday, I have Jameson Lopp. 0:40 Yes, that Jameson Lopp, uh, being interviewed and talking about Bitcoin ossification. And on Fridays, we typically have Bitcoin Writers Room. 0:47 That's where me and Colin over at Blockspace, we, uh, shoot the shit on whatever topics are relevant. Sometimes we bring in an extra guest. But today, I'll hit the metrics. 1:01 Uh, Runes are down and Ordinals are up this past week in a great, uh, fun inversion of the narrative over the past few months. 1:10 But I'm gonna spend a little bit of time talking this episode about something a little more technical that is if you've been wanting an Op_Cat upgrade, if you've been wanting like other soft forks, um, and you're wondering, why haven't they happened yet? 1:25 Well, a lot of people have also wondered that, and, um, some super smart, sneaky developers have figured out workarounds to emulate these things. I will explain more about how that works right after our sponsor. 1:40 [upbeat music] Bitcoin season two is brought to you by Botanix. 1:42 Botanix Labs is pioneering a new direction for DeFi with the first EVM L2 running on Bitcoin that's built to be forward secure, decentralized, and share gas fees generated by the network with users. 1:56 See the future of DeFi at Botanix: botanixlabs.xyz. That's right. There are some sneaky, uh, workarounds to accomplish Op_Cat and other types of covenants that don't even need a soft fork. 2:12 I'll explain what those are, but there's actually three defined schemes, maybe more, depending on how you count them. But before I get into that, I wanna get into the metrics. 2:22 Let's kick it off with a little review of the mempool. Right now, fee rates are sitting at between seven and nine sats for vByte. That's been about where they have been this past week. 2:33 Um, we just had a difficulty adjustment, um, an upward difficulty adjustment of one point five nine percent. So that was just, um, I mean, just a few blocks ago this morning. 2:46 Uh, that means Bitcoin hash rate has continued to climb a little bit. Um, overall, fee rates on Bitcoin haven't been terribly, uh, interesting or active. We saw a little pump yesterday. 2:58 Um, there was a, another, again, a Runes mint that, uh, took up a lot of, uh, transaction volume. But, uh, other than that, we've seen, uh, uh, fees on Bitcoin be relatively stable the past week. Um, 3:14 the Runes market, I'm just gonna look at this snapshot, um, table from GeniData. Um, if you're listening, I'll just describe it to you. Basically, uh, Runes peaked at a total market cap of two billion 3:27 middle of November, and now the second of December. First of December, it's one point five billion. So we pulled back about five hundred million dollars in total Runes market cap. 3:37 Uh, you've seen popular tokens such as Dog Go To Moon, Pups World Peace, Billion Dollar Cat, and Cypher Genesis all down, uh, five to twenty percent on the week. 3:55 Otherwise, more news in, um, just kinda more charts. I'm gonna pull up Data Always's dashboard. Again, I've been looking at this dashboard for now two years now on Dune. Seventy-two point two million inscriptions, 4:11 of which eighty percent of those plus are BRC-20s. We are at a quarter of a billion dollars in total fees due to inscriptions. That's two hundred and seventy-five million dollars in total fees. 4:24 And if you look, this chart on the right here, this shows total cumu- uh, cumulative inscriptions. Um, since the halving, we saw inscriptions on Bitcoin really fall off a cliff. 4:37 We saw them go from, um, about two hundred thousand per day, basically a hundred thousand per week on average or per day, uh, if you smooth out to a week on average, to like ten thousand per day after Runes. 4:53 But since in the past two weeks, Runes have kicked off. We've seen BRC-20s also catch a little more life. And because of that, in the past week and a half, we have seen the number of inscriptions go parabolic on Bitcoin. 5:08 We are looking at, um, on one day last week, we saw three hundred, over three hundred thousand inscriptions in a single day, and that was just, uh, and that was actually on Thanksgiving of this past week. 5:22 So not surpri- not a surprise there. The Chinese don't celebrate Thanksgiving. Uh, we, we, all the Americans are at home eating turkey, and so the Chinese decided to, uh, um, uh, push some BRC-20s into the stratosphere. 5:35 In other news, um, here's the seven-day look on Magic Eden. Um, of the top twenty-five Ordinals collections, um, seventy-five percent plus are up significantly from ten percent to twenty-five percent. 5:51 Puppets are up sixteen percent of the week. NodeMog's up twenty-six percent. OMB, seven percent. QuantumCath, twenty-three. 5:59 Airhead released, uh, that's, uh, you know, it was a, it was a pricier mint, mixed, uh, mixed responses.Um, Bitcoin Frogs, Pizza Ninjas, all those up. Bitmap down twenty percent. Anyway, enough about that. 6:14 Let's get into what the heck this sneaky covenant workaround thing is. So if you're not familiar with covenants, um, you can go to, uh, you know, you can search what they are on ChatGPT. 6:27 You can look at, uh, there's other podcast episodes I've done on this before, but covenants basically restrict future ways that Bitcoin can spent-- can, can be spent. 6:37 Um, you might call some of these types of covenants smart contracts. Um, again, it's a semantics issue, but basically covenants really improve... They can improve privacy, um, scaling. 6:51 They allow you to do what's called UTXO sharing. They, uh, improve lightning. 6:57 And, um, right now when we're talking about different upgrades to Bitcoin, most of what we're talking about are, uh, are things that we can do with covenants. 7:08 But since we cannot do covenants on Bitcoin today, um, people have found workarounds to basically emulate covenants because when there's a will, there's a way, and sometimes this will may cost a lot of money. 7:23 So let's go back, back to May twenty-ninth of twenty-twenty-four, this past year, when Jeremy Rubin published this paper, F-EAT up covenants functional encryption-- using functional encryption to emulate a covenant. 7:37 So that means, um, you are not creating a covenant necessarily on Bitcoin, but you are basically creating workarounds to emulate what a covenant would do. 7:50 Um, and this is just a high-level way to say, "We're going to use encryption to reveal that you can, uh, spend certain covenant-enabled transactions." 8:01 One-- Some-- And these would, would be covenants that would be enabled with OP_CAT or CTV or CSFS, Check Sig from Stack. Um, and then we saw, uh, uh, Misha from Allock in it. 8:19 I did an interview with Misha three or four weeks ago on Bitcoin season two. 8:24 I recommend you go and read and watch that or listen to that episode on his idea called Bitcoin Pipes, which is very similar to Jeremy Rubin's, um, Bitcoin, uh, functional encryption-enabled covenants. 8:37 So Bitcoin Pipes basically says, "We are going to, um, uh, inscribe a, uh, an encoded text on Bitcoin, and we're going to give you a cipher to decode that. 8:52 And depending on how you decode it, it will reveal ways of, uh, being able to produce transactions. And the only transactions it will produce will be ones that could be enabled by a covenant." 9:04 If that didn't make any sense to you, that's okay. It can take a really long time, and I'm summarizing a lot. But basically, this is a really interesting idea. 9:12 Um, we had Misha talk at our conference up next in Boston earlier this fall, um, give a workshop on how Bitcoin Pipes works. I recommend you go listen to this blockspace.media and click on Op next conference. 9:28 So anyway, Bitcoin Pipes. Um, this is, uh, uh, going-- he's going to release a demo soon on how this can be implemented on chain. 9:38 But basically, um, it's like, okay, if you want to, like, spend, uh, you know, if you want to, like, inefficiently create covenants on Bitcoin, you can do it today using these pipes. 9:51 Pipe stands for, uh, Polynomial Inner Product Encryption Scheme, [laughs] but you don't need to remember that. Pipes is a much more catchy term. And then this past week, we saw, uh, Jeremy Rubin, 10:05 uh, release what he calls, uh, a very deranged scheme to, uh, emulate covenants. Um, I would point to, uh, I would point you to this tweet, uh, that he made, uh, last week called Uneffied Covenants, 10:24 um, charting a new path to emulated covenants via BitVM integrity checks, and he published a paper on this, which I will share. Um, 10:43 so again, you can try to read the white paper, but again, it's like kind of hard to understand, but it uses some of your favorite buzzwords. 10:51 It uses, uh, covenants, uh, and it uses BitVM, but basically you have an oracle. 10:57 So if you're familiar, an oracle watches what's on chain and watches what's happening out in the real world and acts as a way to communicate between the two. So you rely, you trust the oracle is telling the truth. 11:08 So basically, you have an oracle which watches, um, things happening on chain, and, uh, it will only give you transactions that are able to be emulated from a covenant. 11:20 And if the oracle lies or is wrong, then we use the, the BitVM mechanism to punish that oracle. 11:29 So that oracle requires it-- that it be bonded, that you have to kind of put up some money as, like, collateral, and we use BitVM to, uh, to slash or punish that, that oracle if it misbehaves, if it gives you-- if it violates the covenant structure. 11:47 Um, so the funny thing, like, this is, uh, we are getting into, like, increasingly goofy ways of emulating covenants without a software. 11:57 Uh, so even if we don't get a software, there's event-- people are eventually going to be doing these things on Bitcoin regardless. 12:04 Um, so, uh, this does kind of force the hand of critics who say we can't let those happen because the reality is that they're going to happen regardless. 12:13 The last optionUm, the last, uh, like, scheme, sneaky workaround, as I call it, is this thing called ColliderScript, covenants on Bitcoin via one hundred and sixty-bit hash collisions. 12:27 Now, this may sound very, very, uh, indecipherable for you, but the short version is, um, we use computers to generate a bunch of numbers, and if some of those numbers accidentally are the same or they collide, then that can produce a couple outcomes. 12:45 And if you basically use all these computers to produce all these numbers to, uh, to use Bitcoin's script to, uh, uh, against itself, you might say, to basically emulate, um, covenants such as you could produce with OP_CAT. 13:01 If you're still with me, basically, you just run a bunch of computers, kinda like Bitcoin mining, and you are able to come up with enough matching numbers to use those to bounce, uh, script, uh, off each other. 13:14 So, um, you can emulate OP_CAT covenants on Bitcoin with this. Shout out to Ethan Heilman, Andrew Poelstra, and a couple people from StarkWare, Victor and Avihu. Um, 13:26 this is really, really interesting because this would be the first, like, um, team-based paper. The other two ideas were independent developers, Jeremy Rubin and Misha Komarov, who put those together. 13:38 And this, these would be research which represents a broad swath, this ColliderScript research is, uh, would represent a broad, like, cohort of StarkWare independent developers like Ethan and Blockstream. Um, so, 13:54 um, what happens next? Like, what-- A lot of people ask, like, how feasible it is to, to do these things? How feasible is it to actually emulate these covenants? And the answer is, it's a spectrum. 14:10 And in fact, I've got a chart which is from Ethan Heilman's presentation at OP_Next, um, this past month, which, uh, basically describes the different types of schemes, the different types of covenant emulation schemes, 14:27 and, um, puts them on a spectrum of, like, how costly they are to perform. Because the more complicated, the more difficult it is, the more costly it is. And over here on the far left, we have 14:41 the lowest cost to use, and that would be is if we soft forked in, uh, covenant opcodes such as OP_CAT or CTV. Those would be the most efficient. 14:52 Those would be a no-brainer, they'd be inexpensive to use, and they would work very efficiently. The next one would be is if we got, um, uh... 15:00 I'm sorry, so dedicated opcodes, so that'd be like CTV, a, a-an opcode which, which specifically accomplishes covenants. 15:08 Then we have CAT covenants, which are going to be a little more inefficient because OP_CAT is kind of a jack of all trades and a master of none. So it can accomplish all the same things, but just not as efficiently. 15:20 So those are gonna be a little more expensive. Then we get into the functional encryption covenants. 15:25 Those would be, um, as the Jeremy Rubin functional encryption and the Misha Komarov Bitcoin Pipes covenants, where you have to post some data, and you have to do a bit of, like, back and forth ciphertext decoding of that data on Bitcoin. 15:41 Then you have CAT ZKP, that is ZK proofs on Bitcoin if you were to use OP_CAT to produce a zero-knowledge proof to produce a covenant. Ethan Heilman estimates that this might be about a thousand dollars per covenant. 15:59 And then you have, um, the most expensive version, but it is ColliderScript. Again, the, the last covenant that I reviewed. 16:08 ColliderScript, where you use computers to produce, uh, you s- you spend compute to produce, uh, numbers, and those numbers, eventually some of them will work within a covenant that you want to work with. 16:21 That could be millions of dollars. 16:24 Um, I have seen some numbers on, uh, like how much it might cost, but he has it positioned here, ColliderScri- ColliderScript, around the, like, two to five million dollars per covenant that you would produce from ColliderScript, uh, that is hash collisions. 16:42 So the funny thing is, like, while this might seem incredibly expensive because you're like, "What do you mean? I'd, I'd spend two million dollars on a Bitcoin transaction?" Well, it may not be that straightforward. 16:54 You maybe s- you maybe spend two million dollars to set up the right Bitcoin transaction. 16:59 Um, but if you look at the scale of, like, how much a company, say, like StarkWare, um, spends on, uh, Ethereum for their StarkNet, uh, layer two, they spend twenty, thirty million dollars a month, uh, from StarkNet to Ethereum to basically secure that blockchain. 17:19 And, um, if StarkWare wanted to build something similar like StarkNet, which relied upon a covenant on Bitcoin's base layer, um, all of a sudden, spending two or three million dollars a month seems like a, uh, a fraction of what it would be-- of what they're currently spending on a less desirable blockchain like Ethereum. 17:40 So this presents a really interesting, um, development in the soft fork discussion. 17:47 I don't think this has really been discussed outside the technical community, and maybe if you're listening to this, you're not in the technical community, and you might be bewildered by it. 17:55 Or maybe it's just the technical people who made it this far, and they're really angry at me because I've been too reductionist, or I've said some things that are kind of incorrect about how these work. 18:04 But the important thing is, the real big takeaway is, um, 18:10 uh, twelve months ago, it was just a single, like, side blog post that someone had written back in the day that says, "Well, maybe we could emulate covenants, probably." 18:19 And now we have three different schemes, three different ways that we can do this, and I don't know if we've actually seen them implemented in the wild, but I think it's just a matter of time until we do.So I will be covering this. 18:35 I don't see other people in the Bitcoin technical space covering this. And I think this applies to you if you're listening and you want OPCAT. 18:43 The answer is we've kind of already got OPCAT, but we don't have the, the best kind of OPCAT. So, uh, 18:51 that is, uh, you know, again, I'm editorializing this a bit because, um, I think this is one of the more interesting developments in the Bitcoin technical discourse over the past year, 19:01 and I think everyone should be paying attention. Um, so, uh, uh, I'm gonna-- The last bit of news that I'll move on to before I wrap this up is that, 19:19 um, we have a big week this week. We have Inscribing Miami twenty twenty-four in Miami at Art Basel during Miami Art Basel week. This is Inscribing Miami twenty twenty-four put on by the Inscribing Atlantis team. 19:32 Um, it's, uh, going on on Thursday, and it's again, you know, your kind of like who's who of ordinals. You've got Ben Charbit, Billy Rusty, BuuToshi, Burt, Eli Hurff, the Ordinals Bot guys, Casey, 19:51 Ordzar guys, Donny. I mean, you got a lot of people. Elizabeth, Erin, Good Things, Jack Butcher, Jeremy Rubin, Nick from Gamma. So, um, I expect there'll be a lot of fun content and, uh, stuff coming out from that, 20:06 uh, conference. So I will not be there. I'm taking the holidays off. But otherwise, thank you so much for tuning into Bitcoin Season two. Make sure to like and subscribe. If you're watching this on YouTube, subscribe. 20:18 Hit that notification icon. If you're listening to this on Spotify or Apple Podcasts, um, leave us a review. I really appreciate that. Otherwise, thanks and see you around. 20:29 [outro music]
