tBTC: What Happens When the Most Liquid Crypto Asset Hits DeFi?

Matt Luongo, CEO of Thesis, the parent company of Fold and Keep, describes the just-launched tBTC, his plan for a censorship-resistant Bitcoin-Ethereum bridge. He explains his personal reasons for wanting such a platform, why tBTC is different from other versions of Bitcoin on Ethereum, and how it works — including the process of becoming a signer in minting tBTC, how the system will handle crises, the reason for high collateralization levels, why staking assets are limited, and the necessity of a work token, Keep. He also discusses the economics behind tBTC-backed tBTC, his vision for DeFi, how tBTC could buffer an ETH crash, and the reasoning behind minimal governance mechanisms — playing into why institutions trust BTC more than ETH. Plus, he contrasts the Bitcoin and Ethereum communities and talks about the possibility of tBTC2.0.  

Thank you to our sponsors! 

Crypto.com: https://crypto.com/

Kraken: https://www.kraken.com

Episode links: 

Matt Luongo: https://twitter.com/mhluongo

Thesis: https://thesis.co/

Keep: https://keep.network/

Fold App: https://foldapp.com/

tBTC white paper: https://docs.keep.network/tbtc/index.pdf

Initial reveal: https://twitter.com/mhluongo/status/1162481737525583873?s=20

Announcement on Keep blog: https://blog.keep.network/bridging-bitcoin-and-ethereum-b2f9923630a7?gi=5c9040ed3a72

Some criticism of tBTC: https://twitter.com/peterktodd/status/1162728205607985152?s=20

Matt on the Breakdown podcast: https://www.coindesk.com/will-defi-matter-in-a-post-coronavirus-world-feat-matt-luongo

Matt on Sendwyre podcast: https://blog.sendwyre.com/announcing-tbtc-with-james-prestwich-and-matt-luongo-of-cross-chain-group-c424e2b0b40c?gi=d1e8b53ca80e

How tBTC works: https://defipulse.com/blog/what-is-tbtc/

The Block on tBTC: https://www.theblockcrypto.com/daily/55284/inside-tbtc-the-bitcoin-backed-erc-20-token-that-could-go-live-in-march

Keep raises $7.7 million: https://www.forbes.com/sites/justinoconnell/2020/04/03/coinbase-co-founder-invests-in-project-to-bridge-bitcoin-and-ethereum/#368a6f737df4

Transcript:

Laura Shin:

Hi, everyone. Welcome to Unchained, your no-hype resource for all things crypto. I’m your host, Laura Shin. Twitter fights, media posts, scammers, phishers, and promotional content, want to cut through all the noise in crypto, sign up for my weekly newsletter at Unchainedpodcast.com to get a quick and easy summary of the top news stories every week. 

Laura Shin:

Today’s guest is Matt Luongo: Luongo, project lead for tBTC. Welcome, Matt. 

Matt Luongo:

Hey, Laura. Thanks for having me. 

Laura Shin:

Just a heads up for listeners, the main topic of today’s show is tBTC but we’re recording before the launch. So by the time this comes out tBTC will just have gone live. So, Matt, I guess I’ll give you a preemptive congratulations. 

Matt Luongo:

Thanks. Yeah. Hopefully that doesn’t become the headline that it didn’t go well. 

Laura Shin:

So you’re involved in a number of companies, Fold, Keeper, Thesis, and obviously now tBTC, which isn’t a company but a project. Can you explain all the various things you do and also talk about here tBTC fits in? 

Matt Luongo:

Yeah. Sure. So clearly I’ve got a bit of brand ADHD. I like to work on a lot of things. So I started Fold in 2014, and originally it was a bitcoin kind of 1.0 payments company and since then when bitcoin kind of stopped the narrative for payments died and we started realizing the store value is really what made more sense for bitcoin. We started pivoting Fold but I got bored, so we found a new team to run fold. The CEO, Will Reeves, is frankly a better consumer app CEO than I could ever be, and they have raised their own money and they’re doing their own thing but then we started working on something different called Keep, and I started to realize that I really like starting things and then growing them, but eventually I’ll probably want to step out. 

So when we started Keep, which is a confidential data layer for Ethereum, we started working on this kind of parent company model called Thesis. The idea behind Thesis is  the tying thread between all of our projects which is empowering individuals and protecting individual rights and liberties. So thesis is the parent company of Fold and of Keep. This latest project, tBTC is an app built on top of Keep to bridge bitcoin and Ethereum. 

Laura Shin:

Well, so why don’t you describe what tBTC is and how you came up with the idea for it. 

Matt Luongo:

Yeah. Sure. So it’s a bridge between bitcoin and Ethereum and I mean that in a couple ways. On the technical side, what we went on to accomplish is take all things that we love about bitcoin and make them accessible on Ethereum. So what is that? So bitcoin is hard money. It’s censorship resistant. Obviously, it’s digital but that’s sort of table stakes. So we said, okay, if we were to have a one to one bitcoin-backed token on Ethereum how could we preserve those properties. So we made sure that there’s not a way to print more. There’s not a way to mess with the supply. The next part and this is the tough part is also making sure that this bridge is censorship resistant and resilient to government or corporate intervention. 

So that was our goal on the tech side but the other piece is almost sociological. Like I’m totally outside my field here, but I think it’s really interesting, which is over the years crypto has split into this bitcoin purist group, this group around Ethereum and then a whole bunch of little splinter cells. The bitcoin folks are sort of more fiscally conservative. The entire hard money narrative draws a very particular kind of person. Me included, frankly. Then on the Ethereum side, we have these sort of techno optimists who lean a little like almost left anarchist and so what I really want to do with this project is I don’t think bitcoin versus Ethereum is a useful dynamic in this space. I think it’s really bitcoin and all of crypto versus the world versus the money printers and banks taking advantage of the situation that we all find ourselves in. So that’s what tBTC is both on the tech side but also kind of my aspirations for it. 

Laura Shin:

I just have to ask you to tell your personal story because I just love that story. And people might already know but in case my listeners didn’t. 

Matt Luongo:

For sure. Yeah. So I’ve been in the space for a little while and we have a little bit of crypto. Not like some crazy people but a little bit. So when our second child came along, we were living in the Bay for a while and it’s just like it’s very hard to raise a couple of kids in the Bay, so we moved back to Georgia. My wife was like well, now in this market we can definitely buy a house. I was like, yeah, that sounds great. Let’s get a house for our kids. So she said, cool. Well, this is why you’ve got all that crypto. I did not like that and I was trying to explain this is like a long-term holding. I would let go of anything else in our lives before I would sell this. 

So I said, okay, what if I can find a loan? This was kind of before loan desks really became more popular. Lately, we have tools like Blockfy. So I went to a local lender that my family recommended that said they were crypto friendly. I met them and I said here’s how much crypto I can use as collateral for this. I’d love to do this. They said we’re totally crypto friendly and we’re so glad that you have this crypto. Why don’t you sell it, come back in 30 days and we’ll pretend like we never had this conversation. So I never want to name and shame these guys. This is like a small local joint. I guess they thought that I wanted to avoid taxes or anti money laundering or something. It was something sketchy. So ever since then, on the bitcoin side obviously I think it’s good collateral and I think the hard money narrative is strong. But the thing that you get on the Ethereum side is a little bit more like I have this kind of Millennial finance idea where it’s like why would I ever have to talk to a human to get a loan against collateral I already have that’s provable. 

So I kind of started thinking it would be really cool if I could get a DAI loan against that bitcoin. It would be really cool if I could…I mean ultimately, I think I should have just been able to talk to somebody and get a mortgage at a super incredible rate because they could see this additional collateral, but I really shouldn’t have to talk to anyone. So that’s what led me to getting really interested in this problem of bringing hard money and bringing bitcoin to DEFI and Ethereum. 

Laura Shin:

One thing I just want to kind of breakdown and understand is why is it that important to have bitcoin in particular. What do you feel that you can’t do in DEFI using Ethereum that you could do with BTC? 

Matt Luongo::

Yeah. I think there’s a really pragmatic answer that the Ethereum folks like and then there’s also maybe a little bit more philosophical an answer. So the pragmatic answer is bitcoin has 10x the liquidity of Ether. Finding a way to access that via DEFI is critical. I don’t want to say that Ether right now is tapped. There still more money sloshing around to use as collateral for sure, but there this whole huge user base in bitcoin of people who have never touched Ethereum because they’ve never really been given a reason. So it’s not necessarily that DEFI needs bitcoin. I would argue that but a lot of DEFI people disagree but they do need users and it’s a lot easier to tell someone you love bitcoin, why don’t you try this new technology, bring your bitcoin with you, than it is to convince someone off the street. What is the value proposition for a mainstream person today for DEFI? 

Hey, you can take this incredibly over-collateralized loan to get 3x leverage. It’s just so far outside of their day to day and obviously I’m interested in that but it’s not like…it’s not something that most people are going to care about day to day yet. So that’s pragmatic. Philosophically, I like Ethereum, the technology quite a bit. As a developer it’s given me tons of tools. I’m not yet convinced of the asset. I think the story of replacing central banks with an algorithmic alternative, which is bitcoin is much stronger than Ether’s current value proposition. That could totally change. I’m not an economist, but that’s kind of the direction I come from. 

Laura Shin:

Yeah. It’s really interesting you’re bringing this up because in my most recent Unchained, I interviewed Cathy Wood and her blockchain analyst, Yassine Elmandjra, and I noticed on Twitter later that people were saying these are investors and they’re saying bitcoin is the main thing to invest in but we think Ether is money and it’s investible and they were kind of taking issue with how in the episode Cathy and Yassine were saying Ethereum is more like technology. It’s not like I have a stance, but I would agree that bitcoin…its monetary policy probably is more in line with something that’s kind of purely financial. One thing I wanted to ask you was tBTC is somewhat similar to some existing products, liquid or WBTC. So how do you differentiate tBTC from those. 

Matt Luongo:

Oh, yeah. So I think there are two interesting camps for alternatives. So liquid is great. I kind of started to show people what we could do. We’ve all been talking about this idea of side chains and bitcoins. So how can we expand bitcoin’s utility in a way that is safe and doesn’t kind of sacrifice the stability on the main chain. So side chains was this idea that we’ve been talking about since 2013, and they’re hard because to do a really great, perfectly… like sort of the strongest version would require some changes to bitcoin that people aren’t willing to make. 

So block stream launched Liquid, and it’s kind of this…it’s like what is the almost simplest way you could do this and still call it a side chain. So the basic structure is you’ve got 15 members of a federation. So on the bitcoin side what you’re doing is you’re saying here is my bitcoin and you put it into a multisig. This multisig is composed of these 15 members and that’s it. I mean you don’t even need to worry about the tech for a second. It’s sort of like if you were to just give your money to a consortium and then hope they gave it back to you. 

What’s interesting about this consortium is it’s across many jurisdictions so it’s very hard to actually sue them if you want legal recourse. What the consortium does is they’re running this faster chain that has some additional power and then if you want you can ask them for your money back. So here’s my problem with that structure. You have to ask them for your money back. Permission less is not a thing here. It’s maybe the closest we could get when Liquid was first launched so for me it’s just a bitcoin bank. It’s kind of like if I were to give Walmart money for a gift card. I hope they’ll let me redeem it for the same amount that I got it for but that’s not why I got in the space is to hope that people would give me my money back. 

But it was a great step forward. It’s a good effort. Then WBTC is quite similar. The difference between Liquid and WBTC though is Liquid, once you have money in Liquid it’s like what do I do with it. So you can move it between exchanges but there’s really not a lot more. With WBTC it’s quite a similar idea to Liquid but with even fewer federation numbers. Right now, the only custodian is Bitgo. But you can plug into DEFI so now you have bitcoin and you can use Compound or whatever else on DEFI so at least there’s stuff to do. But you have to, going in and going out you have to KYC. At any point, a transaction can be censored and this is not like…Bitgo, they’re good players. They did this to help the space. It’s just because they’re a single company that was what was legally required of them launching this. 

So I think those are two different approaches. They’re both, in my opinion, bitcoin banks but one is kind of off without an ecosystem and the other is tapping into the Ethereum ecosystem. So the difference with us is we don’t want you to have to ask anyone permission. So you don’t need to talk to our company. In fact, we go out of our way. We’re trying to get our company out of this as quickly as we can and just launch this thing into the world. You don’t need to send your passport and hope it doesn’t get hacked and leaked on the dark web later. You don’t need to ask permission for redeeming your bitcoin. 

So what we’ve done is we’ve taken this federation idea, originally in liquid and we’ve expanded it to way, way, way more people so that each deposit of bitcoin gets us on federation and then that federation also puts down money. So if they’re dishonest you can just take their collateral and you’ll actually have made more money than they did being dishonest with you. So it’s not quite the same as perfect trustlessness that we expect on Bitcoin but I think it’s as close as you can get. 

Laura Shin:

So walk us through everything that happens when someone comes to the system and want to create one tBTC. 

Matt Luongo:

Yeah. Sure. So I think how deep do you want me to go? 

Laura Shin:

Well, I have a whole bunch of detailed questions here but I know that if I ask this one you’ll probably explain most of it and for whatever you don’t I can dive in and ask the more specific questions. 

Matt Luongo:

Fair enough. I’ll still try to keep it a little short. I don’t want to bore you. So here’s the rough idea. You can go to the staff. Initially, it’s going to be Dap.tBTC.network but shortly after launch you’ll be able to run it on your own machine or IPFS or just sort of whatever other way you’d like to get to it. If you have bitcoin and you have Metamask so you do need to know a little bit about Ethereum in this first version. You can say I’d like to make a deposit, and you can choose an amount that you’d like to deposit. Unfortunately, you can’t in this version just deposit any arbitrary amount and you’ll hear why in a minute. 

So you can choose an amount up to one bitcoin at a time to deposit. Then what happens is on the Ethereum side we put out a request, and this is all of the infrastructure that our team’s built to this random beacon on the Keep network. What the random beacon does is it choose signers from a large candidate set, who will ultimately be your decentralized custodian for your bitcoin. So it chooses these signers randomly and then it also says this is how much this person would like to deposit. We need you to put down 150 percent of that deposit’s value in Ether. 

So now these guys are bonded. They’ve agreed. They come back and they say here’s a bitcoin address. The way the bitcoin address works is quite similar to multisig. It’s actually a little fancier. It’s called Threshold ECDSA. The basic idea is that all of these signers have to agree to move money. Then you, as the user, back up here in your browser are like this looks great. I see a place I can pay bitcoin, I’m going to pay. So you send your bitcoin and this is one of the coolest parts. This is maybe my favorite part. So once you send bitcoin you then send a proof to Ethereum that shows that you paid bitcoin. 

So at this point, you’ve only talked to the Ethereum chain and now you’ve talked to the bitcoin chain. You don’t need to talk to anyone else. You prove that you’ve made this deposit and once that happens tBTC can be minted on the Ethereum side. There’s a small fee taken. I think it’s incredibly low at launch, but it’ll end up fluctuating with the market. Then on the other side, you now have this tBTC token. So as cool as that part is if you can’t get back to your bitcoin that’s not a great trick. So redemption, the way that that works is you take your tokens back to a particular deposit group and you say I’d like to redeem this and then all of them come together to make a signature to move funds and then they take your tokens and they burn them. So it maintains this one to one supply peg. 

At any time, if those guys either send the bitcoin to the wrong place or they don’t send you the bitcoin, their collateral is seized and auctioned off and then it’s given back to you plus profit. So there’s a pretty huge incentive for these guys to be honest and timely. Then you sort of pay them for their time with that fee so they’re happy with the profit in the system. That’s it. I mean that’s end to end. 

Laura Shin:

How do people sign up to be signers? 

Matt Luongo:

Yeah. Great question. Great question. So earlier I was talking about Liquid and affixed federation and I was complaining but I didn’t really say anything about an alternative, right. So the way that we work and the way that you join the candidate set is initially we have a permission set and that’s a whole slew of people will be sharing over the next few days. It’s a mix of VC types and professional operators / staking providers like Bison Trails and Staked and Figment. So it launched…all of these guys will be there and I think we should be able to get to around 80 signers. 

Laura Shin:

Did I also see Coinbase Custody and Anchorage? 

Matt Luongo:

You did, yeah. So both Coinbase Custody and Anchorage are also going to be working here. I think they’re figuring out how much they’re going to stake versus outsourcing. So if you’re either of their customers you can just sort of get in there and you can do it. Then June 8, we are going to start opening up the signer set to everyone. So on the one hand, this system requires a lot of Ether. So in the first version we need enough Ether to make sure that we’re confident that this bitcoin won’t be stolen. So we needed Ether in the system but also like ultimately I want a wide signer set and I want this to be a system that’s across jurisdictions and the whole team wants that. So we need these signers to be everywhere. 

We need them to be in different regulatory environments. We need them to be geographically distributed. So what we’re doing we’re launching something that we are calling a stake drop June 8 and the idea is that you can take your Ether and you can start staking it and you don’t actually need to have any preexisting arrangement with us. You can put your Ether down and you can act as a signer. There’ll be a brief period where anyone can do that. It’s looking like it’s going to be three to six months. We’re pinning down the exact length of time. Once you do that, if you prove that you’re good at being a signer you’ll then be granted these tokens that allow you to sign whenever you’d like. 

Laura Shin:

One thing that I was also wondering though for when you open it up is obviously they need to be able to keep enough collateral that’s 150 percent ETH against whatever BTC they’re signing for. But because that exchange rate is changing constantly, how can you be sure that they’ll have enough if the exchange rate changes. Is there some way of proving how much Ether they have and that they’ll keep it in reserve or how does that work? 

Matt Luongo:

Yeah. There were a couple options here. So one is treating this like a margin account. So if the exchange rate goes too low, signers can top up and put in more Ether but the problem with that is even if you make it incredibly easy to top up you need a lot of people to coordinate very quickly to do that. Otherwise you have this situation where maybe…it’s like a common situation where one person ends up paying for the other signers. So we realized that we really can’t treat this like a margin account. So instead, what happens is if any of these deposits goes undercollateralized, the deposit opens up and any signer or anyone can then redeem the deposit. So the idea is that if the signers want to get out of the situation because they think that Ether is in the middle of taking a big drop or relative to bitcoin or something like that, they can actually just close their deposit and redeem the bitcoin and get their Ether back and sort of rebalance their books however they’d like. 

Laura Shin:

So one thing that I wasn’t clear on is are you moving to a system where people will only be staking Keep or are you moving to a system that’s more similar to multi-collateral DAI where you’re just going to keep adding collateral types? 

Matt Luongo::

Yeah. Both. I know that sounds impossible. So we could have launched a system where you just use Keep but here’s the thing, again, I come from bitcoin land and it is totally unclear to me that this token that we’re launching is going to magically be good collateral overnight. It takes a lot of time for things to be trusted and to have liquidity and to actually be good collateral. So the way that I look at this is this version, we’ve really overdone it with good collateral so that we can make sure…no one can lose a cent here. If you’re a bitcoiner and you’re playing with Ethereum for the first time using this system and you lose money you’re never going to come back. So we really overdid it with both the Ether and the Keep in this first design because we just can’t have anyone have a mistake like that. What we’re moving toward eventually is once we see the fees that a system like this can take in there’s this trick where you say, okay, how much am I making, how much is that worth to me over time. 

You can basically treat your position as a signer as this income generating property. So now we know that that’s valuable to you and it can act as partial collateral and then the second piece is will it just be Ether? So I guess what I’m saying is first I would like to lower the Ether requirement. I think we can get it…my very rough models have said maybe 40 or 50 percent can be Ether in some future design. That’s impossible in this version of the system though because I want people to be confident we don’t have the power to upgrade the system or anything. 

So maybe we’ll have this multi-collateral future, but I think what we’re seeing Maker run into right now is that there aren’t that many interesting assets on Ethereum. I know Ethereum people don’t want me to say that but there is some security tokens which are not really my jam, but I see why people want real estate on chain. There are some interesting systems like Auger where the token does have properties that maybe matter and then there’s Ether. Almost everything else, I mean a lot of it doesn’t have a reason to exist. A lot of it was a speculative land grab and that’s the nicest way I could possibly say that. So maybe we’ll end up moving to multi-collateral but I think we’ll find ourselves in a similar position to Maker, which is there’s not that much good collateral to have on this chain. 

There’s Ether. Hopefully, I hope that we’ll prove that tBTC can be in that category and then there’s a bunch of security tokens. 

Laura Shin:

I just have so many questions about this but one of them is like Keep, if Ether can be used, what is the purpose of Keep? 

Matt Luongo:

Yeah. Why is there even a token here? 

Laura Shin:

I mean you were talking about a land grab and now it feels like there could be an argument made that this also isn’t necessary. 

Matt:

One hundred percent. So oh, gosh, are you ready for some radical candor? I think there’s sort of two very different takes on this. So one is if we ship tBTC just the way it is and we increase the collateralization to 200 percent you would never need another token. People can just keep dumping Ether in. That’s super inefficient from a capital standpoint. But that’s one way to do it and then we could just walk away and the thing would exist. Eventually, though, someone would build something that required way less. The system that requires way less is the system that we’re building with Keep. 

So what’s really great about using…and it doesn’t have to be a fungible token. That was an early decision we made but it could be an NFT for signers as well, is if one of these guys cheats you can kick them out of the system. So if you only use Ether as collateral and somebody loses their Ether they can come right back and they’ll just have more Ether. It’s such a large cap that there’s really not a way to exclude them without burning all of the Ether in circulation. But a work token like Keep, the idea is that if someone does something malicious, so I don’t mean like I messed up or I became uncollateralized but I mean I stoke bitcoin. If you steal bitcoin in a system like this, we take all of your Keep and you’re ejected from the network. You can’t join as a signer unless you buy back in and very quickly, because this is a work token, there’s no liquidity. 

That’s not really a property of a token that’s primarily used like a taxi medallion. So I think like in V1, if we increase the collateralization quite a bit I could probably build some sort of system that didn’t require any sort of work token. But as we move more and more toward lessening the need for Eth, you either need a token like Keep, which is an ERC20 or you would need to give people a whole bunch of NFTs that represent their signing rights and then take those away from them. So it is a pretty necessary part of the eventual capital efficient system we’re building. But yeah, I could totally imagine building this in a way that was just much more expensive but that didn’t have another token at the beginning. 

Laura Shin:

So essentially, tell me if I’ve got this right. You’re going to do this stake drop. It’s going to be six months and then after that, there won’t be a way for people to earn more Keep to enter the system. Either they get kicked out, in which case, they’ll have to buy Keep again to get back in and after that six months anybody who wants to join after will have to buy Keep to get back in. Is that what you’re saying? 

Matt Luongo:

I have no idea if they’ll be able to buy it, but yeah, they’ll have to hold it somehow. So it just gives us a way to basically say this person is a bad actor. They’ve proven it, cryptographically. They’re clearly a bad actor or they were hacked, in which case they’re incompetent and they shouldn’t be on the network and you can just eject them. 

Laura Shin:

When you say you don’t know if they’ll be able to buy it you’re just saying you haven’t requested any exchanges to list it, but I can’t imagine that people won’t be able to…in what scenario would that happen? 

Matt:

Oh, yeah. Well, you look at systems like…so for a long time it was very difficult to get MKR and it was just a bunch of kind of…I don’t want to totally mischaracterize because I wasn’t there but my friends were. Early MKR holders were true believers who were constantly meeting up in video calls, and it was very difficult to get ahold of the token. Even now, it’s a pretty low liquidity token, and I think what we’re looking for is something similar here with Keep where if you hold this, the reason you hold this is because you want to participate in the network. If you don’t, that’s sort of it. That’s sort of the only option. So maybe you buy it. We’ve got a grant program where we’re making sure that folks who we think would be excellent stewards of the network can get Keep regardless of whether or not they want to put money down. Yeah. We’ll just see how it goes. 

Laura Shin:

Okay. I’m going to ask you more about that in a second, but first a quick word from the sponsors who make this show possible. 

Laura Shin:

Back to my conversation with Matt Luongo. So right before the break you kind of were saying that people could be chosen if the system thought they would be good stewards. How would that work? Is there like an application process? 

Matt Luongo:

Yeah. Yeah. So there’s two components, right. So with the stake drop it’s just prove that you don’t lose money for a period of time and that you’re honest and then you’ll be granted this position as a signer and you’ll get these tokens. Then for now, what we’re doing is we’re playing a test net game. We’re calling it playing for keeps because we got tired of everyone calling it Game of Zones or pegs or whatever. So the idea is that anyone who can prove that they’re a good staker right now on test net and then who add to the community. So maybe they’re doing translations or they’re helping other people learn to use the system. They can just be granted a position as a signer and the tokens that will let them sign on main net. 

So the downside to that is it’s permissioned. So my team, not really my team, we actually have a panel of outside judges but people that are affiliated in some way with me and that know me are going to be granting these to people that they think would be good. So that’s like the human component. And then the part that’s just objective is the stake drop where you just put your money where your mouth is and if you’re honest you can keep using the system. 

Laura Shin:

Okay. It sounds interesting. I guess one other thing though is we were talking before about adding other types of collateral. Is there some system for determining… obviously now we can say maybe there aren’t that many compelling collateral types but down the line, if there are, is there a way to add more? 

Matt Luongo:

So total left turn on you here. Sorry if this sounds like a lot. So there is this trend to being incredibly governable and upgradable in Ethereum. The geeky engineer optimist in me thinks it’s so cool but the craggly bitcoin, op sec, security guy is like what are you doing? The whole premise of this space is censorship resistance and immutability and people not being able to sort of mess with things. 

So when I talk about a V1 or a V2, I have no idea if V2 will exist. I could get hit by a bus and our whole team could… COVID-19. I don’t know. Anything could happen that prevents that from being a thing. So no one should get involved with a system assuming that there will be a V2. We have not built in anything to allow the team to upgrade the system as it runs. The reason that we did that outside of sort of philosophical leanings is if you’re a bitcoiner it takes an incredible, incredible amount of coordination to change bitcoin even for a soft fork and for a hard fork we’ve seen that fail and I was there on the front lines watching that fail. 

Laura Shin:

Are you talking about SegWit2x? 

Matt:

I’m talking about SegWit2x. I was a Bitcoin Classic supporter. I’ll out myself. I was a big blocker until SegWit2x and when I saw how that was going I was like, no, this is wrong. We can’t make these decisions with a bunch of companies in a room in New York. That is wrong and not what the system is supposed to be about. So originally, I was like engineer, engineer, we need to grow this thing. We need big blocks and then I sort of realized what is bitcoin for. If it can’t be for payments at 01 that’s okay. The most important thing is that it’s not captured. So this really shaped how I look at these systems. 

So the team does have a privileged key to this system but I can name all the things that privilege key can do. So the first thing is let’s avoid a kill switch. Let’s avoid an upgrade process and a kill switch. So here’s the one closest thing we can do to a kill switch, which is if there is a zero day exploit and we think a whole bunch of people’s funds are at risk in tBTC, the dev team has a multisig wallet that can press a button one time that will pause tBTC’s new deposits for 10 days. That’s it. We can’t press the button again. If I’m compelled by law enforcement to press the button it only lasts for 10 days. 

Then after that, we have three other functions that that key can do. One is to set the signing fee. We do not yet know how the market will discover signing fees, and we’re just going to have to mess with it. What we’ve done to keep that from being incredibly dangerous for users is we’ve said this only impacts new deposits. So anyone would have to opt in before this became effective and it’s in a tight range. We can’t set it to like 100 percent or something. 

The third is that we can set collateralization ratios and that’s also tightly bound. It has to be over 100 percent and less than 300 percent. Then the third is…oh, there’s another fee right structure that we can set as well. So there’s this enumeration of these are all of the things that this dev team can do to the system. 

So if there’s a V2, it’ll be because a whole bunch of people on Twitter trolled us so hard that V1’s not good enough, and it’ll be because we think that we have a better design and we’ll propose it. If people like it they can move to it, but I just want to be really clear. So this discussion of V1, V2…V2 we have some designs but please don’t get involved with the system expecting any of that stuff. 

Laura Shin:

Wait. I’m sorry, I asked whether or not you’re going to add collateral types. So you’re saying that you’re not going to fiddle with the system. Is that what you’re saying? 

Matt Luongo:

That is what I’m saying. So we are going to try to add new types of collateral in this next version but in this version the only acceptable collateral is Ether and all that Keep does is it can additionally kick out malicious signers. That’s it. 

Laura Shin:

Wait. So you just said this next version but before you said…

Matt:

Both. I’m trying to say both. 

Laura Shin:

So you guys are working on potentially having a next version but you’re saying nobody should put their hopes on you guys ever launching it, something like that. 

Matt Luongo:

That is what I’m saying. It might sound like two sides of my mouth but I’m actually trying to do people a favor here, right. So in the Ethereum space people love to say, oh, this is how it will work. I had a really terrible public eating crow incident the other day where as I’m trying to explain to bitcoiners what’s interesting about Ethereum they’re like I don’t see anything here that’s new, and they’re mostly right. There are a couple things that are really cool and a lot of it isn’t new, and you could just do it with multisig on bitcoin. 

So one of the things that is new is robust privacy. Robust privacy tools. You can launch a new SNARK circuit or another sort of privacy tool on Ethereum. So I’ve been really excited about Tornado Cash. It’s not as robust as something like ZCash but it’s interesting and it’s on Ethereum and you can use it today. So I’ve been so excited about it that I’ve been telling people you should really check this out and consider this as an alternative to Coin Join. 

I got into this little Twitter spat with Udi, who if you guys are familiar with Crypto Twitter, he’s a fun guy. I got into this spat with him and he said, this isn’t the robust thing you think it is. I actually looked at the contract and I realized the team has the power to upgrade the contract in such a way that my funds could be totally moved. So look, I’m so excited about Tornado Cash but not yet, and there is just this misunderstanding where a bunch of us in the community thought this thing was ready to roll but it’s not going to be ready to roll for another three to six months, and it looks the same to users and so for me it’s really important to say, hey, guys, by the time this podcast is heard you’ll be able to start interacting with the system and you’ll be able to start playing with your bitcoin on Ethereum but all of these ideas of new collateral and more efficiency and better privacy constructs, there are ideas that our team has for V2. We’ll probably still call it tBTC but it’s incumbent on you. These tools are sharp and you have to do your diligence. 

I don’t want people to think that this is magically just going to get better without them paying attention. 

Laura Shin:

Okay. Just so I understand also about the V2, if you were to ever launch something like that, would you have to wind down the current tBTC network? 

Matt Luongo:

No. So it’s totally a social…it’s sort of like a hard fork. It’s a coordination event. So if people like V2 better, they can drain their bitcoin from V1 and they can move it over. If they just want to keep using V1 forever, again, we don’t have a long-term stop button. I mean I guess what I’m trying to say is I think that even though that might be in my business interests I don’t think that’s in the user’s interest and so that’s why we’ve made sure to not include it. 

Laura Shin:

Okay. So it’s a little bit different from the transition from SAI to DAI where if I remember correctly I think there was…was there a deadline on…

Matt Luongo:

Yeah. They have some buttons. 

Laura Shin:

Okay. And they were trying to move everybody but if you were to ever launch a V2 it would be up to people whether or not they wanted to use the new system. 

Matt Luongo:

That’s right. With my CEO hat on guys were totally launching a V2 but with my bitcoiner had on, please don’t trust me. 

Laura Shin:

All right. So one other thing that I wanted to ask about was for when people meant tBTC obviously the number of signers is going to be somewhat limited. Do you have a sense of how many there will be? 

Matt Luongo:

Yeah. So it should be between 80 to 100 at start. Then I expect before the stake drop we’ll start to approach 200. We’re trying to take this thing kind of slow, so it could go slower. I think the most important thing is that users can see. So as you decide to mint tBTC you can actually see how large the signer set is and decide am I comfortable with this security. The other thing that we’re doing is in the DAPP that we run, we can’t do this in the contracts but in the DAPP that we run we’re actually going to limit the initial deposit size to pretty small and then slowly ramp it up so people can play with this thing and get comfortable before we are off to the races. 

So anyone who’s integrating in the contracts they can just go for it and YOLO, it’s your life savings. If you want to put it on the line that’s your choice but the rest of us who are using this DAPP will get appropriate warnings and take it easy, don’t move too much money until you feel good. 

Laura Shin:

As for choosing the signers you have this random beacon that does that but I guess I was wondering is it always randomly choosing a different set of signers each time or is it groups within the…

Matt Luongo:

Yeah. So it’s actually always choosing random signers. So the way…I’m going to try to not delve in but the random beacon is super interesting and if you guys are familiar with Eth2, it’s kind of an alternative design to what the Eth2 team has shipped but it’s on Eth1. So it’s super interesting. The basic idea is that we’re just sampling, so we use this idea call sortition, which if you look into it it’s actually really fascinating just from a governance perspective. It’s this way to randomly elect people, and the Greeks actually have a history of doing it. So I would really suggest if you feel like going down a Wikipedia rabbit hole to check out that, but we use sortition to choose signers randomly. 

A guarantee that we can’t offer in the system that you can in something like Liquid is we don’t know I these people are different people or not. Ultimately, these people aren’t all providing their KYC information every time they sign, so you’re not confident that these are different people. So it’s important with this random beacon is just to make sure that each time it is actually random and that folks aren’t colluding. Then the other thing is that even if they are colluding that’s why we have all this extra Ether so that if they do try to hurt a user, a user’s got recourse. 

Laura Shin:

One other thing that I heard you talking about on a different podcast was you’re going to allow tBTC as a collateral type, something like that? 

Matt Luongo:

Yeah. 

Laura Shin:

I was trying to listen sort of quickly so can you explain that? 

Matt Luongo:

Yes. So this has totally been kicked to V2 but it’s one of my favorite pet ideas. 

Laura Shin:

Oh, this is V2. Still, keep going because this is very confusing. 

Matt Luongo:

It totally is. It took me a long while to convince myself that it was real. So if you use a system like Maker and DAI and if you make DAI backed byitself so a synthetic backed by itself, the system diverges. It’s going to swing more and more wildly because every time the base swings the collateral also swings. So every time it would swing up, it would swing up harder, ever time it swings down it’ll swing down harder. But in a system like this, what you’re actually saying if you use tBTC backed by tBTC, and this is a huge difference. It’s like people are like is tBTC a synthetic? No. And this is exactly why. 

If you use tBTC to collateralize more tBTC, what you’re actually doing is you’re taking tBTC off the market and you’re having signers put more of their bitcoin at risk. So you do that and what it does is it provides more system security but less system utility on the chain. So you ask yourself, why would you do that. Well, if everyone is moving their bitcoin to the Ethereum chain to get leverage on it as collateral that’s okay. That’s actually fine. So anyway, it’s really interesting and I cannot wait to provide a proper formal treatment of this thing because it’s really kind of a counterintuitive economic effect. 

Laura Shin:

Wait, but let me make sure that I even understood what you said because it sounded like what you were saying was that essentially signers will be minting tBTC and so they’ll be, oh, okay…so now that makes more sense to me. 

Matt Luongo:

Yeah. So the signers basically they also become depositors. They could have bought it on the market or whatever. So it actually has this increased structural property to the system. Balancing those incentives is going to be tricky. 

Laura Shin:

Something that I was wondering about, and this mostly applies especially for ETH backed tBTC. Could there ever be a situation where the price of that collateral crashes and then it would just make more sense for the signers to just steal the tBTC and take whatever punishment they get because their collateral is just so worthless. You know what I mean? 

Matt Luongo:

Totally. Yeah. I will reframe it the way that I like to talk about it. So here’s how I like to think about it, if the ETH became zero overnight this system falls back to security like Liquid, which is that these people are going to be honest by default and that most of them will run the default software and that probably if you go to withdraw your bitcoin you’ll get it out. Yes, the incentives totally skew. So because we’re starting with 150 percent over collateralization, if you were to lose 33 percent Eth to BTC in less than six hours this is where things start to get crazy. So ETH just takes a total nosedive relative to bitcoin or alternatively bitcoin goes on a run, ETH doesn’t follow and these deposits start moving into under-collateralize. If no one does anything they move into liquidation and the sign-in bonds get sold out. 

Again, fall back to liquid mode. The majority of these people are going to be honest. We don’t like to make that a primary assumption, but this is what you’re left with when the ETH goes away. Then the people who do decide…they have to have prepared for this. They have to have written a malicious client up front and be ready to steal everyone’s bitcoin. The people who do decide to actually be dishonest and steal, this is where Keep comes in, they’re ejected from the network. So maybe they get to do that once but they’re never going to make these fees again, especially if the work token stays. 

Laura Shin:

Yeah. I think what’s fascinating to me from what you said, I can see how just having that second collateral type of Keep will help at least a little bit in a black swan type situation because otherwise what I could imagine happening is let’s say there’s some sort of DOA hack-like event and the ETH price just drops precipitously. You could end up with this crazy feedback loop where tBTC is also exiting the system and that would…well, actually, now that I think about it though…wait, does putting tBTC in the system, will that make the price of ETH go up? 

Matt Luongo:

Yeah. I don’t love to…it might. I keep going back to the reason we made so many conservative design choices in this first version is we don’t know. Now, each time you mint tBTC there’s more ETH locked up and so this could have a great impact on the price of Ether because it slows velocity of Ether. Ether gets stuck in the system. What I truly don’t know, we’re running simulations but I cannot give anyone…I mean I can’t be sure. 

We’re right now running simulations with like a Black Thursday style even like happened recently with Maker and have happens if ETH loses 50 percent relative to BTC. There’s a ton of arbitrage opportunities where people “should” be minting tBTC and that could actually have a positive price support impact on Ether, but I just don’t know and so that’s why we’ve kind of done this multi-tier approach because can you imagine if we just relied on Keep and we only had a little Ether or something, the price of Keep could just be swung around everywhere and it would really be…you would have no idea what happens. 

So I think what would happen in that scenario is that there is an arbitrage opportunity to actually mint more tBTC and that has an ETH price support. I just don’t know as tBTC gets bigger that has a bigger impact. I think while it’s still small it’s…I mean it’s small. It’s more likely to break probably in the first 60 days than it will in the next three years. 

Laura Shin:

Okay. Well…

Matt Luongo:

Yeah. We’ll find out. 

Laura Shin:

We will. Speaking of that, so this fact that you’re only going to have this admin key that allows you to do the pause one time, if, God forbid, there is some kind of second situation that is life threatening to the system then what? Are people just screwed? Do you know what I mean? 

Matt Luongo:

It’s a sharp thing. Yes, is the answer. This is a huge difference and this is why you’re hearing me. You’re like is there a V1 or isn’t there? This is why you’re hearing me try to be so careful with my words. If we have to use this pause there’s not another one and so you either have to be very happy with how that pause got used to continue to use the system or maybe don’t ever use it again. I think this is the sort of stuff that we as a team are trying to be much more upfront about. A lot of folks in DEFI, especially in DEFI right now are cowboys and they’re losing 10 million dollars here, 25 million dollars there. It’s sort of gratifying to be like, well  you should have done your research but it’s really hard as a user to keep up with the firehose in crypto and it’s really hard to know if a system is trustworthy or not. 

So my expectation is that if we have to use the pause button ever that probably people will use those 10 days to exit and not come back. That’s what I would expect. That’s probably what I would do with my money. There might be a few cases where that’s not true. So maybe there’s a widespread zero day exploit on a whole bunch of different types of computers but the core tBTC system’s not impacted and we just didn’t want people losing a lot of money so we pressed the button, okay. But if we pressed the button because there’s a Black Thursday style event, that means the system is not resilient. 

I mean my goal as the person who will be part of making that decisions, if it ever comes up is, is this economics working as designed? And if I can, I don’t really want to ever press the button because of an economic reason. What I’d rather do is only press the button if there’s an actual hack that has been disclosed in advance and we know that we can save people tens of millions of dollars. But if there’s a huge drop in the price of Eth, the systems…it was designed for exactly that happening and don’t press the button. This is how it’s supposed to work. 

Laura Shin:

Oh, this is really fascinating because when I first heard you say that you could only press the button one time, I kind of assumed that at some point you guys will need to engage that but what you’re saying is we will always…you’re saying as long as this system exists we will have that backstop and if we ever have to use it that would be kind of life ending for the system. Most people would leave and like game over. 

Matt Luongo:

That’s how I look at it. I mean I think that’s probably how I would manage my money. Again, this is why we’ve taken kind of a different approach. I have spent a long time collecting the little bitcoin that I have. I do not want to see it disappear. When I joined the space it was in the middle of the 2013 rise and then the Gox crash. That was quite…oh, my gosh, I’ve got another one. 

So not only did I join the space mid-Gox but the day my son was born so I’m very…well, I won’t share because it’s bad op sec to share his date but the Bitfinex hack happened right around when my son was born. I was in this position where I really had to focus on my family, obviously. We were having our first child but I was also seeing that I was long, long on Bitfinex and I was watching a big chunk of my life savings just get eviscerated. That was really…I mean I learned a little bit via proxy with Gox and watching what happened there, but I learned a lot. Bitfinex taught me a lot. It taught me a couple things. 

As a user, it taught me not your keys, not your coin. So a system like tBTC will, will be weaker than keeping your bitcoin on L1, and my hope is that we can show that it’s less risky than centralized lending, for example. But the other thing that it taught me and this part makes me sad is that people will forgive you for making huge mistakes. So I do not use Bitfinex anymore and I stopped using it after that and I was done. A lot of people, they recovered and it was sort of miraculous. It took a lot of guts from that team and it’s very impressive, so I would hope though that if there was something similarly disruptive to tBTC that people would be out. But if I’m in the position where I try to regain that trust, I mean I’m going to try and we’ll just have to see. Are people forgiving? But I know that as a user I’m not very forgiving, and I know that as a user I would probably be done. 

Laura Shin:

Well, one other thing I guess I thought initially when I heard about the pause button was we’re just coming out of this period after the dForce Lendf.me attacks and that in large part was caused by this issue around the ERC 777 tokens kind of having more optionality built into them but then making older systems vulnerable. I assume that you were maybe going to use the pause button to integrate stuff like that. So you’re not saying that. It almost sounds like for things like that, as the technology improves essentially you’ll just have to do something like launch a V2. Is that where you’re…

Matt Luongo:

That’s right. If people want to keep using the old one they can. Again, this also goes back to bitcoin, right. We aren’t constantly upgrading bitcoin and that can give people confidence, which is really powerful. That’s another reason I love Ethereum and what it lets me do as an engineer but just the institutions can’t get comfortable with it. Institutional investors and funds can’t get…it’s difficult to be comfortable with Ether because things can change, hard forks happen frequently, and really big like the ice age change over New Year’s where a whole bunch of our teams were kind of like we need to upgrade clients very, very quickly on a holiday. That doesn’t inspire confidence. 

So with this system, we’ve done everything we can not to inspire confidence now but to build a system that can build confidence. So that’s why I don’t want this to be…I don’t want anyone using this system to be, do I trust Matt and his team? That’s how things used to work. Do you trust Sitoshi? No, it’s totally irrelevant to whether or not you think bitcoin is a good place for your money. I hope that one day that’s where this system will be, too. 

Laura Shin:

So a couple last questions. We’re basically over time but just a couple last questions because this is so fascinating to me. As far as I understand, one of the reasons that you’re interested in creating tBTC is because of the ways you can use it on DEFI. So what are you expecting people will do with it and how do you think it will change DEFI? 

Matt Luongo:

Yeah. I mean I think it’s going to depend obviously on people’s risk profiles and DEFI is changing very, very quickly. I think for me, just going back to my story to scratch my own itch, I ended up having to do a side deal with a friend to say here’s my crypto collateral. Here’s how much cash I need for this  long to get this house. I think I would really like to see DAI solve that problem. I would like to just open my browser or open an app on my machine and say here’s how much bitcoin I have and then get a DAI loan. That’s really…so I want to see that, and I think we will. I think we’ll see sort of the collateral aspect and then I think of course there are going to be crazier things. 

People are likely going to do leverage and all sorts of settlement. I also think…this is almost hard to say. I think I’ve come off as a bit of an odd duck to both communities. A lot of my bitcoin friends are annoyed or are wondering what I’m doing in Ethereum. A lot of people in Ethereum, they look at me kind of askance because there’s this sort of paradox of tolerance where they’re a very tolerant community but it’s hard to be tolerant of intolerance and so they were really skeptical of people who come from Bitcoin because a lot of them have said bad things about Ethereum in the past. But I guess what I’m thinking and the reason I bring this up is there are more people like me. There are a lot of them and I think that they might even be the silent majority that believe in the economics of Bitcoin and then the technology of Ethereum. 

So while I think like DEFI is step one and it’s going to be really interesting to see if bitcoin uses collateral and see people take leverage against it, and it’s going to do a lot for the DEFI space. We’re talking about a 10X liquidity injection in this space that thrive on overcollateralization. So I think that’ll be big, but the biggest part, the thing that’s most exciting is when people will be able to get robust privacy. So no CoinJoin but zero knowledge, robust privacy on Ethereum with their bitcoin. Anyway, I guess that’s my end game. Sorry, I strayed a little bit from your question. 

Laura Shin:

Well, wait. So I actually just want to walk through that for a second. So essentially, I turn my BTC into tBTC and then I use it in a private transaction so then the person receiving that receives tBTC privately and then they can cash it. Okay. One other thing I want to ask is what are you going to do when Ethereum transitions to Eth 2.0? 

Matt Luongo:

So well, again, I can’t do anything with V1 so it’ll just keep going and we’ll see if the incentives are compatible with Eth 2 or not. By the way, this is exactly what I was talking about with people struggling to have confidence in Ethereum. So the first release of tBTC will continue on and maybe it will be perfectly compatible with Eth 2 staking and maybe it’ll make the fees shoot through the roof because no one will want to put Eth up. It’s totally unclear. But for our next release that we’re working on now that this one’s about done, this is another reason that this work token becomes much more useful. 

So where the base collateral on the chain is not as easy and the rates are already kind of set by the protocol on what you need to earn there, you can either compete for that collateral or you can say here’s collateral that’s more closely tied to the operation of the system. So eventually that’s my goal for Keep is to move to this system where maybe you still put a little bit of Ether in to make sure that everything is kosher and that you have safety margins but then almost everything relies on Keep. 

Laura Shin:

This is interesting. One last question, which you kind of talked about a little bit but I want to have you elaborate a little bit more. What is your take on the difference between the bitcoin and Ethereum communities and why do you think that there is kind of a bigger group that believes in both but for different reasons? Because the evidence, at least from Crypto Twitter is that there isn’t that big of a group. 

Matt Luongo:

That’s right. So Crypto Twitter is a fun place because it really behooves you to say ridiculous things on one side of the spectrum or another. There are a handful of people who are in the middle and who are trying to just be real or who are trying to provoke one or the other. But if you…I mean the numbers don’t lie. If you look at the people who own bitcoin and Ether and some tokens most people…I’m fairly confident. I actually don’t totally have data to back this up but I’m fairly confident that the majority of individuals who have bought bitcoin have dabbled with another token or block chain. So I believe that’s true. I could be wrong. 

The fact that a lot of people, for example, buy their first bitcoin in Coinbase and then there are like five other assets there, it’s just you’re probably going to try these other assets. I think that that’s this silent majority that maybe they’re excited about this idea of bitcoin and they see that the world is changing. Not to get too ranty about the COVID stuff but we just saw so much money printed. I think we’re all about to see whether or not we know it, bitcoin is having a moment right now and we’re not really going to see t the impact of it for years, but it’s going to be pivotal. So I think that there are people who see that and see this macro stuff going on or they’re uncomfortable with their local government or they’re uncomfortable with how the world’s changing. They’re thinking about opting out, but I think those people have also experimented with other things. 

But as far as the actual difference in the really vocal communities bitcoin has developed this social immune system and I love it. A lot of people don’t but I do. It’s this idea that anytime someone says try this new thing everyone else is like that’s a scam. You know what, they’ve been right 98 percent of the time. That’s the thing. People have been right. Most of these things have been scams. So earlier, you’re hearing me being really soft about our having a token. I was really reluctant. It took me a long time to convince myself that there was an economic reason to do this. That’s because the vast majority of people, there’s just been money printing and bitcoin copies. This has been going on since all coins have been a thing since Light Coin first launched. 

So I think there’s this thing in bitcoin where if you believe bitcoin is the asset that will win and it should be the asset that will win, anything that threatens that narrative is in the way. Conveniently, most of the things that threaten that narrative have also been a scam or at least not interesting maybe in the most charitable way. So that’s bitcoin. It’s this hardened community. People talk about having strong hands. People talk about never selling. It’s borderline a religion, and I think that’s incredible, but it means that when you want to propose something new in bitcoin the chance of you getting shouted down or called a scammer is incredibly high. So it was really hard, in the big block days, to have a conversation about tech because actually a lot of that debate had nothing to do with technology. 

It was about money crypto and this idea of what’s the most important asset versus tech crypto which is this idea of building the future and everything being so cool and wiz bang. So bitcoin is money crypto and it’s this hardened…it’s got this hardened immune system that shouts things down and calls them scams. There’s a very high bar for something being acceptable and trustworthy. 

Then in Ethereum you have all the people that got kicked out as well as a whole bunch of new people who have found that there’s this much more open community where, okay, maybe Ethereum saw 2017 and they saw all these scammy ICOs but they’re still like this is a new token. This is interesting. That’s sort of incredible, that sort of tolerance and open-mindedness is sort of incredible. It does them a service and a disservice, right. So the service is every new developer who comes into this space, it’s very hard to stick with Bitcoin because you’ll start exploring all these ideas and not only is Bitcoin’s L1 fairly limiting. It’s cool and it’s interesting but it is limiting. Not only that but also people don’t necessarily want to talk to you about your ideas because you can very quickly become heterodox just by kicking ideas around and sort of be shunned. 

So in the Ethereum space it’s the opposite where they wear unicorn costumes and do badger dances but if you have an idea they’ll talk to you about it because they’re like any of these ideas could change the world. So you have these very opposing viewpoints. What I really want to see is bring these people together and sort of make them be in the same room because it turns out that both…I really do think of bitcoin kind of as the right and Ethereum left. Both of these people are against big government. They’re against the sort of corporate surveillance state. They’re against all of these…they want power to be inverted and they want it to be grass roots rather than top down. That’s so fascinating and outside of the status quo that I think that they have so much more in common than that they have to fight about. So those are some of the differences that I see. 

Laura Shin:

This is now veering into the political but there is something very of the moment that you were describing if you look at some of the populous trends in the country. But yeah, I mean just as a journalist who’s been covering this space now for…oh, my God, you guys, it’s going to be five years in two weeks or three weeks, which is crazy. But anyway, I would say that I do agree with you that bitcoin has gotten traction as money, as an asset. Ethereum’s gotten traction as technology, just as somebody who’s just kind of looking at the facts. I feel like they’ve carved out different areas and they’re not occupying the same niche. So what you’re doing is very interesting linking the money aspect, which is Bitcoin with the technology aspect, which is Ethereum. 

So I’m very interested to see how this plays out. Obviously, a little concerned about just the security of it all because as we’ve seen with DEFI, which isn’t anything to say about your project specially but just about DEFI in general that it’s extremely risky. 

Matt Luongo:

It deserves all the scrutiny in the world. 

Laura Shin:

But this looks to be super, super interesting to see how this plays out. So anyway, thanks for coming on the show. 

Matt Luongo:

Of course. Yeah. I’ve got a parting thought. Thank you so much for having me. We’re talking about veering into the political. Every time we talk about this stuff it’s political. I think that this is maybe using this technology is probably one of the most political things most of us will do in our lives. So I just want to give you that little parting thought that getting into crypto is opting out. Yeah. Let’s do that. 

Laura Shin:

That’s your rallying cry for the end of the show. Okay. 

Matt:

Thank you so much for having me. 

Laura Shin:

Thanks for coming on Unchained. Thanks, everyone, for tuning in. To learn more about Matt and tBTC be sure to check out the links in the show notes of your podcast player. Whatever your favorite crypto meme is, Lambos, unicorns, or the guy fox mask it’s probably on the Unchained rabbit hole t-shirt. Check it out at Shop.Unchainedpodcast.com and also be sure to check out our hats, mugs, and stickers, too. 

Unchained is produced by me, Laura Shin, with help from Fractal Recording, Anthony Yoon, Daniel Nuss, Josh Durham, and the team at CLK Transcription. Thanks for listening.