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- [00:00]
A
Sam. Foreign.
- [00:33]
B
Bitcoin Monday Freaks. It's your host Odell here for another Citadel Dispatch. The show focused on actual bitcoin and freedom tech discussion. The current block height is 940011. That brings us into fiat time. Fiat time. It's Monday, March 9th. I just did the time zone change on me at 1700 UTC. Nope, 1600 UTC. You guys will probably be listening to this in a couple of hours. I don't like sitting on it. I like to get to ASAP. Current sats per dollar is 1,452. Current price in dollars is 68,863 and the current price in gold is 1 bitcoin. You can get 1 bitcoin for 12.84 ounces. Bitcoin's down on gold on the day, the month and the year, but we're slightly up on the week. Something to keep an eye on. As always, Dispatch is supported by viewers like you. We have no ads or sponsors. So thank you to everyone who continues to send bitcoin donations to support the show. The two largest supporters I'm going to say from the last two weeks since or the last two episodes since they were back to back was you have Mav21. He sent two separate 10,000 sat zaps, both saying great rip. Thank you Mav21 true ride or die. And we have Captain Cook with 7,654 sets. He had no comment, but thank you for your support. As always. Sharing with friends and family also goes a long way. Dispatch is available in all of your favorite podcast apps by searching C Dispatch. All relevant links are@cildispatch.com and recently I've been playing around. I also launched citadel wire.com where you can listen to the most recent CIT dispatch, the most recent Rabbit Hole recap and get on demand news for my soulless robot slave who I've been training and curating to try and provide the most relevant news using live market data. I got Poly Market plugged into him and bitcoin prices and a bunch of other data sources. So that's a bit of a work in progress, but check it out@sillylow.com anyway we have a great show lined up today. I have Scott here. He is the co founder of Sideswap. Sideswap is has just been grinding along building great product in the liquid ecosystem. Something we haven't talked about for a while on the show. How's it going Scott?
- [03:15]
A
Hey Matt, thanks for inviting me. Everything's been going very well. Sizequap's been Growing very nicely these past few years. Start out quite slow, but we're growing organically and cash flow positive and very happy with where we are. We focus much on the tech and building out what we hope is a great product, like by users. We don't focus much on marketing, which is why you may not have heard of us much.
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B
Yeah, so, I mean, I was not really familiar with you guys. I like, kind of a little bit a couple years back. Then I started playing with Samson's Aqua Wallet, which more people might be familiar with, which is tries to do Lightning and Bitcoin with. With Liquid as the base at rest. So it sits in liquid and then he does swaps for receiving and sending, which we've seen a couple wallets do that with. Bull Wallet has been doing it recently. Breeze has their own SDK that uses it as well. Breeze has like two rival SDKs in house. One does Liquid and one does Spark. But I was playing around with Aqua Wallet and then I saw on the back end they were using you as a provider, which was cool. And then I was like, okay, well, let me see what they're doing directly. And that's. That's kind of how I was reintroduced to you guys. And we had a mutual friend put us in touch and I. It's just, it's impressive what you guys have been quietly building with, like you said, very little fanfare. So, I mean, to the freaks, to our audience here, what is Sideswap? How should they think about Sideswap?
- [04:53]
A
Well, Sideswap at its base is really a non custodial wallet, and it's based on the bitcoin premise that your keys, your coins. So when we built the swap market, since Bitcoin doesn't have other assets other than Bitcoin on chain, we started looking at the layer twos. And since Tether was issued on Liquid, we figured we could build swap markets. We effectively have atomic swaps between two parties. So you can create a bulletin board type of system and you create a swap between the two parties so that settlement happens atomically and instantaneously real time between the two counterparties to the trade. So we're never custodian of anything really. And that's the model that we're very much looking for. And a model we think everyone should really aim for and not go for the custodial models. So.
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B
Yeah, go on.
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A
No, no, continue, please. Sorry.
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B
I mean, so the way I look at it is, for the average person, at least on the surface, Sideswap is an app that you can download on your phone that lets you easily go from regular Bitcoin to liquid Bitcoin and vice versa. And then if you want access to tether, you can then easily swap between liquid Bitcoin and liquid tether, correct?
- [06:13]
A
Correct. So one of the first big hurdles that we encountered was obviously getting people to move between the main chain and the liquid side chain. So we effectively built one of these peg in, peg out services, since very few people can be, they don't want to sit there and sync a full node on both the Bitcoin side on the liquid side in order to be able to create the claim scripts and issue coins on liquid. And many of the services at the time had a very high fee. So we cut that down to 0.1% and had effectively a bridging service which anyone can use, which actuality uses. So it's a 50, 50 revenue split on anyone who's a partner, just uses our infrastructure, so they don't need to build it up themselves. And with that done, we started focusing on swaps on liquid so that two participants can trade between themselves without having any intermediary. So we effectively just offer a bulletin board system so that users can find each other. And we help make sure that the swap has integrity so that one party can't cheat the other one by effectively saving half signed UTXOs which they could theoretically broadcast at a later date. And so the way we've built it, we also offer instant swaps, but the way it's built, we actually offer order books where anyone can come in and improve prices within the order books. And any instant swap is essentially a market order into the order books. So dealers compete on pricing. So hopefully we get spreads which become a lot tighter. Right now I think the spreads are about 0.2, 0.3% away from, should we say, the midpoint price? Many times. And yeah, so there's lots of trading opportunities and lots of liquidity. The areas that we've really seen grow, initially it was a loss rather than usdt, but lately it's been deep picks. It's really, really grown in the Brazilian market.
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B
What is Deepix? I saw it in the wallet.
- [08:23]
A
Deepix is a Brazilian stablecoin issued by a company, I believe, called Ulen. So they've been behind much of the increase in adoption within liquid lately. Fascinating. Yeah. So if we look at our swap market just in terms of trades and transactions, I'd say Deepix is probably the biggest market right now. Not in terms of, but in terms of transaction count and transaction count.
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B
Deepix is the biggest. But in terms of total amount, yeah, Tether's still bigger, much bigger. So. Yeah, go on.
- [09:03]
A
People are a lot more comfortable holding Tether, obviously.
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B
Yeah, they've been around for, I mean Tether's bread and butter is a high net worth. Right? They've been around for a decade plus.
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Exactly. Whereas I think Deepix is many local payments within the Brazilian ecosystem. But it brings in a lot of users even if the transaction volumes aren't that large.
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How do I spell? Dpix?
- [09:26]
A
D, E, P I X depix.
- [09:30]
B
Stablecoin. Interesting. Okay, there's a couple of things here. First of all, the order book thing is fascinating. It's like in general a lot of these quote unquote instant swap services you see are first of all custodial. And second of all they're kind of like a black box in terms of pricing. So it's cool that you actually have like a proper order book that basically anyone can participate in and become market makers. And as a result it's more transparent pricing and theoretically I guess it should be better pricing. I think it's pretty cool that you can actually participate in the order book on mobile, which makes accessibility good. But I assume it's quite obvious if you look at the order book for a little bit like there's at least there's like one or two like real market makers there that are putting up more size than others. Are they using, they're not using like a mobile wallet, right? Like they, is there like a CLI or something that they're accessing the order book with?
- [10:29]
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We built quite a suite of tools. So in our GitHub repo anyone can download the dealing software if anyone needs help setting things up. Everything's available and you can write your own front running code. So I think we had a bit of an issue with that at one point since people are flooding the system with lots of quotes. But growing pains are good pains.
- [10:56]
B
Yeah, I agree with that. Okay, fascinating. I mean before we continue on, I mean I think the big question that we've been asking on this show for years now, and I think bitcoiners have been asking for a while, is ironically the lack of liquidity on Liquid and the lack of users using Liquid seems like cautiously optimistic in terms of adoption increasing lately and I would say partially it's probably these wallets that are using Liquid at rest for Lightning payments, specifically Bull and Aqua Wallet. I mean the fact that Liquid has confidential assets, which incorporates confidential transactions. So each transaction you can't see the amount or the asset that's being sent, whether that's bitcoin or tether or whatever, means that people that you know, maybe are in the developing world that are sending 20 cents worth of Bitcoin, you can't tell if that's $2,000 worth of Bitcoin or 20 cents per Bitcoin. So it actually compounds kind of beautifully in terms of adding, I guess anonymity set to, to liquid. Anyway, this is kind of a long winded question, but where do you see liquid adoption? Have you been frustrated with the lack of adoption? Do you, Are you still, I mean, I assume you're still optimistic on adoption and how can that be accelerated? Because it kind of feels like liquid has always been like the ugly stepchild of bitcoin that just hasn't really found its wings.
- [12:31]
A
No, correct. I think much has to do really with bitcoin being a one asset chain. It didn't really have any scripting abilities or, Or ability to issue other assets so that you can trade things like atomically. So there was no real layer two which could really scale bitcoin. So I think when all of these other chains came around and they offered all the smart contracts, et cetera, very easy for anyone to get involved, I think that took off, took off a lot. And many of the exchanges I think focused on offering products and development within that area since there's a lot of money flowing in and promise. But I think as time goes on, I think bitcoin, which is like the settlement layer developed properly and financial markets, it may have taken a bit more time, but I think liquid is a step in the right direction in terms of how you build secondary layers. There's lots of questions around making the two way paying trustless and how you can go about that and the federation model. But if we skip that side of the discussion, it's very nice to have an asset layer which is like bitcoin based, UTXO based, that can hold multiple assets so that you can have these financial transactions and swaps and everything else around it. So I just think that side has taken a lot of time to get going, especially since it requires you to manage your own keys. I think none of the big wallet custodians like Fireblocks or anyone else has integrated liquid. So it hasn't been very easy for any exchange to offer it. So basically onboarding one by one, people are comfortable holding their own keys. But going forward, I think now that simplicity is live on liquid. I think there's a lot of things that can be done and will offer a lot of fantastic features to users, such as being able to create prediction markets in a bitcoin native type of ecosystem.
- [14:24]
B
Yeah, I mean, I want to jump in there specifically on the prediction market stuff, but before we do, just real quick, I mean, like, my fascination with liquid has always been on the privacy side, specifically confidential transactions. Um, you know, a lot of the probability analysis that Bitcoin chain surveillance firms do is based on amount correlation. And once you remove those amounts from being visible, it makes their job of detecting when ownership has changed hands much more difficult. On the asset side, let's be frank. I think most tokens that have been launched in crypto are just straight up scams. And the ones that aren't are also just probably horrible investments. Except for the undeniable USD tokens. Specifically tether. Right. And we've seen a massive market for tether on Tron, specifically to a lesser extent on Solana and Ethereum. And it's fascinating to me because if you use those ecosystems, it's even worse than bitcoin privacy. It's like you have a fixed address that is literally your entire transaction history. And so where I'm going with this is right now it seems like I'm cautiously optimistic that financial privacy in quote unquote, broader crypto space seems to be having a moment. First we saw it kind of with the zcash pump and dump. And then recently Ray Dalio and Chamath both mentioned financial privacy as a concern. And I think part of it is because of the, of, of not even Bitcoin like Bitcoin could have better privacy, but it's still relatively accessible. But the privacy situation on a Tron or Solana is absolutely abysmal. It's horrible. So I'm surprised that there hasn't been more uptick on just the tether use case. Like if you want to use tether, which obviously has a trusted third party. And I've never advocated for people to use tether, but there's plenty of demand for people that want tether and want access to US dollars where they can't get it otherwise. The most private way to access tether is through liquid and specifically through sideswap. Because you make peg ins so easy and peg out so easy and you make the ecosystem much easier, much more accessible. Why do you think we haven't really seen. Let's nail down specifically on tether. Why haven't we seen specifically massive tether adoption on Liquid? It's pretty much negligible compared to the other chains.
- [16:57]
A
It's Absolutely nothing. I think there was about $35 million that tether circulating on liquid up until a few months ago when it was increased to 90 something million. So if you compare that to the other chains, it's a drop in the bucket. But I, I think also much of the liquidity on the other chains is not really held in private wallets. It's held with custodians in one shape or form with liquids as there are no custodians by definition people who are comfortable holding their own keys. Unless it's Bitfinex effectively custody that balances for you. But something that's very interesting which few people might have considered is that USDT on liquid, it's the only due to the confidential transaction nature of it, the issuer cannot confiscate the balance. They don't know which UTXOs are USDT.
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B
Yeah, they'd have to confiscate it basically. They'd have to confiscate all of it. Right. They'd have to like basically shut down Tether on liquid is what they could do. But they can't do their like pick and choose, I'm blocking this Tron address or whatever.
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A
Not like they can do on the other chains.
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Yeah, that's why it's wild to me that just the tether use case alone. And so they have a website, usdt.networkwork that tracks all of their usage across the different chains just, just for reference for the freaks. I mean Scott said. What'd you say you said 95 tether on liquid.
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Yeah, I believe about that ballpark area.
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B
Okay, well anyway, it's completely negligible. There's $92 billion worth of Tether on Ethereum, $85 billion on TRON just with a B. Just to show the discrepancy on the privacy side. I think it's also pretty cool that basically in practice. Am I correct in saying that anyone who's doing a swap between tether and Bitcoin, Lightning Liquid, Bitcoin and liquid Tether is basically a Pay Join transaction. And Pay Join works even better on liquid because of confidential transactions than it does on Bitcoin in terms of breaking probability analysis.
- [19:15]
A
I think there's a few different aspects to that. Pay Join is something that we offer for people who have wallets where they don't have liquid Bitcoin and need to pay network fee. So. So we do lots of Pageoin transactions every day. I think there's about 2 or 3 cent fee which cover includes the network fee. So it's very cheap. To do these page transactions. And when we have swap markets where you have two assets traded against each other, where you don't have liquid Bitcoin as one of the assets, we actually pay the network fee on behalf of the users in a pay join with the swap. And since the swap there's two different assets being exchanged, there's very, very little. The heuristics become very difficult to.
- [19:58]
B
Yeah, it's pretty wild and particularly at a small user base, which is obviously the single biggest thing holding back liquid as a, as a more robust privacy tool. But it's impressive that it breaks. It already breaks even at a smaller usage, it's still breaking a lot of heuristics. It makes it quite difficult.
- [20:18]
A
Yeah. And especially with the peg in, peg out process. When you peg in and then you peg out, the federation also selects the UTXOs that you get when you peg out. So there's no correlation between the two.
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B
Right. They just know it came from the liquid network.
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Yes.
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B
Like if you pegged out and then sent to strike, they would know that those are liquid affiliated transactions. But there wouldn't be a direct connection between peg in and peg out.
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We mind you, this was like two, three years ago. We ran the UTXO set of liquid through one of the chain analysis tools and the UTXO set is effectively pristine since Bitfinex is responsible for, I'd say a decent chunk of it.
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B
Fascinating. Oh yeah, I mean, yeah, let's talk
- [21:05]
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about,
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B
I mean, you mentioned it. Let's talk about prediction markets. I mean, to me one of the big shames is that we, I mean bitcoiners have been talking about prediction markets for over 10 years now and they finally hit critical mass. And the biggest one is on Polygon and uses USDC as its primary base asset. That being polymarket obviously like the functionality specifically with something like prediction markets, you need it to be self custody. You need to not have liquidity concerns. These things make it very difficult to run any kind of prediction market. On Lightning, we've seen a competitor pop up called Predix that is basically just a custodial wallet, you know, with managed payouts, which I think is just not sustainable or scalable and has massive regulatory exposure. Liquid seems like it could be ideal for a bitcoin native prediction market because it has simplicity, because you can do self custody type smart contracts, because you have privacy. I mean, we're seeing on the polymarket side people's wallets are being tracked. They're like this person was successful on these six different military Markets like they must be an insider with the Israelis or an insider with the US or like it's getting. Arguably it's made it more obvious why financial privacy is important on blockchains than actual financial transactions themselves because a lot of these markets are quite sensitive. So how are you thinking about prediction markets liquid? What kind of opportunities are there?
- [22:47]
A
I think there's many aspects to your question. First point and reconsider those aspects. I think they're raised now with the insider trading ahead of the Iran or someone seemingly made quite a bit of money betting on the 28th. I believe in terms of prediction markets being built on liquid, I think it's still a bit out. We've done so much work in the background because there's so many building blocks that need to come into place before you actually build it. So what we've been building in the background is effectively a liquid connect type of function so that anyone can plug their wallet into a web page or that the web page can connect with a wallet so that you can send these transactions to the wallet directly. Because these swap transactions, especially with simplistic contracts can become, shall we say, fairly messy, non standard, not super easy to do. So it requires a bit of work in that regard, a bit of like metamask type of features, but for liquid. So we, we've done much of that work. It hopefully should be, I mean we, we have it ready and in production but it should be a lot more useful I think next week. And we should release a public API so that anyone can integrate. So that was the first step. And then the second step is how do you build these prediction markets? So with simplicity you can build these binary contracts and we've started playing around with it. I'm still not entirely sure all the limitations. You can create these binary contracts between two people and you have an oracle that determines the outcome the of the contract. So as long as the two parties trust the oracle, you, you can effectively bet on anything. But, but then the question becomes also how do you get people to fund the contract at the same time? Because if you create markets where someone needs to fund the contracts initially and then someone funds the contract at a later date, you need to create some form of market structure that allows for that. What, what we've done is we've applied our order book and our swap market to it. So we're looking at creating markets where you have a, instead of an order book that goes from, with a bitcoin price, say from where it is now 70,000, so you have an order book that goes from zero to a hundred effectively. And so the bid will be the yes outcome and the offer will be the no outcome. Wherever you bid, within that order book is the prediction rate. So whoever's on, should we say the yes side, it bids 30, they fund the contract with 30 cents and the offeror will need to fund it with 70 cents so that there's one full dollar in the contract. And once the contract, once the prediction either comes true or false, when the Oracle has a definite outcome, it's a winner take all type of situation where everything goes to one of the two parties and that's effectively how you price it. So with our order book structure we can create that so that two parties enter into a swap at the same time and that the contract is funded with the swap at once so that you don't have the issues of who goes first, et cetera, funding a contract and creating an order book with resting orders and people having locked up funds, waiting for other users to come in, et cetera, et cetera. To be honest, I'm not sure how polymarket's done it. I know their order books quite efficient. But the question is how does it actually work under the hood?
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B
I'm pretty sure they're basically trading yes and no tokens on. Each market has their own tokens. I mean the user doesn't see it.
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A
That's one option of going about. But the other option is creating the contract directly and you have the two users fund the contract.
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B
Yeah, there's a couple different things, right? Because it's like okay, with prediction markets, for prediction markets to work at scale you need a couple things. You need, you need the ability for people to participate anonymously because the whole idea is trading prediction markets benefits insiders. Tracking and watching prediction markets benefits outsiders. Because you're giving insiders an incentive, a financial incentive to effectively tip their hand and, and trade a market which then exposes, which exposes their belief on how that market, well, what the outcome will be. So they need to be able to do it anonymously because if they work for intel or if they work for a government or something, they're not going to do it unless they can do it anonymously. So with that understanding, then it needs to be at least relatively decentralized and self custodial because if there's a single company that is controlling funds and controlling payouts, then they're ultimately going to be pressured by a government to dox all users. So you're never going to have permissionless participation unless it's relatively Decentralized. And then the last piece is the Oracle problem which is like how do you, how do you determine in a robust and objective way what actually happened to settle the contracts afterwards? And so Polymarket like kind of made it there on all of those pieces, but they kind of hand waved a bunch of stuff away like Polygon itself. You know, I think could be argued that it's still pretty centralized. Ethereum, very centralized. USDC obviously is completely centralized and can be frozen at will. The Oracle problem they haven't actually solved, they just offload it. It's like they don't make the decision they have. Like for each market there's a designated quote unquote on contract Oracles. So there's, it's still crypto native if you will, but it's still ultimately, you know, centralized entities saying ESPN reported that the game was, you know, the Clipp won the basketball game or whatever. So they didn't solve the Oracle problem. And they're like kind of quote unquote decentralized enough to not have to do KYC and block people's access to markets. And I think this is just something interesting by the way for Bitcoiners and Liquid where the shit corners have done a really good job of kind of being pragmatic about trade off balance when it comes to censorship, resistance and decentralization that bitcoiners have not been, I mean I, we haven't really touched on it, but there's a lot of controversy for instance around the liquid federation model and whether or not it is technically self custody or not. But if you, which is something that's I think unique to the bitcoin community because if you look at something like Tron, it's pretty much the same trust model as Liquid. But Tron has gotten a pass from regulators. They consider it decentralized enough. And Tron, like I said earlier, has $85 billion of tether volume alone on it, which is a wild stat. So to me liquid could be this middle ground for bitcoiners and we could actually, I mean there could actually be a trust model set up on a liquid style prediction market that is significantly better than polymarket which is right now operating at scale with very sensitive markets at a 10 billion plus valuation with many, many users and it seem too good of an opportunity to miss out. So I mean on that point that was very long winded. But you more than anyone, I mean you've been quietly bootstrapping and building a business on liquid. How do you think about that trust model in terms of the federated model because I mean, it could kill your business if it wasn't sufficient enough, let me put it that way.
- [30:18]
A
Of course, and that's also one of the growing pains that we'll need to encounter at some point. But right now, while we're so small, I think no one's looked deeply enough at all of these questions in terms of liquid, the federation, how it's structured, set up, is it decentralized enough, et cetera, et cetera. Right now we're very much just focused on getting the market model correct. It's get everything easier for users to access, make it easy to trade since everything's non custodial. You hold your own wallet, you hold your own keys, the contracts are on chain, you swap into it, it can be verified within the wallet by the users prior to executing the swap. But then there's all the question. So the question is, is that decentralized enough? It's very difficult to say, like different regulators may, may take a different view given the liquid governance model. Very unclear. Then there's, I think, all the questions around how the Oracle is constructed, et cetera. We're not trying to solve all of these, like should we say philosophical or mathematical questions right now, we're just focusing on trying to get the market structure correct. And once we have that in place, we can start tinkering around the edges with everything else. I think the article super easy to solve. Blockstream's working on it, they have a model that they proposed. Is that good enough? Not sure.
- [31:43]
B
I mean it's like I said, it's not like polymarket has solved, just needs to be robust enough. It's never going to be, we're not going to. I'm convinced that the Oracle problem is unsolvable. You can mitigate it, you can create a relatively usable and decent and robust solution, but actually quote unquote, solving the Oracle problem, solving something happening in the real world and then being able to cryptographically prove it on chain is going to require some trusted third parties that are cryptographically proving it on chain. Those trusted third parties, you can reduce their influence or risk by combining multiple of them by adding reputation Systems. I think DLCs are interesting where they're providing Oracles, but they don't know which market they're providing Oracles for. There's different ways you can do that, but at the end of the day, for someone on chain to know what the weather was in Chicago yesterday, like there's gonna be trusted third parties. There's I, I don't think is solvable in that regard.
- [32:48]
A
There's no way around it, I think.
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B
Yeah, exactly. And on the, on the point of liquid, I mean, would you agree with me, like if Tron is self custody? If you consider Tron self custody, I think you have to consider liquid self custody. I mean Justin sun is basically the. Arguably the model for Tron is worse than Liquid in terms of censorship, resistance and trusted third parties.
- [33:10]
A
I mean, I would say so obviously I'm biased. My hope as well is in that direction. So take it for what it is.
- [33:18]
B
I will say that I think
- [33:22]
A
where
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B
we're seeing, I mean the big one that everyone is, I mean anyone who's actually building in the space has been paying attention to is Spark. And there's a lot out of light Spark, which is David Marcus's a 16Z funded company after he was formerly working for Facebook for Meta. And I'm already seeing like the bitcoin culture fights over whether or not that is considered self custody. And it's a similar idea of a pragmatic approach that is maybe more similar to what we see in shitcoin land, but I think could be very useful for bitcoiners. And I wonder if that will bring more attention to liquid because I mean if you mano a mono it out, I think the Liquid model is more robust than the Spark model. And then you have other things like I love the Phoenix team with Async, like the trust model for that is not as clear cut as you hold your keys, you have self custody on chain is very clean. Onchain bitcoin is very clean. It's either self custody or it isn't. Once you start playing with the trade off balances across the stack, things get a little bit more definitionally messy. And I think the bitcoin community specifically has been wrestling with that for many years now.
- [34:41]
A
I mean if you look at how the financial system is built, you effectively have a central bank, they operate one ledger, but then you have all the commercial banks below, they each operate their own ledger. So if you want to move cash from one bank to another, it's actually the bank's accounts at the central bank that need update before the banks themselves up to their own accounts. So the whole financial system is built on lots of different ledgers and all these clearing houses are effectively the ones managing the risks between the different ledgers and should we say the net deferred settlement between ledgers. So. So for bitcoin to scale, given that is a one asset chain, you need these secondary layers somehow since there's no solution yet exactly of how to create these exact or trustless two way pegs between the bitcoin main chain and a sidechain. There's always going to be these different trade offs and discussion around how decentralized is it. At what point do the regulators consider it being decentralized or not? So there's always these questions.
- [35:47]
B
Yeah, of course. It's just interesting. It's an interesting, interesting thoughts to go down. I mean I'm sure we're going to get comments about it too which is why it's, it's incredibly important to talk about it. Pretty much they come up anytime liquid is brought up. I want to talk about and I think rightfully so, I think it's good that the community is at least a subset of the community which percentage wise is getting smaller by the day but absolute numbers wise has never been higher care so much about these hard questions and sovereignty and, and using these things in freedom oriented ways. While like I was, like I said like shit corners kind of just throw it out the window and think of it as an afterthought. You guys recently launched a new product. Are you at liberty to talk about it right now or.
- [36:39]
A
Yeah. So this is like our first dipping our toes into the simplicity say pool. If we're in the liquid space, look what we've effectively we have this website or sister website called Swaption where we've cloned this Liquid Connect which is a bit of a privacy docs since if you do connect you share the watching only wallet with LiquidConnect because otherwise it wouldn't be able to help you create the transactions and everything within your wallet and send the transaction signing to your wallet. So there is that aspect to consider.
- [37:18]
B
Would you similar to the trade off with using like an Electrum server right on chain Bitcoin.
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A
Yeah, exactly right.
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B
Okay, continue.
- [37:29]
A
There is that trade off. I mean we never data mine our users or anything else so but I mean there's no way for users to verify that. But in terms of swaption, so with the LiquidConnect function that we've developed with the wallet, if you visit the swaption webpage, what we've built is the first binary outcome contracts which is the first step in the direction towards prediction markets effectively. So. So we have two different products. One is will the bitcoin price be higher or lower in should we say two, five or 10 minutes than it is now? And then the other product is will the bitcoin price of Bitcoin go up or down like 1, 2, 3, 4 or 10% first. So it's binary outcome. Does it go up or down 10% so people can make bets in terms of direction, etc, hedge positions with leverage. So the idea is also here is to open up so that anyone can trade in the order book and provide liquidity and improve pricing, et cetera. So right now there's not fantastic payoffs, but we're working very hard in that direction to create these order book type of markets so that anyone can come in and provide liquidity.
- [38:44]
B
So I mean your main website is Sideswap, correct?
- [38:48]
A
That's, that's you download the app and the webpage is being reworked as well. Soon you'll be able to use the Liquid Connect and trade via webpage as well.
- [38:57]
B
And then Swaption is. Is it swaption.com swabtion IO and then that's S W A P T I O N. I'll put all these links in the show notes. And then Liquid Wallet Connect is basically I have the Sideswap app on my phone or another compatible Liquid Wallet, which I don't think there are any right now.
- [39:18]
A
Yeah.
- [39:19]
B
And then like scanning a QR code on the website to sign in basically. Right?
- [39:24]
A
Correct. Or if you have a desktop wallet, it will detect the desktop wallet with a browser.
- [39:30]
B
Do you have a Sideswap has a desktop wallet too?
- [39:33]
A
Yeah. So we build everything in Flutter, so it's very easy to go cross platform.
- [39:38]
B
And then. So you were saying this is kind of, in a lot of ways it's kind of a proof of concept because it's a relatively simple type of market that you could have compared to a prediction market.
- [39:48]
A
Exactly. So we're dipping our toes. This is like the first MVP that we push out. There's only one dealer we don't allow yet, but that's coming that anyone can compete and improve pricing. And then the next steps are obviously developing these open order books so that anyone can come in, maybe add functions such as auto signing, et cetera and the Liquid Connect so that users don't need to sign every transaction. So it becomes a bit more poly market, if you will. So there's lots of these sorts and terms of different directions we can go. We'd love for Aqua and other wallet policies to integrate so that it becomes ubiquitous within the liquid ecosystem.
- [40:27]
B
Liquid Wallet Connect. Yeah, that makes sense to me.
- [40:31]
A
But it's developed by us, so I mean it's called Liquid Connect but let's see if others pick it up or if it's actually Sideswap Connect.
- [40:39]
B
Fair enough. I Mean, we kind of have a similar situation in the Noster ecosystem where we have an open standard called NSEC Bunker that uses you either paste. Either paste a code or use a QR code scan. I think QR code scan makes a lot of sense. If like the user has a mobile phone, they're like scanning with QR code. But the reason I bring it up is because we integrate it into Primal. So it works with any Noster website that has the standard setup. But we are seeing people like add. Like some people frame it as sign in with Primal, even though it's an open standard and technically anyone else can have NSEC Bunker support, which is important, I think. I mean, you want, you know, I think part of the challenge you guys have had is it seems like you've been building quality product, but you need other people to also be building around you. You need more wallets, you need more hardware wallets. It's just jade right now. Right. You need more use cases.
- [41:30]
A
There's quite a few others you have integrated like different types of service providers, different wallets. Mainly actually in the Brazilian ecosystem around Deepfix. And anyone who integrates with us, we offer a 5050 splits on any volumes they drive our way. So it's very easy way for them to build wallets. Not have to develop all the spot market infrastructure, et cetera. They just plug our stack and then we split the weber trading fees 50, 50. So. So it makes a lot of sense for them as well. And it helps us build network effects around our markets so that we get deep liquidity.
- [42:05]
B
Yeah, I mean liquidity begets liquidity. It's like the hardest network effect to tackle. But once you get it.
- [42:11]
A
Yeah.
- [42:13]
B
What like where'd the Deepix guys come from? Was that why'd they choose liquid? That's pretty.
- [42:21]
A
That's a very good question. I'm not quite sure. I actually think one of the aspects was that one of the premises of the ScienceWatch swap market is that any asset you hold in your wallet you can post on the bulletin board and create markets for. And we have all this dealing software that we offer for free so that anyone can create liquidity in whatever asset they have.
- [42:40]
B
So they start using you without even talking to you. Or was there a conversation?
- [42:45]
A
There was no conversation until they were not.
- [42:47]
B
That's kind of awesome. That's super cypherpunk and.
- [42:51]
A
But, but moreover, since we don't charge any listing fees or anything else. So if they went like in the Tron ecosystem, if they want to get listed with Binance, what would that cost to list their coin?
- [43:01]
B
Right. Millions of dollars.
- [43:04]
A
I mean it work. So the barriers to entry I think in liquid are so low because anyone can issue assets and if you trade through siteswap, there's absolutely no gatekeeping at all. Anyone can create order books for whatever product they have.
- [43:18]
B
That's pretty cool. So I mean you mentioned simplicity and simplicity is a smart contract language that Blockstream championed for liquid with the like the hope I think that one day it could be used on Bitcoin on chain as well. Ironically given the name, it's actually not that simple to get your head around. Do you have a high level explanation of why bitcoiners should care about simplicity?
- [43:50]
A
I think high level abilities for bitcoin to have different type of scripting options were like limited to like time lock, contracts, hash lock, etc. There wasn't much functionality around building financial markets. So with simplicity you have something where you have contracts which can be mathematically proven ahead of time so you actually know what you're signing when you get yourself into it. But moreover you can also create these binary outcome type of situations such as prediction markets. You can create these financial derivatives. There's a lot more scripting opportunities since you can have these external oracles that determine the outcome, et cetera, et cetera. So with that you have a lot more opportunities to build financial products which are Bitcoin native. So I think it's very early days it went live on liquidity, it's not live on Bitcoin as you said. I think there's a lot to play around with, to test and it becomes possible to create these like hoddle hodl type of structures, et cetera. You can create options, futures, binary outcome contracts, et cetera, et cetera. So I think it's super, super valuable. But we're so early days. I think swaption is the first one to go live with anything with simplicity. We have maybe 10 trades a day. Most of the trades are very low value at this stage. People are just dipping their toes to try and understand the product I think. So if anyone's out there wants to play around with it, feel free to go ahead. There's no KYC or AML to get involved.
- [45:28]
B
Yeah, I mean the key there is you can set up these types of P2P exchanges and whatnot without giving up custody using something like simplicity, right?
- [45:39]
A
Correct.
- [45:41]
B
And I guess it's kind of been pitched to me as like a competitor to how Ethereum does things that is more conservative and safety oriented, more robust kind of Coming at it from a bitcoiner mindset rather than a shitcoiner mindset, but offering a lot of the same potential, I guess, if used appropriately.
- [46:02]
A
Exactly. The contract is mathematically verifiable ahead of time. Whereas I think on Ethereum many times when a developer creates these smart contracts or vaults, there's a lot of how skilled is the developer behind it?
- [46:17]
B
Right.
- [46:18]
A
Very easy to verify.
- [46:20]
B
Fair enough. Fascinating. Yeah. So I'll put links to all this stuff in the show notes, I mean to the, to the audience, like what do you, how can they be helpful? What are you, what are you looking for? I mean, obviously. Yeah, well, what is it? Do you have a call to action for them or how are you thinking about it?
- [46:45]
A
I mean I'd love for people to just download the app and send a tractor amount of Bitcoin into Liquid and just play around with swaps. Just see what's possible, what's out there, how far it's come. Just do a few swaps back and forth, try the order books, go to swaption, just try these Simplicity contracts and just see where things are heading. And I think things will clear up for a lot of people because it's one thing for us to discuss back and forth, but once you get your hands on something and actually start playing around with it, trying it out, it just resonates so much more with you. If that's what you believe, where things should be heading. And hopefully more eyeballs will start looking at this and start developing these simplicity products and building a lot more financial products around Liquid.
- [47:34]
B
Yeah. What I would say is just on, in terms of low level playing around with liquid. I mean if you install Bull Wallet by Bull Bitcoin. So that's not their exchange service. I think people get confused by it. But this is their self custody wallet that offers on chain Liquid and Lightning Aqua wallet which is Samson's wallet which offers on chain Lightning, Liquid and then also Tether support and then the Sideswap app, you can peg in a very small amount for a very small fee from regular Bitcoin into liquid Bitcoin on Sideswap. Then you can easily send it between the three wallets. And then if you go to liquid.network, which is mempool, Mempool Spaces Liquid instance, it shows all the transactions that are happening on liquid.network and do a little blockchain analysis on yourself. Look at the transactions as they're happening. You can check Mempool space for your peg in transaction. You can look@liquid.network for your transactions in between wallets. Look at what the on chain footprint looks like. I think it's. If you care about Bitcoin privacy, it's pretty impressive if you do a couple small swaps with tether or whatnot. You can also see what the privacy situation is in that regard. And I think that's pretty fascinating. I think if you, even if you're not interested in I, I, I remain convinced that the tether use case is absolutely massive. Maybe not for this audience. I think a lot of us don't have a need for tether. I mean, I have the traditional US banking system. I keep the majority of my family's savings in on chain, bitcoin and self custody. But there's a huge demand for tether out there. But even if, even if you're not interested in that aspect, the settling between lightning focused wallets, like if you have a large amount of funds in Bull Wallet and you want to move them over to Aqua, it's way easier to send a native liquid transaction. You don't have to deal with liquidity. You have pretty good privacy guarantees. You have very low fees. It's way easier to send using liquid than sending through lightning. And I have noticed as someone who's been using Bull Wallet more often, it's a bit of a breath of fresh air versus having funds, you know, stuck in Phoenix Wallet, for instance, and knowing that every time you make a transaction you're going to get charged a 1% fee and you have liquidity constraints and channel management and all that to deal with. So I think that's an interesting way to get your feet wet. I think the Sideswap app in general is, you should be very proud of it. It's, it feels like a very robust app that is performant, you know, like I, I don't feel like it's like lagging when I'm clicking buttons and whatnot. Like, I, I have confidence in it, which is not no easy feat as someone who's been heavily involved in building out multiple apps now at this point. So you deserve a lot of credit there. But you know, people should just, it would be great if people play around with it. And then the last thing I would say is, I don't know, have you been playing around with like any of this AI stuff?
- [50:44]
A
I mean, in certain aspects we've played around quite a bit, but if you mean in terms of developing things within the liquid ecosystem or siteswap, we've done very little helping write press releases, et cetera. Yes. But in terms of code, I Mean everyone is the.
- [51:01]
B
The newest thing to hit the block was this open claw idea which is you know, I think directionally fascinating and probably still pretty early. But this idea of like having a self hosted robot that has its own memory and can access any apps, ideally CLI apps it works better with but it can actually like navigate a gui, which is crazy, can navigate like a graphical user interface or like a website or stuff if there's no API or no CLI and you basically just have like this robot butler and there's I think as a result of it there's been a renewed focus on the concept of agentic payments. Like how would the agents pay each other? I think what a lot of people miss there is also the agents also have to be able to receive and send payments from humans too. So when you say agentic payments it's actually not just agent to agent, it's human to agent and agent to human and agent to agent and liquid could be interesting. There, there's, there's obviously demand for people to have USD token support on these things. USDC has become very common, at least in the Silicon Valley world of AI stuff. But the combination of liquid tether support and liquid bitcoin support on the same chain in a way that is as simple as just holding keys. They can just generate a wallet. They don't have to deal with having the node have uptime, dealing with channel management, dealing with all these other stuff. There, there is an interesting opportunity there in terms of liquid being used by the robots. And that of course is just leaving out the vibe coded apps or whatever building on top of liquid which is presumably much easier than on lightning as well. So that's what I was thinking.
- [52:47]
A
There's so many opportunities in all these areas. We're a super small team. I mean we're trying to just be laser focused in a small area and many times it's probably a bit like a horse walking around with blinders. There's so many things happening around you all the time when you're too laser focused in one area. So right now we're just focused on building these simplistic products, getting more acquainted with all limitation of these binary products. Like how do you have many parties trade, can you like hand over your position among in one binary market to someone else if you need to hold to maturity, can you have netting, etc. But there's love it, so many things to figure out.
- [53:34]
B
Well, I really want to see the freaks now. I just want to see native bitcoin prediction markets with decent privacy Guarantees. I think Liquid could be the holy grail for it. We'll see. Cautiously optimistic. I've been wrong about liquid adoption multiple times, both on the bear side and the bull side. I think I was probably too bullish at one point. Then I was a little bit too bearish. We recently seen more of an uptick in usage. Maybe the reality's somewhere in the middle, but I applaud you guys for continuing to build it out and see what works and see what doesn't and try and build out that key infrastructure to help everything else grow. I would love if we can we do like a update show in like six months or something to see where we stand on all this stuff.
- [54:21]
A
I'd love that. I'd love that.
- [54:23]
B
Awesome. Okay. Yeah, go on.
- [54:26]
A
Let's do something fun here. So if we have this update in six months, prediction wise, where are we
- [54:36]
B
in six months? You're going to have a full fledged Poly Market competitor for me.
- [54:41]
A
Let's make a MVP of it anyway.
- [54:44]
B
I mean where do you think? I'm obviously half joking. It's a big undertaking. Where do you think Liquid and Sideswap will be in six months?
- [54:53]
A
I think we'll have the POC for it.
- [54:56]
B
That's awesome. That's exciting.
- [54:57]
A
We're not very far. We're actually doing in the background a satoshi dice type of structure. So we're building out a few like more betting type style of markets just to figure out all the edge cases around simplicity and just get the market mechanics correct. So we're heading in that direction towards the prediction market model. But right now we're just doing the binary outcome type of contracts. So we need to get the order book correct where the order book is 0 to 100 instead of whatever the price of bitcoin is.
- [55:27]
B
Right.
- [55:28]
A
And then we need to. So we have LiquidConnect, but there's still a bit more work in that area. And then we need to figure out the whole Oracle aspect to make that have integrity in some shape form regard which we don't have any clarity over just yet. Right now we just have a super simple oracle that's basically just assigning the bitcoin price so that the contract can determine outcomes.
- [55:52]
B
There might be something there. First of all that makes sense to me. I mean, you know, you do the little things to get comfortable and improve your understanding and your execution before you actually go for the, the big one. You know, polymarket is using something called Uma. I don't know, it's like so hard to keep track of all this shitcoin stuff. They're using something called Uma's Optimistic Oracle where there's like a whole process on chain of an oracle determining the result of markets. And that's all on chain on something. It's on Polygon or a different shit chain. But because it's all on chain, you might actually be able to just piggyback their oracles in the beginning because that's a hard thing. It's hard to get people to step up and be the Oracles. It's like just a people problem in the beginning. So you might actually be able to just hijack their oracles and just use the same resolution mechanism that they're using in terms of source of truth. If they're already signing cryptographic attestations on some chain out there of ton of markets, right, like from weather to missile strikes to basketball games, then you could potentially just piggyback them until you have a liquid native alternative out there on the Oracle side.
- [57:21]
A
Look into it. I know Blockchain is putting a lot of work now into the Oracle because they're obviously having a big team now laser focused on simplicity. So they're also doing a lot of work around integrating everything. I think they're looking at some wallet connect feature.
- [57:35]
B
Interesting. Fascinating. Scott, this has been great. Do you have any final thoughts for the Freaks before you wrap here?
- [57:43]
A
Not much, just super happy if anyone's made it this far listening to you. I was born about Liquid as invested. My favorite project, Sideswap.
- [57:54]
B
Love it. Freaks. I'll have links to everything we've discussed in the show. Notes. Like I said, you'll probably be listening to this in a couple hours. Best way to support the show is sharing with friends and family all relevant links@citadel dispatch.com reminder to check out citadelwire.com I have already next week I have lined up on the calendar a conversation with Leah who is a co founder of vexel. They do P2P Bitcoin exchanges without KYC. So that'll be a great conversation. Keep an eye out for that and play around with Liquid. Scott is looking for feedback. He's looking for more users, more people playing around with these things. I think all of it can be helpful. While we are in these bear market, it's always great to just dive into the tech and get your feet wet. There's no better time than today. Thank you Scott. Thanks Matt. Thank you Freaks. Stay humble. Stack sets. Peace.