Welcome back to The Gwart Show! We are joined by the 4th most important Taproot Wizard, Udi Wertheimer, to discuss, well, male pattern baldness. We also dive into the wizards roadmap (not just JPEGS) like CATVM, the use-cases for L2s, how blockspace doesn’t solve blockspace issues and why ETH Maxis just keep losing.
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Transcript:
Gwart: Yeah. You are the first person I’ve ever interviewed live, so we’ll see if the vibes are different. How’s it going, Udi?
Udi: I’m gonna make fun of your mustache the entire show.
Gwart: That’s actually pretty funny because I don’t have a mustache. It’s okay. What have Separate Wizards been up to? We’re at the Bitcoin conference. What are you guys up to?
Udi: I mean, we’ve been making Bitcoin magical again for the last year and a half. Right now, we’re super obsessed with our cat and Cat VM. That’s the thing for us. We spent the first 6 to 12 months of our story working to remove cultural roadblocks in Bitcoin.
Udi: And I think that worked pretty well, actually, better than we expected. Now, it’s time to remove some technical challenges in the way to help Bitcoin fulfill its magical potential.
Gwart: Yeah. So, I tend to agree that you guys have done quite a bit to change the culture in Bitcoin. And I think a lot of people have heard from you about that at this point. Right. And so, I want to get into what you guys are doing now. When you talk about technical roadblocks and Cat VM, what are we looking at?
Udi: Yeah. Ever since I first heard about Bitcoin around 2013, 2014, there were already discussions about the concept of sidechains back then. What people call sidechains today is very different from what they described back then. It was supposed to be a permissionless way to transfer Bitcoin between the main chain and some other chain.
Udi: Blockstream coined that term sidechain. And after they realized that they wanted to solve for Bitcoin with some new opcode to allow that to happen, they realized they probably didn’t have the political capital to do that. So, they changed the definition of sidechain to mean a more trusted, federated way to bridge Bitcoin.
Udi: So now, when people say sidechain, they refer to something that’s trust-based. But the origins of the word were not that. Ever since I joined, this was the Holy Grail, not only to scale Bitcoin but also to add functionality to Bitcoin. It would make sense that the added functionality would not be on the base layer but on some other layers with its own risks associated with it, but at least it’s permissionless and you can use it with the new features that you would like.
Udi: And that was always the idea of how Bitcoin would grow. Ten years later, I would say we didn’t achieve it, you know?
Gwart: Yeah, I think it’s fair. Okay, so let’s go back a little bit because I think that the impetus for Taproot Wizards and you guys reinvigorating this period of development in Bitcoin was largely fueled… Well, I don’t want to put you in necessarily this category, but I will say that, and I talked to Eric before this.
Gwart: Right. So, a lot of what I got from Eric was look at all the development elsewhere. Look where the developers are going. Look what’s being built elsewhere. We can bring this to Bitcoin. There was reluctance, obviously, from Bitcoiners because, for all the reasons that you said, we have to get back into it. Right. But I want to know then, what do you think has been wildly successful elsewhere that Bitcoin definitely needs?
Udi: Right. That’s a great question. And potentially the answer is nothing. Right. Because we probably are of a similar opinion that the vast majority of stuff in crypto is complete shit. I don’t know that it’s a specific thing or feature that we want to import. I think it’s the spirit of experimentation. There isn’t necessarily a specific thing, you know, the one use case that I think is pretty cool is being able to take your Bitcoin and maybe sell some of it into stablecoins and then maybe get Bitcoin back later.
Udi: I think that is a very simple, reasonable use case that you would want to do today. You can do that with Bitcoin with centralized exchanges. And it would have been pretty nice if you could do that without them. So, that’s an obvious one. I don’t know that people are going to sit around doing that all day, but it’s like a nice feature to have.
Udi: But beyond that, that didn’t exist either in crypto. The reason it ended up happening was because people were experimenting with a ton of stuff. Right. And I think the experimentation is important. It’s really hard for me to tell you how things are going to end up being used, but I think that there’s been this artificial roadblock that just doesn’t need to be there.
Udi: That’s stopping people from experimenting and finding out what the full potential of Bitcoin is.
Gwart: Did you look at the rest of crypto? And like you said, you and I are probably largely in agreement with regards to the practical use case for a lot of stuff. But did you look at a lot of crypto and come to the conclusion yourself? Because this is something that this is my interpretation. Okay. I think you observed ten years of what you consider to be stagnant growth in Bitcoin.
Gwart: You saw a tremendous amount of development. Now, we can sort of decide whether or not this is sustainable or not. Exactly. But did you come to the conclusion in a sense that the only way we are going to reinvigorate this spirit is through degeneracy? And I’m not necessarily saying that. I want to be clear just before you respond.
Gwart: I’m not saying that with regards to ordinals, you guys have a collection or anything like that. I’m saying that more just like you’re looking at all these coins that are printed out of thin air every single day. Right? And you see all these people degen-ing with them. Did you think this is the only way that we bring people to Bitcoin? This is a little bit of my read on you. That’s why I say this.
Udi: Yeah. So, you know, I used to be known as this like massive Bitcoin maximalist. Right? I vividly hated all of this stuff. And yeah, I think that at some point, it is definitely not the only way to onboard people into Bitcoin. And we’re seeing that it’s not. Right. The ETF has been, I think, a big driver of something like that.
Udi: I think the fact that it’s now a political issue on a national scale is going to be a driver of that too. There are many ways. I think it’s the way that I can contribute. Right. So, like, when I’m looking at this kind of scene, I’m like, okay, here’s something that I understand and that I can work towards and I think is beneficial.
Udi: I am not going to be the guy who brings Kamala Harris to a Bitcoin debate. So, I’m not going to be trying to do that, you know, so like this is the way I look at this stuff. I think I’m kind of looking into my journey into Bitcoin and like look what I got into Bitcoin when I did because I wanted to make money off of it.
Udi: Right. Like this was. Yeah, I saw it as an interesting investment. And more than that, I also liked the fact that, oh, I can quickly like buy and sell and I can like play some trades. I was terrible at it, by the way, but I like the degeneracy aspect of it. And I know for a fact that a ton of other people of that time did too, but we had something that I think a lot of new Bitcoiners don’t have, which back then, which is that we.
Udi: Could take a lot of risks with Bitcoin. Bitcoin was a very risky investment in 2013, an incredibly risky investment and was very edgy, you know, and like it was unlikely to work out. I didn’t think it was very likely to work out, but I could see a scenario where it works out and when it does, there’s of course many, many multiples involved.
Udi: I don’t know that Bitcoin offers that today. I think it’s still bullish. I’m very bullish on Bitcoin. Are people going to get like 5000x gains? No, I don’t see that. I think that’s unlikely, you know. So, that’s why you see those people going down the risk curve and looking for some insanely crazy speculative bullshit because they don’t have that opportunity in Bitcoin anymore.
Udi: I, you know, I was lucky in that sense, but I was there at the right time.
Gwart: Yeah. I think like the way that I see this is that a lot of Bitcoiners maybe, and you’ve certainly played a role in changing a lot of their minds, I think. But like a lot of Bitcoiners have seen a lot of this stuff and observed it maybe even more neutrally than the 10% that are loud and laser-eyed on Twitter.
Gwart: Right. Like there’s a lot of Bitcoiners who have observed a lot of the rest of the crypto ecosystem and have concluded that this stuff isn’t wildly useful. But there’s a tremendous amount of development that goes into it, right? There’s a tremendous amount of funding that goes into it. But on the other hand, like I’ve heard you, you’re patently honest.
Gwart: You said there’s basically two use cases that you’ve seen that have really captured what appears to be sustainable product market fit. And those are stablecoins and NFTs. And I think that this is the bridge oftentimes that a lot of us are trying to reconcile. Right. Like we see Ponzi after Ponzi after Ponzi, and then we see, okay, even you are just admitting and a lot of us deep down are admitting, okay, like what appears sustainable thus far, stablecoins and NFTs maybe. NFTs more of like the cultural side.
Gwart: Right. And then stablecoins and then maybe…
Udi: And to be clear, stablecoins are way bigger than NFTs.
Gwart: Right. Right. Exactly. So, how do you reconcile this with the notion of just build everything? Right. Like go and build all these Ponzi and DeFi games and so on and so forth. When deep down we know now, like these, these are the things that seem useful really, you know. Do you think it’s justified then to sort of create a culture where it’s like move fast, break things, people get rekt, they get rekt, right?
Udi: I do think it’s justified. I mean, I think that people are responsible for their choices. Yeah. And more than that, you know, I have for many years tried to stop people from doing those things and failed miserably because a lot of times they ended up being right.
Udi: You know, they made more money on a bunch of things, you know, like they ended up being right. Like, that’s just the fact that something is a gamble doesn’t mean that it’s my place to tell people not to do it. You know. And, you know, those two use cases of stablecoins and NFTs, they were born out of that kind of speculative frenzy.
Udi: Sure, they wouldn’t have existed otherwise. So, it takes like the degen’s. The reason that they’re there are just an amazing audience for any product that you would want to build because they are eager to try everything as soon as possible. And they are brutally honest with how much they hate everything. And it’s very, if you’re a builder, that’s incredibly useful.
Udi: So, it makes sense to start with that. And hopefully within that thing, find something that works and take it into something that’s more established.
Gwart: I would just note recently, and maybe this is just my own observation, but I would say that the Solana degens, like the pure meme coin degens, a lot of these people really like Bitcoin. And a lot of these people, I mean, there’s a lot of minutiae about this whole barbell idea of, you know, meme coins and Bitcoin, right?
Gwart: It’s like everyone trying to psychoanalyze like an absolute cesspool of the market. Right. But it I’ve seen a lot of these, a lot of people who are like, I know this stuff’s worthless. No one has ever seen this. This is the difference, right? It’s like no one thinks that wit is going to become a currency store value, right?
Gwart: It’s always just like, maybe there’s somebody I can ultimately sell this to. And communities build around this and they can get absurd market caps. Right. But a lot of these people ultimately do see, I think, the story and their value in Bitcoin. Like I’ve seen this a lot from this, a lot of people, I would say the middle of the curve generally is Ethereum people.
Gwart: Now I’m not like trying to be so critical here, but I think they believe a lot more in development in EVM, DeFi, and financial infrastructure. And it just it hasn’t really come to fruition yet. And I don’t know, like, would you generally agree with this or what are your thoughts on?
Udi: I think that’s super accurate. You know, like I used to be way more critical of altcoins back when, you know, Ripple would spend, I don’t know, tens, hundreds of millions of dollars on those marketing campaigns that Bitcoin sucks and Ripple is going to replace Bitcoin because it’s faster. And I that time and like it was like anyone with half a brain would realize that it’s bullshit.
Udi: But they really that was the narrative. And the Ripple crowd believed that. And a lot of like newcomers to Bitcoin believed that. I think today it’s completely different. I think today it’s a lot more honest in that sense. You know, NFTs are just pictures of things. If you think that a picture is going to make you financially free, I mean, I don’t know, go ahead and figure out if you’re right.
Udi: Fine. But it’s no one’s lying that this picture is going to give you access to flying Uber cars or something. Right. It’s the same with the meme coins. You know, they’re very honest about what they are. And it’s very hard for me to find a problem. Like a moral problem with that.
Gwart: I would say one thing with regards to NFTs. I think there are, and you mean, you know this, there are extremely wealthy people who will buy an NFT, and it does not matter what they are offered for that NFT. And so there is I’m being somewhat generous here, but there is a community that develops on that. Cryptopunks. Absolutely.
Gwart: There is a real community of OG Ethereum people, or I mean just crypto people in general that is developer on that meme coins. Conversely, the community I would say is generally there are community members who will hold longer than other community members, but in the end, you do want to exit, right? Yeah. So I think that would be the only difference.
Gwart: But I would agree, like at least on the base level, that both of these are fairly transparent. Right? Okay. And now I want to ask you, does anything interesting with DeFi?
Udi: You know, I think there’s there’s it easy to get confused between like the narrative and like the practicality of things. Yes. The DeFi narrative of we’re going to replace the traditional finance world with decentralized one. I don’t see how anyone could buy that. I think that’s absurd. That said, some of the things that they built ended up being extremely useful.
Udi: The basic concept of an AMM or liquidity pool is the thing that allowed this meme coin casino to exist. Now, sure, maybe you don’t like casinos. That’s fine. But it ended up being a useful primitive for a casino. It was for online digital casinos.
Gwart: Is it useful for more than that, though? Because a designer, like a lot of people I bring on, I’d like to talk about trading and arms and movie and stuff. Right. And like I have come to the conclusion that AMMs are exclusively useful probably for launching long tail assets, right? Yep. And beyond this, I’m not sure.
Udi: Yeah. So I think I think that’s a very good point. I think most people don’t realize that. I think that that is what it’s for. It’s used to be positioned as a way to do a decentralized exchange. I think that’s how we got invented, maybe, but it’s that’s not what it ended up being. Right? It is an automated market maker.
Udi: Markets need market makers. Teeny tiny long tail coins are unlikely to be able to procure a market maker in the early right. You know, unless so. So making it kind of part of the launching process and having some guarantees as to the safety of the funds that are allocated to it all worthwhile to that early.
Udi: That’s what pumped the funding up for sure. So yeah, I agree with you 100%. I think it’s very useful for that launching phase of absolute crappy shitcoins, but that is important because that helps them transition from being absolute crappy shitcoins into being at least something that is liquid, you know? Yeah. So, and I, you know, in the kind of Bitcoin ecosystem with the Bitcoin season two ecosystem, I love criticizing runes for the lack of that.
Udi: I think that a ton of people in Bitcoin kind of ordinals and runes for you just don’t get it. I think runes, because they don’t have liquidity pools, means that those tokens do not have a path to liquidity, which means that they’re dead.
Gwart: Yeah. Well, you I will give you credit, like maybe a week before runes launched, you wrote this thing about how, guys, this is probably not going to be wildly successful. Yeah. Yeah, there’s a lot of screwy things with runes. I mean, even just, like being able to…
Udi: Break down, someone might still fit. Someone might come up with a successful LP thing for runes, it would not be particularly permissionless, but someone might do it in a centralized way or trusted way or something. If it catches on, that might fix the problem. But currently. Yep.
Gwart: Okay. So then Cat VM, what do you want to see? First of all, maybe you can just, people have probably, hopefully read the…
Udi: The children’s comic.
Gwart: Book. Hopefully some people have read this, but about maybe briefly what is Cat VM and then what are you hoping to do with Cat VM.
Udi: Yep. So if you didn’t read it, you can go to cadmium.org and you’ll get this beautiful PDF file. I think it’s the only white paper that’s presented as a children’s book. So what we wanted to do there is make it very easy for people to read it. Most white papers are optimized for being unreadable so that they seem smart.
Udi: And we wanted just to optimize for people actually going through it. So yeah, it’s, I like to describe it as a framework for building cat-based apps. Some people might choose to describe it as an L2. I don’t like that term. So I don’t use it. But it basically, you know, OP_CAT as its own.
Udi: It does allow for a lot of expressivity, but the way it does it is very hacky and ugly. You have to chain hundreds of OP_CAT actions literally in a script and figure out how to do it in a smart way that does what you want. That is not something that I expect anyone to do. Cat VM creates the environment that you would need in order to use a regular programming language to build what you want to build.
Udi: So that’s essentially what it is. And, well, you know, I think the really cool thing about it is people could probably build anything with it. It’s very expressive. So you could build whatever you want. We are going to optimize on that use case, on making ordinals better and making runes better. Because that’s a community that we know is eager to go ahead and play around with those things.
Udi: I think once we achieve success there, I do think it will eventually be used for things like, you know, privacy. So, because it can, there’s nothing that stops you, but you first need to kind of put it on the map. And that’s what the kind of digital community is really good at.
Gwart: What is your I mean, I don’t know if like, I’m sure Randall and Tyler are hacking away. So and I know you guys, you and Eric are the pump guys, right? So I, I understand that I understand the performance art side and the people who understand the computer side.
Udi: I’m not I’m not on that side.
Gwart: Yeah. No, no, no, you’re honest about this. What is like. So my point of saying that was I don’t know how much you can sort of disclose right now, but like, what is your vision for what this bridge or this kind of implementation looks like as of now and then maybe you want to talk about should we get a peek at then.
Udi: Yeah. So, for you, our focus is for users to make this as native to Bitcoin as possible. I think, look, I’m extremely, like, kind of satisfied and happy to see that there’s so many, you know, projects now that are building Bitcoin L2s because I think that is the way to go. I think we need a ton of people experimenting.
Udi: That said, most of it is junk. I I’m sure you would agree. I think that there’s just this path dependency thing where most people in the Bitcoin development community were hyper-focused on lightning or not anything else. So it kind of by definition, anyone who tries anything else has to come from other ecosystems if that’s what happened.
Udi: So if you look at that kind of landscape right now, you would see mostly kind of forks of Ethereum rollups and stuff like that that I don’t know personally if that makes sense. I’m glad they’re doing it, but I think we’re maybe over indexing in that direction. But it’s fine. You know, it’ll figure itself out. What we’re focusing on is making stuff that is completely Bitcoin native.
Udi: It’s definitely not going to be EVM. It’s going to be, you know, incredibly similar to what it is to interact with Bitcoin today, just faster and more capable. For users, we were really focused on eliminating the kind of bridging steps that you’re used to on other chains. The experience is supposed to be like, you have a Bitcoin in your wallet, the wallet manages where the bitcoin goes and how, and you don’t think about that.
Udi: You know, you just go in, oh, you want to buy an ordinal? We will find you the best way to buy it if they’re using Cat VM or not and so on. So that is the way that it’s going to feel for the user. The idea is you don’t feel it, you don’t know that it’s there, but you just end up getting what you want faster and easier.
Udi: And sometimes look, in the case of runes, right. I think it could completely transform the runes ecosystem because right now it is completely incapable. Yeah. And once it fixes that thing, then who knows? But maybe runes become like a bigger, more popular thing. So that’s what I would expect as a user. But also we are working with as many Bitcoin projects as we possibly can to see how it can be useful for them in what they’re doing.
Udi: So, you know, sure, a lot of time would be marketplaces for stuff like ordinals and runes, but also yeah, not not going into any specifics. But yeah, I do think it improves the payment use case too. It improves other things too.
Gwart: So you know yeah there’s kind of this interesting like I’ve gleaned this from Bitcoiners for a while now, which is sort of this idea like you need to prove product market fit. Right. And this is like, this is a very dicey statement here because it’s like we want you to prove product market fit. But in reality, whatever implementation is either currently available.
Gwart: Yeah, it is currently available. It’s hard to say that that would be product market fit because it’s not the real implementation. How do you feel about looking at some of these L2s? Right. Like a lot of them, they’re certainly not as mature as a lot of the Ethereum L2s once again, we’re like being generous with the terminology here.
Gwart: But how do you feel about these L2s proving product market fit like is I’m using a random name here. Right. Like this is just saying this Botanics, Botanics has a tremendous amount of liquidity. Right. And they have some, I don’t know, like incentive programs. Once again, I have no idea if they are. I’m just using it as an example.
Gwart: Right. Do we look at this and say, product market fit here? And the reason I’m asking this is because recently you and Eric were trolling each other on Twitter, and you were talking about how he was all AI dumber, and you were like, you know, you predicted the Ethereum roadmap with the roll-up centric roadmap would take off.
Gwart: And now what we’ve seen is a fragmentation of a bunch of Ponzi schemes. Yeah. Just go ahead. There’s.
Udi: Yeah. So actually, you know, you mentioned Botanics. I actually think Botanics specifically doesn’t do that. Do they?
Gwart: Yeah, I know they’re just going to take sequences of freeze which I don’t. Yeah, I think is not a bad idea. But yeah.
Udi: Yeah. So I, I so because I, I want to preface this with saying they’re not doing that. And then I’ll say.
Gwart: Actually I should have.
Udi: You know, but it’s fine. That’s actually good that you picked that because now, now, now I can sound like all positive. Yeah. I do think that that practice that they’re not doing is not probably a great practice. I but I also understand why people are doing it. I think that look, I think that when Optimism did that on Ethereum, I think it was a smart move actually for Optimism and for the Ethereum ecosystem, even because what they did is they I mean, everyone was doing it before them too, but they just made it like very honest and obvious.
Udi: They’re like, you know what? This isn’t like a professor chain. This is a casino. And we want you to put your coins here and we’ll give you points, whereas the other ones were like, oh, you know, maybe there’ll be an airdrop and we want to. Yeah, incentivize activity. They’re like, guys, put your coins in this address and you’ll get points.
Gwart: 3 or 5 multisig no less. Yeah, yeah.
Udi: But you know, I think they were much more honest about it. And I think by doing that they one made themselves very successful in to they killed the mirror which is beneficial for the space. Now that mirror is look at people like to criticize Optimism now and say, oh they messed up and the market cap or whatever is lower than what people expected.
Udi: But that’s only because the expectations were insane, because of that marketing trick that they did. If they didn’t do that, then Optimism would have been nothing. So for Optimism, it was very successful. And it was also successful for the ecosystem because now that meta is finally dead, it’s a stupid meta. And I do think that the airdrop meta at large is probably over.
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Gwart: What do you think of the Ethereum roll-up centric roadmap?
Udi: I think, you know, it’s funny. Is it even really a roadmap? So like, I think what I like about Ethereum, there’s a lot of things I don’t like. But what I do like is that they did genuinely experiment with a ton of things. There’s so many. They tried the payment channel approach like Lightning. Yeah, for a little while that how.
Gwart: Like trying to bring that back.
Udi: Smile. Yeah, yeah. So they tried that. They tried the roll-up stuff. There were a bunch of other, like, ideas. There’s the optimistic stuff versus the ZK stuff. I think that is positive. It ends up with, you know, obviously there was the Casper thing, right. And the was it Casper or Casper was a proof of stake.
Gwart: Casper was the proof of stake. Yeah.
Udi: Yeah. That’s the proof of stake. Yeah, yeah. So something else was sharding.
Gwart: Sharding.
Udi: Yeah, sharding. They had all of these ideas and many of them, you know, don’t really come to fruition. But I do think that that approach at least progressed somewhat. And, you know, maybe at least now we know that rollups are not that great. That’s good too. Because with, The I only have the kind of Lightning thing to compare it to.
Udi: And I think that process has been terrible. I think it was incredibly bad for the Bitcoin ecosystem. Not only did we not end up with anything useful, I would almost that’s going to be a controversial thing to say, but I would almost say that it ruined a few people’s lives because a lot of people focus the best years of their career on this stuff because a bunch of podcasters and influencers who know nothing about tech told them that this is obviously not only going to change Bitcoin, but the world.
Udi: And it’s the best thing that you could possibly do with your time. And we had, I don’t know, hundreds to thousands of people working on Lightning solutions for the last ten years, which is absurd because it never got anywhere. Why would you have so many people working on something? And so I actually think there’s and I see that today there’s a bunch of people who dedicated the best years of their lives to this thing.
Udi: And now that they’re realizing that it’s probably not going to be a thing, they don’t know what to do with themselves anymore. which is unfortunate. I think there’s been this dogma, you know, about, like, Lightning is the obvious. And I know why this happened, by the way. I think I know, it was very political. So in 2017, there was this whole Blocksize war thing, and the guys on the small block camp, I was part of that camp too, eventually saw Lightning as an excuse that they can use.
Udi: Now, Bitcoin will end up scaling. Yeah. So they turned this into a political tool and into the obvious way that Bitcoin is going to scale. But they didn’t care. They just wanted to shut down the other camp. So it ended up being like a cultural thing. You have to believe that Lightning is going to be that thing. And I really think it did kind of ruin a few people.
Gwart: It’s funny, Alex B was talking to me. He’s like, actually, ironically, the people who were looking into Lightning understood that it was going to, you know, probably devolve and likely devolve, but it would probably end up being more of like a hub and spoke model as opposed to, you know, this like, Tor-like network of routing nodes.
Gwart: Right? Like, ironically, were the Bitcoin Cash people because they were actually willing to dig in and see this. Now, I will say, though, the thing about Lightning, right, like, 100% agreed generally with your views. Right. And it has not lived up to what it was claimed to be prior to this. So you can go and see Greg Maxwell talking about switching way back.
Gwart: Right. And so there was some agreement though, that this way to scale Bitcoin block space was not necessarily with more block space.
Udi: Yeah. No I agree with that too. I also think that the way is not by adding more block space. That I fully agree with. But I think we kind of tricked ourselves, you know, we used this as a narrative in order to win the war.
Udi: And we forgot to, after we won the war, we forgot to move on. And what I like about the Ethereum ecosystem was that they didn’t. They never seem to have pushed themselves so deep into a corner like this. They sure. There’s a lot.
Gwart: They really pivoted from sharding.
Udi: Yeah, they’ve pivoted from sharding. They’ve pivoted from plasma. Maybe they’ll pivot back. The point is they’ve kept an open mind. And I think that is important because if you don’t, then you just commit to. I mean, it’s almost guaranteed that the first solution you come up with will not be the best. You know, like, how would you possibly design the best solution ahead of time?
Udi: It’s very unlikely. I think that was, you know, I was very supportive of the small block camp, and I’m still technically supportive of smaller blocks. But I think that having grown up a bit, I think back on that, I think that the big block camp hit a lot of good points about the kind of central planning where people do things in Bitcoin.
Udi: It was, you know, very heated at the time and everything seemed like a personal attack. But so it was very easy to not listen. But I think they made a lot of good points. I think maybe what this really was about was this kind of more move fast camp against the more central planning camp.
Udi: And I’m not sure that it’s that good that the central planning camp won.
Gwart: Yeah. So but then okay, so on this note, we understand the limitations of Lightning. And now we’re seeing the limitations of rollups. And you know, I’ve talked to people now and I think there’s some, there’s probably some center within the Ethereum community. Okay. Like let’s scale the L1. I mean, the last interview I did with this kid, Max Resnick, is very deep in the weeds on this stuff.
Gwart: And he’s like, we got to bring us back to the L1. They see what Solana can do, right? Like, so maybe not roll ups. Maybe Lightning obviously has its limitations. What’s our solution? What is our solution there?
Udi: So actually with Cat VM, I don’t know that Cat VM is the solution at all. I don’t think it is for scaling. So we are not looking at Cat VM as a scaling solution. Yeah, we’re looking at it as a solution that adds functionality. That’s what’s so different between Bitcoin and Ethereum. Bitcoin doesn’t have a rich L1. So that is the problem we’re trying to fix.
Udi: And honestly that’s a much easier problem to fix. So we’re very lucky that we get to have that problem to fix. The scaling problem is much more difficult. We’re not optimizing them to be the best scaling solution. It will be better than using L1. But I’m not here to tell you it’s going to be the best scaling solution.
Udi: Will live forever. Very likely wouldn’t be. So there would need to be a bunch of developments in the future to but for now, I just don’t think it’s the right approach to look for the most scalable way to do things. Because first we need to prove to people if you want to do this at all.
Gwart: Yeah. And I think it’s interesting, I think you’re being pretty precise with your words and saying, I don’t think it’s a scaling solution. Like, I think, you know what you’re doing. I think it’s Nano because it is an interesting mirror because like I do see on Ethereum with these rollups right there, putting these forth as scaling solutions.
Gwart: And you can talk about whether or not they’re parasitic. That is a slightly different argument to me. Right. Because there’s a lot of well, it’s parasitic to the L1 and they’re ultimately going to want to reject maybe. But more importantly, I think is like when you scale block space with more block space, right. Like for whatever reason, I think there has I mean, this is my pain.
Gwart: This is what I’ve observed. And I think there’s been like some sort of indoctrination with this idea that ZK is inherently scaling. It does allow more throughput of transactions on an L2. But I think in order to run. So this is the equivalent. I use Lightning. If you want to act trustless with Lightning you have to run a node.
Gwart: But what you’re doing is storing local state peer to peer state. If you want to have the same level of trustless ness with these Ethereum L2s, you have to run a node. You probably have to maybe run a sequencer in order to…
Gwart: Yeah. I was like talking to a designer about the strategy better in the technical.
Gwart: We had this. But, so I think you, you guys have brought up a really great point, which I 100% agree with. Ryan Dale said the same thing. People should be able to self-custody receive bitcoin on an L2, or maybe not to call it L2, be able to, in a cheap way receive bitcoin without having to open a channel.
Gwart: Right? and not have that like invalid liquidity problem or whatever we have with Lightning. Now, beyond this, you know, what do you want to see in term like so you talk about like the ordinals and rune stuff right now. Like hopefully, you know, it’ll be it’ll allow people to do it in an easier way. What type of like, let’s be serious for something cause I know, like mainly what it is, is like a little bit of a troll.
Gwart: Right? But let’s be serious. Like, what do you see? Like, for example, I think borrowing against your Bitcoin for stablecoins is like an obvious use case. That to me is like something that a lot of Bitcoiners want. They don’t want to use Unchained. They got blown up last year or like last cycle. Right? What else do you see?
Udi: Look that is one very obvious use case. Sometimes people just want to sell. So trading is the other Bitcoin to stablecoins and the other way around. Another good use case. I think knowing the ordinals ecosystem I can tell you a billion things that we could improve there once we have more expressivity.
Udi: So that’s the other thing for me. That’s enough. You know, like I, you know, I don’t need more than that right now. That will, I think, fundamentally change the way that people use Bitcoin. So that’s, you know, do that first and then. But the really great thing is I’m not, you know, I’m not some genius I’m not going to come on I think.
Gwart: Any of us are. Right.
Udi: I’m not going to come up with on a podcast what are the cool use cases. If we’re lucky, maybe we’ll stumble upon something ourselves. And if we’re not, then hopefully someone else will stumble upon a great use case. But that will be enabled by Cat VM and OP_CAT. You know, just more in general. Right now, you just cannot stumble upon those things.
Udi: An example I like giving is, so if you look at what we call Bitcoin season two so far there’s probably three main protocols that really well it’s ordinals first then BRC20s and then runes. Now they all had these kind of hype cycles right. And if you’re a miner, for example, then you could look and say, well, it’s pretty good for me that there’s these times that the fees are very high.
Udi: That’s great for miners, but then it’s not great that they go back to. Right, for sure. And I think by the nature of it, fees are not going to be sustainably high because they’re high when there’s urgency, when users are trying to get into a block very urgently. And that is by definition a temporary thing. However, it became urgent when those protocols had their at least local peaks.
Udi: And that happened with the limited capability of what you can do with Bitcoin today. I think that once Cat VM is a thing, then you instead of having three successful protocols in a year, you will have three successful protocols in a week or month, right? You’re going to have a ton of people experimenting with a ton of crazy protocols, a ton of Ponzi schemes, mostly Ponzi schemes, you know, and most of them will not even gain any traction at all, but some of them will.
Udi: And because we’re suddenly opening up the design space, then it’s just it’s not something that happens once a quarter. It’s something that happens every week. And for me, from the miner perspective, that’s fantastic. It’s still like peaks and they’re temporary but the peaks are suddenly much more frequent. So for the miners they’re like, oh, this is a nice thing.
Udi: The chain becomes a bit more healthy. So that is how I would describe that. Now, out of all of those Ponzi schemes that people are going to build, hopefully once a year we end up with something that is actually valuable. By accident, no doubt the person who built that built it because they want to build a Ponzi scheme, but maybe by accident it ends up being useful, which is what happened with ordinals and a bunch of other primitives.
Gwart: I recall, I think Randall and Tyler wrote a pretty, well, I don’t want to say critical, but they broke down Cat VM. What are your thoughts on Bit VM? First of all is Bit VM and Cat VM in competition isn’t the right way to say it, but are they similar enough to be comparable? And then also what are your general thoughts on Bit VM and the evolution of the past, like from Bit VM v1 to where we are now?
Udi: It’s tough because Bit VM is very loosely defined. It’s not a secret that the author of Bit VM is not the biggest fan of Taproot Wizards. He’s made that known multiple times through…
Gwart: Multiple Telegram chats. Yeah.
Udi: And that’s okay. I’m used to people not being a fan of me, so that’s fine. But what we’ve found is that when we try to communicate about Bit VM, we are always told that the thing you are describing is not Bit VM. So we’re like, okay, so can you tell us what it is? It is like, oh no, we’re still authoring the paper.
Udi: We’re still, oh, we just launched Bit VM v2, but we can’t tell you what it is yet, which is fine. I think that’s the way that things go. Obviously you’re not going to define everything on day one, but it’s kind of hard to reason about it because of that. I think if I understand it correctly, I think that the goal of Bit VM is to enable more expressivity without a soft fork. That is the goal to do that without a soft fork. And I think that is a commendable goal. I don’t know that it achieves that. It certainly hasn’t so far. But I would love if it does. I think that once you accept, though, that a soft fork exists, by definition, you do not need Bit VM anymore. Bit VM is actually a collection of hacks that exist in order to get around the fact that there is no soft fork. And we just fundamentally believe that a soft fork is not that difficult to achieve. But, you know, that’s a fundamental belief that we have in the company. I think that the market is wrong. You know, the famous market is wrong. Everyone assumes that making a soft fork is like near impossible. Well, and I think they’re just doing it wrong, and that’s why they were not able to do it. So for that fundamental reason, we think that Bit VM is not going to be necessary. You know, it’s just a collection of hacks that will not end up being used.
Udi: Because we will have the soft fork. That said, I think it’s fantastic. If it does work somehow, you know, and that ends up being the way that people get more functionality in Bitcoin. That’s fantastic. My feeling is that…
Gwart: What do you think about some of these projects raising money or promoting the notion that they will use Bit VM when one it’s not really clear there’s a real Bit VM right now. Yeah. From our understanding, it’s extremely impractical. Even if we got to the point where Bit VM is, you know, in production, how do you feel about teams like maybe this is just a broader question that you can roll with, but like, how do you feel about teams now raising on some expectation of X, Y, Z or somebody hacking together a bridge for them and kind of running with that when we don’t know?
Udi: Yeah. There’s maybe two questions in this. One is do I think it’s a good investment? The answer is usually no. I mean, most of the things I’ve chosen not to invest in, so I believe that it’s not the optimal path. However, is it wrong that it’s happening? No, I don’t think so.
Udi: Now that I am on that side of raising funds and I understand the game better, I can see why they do that. I can see why investors feel like they need to hear that. You know, I can see why those things happen. And I also think in general that it is completely fine to present a general, very unclear vision of how things are going to play out, getting the money and then figuring out in a way that might have very little to do with the original pitch. I think that’s fine. If it’s done, it’s very hard to know if this is done from the right intentions or not. If you’re going to raise funds, you should have some vision that you believe in. But also you are not expected to figure out the details and you shouldn’t be. You’re raising the funds in order to figure out the details. I actually think that that has been one of the illnesses of the Bitcoin development community.
Udi: They, over the years, insisted on having this fully fleshed out whitepaper and protocol specs before even going out into the world and saying, if anyone even wants this. I think that’s not the way to go about things. I think it is totally reasonable to raise funds and start acquiring users, even before you have answers to all the questions. I think it is the right way to do those things.
Gwart: I think I recall you saying that, well, I joke about this too, but probably less seriously. I think you’re serious when you say it. You’re like, if a project is wondering whether or not they need a token, they need a token. You have been, I think, pretty optimistic about tokens. Do you still feel this way and how do you feel this way with regards to Bitcoin?
Gwart: L2s maybe.
Udi: You know first of all we are not thinking about a token. I don’t know if one day it will make sense. I’m not saying we want it might be, but right now this is not at all something we’re thinking about. but I can see how it would make sense. I think that look, that statement that I made was very time sensitive.
Gwart: Yeah. I think you like holding.
Udi: No, no, no, I’m saying I think I’m. I stand behind it. I think it was true at the time that I said it. I also think that today it might be different. I think that today the market feels flooded with tokens. Oh, yeah. And liquidity is pretty low compared to the past, for those other coins. so I’m not sure that I would recommend someone to do that right now, but it.
Gwart: Yeah, I think in the past it was an obvious. Yes. And now it really depends. For the other L2s, it’s, you know, for me to tell them once.
Udi: Again of course. But what should tokens represent in that case, like in your vision of a token? It’s equity or governance. Right. And we’ve seen how this plays out. I think this is I would put my I’ll just say more of.
Gwart: A fan of the meme side of things, you know.
Udi: Yeah. But but this but why even have a project behind it then. Right. Like the I, I agree like talking me wrong I agree right. Like Bitcoin’s the greatest meme coin. But I think we all agree on this, right? But why even have any semblance of value or utility or whatever?
Udi: So okay, why does it have value?
Gwart: They would say because of their price. By saying they would say.
Udi: What they say is bullshit. Why does it have value?
Gwart: Because it is a platform for gambling generally.
Udi: And why this is a token is a value because you could have, you know, said like whatever use stablecoins is gas or use like like why there’s if.
Gwart: Well I agree with that. But okay.
Udi: So so I don’t agree with that. I think I used to, but I think that Ethereum would never have gotten to where it is today.
Gwart: Okay then. Yeah. Yeah. I also agree with you then.
Udi: And ETH is much closer to being a meme coin than a lot of the L2 coins. I think one of the I think Vitalik is an incredibly masterful community builder. I think that is the number one thing that he is. I think maybe a lot of people think of him as a developer, researcher or whatever. I think of him as a masterful community builder.
Udi: I think the best that crypto has ever seen. you know, Satoshi was not.
Gwart: Just a junior.
Udi: Okay. The second you.
Gwart: Saw.
Udi: Satoshi was was was not bad, but Satoshi was good at the early stage and left. Vitalik was very good at the early stage, but then also later, I think that without him and I know a lot of Bitcoiners would say that is a bad thing. Without him, Ethereum would not be here. I think it’s a very good thing that he made it happen.
Udi: I think he built a community that sees Ethereum as a mission.
Gwart: Yeah, I agree.
Udi: That is in my opinion, not really true about Solana yet. It’s close.
Gwart: What do you say that.
Udi: So so maybe and maybe because Solana’s mission is more generic, it’s like, oh, this needs to be faster and needs to scale to a billion people, you know? And it’s a good mission, but it’s hard to it’s a good meme. I don’t think it is a very good. It’s like it’s like an optimizing thing. And Vitalik, you know, especially in the early it’s easy to take Ethereum for granted now, but especially in the early years when this was just a vision, he really inspired this community to think about how the internet would change and how finance would change.
Udi: Now, I don’t think finance changed the way that they believed, right. But it did change in the sense that crypto is now a real financial asset. Meme coins are a real thing that attracts a lot of capital. A lot of this stuff would not happen otherwise. It did affect financial markets to the degree.
Gwart: I would.
Udi: Not in the way they thought.
Gwart: I just would counter, I don’t know, it’s a counter. But with regards to Solana, I would just say like, I mean, it’s one I wouldn’t like me to say this, but I don’t know that Solana ends up exceptionally decentralized. I don’t think it’s feasible when you’re trying to go, yeah, as fast as they are.
Gwart: I don’t think it’s possible, but I do think it’s like they’re optimizing for what they saw. Six years of users on Ethereum, which is they can have.
Udi: An advantage or you just vanish. You just don’t know that as a community. Oh, I’m incredibly bullish on the Solana community. I just mean that is that kind of mission-driven thing. I don’t know that they have that.
Gwart: Yeah. But what value? Oh, I’m going to really put myself in a, in a like, I don’t know, laser eye category here or something, but like what values have derived from that outside of this group of sort of ideologues has transcended into the real world? I mean, I guess what I’m saying with the DAOs, quadratic voting like these are idealistic, right?
Gwart: I think Vitalik genuinely believes in the vision that he promotes. I have never thought that Vitalik was a scammer. I think that Bitcoiners, they look at Vitalik and they say Ethereum is controlled by Vitalik, and it actually is extremely detrimental to what they should be saying, which is that these high ideals have permeated the culture.
Gwart: And a lot of these don’t actually reconcile well with what the users end up wanting to do. And we’ve now seen this sort of like alignment and realignment and all this stuff in a theorem. Right. And I look at Solana, I understand, like they saw, you know, a lot of these kind of visions, but what they saw were people wanting to degen and get, you know, max leverage and form a bunch of shitcoins.
Gwart: And they said, hey, we can do this on a single monolithic chain that goes really fast and the fees are cheap.
Udi: And that’s the yeah, I think, I think maybe I wasn’t clear with what I was trying to say. I’m more bullish on Solana. I don’t really theory easily. However, I think the value of ETH would have been zero if not for the community that was built around it. And I think that does need to be studied because it is the second biggest crypto asset in the world.
Udi: Just got an ETF recently that people thought would never happen.
Gwart: Solana will get ETF too probably.
Udi: Yeah maybe.
Gwart: Even Avalanche and.
Udi: I mean yeah yeah. But my point is I think that ETH is seen today as this kind of crypto asset that is unlikely to go to zero. True. And I think that happened because it was memed into being that it didn’t happen because of the tech and didn’t happen because of the roadmap. I think it happened because the community memed it into this thing.
Udi: And I think that most of the roll-ups, you know, Optimism, Arbitrum were very bad at it. And it’s easy to see that. Right? Like the way that people think about, you know, the Optimism coin or the Arbitrum coin is not anything like what they feel about Ethereum.
Gwart: So maybe actually.
Udi: That’s why I’m like saying I do believe in the like if you’re asking what are those tokens going to be? I think that if you want to build tech and infrastructure, that’s great. But the token, if you think it’s going to have a token, you need to focus on the community building in the memes, not on, you know, the governance, like messaging.
Gwart: So, for the rest of this, let’s dive a bit deeper into your vision for Cat VM. How do you see it evolving in the next few years, especially considering the current trends in the blockchain space?
Udi: For sure. Cat VM is about bringing new capabilities to Bitcoin in a way that respects its core principles. We want to see more experimentation and innovation on Bitcoin without compromising its security and decentralization. Over the next few years, I hope to see a vibrant ecosystem of developers building on Cat VM, creating new applications and use cases that we can’t even imagine today. This could include more sophisticated smart contracts, privacy-preserving technologies, and new financial instruments.
Gwart: That sounds promising. One last thing before we wrap up. What advice would you give to someone looking to get involved in the Bitcoin or broader crypto space today?
Udi: My advice would be to start by educating yourself as much as possible. Read the original Bitcoin whitepaper, understand the basics of how blockchain technology works, and stay updated with the latest developments in the space. Also, don’t be afraid to experiment. The best way to learn is by doing—set up a wallet, make some transactions, try using different DeFi protocols, and even contribute to open-source projects if you can. And most importantly, always be critical and question everything. The crypto space is full of hype and speculation, but there are also genuine innovations happening. Learn to distinguish between the two.
Gwart: Great advice, Udi. Thanks for joining me today and sharing your insights.Udi: My pleasure. Thanks for having me.
