Bitcoin Tech #4 - Wrapped Bitcoin & Sidechains with Shinobi & Nadav Kohen

 
 
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“Blockchains solve a very specific problem, that’s their big innovation, but they suck at pretty much everything else.”
— Nadav Kohen

SHOW DESCRIPTION

Location: Remotely
Date: Tuesday 27th April
Company: Block Digest, Suredbits
Role: Host, Software Engineer

Since Bitcoin’s inception, scaling has been a divisive topic. The very first reply to Satoshi Nakamoto’s email introducing the bitcoin whitepaper stated that “We very, very much need such a system, but the way I understand your proposal, it does not seem to scale to the required size.”

The scaling debate came to a head in the block size wars. Part of the community wanted to scale bitcoin by increasing the block size. However, a larger section believed that scaling was better handled on other layers, culminating in 2017 with the BCash fork.

Four years on and the market has decided that layered scaling is the preferred solution. Today, there are several approaches to off-chain settlement, and by experimenting with these on higher layers separate from the protocol, the security of Bitcoin can remain robust.

These different second layers offer additional functionality and programmability not found on the Bitcoin base chain, but they do come with tradeoffs. Users should consider who or what they are trusting, be it a peg, a federation, a protocol, or a combination.

In this interview, I talk to Shinobi, the host of Block Digest and Suredbits software engineer Nadav Kohen. We discuss Bitcoin scaling, the Lightning Network, wrapped Bitcoin and Liquid.

TIMESTAMPS

00:05:23: Introductions
00:09:35: Layer 2 explained in detail
00:13:41: Super hard money defined
00:15:12: Bitcoin vs Ethereum
00:16:50: The history of scaling
00:22:18: Sidechains and how they work
00:25:05: Liquid Bitcoin
00:27:58: Liquid's Federation
00:31:42: Liquid's use case
00:35:46: Is Liquid a risk to the basechain?
00:38:53: Explaining a peg
00:39:48: Burning Bitcoin through an OP Return
00:42:59: Using miners in a multisig to two-way peg
00:48:54: Wrapped Bitcoin
00:55:15: Ethereum's risks outlined
01:01:13: ETH vs Bitcoin
01:06:25: Investment vs trade
01:09:18: The Lightning Network
01:11:31: Lightning Network payment channels
01:21:17: Transacting on the Lightning Network in simple terms
01:26:57: Channel fees
01:29:42: Different ways to close out a channel
01:33:59: Security of Lightning transactions
01:46:22: Lightning Network custodial services
01:53:11: Selection of preferred wallets
01:54:31: Final comments


 

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SHOW NOTES

PodcastPeter McCormack