WBD270 Audio Transcription

Bitfinex - The Hacks, Tether and Bitcoin with Paolo Ardoino

Interview date: Friday 16th October

Note: the following is a transcription of my interview with Paolo Ardoino. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

In this interview, I talk to Paolo Ardoino the CTO of Bitfinex. We discuss how Bitfinex dealt with the exchange hacks, protecting against future attacks, Tether, the Lightning Network and funding Bitcoin projects.

“It’s important to us to support Bitcoin and to show respect to the coin that made all of this possible.”

— Paolo Ardoino

Interview Transcription

Peter McCormack: Right, good afternoon, Paolo, how are you?

Paolo Ardoino: I'm doing really well thank you, Peter.

Peter McCormack: It's good to finally get you on the podcast.  You have a rich history in Bitcoin.  A lot of people won't know it all; I only know parts of it.  One of the interesting things is that, when I talk to a lot of kind of Bitcoin OG people, they always talk very highly of Bitfinex, talk very highly of the company, of the history, of what they went through in terms of just trying to build an exchange through especially very difficult early times. 

So, I want to do a bit of the history lesson with you on Bitfinex and Tether, and then I would like to talk about some of the stuff that you're focussed on for the future; how does that sound for you, man; you cool with that?

Paolo Ardoino: Sounds really great.

Peter McCormack: All right, cool.  So, listen, let's go right to the very start, Paolo.  Tell me about your intro into Bitcoin, and I don't often ask this question anymore, because they're usually told everywhere.  I even hate answering it myself, but I'm sorry, I'm going to make you do it.  Tell me your intro into Bitcoin?

Paolo Ardoino: Well, my intro in Bitcoin was around 2012/2013.  I come from a computer science background, started in university in Genoa.  I'm a coder since I was eight years old and always excited about technology.  Then, I got more into scalable applications, decentralised distributed computing and parallel applications.  And, that was really my thesis argument.

Then, I started working on an interesting military project in Italy, and then decided that it was not paying enough, as happened often in Italy, and then moved to finance.  So, I started studying finance and then started building a nice cloud-based portfolio management system.  That was around 2012/2013. 

I was dealing with banks, with big institutions, and they had really outdated infrastructure.  They relied on weird SFTP connection with text files to share the data between themselves only once per day.  All these files were all full of errors; there was no way to make sure that the accounting was perfect.  So, you had to go through many, many iterations just to reach a good stage of your hedge fund.

Then, I started hearing about Bitcoin.  I think in the end of 2013 was the first time it broke $1,000 and I started to hear about it and started reading and the first thing that popped into my mind is, "Okay, this thing can solve all my issues that I have every single day".  So, I got really excited and started digging more into it; started thinking how I could use it. 

Unfortunately, I had my day-to-day job, so I didn't have as much time as I wanted to spend to it, but then eventually I met Giancarlo, that is Bitfinex and Tether CFO, and he said, "Well, Paolo, we have a problem with the management engine; can you step in; can you help us?"  I had my company, but I saw the opportunity to be full -- well, to start playing with probably the most, or one of the most interesting companies at that time, and of course still today, but especially at that time, in Bitcoin.

So, I was really excited, was all about finance, was about all performance; that is my daily bread, and it was all about Bitcoin.  So, as sometimes happen, the more time I was spending on it, the more I was realising that I really didn't care much about my company.  Eventually, I ended up shutting down my company and joining full time Bitfinex, right basically when the hack happened.

Peter McCormack: Right at the hack; which hack, because there were a couple?  The big one?

Paolo Ardoino: Yes, there are a couple and the big one.

Peter McCormack: So, did you join before the big one happened?

Paolo Ardoino: Yeah, so basically I joined in early 2015 as a consultant for the management engine and the APIs.  When I joined, the order book of Bitfinex was updating between 10 and 15 seconds.  So, you were seeing the book refreshing every 15 seconds.  So, my job was okay, let's fix the management engine, because in 2014 and 2015, there was a period when the volume was really high, so there was some lag.  So, I stepped in to fix that, to bring from when I joined, it was like 50 orders per second, and my first part was how I make the management engine handle 50,000 per second. 

So, I started doing that and in a few months, I was able to deliver a product that was increasing the scalability by 100 times.  And then, I started focussing on APIs.  So, still young, quite outside of the company.  Then, 2016, I decided in May/June to close my company to dedicate full time to Bitfinex.  The hack happened early August 2016 and at that time basically, Giancarlo asked me, "Okay, are you feeling comfortable to become the CTO and have everything under your scrutiny?  If you are okay with that, I think that we can resume operations in one week". 

So, that is basically the time when I decided, yeah, I will be 100% full time in this company; I will step in as CTO; I will take over responsibilities of the technical side in order to, you know, if something bad happened, I didn't want ‑‑ even it wasn't my company, but I felt really bad for all the customers.  I wanted to step in, make it right, resume the company from a newly-created infrastructure so that we could start servicing again our customers and make them whole.

Peter McCormack: Right.  So, you took over the CTO role one week after the hack?

Paolo Ardoino: I would say two days after the hack.

Peter McCormack: Two days after the hack?

Paolo Ardoino: But, Giancarlo asked me and I said yes.  It feels like a wedding proposal, because I had five days basically to review the entire code base, to install it on a newly-created infrastructure and then start back the operation.  So, the seventh day, we started trading again and in, I would say, after a few hours, we were the top exchange by volume.  We were back on track, of course with a lot of noise, with a lot of problems, with a lot of critics; still, we were there.

After that, month by month -- well, day by day, week by week and month by month, we were able to demonstrate that a company can resurrect; a company can be brought back.

Peter McCormack: So, that must have been a lot of pressure at the time because, like I say, there'd been a couple of smaller hacks, but this wasn't an insignificant hack, right?  This was, as I remember, like $70 million of Bitcoin went?

Paolo Ardoino: Yeah, $70 million.

Peter McCormack: Yeah, but you were working at the time, right; you were an employee, but you just won the CTO?

Paolo Ardoino: Yes, that's correct.

Peter McCormack: Do you remember when you found out that it had happened?

Paolo Ardoino: Well, I found out quite early because basically, it was early, I would say around 8.00 my time; I was in the UK at the time.  When that happened, of course we all would start seeing -- okay, first of all we thought there was an accounting issue, but then we realised that there were bigger problems.  The entire team was really small at the time, you know, so it was with a shout, you could reach everyone.  And, we started working, checking, we broke down the platform and so on.

It was one of the toughest days of my life.  It was really sad for so many different reasons.  First of all, you felt like you let down all the people that were believing in you.  From a personal point of view, I was thinking, okay, I'd found the best job ever; I don't want to let it go; I will do whatever it takes to keep it, even if that means dedicating the next five years of my life without physically sleeping in order to make sure that it's safe.

Peter McCormack: Yeah, still a lot of pressure, man.  Because, you do not what, I actually really admire people who are CTO of exchanges, because you essentially are in charge of the security of some of the biggest honey pots in the world which, once someone gets access to, it's very hard to reverse what they've done.  And, I guess there must have been a lot of pressure on you with that early on?

Paolo Ardoino: Yes.  It was quite a bit of pressure but, you know, again, I thrive under pressure; I like to write my own code, so basically I started to write everything, my microservices system; the entire infrastructure was designed under my guidance; the management engine was basically written entirely by me; APIs as well; refactored all the back hand.  You know, in that way, I could be 100% sure that there were no issues.  And in fact, so far we didn't have any additional issue.

Of course, we have many more developers now and things are, you know, there are many more additional security checks.  But, at that time, I was sure I could do it, and I really, for me, the idea of losing that opportunity was just not possible.

Peter McCormack: Has it changed a lot over the last sort of five or six years?  Is exchange security still a very scary thing; is it something you lose sleep over; or, have you got to the point now where you're pretty comfortable with the security of custodying so much Bitcoin?

Paolo Ardoino: So, I think that the custody of Bitcoin, we are really comfortable with that.  You, of course, have MultiSig and you learn a lot of lessons of course with also all the other hacks that happen afterwards.  Every single hack teaches you something, so you learn, you improve.  In the company, hardware wallets became better; the company, the understanding of all the team members became better. 

I'm a guy that keeps harassing people in my team to install tubes, to use YubiKey, to use everything, right, so I'm really annoying in this thing.  So, I call them periodically and I'm basically treating them as my babies.  I want to grow them in being super security-cautious.  So, right now we are in a really good spot, actually.  I think that managing such a large amount of money has become, I would say, more comfortable, although you cannot ever let it go.  You can never think, "Okay, now I'm safe".  I'm the type of guy who is always paranoid.

But still, tubing has improved a lot and I think that with all the cracks and hacks we have seen so far in our industry, I think that protection has gone really high.

Peter McCormack: Okay.  As I remember it, you socialised the losses, which I know upset some people, but I actually kind of understand why you did that.  But, the BFX token was designed to try and at least compensate people for their losses.  How far did that go to making people good on their losses?

Paolo Ardoino: I think that people were made whole.

Peter McCormack: Okay, great.

Paolo Ardoino: Because, eventually -- so, the logic was simple.  Either we redeem it at $1, or you can convert it and have shares.  So, if we redeem at $1 and we recouped already $72 million and actually part of it was converted in Bitfinex shares that, by the way, I think was one of the best deals ever because of course, the company started running like crazy in the months afterwards.

Peter McCormack: Yeah, because it was like, I guess, late 2016 to, shall we say, early 2018, it was a very busy period, right, so the trading was high; high fees; I guess it was a good opportunity.  You know, it's really interesting looking back at that whole time, and whenever I speak to somebody, like I say, who runs an exchange, I'm always like, "God, this must be a stressful job". 

But, my assumption is the industry must have matured to a point now whereby big exchange hacks are either down to stupidity, or some unknown issue; but, the management of hot and cold wallets and multisig now, there are pretty standard practices, wouldn't you say?

Paolo Ardoino: Yeah.  I think that, you know, multisig, MPC, there are, let's say, many flavours.  Of course, the important lesson that we learned is, whatever happens, 99% of the asset should be in the cold wallet; that's it; simple as that.  So, we learned that lesson.  You know that you have to use multisig, or a multifactor system in order to authorise reveals from cold wallet to hot wallet, and I would say that you are already in a really good spot only following this simple rule.

Peter McCormack: Yeah, well interesting stuff, man.  All right, the other thing I wanted to talk about with you, before we get into the future stuff, is Tether.  I actually met Phil Potter a couple of years ago in New York and he came on.  We talked a little bit about Tether, but I want to hear it from you, because I saw a presentation of yours once where you actually talked a lot about the technology of Tether and the innovation that brought to the industry.  Obviously, we have so many stablecoins now, but let's be honest, Tether's the king.

Can you, I think, if we probably go back a step and, say, talk about the reason why Tether came into existence, because it was there to solve a problem, a banking problem, right?

Paolo Ardoino: That's correct.  So, when crypto exchanges started to become a bit more popular, and you can think about 2013 when the Bitcoin price moved to over $1,000, then there were many exchanges that had -- well, between exchanges there was a huge price discrepancy; even $200/$300. 

In trading, there is a simple concept that is called "pair".  BTCUSD is a pair.  Pair means something made by two things; in this case, two currencies.  And, BTCUSD is made by BTC and USD.  So, in finance, it's important that the two parts of a pair, they move or can be transferred at the same speed.  So, if you are trading Tesla, it means that you can move Tesla shares and make a wire almost at the same time.  But in Bitcoin, you could send Bitcoin from one exchange to another in 10 minutes or 30 minutes, depending on the number of confirmations, but the wire could take one or five days.  So, you see, there was a big discrepancy in speed between the two currencies of the pair. 

So, if you think about it, the solution is really simple.  We had Bitcoin; why can't you use the same technology to create a surrogate of the dollar?  I mean, again, if you think about it now, it's very simple but at that time, 2014, when Giancarlo and Phil had this idea, no one thought about it.  They looked around and saw that the only blockchain that could allow this was called MasterCoin, that then was rebranded Omni Layer.  They basically started using that and the first couple of years were quite rough, because they were pitching this stablecoin to a lot of exchanges, but no one seemed really to get it.  They didn't understand the importance of it.

Peter McCormack: They do now!

Paolo Ardoino: Yeah!  And things have changed quite a bit in that respect.  And, in 2016, then Poloniex started to use it, so traders could arbitrage between Poloniex and Bitfinex because we had USD pairs, but we were considering merging USDT.  Poloniex had no banking, but USDT pairs.  So, traders started to really tie arbitrage between the two platforms.

Then, 2017 came and most of the ICOs, most of the new blockchain tokens were listed against USDT.  So, for the first time, we started seeing spreads that were more like traditional finance rather than being, you know, 5%, 10% or even 2%.  So, we were seeing ten business point spreads; even sometimes one business point spread.  So, between the technologies that grew off the exchanges, and Tether, those are the two things, in my opinion, made possible creating changes with the same technology performances as traditional finances.

Peter McCormack: What were the challenges you had building Tether though, because it sounds like there were two challenges.  One is, you obviously had to build Tether; but the other one was convincing people that they needed to use it?  Was Bitfinex the first kind of case study for Tether?

Paolo Ardoino: Yes, it was, but of course in this case, if you had only one exchange that supported it, it doesn't really help, because Bitfinex was an exchange that offered fiat.  So we didn't have any problems in setting and sending out wires.  So basically, we were suggesting to exchanges anyway to use other exchanges, of course, to use Tether because sending wires from one exchange to another could really take one day or more.  So, in order to solve the big problem of our industry, we were pitching Tether as the solution there.

Peter McCormack: Right, okay, I see.  It's funny though, because Tether is such an important part of the industry now; it's such an important part and it's really become, like we've seen all these other stablecoins be launched, but still the vast -- I mean, I don't know what the total percentage of the volume Tether has, but it is significantly higher than the rest of the other stablecoins.

Also, you've put it on other blockchains.  What was the whole idea of moving it outside of Omni Layer, because as I know, it's on Ethereum and, is it on Tron?

Paolo Ardoino: It is on Tron, Ethereum, EOS and many others, and I can explain you why?

Peter McCormack: Yeah, go on, man.  Listen, the maxis will be angry about this, but go on!

Paolo Ardoino: Yes, just don't laugh too hard.

Peter McCormack: I won't laugh too hard, man!

Paolo Ardoino: So, you know that in my background, I'm a really big Linux believer, right?  I started using Linux since a long time and from 1995 to 2000, 2010, there were a lot of Linux distributions, and there were things called revision wars between, you know, Debian is better than Gentoo that is better than Red Hat and you had so many, or SuSE, and so on. 

The only thing that crossed this -- well, there were a few things that were similar across these distributions.  So, they had many different things, like package manager, and so on.  But basically, they had in common Linux, the kernel, and they had in common the desktop environments like Gnome or KDE.

Now, we thought at Tether that in truth, it is quite similar.  So, you had so many different blockchains, but they need something in common.  And blockchains sometimes, you see revision works, like the Ethereum guys that don't really like EOS, maybe Tron and so, and the same goes with Bitcoin and so on.

Peter McCormack: Bitcoiners hate everything.

Paolo Ardoino: Yes, of course; it's like the Scots, right?!  Yeah, I'm talking about the episode in the Simpsons …

Peter McCormack: All right, fair!

Paolo Ardoino: So, we thought, okay, why we cannot be the thing that you unifies them all; so the common layer, the common liquidity layer for all that.  So, we started to think, okay, this can actually work because they might not like each other, but what is there is something that allowed them to easily move well from one chain to another.  So, that was the big revelation and we started doing that, and actually it worked out really well.

Peter McCormack: What's the total volume of Tether right now?

Paolo Ardoino: I think it is around -- well, there are two types of volume that you want really to check.  So, although the trading volume is astonishingly high, I would say that on-chain volume is a much more important measure because, of course, costs and fees.  So, I think that is, if I'm not wrong, is 2 billion per day.

Peter McCormack: Wow.

Paolo Ardoino: That is quite an enormous amount.  Of course, the more blockchains we add, the harder it is even to track, but it's growing a lot; especially, the thing that I like more is that the average of the transaction size is going down, and that has an important meaning, because Tether is not anymore something for the big hedge funds.  Of course, it serves big hedge funds, people that have a lot of wealth, and they are big positions, they have to hedge themselves and so on, right, fine. 

But, it also is becoming more and more something that can be integrated in everyone's life on a daily basis.  So, the more it goes down, the more we are happy.  So, smaller traction size, broader audience means broader number of wallets that have ever received a little bit of Tether.  These are two important measures that we like to track and, of course, can represent Tether being brought to the masses.

Peter McCormack: What's the total amount of Tether that's been minted now?

Paolo Ardoino: 14 billion.

Peter McCormack: 14 or 40?

Paolo Ardoino: Yes, 14.

Peter McCormack: 14, wow!  It's amazing really because, do you guys ever worry because what's the difference -- let's deal with some of the FUD.  What's the difference between, say, Tether and something like Liberty Reserve, because those guys ended up in a lot of trouble?  What is it that you're doing differently that kind of protects you from the strong arm of the law?

Paolo Ardoino: Well, I think that we are just following the law.  We are registered in St Vincent; we collaborate with all the regulators and law enforcement around the world; so, we are really careful about following the rules.

Peter McCormack: All right, okay.

Paolo Ardoino: I am sure that our legal team can speak at length about that.  I'm a simple CTO only!

Peter McCormack: Yeah, I can speak to Stuart, see if he wants to talk about that.  There are a couple of other things; I'm not sure how much you can answer on this.  For a long time, people wanted to audit Tether to see if there was a one-to-one backing; and then, we saw something came out related to crypto capital and you've now got the New York Attorney Generals in; can you talk about any of that?

Paolo Ardoino: Well, I would prefer to leave that to our legal team, because I'm not expert in law and I just don't want to get slapped really hard when we finish this call!

Peter McCormack: All right, listen, I'll ask Stuart about that; that's probably better then.

Paolo Ardoino: Thank you.

Peter McCormack: What about one other thing; tell me if you can answer this?  There's a lot of FUD where people talk about the market being manipulated by the printing of Tether, but I've seen other people come out, other exchange operators, and say, "This is just absolute nonsense.  The printing of the Tether relates to demand".  Is there anything you can talk about on that?

Paolo Ardoino: Well, that is an easier story in the sense that, I think that it's obvious that Tether is following the rules and is issuing Tethers when actually there is a counterparty that is a wire that has received a movement that is received, right?  The growth of Tether is just driven by the actual demand of Tether to the market.  So, the entire manipulation thing is nonsense.  I think that in 2017/2018, there was just, I mean, the crypto was the boom of the interest in retail that made the crypto balloon.  So, that's basically it.  I think that the past action is completely nonsense.

Peter McCormack: It must be frustrating though, because it's the same story again and again.  I saw somebody else put it up the other day and there was nothing new in their story; it was just the same stuff.  Do you get pissed off with it keep coming up?

Paolo Ardoino: Well, initially yes, but then you realise that if you let them get at you, your work performance will become lower and lower and then, your productivity will decline.  So basically, we really just don't care.  Come at us; we will win; and we will continue to grow. 

There are Tether, Bitfinex; we are subject to a lot of different attacks, accusations, and they always came out bigger, stronger, so we are not afraid of that.  That's something really important for the team.  Everyone in our team really thrives under pressure and we like to demonstrate to the broader community that we are the good guys here.

Peter McCormack: And, how much has operating an exchange changed over the time you've been CTO?  Are there different challenges that you're facing now that you were facing five years ago; how has that changed for you?

Paolo Ardoino: So, I started one team of developers who were basically composed of 30 people, including me, and now we are around 35.  That is still really small if you think about competitors that have maybe three or four times the number of developers that we have. 

So, I would say that the hiring part was -- the creating and hiring process that would let me hire the type of people that could work well with me was the most difficult part, because I like to code most of my time.  So, I only hired people that are super-independent and I have a great feeling with, so that I can delegate and they can create stuff I can double-check periodically with them; but then, I can spend my time in building things.

Peter McCormack: Are you still coding?

Paolo Ardoino: Yeah, most of my time.  I would never have accepted this role if I had to stop coding.

Peter McCormack: Oh, wow, because I would have thought at some point, the pressure gets too much to do all like day-to-day stuff that you cannot still code?

Paolo Ardoino: No, it's what makes me happy every day, apart of course from my wife, and you know, the management engine is 100% made still by me.  I like that part; I like to go to bed and, you know, you are in a taxi or on a train or in a car and you think about how you can squeeze performance up there, how we can make the next version even more scalable, even more performing, even more stable.  So, it's something that I would never let go.

Peter McCormack: Yeah.  It's kind of interesting and yeah, I mean, I just think it's really interesting that you're still doing that.  I guess, if there comes a time that if you stopped coding, how would you know who the best coders are, how would you review -- I mean, I'm not a coder, so I don't know, but I guess it keeps you closer to the work and closer to the work of your team?

Paolo Ardoino: Yeah, and do you know, I don't really trust CTOs that are not really great coders themselves.  So, my worry; I'm a really competitive person as well, so my worry is that at some point, if I let it go, I would not be able to keep the same quality of the platform, just because I would not be able to keep up with the latest technologies with the new languages and so on, unless you do it every day; unless you force yourself into it and to keep learning; it's really hard.

But, that's the same with crypto, right?  I mean, Bitcoin keeps growing; Lightning Network is an entire world as well; so, if you stop doing that, you will lose it all.  I mean, I'm not saying that everyone should be a coder, but just for the passion to learn, even if you don't code, the passion to always look into it, to always know about it, to talk to people about it always; it's something that you should never lose.  For me, that passion is also driven by coding.

Peter McCormack: Amazing.  So, listen, let me ask you something, because there's this kind of weird Bitcoin world in that half of your job is building out your business, but then you have this other half where you kind of take an interest in the ecosystem and the growth of the technology, etc. 

Two points really: firstly, on a personal level, what are the areas of Bitcoin you're most interested in, like where's your passion; and then secondly, and it might be the same, but what about for Bitfinex, you know, what else are they interested in beyond just the trading environment?

Paolo Ardoino: So, when it comes to Bitcoin, I like the "simplicity" of it.  So, I like that it doesn't have smart contracts; I like that it's a simple layer-1; I like that it does one thing and it does it amazingly well; and I like that other people could add complexity on top of it with layer-2 solutions, like a network.  So, I think that I am generally quite sceptical of blockchains that try to do it all, like trying to be computers. 

I think that eventually, as much as you try, the history and the academics of computer science teaches a simple thing that you should build layers and not try to go with super shards and, you know, really complex strategies.  So, you can actually build really fast solutions that are peer-to-peer, that preserve privacy and so on, on top of Bitcoin, although Bitcoin has a ten-minute block time on average.

Peter McCormack: Are you integrating Lightning into the exchange?

Paolo Ardoino: So, we started with positive withdrawals on Bitfinex and then we started working with, well, one of the first use cases was supporting Bitrefill that, you know, they are a gift card operator.

Peter McCormack: Yeah, I know Bitrefill.

Paolo Ardoino: Yeah, and then we are thinking to bring the Lightning Network even deeper and allow fast deposits directly into refilling your collateral for trading purposes.  I think that our mission will be in part completed in that sense when we are funding projects that aim to bring digital assets on top of that network. 

So, the beauty of it is again, we want to be in a situation where both the parts of a pair -- like, when Tether started, I said, "Things should move -- so two parts of a pair should move with the same speed".  So, what we want to do is have Bitcoin and Tether being moved on Lightning Network at the same speed, so almost instant speed, so that you can really trade and you can deposit, withdraw, everything in a matter of milliseconds through Lightning Network.

Peter McCormack: Right, okay.  So, talk to me about RGB then, because you mentioned that to me before.  I still don't know anything about RGB.  I've seen it mentioned; I've seen people talking about it; can you talk to me about it and why you care about this?

Paolo Ardoino: First of all, I'm not just a super fan of tokens in general.  There are ways, or important parts of the token ecosystem, and Tether is a token.  And I believe that it is important, especially maybe in the future, Bitcoin will be used for everything and for small payments, people will accept payments in Satoshis.

I'm the kind of guy that is waiting for that type of future but at the same time, if you asked me now, I prefer -- I don't like to detach myself from Bitcoin; I really care about them.  What I prefer is to use a stablecoin so that I can always predict -- with a stablecoin, I will never regret to have paid something in Bitcoin.  So, I really like the aspects of Lightning Network that is a pure peer-to-peer solution that goes against the big other token solutions that are popular nowadays, like Ethereum and so on. 

What I like with the Lightning Network is you have a lot of small hubs that talk to each other.  Then, you have some sort of -- they can even act as completely segregated networks.  It's really hard; once it starts, the more withdrawals, the more it becomes -- like you can see like breaks, so it's really hard.  Once it starts to become broader, it's really to stop it and it's truly hard to stop it, because you have people can have hubs in towns; they can just talk to each other.  They might now know people from 100 kilometres away; they are not connected there; maybe they are, maybe they are not. 

So, there are links that maybe link all these hubs or these ecosystems together, but that is pure peer-to-peer; that is how the internet should be.  So, Lightning Network expressed really well that concept.  The thing that was missing for us was okay, how can we issue Tether in, because it's so difficult.  So, RGB is something that neither Bitfinex nor Tether did, which was a project that was created by Peter Todd and Giacomo Zucco. 

It was started a couple of years ago, then we met in Malta at a conference and started talking to each other and I was really interested.  So, I raised a hand with a few other companies interested, and we decided to fund the project.  So, from there, now it's in a really good development stage, the community's broader, there is a lot of interest around it, we are getting questions on a daily basis, so we aim to have something useful by the end of this year or beginning of next year.

Bitfinex, Tether, again, we are supporting it, we are testing it, we are working with different -- we are interested to create the wallets for using it; but, kudos to the developers who really are developing it, they are really great people, and also the ones that created it.  So, I don't want to take credit when it's not due.

Peter McCormack: Well, it needs funding, man; you can't do much of this stuff without funding as well.  But, what do you see as the use case for RGB; can you give me an example?

Paolo Ardoino: So, it's a way -- so, imagine to go into the Tube in London and instead of swipe your card, you want to have a really fast payment system that still pays with fiat, but sits on top of Bitcoin.  So, I think that is really poetic, that vision, at least in our minds and I believe that we are in a really good position to solve one of the biggest problems of this industry which is the UX, right? 

We know we are imaging already our wallet, how application could use Tether or Lightning Network in order to bring a really fast payment system to the masses with, you know, incentives; well, not incentives but everyone has incentives through a router to route messages like Lightning Network.  So I think that, for us, is just fulfilling the Bitcoin vision.

Peter McCormack: Yeah, but sorry, I still don't understand what RGB does on top of Lightning.  Lighting is already fast payments, right; what's the RGB bit?

Paolo Ardoino: So, it's a way to issue digital assets.  We're using the protocol that Lightning Network uses.  So, the idea is that the Lightning Network protocol routes messages that are basically payments for Satoshis in BTC, right; in Bitcoin.  It is, use the same protocol but instead, in the same channels, try to use a slightly different protocol that allows you, instead of transferring only BTC, transfer also custom-created assets, and that is basically RGB.

Peter McCormack: Right, okay, so you might create a Tether asset?

Paolo Ardoino: Exactly, yeah.

Peter McCormack: But does that asset also therefore need to have liquidity across the network, or can it survive on the Lightning Network's own liquidity?

Paolo Ardoino: No, it has to have a liquidity.  So, some of the considerations need to be there but at Tether, we are interested of course to see this coming to fruition.  So, we are happy to start spinning nodes in order to make that happen in an easier way.

Peter McCormack: Right, I understand.  What else is Bitfinex interested in; are you funding anything else?

Paolo Ardoino: So, we are funding Proof Marshal from Peter Todd and we are funding Omni Layer.  You know that Tether actually started on Omni Layer?

Peter McCormack: Yeah, I did, yeah.

Paolo Ardoino: These guys are really good coders.  Recently, they solved one of the most annoying problems of Omni Layer.  Omni Layer, until one year ago, was relying on an outdated version of Bitcoin Core, and now they've brought it up to speed in the last year or so with part of the funding to 0.18.0, now 0.19.0 coming. 

Also, they are focussing on OmniBOLT that is a protocol that still aims to issue digital assets, or really convert the digital assets that are on the Omni Layer, like Tether is already there, on using a protocol similar to Lightning Network.  So actually, we are funding two different projects that are competing for the same thing, because that's how much we care, how much it's important for us that we see a really fast payment system secured by the Bitcoin network; because Omni Layer is also secured by the Bitcoin network; RGB on top of Lightning Network is secured by the Bitcoin network.

Peter McCormack: Is this because you feel some sense of responsibility to support the Bitcoin network, or is it always just decisions that are made on an opportunity for return on investment?  Or, are you doing this also because you feel like you have this sense of responsibility?

Paolo Ardoino: No one is really seeing a big business case unless we created it first of all.

Peter McCormack: Okay.

Paolo Ardoino: But in the sense that it is important for us to support Bitcoin and to show respect to the coin that made all this possible, right.  And we feel that sometimes people take that for granted.  It is not that we are seeing this big business opportunity there, but we think that if we do a good job, people will start falling back and using Bitcoin security for their day-to-day life, maybe even without knowing it.

So that, for us, is like keep doing our work hard, maybe even in a small way, to help the ecosystem because from one side, in 2017, Tether was using a lot of Bitcoin network.  Because Omni Layer was, of course, every time you send Tether from one exchange to another, the transaction was broadcast on layer-1.  So, the sense of responsibility goes also to the fact that we don't want to clog layer-1.  Layer-1 should be there for everyone.  If there is a better solution, we should use that.

So, Bitfinex is made by bitcoiners, so that is what is driving us.

Peter McCormack: Interesting.  Well, look, it's fascinating stuff and if people wanted to find out more about it, is there any way to find out more about these projects; is there a way you update people?

Paolo Ardoino: So, I think there are a couple of different channels around.  There is a Telegram channel; I think there is RGB-org; and then it's moving to IRC, it's quite cool and a bit more private; there is a website; there is the GitHub of the RGB project; so, everything is open source, like it should be.  So, there is plenty of information around.  We are happy, if people want to reach out to Bitfinex as more support, we can introduce everyone to the right channels to make sure they get the best information possible.

Peter McCormack: And, if people want to follow you, Paolo, where can they get hold of you?

Paolo Ardoino: I'm on Twitter.  I'm that crazy Italian that writes random tweets every day.

Peter McCormack: Well, you're not the only one; we have Giacomo as well.  You can't say, "I'm the crazy Italian", because we've got him as well!

Paolo Ardoino: Yes.  Us Italians are really interesting reads, but I really love the guy!

Peter McCormack: Yeah, I love Giacomo.  Well, look, it's great to have you on, great to talk about this stuff and look, I wish you the best and appreciate all the support you've given me over the last few months and yeah, if I can ever do anything for you, you know where I am.

Paolo Ardoino: Well, keep doing whatever you're doing, because you're great; you're a great speaker; Bitcoin needs you. So, thank you very much for having me today.