Bitcoin Renaissance? The Evolution of Digital Finance w/ Diego Gutierrez & Pei Chen

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1:25What's going on, guys? Welcome to the Real Vision Crypto Daily Briefing. Diego Gutierrez Saldivar, co-founder and CEO of IOV Labs, and Pei Chen, chief growth officer at IOV Labs, join me today. Welcome, guys. Thank you, Ash. Very happy to be here. Likewise. Well, very happy to have you. Very excited to be talking about Bitcoin and all the latest developments on that network. But first, I want to take a look at some prices. Bitcoin right now trading at$26 ,692. Trailing seven-day basis, it's basically off. Call it about 0.8 % Ethereum. Very similar looking chart here,$1 ,853. Trailing seven-day basis off about half a percent.

2:11One-day basis, it's up about 1%. Looking now at some other protocols here. Boy, these are some ugly charts, and they all have the same pattern. Let's look right now at BNB. This is the Binance coin. Off 13 % trailing seven days. Let's go to Solana. Boy, you could be mistaken for thinking it was the same chart. It's not, just the same pattern. Trading right now, 18 ,000.86, just shy of 19 bucks. Off trailing seven-day basis, about 9%. Cardano, there you see it. Same pattern again, trading at 32 cents on my screen. Off 10 % trailing seven-day basis. Polygon, also known as Matic, right now at 777, 0.777.

2:52And I should say you already knew that off about 13 % on a trailing seven day basis. Not a pretty pattern. There are obviously some news flow pushing those protocols downward. OK, shifting gears away from those coins and back to Bitcoin. Guys, welcome to the show. Really excited to have you here. Let's talk a little bit about what you guys do at IOV Labs. well um may if i if i may pay i can start i think it's um you know iob labs it's a it's an organization that has many many years of existence in the crypto world which is not so common uh it started in january 2016 although the the ideas uh and and the reason why it started come like way back to, we can, you know, connect them to 2012 or, you know, back to 2012, 2013.

3:55With the beginnings of the Bitcoin community in Argentina. So we started to try to sort out the problems of adoption, Bitcoin adoption, and the problems in Latin America. and over the years, IOB Labs created the source code of Rootstock, the smart contract platform, the first layer to the first sidechain to Bitcoin that went live in 2018. And then we kept building protocols, the RIF protocols to sort out scalability, usability and interoperability needs to create what in our vision is the Internet of Value, A new network of networks for the sovereign handling of value built on top of Bitcoin. So that's a little bit, sorry for the long description, but that's what we do.

4:53We love the deep context here, Diego. Pei, tell us a little bit about your journey at your firm and also about how you got involved in the first place in the world of digital assets, specifically Bitcoin. Absolutely. I think my journey at LV is relatively short compared to Diego. So I joined the company about a year and a half ago. And the interesting thing is I went from the Ethereum camp to the Bitcoin camp in pursuit of what else can actually be built on top of Bitcoin after living my life in crypto, simply just like DeFi on Ethereum. And what I found is actually quite interesting. I very quickly got involved in the development work in the emerging market side.

5:44As Chief Growth Officer, I am very involved in specific opportunities and utilities for building with our technology, thinking about as the earliest and still pretty much the most active site chain community on Bitcoin, how can we rebuild our leadership and how can we actually take advantage of this recent trend of building activities on top of Bitcoin and actually bring our technology to market. So I would say that from 2016 to 2018, 19, I think we as a key contributor to the rootstock community was very much in building that foundation. And then we created a lot of primitives, but working with our anchoring projects such as Sovereign and Money on Chain.

6:33So it's stablecoin, it's the trading platform for DeFi and all of that basic functionalities. But now we are in the phase that we're thinking out loud of how can we engage the broader community, not just the Bitcoin builders, but also the entire Web3 builders, the builders that have done Solidity, Ethereum, and other layer ones, how can they actually now come join us in building the next area for the Bitcoin? So basically, we're engaging them through a variety of activities. We have grants program that we rolled out this year, and we are working with tier one, fintechs, and web three companies, building out utility-driven use cases like remittances that's still the holy grail that a lot of layer ones haven't been able to tap into for real.

7:24And we're thinking about savings and wealth protections in specific pockets of the world where crypto is actually the best suited for, right? Like Argentina, Colombia, and all those markets where people really need a much more sensible way to save their wealth and run away from the hyperinflation. So those are some of my key focus. So let's back up the bus a little bit and do some definitions here. For people who may be relatively new to this and hearing about it for the first time, let's talk about Rootstock and Sovereign. Let's talk a little bit about what that means, what the functionality is, and what the current state of play with those technologies are in the Bitcoin ecosystem.

8:07Absolutely. Rootstock is, as I mentioned, is a layer two to Bitcoin. Bitcoin is the first layer two in existence and has been running since January, actually the birthday of Bitcoin, January 3rd, 2018, with 100 % uptime, no stops. And what we did when we built Rootstock was like combined two things, is that we combined, you know, the Bitcoin infrastructure, Bitcoin as a native currency. That's why Roostock is a sidechain. And brought the functionality of Ethereum into a second layer. So Roostock has all the capabilities of Ethereum, has solidity support, all the APIs, interfaces are exactly the same.

8:56And then we started building, as they mentioned, with sovereign, with tropicals, with money on chain, with the leading protocols in our ecosystem, building, you know, first a peer-to-peer monetary system on top of Bitcoin, where you could have stable assets that are fully collateralized with Bitcoin. That's the case of money on chains, dollar, and the zero dollar from some sovereign. And then on top of that, the basic financial primitives that people need on day-to-day. It's like once you have stable assets, you have Bitcoin, then you want to have lending systems, trading systems, exchange systems.

9:37So in a way, the ecosystem started building all those primitives, and we have been working together with them in Latin America to also create the bridges between this rootstock ecosystem and economy that is global by design, that is secured by the Bitcoin miners and the local economies, because you need to create those bridges, and that's the process we are into. So essentially, rootstock is basically a layer that provides similar functionality to what you might see in Ethereum, also known as a smart contract layer, being built on top of Bitcoin. Bitcoin is used for settlement on rootstock. Correct.

10:19Correct, correct. For settlement and as collateral in the case of the stable assets, the truly centralized stable assets that we have, which in my opinion are the sturdiest, the more robust stable assets you can have in the world today. because they don't have counterparty risk. They have platform risk. But, you know, unlike counterparty risk that only, you know, the chances of failure increases with time, in the case of protocols and protocol risk, is like with time you have less and less chances of failure. And, for example, Manion Chain has been running since 2019. it went through the crash, the flash crash of 50 % on Bitcoin in 2020.

11:10Flawlessly, it went through the latest crashes as well. So it's a stable asset protocol that has survived huge crashes and now has 70 million TVL. So you have a big bounty for hackers. to, if they want to hack it, they can get like that sweet pot of money. And I think it's, of course, the main challenge we have is adoption. And I think that's where they and all the team and the work we are doing today with different hackathons, bounties, and work with the traditional fintechs as well in the region will come into place. It's like how we take these amazing tools, these tools that have survived the test of time, reach the hands of the regular people, the people who need everyday DeFi, not sophisticated DeFi, but DeFi for everyday needs.

12:14Yeah. I would add to that by saying, because just to answer Ash's question, right, where is the technology at? What does the stack look like today? I think the most incredible thing about the rootstock is so far it started with a super strong narrative. I think back in 2015, 2016, this is to combine the security of Bitcoin and the programmability and compatibility of Ethereum. Meaning this platform is supposed to expand the Bitcoin network by giving it the smart contract capabilities. And we did it in the most pragmatic way that let's just go with the solidity. That's 4K theorem. And therefore, you have this merge mining component that is super secure with the most secure network.

13:00Let's jump in and define some of those terms for folks who may not know. Specifically, merge mining is the simultaneous mining of multiple coins at the same time. Talk a little bit about how that plays a role in this particular ecosystem today. Yeah, I think it's very important because, you know, when you have a layer two to Bitcoin, you have like three elements that make a layer two and not all layer two has all the elements. No, it's like, you know, every layer two anchors the latest status of the network, of the secondary network into the primary network. That's Bitcoin. No. So they anchor every certain period of time.

13:41what is the latest state of the network in the primary. That all layer two do. A sidechain specifically needs also to have Bitcoin as their native currency. And that happens with Roostock, that was the first sidechain to exist, and then Liquid came right after. So both of those networks have also Bitcoin as their native currency. That's the second element. But the third element is unique to Roostock. That is the merge mining. And what merge mining does is it incentivizes, it provides new revenue streams for Bitcoin miners to protect that second network. And the main challenge we had when we started with Rusto was how we could create merge mining of two networks, of Bitcoin and Rusto at the same time, without impacting the efficiency, the revenue streams on the Bitcoin side.

14:37And we managed to do that. That was like one of our first technological achievements by syncing the polling of, you know, in the mining process of Bitcoin with the creation of the new blocks in the Roostock network. The Roostock network has blocks every 30 seconds. And that's exactly the same time when the Bitcoin miners update the block template, like all the transactions that get into the Bitcoin blocks. So by doing that, we avoided any impact, economic impact on the Bitcoin side of mining. And we added a new revenue stream for Bitcoin miners. So in that sense, Roostock is unique because every smart contract transaction, every NFT minted, every ordinal minted in Roostock actually is paying fees to the Bitcoin miners.

15:29So it's creating, it's making Bitcoin stronger, not only as a currency, as an asset, but making the Bitcoin network stronger. So that's very unique. And I think it was part of our initial decision-making process. It's like why we decided not to mint a separate currency or token for Roostock. Why we decided to use Merge Mining? Because we also wanted to protect Bitcoin. No, we wanted to have a network that would add new functionalities, new use cases to the Bitcoin ecosystem, but contributing to the infrastructure and contributing to Bitcoin as an asset as well. Right. Pei, you also mentioned Solidity, which is the smart contract language of Ethereum.

16:16Talk a little bit about how the functionality in rootstock compares to Ethereum smart contract functionality, which I think is what most people who think about smart contracts are probably a little bit more familiar with. Yeah, essentially everything that's been enabled on Ethereum through Solidity either have already been built on Roostock at the application level or technically can be enabled. So it's very much think about if you're a developer working on Ethereum with a specific use case, you can completely just port the code and everything to Roostock. with a very minor configuration of tweaking on the code level, but it's essentially the same functionality.

17:04So if you think about stablecoin minting that is available on Roostock, and if you're thinking about DEXs, P2P trading, that's enabled by our projects, lending and borrowing being at the primary and the biggest proven use case on Ethereum currently is being enabled on Roostock. So the functionality-wise, I think technically speaking, the one thing I would say would be very different is how NFTs are being supported and created, right? So if you look at the ERC-721-based NFTs on Ethereum, it is very much a URL-linked data management, right? It's not the actual thing, but it's not everything stored on chain, but you can point that URL that points to the storage and the original assets versus the NFTs on Bitcoin and later on on Roostock is it could be very much, it's a completely different mechanism.

18:05It's inscription technology that is everything stored on chain. It's inscribed at a Satoshi level on the Bitcoin and can be soon moved on to the rootstock and build that economy out. And there's no URL. There's no concerns about the counterparty risk or the actual asset. Whereas it sits on the top of the Bitcoin, essentially on top of rootstock. I want to talk a little bit more about the Latin American use case for Bitcoin specifically. You know, if you live here in the United States and someone asks you what the price of Bitcoin is, you say it's about$26 ,000, as we quoted in the top of the show, obviously off about 60 or so percent from its November 2021 high of$69 ,000 or thereabout.

18:51But what if I were to tell you that Bitcoin is at or near its all-time high? Well, it is if you look at BTC ARS. This is Bitcoin priced in Argentine pesos. Let's take a look at that chart if we can. There you see it. Very close, obviously, to a peak in late 21 that we saw in November. But this is all about the deteriorating value of the Argentine currency. And it really is an incredibly powerful chart when you see it and you think about it. I know we talk about the United States. I'm based here. A lot of Real Vision folks are. But Bitcoin is very much a global phenomenon. And when you look at that chart, it really does resonate to folks who are essentially stuck using a currency where their hard labor is being devalued.

19:34Every day they keep money in the bank or money underneath the mattress. This really is a significant problem for a great percentage of the world. Diego, talk a little bit about the use case as a store of value as well as a medium of exchange in Latin America. This is something I'm incredibly interested in. Absolutely. I think, you know, I always say, like, why the crypto, I mean, why Bitcoin community and the crypto community has grown so much in Argentina, in particular in Latin America in general, but Argentina in particular, like, it's the home of many of the leading projects, crypto projects and Bitcoin projects in the world.

20:13And I think the reason, the main reason is because Argentina has first a tradition of, you know, decades of financial system failing people. So, you know, bail-ins we had in 2001, bail-ins where everybody got their money locked in banks. And when it went out of the banking system, it was worth one quarter of their initial value. So one year later, you have one quarter. And this was people's life savings. And all of us, like every Argentinian has a family member, whether it's your father, your grandpa, or somebody that lost like three quarters of their total savings in that event. So for us, this understanding of why we need to protect our wealth, why we cannot trust centralized systems, it's very clear, which maybe in the first world is tougher to understand because you don't have that tough experience we went through.

21:16That combined with hyperinflation and other big problems we have in the region. And the other thing is Argentina in particular is very prone to technology, so like very friendly with technology where we were one of the first countries to adopt like social networks. Buenos Aires in particular is a cosmopolies, so it has like, you know, very good connectivity, great developers. So it's like, at the end it's like something we used to talk with Andreas Antonopoulos when he was coming to LaBitConf, the Latin American Bitcoin conference I co-created in 2013, was like, when you come to Latin America, you don't need to explain why Bitcoin.

22:01It's like, people understand why Bitcoin. Whether because you want to protect your wealth from corrupt governments or you want to protect your wealth from hyperinflation and extremely unstable economies, Bitcoin makes sense. but also I think and that's why Roostock was born and we built it most people cannot afford to be exposed to the volatility except in extreme situations of Bitcoin all the time so most people need to have also what now we call stable assets they need to have access to the dollar and that's why actually people in Argentina when they protect their wealth they go to the dollar I think Argentina is one of the countries with more physical dollars in the world after the U.S.

22:52So that's crazy. It's like people storing their value under the mattress. And storing it in dollars. Guys, there's so much to talk about here. So many topics I want to cover. I wish we had three hours for this conversation. I really want to ask you guys this question, which is about the news flow this week with regard to SEC, Binance and Coinbase. This is an interesting question. Really two questions here. First, what's your view on what's happening in SEC with SEC? And second, what's the view in the Bitcoin community about this? I think a lot of people who are not Bitcoiners themselves may see that as a little bit counterintuitive because there's been a lot of interesting chatter on what's happening with regard to the SEC in the Bitcoin community.

23:36Well, maybe we should start with that question, actually, the second one first. Talk a little bit about the view from Bitcoiners about what's happened this week with SEC and Binance and Coinbase. Yeah, sorry. Maybe, Pay, you want to share something, and then I will do like, you know, I've been a Bitcoiner for 11 years. So, and you know, I'm a very particular type of Bitcoiner because I'm kind of - I think I can do the primer because I'm a more neutral, having been in multiple ecosystems. I think I've, you know, heard a lot of extreme views about this. And sadly, there are also Bitcoiners who are cheering for the situations and the current events.

24:20Explain why that would be for people who may not be as familiar with it as you are, obviously. I think it's, you know, obviously, if we're being fair here, the two exchanges, Coinbase, Binance, are probably the two driving force, if not like the biggest driving forces, but people onboarding onto crypto Bitcoin specific, right, in the early days. I felt their contribution is not to be undermined. But at the same time, over time, they've kind of onboarded a lot of other alternative or additional assets, which kind of create a certain impression and start a certain feeling of the Bitcoin community.

25:02And also within the Bitcoin community, it's quite complicated segments as well. there's the maxi camp i'm sure you hear about all the time and there's the the working class or the the plebs community where they are simply just adopting as a citizen right like bitcoin native citizen then you have the builders and infrastructure technologists such as our companies our teams our engineers they're all very different so i think the perceptions towards um the the incident like the events that currently are happening can be from one side of the spectrum to the other. And I think overall, the definition of Bitcoiner also is probably worthwhile, challenging and questioning at this point.

25:48It's like, it's not just Bitcoiner anymore. It's the Bitcoiner Mexie, there's Bitcoin Clubs, there's Bitcoin Builders, right? So if you ask me as someone who's in the third camp, I would say it's unfortunate. And I think this is not putting a lot of confidence in the builders in our space to continue working in depth within the US territory. And what would that do as a business is that we have to hedge the risk. We have to pay close attention on how things are evolving. And we have already been kind of intentionally working a lot more with decentralized exchanges and non-custodial wallets, for instance, instead of centralized and regulated organization because we saw that coming.

26:35But this is obviously a very special, unique week where it's just so dramatic. Yeah. Diego, over to you for the first question. What's your view on what's happened here in the last week? What are the potential implications? How do you think it's going to shake out? Well, I think what is happening is like the US needs to protect the US dollar and you know it's this is like I think crypto is seen as one threat I don't think it's like we are going into a multipolar world where you have also China creating economic networks around the Yuan the RMB so it's not only crypto but I think there is a threat and and under that umbrella crypto is also receiving the heat but I don't think it's like necessarily against crypto at the end.

27:26At the same time, it's like, as Bay said, no, it's like I'm more of a position of being grateful with anybody that help people get in touch with Bitcoin. Although, you know, we also want to promote the values of decentralization, self-sovereignty and educate people so they understand, you know, that truly the principles of crypto are enforced and lived when you own your own keys. No, it's like versus having intermediaries. But those intermediaries are breaches. No, it's like we are in a transitional phase. So we need the intermediaries to bring like the regular people into the space and understand.

28:10You know, something over the years I realized is like people come into crypto, into Bitcoin because of the price rise and they stay because they start understanding how, you know, self-sovereignty, economic sovereignty, how valuable it is, and more when the crisis comes. So people is like, you know, come for the money, stay for sometimes because they understand the true value and use it in the crisis. So I think in that context it's like we are in a moment where everything we have been building is more important than ever. And this having alternatives, truly self-sovereign and decentralized alternatives, like what we have in the Roostock ecosystem built on top of Bitcoin and everything, are key for people, for the regular people.

29:00Then you have ideological points of view. And, you know, I might even agree and understand why Maxis feel like everything else, everything that is not Bitcoin is a threat. But at the end, that's not the way. It's not that we will build something new, like stepping on the bodies of other people who fail to achieve their goals. It's like what we need is first like foster diversity, like from diversity. Be very clear and be intellectually honest about, you know, our values, but not impose on others. So, so it's like, you know, it's enough to tell people the truth. It's like, I understand when Maxis get some Maxis get mad at people who actually tweaks the truth or try to cover things.

29:54And I understand that feeling, but I think the true way of sorting that out is not smashing on others or, or being toxic, but educating. It's like, like telling things for what they are. It's like, you know, we don't need to like, self-sovereignity is important. not your keys, not your cheese is true. It's like you need to understand that. But also be diverse and embracing of other things that are in between because decentralization is also a gradient. It's like if you talk on DeFi protocols, there are certain trade-offs in terms of decentralization, and it's good that we have that continuum of decentralization.

30:36And it's also a very significant sort of mental philosophical leap for people who don't have backgrounds in computer science and analytic philosophy and economics, who don't have just the background to kind of understand what this is. I think that's absolutely correct, that it is certainly a continuum decentralization. And I think that was a very sort of nuanced answer and I very much appreciate it. Talking of which nuanced and subtle questions, we've got some great ones coming in. And I just wanted to touch on a few of these. I know we don't have a lot of time left, but there's just some really great questions for our viewers and listeners coming into us right now.

31:11Christopher on the Real Vision website, not asking a question, but making an observation. And this is great. He says, Diego's quote from years ago still sticks in my head. We in South America have a fundamentally different relationship with money than you in America. He says that clicked. I think that's just a very important point, particularly for people in America to think about the fact that we've been very fortunate to We have had the currency that we've had over the last 50, 100 years. But not everyone everywhere in the world has had that experience, not just South America, but across developing Asia and Africa.