Marco Argentieri is the co-founder of Fuji Money, a non-custodial platform for issuing Bitcoin-backed stablecoins and synthetic assets using the Lightning Network and Bitcoin’s Liquid sidechain.
In our conversation we discussed how Fuji works, the concept of over-collateralized lending, and why Fuji is building on Lightning and Liquid.
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00:00 - Intro
02:07 - Marco Argentieri Intro
06:36 - Why Fuji Is Building on Lightning & Liquid
13:56 - How Does Fuji Money Work?
19:06 - Why Do We Need Over-Collateralized Lending?
34:13 - Fuji Money’s Business Model
37:20 - How Fuji Interacts with the Lightning Network
41:28 - Fuji Roadmap
44:07 - Regulatory Issues with Issuing Stablecoins
49:17 - Ideas for Bitcoin Builders
52:32 - The Lightning Round
Marco Argentieri - 00:00:00:
Fuji combines Liquid to Lightning, to have a trust minimized way to over collateralised lending. Combining this capability is literally allowing you to do 90% all possible financial application you might think of, and if you're looking and still retaining the stateless nature of the bitcoin model. So, I think again, it's a nice test bed of trying to see what's interesting for Covenants and especially what would be an interesting proposal to include Covenants in a different when borrowing Fuji USD, you are not paying any interest, any recurring interest. You are literally using depositing or withdrawing from Liquid at the velocity of Lightning using a summary's Go provider.
Kevin Rooke - 00:00:58:
Marco Argentieri is the cofounder of Fuji Money, a noncustodial platform for issuing bitcoin-backed stablecoins and synthetic assets using both the Lightning Network and bitcoin's Liquid sidechain. In our discussion, Marco explained exactly how Fuji works. We discussed the idea of over collateralised lending and we got into why Marco decided to use the Lightning Network and Liquid to build this platform. I've also added Marco to today's show splits. So if you enjoy this episode and if you learned something new, the best way you can show your support is by sending in sats over the Lightning Network. You can use any Podcasting 2.0 app. There are dozens of them, but my favorite to use is Fountain. Quick shout out before we get to the episode. Today's show is sponsored by Voltage. Voltage is the industry standard and next generation provider of Lightning Network infrastructure. Today's show is also sponsored by Stakwork. Stakwork is a Lightning powered transcription tool that takes the best of AIs and humans to create better, faster and less expensive transcripts. We'll have more from Voltage and Stakwork later in the show.
Kevin Rooke - 00:02:07:
Marco, welcome to the show. I can't wait to discuss all that you're building at Vulpem Ventures. Specifically, we'll get into Fuji Labs. But before we do that, why don't you start with your background in bitcoin. Tell listeners a little bit about how you discover bitcoin, how you got into the space and why you decided to build on bitcoin.
Marco Argentieri - 00:02:27:
Sure. First of all, thanks for having me. I'm a huge fan of your pod and looking forward to a chat about Fuji. So, yeah, I started very early in my career, I would say with bitcoin in my town in Order, Italy, just after high school, I created this local cash brokerage. Basically I was meeting with people, I was exchanging bitcoin for cash and vice versa. And after that I moved on. And I work in classic software engineering from mobile app development to distribute a system. I will say that at some point I got the bitcoin holding again. In 2017, I co-founded with Vulpem Ventures, where basically we are R&D Lab working on bitcoin Liquid and Lightning. So we are, for example, the creator of Nigiri, which is a developer box for bitcoin Liquid and Lightning stuff. Also, we offer Liquid Taxi, which is basically allows you to move assets like tetra without having to pay fees in bitcoin. And also we are the creator of Marina Wallet, which is basically a browser extension wallet that allows you to connect to web apps and use Liquid assets and Liquid web apps. I think that last year in Woodland, we decided to start researching a bit about governance, in particular, how we can use that to create synthetic assets. And so we started incubating this idea. So we published this February, we published a paper called Synthetic Asset Smart Contract on the Liquid Network, and we outlined it there in the paper with me, Dimitri Petrochov and Andrew Hamillary. We basically outlined there all the possible problems and how to create a scheme that allow you to issue fantastic assets. We received quite few interests at the time, so we decided, okay, so let's definitely make a venture out of it and let's create a product. So Fuji Money was born at that point.
Kevin Rooke - 00:04:44:
Now I want to talk about the tech stack here, because building on Bitcoin, Lightning and Liquid, I don't know if there's any other R&D studio or venture group that is specifically targeting these three, all three of these at the same time, and only these three. Why focus on this text app over all the other things you could do in bitcoin and the broader crypto ecosystem?
Marco Argentieri - 00:05:09:
Yeah, you said it right. We basically, Fuji combines Liquid and Lightning to have a trust measured way to overcoturize lending, but at the same time with fast deposit and fast withdrawal. So I think that actually the combination of having a very fast payment method like Lightning and all the new capability that a side chain like Liquid can give to you, like covenants. And I would say what normal people calls smart contracts. I think that combining the two I think is the right way, right approach to try to start offering to bitcoiners products that at the moment are only offered in a centralized exchange or in a centralized custodial environment. So I think it's a nice improvement compared to the status quo. So I think that at the moment, we are very conservative. We don't want to touch bitcoin for some exotic use case. We don't want to touch bitcoin maintained. So we try to get around that and we combine, as I said, Liquid and Lightning to try to offer more capabilities and trying to retain the trust minimize approach that we have with bitcoin itself.
Kevin Rooke - 00:06:36:
Right. And so would it be fair to say that in your view, these are two complementary pieces of technology? Lightning for transaction throughput and like instant transactions, low fees, and Liquid for more expressive transactions. Is that roughly the right idea?
Marco Argentieri - 00:06:55:
Yeah, I mean, definitely other people may have different opinions, but I really think that basically, Liquid can be the smart contract layer for Lightning applications. Because if you think about it, most of financial applications or financial services that allow you to deposit or withdraw Lightning are all centralized. Every service like this wants you to deposit and create an account in their own service. And it's great that you can do it with Lightning because it definitely improves the throughput. I'm using Bitcoin, I'm not using a credit card. That's all great, but the service itself is custodial and I need to trust the service like I will need trust any other crypto lender or any other, you know, crypto exchange or other. So, I think having your logic of your application being on, I would say on a side chain like Liquid, it makes much more I would say let me say, if I found the right word, but definitely makes you much more comfortable on what you're saying instead of just trusting your intermediary with your own Bitcoin that you deposit. So, yes, again, I really think that combining Liquid and Lightning for their best capabilities, I think it's their approach. I don't see them as other solid to each other. I totally see complimentary to each other.
Kevin Rooke - 00:08:28:
And do you think that you mentioned the logic of some of these applications being put on Liquid? What can Liquid do? What can we take from a centralized form today and put on Liquid and turn into a trust minimized version? What are some of those examples?
Marco Argentieri - 00:08:47:
Yeah, I think that let's start first maybe with the capability the Liquid gives you compared to just the Bitcoin main blockchain, you can have one very important thing, which is confidential transactions. And if you think about in other blockchain, in other ecosystem, every transaction, I'll say every DeFi transaction is public. So this means not only regulator or your government knows about your transaction, your trade, but also your competitor. And in a centralized environment like a broker or an exchange, only you your exchange. And maybe the government knows about your trade, but not your competitor instead. But when everything, you know, every detail of your trade is public, that's not great. And I don't really think that the mainstream finance will go to a public blockchain where everything can be seen. Right. So I think confidential transaction is one of those primitives that are very important for financial application to work, to essentially allow to have the normal activities that we do with some sort of confidentiality that is required for those type of applications. The other essential is asset issues. So, the fact that you can natively create assets that are treated in a transaction like satoshi, like Liquid, between satoshi and any other asset, like Tether or any other isolated Liquid, definitely that's very important for many kinds of use cases. So you can create options, futures or any other type of instruments and you can try to replicate them. I think that the third part. The third part is also covenants, which allows you to give much more expressive functionality to your own coins that you have a Liquid. So you can create more complex, more advanced rules for how you can spend your assets, right? Either Liquid bitcoin or any other assets being issued there. At the moment, in bitcoin, you can only spend your bitcoin if you spend with your own private key or multiple of them, if you're doing a multisignature or maybe a time block right after some period of time. But with covenants, actually you can encumber your own coin to be spent only when some condition is met. And in this case, how you want to spend your bitcoin and where you want to spend your bitcoin. For example, I want to spend this bitcoin only if they go, I don't know, 50% if they go to this address or only so I think combining having this capability is literally allowing you to do 90% of all possible financial application you might think of if you look and still retaining the stateless nature of the bitcoin model or the bitcoin smart contract model. So you don't need to incomplete smart contract at all. If you look at all major DeFi smart contract on Ethereum, for example, most of them, they don't need any state every use case that could be replicated in a stateless way.
Kevin Rooke - 00:12:13:
So, do you expect to see them over time, people building on bitcoin using both Liquid and Lightning? Because right now there are dozens of projects that are on Lightning. There's a number of them that are on Liquid too. But I find that there's a bit of almost a distinction like you're either building on one or the other today. So I want to get your sense for whether people will start to adopt both together and use this complementary functionality that you allude to.
Marco Argentieri - 00:12:45:
Yeah, I see, and I totally see your point. I think that much more use case will come on Liquid, will definitely make clear to other developers that they can build those things. And also for us, even if we are a Liquid federation member and we were very active early on in Liquid, a lot of things were not clear. And we discovered along the way, having this work done under a search paper for Fuji. So I really think that it's more like having seen the way you will find definitely the way. So I really think that this model of having Lightning as a fast deposit and withdrawal from Liquid and having your logical Liquid, definitely this approach will catch on. And it's more like having tooling out there so other developers can experiment, can try from basic things to more advanced enterprise level kind of application. So it's more like I said again about tooling and having the right example out there.
Kevin Rooke - 00:13:55:
Right. Okay. So, let's jump into exactly how Fuji money works today. What is the plan here? You mentioned over collateralised lending immediately. That makes me think in my head, I think of projects like Maker in the DeFi ecosystem. Can you speak to some of the similarities and differences between those two projects?
Marco Argentieri - 00:14:18:
Sure so yeah, let me say first Fuji Money is a noncustodial protocol that allows you to create any synthetic assets. Again it combines Lightning and liquid to have you a trust minimized way to create the synthetic assets but at the same time with Lightning you can go back and forth from Liquid very fast. I think that the first synthetic asset that we plan to issue is Fuji USD which is basically synthetic US dollar but actually any asset can be issued as long as an Oracle making attestation for it we can even be the SB 500. It can be the 200 week moving average of bitcoin for example so basically you create a derivative of bitcoin which is much more stable but not linked to the BTC price and that being said I think MakerDAO is very similar in terms of mechanics. Underlying mechanics in both systems you need to overquarterize your own position and then you can mint basically your synthetic asset in the case of DAO or MakerDAO it's called DAI so it's just synthetic dollar. I think that the main difference is a technical one MakerDAO is a pool so basically all the collateral is all kept in the same smart contract this creates in my opinion risks systemic risk and instead food is more like PeerToPeer, right? Basically, you are overcollateralizing, so you are putting your collateral in a covenant between you and the liquidator but you are not mixing your own bitcoin with someone else and in the future when you pay back your debt you are getting back your own Liquid bitcoin that are locked in the covenant. So, I think it's much more like combining the utilities model versus single pool state pool smart contract approach I think this is the main technical difference. The other difference again is and I think the advantage on the Fuji side is when you do Oracle attestation when you want to use an Oracle attestation in a continental Liquid for example you don't need an external party to push to the blockchain like for example Ethereum. Ethereum, you have some external party that needs to be aware of your contract and push proactively to your contract the price every minute for example besides scalability problem, right? So you're basically clogging the network. This also is bad for the incentives because everybody I mean the Oracle knows about the contract and knows about the economic incentives there. Instead in bitcoin world and this is true both for DLCs and also Oracle attestation using Oracle attestation in a covenant or Liquid. The article is basically blinded meaning that the article doesn't even know so the article is only for example in our case the price feed like it can be Coinbase for example just an exchange or any other exchange and instead of just, in their own API, instead of just announcing the price for BTC within every minute they just add a signature which is basically a cryptographic attestation that that price has been signed by Coinbase. Right? So I think in this scenario it's much more secure because the article here doesn't have any knowledge about the contracts, all the contracts being open on the blockchain because it's only publishing an attestation, it's just publishing a scenario somewhere in their API, in their website and there is no knowledge of the content on the site. So I think those are the two main differences.
Kevin Rooke - 00:18:18:
So if someone were about to be liquidated on something like Maker, the Oracle may know that in advance and can participate in trying to nudge them to be liquidated or be the one to liquidate them, whereas you can't do that on Liquid, is that correct?
Marco Argentieri - 00:18:35:
Yes, in the sense that the article actively knows that it's pushing to that specific smart contract the price. So definitely change the balances of power here, you know what I mean? So there is more interest to try to corrupt the Oracle and the Oracle may have a nice number with a price. He knows how much will gain forging his own signatures.
Kevin Rooke - 00:19:02:
Right? Okay, so I want to talk about just the idea of over collateralised lending and bringing some of these DeFi applications to Bitcoin or to Liquid and Lightning. I imagine there's a big group of Bitcoiners that may call into question the need of any of this, right? There's a group that will say why do we even need stable coins? One Bitcoin is one Bitcoin and I imagine there's another group that says why do we need over collateralised lending? I'd love to hear your thoughts on like what's your message to the Bitcoiners who say listen, we already have this incredible money, it's money, we don't need any additional complexity and things like that. What do you say to that?
Marco Argentieri - 00:19:56:
Sure, I think it's a very legit issue that you may have. I think that let's start from the users. So from user perspective and especially the two main categories of users that we are like talking with daily, meanwhile you are in closer to beta. I think that there are two types of users, one maybe a trader, so a trader currently to go long on their own Bitcoin and we saw in the last two years basically what they need to do is going to a centralized custodian and either overcut allies or using trust or using identity as a way of plugging credit, you know what I mean? Or they need to go to other blockchains, right? And trying to swap Bitcoin for a series for example, and then issue die and then converted maybe to other stablecoin and then buy more Bitcoin. So I think that on the side is more like you are serving a category of users that they are fine with over quarterly lending and they're totally fine in the old days, how much is faster to go to a protocol and to issue some stablecoin to buy more Bitcoin without any KYC documents or any other account of sort the other category of users instead. And I will put myself, since I may be the most bullish user of the product, because I'm really looking forward to it. I basically live out of bitcoin, so I received my salary in bitcoin 100%. And basically I always find a way to either buy gift cards or to convert bitcoin to fit some way to lead right, to spend bitcoin in real life. And a lot of users, especially, for example in us, whenever you spend your bitcoin, it's a taxable event. And this basically, in my opinion, is not only us problem, but many more jurisdictions are in the same category. And I think the possibility to borrow against your own bitcoin, to have a stable coinage that allows you to not be taxable, right? So to not pay any capital gain taxes to do that, that's a pretty compelling future. And at the moment, this is being sold again by centralized crypto lender, which on a side, expose you to the profits of companies that of course are basically bitcoin casino, right? And on the other side, if they don't do it now, they will do it soon, since you need to do an account and since they are custodians of bitcoin, they will ask you to do all the KFC and procedures that as bitcoin we don't like at all, right? So I think that if you want to spend your bitcoin, definitely you may want solution like this that allows you to not have any account. And as long as it's okay for you. The Liquid federation model and the Liquid federation risk, I think beyond that, we don't have any other intermediary, right? And I think it's an improvement from a custodial centralized exchange to something which is much more just minimized. Nothing will be censorship resistant, of course. Nothing in life will be maybe neither bitcoin, but bitcoin is very, very hard to censor, so we all know. So I think that bitcoin is like the standard and anything that goes from custodian accounts to something in the middle, I think it's an improvement.
Kevin Rooke - 00:23:43:
And is it also important to bring up that because you're building on Liquid and Lightning, you're not necessarily adding complexity to bitcoin's base blockchain, whereas maybe other protocols, you may be adding that complexity. If you're trying to make an expressive smart contract protocol, you have all this complexity at the base layer. Whereas my understanding here, correct me if I'm wrong, but my understanding is like, because it's on Liquid and Lightning, a lot of these decisions are not impacting the fundamental security of bitcoin, the asset, is that correct?
Marco Argentieri - 00:24:22:
100%. You are only risking everything which is built on top. So the risk is just not systemic, it's just limited to the bitcoin or, you know, locked in the system. But I will go even beyond that. And if we assume the Liquid blockchain to be running in some way, even if the synthetic asset in the case of, for example, Fuji USD, I don't know, goes away from markets, got blacklisted and it goes to zero. This doesn't matter because it would be even better for you because as a borrower you're basically paying zero for an asset to pay back your debt and you can get back to your Liquid bitcoin. And getting back your Liquid bitcoin, fuji is a non interactive process and this allows you to not have any other interaction with any other party. You just spend your bitcoin like you were spending your own bitcoin with just a private key, right? But going back to the original topic, yes, you are totally right and I think I hear the concern that is not interesting for most of the corners, but if there is a subset of bitcoin that may be interested, I think that doing these things on a side chain, which is a separate blockchain is much more better. And eventually we all know that consensus in bitcoin is very slow and this is the feature. And eventually if we will get, I don't know from simplicity or any other common proposal, maybe this can be ported easily, right? On bitcoin mainchain if there is a need and if there is a user asking for it instead other maybe sidechain that they are not based on Bitcoin core like, I don't know, for example, you will not be able to port any other logic on bitcoin mainchain when bitcoin mainchain will allow you to do that capabilities. So, I think Liquid is again, it's a nice test bed for trying to see what's interesting for covenants and especially what could be an interesting proposal to include covenants in the Bitcoin mainchain right.
Kevin Rooke - 00:26:29:
Now, when you look into the future here and you think about all the things that Fuji money and Liquid and Lightning can accomplish together, what do you think this opens the doors to? Like how will the bitcoin ecosystem look different in a few years assuming people begin to adopt Fuji and Lightning and Liquid in the way that you expect they will?
Marco Argentieri - 00:26:54:
Yes, I think that definitely I really expect much more financial application to be trying to be much more trust minimized and to be posted using these primitives. So I really looking forward to options, futures and any other kind of financial instrument that at the moment requires trust, require a decentralized ID would say marketplace or in general they require a centralized custodian to perform that. But if you can move away from a custodian, then we can definitely try to board even much more people to this type of instruments. And I also think that a lot of other options to improve your own custody and to try to improve your own financial life could arise. Right, because definitely having bitcoin cold storage all the time and just saving, that's great. And it's not great for the times we are being right. We have been in times where we are over financialized everything is basically adapt everybody's in depth. So I really think that the opposite direction that we are taking between is great because we are like pushing people back to saving and that's absolutely great. But in a mainstream, I would say mass adoption scenario, you need the scale of Visa and I think lining and any other payment channel solution will help with that. But at the same time you want to also try to decrease the amount of trust that you have with intermediaries because there is no other way. And this creates, as we know, kind of third parties like regulatory bodies or agency and so on, that they need to check the market because people will do bad things with their own money and they create power. They create power for these intermediaries and they create power for these agencies. So I think if we can also have a clear plan for how to try to create this kind of financial products in a more trustworthiest way, for sure we can decrease the amount of systemic risk that we created anyway, that they will eventually happen even with business, if all the financial products still requires intermediaries to be offered.
Kevin Rooke - 00:29:21:
Have you spoken to any centralized intermediaries or large financial institutions about what you're building? And if so, what has that reception been like?
Marco Argentieri - 00:29:32:
Okay, I think that there are definitely two types of I would say institution. I think that there is the west kind of institution which is highly regulated but has all the benefits already. So like say US kind of capital markets in the US. Or even in Europe, they basically add all the benefit in the last 50 years. And they actually don't mind about regulations and this kind of problem because it's the same problem. They are already big. They afford to pay for extra regulation, the small incumbents coming or the small player coming, that the barrier of entry of the regulation is too high. Instead, if you go look outside the west, in other places where even between institution of different jurisdictions, I don't know, in the Middle East or Africa area or Southeast Asia and so on, even doing a cross border trade between two institutions, regulated institution in their own country or regional countries, that's very problematic. So my personal experience, I'm based in Dubai and I work a lot in the Middle East. And the main problem is how to solve the problem between different jurisdictions with different religion, with different kind of trying to laws and so on. And Bitcoin actually is the gray bridge. So already institution, this type of institution outside the west, they see Bitcoin as a way to overcome their own local problems. And institution itself, enterprise itself, they really are really interested to lower the amount of paperwork they need to do to try to transact this will open more markets for them and more trade between them. So I really think that outside of the US or west kind of conception of regulation. There is very huge interest in trying to trust minimized way even between the solution not only for people for their own self-aware savings, you know what I mean?
Kevin Rooke - 00:31:44:
Right. So you figure the regulations and some of the paperwork associated with making transactions is a bigger deal than the ability to have maybe instant transactions or very low fees to the institutions. They're more aware of the paperwork and the regulatory issues. Then I found a way here, I can improve my margins and get a lower fee on this trade or things like that.
Marco Argentieri - 00:32:12:
Yeah, consider. One other and very interesting thing, especially for Fuji money, is the fact that when you're borrowing Fuji USD, you are not paying any interest, any recurring interest. And maybe you may not know, but Islamic finance basically is based on the concept that you don't have any interest, any recurrent interest. This is against both religion but especially their own economy. So actually all the crypto lenders that we have in the west, they will not be able to serve this type of customer, right? Because they charge our current interest to borrow against their own Bitcoin. And actually Fuji will be totally shariacompliant products, right? Because there is no recurrent interest. And you can borrow against Bitcoin, which is actually the most pristine colossal you can add. There is no trust, it's not a security. Right? This is even now in US. So we all know Bitcoin is not a security. And this from Islamic finance standpoint, that was obvious, right? There was nobody benefiting from Bitcoin. So there is no pre mine, there is no original allocation to funders. So definitely that Bitcoin in general is definitely a technology which is much more interesting to that area of the world maybe than what we may be interested in the west.
Kevin Rooke - 00:33:42:
I hope you're enjoying the show so far. I just want to give a quick shout out to our sponsor, Voltage. Voltage is the industry standard for Lightning Network infrastructure. Creating layer two applications and services on top of Bitcoin starts with Voltage where you can spin up nodes, get access to liquidity, optimize your node and much more. Voltage is leading the way as the next generation provider of Lightning Network infrastructure. And if you want to get a free trial and start using Voltage today, you can do so at Voltage.cloud.
Kevin Rooke - 00:34:14:
Right. So that's really interesting. There's going to be no interest rate charged on if you deposit Bitcoin as collateral and you then create Fuji USD a portion of your collateral with using a portion of your collateral, you are not going to be charged interest rate as long as that remains open. Correct?
Marco Argentieri - 00:34:37:
100%. There is no recurrent interest. There is already a set up comfort fee, but this is just paid at the beginning and it's fading kind in Fuji was being the synthetic asset. But there is no business model.
Kevin Rooke - 00:34:49:
Is the business model that every time. Someone creates a contract you're going to earn money.
Marco Argentieri - 00:34:55:
Yeah. The main business model for us for the project is the set up control fee and also the liquidation spread. So whenever there will be a liquidation to be open we sell the collateral to buy back the synthetic asset on your behalf. And if you are fast we keep the over quaterization ratio as well. So for example if you're fast and the quarterly ratio is 150% we keep 50% as a penalty for the confiscation of your collateral.
Kevin Rooke - 00:35:34:
Why has no one else tried this approach or have there been other instances of in the crypto space, crypto lenders taking this like 0% interest approach? Because my impression is that almost all of them have some kind of recurring interest rate. Why do you think that is?
Marco Argentieri - 00:35:54:
Yeah, consider that the synthetic acid protocol is not really you're not leaving borrowing from someone else. Right. So in a crypto lender typically you're basically borrowing but there is someone which is lending to the crypto lender itself. Right. So it's not the crypto lender, it's like a bank. Someone is depositing money and then the bank lends to someone else. Of course in this type of system which is literally like what banks doing since ages I think in this type of system you need maybe this kind of business model to keep, you know, the risk and to have an interest to keep having funds and the custody risk and so on. Instead in I would say Fuji, literally nobody is lending the asset but the asset is being created when you borrow. So when you borrow you basically issue at that moment the asset based on the collateral value and when there is a liquidation or when you want to take it back simply you want to just take it back to your bitcoin. You must borrow the Fuji asset that has been issued to you at the beginning. In the closed case when you are closing you are born or in the liquidation case we are boarding since you are the liquidator.
Kevin Rooke - 00:37:17:
I see. I want to get into Lightning specifically. Can we do a highlight on exactly how Fuji interacts with the Lightning Network and in what cases a user might be actually sending funds across Lightning?
Marco Argentieri - 00:37:32:
Yes. So, one thing which will be available in the app and now beta tests that are trying it out is basically we are using summary swap to go from Lightning to Liquid. Right. So usually use summary swap maybe to rebalance your channels or just get some bitcoin mainchain without closing your channels for example. But actually if you use Liquid as a base chain instead of bitcoin you are literally using depositing or withdrawing from Liquid at the velocity of Lightning using a summary's work provider right in the middle. And in this way you can use your own Lightning wallet to borrow and to get Fuji USD on Liquid without having to go buy Liquid bitcoin on the market or to do a pegging which takes one day, right? It takes 100 bitcoin blocks. So this way it's much more faster for you to get in and also you can get out to your online wallet. Only the collateral will be held in the Liquid commonent in the Liquid smart console. But this is again very similar to the model where lining user are reduced. They go to a website, they create an account and then they deposit lining to that account or they withdraw. But all the logic can be audited. All the logic and all the balance sheet of the system services basically custodian and you're trusting them Liquid at least you can run a full node. You can verify block per block the amount of Liquid bitcoin being born issued. And you can also verify all issues of Fuji and all the Fuji and so on.
Kevin Rooke - 00:39:22:
Right. Now, on late networks today, a lot of the transactions that are happening are relatively small in size. I believe the transactions happening on other lending protocols in the crypto space are really large transactions sometimes. And people are sometimes collateralizing millions of dollars. Is this something that Lightning can handle today? What do you think about the capacity for Lightning to process some of these larger transactions that someone might want to make if they are doing over collateralised lending?
Marco Argentieri - 00:40:04:
Yes, I think that should be clear. The fact that basically when you're depositing and doing a Samaritan's work you only have one channel, right? Or maybe multiple channel. But will be convenient for you if you're using, for example, Fuji a lot and you want to use Lightning would be convenient for you to open a channel directly with the Samurai provider and you only need to open that channel with them because when you're depositing. Then when you done. When you're done and you want to get back your collateral. You're using the same channel that you use to deposit at the beginning to get it back. So if you create a channel of the size that you're okay with, you can technically create very big channel. Of course you cannot travel all the network, but you are only doing one hop right from your own wallet to the summary provider and then back to you. So you can even create one BTC channel for example, right? But yeah, I think that in general this model could work because you're basically using a provider to provide you routing and channel management, but you're only basically using Lightning for the nice UX of fast deposit and withdrawal.
Kevin Rooke - 00:41:27:
Nice. What does the roadmap look like for Fuji money? Like where are you guys at in the process of building this platform today? And what can listeners expect to see over the next six to twelve months?
Marco Argentieri - 00:41:40:
Yes, we are currently inclusive data. We are learning a lot. We are talking with user almost daily and that's very interesting because we are really very focused on trying to try to solve their needs as much as we can. At the moment we are really looking forward to trying to go, I would say if you complete, to release it to a public beta and to try to onboard much more people than the currently closed beta that we are doing now. I think this could happen end of this quarter or realistically beginning of the next year. And at the beginning of the next year, the idea is to make the initial mainnet issues because at the moment the closest beta is Testnet. So there is no value in the funds being issued yet. So I think that beginning of the next year we are looking forward to make the first issuance of Fuji USD. Then our roadmap is of course, again, depending on the user needs. But as I said before, the main two category user traders, they will still have a web apps, so they can easily go long on their own Bitcoin. So they don't even need to go and buy Bitcoin with Fuji USD we will allow them to connect to any decks like TDEX or Bitmatrix and Liquid. So they can right away borrow and go long on their own Bitcoin right, without leaving their own wallet. And the other is like creating a mobile app for end users. Especially for retailers or people that want to simply spend their own Bitcoin and they just want with a tap on their mobile phone borrow or just increase the type of collateral to have a sort of a credit line in the stablecoin and then use it to buy gift cards. To integrate different company or virtual prepaid card. Especially in US, you can have virtual prepaid card with no KYC. So we're working with various wallet and different companies in the space, working in this sector to try to integrate this, to try to give you a nice ecosystem where you can spend, use and trade with Fuji USD and of course being able to borrow against your own Bitcoin collateral to more fuel USD.
Kevin Rooke - 00:44:05:
Right. Now when issuing Fuji USD, do you have any concerns about the regulatory attention that that could draw? And if so, what are the scenarios in which you're concerned about or in which it could lead to some kind of regulatory capture or some issue that is presented by a government saying listen, can't be doing this, you can't be creating USD stable coins, we're going to clamp down, we're going to try and shut this market off. What are your thoughts on that kind of situation?
Marco Argentieri - 00:44:44:
Yes, I think that the first, the first answer is the contract that you already issued cannot be, I mean the Fuji USD that has been issued, cannot be frozen. So all the contracts being issued, all the Fuji was being issued before any regulator shut down, they will still be open, right? And so again, there is no risk of your collateral. You can always redeem, so nobody can interrupt or stop you to do that. Definitely they can eventually stop new issues, but everything is open source in terms of client software and governance contract. It's already open source, has been published in our paper in February. So the idea will be okay, so likely will not operate eventually the foolish itself, but definitely there is other people that can pick it up and do other approach. And this is just my worst case scenario, right? So I'm just putting ahead and say, okay, anything can happen and nothing is very hard to censor like Bitcoin, and they are trying every day to censor between. So the war is never ending, even for Bitcoin itself. So I'm really thinking that this definitely could happen. One thing I will say is like issuing synthetic assets with this model is most similar to create a multi sensory wallet and having any regulator to try to say okay, you can't share publicly with other parties to create a multisig. I think that would be stretching any jurisdiction, right? Because essentially you're not depositing funds in US. We're not custodian, we are not an intermediary. You are locking funds in your own address, which has some rules that you agreed beforehand to deposit. So I think it's much more similar to a cosigner server, cosigner service, multisignature service. So I think it's more like in that scenario, I think that the third approach will be to try to move all our capabilities like liquidation, to be open to everybody. And this way basically there is no single point, so everybody can do it. Although there are some concern. And that's why we're not starting with an open liquidation scheme. Mostly around we want to be very sure all the liquidation infrastructure is like well tested and it's fast, responsive, and most important, we find a solution for the Oracles problem in the end, because Oracle, they might know, they might not try to cheat on you on purpose, but they might have backs, right? So two years ago, Binance published zero, the price of BTC was zero for a couple of seconds. If that happens, and if the liquidation is open to everyone, it means that they can liquidate every contract, right, being open. And so I think as soon in aversion to, for example, Fuji, we can try to limit this risk, maybe doing some average in the contract itself. So inside the column itself, we do some average, we require you more Oracles, things like this. As soon we try to solve this solution, we can also open to liquidation and this definitely will increase the resiliency of the protocol.
Kevin Rooke - 00:48:18:
Nice. What's the relationship going to be over time with Vulpem and Fuji? Is this going to continue to be a project underneath Vulpem? Is it going to be spun out into its own project? Can you talk to me about how that relationship will develop over time?
Marco Argentieri - 00:48:35:
In general, we are more like a venture builder model. So we work with us, with other partners as well. And eventually when a project is not open source as a service and get some traction. What we usually did in the past was creating a spin off company dedicated to just driving a dedicated team to that. So I think that the path will be the same. So Fuji will have his own company and of course Vulpem is just incubated at the beginning the project with research capabilities and knowledge and engineering and eventually Fuji will be a spin off from Bulletproofs itself.
Kevin Rooke - 00:49:17:
Now, for all the Bitcoin builders listening to this podcast, do you have any ideas, any specific projects you wish Bitcoin would take on, you wish people would realize as possible things that maybe no one is doing today or things that aren't getting enough attention today?
Marco Argentieri - 00:49:39:
Well, there are lots of things out of the thing that especially in a project like Bitcoin, which there is no penalized marketing department or in general no CEO, there are also things that my opinion should have much more attention. But I think from my personal standpoint, I really looking forward to having covenants capabilities of Bitcoin to have much safer Bitcoin custody solution. Even as a technical user as I am, I can roll out my scripts, I can roll out my multisignature script and so on. Still, I'm not feel confident to storing generational wealth this way. One is the initial problem, right, that can be solved, but not yet. There is no bottle tested solution to that. And also, especially the fact that, yes, I can have a lot of keys, but one more keys increase my operational cost to store my keys and also they don't it's not a zero chance that you can lose those key or your attacker can get ahead of your majority of your keys. Right? So I think that commons, especially construction like this marbles to me are really the real missing piece. I could live without it, but if I look in generation and not just years, I really think that that's the missing point. So really looking forward to things like simplicity or any other proposal that will allow us to try to do this kind of more advanced bolts for your business, to try really to move the next generation, the wealth of the next generation. Right?
Kevin Rooke - 00:51:34:
Okay, I want to jump into a segment I do at the end of every show called the Lightning Round. Are you ready?
Marco Argentieri - 00:51:40:
Kevin Rooke - 00:51:41:
I hope you're enjoying the show so far. I just want to give a quick shout out to our sponsor, Stakwork. Stakwork is a Lightning powered platform that generates high quality transcripts from all of your audio or video content. They combine AI engines and hundreds of human workers all over the world who are paid over the Lightning Network to assemble these transcripts. And that's what lets Stakwork create better, faster and less expensive transcripts than anyone else. I've used Stakwork to transcribe all of my episodes on my personal website. You can check that out. I just get the Stakwork file, copy paste and go. No additional editing required. If you want to learn more about Stakwork, you can visit Stakwork.com. That is s-t-a-k work.com.
Kevin Rooke - 00:52:32:
First question is there any book that has meaningfully changed your view of the world?
Marco Argentieri - 00:52:40:
I think definitely Sovereign Individual. So, I read lots of years after I started working on bitcoin as well, but really reading it, I thought, wow, I really wish to be in the reading this and not acting. I was like, this is really like a game changer for me and how I see macro events and in general say use topics and it definitely changed the lens I used to see by macro events.
Kevin Rooke - 00:53:15:
Yeah. If you had to guess how many bitcoin will be on Liquid in five years?
Marco Argentieri - 00:53:25:
Let's say we reach 4K BTC in four or five years. Now let's say 10k BTC. I'm not good with predictions, but maybe it's conservatives to double it.
Kevin Rooke - 00:53:40:
Okay, so right now we're at about 4K, is that correct? And then 10k. Okay?
Marco Argentieri - 00:53:46:
Don't take my word. So run a Liquid full mode and verify. But I definitely think that we are around that number.
Kevin Rooke - 00:53:54:
Okay. Same question for Lightning. How many bitcoin will be in public capacity on Lightning in five years?
Marco Argentieri - 00:54:01:
Well, I really wish it never increased because I really want to be much more private channels. Right. So we all know that public channel is like not great for your privacy, but at the same time it's what allows us to have more hops. I think that there are lots of unsolved challenges relining right. And by the same time, jobs apart, I really think that maybe that could be doubled easily in terms of public channel capacity. But I really looking forward to a more private Lightning network because I said at the beginning, I really think that confidentiality is a key for normal financial activities. So I think that looking forward to much more liquidity but in private channels, right?
Kevin Rooke - 00:54:48:
Yeah. If you could only hold one asset for the next decade and it could not be bitcoin, what asset would be.
Marco Argentieri - 00:55:00:
Interesting. It's hard because we told ideas I have currently will be very hard to say. Any other assets? I think maybe art will be the thing, not for a financial perspective, but I would say if we know that we are going in a very bad outlook and scenario, at least they want to contemplate some beauty.
Kevin Rooke - 00:55:29:
Yeah, you got something nice to look at if the world falls apart. Alright. And one final question. If you can give a shout out to any bitcoin builder, any company who you want to give more attention to or you think deserves more awareness, who do you shout out in the space who's doing great work that you want to draw more attention to?
Marco Argentieri - 00:55:54:
Well, I'm biased since I started my between career with peer to peer local cash exchange. Everything that companies like Peach, which they're building, is with someone, a way to exchange directly very easily between you and other peers. From Fiat to Bitcoin, that's definitely something needed and I think they are naming it. So we're looking forward to releasing soon.
Kevin Rooke - 00:56:26:
Awesome. Thanks so much for taking the time. Where can listeners go to learn more about you and Vulpem Ventures?
Marco Argentieri - 00:56:33:
I think Vulpem.com is the right website if you want to learn more about Fuji. We have a website which is fuji.money. So you have all the links to the Telegram group, you have all the website, the paper, you can read more about the paper and all the social links and so on, and all the frequently asked questions are there. So I think that's the best space where you can learn more about it.
Kevin Rooke - 00:57:03:
Awesome. Thanks again for the time. I hope we can do it again soon.
Marco Argentieri - 00:57:07:
Thank you so much.