Host (Rachel): Chad, thanks so much for joining us today.
Chad Patt: Yeah, it's a pleasure. Thanks for having me.
Host: So it seems like the market is a little bit obsessed at the moment with the AI trade or the space IPO, and they are overlooking some of the great things that are being built in Bitcoin or on Bitcoin. I'd like you to start with the why. What were some of the challenges that you were trying to solve when building OP_NET, and why did you choose to do it at the layer one level rather than, for example, layer two?
Chad Patt: No problem. I think that Bitcoin needs more use cases. Right now in the modern era you have a lot of institutional inflow into Bitcoin. You have more banks, more everyday investors getting into Bitcoin, and most of those types of investors are looking for their investments to work for them in some way, shape or form.
Bitcoin itself has kind of patently failed as a peer-to-peer value transfer, which is what it was originally designed for. It has this digital gold narrative around it right now, but there is nothing from a code base level that is making the price of Bitcoin double every four years. So it is not inherently the perfect store of value.
It has some sort of middle ground that it needs to hit where it acts as a decent store of value, but I think a lot of people want their Bitcoin to start working for them. Being able to use your Bitcoin in a Bitcoin-centered economy, where you can build applications on Bitcoin and use the Bitcoin network in a way that works much more like Ethereum, opens up the door for yield on Bitcoin, stablecoins on Bitcoin, and all these great functionalities that the rest of the world gets to benefit from but that Bitcoin has no real way to touch right now. So if you have something like OP_NET, which is a smart contract protocol for Bitcoin, all of a sudden it opens up all these doors to building applications and starting a big economy within the Bitcoin network itself.
Host: And what was it that convinced you that it was not only possible but also necessary for Bitcoin? Because there is a lot about the way Bitcoin is actually built that makes it difficult to build on.
Chad Patt: I am a huge proponent of DeFi. I think that one of crypto's greatest inventions is DeFi. Decentralized lending, decentralized trading, decentralized exchanges, being able to issue new assets on a crypto blockchain. These are some of the biggest benefits that crypto has brought to the industry.
On Bitcoin itself you do have a lot of limitations from a code perspective, but a lot of this stuff has been possible. The first stablecoin, Tether, was actually issued first on a Bitcoin sidechain called Omni Layer. So Tether started on Bitcoin. There have been a lot of experiments. Ethereum started as an experiment to put smart contracts on Bitcoin, and eventually they gave up and started their own chain. But this has been a holy grail for a lot of OGs in the space for a long time.
Given all the advancements in technology, the maturity of the market, the tooling that exists, and the advancement of AI, you have a perfect storm for something like this to exist. Over the course of the next one to two years, I think we will slowly but surely start to see Bitcoin advance in terms of what you are really able to do with the asset.
Host: Give me some practical examples of what you are actually building, whether it is DEXs or on the smart contract side.
Chad Patt: Absolutely. One of our flagship products is a DEX that we built on Bitcoin. Right now, if you compare Bitcoin to other blockchains, other blockchains have full economies of applications where you can use the asset in decentralized trading, lending, perpetual trading, and all sorts of things. On Bitcoin you do not even have basic stablecoin issuance right now.
So first you need the ability to issue assets on Bitcoin. That is what we have built with OP_NET. I can now issue a smart contract based decentralized asset on Bitcoin and trade it within a decentralized application like a DEX. The next step from there would be tokenized assets, tokenized real world assets, and stablecoins. Then you get into lending, where I can borrow against my Bitcoin, borrow stablecoins against my Bitcoin, and you can create options markets on BTC. There are a lot of really compelling real world use cases for this technology. We are still in the early stage of development, but those are the immediate one-year use cases of this tech.
Host: What do you think this will actually mean for the Layer 2s? They sort of developed because it was almost impossible at the time to do this directly on Bitcoin. So what does this mean for the future of Layer 2 now that you can do this?
Chad Patt: Certain blockchains have very specific use cases. High frequency trading is never going to be Bitcoin's strong suit. Bitcoin is slow but it is very secure. So this is really for high value, high security demand traders and assets. If you do not need high frequency trading, you can settle on a ten minute settlement time, which in the real world is actually not that bad. But compared to other blockchains where you have near instant settlement, it is super slow. It is, however, extremely secure and extremely decentralized.
There are throughput issues with Bitcoin that will always mean there is a market for Layer 2s and non-Bitcoin blockchains. But we are trying to bring a lot of the unnecessary activity that has left Bitcoin back to the network. Real world assets, stablecoin trading, anything that does not require super high frequency should be done on Bitcoin.
Host: Amazing. Final closing question. We have seen a lot of hype and things come and go in Bitcoin. Why is this different?
Chad Patt: The way that we built OP_NET is that it is an open source and decentralized protocol. We built this to be more like the internet for Bitcoin rather than its own blockchain. OP_NET itself does not have a token. It is just an open source piece of technology. It is really supposed to do what HTTPS or TCP/IP did for the internet. It is a layer that allows people to use this network of computers, which is really what Bitcoin is, in a more complicated and robust way.
That is something that will live beyond the existence of my company. My company built this protocol, but we are also building applications within the ecosystem. That is really our bread and butter. But after we are gone, this protocol will still exist, just like Bitcoin does.
Host: Fabulous. It has been so great having you on. We would love to have you back to check in on the journey in a year or so. Thank you so much.
Chad Patt: Thank you so much
