All Fiat Companies Become Zombies. Bitcoin Tech Talk #269

A lot of businesses are huge. Citibank has 210,000 employees and IBM has 30,000. These are enormous organizations, historically speaking.

Large organizations have a lot of disadvantages compared to small ones. They’re not as nimble, they have a lot of management costs and they’re generally under more scrutiny. Large companies persist in this economy, which suggests that there are some advantages to being big.

The main advantages are around scale. Big companies can get better prices for raw materials because they can buy a lot more of it and the fixed costs, such as production equipment are effectively spread over a larger number of units being sold. They can also afford to do more research, because, that, too, can spread over a larger number of units being sold.

Yet when we look at big companies, innovation is not typically the word we associate with them. Big companies are much better known for having large lobbying efforts, not innovation. This wasn’t always the case, of course. Bell Labs and Xerox Parc are legendary in what they were able to produce through innovation. Attempts by large companies to make innovation happen inside are nearly always met with failure. For example, blockchain R&D from IBM and Accenture were complete wastes of money.

So what changed?

What seems to have happened is that fiat money changed the equation for big organizations. Companies used to be evaluated purely by the market under hard money. The company that made products with market demand would win over the company that didn’t. Goods and services had to be better in some fashion over what already existed in the market: more convenient, better quality, cheaper or having more features.

This equation has changed as fiat money has entered the picture. Large companies now have an inherent advantage. They have access to low-interest loans, which I’ve spoken about before. This lets them expand and delay paying for the expansion while the dollar debases. This can be a huge advantage in the economy as they now have an unfair advantage over their smaller competitors. Usually the strategy ends up being lower prices, which generally requires even bigger scale to economically justify.

The other major thing that companies get as they get bigger is just the sheer number of workers. In a democracy, having a large number of workers is a big advantage politically. Employing a lot of people is grounds for the government to bail you out. Thus, even when a previously innovative company stops innovating, they tend to stick around.

That starts their zombie existence as they use their bigness to get loans they don’t deserve to continue their existence. Many of these companies move from products to business services. Many of these services are of questionable value, yet they sell, often to government organizations. In other words, fiat companies are destined to becoming zombies living off the brains of the fiat system.

No wonder so many people working at these places are so depressed! Fiat is a deep infection, one that can’t be cured with just surface-level changes. The whole thing needs to change, and Bitcoin is our hope against all these zombies.

Bitcoin

Jameson Lopp has his annual node software sync tests. As expected Bitcoin Core does the best and seems to have improved from last year. GoCoin also seems to be a pretty fast implementation. Both Bitcoin Core and GoCoin seem to be benefiting from libsecp256k1’s speed improvements in the EC math operations. btcd, bcoin and libbitcoin are slower, mostly due to lots of disk writes.

Jeremy Rubin sums up the next Bitcoin soft fork proposals as part of his Bitcoin Advent series. He lists no less than 13 (!) different possible primitives that are candidates for inclusion, including his OP_CTV. Jeremy does a great job explaining what the proposals are and what capabilities they would enable. One primitive I wasn’t aware of is OP_VER, an OP code that checks that a certain transaction is in the same block.

Casa blog explains coinjoins. The basic idea here is that the coinjoins add privacy by making it harder to guess whose coin is whose. They also explain what an anonymity set is and why that’s important for privacy. Finally, they explore payjoins as a way to defeat some coinjoin stuff. They explain coinjoins in simple language very well here.

Unchained Capital shows what a multisig configuration file is and what it contains. The post shows what the fields are and why they’re there. They also give some security tips around this data. As more people move towards multisig, explanations like this will help the transition.

Lightning

Wavlake is a way for musicians to make money for their music using the Lightning Network. The business model is that a musician can stream their music for Lightning tips. They would be hosting their own music, owning the distribution instead of relying on giant streaming platforms. It’ll be interesting to see if this can become a profitable enough business model for artists.

Nodl has launched a lightning-only hardware product. The product is aiming to be priced at under $200, which would be quite a feat. A consumer server that does lightning routing would make the network more resilient and robust. I’m curious about what sort of specs such a system would have and what it’ll be able to do.

Lightning Labs has a new tool called Lightning Terminal. This is a web-based UI for managing your lightning node, encouraging certain channel opens and has a native way to access Loop and Pool, so you can manage inbound liquidity. Once Lightning becomes a bigger part of the general ecosystem, I expect home-brew lightning nodes to be a possible way for people to make money. Users are essentially doing the work that Visa does, but competing with each other.

Economics, Engineering, Etc.

Lyn Alden expains why proof-of-stake doesn’t work. The article is long but worth reading. As she expresses over and over again, the main problem is that proof-of-stake is a hugely centralizing force. She makes the intriguing analogy that Bitcoin likely would not have survived the 2017 blocksize war intact had the system been proof-of-stake. There are simply too many subjective human decisions that are made centrally in proof-of-stake.

Alex Leishman argues that Congress should treat Bitcoin like the internet. His argument is that Congress should be light on Bitcoin regulation, much like Congress was on the internet. I wonder, though, whether the opponents of Bitcoin won’t lobby harder than the opponents of the internet. Then again, lobbyists for tech companies are some of the biggest today, so perhaps that’s what it’ll take.

Shinobi explains what a smart contract is and how the term has been distorted by altcoiners. He dispels this FUD that Bitcoin doesn’t have smart contracts by going back to the original definition. Unfortunately, altcoin advocates distort this term, usually to whatever capabilities their particular altcoin has. Word redefinition is a political attack and we need to strongly refute them, much as this article does.

Stephan Livera champions Bitcoin as the priority for libertarians. As he explains, the libertarian strategy in politics simply has not worked, as can be evidenced by the encroaching statism all around us. Bitcoin is the opt-out alternative, which lets libertarians build a new parallel system instead of trying to change the current corrupt one.

Goldman Sachs is exploring Bitcoin-backed loans. This is not a surprise given that Unchained Capital has had so much success with this product. The intriguing possibility here is that they’d be able to give much lower rates, which in turn would mean that there would be an easier path to leverage for a lot of people. Given the scale of loans that firms like this are able to get, this could be a step toward hyperbitcoinization.

Quick Hits

Liquid has a PSBT extension for confidential transactions.

Wyoming is aiming for 5% of Bitcoin hash rate by 2024.

The current and last SEC chiefs seem to agree ICOs are securitees.

TOR doesn’t seem so anonymous anymore.

It has been a great year for smart contract lawyers of ETH smart contracts.

Events

I am planning to be in London for Advancing Bitcoin March 3-4, but there is some possibility I won’t be able to get into the UK. I am also going to be at Bitcoin 2022 in Miami April 6-8.

I’ll also be doing the Programming Blockchain seminars in London March 1-2 (subject to being able to get into the UK) and Miami April 4-5.

Podcasts, Etc.

On this week’s Bitcoin Fixes This, I took listener questions and talked about Taproot and possible next soft forks.

I read through last week’s newsletter which you can find here.

I talked with Robert Breedlove about Hoppe’s Democracy the God that Failed. There’s a lot more of the conversation that hasn’t been released yet, but it’s what you would expect—a lot of philosophical exploration of Democracy as a system.

I also talked on The Dallas Business Podcast about Thank God for Bitcoin.

My other books are here. I have another book coming out soon that explains Bitcoin for policymakers, please stay tuned!

Unchained Capital is a sponsor of this newsletter. I am an advisor and proud to be a part of a company that’s enhancing security for Bitcoin holders. If you need multisig, collaborative custody or bitcoin native financial services, learn more here.

Fiat delenda est.