Bitcoin and Cypherpunks, a history. Bitcoin Tech Talk Issue #183

In a time of money printing, stay-at-home orders and degradation of civil liberties, Bitcoin looks better and better. That Bitcoin seems like the perfect hedge against the very things we are witnessing is not an accident. The reason Bitcoin has the properties that it does is due to its inception and history.

Jameson Lopp has written a history of the technologies that led to Bitcoin. The article covers cryptography, cypherpunks, the crypto wars of the 1990’s, hash cash, b-money, various privacy technologies and of course Bitcoin. The point of the article is that
Bitcoin is a part of a larger story of people that have been working to use technology and cryptography for the purposes of personal liberty and against the Orwellian control by authoritarian governments.

The EARN IT bill, which is before Congress is an excellent example of the state using technology to track and control our behavior. The cypherpunk movement and Bitcoin in particular are the ways in which we can combat the degradation on our civil liberties as in this bill. The article is worth reading to learn about the roots of Bitcoin and the ethic that goes behind it.

Bitcoin

Blockstream has released a developer preview of Simplicity which come with jets. Jets are Simplicity programs which are highly optimized and correspond to typical things you’d want to do, such as checking an ECDSA signature. Though Simplicity has a long way to go before getting integrated into Bitcoin, there’s already a demo of what Bitcoin might look like using Simplicity using regtest. The long-term potential of Simplicity, especially with the ability to prove the soundness of a smart contract is enormous. How the Simplicity ecosystem and tools progress is worth watching.

Calvin Kim has written an excellent overview of UTreeXO, a way to potentially run a fully validating node with very little resources! Currently, running a full archival validating node requires upwards of 250GB of disk space and running a pruned node requires somewhere in the vicinity of 20GB. UTreeXO, by contrast would allow for something in the kilobyte range using Merkle Proofs. The nice thing is that it wouldn’t require any sort of fork at all, but does require some way to get the UTXO set at a particular height. Regardless, it’s an interesting improvement that I hope someone makes.

Jameson Lopp has written a post on timelocks and why Casa hasn’t implemented them in their product. The complexity that timelocks add to scripts, the on-chain cost of the more complicated scripts and the difficulty of rotating keys if they get compromised are the main reasons. That said, the advent of Taproot bodes well as these concerns will be mitigated to some extent.

Unchained Capital continues its series on multisig with an explanation of where the keys come from. The post explains well what you need in order to create a multisig, including a coordinator, consensus and keystore. The process of setting up a secure multisig setup is complicated and thinking in the terms as the article has laid out is well worth learning.

Lightning

Anonymous developer ZmnSCPxj has posted on griefing attacks and how they could be mitigated using something called proof-of-closure. Griefing attacks are a way to put LN payments into a pending state by using hops that are particularly slow. Such attacks could potentially be used to lock up liquidity for certain channels in the Lightning Network to be able to charge more in fees for other ones. The mitigation is using proof-of-closure, which involves creating a soft timeout, which is different than the on-chain HTLC timeout. By creating a commitment to enforce a soft-timeout, we can have proof-of-closure to prevent this particular form of attack.

An interesting way to hedge Bitcoin on Lightning is on lnmarkets.com. Essentially, you can enter hedged positions using lightning and contracts for difference (CFD). It’s a centralized service and very alpha, but the potential is there to trade derivatives using Lightning as the backbone.

Economics, Engineering, Etc.

Phil Geiger of Unchained Capital has an excellent article on why the 21 million limit will never change. Among other things, the article puts to bed fallacies such as the mining death spiral, what we’re going to do when the miner subsidy runs out and how inflation doesn’t increase wealth. This takedown of Keynesian fallacies is really needed today in a world of trillions of dollars of money printing.

Coinmonks has published an article on the memes around Bitcoin. This is extremely useful if you want to know what Bitcoin Twitter is talking about. The article covers #stacksats, money printer go brrrrr, OK boomer, 6.15BTC, number go up and HODL. For anyone new to Bitcoin, this is a good way to get caught up on the memes.

Factom Inc. is very close to liquidation. This was one of the earliest ICOs in that they sold a token as a way to raise money for their operations back in 2015. The 2278 BTC that they raised at the time wasn’t enough and they ended up raising an additional $18M from investors throughout their life. This one is particularly interesting to me as I wrote about how their protocol didn’t need a token back in 2014 after the release of their white paper. As they were one of the first ICOs and managed to last 5 years on the money they raised, we can expect the ICO class of 2017-2018 to survive at least that amount of time, though, of course, many of these ICOs raised orders of magnitude more money. The sad reality is that these foundations/companies/protocols are essentially zombie companies from the very start and have no incentive to build anything useful and instead survive through rent-seeking.

Canaan, a public Bitcoin miner posted its earnings report for 2019. The firm lost $149M ($114M in Q4), which on revenue of $204M is pretty terrible. The report gives some decent insight into the economics of mining manufacturing.

Podcasts, etc

Last week’s show for this newsletter is here. And part 2 of my reading/explaining of Nick Szabo’s Shelling Out is here. I also did a show with Tone Vays on the BCH halving here.

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Fiat delenda est.