Bitcoin Tech Talk #299
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What I've been working on
Fiat Possessions - I wrote about real estate and how it’s not so much property as it is a lease from the government dependent on your compliance. I also wrote about mortgages and how they’re direct Cantillon winners which add new money to the economy and the reason why real estate does so well versus other commodities during monetary expansion.
Crypto Mile - I was on this new show out of the UK to talk about Bitcoin, the Fed and much more. I explain how altcoins are not Bitcoin and that you should take your Bitcoin off of exchanges.
What I'm up to
Austin Bitcoin Club - I’ll be at the Austin Bitcoin Club on Thursday, July 7th this week to talk about mining with some folks. Bear market meetups are the best as you get the real builders. Hang out with us!
Rene Girard - I am devouring this guy’s writings and trying to incorporate it into the stuff I’m doing. I have an episode with Johnathan Bi coming out to discuss Girardian philosophy and Bitcoin. In particular, there’s a deep psychology of envy that economics doesn’t treat very accurately. It explains a lot of what’s happening with altcoins and the stupid risk being taken.
Baltic Honeybadger - Riga here I come! The conference is on Labor Day weekend in the US, but should be great as it’s the first one since 2019. The speaker lineup is great and I look forward to seeing many of you there!
Tweet of the Week
What I’m Shilling
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Bitcoin
Non-interactive Threshold Signature Schemes - This paper looks at various threshold signature schemes and devises a common language around them. Threshold signatures are k-of-n signatures that combine to produce a single valid signature for an aggregated key. The paper introduces some proofs and notation that are rather technical, but give us a great way to understand
TxWithhold - Gleb Naumenko makes the case that there are situations where miners may be able to coordinate to deny a large-fee transaction. He constructs a TxWithhold transaction, which essentially makes it irrational for miners to mine a particular transaction by giving them some other transaction award. The main mechanism requires an oracle that announces whether a transaction has been included in a block or not. There would be a DLC that would pay out some money based on the oracle to the coinbase output. It’s an interesting exercise and one that helps give a better understanding of the censorship attack surface.
Vision for Bitcoin - Paul Storcz makes the argument for a lower block size and multiple chains. The article is essentially a tailor-made argument for his BIP300 side chains proposal, but there are some good points about ossification. I don’t agree that we need to worry so much about the “security budget” as if it’s a centralized thing and I don’t think we’ll be getting smaller block sizes anytime soon. Still, he makes some interesting points and it’s worth reading his stuff, even if you don’t agree with them.
Lightning
Lightning Spam Mitigation - This discussion on the Lightning Dev mailing list about how to relay messages in a way that won’t DDoS nodes. The mitigation involves rate-limiting each connection so that it doesn’t flood the node with messages to relay. The topology of decentralized networks like Lightning are very different than centralized ones and will have to be negotiated on a per-node basis, which makes this problem very interesting. Each node has more autonomy making anti-spam measures different and interesting. This is what the decentralized web we’re hoping for will be built on so it’s not a trivial problem.
Wavlake Update - The Lightning service for musicians which was to become something like a decentralized spotify is refocusing. Michael Rhee has determined that the onboarding process needs to be far better and the system needs to be more open. As he’s finding out, consumer products need really good UI to compete, especially when it’s not solving a pressing problem. The problem WavLake and others like them are solving are for the creators/merchants, which is only half the equation. Lightning apps’ biggest challenge in the coming years will be making competitive UIs.
Zion and Web5 - Zion, the decentralized social network, is using Web5, the platform announced by Jack Dorsey’s Block. This will be an interesting test of the Web5 infrastructure and should get a lot more Web5 nodes up. The stack for building something decentralized is starting to take shape and if Zion succeeds, I can imagine a lot more services headed this way.
Economics, Engineering, Etc.
Is Bitcoin Dead? - Jameson Lopp goes through the many times that Bitcoin has been declared dead and shows how it’s fiat money that’s really doomed. Though there’s significant gloating by fiat people during bear markets, it’s really a self-own as the dollar clearly has done very poorly over 5-10 year horizons. This is the equivalent of the bowler bragging about a strike after 6 gutter balls in a row.
BitFinex Hack Saga - The piece goes through what exactly happened in the BitFinex hack and the personalities involved. There’s still a lot that’s unknown, but even for people that managed to get billions in a hack, it sounds like their lives weren’t exactly easy and care-free. They now face the prospect of prison and significant blowback for their theft. This episode shows us that the costs of theft in Bitcoin are significant, even when stealing billions, making legitimate transactions that much more attractive.
3AC Post Mortem - Arthur Hayes has another one of his inimitable articles on what happened with 3AC. The main thing I got out of it is that there are plenty of people willing to trust lending platforms with their money for yield, but not too many people that want to borrow, which is what led to the blowup. I can’t see lending platforms making sense until the very cheap fiat lending dries up.
Screed against Maxis - Nic Carter wrote a rather bitter-sounding diatribe against Bitcoin Maximalists. I like Nic as a person, and to me, this seems very much out of character, but bear market stress can be hard on anyone, especially someone in venture capital. If there’s to be a lesson learned here, it’s to not double down and criticize and make wild claims about NFTs and DeFi. I think he would have been better served just apologizing and moving on.
Quick Hits
FTX backs out of Celsius Deal - They saw a $2B loss and decided to walk away.
DeFi Hacks Fund North Korea - They claim North Korea has gotten $2B from smart contract lawyering.
Your Exchange Account Info - In Darknet markets, a verified Coinbase account goes for $610.
SEC Chair says BTC is Commodity - He implies that everything else is a security.
BlockFi, 3AC, Voyager - The Contagion continues to spread with some getting bailouts, others entering bankruptcy.
Roger Ver vs. Coinflex - Each claims the other owes it money as BCH continues its collapse.
Fiat delenda est.