Bitcoin Tech Talk #384
Interesting Stuff
Bukele’s Story - Written by another Latin American, this article goes through Bukele’s journey to become president of El Salvador and how he made it one of the safest in the world. One of the most remarkable feats was his legal maneuvering to get on the ballot in 2019 when the two major parties at the time were planning to block his access to the ballot. The other part that showed me a bit of his character was when he had the chance to take an uncooperative legislature by force and didn’t. He instead led a prayer.
Arguments don’t matter - When it comes to politics, we’ve all mostly lived under the implicit assumption that the good argument wins. At least it *should* win, but in today’s nihilistic, hyper-partisan atmosphere, it really is not, at least according to this article. In particular, conservatives spend an inordinate amount of time trying to make good arguments, but in a sense, that’s not what wins anymore. Will-to-power is unfortunately becoming the way that politics is settled now. When the prize of money-printing is at stake, this is what you get.
Bad Incentives - The article starts with a story about cobras and how one jurisdiction paid for dead ones as a method of getting rid of them. If you don’t know the story, some enterprising people started breeding cobras to get more bounties and soon, there were more cobras than before. This is an example of a well-intended program that went awry, but the article asks a very interesting question about things that go the other way, where a program that sounds bad actually produces good outcomes. Apparently, legalizing the hunting of endangered rhinos preserved them, for example. There’s more to the article with respect to incentives we’re more familiar with and it’s worth thinking about.
Agreement is Hard - The article is about making policy and how tricky it can be. The idea is to see how hard interpreting what looks like a very straightforward rule can be and it turns out to be very difficult. The rule in question is “No vehicles in the park” and as the article shows, agreement on exactly what that means is actually quite difficult. In a sense, this article shows why smart contracts will never really replace human judgment because it will do things that are unintuitive for most people at the edge.
What I'm up to
Free Private Cities - I talked with Marthinus and Alex about free private cities and the possibility of Bitcoin Citadels. The general trend has been toward more areas where economic freedom is given, and because they’re competing with each other, we’re getting to the point where they’re having to continuously up what they offer. As we go towards a Bitcoin standard, this will be how jurisdictions will compete and we may very well get autonomous regions.
Fiat Ruins Church - Part 2 of my interview with the Throwing Mountains podcast where I specifically talked about how fiat money corrupts the church. We talked about the primacy of money, the availability of debt, the high time preference behavior this causes and the paycheck-to-paycheck reality that most churches now experience. We talked also about how getting out of debt requires a deeper obedience to Christ and the blessings that come from growing in character.
Relai Podcast - I talked on this podcast about not working a fiat job and my journey to being an entrepreneur. We talked about the courage required to not have a job and go create something for the market and the mentality shift that’s required. We also talked about the dominance of large companies and how they continue subsisting on newly printed money and live out a zombie existence through financial games. I also analyzed what’s happening globally and how the dollar hegemony is crumbling gradually, then suddenly.
Nostr Note of the Week
What I’m Promoting
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.
Bitcoin
Evil Covenants - RobinLinus has this spicy post on Delving Bitcoin about the possibility of a covenant that would be perpetually KYC’d. It requires a lot of different OP codes, but the idea is that they could force a regulated entity like in an exchange to only send to covenant addresses of this type. Of course, they could do this already using multisig, but this design minimizes their need to keep up some sort of signing server based on allowed and disallowed public keys. This kind of thing is exactly the kind of attack vector that I don’t like about covenants, and while the benefits might be great, we have to consider the possible tradeoffs.
BitStake - Building on BitVM seems to be opening up a lot of interesting ways to create side-chain like capability and this is indeed what this one is. The difficulty of side-chains is the pegging out mechanism and Drivechains essentially adds this responsibility to miners while Liquid puts this responsibility in a supermajority of a federation. BitStake puts the responsibility on N stakers of Bitcoin, where even if one honest staker exists, then the peg out would work. Anyone can stake to become a part of the peg-out group by staking more than the least of the N stakers. This means an attacker would need to be all of the top N stakers to prevent a legit peg-out.
Multi-user custody Compared - Unchained has a blog post on the various ways in which multi-user custody of Bitcoin can be done, specifically multisig, MPC and Shamir’s Secret Sharing. There’s a lot of discussion around the various benefits and tradeoffs and the potential for some of the newer stuff coming down the pipe, like FROST and MuSig2 as they become standardized. As Bitcoin becomes more a part of corporate treasuries, or even large family offices, these tools will become essential to prevent embezzlement and general corporate stupidity.
Lightning
DNS Payment BIP - Matt Corallo has a BIP for an address format that uses DNSSEC and compatible with both on-chain and Lightning addresses. The main motivation for this BIP is that it allows for succinct proofs of domain ownership. DNSSEC is an industry standard in that regard and allows for cryptographic proof. The only part that’s a little tricky here is preventing tracking of the DNS lookup, which if done over clearnet, will leak your IP to the DNS server, but that can be mitigated using TOR. Overall, a very interesting idea and one that very well could become industry standard because of its convenience.
Domain Spoofing - Speaking of DNS, this post goes through spoofing the Lightning web wallet Mutiny using internationalized domain names. What’s scary is that the domain in the url bar looks like Mutiny Wallet and in browsers other than Chrome, but points to a different server. The attack takes advantage of the fact that certain letters in English look the same as letters in other alphabets and those can be used for domain names. Basically, don’t use links from strangers to access your wallet.
npub.cash - This service automatically gives a Lighting address to any Nostr user with the address <npub>@npub.cash. The idea is that it will be locked to the same private key as your Nostr account. The way it works is that there’s a Cashu Lightning address that’s created from the npub and the recipient can claim the coins sent to the address. The main feature is that of the Cashu-address protocol, which is that you can receive LN payments offline. The main tradeoff seems to be that the recipient has to go and claim the payment.
Economics, Engineering, Etc.
51% Attack Cost - An academic paper goes through the total cost to attack Bitcoin. What’s unique about the paper is that it goes through all of the various costs, not just in acquiring ASICs, but in electricity cost. The conclusion seems to be that it would cost somewhere between $5B and $20B to do a 1 hour 51% attack on the Bitcoin network. Of course, that’s not nearly enough time to guarantee a 6-block reorg and there are significant limits to the model, especially around the ASIC price volatility to be expected if an entity is buying a lot of them up, but it’s at least a first-order approximation.
Microstrategy Case Study - The report is from October 2023, but it’s one that I hadn’t come across. The research paper goes through how Microstrategy used Bitcoin to propel itself to a significant player in the markets. The decision to put Bitcoin on its balance sheet has been an unqualified success thus far, and CFOs would do well to read this report to understand the dynamics that have propelled the stock to the position it currently has. If bull market continues, I suspect we’ll see more than a few companies copy this strategy for their balance sheets.
A Stacker’s Journey - This is a blog of a guy that’s been stacking Bitcoin at 500 Euros a month since late 2017. Roughly 6 years worth of stacking has brought him to a total of 4.47 BTC (about 215k EUR). It’s really remarkable how well a DCA strategy performs, and for salaried workers, it’s a hard-to-beat strategy. The goal for this blogger seems to be early retirement, which he very well may get in the next few years.
Quick Hits
WSJ was lying - The original story was about how Hamas relied on crypto for their financing, but as the Treasury official says in the clip, it really wasn’t very much.
CPI up - The Year-over-Year numbers actually declined from 3.4 to 3.1% but the 3-month annualized was at 4%, stoking fears that the rate cuts will take longer to come to fruition.
Coinbase Commerce - They don’t accept Bitcoin payments anymore unless the user has it in their Coinbase account.
COPA Trial Mishap - CSW couldn’t describe what an unsigned integer is.
Fiat delenda est.