Bitcoin Tech Talk #386
Interesting Stuff
Shirky Principle - I wish I had known that this concept was named. Shortly stated, “entities tend to prolong the problems for which they are the solutions.” This principle so obviously explains the persistence of rent-seeking and why so many organizations never achieve their stated goals and why so many institutions last well past their usefulness or effectiveness in a fiat economy. For example, an organization focused on eliminating homelessness will, intentionally or not, exacerbate homelessness to avoid its own destruction. ZIRP money will keep alive zombies well past their natural lives, indeed.
Check Cashing - The article is about check-cashing, specifically for people that don’t have bank accounts. I’ve more or less had a checking account all my adult life, so it’s not something I’ve thought much about, but the crazy processes involved in it are frighteningly complex and fraught with weird tail risks. As a result, many check cashing places have up to 3% fees on checks and they barely make any money. I imagine similar systems in developing countries are just as fraught with weird risks. After reading this, I’ve started to understand why something like Tether is so popular in the developing world.
Rewriting Code - This is a classic article by Joel Spolsky about the perils of rewriting code from scratch. As he points out, you may think a codebase is ugly, but you’re throwing away a lot of hard work finding and fixing bugs by choosing to rewrite the entire thing. There’s a hardness to old code that’s been working a while that most new programmers don’t appreciate. When I look at projects like Ethereum 2.0 and really even the first version which made completely unnecessary new things where old, hardened libraries already existed, I see a complete lack of real world experience rearing its ugly head.
Writing on the Internet - With the advent of AI, there’s now going to be essentially infinite “original” content that will be churned out by the bucket. As the article points out, this changes the incentives of writing. Previously, it was for the possession of intellectual property around the writing. But if you’re not going to be able to profit easily from the exploration of the idea, what is the motivation? Well, it’s the idea itself, which is the original reason for content creation. Intellectual property is going to die a slow death, and that makes me more optimistic. Proof-of-work over Proof-of-stake every time.
What I'm up to
Vida Podcast - I was on this podcast a few months ago to talk about money, my new book and the case for Bitcoin. I explained how low birth rates are ultimately caused by fiat money, how I was very fortunate to encounter Bitcoin when I did and how there were a bunch of close calls in losing my coins in my time in Bitcoin. I also argued that other store of values have significant risk.
Physical Coin Auctions - I’m selling off some of my physical Bitcoin collection! I have 3 Casascius coins from 2013 and 1 Denarium from 2015. I’ve been holding these for a long time and in Bitcoin terms, the highest numismatic premium on them was in the bull market of 2013 (I have no idea about the Denarium one). The auction is being run by a highly reputable coin dealer called Stack’s Bowers. It’s kind of sucky that I have to get US dollars for them, but that’s just USD that I’ll be converting.
Advancing Bitcoin - I’ll be in London next week for this annual dev conference. There’s a lot going on, including an LDK hackathon and a bunch of talks. This is a conference for developers organized by developers. You can get a discount by using the coupon code SONG.
Nostr Note of the Week
What I’m Promoting
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Bitcoin
Rethinking Bitcoin URI’s - Bitcoin URIs have a long history and most wallets support them. But they’re old and outdated. First, they encourage address reuse, which is terrible for privacy. Second, they don’t give wallets options for cheaper fees like with Segwit or Taproot addresses. As Ruben points out in this post, BIP21 could really use a refresh or an upgrade so the industry has a standard by which we can all build.
OP_CAT Covenants - This is a highly informative post on how a very simple OP code originally enabled in Bitcoin can be used for covenants in combination with Schnorr Signatures. At its heart, this method of making a covenant is using OP_CHECKSIG to see that the transaction satisfies certain properties. But the actual act of constructing the point and signature for OP_CHECKSIG require OP_CAT. What this tells me is that covenants are a lot like Turing completeness, it’s very easy to accidentally get it.
Twenty-two hardware wallet - This is a hardware wallet meant to be used in a mobile context. What’s really interesting about it is that it doesn’t need any power! It uses NFC to do everything and has a display to boot. I like the concept because it’s the most bare bones thing a hardware wallet should do, which is show what’s being signed and actually signing it. It’s only available for pre-order so far, but I look forward to playing with it.
Lightning
NiceHash LN Payouts - NiceHash miners can now get instant lightning payouts. This is such an obvious upgrade for any mining pool that I’m surprised it’s taken so long. Not only are fees a problem when you get congestion, but the microtransactions of small miners makes the economics of payout pretty daunting and more risk-filled. Perhaps enabling Lightning will create a bigger market for at home mining where you can run miners in your garage and get paid regularly.
Lightning OFAC Compliance - I honestly hate that this product exists, but I understand why it does. It’s essentially a way to make sure you don’t run afoul of various laws, particularly the OFAC restricted list for Lightning payments. For registered businesses, this is surely a big risk to mitigate and these are probably the customers that this product is aimed at. Yet it makes you wonder, without fiat subsidization, will “compliant” companies necessarily have the advantage? If the costs get onerous enough, I can see Lightning being more used in the black market first.
Routing Profitability - Routing is a hard game, and as this blog post from Voltage shows, most people that try it aren’t very good at it. As with most income that’s supposedly “passive,” in requires quite a bit of work to actually earn some money. The main considerations are leasing liquidity which requires quite a bit of capital investment (>10 BTC) and a lot of management. That said, Lightning routing is becoming like mining in that there’s an infrastructure service that people will pay for.
Economics, Engineering, Etc.
Zaprite Teams - As far as point-of-sale services go, Zaprite, for me, is the best solution I’ve tried, mostly due to the static URL that you can show to people that want to buy from you. The one thing missing was the ability to work in a team, where you can all do sales at the same time, which happens quite a bit at events. Now they have this feature and I suspect that this will be a much faster way for people to do in-person transactions. Once they add some sort of receipt so people can pay for items while in line, the in-person Bitcoin buying experience should be way, way better.
Wright Keeps Forging - There is some chutzpah for you. CSW was caught forging documents to his own lawyers. The fact that someone that’s lied over and over in multiple courts of law doesn’t face any consequences for perjury is why we are getting more and more lawfare. COPA looks like it will win this trial, but it’s still disconcerting to see how a well-funded adversary can wreak havoc in the courts. In a sense, this is why Bitcoin is so powerful, because the system is not subject to this kind of abuse.
$10B AUM - That’s how much Blackrock’s Bitcoin ETF has. As an industry, the Bitcoin ETFs have already surpassed 50% of the Gold ETFs. Given how they’re not even 60 days old, that’s quite the accomplishment. The significant inflow is despite the $1B or so in outflows from GBTC for the Genesis/DCG bankruptcy proceeding. The price of Bitcoin seems very much to be reflecting this reality.
Quick Hits
Coinbase goes down - It wouldn’t be a bull market without this company having degraded performance.
MSTR adds 3000 BTC - Microstrategy continues to stack as hard as they can.
Strike Africa - Jack Mallers continues to expand.
Delving Bitcoin Accusations - There are many layers to this story, most of which I haven’t looked into, but suffice it to say that the accusations are pretty serious with regard to Bitcoin development.
Fiat delenda est.