Bitcoin Tech Talk #387
Interesting Stuff
Financial System Holidays - This is an article about how the financial system deals with downtime, particularly downtime that’s not consistent throughout the world. Banking is a strange industry in that it doesn’t like to be open all the time, due to the nature of fractional reserve banking. What I learned from this article is that the holidays are there for a good reason, mostly around lessening the requirement of trust, which unsurprisingly plagues fiat systems. Bitcoin can operate 24/7 because it doesn’t have any authorities.
North Korean Slave Labor in China - This is a story from the New Yorker which suggests that a lot of Chinese companies get North Korean workers to work at their factories. Generally, these are women from North Korea with either parents or a husband back home so they can’t defect. The most horrible part was how they were sexually abused by their North Korean managers who also double as their translators. The relentless fiat pursuit of cheap labor leads to situations like this, sadly.
DEI Pork - Remember how we were investing in chip manufacturers in the US by subsidizing them? This was what the CHIPS act was supposed to be about and roughly $39B was earmarked for tax breaks for chip manufacturers like TSMC, Samsung and Intel to build chip fabs in the US. Turns out they’re all turned off because of the pretty large DEI requirements from that bill. Apparently, it’s very difficult to get the money without paying off all sorts of rent-seekers and it turns out that the tax breaks don’t offset them enough. Manufacturing is hard to bring to the US to begin with given the high cost of labor, but DEI requirements are making them even worse.
Google Deathwatch - Speaking of which, this article about the internal politics of Google paints a pretty bleak picture. Apparently, HR runs the entire place and DEI policies have completely soaked the company with rent-seekers. Despite the huge layoffs less than a year ago, one person estimates 50% could be cut without much consequence to the business itself. To be sure, this is a very profitable company still, but it looks to be suffering from a deep rot that only fiat money and large scale can produce.
What I'm up to
Where Madness Lies - I talked on this new podcast about fiat money, my Bitcoin journey and my general philosophy of life. Aaron is a good interviewer and we touched on topics that I totally did not expect (like my pregnant coding teacher from middle school and the dishonesty of Sam Harris). There’s a little speech in there about the importance of motherhood that I don’t think I’ve ever shared on any podcast, but have in private settings.
Fiat Ruins Church - I gave this talk at Lipscomb University last month to talk about how fiat values have penetrated the church. It’s a lecture geared toward Christians to help them understand just how much the lack of savings vehicles, the societal trust in money, the tendency toward large scale and outsourcing of virtue have made churches go away from the Christianity of the New Testament. I hope to write all this as a book someday, so if you have any thoughts about it, please let me know!
Advancing Bitcoin - With the all time high taken, I will be at this conference later this week to speak about FROST and how we could use it to build very different types of wallets. There are lots of other events all over the world this week, but I make it a point to support these developer-oriented conferences so that we can build better stuff. Hope to see you there!
Nostr Note of the Week
What I’m Promoting
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Bitcoin
MuSig2/PSBT problems - salvatoshi on Delving Bitcoin goes into why the current signing paradigm for MuSig2 is problematic, especially for hardware wallets with limited storage capacity. The main problem is that PSBTs treat each input as a separate signing session, where in most transactions, multiple inputs likely use the same descriptor. His proposal is to move the session data up a level to the transaction to decrease the amount of state that needs to persist on hardware devices.
Hardware Wallet Design - The TwentyTwo hardware wallet blog goes through its rationale for making their NFC-powered hardware wallet as big as they chose to make it. Hardware wallets have been trending smaller, probably for portability purposes, but in security scenarios, readability and verifiability are just as or more important. As with mobile phones, hardware wallets have been getting smaller for some time, but it may be that they start increasing in size to show the user more information.
Ownership Heuristics - A new paper looks at current heuristics for determining which UTXOs belong to the same owner and comes up with a few new ones. Specifically, coinjoin transactions are excluded and change addresses further refined through round-number determinations in both USD and BTC. Privacy-based wallets would do well to look at the techniques used in this paper as they’re likely being incorporated into chain-analyses.
Lightning
On Lightning Liquidity - Roy from Breez writes a really good analysis of Lightning, the tradeoffs and opportunities. As he points out, the UX of Lightning was pretty terrible at the beginning, but has since become an opportunity for LSPs. As these services mature, the long-term viability of these businesses ultimately rests on the profitability of these transactions. Lightning is maturing and while it’s not a panacea for all transaction problems, it is significantly better than everything being on-chain. And that’s a good thing. We don’t need to solve everything at once.
Async Payments in LN - Voltage has a good overview of the utility and progress around asynchronous lightning payments. As they point out, there have been several interesting ideas, most of which wait for the recipient to come back online before completing the payment. They also point out some of the dangers of these approaches, which include trust in the Lightning Service Provider. BOLT12 and PTLCs could help here to make re-using invoices impossible.
Lightning Power List - This site gives you a list of the most well-capitalized nodes on the network, why they exist and who operates them. Most of the power nodes are whom you’d expect like the big exchanges and lightning companies. I was surprised at how big Alex Bosworth’s node is and how few channels he has for the amount he has on the node. For that matter, there are a bunch of nodes that have a lot of Bitcoin but relatively few channels like Binance (224 BTC and 81 channels), which tells you there are a lot of “wumbo” channels out there.
Economics, Engineering, Etc.
Nobody has enough insurance - Bitcoin custodians like Coinbase have a significant amount of assets that could, theoretically be taken at any time by hackers, employees or government. These risks are normally mitigated through insurance, but given how so few people really understand how Bitcoin works, insurance rates are apparently too high for most organizations to use. As the article points out, Coinbase has over $40B in Bitcoin, but only has insurance for less than 1% of that amount. Of course, the controls around Bitcoin are much more flexible as they are around a physical asset like gold, but it’s crazy that insurance companies are so unwilling to insure them.
CSW Lies at COPA - This is a very long read and if you don’t care about how much of a liar he is, feel free to skip it. But wow, the amount of deception the guy engaged in during the COPA trial is a marvel to behold. If there is any justice, this guy should be going to jail for the amount of time and money he’s wasted from innocent people, but sadly, his lawfare tactics will probably see him try, try again. What’s concerning are the BSV supporters who seem to believe these crazy lies. It’s hard to convince a man to believe something if his illusions of grandeur depend on him not believing it.
BitDeer miners - BitDeer is probably not a familiar name, but their CEO probably is: Jihan Wu, formerly of BitMain. His company is making a splash in the miner manufacturing game with 4nm process for their chips. Say what you will about the CEO, but he knows how to deliver production-ready ASICs. Their reservation system is also pretty unique in that it costs only $0.99 to reserve one for later delivery. Competition is good and however mistaken he was in the Fork Wars, these new machines, if they work, will be a good thing for the mining community.
Quick Hits
MSTR raises $700M - Their bond offering was $600M, but they were oversubscribed, due to the convertibility option into common stock. Saylor will be stacking some more soon.
Feed Cats - You can feed some cats in Switzerland by donating funds via lightning.
McCormick vs profplum99 - An easily-hedged bet is being made by profplum99 who managed to get Peter McCormick to extremely favorable terms. Peter wins if BTC is above $100k by the end of the year.
Dune vs. Bitcoin - Humorous take on how Dune movie releases correspond to Bitcoin highs.
Fiat delenda est.