Bitcoin Tech Talk #392
Interesting Stuff
Centralizing/Decentralizing Cycles - Fair warning: this article is easily as long as a novella, perhaps even a short book (my browser says 70 minutes), but it’s definitely worth a read. The basic premise is that there are periods of history when things centralize (Romans conquering Europe) and other periods of history when things decentralize (Same Roman collapsing and giving way to lots of smaller states). The post argues that we’re in for an imminent decentralizing and goes through the chaos that will come to pass. The most interesting bits for me were how the bureaucracy has become the tail that wags the dog and why there’s little hope of it getting fixed. There’s nothing really about Bitcoin in the article, but you can easily figure out how it would fit into the scenario laid out.
Credit Card Reward Programs - This is an article on how credit cards fund the reward programs that have become so ubiquitous. The economics are fascinating and the behavior patterns determine how the programs get designed. Essentially, credit cards have been able to snipe 1-2% of every transaction done with them, allowing them to rent-seek in deep and pervasive ways. There are also all kinds of safety controls to make sure these programs don’t lose money which many people spend unbelievable amounts of time trying to game. This is the fiat system gone digital and it’s everything you’d expect, with kickbacks on kickbacks, rent-seeking taken to the nth level.
Do Incentives Really Work? - Of course they do, would be my answer, but here’s an article about why this may not be true. There’s a lot of good nuggets in here, including the Jukebox theory of human behavior and the Secret Criminal assumption of other people. The main argument is that when you design an incentive system a particular way, the people attracted to that system are generally people motivated by the incentives you put in place, hence there’s something of a self-selection problem which ends in a self-fulfilling prophesy. I think the author has found something about intrinsic motivation that’s very interesting, but I suspect that for the mass of Nihilistic people, incentives or carrot and stick stuff work pretty much as expected. The real question is about the decline of morals which allow people to live above the incentives given to them.
Lenocracy - I’ve called the concept here rent-seeking for the longest time, and I’m glad that the concept is solid enough for there to be other names for it. The author here goes through all the different ways in which useless rent-seeking causes pain for good economic activity and how it’s essentially made the world that we see today, where even producing weapons and ammunition for a relatively small conflict in Ukraine is straining the defense contracting industry. Contrast that with WW2 and it’s clear that all the rent-seeking has severely degraded production capacity. As with the first article in this section, the article predicts some sort of reckoning, though it’s not clear when or how it will happen.
What I'm up to
The Two Stewards Show - I talked with these guys about Bitcoin and Christianity and we talked for almost 2 hours! We covered Natural Law vs Positivism and how Christian niceness is used against them to impose positivism. We talked about the way that the fiat monetary system is used to deputize enforcement of the state’s mandates and techniques for orange pilling people and its parallel to Christian evangelism. And finally, I talked about how fiat money has ruined churches.
Bitcoin Seoul - I will be at this conference in late May as the premiere Bitcoin-only event in Asia. The star-studded lineup is a first in that part of the world and it’s going to be a great event in one of the most interesting cities in the world. It’s one of the easiest cities to get to in Asia and flights are extremely affordable if you already live there. You can get a 10% discount if you pay using Bitcoin. Hope to see you there!
Oslo Freedom Forum - I will be in Norway just a few days later to talk about the importance of Bitcoin to human rights activists all around the world. It’s one of the most surreal places to be in June as the sun does not set until 11:30pm! This is one of the more unique experiences you’ll get if you’re looking for Bitcoin content as it’s so focused on human rights.
Nostr Note of the Week
What I’m Promoting
Bitcoin
DSL for Bitcoin - Describing a particular set of transactions and blocks that you want constructed for a testing blockchain is not easy and this project is an attempt to describe them in a syntax language. Descriptive syntax languages can definitely be useful for testing certain behavior, though it’s hard to say how much of the edge and corner cases it’ll capture. It’s certainly better than just keeping various regtest db’s in a zip file and unzipping them to run certain tests.
Cluster Mempool - The cluster mempool proposal has been worked on for some time now, but we now have some good data from the proposal author, Suhas Daftuar. The idea is that you purge transactions from the mempool based on the cluster of transactions instead of by particular fee rate, which makes sense. His simulation showed that a small number of transactions would have been added to certain blocks. It’s not a big change, but should result in a small improvement in block construction.
BitVM Liquidity - In response to criticism of BitVM which I put in the last newsletter, shinobi has written about the liquidity crunch problem and the various mitigations around it. The main problem is that the operator of the peg (or bridge in the criticism’s parlance) needs to front the liquidity for peg-outs, but if they run out, then they can get punished without really doing anything wrong. Some solutions the article proposes are along the lines of multiple operators, but the more interesting issue is what to do as a backstop. Do you burn the funds or send them to the verifier? It’s good for these issues to come out now while the system is in development instead of discovered after, which happens way too often in altcoinland.
Lightning
Pathfinding - Finding the right route for a lightning payment is a hard problem and this post by Lightning Labs gives you a glimpse into how hard it can be. They describe the algorithm they use, which is Djikstra’s algorithm, which is breadth-first. Then they add complications from hidden channel balances along various paths, the probability of success vs fee tradeoff, and the model they use for figuring out that probability of success. I imagine there are some fruitful grounds for research here.
Constellation - This is a federated layer 3 that builds on top of lightning. The main idea is that an operator keeps a ledger for a limited set of people and transactions between those people are handled within that operator. Two operators can settle transactions between them using lightning and groups of operators are considered a guild. The idea is that guilds are trusted entities, but can have whatever trust model you want, allowing users to choose.
Federated Lightning Addresses - Mutiny wallet has a very interesting way of creating lightning addresses in a trust-minimized way by using your ecash pubkey to lock payments that come into it. Essentially, you’ll have to spend the ecash into your own lightning node afterwards to get at it. The concept is not new, as Hermes project was founded on this concept. What’s new is that there’s now an implementation in a popular lightning wallet. Now everyone can get an easy Lightning address.
Economics, Engineering, Etc.
Bitcoin Ecosystem Report - Trammell Venture Partners has published a report on the startup ecosystem around Bitcoin and it’s pretty positive. There’s generally a lot more activity as you might expect in a bull market. What’s more interesting is the comparison versus altcoin companies. The growth in Bitcoin-only is objectively bigger than that of altcoins. Of course, TVP is a Bitcoin-only VC, so they may have some incentive to spin things a certain way, but the general vibe I get from the broader ecosystem is that Bitcoin-only is now way more favored vs “crypto.”
Nigeria Reality - This report from Blink wallet is about the reality of monetary debasement in Nigeria. The horrible debasement of the naira is the main reason for the monetary suffering and as the post points out, securing your wealth is not easy over there. It’s hard to remember that most of the world has much worse inflation than the US and are without investment vehicles to compensate. Bitcoin for them is a lifeline and deeply necessary for planning.
No Longer Passing Fad - It looks like Bitcoin is here to stay. So say most of the respondents to a Deutchebank’s survey. Only 1% of them think of Bitcoin as a passing fad now, which was definitely not the case, say, 10 years ago. I’ve always said that time is the best ally of Bitcoin as lasting a long time gets people used to it and eventually leads to some trust that it’ll stick around.
Quick Hits
FBI Subpoena - The FBI has worryingly put a gag order on a bunch of devs for a year for Luke-jr’s stolen Bitcoin case, which just expired. We can assume there either are more in place now or will be in the future.
O’Dell on Saylor - Some weird rumors being thrown around about Saylor demanding certain ETFs not donate to Bitcoin development.
Chivo Wallet DB Hacked - A hacker has posted a database of El Salvador’s citizens’ info allegedly from Chivo wallet’s central DB.
TD Bank on BTC Halving - I can’t believe we’re at the point of BTC development where a bank has made a commercial to explain the Bitcoin halving.
Fiat delenda est.