Bitcoin Tech Talk #428
Interesting Stuff
De-risking De-civilizes - Full disclosure, the book being reviewed in this article is by a personal friend, Tobias Huber, though I haven’t read the book yet (Sorry Tobias!) The observation that progress has stagnated since 1971 is not new, but the reasoning behind why is genuinely intriguing. The article and presumably the book, argues that it’s a result of de-risking. Though it’s much easier to take risks than ever, more people are going down the least risky paths, which, when done on a society-wide basis results in stagnation. There’s a lot of reasons for that lack of risk-taking, including the feminization of society, lack of children and the population trending older, but I suspect that the biggest reason is that more people are rent-seeking than ever. That, of course, is directly attributable to fiat money.
Changing Coalitions - The most recent election brought a lot of punditry about the future of the Democratic party but I think this article sums up the situation the best. Essentially, the utopians have taken over the Democrats and have abandoned the working class which was the bulk of their coalition. Those same workers have largely gone over to Trump, while the warhawks on the right have now found themselves a bit politically homeless (despite Liz Cheney’s defection). The most insightful part of the article for me was how there’s an ideological barrier for the Democrats to moving more toward the center.
AI Laziness - The article is about how AI is marketed and whether this is a good thing. Essentially, the main “benefit” of AI is giving people the ability to be lazy and deceitful. Humans have always wanted to do that, especially to seem more considerate or conscientious, but as the article points out, it was not normally the main sales pitch as it is with the AI commercials that the article refers to. In a sense, AI is making it easier for people to rent-seek, and in that way, AI is about as fiat a tool as it can get. There are, of course, other uses of AI which aren’t nearly as cynical, but it’s a good reminder that the development of technology takes certain forms in a fiat society.
Intellectual Obesity - I think most people are aware of the junk food that goes into our bodies, but not as many are aware of the junk food that we consume into our minds. This article makes the case that we need to be just as selective over what we read, as it’s very easy to get addicted to things that are essentially the equivalent of empty calories. One of the recommendations at the end is to write more, as it requires a lot more selectivity in what you read. Not to get to meta on you, but writing this section of the newsletter has been for me one of the disciplines that have kept me from intellectual obesity.
What I'm up to
Once Bitten - I talked to Daniel Prince for a couple of hours, talking about everything from why I wear my hat, to how to leverage your skills to benefit both yourself and Bitcoin. We also talked about Fiat Ruins Everything, and particularly the academic industrial complex that’s unfortunately captured a lot of young people.
Doomerism - I wrote an article about my annoyance at the persistent doomerism that seems to depress the discourse in Bitcoin. I wrote this as a reminder that we are winning big and that there’s never been a time to be more optimistic about Bitcoin. Yes, there are issues, but they’re not really major, akin to first world problems.
Plan B San Salvador - I will be at this conference in late January and it looks like I’ll be participating in another one-on-one debate, this time about whether using fiat debt is a good or bad thing. I’ll be taking the anti-debt side and Mauricio Di Bartalomeo will be taking the pro-debt side.
Nostr Note of the Week
What I’m Promoting
Bitcoin
ColliderScript - Andrew Poelstra writes about how to get covenant functionality without a soft fork, and it involves finding hash collisions. The scheme is entirely impractical as it costs about 625 BTC per transaction. The main claim in the article is that covenants are *possible* and undoubtedly that will be something used in the current soft-fork debate around which covenant proposal makes most sense to active and whether to activate them at all.
Soft Fork Reasoning -Speaking of which Antoine Poinsot has an article about how to think about soft forks in a reasonable way. As he notes, any sort of soft fork must first do no harm. In addition, much of the rhetoric around soft forks is dialectically lacking. Much of the lack of engagement around certain soft fork proposals is that there’s no real excitement around the proposal, despite what the proponents will tell you. As he suggests, any proposals that does not acknowledge risks is not a serious proposal.
CoinJoin DeAnonymization Attacks - Yuval Kogman blows the lid off of the various CoinJoin protocols and the ability of the coordinators to de-anonymize the participants. This was thought to only apply to Samurai as noted last week, but it turns out there are more ways for coordinators to figure out whose input correspons to whose output. As he was one of the designers of the WabiSabi protocol by Wasabi, the post carries extra weight.
Lightning
Stacking on Lightning - For people dollar-cost-averaging, there’s a big question of how often you withdraw. If you withdraw on-chain, that creates too many UTXOs to manage, many of which may not even be spendable in high fee environments. But keeping it with a custodian is not ideal either as it exposes you to catastrophic events on the custodian’s side. You can avoid both by doing what this guide suggests, which is stacking on lightning and storing on-chain as you feel the need. The process is specific to Bitcoin Well, the author of the article, but the general idea is something you can implement with any exchange that allows lightning withdrawals.
Beginner Lightning Wallets - I was embarrassed a couple of months ago when someone wanted to learn about Bitcoin payments and I couldn’t figure out which wallet they could download. To be fair, I’m in the US and there are a lot of different wallets that have stopped being available here, but still, when someone asks you to orange pill them and you can’t give them a demo, it’s pretty embarrassing. This article will give you some resources on wallets that you can use. I love Phoenix, but that’s a wallet that’s no longer available in the US. You can use Breez or BitKit instead.
Off-chain Payment Resolution - Lightning payments having to resolve on-chain for disputes is one of the biggest vulnerabilities, especially in high fee environments. This is a protocol designed to not require on-chain resolution and has some very desirable properties like not needing a watchtower service for casual users. The remarkable scaling properties of the protocol as the on-chain footprint is zero at the margin. The main mechanism is a burned output, which requires a lot more analysis, but the approach seems promising.
Economics, Engineering, Etc.
Bitcoin-Backed CDOs - Pierre Rochard has one of the most interesting proposals to bring in traditional fixed-income investors into the Bitcoin ecosystem and it’s using collateralized debt obligations. The investment vehicle is a bit complicated, but essentially, investors with different risk profiles choose different tranches within the CDO, senior, mezzanine, junior or equity, which are in order of least risk to most risk. Accordingly, the returns are from least to most to compensate. The money collected is used to buy Bitcoin and then the same Bitcoin is sold on a set schedule to pay off the different investor tranches. The senior note holders get their money first and then the mezzanine and so on. It’s a way to give some of the upside of Bitcoin without nearly as much volatility which is what makes it intriguing.
Quantum Hype - MARA, the Bitcoin mining company has a blog post on why quantum is not a threat to Bitcoin anytime soon and they point out the obvious stuff, like the fact that you need a lot more qubits and that hashes aren't crackable in any meaningful amount of time using quantum computers. I wish they would have included the doubts around quantum computing in general, as it’s failed to do something as simple as 1+1 so far, but it’s at least a good start.
Turmoil at CoinDesk - Three of the main editors at CoinDesk have been fired, it looks like, for refusing to take down an article about Justin Sun’s $6.2M banana stunt. If you haven’t been following this altcoiny publication, it was sold last year from the bankrupt DCG to Bullish, which is a “crypto exchange” that is better described as an EOS cantillionaire. The publication didn’t have a great reputation to begin with, but it looks to descend further in the wake of this scandal.
Quick Hits
More MSTR buys - 15350 BTC this time.
FASB Rule Change - Companies holding Bitcoin can now report its value based on current market prices.
Foundation Prime - No longer just a Bitcoin hardware wallet, it can now do 2FA codes and some other stuff.
CSW found in contempt - He gets 2 years suspended sentence from the UK, meaning he doesn’t have to serve jail time.
El Salvador to keep buying BTC - They made a confusing deal with the IMF, but it seems they will keep stacking sats at least.
Fiat delenda est.