Bitcoin Tech Talk #458
Interesting Stuff
Epstein Theories - The pivot on Jeffrey Epstein by the Trump administration is one of the strangest, gaslighting events in recent memory (though COVID still trumps it), and there are many theories as to what’s actually happening behind the scenes. This post goes through the various possibilities, most of which sound delusional and stupid. It also offers up another possibility that hasn’t been widely discussed, which is that perhaps Trump is afraid of the mutually assured destruction craziness that’s about to explode with AI-generated videos should the Epstein thing come to light. It’s a fun theory, but I’m still of the opinion that he’s either protecting himself or someone close to him that he can’t afford to lose.
Tourism, the Red Herring - The article is about making tourism the center of an economy and the futility of using it to create prosperity. I’ve been traveling a good bit the last few years and this is one of the more obvious conclusions that I’ve drawn from having been at a lot of different places. The essential point of the piece is that there’s no labor productivity in tourism and it really reduces the local jobs to fairly non-productive work like serving food or cleaning rooms rather than the force multipliers like manufacturing. As the article states, tourism is not just a red herring for economic growth, but a red flag. An economy depending on tourism is generally not going to be able to sustain itself for long. In a sense, tourism is a zero-sum game where the goal is to extract money from people visiting from other places, and while fun for the participants, it’s not sustainable for most places.
Democracy, the Red Herring - Similar to the last story, this article examines the centrality of democracy to economic prosperity, and once again, comes to the conclusion that democracy is usually found near the end, not at the beginning of a society’s development. As the article suggests, the correct path seems to be to introduce democracy slowly, not suddenly as so many western initiated regime changes have tended to do. I do wonder how much the introduction of a central bank affects economic development of a country, but I would suspect that this is a much more useful data point than the particular form of government.
LLM Similarity - This article introduces an intriguing hypothesis about why LLMs work and how they all seem to converge into similar models. The name of the hypothesis is the Platonic Representation Hypothesis (PRH), which essentially says that there’s an ideal underlying representation of the training data, or a statistical model that gives the best answers, which models converge to as they get “better.” They seem to converge on the same concepts and essentially end up giving the same answers. If the hypothesis is true, then the end state of every LLM model will be the same suggesting that there’s a deeper reality that the models are accessing through the statistical learning.
YIMBY LARPing - YIMBY is in theory a good movement. The idea is to let people build things, like residential homes, useful services and whatnot, and not let the neighbors determine what is or is not allowed to be built. Yet, what happens in practice is that few projects end up getting built as most of the economic incentive to build gets destroyed by amendments by the people the YIMBYists are aligned with. It suffers from what the article calls the Palestinian Syndrome, which is that while many on the left are for Palestine, they’re just making demands without any real teeth behind it to get their government to take corrective action. Such posturing is sadly too common in any political sphere, where you get credit for taking a position rather than real actions.
What I'm up to
Brian Paik’s Podcast - I did this podcast while I was still in Korea to talk about all things Bitcoin, including Tether, treasury companies, the viability of a Won stablecoin and much more. A lot of my observations were about how Korea seems to be suffering from inflation and the distinction between an attack on the Korean Central Bank vs the Korean people. Most governments conflate the two, which is absolutely, demonstrably incorrect.
Korean TGFB Book Launch Part 2 - This is part two of the Korean edition of Thank God for Bitcoin launch. We talked about how this book is different than other Bitcoin books, why it hits differently, the US church perspective on Bitcoin and the impact this book may have going forward.
Tokyo Bitcoin Base - I will be at this meetup in Tokyo at the new Bitcoin Base on July 28, 7pm. There’s only a limited number of spots, so please register early!
Nostr Note of the Week
What I’m Promoting
Bitcoin
Chain Code Delegation - This is an interesting use of the chaincode in the BIP32 specification, which is to make multisig private from one or more of the signers by hiding the chain code, making the signer without the chain code ignorant to what the private or public key is. Only when signing would the signer be given the tweak needed to provide a signature, which would also show whatever balance on-chain, but the signer without the chain code would remain ignorant of the UTXOs belonging to the wallet. It’s a clever solution and something I hope gets implemented.
BitVM 3s - BitVM has had several iterations of the paper already, and here’s yet another, which is an improvement over BitVM 2. Instead of 4MB of transactions, there’s only 66KB necessary, and the collateral requirement is much less. The main mechanism is something called a Garbled Circuit, which is essentially encrypting some computation that needs to be performed that someone else performs and finally is verified. It’s crazy that BitVM is already 2 years old and has had this many iterations without anything being released to production yet.
Identifying Chainalysis Electrum Servers - 0xB10C attempts to identify electrum servers which are being used by Chainalysis companies to de-anonymize transactions. Interestingly, the same sort of fingerprinting is being used by the server analyzer to figure out which ones are associated with chainalysis companies. It will be interesting to see whether such blacklisting will be effective over the long term as the game likely will become cat-and-mouse-ish.
Lightning
Analysis of Lightning Privacy - Super Testnet dives deep into a lightning privacy paper about the different ways to de-anonymize lightning transactions. As the post shows, the paper makes a lot of unfounded assumptions about lightning transactions that don’t necessarily hold. Super rightly calls these attacks to de-anonymize as weaknesses in the paper. It’s worth reading to understand how to analyze papers from academia like this.
LiquidityStr Exploit - The LSP providing liquidity has had an exploit which has made the creator a bit shaken and the service suspended. Apparently, there was a way to open a channel for a certain amount without paying the full amount of the balance. I’m surprised exploits like this haven’t come up more often, but it’s entirely possible these stay under the radar because lightning is so private.
Replacement Cycling Attack Explained - This post explains the Replacement Cycling Attack, which is a fairly sophisticated, capital intensive and very particular sort of attack. The whole thing is worth reading, but suffice it to say that there’s an interesting combination of using mempool transaction replacement policies to get the victim to not be able to get a justice transaction in. I imagine lightning implementations will figure out some way to watch for this attack.
Economics, Engineering, Etc.
Bitcoin Treasuries - This is written by a Bitcoin hater (Matt Levine), but it’s nevertheless worth reading, for the insight it offers on why Bitcoin treasury companies make sense at the moment. Every Bitcoin in a treasury is worth two to a Bitcoin treasury company, which means that they’re incentivized not just to buy lots of Bitcoin but also to not sell. The irony is that the author doesn’t recognize that this dynamic is much worse in a fractional reserve system with dollars at a bank.
Privacy as OPSEC - A bit of a sober reminder that cold storage is just one aspect of good OPSEC. As the article argues, any privacy loss makes you just as vulnerable as your physical person is in many ways a lot easier to capture than your seed phrase(s). Privacy is a security issue and paying more attention to it as we enter a bull market is a good idea.
Ashigaru Whirlpool Vulnerability - The new coin mixer software has some vulnerabilities related to its implementation of RSA blinding for the coin join. The blog post is refreshing for its honesty, particularly with respect to how they mis-analyzed the vulnerability before figuring out how it works, and then finding another more serious de-anonymization technique that would work based on the signing rounds and what keys were used.
Quick Hits
29,000 BTC - Is the amount of BTC held by the US Marshall service, according to an FOIA request.
4225 BTC - That’s how much Strategy stacked this week, who wasn’t the only one to stack.
Identity Endpoint BIP - There’s a proposed BIP for generalizing LN addresses for domains to identify the user being paid.
BIP 353 Bounty - Matt Corallo is offering some money for someone to implement BIP353.
Modern Alchemy - Apparently, someone has figured out a way to generate 5kg of gold per year from mercury using about a gigawatt of electricity generation in a fusion reaction.
Fiat delenda est.