Future of Light Wallets. Bitcoin Tech Talk Issue #190
Light wallets that have to trust one or a group of third parties is essentially the SPV model. The SPV model is pretty broken. There is an alternative with Neutrino which uses a less vulnerable protocol, but Neutrino-based light wallets haven’t really been tested much. The only real alternative for self-sovereign light wallets is to use a personal server. That is, such a wallet uses a trusted server from home to get the data it needs.
Electrum is an early light wallet that allowed for this model. Using a third-party Electrum server makes Electrum equivalent to the SPV trust model. Using a personal Electrum server makes Electrum a self-sovereign light wallet.
This requires, among other things, Electrum-server allows for arbitrary address lookups. Having your own trusted server on the backend is better than, say, trusting some third party from not just a security perspective, but also a privacy perspective.
Unfortunately, one of the easier to use electrum server implementations, ElectrumX has gone full BSV. Thankfully, as the protocol is open-source, shesak has created an interesting new project on GitHub for watching Bitcoin wallets. It’s called Bitcoin Wallet Tracker and uses Bitcoin Core to keep track of your HD xpub addresses and adds programmable hooks for transactions related to those xpubs. This is meant to be an alternative to Electrum Personal Server and has great potential to be a nice backend for light wallets.
As we move toward better light wallet implementations, such open source software becomes a critical part of the infrastructure and the more decentralized those are, the less vulnerable the network will be.
Bitcoin
Michael Ford (fanquake) writes about 4 different issues he’s been working on in Bitcoin Core. These are all subtle bugs related to building Bitcoin Core on different platforms like Windows, MacOS and BSD. The post details why these issues are being fixed, how subtle they can be and the fixes that were deployed. I guarantee that this level of analysis is not happening in a project like Ethereum.
Jameson Lopp has released an open source transaction size calculator. Fees are an annoying, but crucial part of transaction construction. This is a tool that helps with calculating exactly how big transactions will be. Exchanges, please pay attention. This tool can give you a good idea of how much you’d be saving by, say, not using inefficient P2SH addresses.
Chris Belcher has a deep analysis of CoinSwap, which is a coin anonymizing protocol proposed by Greg Maxwell back in 2013. He proposes using ECDSA-2P, which is similar to a Schnorr Signature, except done using ECDSA as a way to improve the anonymity set tremendously. The idea requires some sort of Liquidity market where interested parties can find people to swap coins with. I suspect that this may be the one centralizing point which undoes a lot of the anonymizing that would otherwise be possible. Still, it’s an excellent analysis and I hope research into this sort of technique progresses.
Lightning
The eye of Satoshi (TEOS) is a Lightning Watchtower project on Github. Written in Python3, watchtowers allow you to punish bad behavior in payment channels. It’s a fairly new project, but one with some promise.
Economics, Engineering, Etc.
Goldman Sachs made some news this week with their outlook on Bitcoin. Here’s a nice summary of all that they got wrong. This includes the “used for bad stuff” narrative, that there are other cryptos which are scammy and that it’s volatile. As Cameron Winklevoss correctly points out, these are all talking points from 2014. They seem to be about 5 years behind in their analysis, or as some suspect, they’re trading against their clients. For a more current and better thought out perspective on Bitcoin, check out Matt Huang’s 7 things to read about Bitcoin for institutional investors. This amidst the news that Grayscale has bought up more Bitcoin than has been produced post-halving!
Sylvian Saurel argues that Central Bank digital currencies are a Trojan Horse for Bitcoin. The argument is sound. Digital currencies will get people used to digital things having value and many will pursue decentralized alternatives once they start feeling the effects of monetary expansion and lack of privacy.
Podcasts
Bitcoin Tech Talk this week read through the open hardware initiative from Trezor. Whitepaper Wednesday was part 1 of Adam Back’s Hashcash paper from 2003. I did a show earlier in the week with Tone on more early addresses calling CSW a fraud and another later in the week with Tone on the Goldman Sachs report among other things.
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