A person recently asked me about what I thought the world would be like on the Bitcoin standard. Would it be less dangerous or more dangerous than now? How much in resources would you have to put into security, especially if you’re very wealthy? How should we prepare for such a scenario?
This topic comes up because the future is very uncertain. We don’t know when some cataclysmic event may happen, and as the past 20 months have shown, such events can have some serious knock-on effects that change nearly everything. Bitcoin, in that sense, is a giant change that will have significant consequences in all aspects of life.
I spend a lot of time thinking about this and enjoy trying to figure this out with other people on my podcast, Bitcoin Fixes This. I’m optimistic about how Bitcoin changes things and how it’ll fix a lot of the problems we see, which is what makes interviewing people and speculating about the future so much fun. That’s not to say that there are no downsides. Indeed, a lot of what we take for granted now will have to be re-thought.
One of those things is personal security. To be fair, this is atop a lot of peoples’ minds, especially recently, but there are parts that we take for granted. Most of us don’t fear being kidnapped because this is not a common crime in the first world. This is because the fiat monetary system makes it very hard to transfer significant amounts of money without revealing who you are. Hence, such transactions in the past have to been done in cash. Cash, however gets very heavy. Using $100 bills, $5M ends up being about 100 lbs. Given how expensive and risky such an operation is, kidnapping literally doesn’t pay enough.
Under a Bitcoin standard, the equation changes. Now kidnapping has a higher payout because the transfer of money is less of a problem. There’s no central party that can stop the transaction, nor a practical limit on how much cash can be delivered and carried, so the kidnappers can demand a lot more money.
This won’t only suck for Bitcoiners, but anyone that’s rich. Kidnappers don’t have to target Bitcoiners, they can target any rich person. As long as they receive payment in Bitcoin, they won’t care where the money comes from. As a result, there won’t be a cap on the money they can request. Nothing stops them from demanding a billion dollars’ worth of Bitcoin for the return of a billionaire’s child, for example.
What this means is that everyone will have to focus a lot more on security. This doesn’t necessarily just mean armed guards and intrusion detection system but also where you live. A place that offers better security services will be rewarded accordingly. Indeed, there will be a thriving private security market whose competition with one another will spur innovation. Similarly, security products that allow people to defend themselves will also thrive.
The pattern here should be familiar. Centralization generally gives a little more safety in return for less liberty. When taking back that liberty, responsibility comes along with it, in this case security over us and our loved ones. This is scary, not just to people that are used to being coddled by the state, but even to die-hard libertarians who want nothing to do with the state. In a sense, we’ve been lulled by not getting to exercise our personal security muscles. Liberty doesn’t come for free. It always comes with some form of personal responsibility.
This is why I am so optimistic at a societal level about Bitcoin. More personal responsibility means more responsible people. And more responsible people means a more moral, industrious and thriving civilization.
BitcoinIDE is a way to visualize the stack programming of Script. This is especially useful for developers and complex scripts. Indeed, with stuff like miniscript, the actual execution is not at all obvious by looking at it. I think this is a great teaching tool and I hope additional features, particularly around Taproot come in soon.
Specter wallet now supports Blockstream’s Jade hardware wallet. The two companies seem to be working together a lot more recently and the additonal hardware wallet support is great. Given that it’s a different design than, say Coldcard, Keykeeper, Trezor, etc. this wallet now deserves a look as part of a good multisig setup. I imagine that Unchained and Casa will also soon start supporting the wallet to get that extra layer of security.
Jameson Lopp goes through his tips on custody of Bitcoin in Forbes. The article is a great summary of the various trade-offs of different solutions. As he points out, the tendency of a lot of people is to outsource the custody of their coins to another party completely, such as through storing it on exchanges. This is definitely not the recommended setup as those exchanges can get hacked or compromised through government regulation. Thankfully, multisig exists to mitigate a lot of the problems of outsourcing security as you partially outsource security without giving up control.
Jonas Schnelli has stepped down as Core maintainer and contributor. I’m thankful to him personally for merging a few of my commits. He’ll be missed given his service to the community over the years. Best of luck to him as he moves on to other things.
LN Markets newsletter has a nice interview with Rusty Russell about BOLT 12. Specifically, he talks about the offers protocol which allows for much easier ways to receive lightning payments. Currently, an invoice has to be generated and sent, which requires a lot of interactivity. The alternative is to use LNURL, which requires a domain and all the costs of doing that. Offers lets you receive money without so much interactivity. The article is well worth reading and I really hope this gets implemented soon so I don’t have to generate separate invoices every time I sell a book!
ThunderHub is software to manage your lightning node. The idea behind the software is to automate a lot of hard things like rebalancing and getting an LNURL set up with it for handling payments. The software essentially acts as a dashboard to control your lightning setup. I’d love to see more routing options and so on as they evolve this product.
Economics, Engineering, Etc.
Robert Breedlove has a two part series on our most brilliant idea. The first part is about how ideas drive human civilization and how money is the driver of ideas. The second part looks at how regulation stifles the free market of ideas, essentially de-civilizing society. The two articles are a good look into why money works so well and why central authorities’ control of it is so detrimental.
ProShares ETF had quite the debut this week. Apparently, they’ve been so successful as to be approaching the 2000 contract limit for front-month futures by the CME. They were closely followed by the Valkyrie ETF, which was the topic for the podcast this week (see below). Given that they’re both futures based, both ETFs place a lot of burden on the fund managers to make sure they roll over the futures in a way that minimizes the loss from the frequent transactions. Still, there’s so much demand for this product that ProShares already has over $1B AUM. I suspect this number will only rise.
PlebLab is a Bitcoin work space in Austin. They already have a bunch of companies and plebs working out of their space and contributing to the Bitcoin ecosystem. I love that Austin is becoming the world capital for Bitcoin and communities like this are popping up. It’s clear by now that SF and NYC have lost their edge and Miami is more an altcoin capital, which leaves Austin as the geographic center. This past week had no less than 5 different Bitcoin events with hundreds of Bitcoiners participating in each one. If you’re looking for a Bitcoin-centric place to move to, you’re not going to do much better than Austin.
jbourneBTC has a thorough takedown of all FUD around Bitcoin. There are a lot of topics covered, including the obvious ones like volatility, environment, scalability and the like. What’s interesting to me when looking at it all in one place like this is how all the FUD is dependent on a lack of economics knowledge. Keynesian economics, in other words, is really a form of propaganda.
Bradley Rettler debunks the analysis of Keynesian economist Steve Hanke. Hanke, like most economists that dismiss Bitcoin, has shown some deep ignorance when it comes to nearly everything and Bradley does a good job pointing these out. Bradley’s analysis concludes with a sobering thought. People like Hanke have been beating the anti-Bitcoin drum for years and they simply refuse to change their minds. It seems being a rent-seeker gives you the luxury of never having to admit you’re wrong, which is why people like Hanke are worse than useless.
Protos.com has an interesting profile of Jihan Wu and his journey in the Bitcoin space over the past few years. As the article points out, Jihan lost the blocksize war in 2017 and lost a lot of influence. Similarly, his involvement in Bitmain also ended with him leaving the company. The article also goes into the failed Bitmain IPO, how AntPool has since been spun out as a separate company and how China’s ban earlier this year has affected their operations. For someone worth billions of dollars, it’s sad to see how far he’s fallen.
Google is really, really evil.
A firefighters’ pension fund just got into Bitcoin.
VCs continue to try to print their own money.
Ethereum gas fees are to store a bunch of zeros.
Binance had a flash crash to $8k.
I will be in Atlanta for TabConf on November 4-6.
The Programming Blockchain seminar is in Atlanta, GA on November 2-3. This is a 2-day seminar for programmers to learn about Bitcoin. You can apply here. I also have a few scholarships available for those that can’t afford it.
On this week’s Bitcoin Fixes This, I talked to John Mulroy about ETFs. John works for Valkyrie who released a futures-based Bitcoin ETF this week. I released this a day late as they finally got approval for their ETF on Friday. He’s a veteran of the industry and explained why ETFs exist and how they work.
I read through last week’s newsletter which you can find here.
Unchained Capital is a sponsor of this newsletter. I am an advisor and proud to be a part of a company that’s enhancing security for Bitcoin holders. If you need multisig, collaborative custody or bitcoin native financial services, learn more here.
Fiat delenda est.