Lightning is the Internet We Always Wanted. Bitcoin Tech Talk Issue #199
Oftentimes in technology, what’s created to serve one market ends up serving some other market. For example, Viagra was originally a medicine to treat hypertension. It wasn’t until the people doing the drug trial wouldn’t give the medicine back that they realized it had other uses.
The internet was originally created to connect universities and research centers in a decentralized way to collaborate. Of course, the internet has affected far more than universities and research centers. People have preferences and the way they use something isn’t necessarily the way the designer intended.
Lightning, much like Bitcoin, was seen by many as a way to do quick payments. While this is certainly a huge feature in Lightning, we’re finding that there are much more interesting use cases being explored. For example, whatsat is an end-to-end encrypted and decentralized messaging system, with far better privacy than any messaging system out there. This is largely due to the lack of a third party to coordinate the communication.
What’s intriguing about Lightning is that, much like Bitcoin, payments might not be the killer app! Having a native payment platform is an important feature, but the decentralized nature of the Lightning Network lends itself to all sorts of privacy-preserving, decentralized applications.
Imagine a LN-based Twitter, for example, where no users can be censored and a market for data preservation exists. The cost of running a Lightning node means that such an app has natural Sybil-resistance. In a sense, this is the internet we’ve always wanted. A place that’s really decentralized instead of being a bunch of walled gardens as it currently operates. It’s probably going to take a long time to get this new internet, but for self-sovereignty’s sake, something worth building.
Nadav Ivgi has designed a language based on miniscript. This is a much more natural way to think about Bitcoin smart language scripting versus Script. The code is available on GitHub and should be a great way for developers that want to learn miniscript to get started.
Thor has written about new ways to encode private key data for humans. Instead of a seed phrase, they’re researching alternative ways to encode the 128-256 bits of information using visualization and sound which are more fitting for a human brain. Some ideas include music, pictures, symbols, 3d objects and even physical gestures. It may be possible some day to regenerate a seed based on a dance routine (!)
You can now fund Bitcoin developers directly! This is an interesting initiative to see if this economic model for funding will work. It’s a lot like Patreon, but without the exclusive content or the overhead of being on the Patreon platform. I’m a little bit pessimistic about these kinds of efforts as usually, donations become a tragedy of the commons problem. That said, perhaps the better marketing will aid in getting their value out to the general public.
Christopher Calicott has written a long, but worthwhile paper on all the reasons why investing in Bitcoin makes sense. The paper goes through the macro environment and shows how Bitcoin was made for a time such as this.
LN Markets is a way to trade derivative markets on the Lightning Network. The market uses discrete log contracts to provide peer-to-peer derivatives. This turns smart contracts on its head by not putting anything into a blockchain, but only making the contract available to the people that are concerned, usually the two parties and the oracle. If smart contracts are useful more generally, this is the right architecture to use instead of announcing everything to everyone like Ethereum does.
Breez has an interesting post on all that they’ve encountered building a lightning wallet. The post has a lot of interesting engineering problems they encountered, including putting a Lightning node on a mobile device, the CPU constraints, use of Neutrino, various routing problems that they needed to solve, including “zombie” nodes. Well worth reading if you want to know what considerations need to be taken into account to build a Lightning application.
Economics, Engineering, Etc.
Unchained Capital has a guide on getting Bitcoin loans. The article explains the risks of rehypothecation and the various fees you can expect. In addition, they cover the loan-to-value ratios and the tax implacations. Loans are going to become a much bigger part of the ecosystem in the future as losing the upside of Bitcoin will become more and more painful.
Chainalysis has published an analysis of how they caught the Twitter hacker. The hacker apparently had been selling OG accounts before doing the Twitter hack and the big break was a Binance account that was used to cash the BTC that the hacker received. As usual, the weakness in Bitcoin privacy are the central points like exchanges which generally have AML/KYC requirements that make this sort of sleuthing easy. In other words, blame fiat for getting caught, not Bitcoin.
Ledger had a data breach of its marketing database. Nobody’s funds were lost, but this doesn’t bode well for that company. Many exchanges experience some sort of downtime 6-12 months before a theft, indicating that engineering sloppiness in one part of the business translates to other sectors. That said, they’ve been in operation for 5+ years now, so maybe one such incident isn’t that bad. If you provided marketing information to Ledger, you may be a target going forward.
My podcast this week was with Parker Lewis on Banking. I was on the Bitcoin Magazine Live Stream talking about the anniversary of The Little Bitcoin Book. I did three shows with Tone, one on Defi, localbitcoins and the demise of Tetras Capital, another on Ethereum 2.0, Russia and the PlusToken arrest and finally, the Bitcoin Independence Day show.
Fiat delenda est.