LSAT, paying for API calls one at a time. Bitcoin Tech Talk Issue #182
One of the reasons why surfing the web can be slow and annoying is the presence of ads. Unless you’re tech-savvy and know how to install ad blockers and filter out the noise, it’s a constant part of our digital experience on the computer. On our phones, it’s even worse as those platforms make ads the centerpieces of the freemium experience.
The reason ads are so ubiquitous on the internet is because of the need for revenue. Most websites are free to read, but producing the content, not to mention all the infrastructure needed to support it, is by no means free. As the prices that need to be charged on a per-article basis is way too small for the de-facto payment system on the web (credit cards), we are stuck with having to watch ads, which are honestly a poor substitute for what should be a simple, market-based transaction. Of course, this is just one of many problems on the web due to the lack of what I would call micro-payments. It’s simply not worth it for current payment systems to process $0.005 transactions.
There is now an alternative. A decentralized, payment system that’s instant and trustless. Lightning has always had the promise of being able to solve the problem of micropayments. We finally have a framework by which such payments can be made.
Lightning Labs has come out with LSAT, a protocol for an authenticated API. Here is the blog post announcing it. Essentially, LSAT is a way to pay for API calls in small enough increments through the Lightning network. This is a different model than the typical paid API, as generally, they require some sort of subscription or payment per 1000 calls or the like. Lightning has always had the potential to disrupt this as very small payments can be made.
The possible uses for this are endless. For example, someone could deploy a lightning-connected temperature sensor in some remote part of the world and make readings available via LSAT. Raw data would be available to anyone who wants it for a fee. Micropayments make the division of labor around large-scale projects easier and I hope this sort of thing takes off.
Bitcoin
If you’re a developer wondering why testnet has so many more blocks than mainnet, Jameson Lopp has written on the difficulty adjustments on testnet. Essentially, the desire to make testnet more consistent with respect to finding blocks has made reorganizing hundreds, sometimes thousands of blocks pretty easy. This has caused many software implementations to corrupt their dbs or even crash. If you’re making a Bitcoin product and testing on testnet, reading about how this works is a must.
Ruben Somsen has written on the perpetual one-way peg (P1WP) as a way to experiment with sidechains. This is an interesting idea to test whether anyone would make an altcoin if there were no premine or rewards or even a separately mined token. The main mechanism is use of token burning (a la Counterparty), but done perpetually and also using Blind Merge Mining as a way to give the chain Bitcoin-level security. The idea is nice in theory, but I suspect that there really aren’t that many projects that can afford to develop something like this without the funding that comes from token sales or mining. That said, I would love to see some sort of decentralized identity with the public key infrastructure in a P1WP sidechain as an alternative to GPG and the like.
BTSE Academy has written a nicely readable overview of the benefits of Taproot. They cover the privacy and scaling benefits well and go through some practical examples to boot. Now if only wallets would start incorporating these features…
Lightning
Bitfinex has expanded the capacity of Lightning BTC withdrawals. As volumes on exchanges increase, this will be an essential part of the strategy to scale, along with Liquid as fees increase. Exchanges are almost always the largest users of the block space, so a maximum of 0.5BTC per withdrawal is welcome. The next bull run will likely build up this or some other technology as necessity is usually the mother of invention.
Lightning Labs has also announced Faraday, which is software that helps manage your own node. As most channels are essentially lines of credit that lock up your bitcoins, managing underperforming channels and putting them to better use is a critical part of getting the most profit out of your node. As such, this software should help a lot in making node management for routing nodes a lot better.
Economics, Engineering, Etc.
Veriphi has written a summary of why fiat money is the real virus. The argument made in the article is that most people are turning to Bitcoin, not because they’ve studied and learned the benefits, but mostly because they have to as a result of continual money printing. It’s a long but worthwhile read, covering Bretton Woods, the benefits of Bitcoin and many other monetary topics in between.
BitMex Research has an excellent article on the unprecedented volumes we saw in March. They have excellent segmentation of the spot and derivatives markets and the general conclusion is that as far as Bitcoin is concerned, the volumes were unprecedented.
Coinbase has a more focused look in a blog post on the volumes they saw on March 12th. They report that they experienced way more people buying on that day, among other things. The trigger seems to have been liquidations of leveraged positions which they claim is similar to the 2008 crisis where gold made a similar move.
As Bitcoin demand keeps surging, this site is an interesting view into where Bitcoin is in demand. The site gives information on where there’s a premium/discount on Bitcoin and encapsulates not just the demand surge, but also the effect of capital controls. I suspect that the disparities will only increase in the next 18 months.
Despite the unprecedented volume across many exchanges, it seems BCH isn’t experiencing the same level of interest. Bitcoin.com laid off half its staff. This may or may not have something to do with the BCH halving coming up this week. What’s fairly clear to me is that this is a company that’s been subsidizing the BCH ecosystem in one way or the other for the past 2.5 years. As that subsidization gets more and more costly, something has to give, as it has for the other company that’s been subsidizing BCH, Bitmain. Bitcoin.com has spent a lot of money promoting BCH at various conferences and promoting merchant adoption with little price appreciation to show for it (combined BCH+BSV price is below what the then-combined BCH futures were trading at before August 1 2017). That which is unsustainable will simply not be sustained.
Podcasts, Etc
I did a podcast on Crush the Street, mostly about what the Fed is doing but also about how that affects Bitcoin. For those interested in economics, this may be a good listen.
I also did two shows this week. The first is a summary of Statechains and the second is a readthrough of the first half of Nick Szabo’s Shelling Out.
My books are available if you want something to read during your quarantine.
Fiat delenda est.