Welcome to the new format for Bitcoin Tech Talk! Instead of shooting you links every week, from now on I’m going to hand-craft a newsletter about Bitcoin from a technical perspective and give you more of a narrative of the stuff I’m following in the Bitcoin space.
The big news so far this year is the progress of Taproot, which is the next soft-fork for Bitcoin. It’s got a whole lot of things in it, but the main things are Schnorr Signatures, Taproot/TapScript and new spending rules for Segwit v1. I read through the entirety of BIP-340 (Schnorr Signatures) on my YouTube channel. I will likely do something similar for BIP-341 this week, so please subscribe to be notified.
My Bitcoin Tech Talk show last week covered the links there along with a read-through of PlanB’s efficient market hypothesis. I believe that the stock-to-flow model will be the talk of Bitcoin from an economics perspective for the next year and a half and if you’re not familiar with it, please read (or re-read) his seminal post on the topic.
Besides Taproot, another big proposal got a BIP number: OP_CHECKTEMPLATEVERIFY from Jeremy Rubin. BIP-119 will “smooth out” transaction fees by use of a simple covenant called a “template.” The new OP code allows for congestion control, allowing commitments to payment without necessarily taking up much block space.
BTCPay announced BTCPayVault, which lets you connect a hardware wallet directly to your BTCPay server’s full node. This is very useful, especially to preserve privacy and adds security for taking payments.
Besides Taproot, there’s a lot of interesting developer-friendly things happening on Lightning. Tierion debuted LSATs, which stands for “Lightning Service Authentication Tokens.” The idea is to create an easy way to pay for content using Lightning. A payment invoice is embedded into the HTTP header creating something like a 402 Payment Required request and response.
The other major announcement was Square, who announced the Lightning Development Kit (LDK). The actual code isn’t released yet, but anything that helps developers onboard into creating Lightning apps is very welcome.
From an economics point of view, Stephen Livera has published an excellent post on mises.org debunking monetary velocity theorists. This is a great read from an Austrian perspective. Charles Edwards points out that Bitcoin may very well have been anticipated by Henry Ford with the “Energy Standard.” Henry Ford thought that instead of being backed by gold, a currency backed by energy would be better. Parker Lewis continues his excellent series “Gradually Then Suddenly” arguing why markets naturally collapse toward a single currency. The essence of the argument is that network effects converge and create incentives for everyone to settle into the dominant currency quickly.
Bitcoin Cash came out with a developer tax this week. Essentially, the plan forces all miners to fund BCH developers with 12.5% of the miner reward for 6 months (May to December this year) or else risk having their blocks orphaned. I railed about it on Bitcoin Brief with Tone. I also wrote about their very deceitful claim that the tax would essentially be paid by BTC miners. Their claim is deceitful because they’re only taking very specific first-order effects into account and not any of the others.