Tempering Enthusiasm For Corporate FOMO. Bitcoin Fixes This #209
Microstrategies isn’t the only company to invest a ton of money into Bitcoin. Square revealed that they invested $50M into Bitcoin making this a trend. More importantly, they published exactly why. This is an obvious template that they’re hoping other companies will use to justify buying Bitcoin.
Bitcoin has always had this virtuous cycle. Those that buy it want other to buy it and become the best evangelists. At the retail level, this has been true for a very long time. I’m sure many of you reading this newsletter have talked to your friends and family about buying Bitcoin, for example. There are a lot of aligned incentives here. If you can get other people to buy Bitcoin, it makes your own investment better. To get other people to buy is not a simple thing and generally Bitcoin holders learn to explain Bitcoin and the case for Bitcoin over and over.
We’re now seeing this at the corporate level and boy is this going to be sweet. Retail FOMO is one level, corporate FOMO is going to be at another scale. Microstrategies obviously wants to get other companies to put their unproductive cash to Bitcoin and they have a great argument. Square’s made an even better one. Once we get more companies doing this, we’ll hit an inflection point where near every CEO and CFO will be talking about it.
We’ve seen this before, this is what a bull run looks like. It starts off slowly, but at some point everyone starts talking about it. There were many reports of NFL locker rooms back in December 2017 being abuzz with Bitcoin. I’m sure many other retail investors were saying the same. Think about this at a corporate level and how much this will affect everyone.
Of course, that’s not the whole story. There’s a downside to bull runs and that means there will be a top. The question is, what will happen once we start a bear market? Will companies dump insane amounts into the market? What we’re about to see in the next year or two is going to dwarf anything we saw in 2017 on the way up and on the way down.
Bitcoin
Floating Point Nakamoto Consensus is a way to break ties between chains that have the same number of blocks. This is an interesting idea which has been circulating on the bitcoin-dev mailing list. The problem that this solves is that currently, miners are motivated to withhold blocks they’ve found to get an advantage on the next block. I hope this becomes the standard to remove incentives for intrigue and deception among miners. A system that’s more open and transparent is always better for the rest of the Bitcoin community.
Casa has published an article detailing how you can use their service without revealing who you are. The idea itself is intriguing as it lets Casa off the hook should a court file a subpoena to get data about its customers. They simply won’t have it. The process seems reasonable enough, using a pseudonym and email that only you know. I hope that they have a product some day to make this much easier. Maybe a Casa pseudonymous service box which will connect everything through TOR and set up email accounts and such.
BlueWallet has implemented PayJoin into their latest release. PayJoin, if you don’t remember, is a coinjoin protocol where the recipient adds some inputs to mix with the payment input. I hope PayJoin becomes a standard for any normal payment to merchants to increase anonymity sets. In a way, this could be an organic way to increase spending. If anonymity sets can be increased with each spend, there’s now a decent reason to do it.
Lightning
lnd has announced a vulnerability. This vulnerability only affects lnd (not c-lightning or eclaire) and the disclosure will be announced in full on October 20. In the meantime, they urge an upgrade to 0.11 or above.
Economics, Engineering, Etc.
Nic Carter has an article on fee cycles. The main trend he points out in this article is that fees regulate themselves. When they get too high, everyone paying fees adjusts to reduce the fees that they’re paying which culminates in fees getting lower. This is now a phenomenon that’s starting to appear on Ethereum. The fees lowered each time on Bitcoin because it’s pretty straightforward to reduce fees on Bitcoin. Batching and using segwit, for example, are obvious solutions. With Ethereum, such optimizations don’t seem so simple. After all, the kinds of contracts that are being evaluated are not uniform and are not usually written with space optimization in mind.
Speaking of the current Ethereum fee situation, Atomic Loans has published the reasoning behind their pivot from Ethereum to Bitcoin. They’ve been in the Ethereum ecosystem and have seen first-hand what a crazy system it is, kept together more or less by sticks and bubble gum. Their analysis is sound and I think their new product of allowing bets on the Bitcoin blockchain using DLCs is going to be useful. Incidentally, if anyone wants to bet me on the price of ETH/BTC being above 0.05 by the end of 2021, ping me. We can do this on Bitcoin using DLCs and their product.
Carrot is a new sats back affiliate. The idea is that you get some sats back when you use their affiliate links to buy some product or service. If you’re not familiar with the economics of affiliate marketing, essentially affiliate sites get a cut of the sale whenever they send traffic to a store. Giving users money in the form of Bitcoin is obviously a big win, though there’s not many stores there at the moment.
The Justice Department in the US has published a framework for cryptocurrencies. As I’ve said before, it looks like they’re paying attention to our industry and trying to come up with something reasonable to use. If the SEC/CFTC indictments are any indication, I’m going to guess that a lot of people are going to pay to avoid jail time.
Podcasts
My podcast this week was with Isaiah Jackson on Black America. We talked about how to talk about Bitcoin in the black community, the political situation the black community finds themselves in and how the media narrative hurts the black community.
My books have been known to cure no-coinery.
Fiat delenda est.