The Great Bitcoin Reset. Bitcoin Tech Talk #242
The past year and a half has completely overturned the world. The world is still locked down in large swaths, we went through a pretty contested presidential election and there were social protests of all types all over the world. The Bitcoin community and its perception in the mainstream have also gone through a significant amount of change in the past year.
Not only did Bitcoin survive a huge crash in March of last year, but Bitcoin also went through its third halving, kick-starting a supply shortage that resulted in another bull run. More than that, however, has been the narrative change around Bitcoin. Few people are now challenging the store of value narrative and few altcoins talk about usurping Bitcoin.
There’s also been a separation of Bitcoin from altcoins and the differences are better understood by the market. Institutions have started getting in and we’re seeing a financialization of Bitcoin, or rather, the Bitcoinization of finance that we hadn’t previously seen.
Sure, there are still altcoin pumps and people printing their own money, or non-fungible versions thereof, but the narrative is clearly Bitcoin and it’s very different than, say, 2017.
This shift is reflected in the conference coming up this week, Bitcoin 2021. This conference will be breaking all sorts of Bitcoin conference records and unlike, say Consensus 2019, which is best remembered for having Tron creator Justin Sun’s face everywhere, the focus is on Bitcoin, and not on scams. The industry is maturing and it’s obvious that there’s intellectual depth to Bitcoin unlike the flash-in-the-pan promises of everything altcoins. We’re going to see really interesting talks about the future of Bitcoin and not marketing drivel to get you to buy some token that the speaker is backing.
Just look at the content that Bitcoin 2021’s organizers, Bitcoin Magazine, have been putting out in comparison to the articles from Consensus’s organizers, CoinDesk. The difference in analysis, thoughtfulness and value is stark and it’s clear the center of gravity has shifted. The pump and dumps have left a lot of altcoiners jaded and tired, while the proven value has left Bitcoiners energized and excited.
In other words, the industry as a whole is becoming more Bitcoin and less “crypto” and this conference is one of the major indicators. And boy, do we have a lot of celebrating to catch up on. Halving, ATH, Trillion dollar market cap, possible ETF and Taproot among other things are worthy of celebration and should make for a good time.
A new Taproot signaling period began on Saturday. BTC.com seems to have completely upgraded and is now consistently signaling. As every major pool is now signaling with MARA being the lone exception, about 97.5% of hashing power is signaling for Taproot. When this signaling period closes around June 12, Speedy Trial should be locked in and ready to go.
A new paper puts forward a better algorithm for block transaction selection to optimize fee revenue. The paper does a good job of showing how Child-pays-for-parent transactions in aggregate can have better per vbyte fee rates than the root transaction might have. The construct of treating these as a single group should make the fee calculation much easier and should improve miner profitability.
Speaking of CPFP, Antoine Riard explores the various fee-bumping strategies, which are particularly important for second layer protocols like Lightning. CPFP, input-based fee bumping using SIGHASH_NONE and SIGHASH_SINGLE are explored as well as one potential new one in SIGHASH_ANYPREVOUT. Among other things, Antoine shows how using SIGHASH_ANYPREVOUT, fees can be bumped for whole chains of transactions, which in turn could represent a large number of Lightning channels. Something to think about as ANYPREVOUT is on the docket as a possible next soft fork.
Lightning Labs introduces Sidecar Channels, a way to onboard new users onto the LN very quickly. Their Lightning Pool is a liquidity provider market with lots of inbound channels and someone can buy inbound channels for nodes that haven’t yet been spun up. Essentially, inbound liquidity can now be purchased without the need to have Bitcoin. This is great for a more seemless user experience which entrepreneurs can take advantage of.
Michael Levin argues that Lightning will be the technology that crosses Bitcoin into the mainstream. The article’s model of tech adoption is based on a famous book, Crossing the Chasm. Levin argues that the Chasm crossing will happen as Bitcoin becomes more a payment mechanism. I’m not sure I entirely agree, but I do think there’s something there about money’s general adoption curve. Store of value, method of payment then unit of account.
Economics, Engineering, Etc.
BitOoda has an analysis of what’s going on with Bitcoin mining in China. Many miners are anticipating a ban, so are looking for new places to deploy their equipment. As BitOoda points out, this is not likely going to be easy as there aren’t that many places that can take the amount of equipment and put them to use. They predict that mining equipment prices will go down as a result of the selling pressure. The mining economic dynamics are fluid and very interesting and worth keeping an eye on.
Hodl’n Caulfield and Selene Lindstrom show how energy is crucial to civilization and how Bitcoin is set to make it much better. As they point out, it’s not energy production, per se, that is valuable, but ordered energy, particularly in the form of electricity that is valuable. As electricity is not that portable, energy production requires a significant amount of capital expenditure to make electricity available. They predict that miners will eventually just be electricity providers and theorize about the prices at which they’ll secure the network.
Alex Gladstein makes the argument that Bitcoin is a huge humanitarian benefit. As he points out, aid from western countries usually sets back domestic industry in the less developed countries. Bitcoin gives such places a way to bootstrap energy as there’s a natural market that requires much less infrastructure. His suggestion for improving these countries through markets, including Bitcoin, instead of straight up aid is worth contemplating.
Vlad Costea makes the excellent point that all this talk of green energy mining and ESG isn’t at all about the environment or diversity. As he argues, it’s all about control and we should be very wary of such restrictions being used as an end-around to centralization. He essentially makes the argument for Bitcoin toxicity, should any of these talking points become ways to centralize. Read the piece and understand that we have to protect decentralization and that this is a necessary part of Bitcoin’s value proposition.
Arthur Hayes explains why dollar expansion is what matters. As usual, his style is irreverent and he makes connections you wouldn’t expect. Ultimately, his argument comes down to, inflation is out of control and it’s bullish for Bitcoin.
Haas McCook dissects Elon’s tweets and show how he is wrong.
There’s a new Bitcoin FUD-busting site.
A look at how many times China has banned Bitcoin.
Colorado has shown interest in collecting taxes in crypto.
Vijay Boyapati is releasing his book as a kickstarter. I can’t believe I didn’t think of this. I’m totally going to do this for my next book (probably in the fall).
An interesting thread on how institutions manipulate the market.
Another week, another DeFi project scams its users.
I’m in Miami for Bitcoin 2021 this week. I am hosting a Christian Bitcoin Prayer Breakfast on Friday, June 4th at 8am near the conference venue.
I will also be at The Bitcoin Standard conference on August 12-14 in Mexico.
The Programming Blockchain seminar is in Mexico on August 10-11. 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 Adam Dirks and Bethany Hamilton about identity. Adam and Bethany talked about how to stay grounded in a social-media obsessed world.
As usual, I read through last week’s newsletter on Twitter Spaces which you can find here. I was on a podcast previewing Bitcoin 2021.
I was also on Theology of Business to talk about Bitcoin and the new book:
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Fiat delenda est.