Bitcoin Tech Talk #313
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What I've been working on
Dictator’s Handbook - I enjoyed this book as it was a masterclass in realpolitik and game theory of governance. The main message of the book is that you can’t get people to do the right thing just by beating them over the head with it. You have to ultimately incentivize them, either through increased power or increased wealth. The part that I don’t think the authors fully appreciated was fiat money’s role in enabling theft by dictators and democracies alike. Still, it’s well worth reading and it’ll give you an appreciation of how Bitcoin makes the depressingly destructive governance as described in the book obsolete.
Gold Wars - This was a book I started before Dictator’s Handbook and finished after and it’s got a lot of explosive allegations against how gold price is manipulated. The main lesson for me was that custodians can and do abuse the trust that’s given to them through rehypothecation, swaps and other financial games. Gold’s physicality is ultimately its downfall as securing it is so precarious and prone to error. The resulting centralization has meant that bankers have been able to manipulate the price in many different ways. Worth reading, even if the author seems completely ignorant of Bitcoin.
The Case for Children - The article should be dropping later today on Bitcoin Magazine where I make the case that there’s been a 100-year debasement of the family and specifically a devaluation of children. This one hits pretty close to home for me as I’ve seen the country of my birth go from a relatively high birth rate to below 1 per woman. Fiat money, as you would expect is to blame and I believe Bitcoin will help us properly value children.
What I'm up to
Italy - I’ve been in Rome, the eternal city, the place that had over a million residents two thousand years ago! I’m appreciating the ancient architecture, the genius art and the general European vibe of the city. I’ll be doing a little more travel visiting Naples and Florence in the coming weeks and I look forward to seeing those places as well. If you’re in any of these places and have recommendations, please feel free to email me by replying to this newsletter.
laBitConf - The Latin American Bitcoin Conference is up for its 10th edition in Buenos Aires! There’s nothing quite like this conference anywhere in the world and as usual, it’ll be a lot of fun. I also hear Buenos Aires is a wonderful city and I’m looking forward to seeing the place.
FROST - I’m studying this protocol as it’s got a lot of interesting properties. You can get rid of the interactivity requirement if you generate private keys in a particular way at the beginning. This is a very desirable property for advanced users as MuSig’s interactivity requirement makes creating the signature too expensive. I’ll be working on this in the buidl-python repository if you’re interested.
Tweet of the Week
What I’m Shilling
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Bitcoin
UTXO Privacy - Unchained Blog has a nice primer on how to think about privacy at the most atomic level: UTXOs. As they point out, keeping privacy while receiving coins is relatively easy as generating new addresses has a marginal cost of 0. The hard part is when the UTXOs are being spent, particularly for relatively large payments. They point out solutions like coinjoins which help preserve privacy there. I suspect that privacy will be much more a second layer property than on-chain going forward.
Braiins Mining Newsletter - This is a newsletter I wasn’t aware of until recently and it’s a must-read for any miner. As they point out, September has been particularly hard for miners as the price has stayed steady while hash rate has gone up significantly. This is not surprising since during the bull market, hash rate was lagging due to the ban in China. I suspect that this bear market will be the most bullish for hash rate that we’ve had.
Bitcoin v2 P2P - BIP324 continues to progress, with some improvements in traffic privacy. The protocol is a lot more geared toward preserving privacy between nodes by making sniffing much harder. The P2P layer could use a lot of improvements but the base of how it works hasn’t changed since its inception. Given that it’s not consensus-critical, this speaks to how momentum with the current protocol and getting agreement on a new one can stall improvement.
Lightning
Taro and Lightning - Ryan Gentry explains why Taro is going to add a lot of use cases to Lightning. The main thing that Taro is trying to do is allow stablecoins to be exchanged for Bitcoin in atomic swaps over Lightning. This would mean not just peer-to-peer trades, but also for fiat denominated payments. I remain a bit skeptical on whether this will catch on, because at least in my experience, the most important thing for payments is a really good UX. I’m not sure we’re there yet with Lightning.
Offline LN Payments - Great article outlining possible methods. The first is using trampoline relays, or using an escrow node to finish the payment when the receiving node comes back online. The second is using PTLCs to make conditional payments. The main thrust is that there’s some benefit to asynchronous payments on Lightning and the development of the network will likely require something along these lines.
React/LN Integration - This post from MinatoPay lets you integrate Lightning to your ReactJS app. This is a lot like Strike and other APIs to integrate lightning in that you still need a custodial account, but it’s relatively simple an lets you get set up with payments without a traditional bank account. In theory, this means someone in a non-first world country can create digital goods and services fairly easily. Let’s see if this takes off.
Economics, Engineering, Etc.
Capital Misallocation - Lubka writes this wonderful piece on Swan blog about how capital misallocation is a huge problem that Bitcoin fixes. The misallocation of capital is the sole reason we haven’t progressed that much scientifically the last 50 years and the technologies that we did get are navel-gazing narcissistic ones like social media. This is one of the great changes I look forward to as decentralized money removes the power of capital misallocation from those in power.
Immersion versus Water Cooling - I’m not an overclock expert, but this post compares the benefits of water cooling to immersion cooling. Apparently, water cooling using coolant fluid can be a lot more efficient. As hash rate goes up globally and mining becomes more competitive, we should expect tiny efficiencies like this to come to the economic forefront. We’re still not near this level of optimization yet, but we will get there soon.
ESG Criticism Sources - Level39 writes about how the source of the ESG-based criticism comes mainly from central banks! This is not a surprise as so much of it is so obviously shoddy research and the claims are just plain ridiculous. Exposing the games that these bureaucrats play with academia, media and Hollywood is something we need to do more forcefully to thwart these baseless criticisms.
Quick Hits
ZCash Spam Attack - The zero-knowledge proofs are big and they can bloat the ZCash blockchain by a lot. Decentralized in name only.
More Printing to Come - At least according to the inimitable Arthur Hayes. He cites the current energy situation as a major reason why.
Mining benefiting Rural Communities - Too much “crypto” and not enough “Bitcoin” in the article, but it’s true. Rural Texas communities are getting jobs from Bitcoin mining.
38 lonely people - That’s how many daily active users are on DecentralLand, a $1.3B market cap project/altcoin. If there’s any doubt this is a money grab, here’s your proof.
Fiat delenda est.