Bitcoin Tech Talk #318

This is a paid newsletter. If you’re an open source contributor to Bitcoin projects, please email me with your contributions and I will give you complementary subscription.

What I've been working on

  1. The Debate - I was at laBitConf this past week and this is the panel everyone is talking about. The panel had Samson, Vitalik, Diego, Rodolfo and others, but the main message that I had during the panel is that “don’t trust, verify” has been corrupted by altcoiners and that’s resulted in tragedies like FTX. I admit being very spicy during the panel and I wish Diego didn’t interrupt the discussion I was having with Vitalik as his comparing Satoshi’s creation of Bitcoin to “useless coin on Bitcoin” is just utterly disingenuous. Satoshi didn’t premine a bunch of coins and it required proof-of-work. The crowd was obviously pro-Vitalik, and I really hope they started understanding that trusted third parties really are giant security holes.

  2. Don’t Trust, Verify - I said basically the same thing to many reporters about FTX and how too many people are trusting and not verifying. Especially in Latin America, where trusting central banks bites you in your wallet on a continuous, obvious way, this message really needs to be spread far and wide. Trusting USD, in particular seems to be their alternative, but that’s proving to be pretty bad given the inflation the last few years.

  3. Central Banks and Politics - I was on the Bitcoin Magazine podcast to talk a little politics and central banks. It’s all a bit moot now that the election is over, but still, the inevitability of fiat collapse seems pretty relevant. I see the current system as a problem of incentives. The politicians are incentivized to think very short term and are thus very high time preference.

What I'm up to

  1. Buenos Aires - I’m loving this city with the abundant, delicious meat. That said, being here is showing me just how broken the monetary system is. I can’t use my credit card unless I want to pay an 80% premium on all goods and services, so I’ve been converting USD and BTC to local cash. Sadly, the highest bill is a 1000 peso bill, which is worth around $3.50. Carrying even $100 is a thick wad of bills and it’s not fun having to count so many bills. The western world really does have a lot of financial privilege and it’s not obvious until you’ve counted hundreds of bills many times a day.

  2. Chile and Uruguay - I’m planning to visit both places over the next few weeks. Please let me know if there are any must-see places or interesting things I need to try! I’m especially interested in interesting landscapes or cool places to visit (particularly for photos!) Please reply to this email if you have suggestions.

  3. More articles - I have a bunch of thoughts that I really need to write down for some articles in the near future. I’ve found that going to conferences and talking to people clarifies my thinking and I want to write them down, for myself, more than anything. Look for some articles the next few weeks, probably in Bitcoin Magazine.

Tweet of the Week

What I’m Shilling

  • Unchained Capital is a sponsor of this newsletter. I am an advisor and proud to be a part of a company that’s enhancing security for Bitcoin holders. If you need multisig, collaborative custody or bitcoin native financial services, learn more here.

Bitcoin

Sunday Advice Of The Experts - Dilbert by Scott Adams

  1. SatsSale - This is a plug-and-play PoS system that hooks into your Bitcoin node. It’s similar to BTCPayServer, but can connect remotely. This way, you can run your PoS system in one location and connect to your node at home. I like the idea, but I suspect that for most vendors that want a PoS system, they want someone to call to fix things when they don’t work, which probably means there’s a business opportunity here.

  2. Nonce Covert Channel Attack - The article here goes through an attack made by the firmware of a hardware wallet manufacturer to leak the keys inside the hardware wallet. This is a weird attack and assumes the offline hardware is compromised while another device that’s online is not. Still, there are mitigations by making sure that the randomness in the transaction uses some of the randomness in the trusted online device. This attack is worth knowing, especially as it sheds light on how transactions themselves can be used for communicating something other than the transaction.

  3. Python Developer Address Replacer - This is a nasty attack against python developers. There are a bunch of packages with the wrong name “ipyhton” instead of “ipython” which will drop a malicious JS into your environment which then replaces any copied address from your browser to one of the ones designated by the hackers. Be very careful installing this as copying an address from your gmail may be replaced (and lost!) if this malware gets on your computer.

Lightning

  1. LN+ - This app is a way to trade inbound liquidity with people you know and it’s now available to install on your Umbrel node. Liquidity swaps are an important way to make the lightning network more robust and reliable so an app like this helps everyone. I would love to see more stats around various nodes so liquidity swaps can be more intelligently made.

  2. PlebLab - This Bitcoin-only and Lightning focused startup incumbator is taking applications in Austin, TX! If you have a product or idea and want to be in a community of like-minded individuals, this is a great program. The main benefit of programs like this is that by talking to a lot of people that share the same ideals, you can really refine your product to what the market really wants. I daresay that Austin is one of the best places in the world to do this.

  3. Lightning Report - The latest report from LN Capital goes over how channels are getting larger and the implications of that for the network. The bigger channels indicate that there’s a lot more usage and node operators are willing to leave more money in lightning. This shows that more of the capacity is being used and more transactions are happening. The full report is very bullish on Lightning, which, unlike altcoins, continues a slow and steady climb.

Economics, Engineering, Etc.

  1. FTX Charges - FTX is under criminal investigation as a result of the many different things that happened this week. First, their close ties to Almaeda were made public. Then it was revealed that their main asset was their own printed token FTT. CZ got into the fight by announcing a sale of the FTT tokens they held which in turn caused a bank run at FTX. It turns out that they were insolvent by a significant amount and SBF apologized. The amounts left in their exchange were “hacked” and completely drained. Now SBF looks like he’s on the run, joining the likes of Do Kwon in trying to outrun the people they’ve screwed over.

  2. SEC LBRY Ruling - The SEC has ruled that LBRY is a security, which likely means a lot of other tokens are going to get the same treatment. Given what’s happened with the FTT token, I’m guessing there’s a whole lot of regulation coming around this stuff and I wouldn’t be surprised if altcoin trading in the US goes down drastically. Single points of failure will be severely tested over the next few years and anything centralized will likely feel some pain.

  3. Peak SV - Allen Farrington makes the case that “crypto” is the logical end of the fiat games of silicon valley. As he points out, the yield chasing, dematerialization and access monopolization are all useless fiat games of pushing paper around to get something for nothing. The chickens are coming home to roost and this game isn’t sustainable, so it won’t be sustained. Let’s hope it crashes before it hurts more people.

Quick Hits

Image

Fiat delenda est.

View on Substack