Bitcoin Independence Day; Fed Cuts Rates; Gold vs. Bitcoin Debate; >85% of Coins Mined
Newsletter #7: 20190726 - 20190802
Highlight
There’s a common misconception that miners and big companies like wallet providers and exchanges are the ones who govern the rules in the Bitcoin network. Bitcoin Independence Day proves why this is not true.
August 1st marked the 2nd year anniversary of Bitcoin Independence Day, where user-operated full nodes initiated the BIP148 User-Activated Soft Fork (UASF). This UASF would reject all blocks from miners that did not signal readiness for BIP141 (SegWit). It would also stand against those involved in the New York Agreement - companies who proposed to increase block sizes by 2x, implemented via hardfork.
The UASF demonstrates why it’s so important to run a full node - not only to verify transactions, but also to signal preferences RE: the network’s rules.
To better understand this key event in Bitcoin history, I highly recommend reading these two articles (Countdown to SegWit + The Long Road to SegWit) by Aaron van Wirdum, as well as this blogpost from Jimmy Song. I will publish an in-depth analysis on this event some time in the future.
Bitcoin Tech
(1) Braiins, the company behind the first Bitcoin mining pool, Slushpool, finally released new mining software. Stratum v2 purports to be more secure, efficient, flexible, and decentralized.
You may remember the other mining software proposal, BetterHash, from newsletter #5. Here’s how the two differ:
(2) Bitcoin Optech newsletter #57:
Describes fidelity bonds for improved sybil resistance and JoinMarket-style decentralized coinjoin
Mentions a PR for a BIP322 generic signed message format (including the ability to sign for bech32 addresses)
Summarizes a discussion about bloom filters. You may remember bloom filters from newsletter #5 RE: their privacy and DoS vulnerabilities.
Lightning Network
(1) On 30th July 2019, BitMEX Research successfully tested the watchtower system. Much like our previous piece on justice transactions, we tried to cheat ourselves, but this time used a watchtower. In an encouraging sign, the watchtower functionality correctly worked and the would-be thief was punished.
(2) Previously, it’d be difficult to spot problems in the Lightning P2P network until they became harmful. LNDmon is an easy-to-use tool for routing node operators to explore information about their node and track this info over time.
Bitcoin Products
(1) Square’s Bitcoin business is booming. Jack Dorsey, Founder/CEO of Square & Twitter says, “We love you Bitcoin” during Square’s Q2 2019 earnings call.
(2) Blockchain.com announces its institutional-grade crypto trading platform: The PIT. They tout SegWit-enabled, non-custodial wallet trading with high speeds, “clocking in at 40 microseconds per trade, capable of executing millions of orders per second.”
(3) Kraken acquires accounting, reconciliation, and reporting service provider Interchange, to serve institutional clients under one roof. This represents the second of Dan Held’s Bitcoin businesses that have been acquired.
Bitcoin Markets / Stats
(1) Gold Market Cap
Gold: $7.77 T at ~$1450/oz
Bitcoin: $190 B at ~$10650/btc (~2.4% of gold’s market cap)
Gold settles at a 6-year high after gaining 2.7% this week. Central banks have been the main drivers of the demand, reportedly buying $15.7 B during the first half of 2019. This increased demand may testify to the confidence central banks have in their own currencies, which begs the questions: how sound are fiat currencies? What is sound money?
(2) Fiat Market Cap
Bitcoin ranks #35 compared to all fiat currencies, placed between the Czech Koruna (CZK) and the Colombian Peso (COP)
(3) Government Debt Clock
Global: $59.327 T
US: $15.991 T
(4) Crypto Market Cap Dominance
Bitcoin represents 66% of the total cryptocurrency market cap
(5) Bitcoin Security: Hash Rate + Difficulty
The two metrics hit new all-time-highs again, reaching ~71.73 EH/s and ~9.01 T respectively, according to BTC.com
(6) Supply + Halvening News:
~289 days until the next halvening, where the issuance rate of new bitcoins will decrease from 12.5 to 6.25 bitcoins per new block mined. Bitcoin inflation will decrease to 1.8%, rivaling the US inflation rate.
We’ve mined >85% of the 21,000,000 bitcoins that will ever exist, in the past ~10 years. To mine the remaining 15% will take ~120 years.
Bitcoin Talks / Theses
(1) The Gold vs. Bitcoin Debate: Peter Schiff vs. Anthony Pompliano
(2) Business Insider on using Gold vs. Bitcoin in NYC
(3) Dan Held debunks the “wasteful” mining argument and the misleading KPI, electricity consumption per transaction [old article].
PoW transmutes electricity into digital gold. The Bitcoin ledger can only be immutable if and only if it is costly to produce. The fact that Proof of Work (PoW) is “costly” is a feature, not a bug.
(4) WBD 132: Pieter Wuille, co-founder of Blockstream and one of the most prolific contributors to Bitcoin (eg. SegWit, Schnorr, etc.), talks about:
His days of mining and selling 1000s of Bitcoin back in 2010, when each bitcoin was worth about $0.20
Privacy & fungibility vs. 21 million coins & auditability
and more…
Bitcoin Regulations
(1) South Korea declares Busan a “regulation-free” zone for blockchain development, modeling the zone after Zug, Switzerland. On the other hand, the country’s biggest exchanges - Bithumb, Upbit, Coinone and Korbit - are reportedly facing stricter requirements for renewal of their bank accounts, due to recent FATF guidelines.
(2) Cryptocurrency mining is now an official industrial activity in Iran after winning approval from the country’s cabinet. Cryptocurrencies are still not allowed in domestic transactions, according to Mehr. Mined cryptos will be taxable under the country’s rules, unless the cryptocurrencies are exported and the revenues brought back to Iran.
(4) MIT-IBM Watson AI Lab used machine learning to parse 200,000 Bitcoin transactions worth about $6 B. 2% were deemed illicit, 21% were deemed lawful, and 77% remained unclassified. This is in line w/ Chainalysis’ study, which estimated just 1% of Bitcoin transactions to be categorized as illicit activity.
(5)
Bitcoin Events
(1) Liquality will be presenting at Bitcoin Wednesday in Amsterdam on August 7th
(2) Scaling Bitcoin 2019 will be hosted in Tel Aviv, September 10 - 11
(3) Baltic Honey Badger will be hosted in Riga, September 13 - 14
(4) Russell Okung is hosting an educational event in LA on September 1st
DM me on Twitter if you’ve got feedback, questions, and comments.
This is not financial advice. Do your own research.