What You Missed In Bitcoin

November 2019 Review

TLDR: Bitcoin is still producing block after block.

Development

Bitcoin Core 0.19.0: The 19th major release of Bitcoin’s original software client launched by Satoshi Nakamoto almost 11 years ago. It is still the dominant Bitcoin implementation on the network today. (Though due to an issue that came to light in a late stage of the Bitcoin Core 0.19.0 release process, the version released for download is actually 0.19.0.1.) Overseen by Bitcoin Core lead maintainer Wladimir van der Laan, this latest major release was developed by over a hundred contributors over a span of about six months.

The result of 550 merged pull requests, Bitcoin Core 0.19.0 includes a range of performance improvements, modernization and bug fixes, as well as other changes. Read more here

Whatsat: Whatsat is a new text messaging app that uses bitcoin's lightning network to exchange messages instead of money. It is possibly the first third-layer application to be built on top of the LNP/BP stack (Lightning Network Protocol on Bitcoin Protocol). The lightning network is a good candidate for exchanging messages because it is already capable of routing bitcoin transaction data in a private, peer to peer, and bitcoin data is already a form of text message. Whatsat works with the existing lightning network on the bitcoin testnet and leverages the built-in capabilities that most up-to-date lightning nodes already support. What it adds is a new data type: instead of transmitting transaction data, it uses other lightning nodes to transmit a custom message to the recipient. Read more here.

BTCPay Server version 1.0.3.137: The freshly-baked version introduces several new features together with several bug fixes and improvements. With this release, BTCPay Server continues to be a tech-stack which glues many prominent projects built on top of Bitcoin and displays it in a coherent, unified interface for the end-user. Read more here.

Wasabi wallet valued at $7.5M: The privacy-centric bitcoin wallet Wasabi, launched by zkSNACKs Ltd. in 2018, just raised its first equity investment from Cypherpunk Holdings, a publicly-traded Canadian firm. The co-founder Adam Fiscor previously told CoinDesk the company’s mixer transaction fees earned 14 bitcoin in July 2019 alone (roughly $112,000 by current prices). It appears Wasabi Wallet processed at least 5,373 mixed CoinJoins in July, August and early September. If that trend continued for 12 months, it would put revenues at over $1 million. Read more here.

Neutrino adds Lightning Network support on mobile: With the release of lnd 0.8, developers now have the tools to make Lightning Network payments work with any android or ios app using Neutrino. Some wallets already using lnd 0.8 are Breez, Zap and tippin.me. Read more here.

A Bitcoin Node running on a $11.99 piece of hardware: While setting up a Bitcoin node this way may be impractical for anyone that does not have a technical understanding of both the hardware and software, it remains an interesting example of Bitcoin’s potential. Read more here.


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Politics And Regulation

China - A mixed amount of news has come out of China within the last month, much of it contradicting itself on the surface. Last month when China’s President Xi stated the country would “embrace blockchain technology”, a quick succession of events followed (source). Bitcoin’s price ended up with its third largest positive day in its history. This was short-lived. Chinese investors were quickly told to ‘stay rational’ after the stocks of almost 200 mainland based companies that invest in ‘blockchain technology’ jumped ~8% the next day. Some companies even hit their 10% increase regulated limit (source). Multiple state media publications followed, including The People’s Daily, urging citizens to not speculate on cryptocurrencies themselves,

The rise of blockchain technology was accompanied by that of cryptocurrencies, but innovation in blockchain technology does not mean we should speculate in virtual currencies (source).

Further obscuring the message, a department called the National Development and Reform Commission (NDRC) of China decided to put its ban of cryptocurrency mining on hold (source). Earlier in 2019, the institution published a draft proposal of its Industry Restructuring Catalog. The list of industries to be restricted included cryptocurrency mining due to ‘environmental effects’ (source).

A state-run newspaper in China published a front-page story titled, “Bitcoin: The First Successful Application of Blockchain Technology’ only a few weeks later. The write-up itself was a bit mixed in its messaging, with a compliment of the technology followed by a harsh characterization of its use. Overall, this piece of promotion for Bitcoin could be seen as a promising first step. It at least covers the basic fundamentals of what Bitcoin can offer.

People can freely transfer money through bitcoin without having to verify various identity information... However, this feature also makes bitcoin widely used in illegal transactions (source).

China appears to be preparing for another crackdown on cryptocurrency trading in the country just as all of these headlines are being published. State regulators had been given a deadline to search and inspect all cryptocurrency exchange-related services before Nov. 22nd and report back to the Central Bank. Since that deadline passed, at least five local cryptocurrency exchanges have stopped operations or announced they will no longer serve domestic users. This is the largest crack-down on China’s exchanges since it first initiated its moves against cryptocurrencies in September of 2017 during the bull market (source).

Simultaneously, the country's popular social media platform Weibo banned users from publishing any posts that contain “blockchain” and “crypto trading” at the same time. Users can still use the words separately, but it has to be only in separate posts. Even the well known cryptocurrency, Tron, had its Weibo account suspended (source).

After looking back at a month’s worth of governmental headlines, it becomes easier to make sense of it all. As exciting as the news was to many people, the government is not promoting a permissionless and open-source tool for freedom. Consider the priorities and past actions of the Communist Party of China before jumping to conclusions. It is safe to expect that this digital currency, along with the use of blockchain technology, will take the cypherpunk ideals of bitcoin and remove the “punk” aspect while keeping financial privacy for the government.

Acclimation of this new technology to the population appears to be the goal these latest moves. Many in the country most likely only know of “blockchain” as a means for speculation. Government actions indicate a balancing act between educating citizens on its potential, while also limiting that same end potential. The true potential of blockchain technology is Bitcoin, an open and permissionless financial system. This network would contradict the government's goal of a more controllable blockchain based network.

United States - While not filled with as many gripping headlines as developments in China, the United States has had notable events. A researcher for the Ethereum Foundation was arrested, as reported by the office of the U.S Attorney for the Southern District of New York and the FBI (source). He was charged with conspiring to violate the International Emergency Economic Powers Act. In the report, it alleges he traveled to North Korea in order to give a presentation titled "Blockchain and Peace". As part of the presentation, he supposedly described how to “launder money and evade sanctions”.

Unrelated to this case, the FBI Director, while speaking with the U.S Senate Homeland Security and Governmental Affairs Committee was questioned by Senator Mitt Romney on cryptocurrencies and the possible risk it may bring to the ability of law enforcement to perform their jobs effectively. There was no doubt a point trying to be made here from the Senator with the inclusion of “terrorist activity” in the questioning. As a response, the FBI director said cryptocurrency is a ‘significant Issue’ for them and is only becoming “bigger and bigger”.

To reiterate what Mark Zuckerberg said last month during his testimony in front of Congress, “If we can’t innovate here, someone else in another country will.”  Even taken in the context of Libra, it rings just as true for the ecosystem surrounding Bitcoin and all other digital currencies. If innovation is forced offshore, there’s no guarantee that the technologies being developed will be anything more than just extensions of authoritative governments.

Meanwhile, a one gigawatt Bitcoin mining farm is reportedly under construction in the state of Texas. This operation would be even larger than that of Bitmain. It would take the title of ‘world’s largest’ Bitcoin mining farm (source). It is scheduled to achieve this feat by late 2020 and would poke even further holes in the already weak argument of mining centralization located in China as a problem for Bitcoin’s future.

Europe - A European digital currency might be announced within the next few months. ‘An ECB official told Reuters the euro zone’s central bank was already working on the technical aspects of a digital currency and would present clarifications to European Union governments soon (source).’

The central bank of France weighed in with its desire for the European Union to leverage a blockchain-based settlement system saying:

As a major provider of critical wholesale clearing and settlement services in euro, [the Eurozone] should be open to experimenting these innovations in order to revisit and possibly improve the conditions under which we make available central bank money as a settlement asset (source).

Less than a week later, while ‘speaking at a joint conference held by the European Central Bank and the National Bank of Belgium, the executive board member Benoît Cœuré said the bank will examine the potential influences of digital currencies over the existing financial system (source).’ With as many comments coming from the central banks of Europe, it should be no surprise when they launch a digital euro, a possible blockchain-based stablecoin. They have begun acclimating for this shift the past year.

Germany has moved forward with its own legislation, separate from the EU, which will allow banks to directly store and hold client’s cryptocurrencies. Currently, banks use third parties to hold clients’ assets. Already passing in parliament, this new bill now just needs to be signed off by each of the individual states (source). 

Russia - Not to be left out of the seemingly global crackdown on Bitcoin, the Bank of Russia stated they support a ban on cryptocurrencies as a use for payment. Holding the currency is not what is in question. Buying, selling and trading is however. This is not legislation, but it does point to where the industry’s future may be heading in the country. The bank had this to say about its reasoning:

We continue to believe that cryptocurrencies carry significant risks, including in the field of laundering of proceeds from crime and financing of terrorism, as well as in conducting exchange transactions due to sharp exchange rate fluctuations (source).

This statement only comes less than a week after Bloomerg published news on Russia’s largest Bitcoin mining farm (source). The operation itself is impressive and is already servicing clients from all around the world. With its cold climate and abundant hydropower, it is the perfect location. Interestingly, the company does not mine Bitcoin itself. It only rents space, hardware and provides energy to its clients. This allows the business to legally operate under the country’s growing restrictions on cryptocurrencies.


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Traditional Finance

Recently, legacy financial institutions have also been making a great case for Bitcoin, a permissionless and censorship-resistance currency. As protests continue in Hong Kong, one of the largest banks in the world, HSBC, shut down the account for an anti-extradition bill organization. The account was used to raise funds for Spark Alliance HK, which helps cover legal and medical fees for protesters. The bank said it discovered that the account was being used for ‘activities that do not match the business purposes stated by the client’. An HSBC spokeswoman declined to comment (source).

Only a week later, unrelated to the protestors being deplatformed, the ex-CFO of PayPal and a partner of one of the largest venture capital firms in Silicon Valley, had his Bank of America account closed without explanation. While the reason has been unconfirmed, it is no secret that he personally owns Bitcoin. That has been more than enough of a reason for banks to close accounts in the past (source).

Not just banks, but payment providers themselves also had their moment in the deplatforming spotlight. Pornhub announced on their blog that PayPal will no longer support payments for performers on the site. PornHub says this action will affect over a hundred thousand individuals (source). This will only push more users to search for alternative means of payment, ones that don’t censor based on “certain sexually orientated materials or services’ as PayPal does.

Content You Need To Read, Hear or Watch

  • [Write-Up] A research report was released by Tuur Demeester at Adamant Capital. “The Bitcoin Reformation’ gives a unique insight into the socio-economic trends of Bitcoin and how they might end up evolving. Read it here.

  • [Video] Alex Gladstein’s thesis keynote: financial freedom and privacy matter for human rights, and Bitcoin gives us a way out of Big Brother and surveillance capitalism:

  • [Podcast] Defiance episode with Andreas Antonopoulos. He is a speaker and the best-selling author of Mastering Bitcoin and The Internet of Money and is unrivalled in evangelising Bitcoin. Andreas explains why the current monetary and financial system is no longer fit for purpose and why Bitcoin may be the answer. Listen to it here.

  • [Write-Up] Leigh Cuen at Coindesk wrote about the tests Bitcoin and censorship-resistant technologies are facing in the places that need them the most. A look at the limitations of Bitcoin for people in Hong Kong, Lebanon and Iran. Read it here.

  • [Write-Up] A slightly older article from earlier this year by Coincenter describes how you can use Bitcoin without relying on centralized internet service providers. After seeing Iran cut internet to their citizens, this write-up is as relative as ever. Read it here.

  • [Podcast] Marty Bent’s Tales from the Crypt episode with Trace Mayer. He is one of the longest standing Bitcoin investors and educators in the space. Listen to it here.

  • [Podcast] Peter McCormack’s What Bitcoin Did episode with Nick Szabo. He is a computer scientist, cryptographer, the designer of Bit Gold and was among Satoshi's email recipients. Listen to it here.

  • [Write-Up] Anthony Pompliano gave some perspective of the early internet and where Bitcoin is today in his newsletter. Read it here.

  • [Write-Up] Unchained Capital put together their ‘greatest hits’ in an easy to navigate post. This is a resource worth bookmarking. Read it here.

  • [Podcast] Stephan Livera’s episode with Allen Piscitello, VP Product of Blockstream. They talk about Blockstream Liquid as a new model for inter exchange settlement, and the possibility of building out new financial infrastructure in a way different from the legacy financial system. Listen to it here.


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    I'd like to thank eToro for sponsoring this week’s issue of the newsletter again! eToro is one of the largest trading platforms in the world, with over $1 trillion in trading volume on the platform per year. 

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    Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any sponsors.