This is an opinion editorial by Shinobi, a self-taught educator in the Bitcoin space and tech-oriented Bitcoin podcast host.
What is Bitcoin Maximalism? People will not stop asking this question, either to defend it as a virtuous label, or to attack it as a symbol of everything wrong and rotten in this ecosystem. This question is as meaningless in my opinion as asking:
- “What is a liberal?”
- “What is a conservative?”
- “What is a Christian?”
No one is going to have the same definition, or same notion. Those labels will always mean completely different things to different people. They will be associated with different identities, different behaviors, different morals and values. No matter what a dictionary or definition says in the strict sense, there will never be consensus around them.
It is completely and utterly meaningless in a discussion on a topic like this to fixate so much on labels, attempting to universally apply them to everyone, instead of focusing on the actual conceptual core of the conversation. The root of this issue has nothing whatsoever to do with labels, and everything to do with behaviors. So let’s talk about the behaviors.
One of the core behaviors commonly associated with Maximalism is a focus on Bitcoin. Bitcoin is the longest running project in this ecosystem. It is the most sound system compared to everything developed thus far, and is extremely conservative in its approach to changes and upgrades. While everything in this space in terms of assets is highly speculative in nature, Bitcoin is the one with the longest running and most consistent market performance, and has maintained the top spot in terms of overall market value through the entire history of every asset in this space. Approaching things from this reality, focusing on bitcoin above all other assets in this ecosystem is a perfectly rational financial decision. Yes, like everything else, it is still speculation to invest in bitcoin, but in terms of the financial risk that entails bitcoin is the least volatile asset trading in this space. Most people are not day traders, they are not financial experts, and the further away from bitcoin you go in terms of investments the more skill and understanding of those activities is required to not burn yourself. The vast majority of projects in this space have their one blow-off market pump, crash and then do not recover. There is absolutely nothing wrong or toxic with sticking to bitcoin given that reality, and attempting to inform people of that reality is in no way unethical.
Another core behavior is the criticism of other technologies in this space, particularly with the goal of demonstrating a lack of decentralization, or more specifically misrepresentation of the degree to which something is decentralized. Bitcoin is the only system in this space that has demonstrably shown an extreme degree of decentralization. It has fought off numerous attempts by developers to alter the core of the system, as shown when Mike Hearn and Gavin Andresen were still involved and pushing for block size increases to an extreme. It fought off the later attempt by most of the major corporations involved in the New York Agreement/UASF debacle to do the same thing. It survived the implosion of the only sizable exchange when Mt. Gox went under, the Bitfinex hack, the bust of Silk Road and even massive nation states like China slowly creeping towards banning it, culminating in restricting all mining activities. Bitcoin has stood strong and continued functioning in the face of everything thrown at it so far.
Contrast this with platforms like Ethereum. The DAO was launched as the first massive experiment in decentralized coordination of financial activity on the platform, with the promise “code is law.” This blew up in their faces due to poor engineering that allowed funds locked in the DAO contract to be drained by what were supposed to be unauthorized users. The code however allowed it, the “law” as it were.
In response to this the Ethereum Foundation and development team enacted a fork to walk back what legitimately occurred according to the rules of the system on the blockchain. Specifically, they did this because of a conflict of interest in the form of many people associated with them being invested in the DAO and losing money. They have multiple times forked to push forward the difficulty bomb, a feature that makes it more and more difficult to mine until its effectively impossible, a feature specifically implemented to force them to switch to proof-of-stake. They have forked to alter the economic issuance policy. The development plan has pivoted drastically more times than I can count based solely on Vitalik Buterin’s changing ideas about how to improve the system.
Pointing out these differences is again, completely rational and legitimate behavior. They are very real criticisms, based in reality, with very real consequences. The less decentralized something is, the more prone to sudden massive changes it is, which has very real consequences to the value and usability of the system. This is perfectly demonstrated by the recent events with Tornado Cash. Yes, the contract is still there, yes, you can in theory use it still, but in reality every single major API provider and wallet backend that is dominantly used has blacklisted interacting with that contract. The website was seized and shut down through DNS registrars. To interact with that contract requires technical know-how beyond many users of the system, because most of the ways to interact with the system were heavily centralized. Pointing these dynamics out is perfectly rational and legitimate.
What is the root motivation behind these behaviors? In the case of focusing on Bitcoin and conveying to people why that decision was made, to provide realistic expectations of how you will do in a market. Also, to correct the illusion in most people’s heads that they will magically figure out how to time the market, ride the pump and make out like a bandit; because most people won’t. In the case of correcting misrepresentations of the level of decentralization in other projects, it is to allow people to make rational decisions when interacting with them, and to make people aware of the potential consequences and risks varying degrees of decentralization expose them to.
We’ve gone through some positive behaviors — let’s look at some negative ones.
Constantly preaching like you are a priest in church, speaking directly from the holy gospel that preordains Bitcoin’s success in consuming the entirety of the world’s financial system and currency markets as a guaranteed divine certainty. Stock-to-flow was a perfect example of this type of behavior. In reality, all that model is, is a somewhat interesting backtest. By backtest, I mean it is a model that can verify that a market has followed some particular behavior in the past. It has no predictive power, and no ability to model things going forward. It literally does not have the data in the model necessary to do so, i.e., the demand variable to account for shifts in demand for bitcoin. The movement around the model was completely absurd cult-like behavior. It had no rational basis at all, and yet became a dominant narrative pushed all over the space. This did not inform people, or give people realistic expectations or reasons to invest in or use Bitcoin. It projected the outward appearance of a cult.
Or take for instance, in the exact same dogmatic manner, calling something a scam without being able to actually provide a reasoned argument or criticism. One example are the ICOs of Ethereum and EOS. Mobs of individuals constantly rail against these systems almost solely on the basis of being a scam because they centrally issued tokens before launch. There are almost no mention of real technical faults. In EOS’s case, there is a concept called “virtual RAM,” which limits how many smart contracts are allowed to exist and run on the system. Use of the virtual RAM is a scarce economic resource you have to pay to own, while at the same time EOS block signers are in total control of the supply. This allows the block signers to buy RAM, sell it as it appreciates in value, and then create more to crash the price, buy low and repeat. The incentives of the entire system are totally gameable by block signers to rent-seek and extract maximum value from users in a manipulative fashion. Another example, one of the biggest value propositions of Ethereum currently is the use as a platform for decentralized finance, i.e., building exchanges and trading platforms on-chain to allow people to trade peer-to-peer. A requirement for that to work is a smart contract that anyone can interact with by themselves, that automatically handles facilitating a trade. Anyone being able to engage in that interaction, in combination with the fact that miners (or stakers) choose which transactions interacting with the contract occur first, allows them to front-run any use and soak up any profit able to be made doing so. The incentives are broken.
The vast majority of people, at least that I see, criticizing other projects articulate criticisms more along the lines of, “It was an ICO, scam!” rather than, “The RAM market, or MEV, fundamentally breaks the incentives of block producers.” Such behavior is not at all constructive, informative or something that will actually convince people to reassess their opinion of a project. “It’s a scam,” with no supporting argument is not convincing at all and it does not inspire self reflection or reassessment. It creates the perception of jealousy over a potential for greater profit.
Now think about the “left/right” categorization of political positions versus the four quadrant categorization. That is what is occurring, a complex reality of many different behaviors is being over simplified into “left/right” categories. That is not productive, it is not constructive criticism or feedback, it is binary over-simplified tribal thinking. It does not change people’s minds, does not equip people to make informed decisions, it does nothing constructive.
Think about all of these behaviors, and then think about all the people you know in this space who exhibit them. Can you draw a black and white line to divide them into groups? I doubt it. So why is the entire conversation focused entirely on labels and groups, instead of individuals and behaviors? One is completely disruptive, divisionary and unproductive in every way. The other is rational, potentially unifying and productive.
Labels ultimately are nothing but vague and shallow social signaling. Virtue signaling. Behaviors and their effects are ultimately what really shapes and changes things. If there is any discussion to be had, that is the one that should be had. Not one over labels, but actual substantial behaviors and rational arguments. Who gives a shit about the label “Bitcoin Maximalism.”
This is a guest post by Shinobi. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
El Salvador Takes First Step To Issue Bitcoin Volcano Bonds
El Salvador’s Minister of the Economy Maria Luisa Hayem Brevé submitted a digital assets issuance bill to the country’s legislative assembly, paving the way for the launch of its bitcoin-backed “volcano” bonds.
First announced one year ago today, the pioneering initiative seeks to attract capital and investors to El Salvador. It was revealed at the time the plans to issue $1 billion in bonds on the Liquid Network, a federated Bitcoin sidechain, with the proceedings of the bonds being split between a $500 million direct allocation to bitcoin and an investment of the same amount in building out energy and bitcoin mining infrastructure in the region.
A sidechain is an independent blockchain that runs parallel to another blockchain, allowing for tokens from that blockchain to be used securely in the sidechain while abiding by a different set of rules, performance requirements, and security mechanisms. Liquid is a sidechain of Bitcoin that allows bitcoin to flow between the Liquid and Bitcoin networks with a two-way peg. A representation of bitcoin used in the Liquid network is referred to as L-BTC. Its verifiably equivalent amount of BTC is managed and secured by the network’s members, called functionaries.
“Digital securities law will enable El Salvador to be the financial center of central and south America,” wrote Paolo Ardoino, CTO of cryptocurrency exchange Bitfinex, on Twitter.
Bitfinex is set to be granted a license in order to be able to process and list the bond issuance in El Salvador.
The bonds will pay a 6.5% yield and enable fast-tracked citizenship for investors. The government will share half the additional gains with investors as a Bitcoin Dividend once the original $500 million has been monetized. These dividends will be dispersed annually using Blockstream’s asset management platform.
The act of submitting the bill, which was hinted at earlier this year, kickstarts the first major milestone before the bonds can see the light of day. The next is getting it approved, which is expected to happen before Christmas, a source close to President Nayib Bukele told Bitcoin Magazine. The bill was submitted on November 17 and presented to the country’s Congress today. It is embedded in full below.
How I’ll Talk To Family Members About Bitcoin This Thanksgiving
This is an opinion editorial by Joakim Book, a Research Fellow at the American Institute for Economic Research, contributor and copy editor for Bitcoin Magazine and a writer on all things money and financial history.
That’s it. That’s the article.
In all sincerity, that is the full message: Just don’t do it. It’s not worth it.
You’re not an excited teenager anymore, in desperate need of bragging credits or trying out your newfound wisdom. You’re not a preaching priestess with lost souls to save right before some imminent arrival of the day of reckoning. We have time.
Instead: just leave people alone. Seriously. They came to Thanksgiving dinner to relax and rejoice with family, laugh, tell stories and zone out for a day — not to be ambushed with what to them will sound like a deranged rant in some obscure topic they couldn’t care less about. Even if it’s the monetary system, which nobody understands anyway.
If you’re not convinced of this Dale Carnegie-esque social approach, and you still naively think that your meager words in between bites can change anybody’s view on anything, here are some more serious reasons for why you don’t talk to friends and family about Bitcoin the protocol — but most certainly not bitcoin, the asset:
- Your family and friends don’t want to hear it. Move on.
- For op-sec reasons, you don’t want to draw unnecessary attention to the fact that you probably have a decent bitcoin stack. Hopefully, family and close friends should be safe enough to confide in, but people talk and that gossip can only hurt you.
- People find bitcoin interesting only when they’re ready to; everyone gets the price they deserve. Like Gigi says in “21 Lessons:”
“Bitcoin will be understood by you as soon as you are ready, and I also believe that the first fractions of a bitcoin will find you as soon as you are ready to receive them. In essence, everyone will get ₿itcoin at exactly the right time.”
It’s highly unlikely that your uncle or mother-in-law just happens to be at that stage, just when you’re about to sit down for dinner.
- Unless you can claim youth, old age or extreme poverty, there are very few people who genuinely haven’t heard of bitcoin. That means your evangelizing wouldn’t be preaching to lost, ignorant souls ready to be saved but the tired, huddled and jaded masses who could care less about the discovery that will change their societies more than the internal combustion engine, internet and Big Government combined. Big deal.
- What is the case, however, is that everyone in your prospective audience has already had a couple of touchpoints and rejected bitcoin for this or that standard FUD. It’s a scam; seems weird; it’s dead; let’s trust the central bankers, who have our best interest at heart.
No amount of FUD busting changes that impression, because nobody holds uninformed and fringe convictions for rational reasons, reasons that can be flipped by your enthusiastic arguments in-between wiping off cranberry sauce and grabbing another turkey slice.
- It really is bad form to talk about money — and bitcoin is the best money there is. Be classy.
Now, I’m not saying to never ever talk about Bitcoin. We love to talk Bitcoin — that’s why we go to meetups, join Twitter Spaces, write, code, run nodes, listen to podcasts, attend conferences. People there get something about this monetary rebellion and have opted in to be part of it. Your unsuspecting family members have not; ambushing them with the wonders of multisig, the magically fast Lightning transactions or how they too really need to get on this hype train, like, yesterday, is unlikely to go down well.
However, if in the post-dinner lull on the porch someone comes to you one-on-one, whisky in hand and of an inquisitive mind, that’s a very different story. That’s personal rather than public, and it’s without the time constraints that so usually trouble us. It involves clarifying questions or doubts for somebody who is both expressively curious about the topic and available for the talk. That’s rare — cherish it, and nurture it.
Last year I wrote something about the proper role of political conversations in social settings. Since November was also election month, it’s appropriate to cite here:
“Politics, I’m starting to believe, best belongs in the closet — rebranded and brought out for the specific occasion. Or perhaps the bedroom, with those you most trust, love, and respect. Not in public, not with strangers, not with friends, and most certainly not with other people in your community. Purge it from your being as much as you possibly could, and refuse to let political issues invade the areas of our lives that we cherish; politics and political disagreements don’t belong there, and our lives are too important to let them be ruled by (mostly contrived) political disagreements.”
If anything, those words seem more true today than they even did then. And I posit to you that the same applies for bitcoin.
Everyone has some sort of impression or opinion of bitcoin — and most of them are plain wrong. But there’s nothing people love more than a savior in white armor, riding in to dispel their errors about some thing they are freshly out of fucks for. Just like politics, nobody really cares.
Leave them alone. They will find bitcoin in their own time, just like all of us did.
This is a guest post by Joakim Book. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
RGB Magic: Client-Side Contracts On Bitcoin
This is an opinion editorial by Federico Tenga, a long time contributor to Bitcoin projects with experience as start-up founder, consultant and educator.
The term “smart contracts” predates the invention of the blockchain and Bitcoin itself. Its first mention is in a 1994 article by Nick Szabo, who defined smart contracts as a “computerized transaction protocol that executes the terms of a contract.” While by this definition Bitcoin, thanks to its scripting language, supported smart contracts from the very first block, the term was popularized only later by Ethereum promoters, who twisted the original definition as “code that is redundantly executed by all nodes in a global consensus network”
While delegating code execution to a global consensus network has advantages (e.g. it is easy to deploy unowed contracts, such as the popularly automated market makers), this design has one major flaw: lack of scalability (and privacy). If every node in a network must redundantly run the same code, the amount of code that can actually be executed without excessively increasing the cost of running a node (and thus preserving decentralization) remains scarce, meaning that only a small number of contracts can be executed.
But what if we could design a system where the terms of the contract are executed and validated only by the parties involved, rather than by all members of the network? Let us imagine the example of a company that wants to issue shares. Instead of publishing the issuance contract publicly on a global ledger and using that ledger to track all future transfers of ownership, it could simply issue the shares privately and pass to the buyers the right to further transfer them. Then, the right to transfer ownership can be passed on to each new owner as if it were an amendment to the original issuance contract. In this way, each owner can independently verify that the shares he or she received are genuine by reading the original contract and validating that all the history of amendments that moved the shares conform to the rules set forth in the original contract.
This is actually nothing new, it is indeed the same mechanism that was used to transfer property before public registers became popular. In the U.K., for example, it was not compulsory to register a property when its ownership was transferred until the ‘90s. This means that still today over 15% of land in England and Wales is unregistered. If you are buying an unregistered property, instead of checking on a registry if the seller is the true owner, you would have to verify an unbroken chain of ownership going back at least 15 years (a period considered long enough to assume that the seller has sufficient title to the property). In doing so, you must ensure that any transfer of ownership has been carried out correctly and that any mortgages used for previous transactions have been paid off in full. This model has the advantage of improved privacy over ownership, and you do not have to rely on the maintainer of the public land register. On the other hand, it makes the verification of the seller’s ownership much more complicated for the buyer.
How can the transfer of unregistered properties be improved? First of all, by making it a digitized process. If there is code that can be run by a computer to verify that all the history of ownership transfers is in compliance with the original contract rules, buying and selling becomes much faster and cheaper.
Secondly, to avoid the risk of the seller double-spending their asset, a system of proof of publication must be implemented. For example, we could implement a rule that every transfer of ownership must be committed on a predefined spot of a well-known newspaper (e.g. put the hash of the transfer of ownership in the upper-right corner of the first page of the New York Times). Since you cannot place the hash of a transfer in the same place twice, this prevents double-spending attempts. However, using a famous newspaper for this purpose has some disadvantages:
- You have to buy a lot of newspapers for the verification process. Not very practical.
- Each contract needs its own space in the newspaper. Not very scalable.
- The newspaper editor can easily censor or, even worse, simulate double-spending by putting a random hash in your slot, making any potential buyer of your asset think it has been sold before, and discouraging them from buying it. Not very trustless.
For these reasons, a better place to post proof of ownership transfers needs to be found. And what better option than the Bitcoin blockchain, an already established trusted public ledger with strong incentives to keep it censorship-resistant and decentralized?
If we use Bitcoin, we should not specify a fixed place in the block where the commitment to transfer ownership must occur (e.g. in the first transaction) because, just like with the editor of the New York Times, the miner could mess with it. A better approach is to place the commitment in a predefined Bitcoin transaction, more specifically in a transaction that originates from an unspent transaction output (UTXO) to which the ownership of the asset to be issued is linked. The link between an asset and a bitcoin UTXO can occur either in the contract that issues the asset or in a subsequent transfer of ownership, each time making the target UTXO the controller of the transferred asset. In this way, we have clearly defined where the obligation to transfer ownership should be (i.e in the Bitcoin transaction originating from a particular UTXO). Anyone running a Bitcoin node can independently verify the commitments and neither the miners nor any other entity are able to censor or interfere with the asset transfer in any way.
Since on the Bitcoin blockchain we only publish a commitment of an ownership transfer, not the content of the transfer itself, the seller needs a dedicated communication channel to provide the buyer with all the proofs that the ownership transfer is valid. This could be done in a number of ways, potentially even by printing out the proofs and shipping them with a carrier pigeon, which, while a bit impractical, would still do the job. But the best option to avoid the censorship and privacy violations is establish a direct peer-to-peer encrypted communication, which compared to the pigeons also has the advantage of being easy to integrate with a software to verify the proofs received from the counterparty.
This model just described for client-side validated contracts and ownership transfers is exactly what has been implemented with the RGB protocol. With RGB, it is possible to create a contract that defines rights, assigns them to one or more existing bitcoin UTXO and specifies how their ownership can be transferred. The contract can be created starting from a template, called a “schema,” in which the creator of the contract only adjusts the parameters and ownership rights, as is done with traditional legal contracts. Currently, there are two types of schemas in RGB: one for issuing fungible tokens (RGB20) and a second for issuing collectibles (RGB21), but in the future, more schemas can be developed by anyone in a permissionless fashion without requiring changes at the protocol level.
To use a more practical example, an issuer of fungible assets (e.g. company shares, stablecoins, etc.) can use the RGB20 schema template and create a contract defining how many tokens it will issue, the name of the asset and some additional metadata associated with it. It can then define which bitcoin UTXO has the right to transfer ownership of the created tokens and assign other rights to other UTXOs, such as the right to make a secondary issuance or to renominate the asset. Each client receiving tokens created by this contract will be able to verify the content of the Genesis contract and validate that any transfer of ownership in the history of the token received has complied with the rules set out therein.
So what can we do with RGB in practice today? First and foremost, it enables the issuance and the transfer of tokenized assets with better scalability and privacy compared to any existing alternative. On the privacy side, RGB benefits from the fact that all transfer-related data is kept client-side, so a blockchain observer cannot extract any information about the user’s financial activities (it is not even possible to distinguish a bitcoin transaction containing an RGB commitment from a regular one), moreover, the receiver shares with the sender only blinded UTXO (i. e. the hash of the concatenation between the UTXO in which she wish to receive the assets and a random number) instead of the UTXO itself, so it is not possible for the payer to monitor future activities of the receiver. To further increase the privacy of users, RGB also adopts the bulletproof cryptographic mechanism to hide the amounts in the history of asset transfers, so that even future owners of assets have an obfuscated view of the financial behavior of previous holders.
In terms of scalability, RGB offers some advantages as well. First of all, most of the data is kept off-chain, as the blockchain is only used as a commitment layer, reducing the fees that need to be paid and meaning that each client only validates the transfers it is interested in instead of all the activity of a global network. Since an RGB transfer still requires a Bitcoin transaction, the fee saving may seem minimal, but when you start introducing transaction batching they can quickly become massive. Indeed, it is possible to transfer all the tokens (or, more generally, “rights”) associated with a UTXO towards an arbitrary amount of recipients with a single commitment in a single bitcoin transaction. Let’s assume you are a service provider making payouts to several users at once. With RGB, you can commit in a single Bitcoin transaction thousands of transfers to thousands of users requesting different types of assets, making the marginal cost of each single payout absolutely negligible.
Another fee-saving mechanism for issuers of low value assets is that in RGB the issuance of an asset does not require paying fees. This happens because the creation of an issuance contract does not need to be committed on the blockchain. A contract simply defines to which already existing UTXO the newly issued assets will be allocated to. So if you are an artist interested in creating collectible tokens, you can issue as many as you want for free and then only pay the bitcoin transaction fee when a buyer shows up and requests the token to be assigned to their UTXO.
Furthermore, because RGB is built on top of bitcoin transactions, it is also compatible with the Lightning Network. While it is not yet implemented at the time of writing, it will be possible to create asset-specific Lightning channels and route payments through them, similar to how it works with normal Lightning transactions.
RGB is a groundbreaking innovation that opens up to new use cases using a completely new paradigm, but which tools are available to use it? If you want to experiment with the core of the technology itself, you should directly try out the RGB node. If you want to build applications on top of RGB without having to deep dive into the complexity of the protocol, you can use the rgb-lib library, which provides a simple interface for developers. If you just want to try to issue and transfer assets, you can play with Iris Wallet for Android, whose code is also open source on GitHub. If you just want to learn more about RGB you can check out this list of resources.
This is a guest post by Federico Tenga. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.