Priceless advice from Mark Moss.
Bhutan going public with their bitcoin accumulation strategy is a data point that lends credence to the belief that hyperbitcoinization is likely to start at the edges.
- Marty Bent
- 4 min read
- 1 May 2023
This maybe the first bold effort or experiment of its kind where a Least Developed Country with major developmental disadvantages aims to leap frog into the future using the fourth industrial revolution. – The Buthanese
Over the weekend the world received confirmation that the Kingdom of Bhutan, a small country in the Himilayas with a population of 777,486, has been mining bitcoin since 2020 when bitcoin was trading around $5,000. Druk Holdings Investments (DHI), the official investment arm of the Bhutanese government, was essentially forced to come out and explain their “digital asset” strategy after it became apparent that they were involved in the space when their name was disclosed in the bankruptcy documents of Blockfi and Celsius. The Bhutanese, a local paper in Bhutan, wrote an article over the weekend walking through their mining and broader “digital assets” strategy. After reading the article, it is clear to your Uncle Marty that Bhutan is way ahead of the curve when it comes to a bitcoin strategy. Not only that, their involvement is a massive validation of a number of things that bitcoiners have been saying for many years.
The Kingdom of Bhutan is a very small country that has been struggling for decades to jump start their economy to the point that it is attractive enough to retain young talent while becoming economically self-sufficient. Getting into bitcoin is a great way for the country to kill two birds with one stone. By utilizing excess cheap electricity produced by the country’s hydroelectric dams, Bhutan is able to take previously stranded and wasted resources and turn them into a significant revenue stream. Not only that, the revenue is realized in bitcoin, which is a nascent monetary asset in the beginning stages of its monetization process. DHI simply has to sell some of the bitcoin they mine to cover the operational expenses of their mining operations and hold the rest on its balance sheet. In time, as bitcoin adoption continues to increase, the value of the bitcoin sitting on their balance sheet should increase and if DHI is holding a material stack that should allow Bhutan’s sovereign wealth fund to accrue a significant amount of value in a relatively short period of time. If bitcoin is as successful as we believe it will be and DHI is able to hodl their stack, it isn’t hard to imagine them reaching the point of economic self-succifiency by the end of the decade.
This is beautiful to see because it is a direct validation of something bitcoiners have been saying for well over a decade; smaller nations are highly incentivized to get into bitcoin as early as possible because if they accumulate a sizable stack at a relatively low price they will be able to benefit massively from its monetization process. Not only that, but that they’d likely start accumulating under the radar as to not send a signal to their counterparts around the world that they should be doing the same thing. If it weren’t for Blockfi and Celsius falling into bankruptcy the world would likely be completely unaware that Bhutan has been mining and accumulating bitcoin via their sovereign wealth fund. Now that this information is public one must ask “How many nations are out there who didn’t get caught up in the messes caused by Blockfi, Celsius and others that are also accumulating?”
I don’t think it’s crazy to say there are others out there. With the unveiling of DHI being allocated to the space, Bhutan joins Venezuela, El Salvador and Russia as countries that have publicly admitted that they are accumulating or mining bitcoin.
Bhutan going public with their bitcoin accumulation strategy is a data point that lends credence to the belief that hyperbitcoinization is likely to start at the edges. Countries with little to lose and everything to gain will make the conscious decision to begin getting exposure to bitcoin because it presents them with the best risk-reward profile. Everyone can see the writing on the wall as it pertains to the dollar’s status as global reserver currency. The US and the countries closest to its sphere of influence are almost forced to go down with the ship. If they admit that the dollar endgame is in sight and decide to posture favorably toward bitcoin they will accelerate the dollar’s demise and do a lot of harm in the process. Countries who are not in the direct orbit of the US’ sphere of influence and are able to clearly read the writing on the wall – the dollar is being debased, the rails that it runs on are becoming increasingly censored, and trusted custodians cannot be trusted – are going to take a chance on bitcoin. It’s really quite simple.
The question that remains now that Bhutan has been forced into the open is, “which countries are currently running onto the field from the sidelines to ensure that Bhutan doesn’t end up with a bigger stack than they do?”
#bitcoin2023 speaker @LynAldenContact on #Bitcoin’s path toward adoption at the sovereign level 🚀— Bitcoin Magazine (@BitcoinMagazine) March 23, 2023
Join us at the world's biggest #Bitcoin conference – ticket prices increase TOMORROW at MIDNIGHT! ⏰
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By: Samuel Atta Amponsah
In this piece, we review and respond to criticisms and misconceptions that continue to come up in our conversations. These criticisms outlined below have been addressed many times over, but we wanted to share an updated response given the increase in attention on Bitcoin. Specifically:
- Bitcoin is too volatile to be a store of value.
- Bitcoin has failed as a means of payment.
- Bitcoin is wasteful
- Bitcoin is used for illicit activity.
- Bitcoin is not backed by anything.
- Bitcoin will be replaced by a competitor
#1: Bitcoin is too volatile to be a store of value.
My view: Bitcoin’s volatility Is a trade-off it makes for perfect supply inelasticity and an intervention-free market. However, with greater adoption of bitcoin and the development of derivatives and investment products, bitcoins volatility may continue to decrease it has historically.
As discussed in the report on Bitcoin as an Aspirational store of value, the trajectory of a new asset from negligible awareness and adoption to a global store of value is unlikely to be linear, In this moment, bitcoin is an emerging store of value- it is undergoing financialization and Is in cementing its status as a store of value. Relative to other stores of value assets (eg gold) bitcoin is narrowly held.
The day-to-day volatility should come down over time with increasing spot and derivative market liquidity and the development of products that allow investors to express interest in bitcoin in different ways, leading to greater ownership, participation, and heterogeneity of market participants. As bitcoin ownership becomes more widespread, the price of bitcoin should stabilize in tandem with new participants having less of an ability to move the market. However, while the vocality of bitcoin should continue to decline relative to where it is today, in the following paragraphs, we put bitcoin’s volatility into context.
One way to put the volatility of bitcoin into perspective is to compare it to gold in the 1970s. AS Matt Hougan go bitwise investments highlights, the role of gold was unclear to investors when the U.S. abandoned the gold standard. This resulted in the annual and even daily volatility that is similar to the volatility of bitcoin today. For example, In 1973 the price of gold changed by over 3% in one out of ten days. However, as Paul Tudor Jones outlined in his widely read May 2020 investor letter:
“ With gold, it was a tremendous buying opportunity as gold went on to more than quadruple past the prior highs”.
Paul Tudor Jones, Tudor Investments.
Another way to understand Bitcoin’s locality is that it is a consequence of the asset’s perfect inelastic supply. A rise in the demand cannot increase the supply of bitcoin or increase the speed at which it issues bitcoin( thanks to the difficulty change, which ensures that it produces blocks every ten minutes on average). Notably, this supply inelasticity is also what makes bitcoin scarce and valuable. Thus, bitcoin investors accept volatility as the cost or premium of getting access to a rising store of value asset that they believe has a significant untapped addressable market.
This fact could also explain bitcoin volatility coin has an intervention-resistant market- no central bank to the government can step in to support or prop up markets and artificially subdue vocality. Bitcoin’s vocality is a trade-off for a distortion — free market. True price discovery accompanied by volatility might be preferable to artificial stability if it results in distorted markets that may break down without intervention.
“ We are operating in high distorted markets whose upward trajectory depends ever more on the persistence of investor collective faith in ana already-stretched monetary policy stance to compensate for a growing number of headwinds”\
C#2: bitcoin has failed as a means of payment.
My view: Bitcoin makes deliberate trade-offs, such as limited and expensive capacity, to offer core properties such as decentralization and immutability. Given its high settlement assurances, Bitcoin optimizes its limited capacity for settling transactions that aren’t well-served by traditional rails.
Many continue to believe that bitcoin’s core use is as a means of payment for everyday low-value transactions. Believing this, critics suggest bitcoin has failed because it does not (and cannot) offer the same transaction throughput as payment rails like Visa, MasterCard, or Paypal. Contrary to what some people think, data from Chain analysis highlights non-trivial transaction volume flowing through online payment processors at more than $500million per quarter since 2017, presenting a lower bound for bitcoin’s use as a means of payment.” However, while the medium of exchange may be one of Bitcoin’s use cases in specific situations, it is not Bitcoin’s core or only function.
As a means of payment, it can perform better than incumbent technologies in specific instances( think international payments) but Visa, Apple Pay, Google Pay, PayPal, and fiat currency work well and better than cryptocurrency for most day-to-day payments.
Bitcoin has properties that make it a viable payment tool- it is portable, fungible, and divisible. On the flip side, it also has limitations in that is volatile and has limited throughput. These are deliberate consequences that Bitcoin accepts. As discussed above, volatility is the tradeoff bitcoin makes for decentralization, which is a direct result of cheap and easy validation, By placing a cap on capacity( which limits the amount of data stored on the ledger), bitcoin makes it possible for people with basic computers to run validating nodes. Validating nodes are important because they verify the work performed by mining nodes and present checks and balances on miners in charge of creating blocks and processing transactions so that no one group of stakeholders has outsized power and influence so that bitcoin can be decentralized.
Accepting Bitcoin’s limited throughput to achieve decentralization and implement appropriate checks and balances, the next question worth asking is what transactions deserve to be written to the base layer of Bitcoin? And, what transactions demand Bitcoin’s global immutable settlement? Arguably, the most valuable use of Bitcoins limited capacity is not to record transaction data related to day to day payments at the point of sale, like the popular example of paying for a cup of coffee, but rather for situations that have the most to gain from Bitcoin’shigh level of assurances and are underserved by traditional rails — eg, that are inefficient and/or costly using traditional rails.
This includes, though is not limited to global settlements between international businesses and eventually even central banks and governments. One such example is BitPesa, which helps clients (SMEs and multinationals) trade ingot, and within African Currencies via Bitcoin. BitPesa was one of the first companies to leverage Bitcoin for commercial settlement to reduce the cost and friction of doing business in frontier markets. In specific situations, bitcoin may also offer a superior option in remittances that have been burdened by slow speeds and highness, especially to and from counties that face capital controls or struggle with high levels of inflation. According to the World Bank, the global average cost of sending 200$ remittances was 6.8% in the first quarter of 2020.
Additionally, while on-chain capacity is limited, second layer solutions that settle to Bitcoin( e.g. The lighting Networks, Bitcoin banks, or something else) may address the demand for lower value bitcoin transactions( though without the same on-chain settlement assurances).
Tax treatment is another factor that complicates the use of bitcoin as a means of payment in countries like the United States. For example, the IRS classifies Bitcoin as “property”. In the context of payments, this means that bitcoin users must calculate their gain or loss whenever they make a payment or purchase with bitcoin, reducing the attractiveness and seamlessness of bitcoin as a payment tool.
#3 Bitcoin is wasteful.
My view: A substantial portion of bitcoin mining is powered by renewable energy or energy that would otherwise be wasted. Additionally, the energy the Bitcoin network does consume is a valid and important use of resources.
There are different estimates for a portion of bitcoin mining powered by renewable sources. For example, the 3rd Global Cryptoasset Benchmarking report by the Cambridge Center for Alternative Finance(CCAF) estimates 76% of miners use renewables, especially hydroelectric power, as part of their energy mix. The aggregate share of renewables as a portion of total energy consumption by bitcoin miners is 39%, according to CCAF. CoinSHares estimates that the renewables penetration of the energy mix powering bitcoin mining is 73% as of December 2019. Both estimates suggest a significant number of operations are powered by renewables. (Eg. Hydropower, wind, solar). Recent announcements also suggest that the portion of mining tied to renewables will continue to grow. For example, the EN+ group formed a joint venture to leverage renewables energy assets that have a low carbon footprint in mining bitcoin. CCAF also estimates that total carbon dioxide emissions from bitcoin mining would not exec 58million tons or 0.17% of total global carbon dioxide emissions, even if bitcoin was exclusively powered by coal.
More recently, mining operations have been set up to power bitcoin mining with stranded gas, which leverages energy that may not be consumed for other purposes and reduces carbon and methane emissions in the process. Companies that use stranded gas byproducts to mine bitcoin also have the potential to generate more than fifteen times more revenue than if they could sell the gas at market prices. They may also set up bitcoin mining operations to comply with regulations that limit the amount of stranded gas that can be flared or vented and avoid regulatory fines or shutting down operations to prevent natural gas build-up.
Stranded gas is natural gas that has limited utility and is likely to be wasted. AN oil or gas well that does not have the pipeline infrastructure needed to transport the gas is considered stranded. Stranded gas is flared( deliberately burned into the air to avoid the risk of explosions) or vented( allowed to escape into the air) if it cannot be used, if there is no pipeline capacity to transport it, too if prices are too low for it to be economical to transport. America’s two biggest oil fields flared and vented almost a 500billion cubic feet of gas in 2019,w hick would have had the climate impact of seven coal-fired plants if released directed into the air. In December 2019, Crusoe Energy Systems announced it had plans to set up 70 bitcoin mining units this yea, preventing the flaring of 10 million cubic feet of gas per day. Equinor,a. Publicly traded petroleum multinationals also revealed plans to use stranded natural gas that would otherwise be flared and create carbon emissions to power bitcoin mining.
“ My favorite way to think about it is as follows. Imagine. Topographic map of the world, but with local electricity costs as the variable determining the peaks and trough. Adding Bitcoin to the mixes is like pouring a glass of water over the 3D map — it settles in the thoughts, smoothing them out.
However, it is undeniable that bitcoin mining does consume energy. Thus, the question becomes, is it a worthwhile use of energy to secure the Bitcoin network and process transactions? Certainly, the answer will differ based on the person answering the question. Those who appreciate the importance of the first and only provably scarce, decentralized, censorship and seizure resistant digital asset that offers irreversible settlement would argue that it is> Bitcoin’s most valuable features- its perfect scarcity, its immutability(irreversibility of transactions), and its security( resistance to attack) are tied directly to real-world resources used in mining. Bitcoin would not be bae to fulfill its role as a secure, global value transfer and storage system without being costly to mine and maintain.
“ In the long-game, there may be no greater, more important use of energy than that which is deployed to secure the integrity of a monetary network and constructively, in this case, the bitcoin network.
#4: Bitcoin is used for illicit activity.
My view: Bitcoin, like cash or the internet, is neutral and has properties that may be valuable to good actors ad bad actors. However, as a share of total transactions, Bitcoin transactions are connected to illicit activity are very low.
Criticizing bitcoin for its use in criminal activity is akin to criticizing cash for its use in illicit activity or criticizing the internet for hosting the dark web and illegal marketplaces. Bitcoin ( like cash or the internet ) is neutral, Bitcoin offers novel characteristics that have a net positive impact on society; however, it may be also be exploited by bad actors who take advantage of bitcoin’s decentralized and censorship resistance characteristics.
It is important not to consider Bitcoin’s use in illicit activity in a vacuum. According to data from blockchain analytics firm, Elliptic, bitcoin’s use in illicit activities9 (e.g dark markets, ransomware, fraudulent activity) has been on a downward trajectory, and transactions connected to illicit activity Maddie up less than 1% of total transactions in recent years. Bitcoin transparent nature allows us to establish a concrete estimate of bitcoin’s use for illicit activity in a way that we cannot for fiat currencies making it easier to point fingers at bitcoin for facilitating criminal activity while ignoring the role that cash, as well as the financial system play in criminal activity. for example, for every dollar, spent in bitcoin on the darknet. At least 800$ was laundered via cash, according to the United Nations drugs and crime office and Chain analysis
“ Although virtual currencies are used for illicit transactions, the volume is small compared to the volume of illicit activity through traditional financial services.
The revelation that law enforcement can detect and punish criminal activity with the help of blockchain forensics may also present a barrier to the use of bitcoin by bad actors. Bitcoin is pseudonymous, not anonymous, and blockchain analytic firms have developed sophisticated techniques to trace criminal activity via Bitcoin to real-world identities. Additionally, the focus and scrutiny on Bitcoin from regulators and regulated institutions who must monitor for illicit transactions are only growing as Bitcoin becomes more financialized.
#5: Bitcoin is not backed by anything.
My view: Bitcoin is not backed by cash flow, industrial utility, or decree. It is backed by Conde and the consensus that exists among its key stakeholders.
In “What is an Asset Class, Anyway?” (Journal of Portfolio Management, 1997), Robert Greer defines three assets as “superclasses” — capital assets, consumable/transformable (C/T) assets, and store of value (SOV) assets.xxiii
Gold is placed in the “SOV” superclass, which includes assets that “cannot be consumed nor can [they] generate income. Nevertheless, [they] have value”. However, gold has also been characteristic of the “C/T” superclass given its use in jewels and technology (e.g. electronic, dentistry), which drives the idea that gold is backed by the utility in jewelry and industrial applications. However, gold jewelry is arguably an alternate vehicle to store wealth and is used as a private monetary reserve, and only a very small portion is used for industrial applications (only 7% of 2019 gold demand is tied to applications such as electronics and dentistry).
Based on Greer’s definitions, Bitcoin best fits in the “SOV” superclass. Bitcoin is not backed by cash flows, nor is it backed by industrial utility or by decree. Distinctly, it is backed by code that is brought to life by the social contract that exists among its key stakeholders. These stakeholders groups exist in equilibrium with no one group having outsized power:
Users that choose to transact on the network and pay for transaction finality
Miners that choose to incur costs to process transactions, providing finality
Nodes that choose to run bitcoin software to validate transactions
Developers that choose to maintain bitcoin software
Bitcoin’s stakeholders make the explicit choice to use and support the network, realizing bitcoin’s unique attributes the perfect scarcity of bitcoin, transactions irreversibility, and seizure and censorship resistance. The addition of every new stakeholder, in other words, Bitcoin’s network effect makes it more reliable and further hardens its properties, attracting more stakeholders to the asset, and so on. Bitcoin code presents the rules but the execution of and agreement on the rules by stakeholders gives rise to the secure, open, and global value storage and transfer system that exists today.
Criticism #6: bitcoin will be replaced by a competitor.
Response: while bitcoin’s open-source software may be forked, its community and network effects cannot. Bitcoin makes trade-offs for core properties that the market deems valuable.
Many digital assets have emerged that claim to improve on bitcoin’s deficiencies. However, to date, none have been able to achieve Bitcoin’s network effects. Bitcoin has qualities that make it valuable, and it makes explicit trade-offs to offer those qualities, as mentioned multiple times in this piece. While competitors have attempted to improve upon Bitcoin’s limitations (e.g. its limited transaction throughput or its volatility), it has been at the cost of the core properties that make bitcoin valuable. (E.g. perfect scarcity, decentralization, immutability). This explains why bitcoin continues to dominate in terms of market cap, investors and users, miners and validators, as well as retail and institutional infrastructure and products. AS shown in the charts below, bitcoin’s market cap is orders of magnitude higher than the combined market cap of competitors (other proof of work digital assets).
While Bitcoin’s software is open source and may be forked and improved upon, its network effects and community of stakeholders( users, miners, validators, developers, service providers) that understand and accept the trade-offs it makes cannot be easily replicated away.
While this piece does not cover the exhaustive list of criticisms against bitcoin, we believe the responses outlined here may be adapted to address other misconceptions.
Bitcoin is a unique digital asset for an increasingly digital world that requires digging deeper than the surface level to understand its core properties and trade-offs. It pushes onlookers to question preconceived notions of what is right and widely accepted to begin to understand its full value proposition.
Welcome to clown world 🤡
Sadly, unlike El Salvador, shitcoins will be equal side by side with Bitcoin.
Bitcoin is not crypto and crypto is not Bitcoin. Crypto is only about shitcoins that want to siphon your money away from you. Bitcoin is all about fixing the money of the world. This is a difference that you should learn about if you haven’t already.
By: Joseph Hall
A Bitcoiner used his wedding day to share his love for his favorite digital currency, Bitcoin, by gifting 4,000 Satoshis to every guest and incorporating a volcano theme.
A Bitcoin (BTC) evangelist in Lebanon took their love for Bitcoin to the next level. Said Nassar, an international business engineer, themed his wedding day around Satoshi Nakamoto’s innovation, Bitcoin.
Each and every wedding guest received Satoshis (the smallest denomination of a Bitcoin) as a wedding gift for attending the Nassar family’s special day, while the theme of the wedding was volcanoes—a nod to El Salvador’s Bitcoin bonds, commonly known as the Volcano bonds.
Nassar told Cointelegraph that he put a volcano stand in the wedding and “distributed gifts via the Lightning Network.” Indeed, under every cutlery set for the post-ceremony banquet were instructions to download a Bitcoin Lightning Network wallet to receive 4,000 Satoshis. Worth roughly $0.80 now—due to bearish price action—at the time of the wedding, the gift was worth $1.60.
The link took the wedding guest through to a thorough YouTube video that shows how to set up a wallet and why people should buy Bitcoin. Of the 250 to receive wedding Satoshi gifts, 75 people downloaded wallets and asked Nassar to send over the 4,000 Satoshis—this was the first time these people had received Bitcoin.
At a 30% success rate, his method for promoting Bitcoin adoption is high given that worldwide Bitcoin adoption may only reach 10% by 2030. Plus, Nassar qualifies, “All of them [the wedding guests] saw it and thought about it.”
Nassar is an insatiable Bitcoin advocate. So naturally, his wedding day would be the perfect time to “orange pill” or educate more people about the importance of Bitcoin. He’s the brains behind Lebanon’s first Bitcoin-themed escape room and jokes that he has a half-hour limit for talking about non-Bitcoin themes when making acquaintances:
“I try to explain monetary policies and what is fiat money to every person I meet longer than 30 minutes.”
Curiously, Twitter user Stackmore also treats weddings as the ideal time to both start a family and start stacking sats. Stackmore has sent Satoshis as wedding gifts for the past five years:
In Nassar’s home country Lebanon, the inflation rate exceeded 200% in January this year. Bitcoin, by comparison, has a fixed supply of 21 million coins and benefits from a programmed issuance rate that makes the currency deflationary.
Despite calls from top execs to avoid buying Bitcoin in Lebanon, groups such as AlJazeera report that Bitcoin adoption is booming in the country. For Nassar, it’s key to start with family and friends as “Hyperbitcoinzation starts at home.” He has already introduced his nearest and dearest to Bitcoin:
“All my close friends and my family members have bought bitcoin, and my mother is a whole coiner.”
What about you, anon? Do you love Bitcoin enough to theme your special days around the coin?
It can’t be said often enough: Bitcoin is confusing. However, it’s not complicated like a Rube Goldberg machine is complicated. It’s just very foreign and thus very misunderstood—it is a completely new thing. “There’s nothing to relate it to,” as Satoshi put it in one of his posts.
Because there is nothing to relate it to, we are all having a hard time wrapping our heads around the various aspects of it. We need to use words if we want to talk about it in a meaningful way, and words are what I will focus on.
I want to talk about two things: (1) the language used in Bitcoin and (2) the language used to attack bitcoin.
Part 1: The Language Used In Bitcoin
Let’s get one thing out of the way: it’s all numbers, all the way down. Bitcoin does the one thing that all computers do, which is actually two things: it takes certain numbers as inputs, does calculations, and presents the result of said calculations to someone else. In Bitcoin’s case, this “someone else” is another node on the network—or multiple, to be precise. When stripped down to its bare essentials, that’s all there is to it: math and messages.
Consequently, we have to use metaphors—and lots of them. Keys, wallets, addresses, signatures, contracts, mining, dust, fork, oracle, orphan, seed, witness—the list goes on.
However, here’s the thing with metaphors: “All metaphors are wrong, but some are useful,” to paraphrase George Box. Undoubtedly, many people are confused precisely because of the shortcomings of these metaphors. All the labels that we apply to the various concepts in Bitcoin are wrong, at least a little bit. Some are wrong a lot. Everyone who ever tried to explain that “your bitcoins are not actually in your bitcoin wallet” to a glossy-eyed newbie knows what kind of confusion I’m talking about.
Unfortunately, this confusion won’t be going away anytime soon. And more worryingly, this confusion is being weaponized by legislators, politicians, and commentators alike. Those who despise Bitcoin are trying to pass laws and plant ideas in people’s heads that are bastardizing how Bitcoin works, as well as the language we use to describe how it works. Consequently, it would be beneficial to get our language straight. After all, how high are the chances of understanding something deeply if the words we use to describe said thing are inadequate?
First, let’s go through some of the words we use in Bitcoin and see where they fall short. We all know these words, and we usually don’t think twice about them. Let’s start with “wallet.”
A wallet is a piece of software or hardware that makes it easier or more secure to store and/or spend your bitcoin. It’s easy to see that a wallet is neither one thing nor easily defined; just look at all the various forms of wallets we came up with over the years: paper wallet, brain wallet, hardware wallet, mobile wallet, multisig wallet, lightning wallet, watch-only wallet, and so on.
In the end, we have to understand how Bitcoin operates if we want to get a grip on what a wallet is. Here is the gist of it: to create a bitcoin transaction, you need to sign a message with a private key. Consequently, two things are essential for a wallet: key storage and signing. But that’s not enough, usually. To interact with the Bitcoin network, you need to interact with a Bitcoin node. You need a way to access the public information, the “distributed ledger” that is so often mentioned by finance and crypto bros alike.
What we have historically called a bitcoin wallet, thus, is just some software that manages and stores keys and allows the user to easily use these keys to sign and broadcast messages. To increase security, said software might be embedded in a dedicated hardware device. The more effort it is to spend your sats, the lower the risk of theft or loss of funds. A wallet might not have any signing capability at all, as is the case for brain, paper, or watch-only wallets. This begs the question: how useful is the term wallet?
Interestingly, we have already switched to a different term when it comes to seed storage. We are not talking about “metal wallets” or “metal keys” when we talk about key storage; we usually talk about seed storage, metal seeds, or seed plates nowadays.
Further, we now refer to various multi-signature and timelock constructs as “vaults”—a powerful and clear distinction. The vault metaphor makes it immediately obvious that whatever is stored in the vault is there for the long haul. It isn’t spendable easily or quickly.
I hope that, in the future, we will also manage to do away with the generic “wallet” term. When it comes to hardware wallets, a change of terms is already underway. Given that a hardware wallet is nothing but a small device that is used for signing transactions, a more accurate term is “signing device,” which is currently gaining traction thanks to people who understand the technicalities of Bitcoin deeply.
Maybe usage will morph so that whenever someone says “wallet,” it is implied that it is something that isn’t holding massive amounts of value and that said value is spent easily and quickly, as is the case for Lightning wallets. In the end, the “wallet” metaphor will always be wrong in a crucial way: your wallet does not actually hold any of your coins. That’s not how Bitcoin works. It might hold your keys, which brings us to the next word.
In the physical world, a key is used to open something. A door, a chest, a locker, and so on. It might also be used to start something: a car, a motorbike, a nuclear missile—you get the idea.
As mentioned before, to create a bitcoin transaction, you use your private key to sign a message. The keys in bitcoin are cryptographic keys, and cryptographic keys can be used to create digital signatures.
This, of course, only makes sense in the world of cryptography. Commonly, a key is used to lock and unlock things. If you want to sign something, you need a pen. This confusing metaphor is not exclusive to Bitcoin, of course. Plenty of other software uses cryptographic keys to sign stuff, which is why in 2010, this abomination of an emoji was introduced: the padlock, “locked with pen.”
Consequently, a “key” in bitcoin is more like a pen, not an actual key. Granted, you can use your key to “unlock” sats that are “locked” by yourself or someone else, but still, no matter what metaphor you use, it will always fall short. It will always fall short because the keys in Bitcoin are data, nothing else. Your private keys are secret information—information that nobody but you should ever know. If someone else gets possession of your private keys, your bitcoin will be their bitcoin.
To make theft or accidental spending as difficult as possible, keys that give access to large funds are held in “cold” storage. The secret information is disconnected from the internet, held on special signing devices that never touch a general computation device.
A “hot wallet,” on the other hand, brings the secret information required to move your sats as close to the network as possible. If you want to spend frequently, your keys have to be readily available. A lightning wallet, for example, is a “hot” wallet: the private keys that allow you to spend your sats are connected to the internet at all times. If your computer or smartphone is compromised, your funds are at risk. Such are the tradeoffs between “hot” wallets and “cold” storage.
“Hot” and “cold” are again, of course, metaphors. A hot wallet is hot like a microphone in a recording studio is hot. It means that it’s charged, fired up, and to be handled with care, not that its temperature actually increased.
We can see that language is neither singular nor static, which makes the line between a useful metaphor and an outright linguistic attack a blurry one.
The “key” metaphor, for example, isn’t terribly wrong. We can actually think of signing as unlocking. The underlying elements responsible for spending sats are referred to as locking and unlocking scripts, and for good reason. These scripts are small computer programs that define the conditions that are required for certain sets of sats to move. You can think of it like this: those who want to move sats have to solve a cryptographic puzzle. Usually, a private key is required to fulfill the spending condition: the key is the key to the puzzle. So if we think “key to the puzzle,” it’s not even wrong. And anyway, I’m afraid we’re stuck with it.
Two more things: the reason why your private key can be represented as words is that it is, just like everything else in bitcoin, information. And the reason why we call these words a “seed phrase” is because your private key is the seed from which all your other keys and, ultimately, addresses are derived from. This brings us to the next word: “address.”
This is probably the worst of all. To quote Luke Dashjr: “It’s so bad, we made a BIP to get rid of it.” He is talking about BIP 179, a Bitcoin improvement proposal that’s sole purpose is to propose a new term for “address.” The new term is “invoice,” which is the default in lightning and is actually more accurate—technically speaking—even on the base layer. It is more accurate because bitcoin transactions do not have a “from address,” even though you might think they do, especially if your mind is poisoned with the “address” metaphor.
The concept of a “from address” only exists heuristically. In Bitcoin, only receiving addresses exist. A transaction does not contain a from address. A transaction only contains the aforementioned scripts, which are challenges and solutions to challenges. If you can solve the challenge, you can move the coins.
The way to think about this properly is to think about flows, not coins. Let’s say you take a big scoop of water out of a lake, and let’s further say that this lake is fed by multiple streams. It’s a pristine lake in a mountainous region, so you fill up your bottle to cool yourself off with a refreshing drink. You sit down, take a sip, and ponder the following question: where did the water in your bottle come from?
From the lake, obviously—but from which stream? And how many molecules came from the clouds directly, raining down on the lake? Can you tell, even in principle? A God-like entity probably could, since water consists of molecules, and you could—at least in theory—track said molecules.
You can understand Bitcoin and bitcoin transactions in a similar way: transactions can have multiple inputs and multiple outputs, i.e., inflows and outflows, to stick with the liquid metaphor. However, there is one important difference: there are no molecules in bitcoin; there is only accounting. You can’t track anything for sure; you can only make educated guesses—heuristics that are, in many cases, plain wrong.
There are no molecules in bitcoin because every transaction “destroys” all inputs and creates new outputs. If you are dead-set on thinking about coins—i.e., if you view every UTXO as a coin of a different size—you can think about every transaction as a smelting process. All inputs are liquified in a big furnace, and new coins are created as outputs.
This brings us to the next problematic metaphor: coins.
I always loved this quote by Peter Van Valkenburgh, musing on the locality of bitcoin—or lack thereof:
Where is it, at this moment, in transit? […] First, there are no bitcoins. There just aren’t. They don’t exist. There are ledger entries in a ledger that’s shared […] They don’t exist in any physical location. The ledger exists in every physical location, essentially. Geography doesn’t make sense here — it is not going to help you figuring out your policy here.
What we call “coins” only exist by convention. The protocol is oblivious to our notion of coins. It only knows sats and spent or unspent transaction outputs. Spent outputs are inputs of past transactions. If the sum of one or multiple outputs adds up to 100 million sats, we call it “one bitcoin.”
Of course, it is way easier to talk about “coins” and “addresses” and “wallets,” because we know these things intimately from our real-world experience. We have an intuitive understanding of these metaphors, so it is clear what is happening if one “coin” moves from one “wallet” to another “wallet”—or so we think.
While the mental image of coins moving from one wallet to the next in an intuitive and easy-to-understand manner is a comforting one, nevertheless, it is wrong. What happens under the hood in bitcoin is much more wonderful, much more elegant, and much more magical than boomer gold coins moving from one leather purse to the next. It has to be. Bitcoin is information, not a physical thing. It is teleported at the speed of light, not moved in any physical sense. It is Magic Internet Money for a reason, and I’m afraid that we all have to understand its inner workings to a certain degree, especially if we want to be properly equipped to fight against any and all linguistic attacks, present and future.
Part 2: The Language Used To Attack Bitcoin
Bitcoin is under attack, always. Money is adversarial by nature because money is used between parties that aren’t fully trusting each other in the first place. Consequently, a monetary system is an adversarial system.
Everyone would love to have something for nothing; to cheat the system and get away with it. Everyone’s a scammer;1 everyone wants to get some sats for free.
Bitcoin is the biggest honeypot the world has ever seen; everyone and their grandma would love to break it. Further, the powers that be are, at least in part, powerful because of the fiat money printers that are rendered obsolete by the orange coin. Attacking Bitcoin becomes a necessary strategy if your very survival is threatened by it.
But, what parts of Bitcoin to attack? It is difficult to nail down what Bitcoin is and what it consists of in the first place. I like to think of it as a big hot mess of two parts software and two parts hardware—or wetware, to be more precise. A mix of technology and biology, with a large dash of economics on top.
Viewed in this light—that Bitcoin is made up of ideas, people, code, and nodes—it is easy to see that some attacks would be more obvious than others.
An obvious attack would be a software exploit that shuts down a large number of bitcoin nodes, for example. An even more obvious one would be a large-scale attack on its physical infrastructure. If the foundries that produce the current generation of SHA-256 ASIC chips are bombed or various large-scale mining operations go up in flames, we can confidently say that Bitcoin is under attack. In the same vein, if bitcoiners are declared the enemy of the state and are incarcerated or killed en masse, we can also deduce that Bitcoin is under attack.
But: how do you attack an idea? With bad ideas, that’s how. The civil war of the blocksize debate was such an attack on Bitcoin from the inside, and its resolution was a hard fork—an economic instantiation of said idea.
In addition to attacks from the inside, we already had many attacks from the outside. Almost as soon as Bitcoin appeared, it was attacked by politicians, central bankers, traditional investors wedded to the fiat system, as well as the economically and technically illiterate. We’ve heard it all before: bitcoin is only used by criminals, bitcoin is worthless, bitcoin’s value is based on pure speculation, bitcoin is old technology, bitcoin is too slow, bitcoin is a bubble, and so on and so forth.
Allow me to highlight some of the more recent terms and phrases dreamt up by those who hang on the tits of various money printers—whether it be politicians, special interest groups, or crypto bros.
Two words, one goal: pushing users away from sound money and independence into something that we all know too well from the fiat system: trust, and dependency.
The inconspicuous nature of this phrase is what makes this attack so ingenious. Calling a regular bitcoin wallet “unhosted” gives the impression that it should be “hosted” in the first place; that something is missing from how it should be, like an unfinished puzzle or an unsupported beam.
The discussion shouldn’t be about “hosting” in the first place. It should be about control. Who can access your funds? Who can freeze your account? Who is the master, and who is the slave?
Just like “the cloud is someone else’s computer,” a “hosted wallet” is someone else’s wallet. It should be obvious that the centralization of control is what brought about all the monetary problems in the first place, but I’m afraid that we will have to learn the lessons of history and the lessons of Mt. Gox over and over and over again: money held and controlled by others can and will be manipulated. We do not want to make this mistake again, which is why the following became a mantra of sorts: not your keys, not your bitcoin.
Bitcoin wallets are supposed to be unhosted—or, to use a word that wasn’t made up by devilish puppeteers: independent. The purpose of Bitcoin is to bring full sovereignty to the individual and to remove all dependencies on trusted third parties. No rulers, no masters, no hosts. Only peers.
Instead of using the term “unhosted wallet,” one could refer to regular bitcoin wallets as independent or freedom wallets. The opposite of an independent wallet is a custodial service, which means that you have a permission slip, nothing more. By using a custodial service, you destroy what makes bitcoin valuable in the first place. You revert to the permissioned model of money: a debt relationship between masters and slaves, which is the fiat system we want to move away from. Some have all the power; the users have none.
Such a custodial service, a service that they want you to refer to as a “hosted wallet”—but what might be better described as a slave wallet—offers nothing but IOUs: permission slips & debt certificates that can be revoked, multiplied, re-issued, and destroyed at any time. The slave has nothing; the master has everything.
Make no mistake: this is a war of narratives, and the stakes couldn’t be higher. Freedom vs. dependency, control vs. self-ownership, reliance vs. responsibility. If anything, a wallet should be self-hosted, and self-hosting is not a crime. However, we shouldn’t think of “hosts” in the first place. A wallet does not need to be hosted because a wallet, as we’ve seen previously, is nothing but a key—private information—combined with hardware or software that allows you to do something with said key, e.g., derive addresses or sign transactions.
Having 12 words in your head doesn’t make you the owner of an unhosted brain wallet; that’s ridiculous. You don’t need permission to remember 12 words by heart, and any law that makes the act of remembering 12 words illegal is a very, very, (very!) stupid law. But even ignoring this stupidity for a moment, such a law can’t possibly be enforced. It should be rendered meaningless as soon as it is passed. You can’t prove that I have 12 words in my head, just like I can’t prove that you are not thinking about an orange elephant at this very moment. Holding a key is knowing a secret, and here is the thing about secrets: if you don’t tell, nobody knows.
Letting someone else hold your keys destroys all the benefits that bitcoin brings with it. If others could be trusted with our money, we wouldn’t have needed Bitcoin in the first place. And if nobody takes the responsibility of self-custody, Bitcoin will be captured, just like gold before it.
Consequently, the term “unhosted wallet” is an attack on Bitcoin that we should take seriously, along with the implications that a successful ban would entail. It is a most ingenious and mischievous attack—subtle yet effective, re-framing what a wallet is and should be.
The fact that someone sat down and came up with this phrase makes me think that the powers that be are starting to grasp what Bitcoin is and how empowering it truly is, which is why they will do everything they can to keep you numb, dependent, and enslaved. “They want more for themselves and less for everybody else,” to quote George Carlin. “They don’t want well-informed, well-educated people capable of critical thinking.”2
Ask yourself: should flipping a coin 256 times be illegal? What about math? What about having certain thoughts? Do we really want to live in a world in which having 12 words in your head makes you an outlaw?
Another phrase, another implication. The #ChangeTheCode campaign is ingenious; you have to give them that. It implies that Bitcoin’s code can’t be changed, which couldn’t be further from the truth.
Allow me to replicate the license in full:
Permission is hereby granted, free of charge, to any person obtaining a copy of this software and associated documentation files (the "Software"), to deal in the Software without restriction, including without limitation the rights to use, copy, modify, merge, publish, distribute, sublicense, and/or sell copies of the Software, and to permit persons to whom the Software is furnished to do so, subject to the following conditions: The above copyright notice and this permission notice shall be included in all copies or substantial portions of the Software. THE SOFTWARE IS PROVIDED "AS IS", WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. IN NO EVENT SHALL THE AUTHORS OR COPYRIGHT HOLDERS BE LIABLE FOR ANY CLAIM, DAMAGES OR OTHER LIABILITY, WHETHER IN AN ACTION OF CONTRACT, TORT OR OTHERWISE, ARISING FROM, OUT OF OR IN CONNECTION WITH THE SOFTWARE OR THE USE OR OTHER DEALINGS IN THE SOFTWARE.
Anyone is and always was free to change the code of Bitcoin. Bitcoin’s free and open-source nature is why we have thousands of forks and clones in the first place, including forks that implement what the #ChangeTheCode campaigners are proposing.5
While this whole campaign to “change the code” shouldn’t be taken seriously in the first place, the tactics behind it shed some light on the attacker’s motivation and on what is yet to come. #ChangeTheCode was funded by Chris Larsen, founder of Ripple, the company that created the shitcoin that is XRP. These kinds of shitcoins can’t compete with Bitcoin on merit because they are permissioned, centralized, and have no reliable monetary policy, among other things. Consequently, they have to resort to smear campaigns and hiring reputational hitmen.
The thing about money is that all forms of money are competing, either directly or indirectly. All monies compete for liquidity, credibility, attention, value stored, and more. Consequently, the marketing departments of virtually all shitcoins are directing funds to dismiss or attack bitcoin in one way or another by implying that Bitcoin can’t be changed, that it is used for illicit activity, or that it is too slow or wasteful.
Bitcoin, however, is neither slow nor wasteful. Proof-of-work is insanely efficient if your goal is to create a monetary system that is free from politics and secured in a public and transparent manner. If you do not value such a system, it will always seem wasteful.
This, coincidentally, brings us to the next attack.
“Proof of Stake”
Let’s get one thing out of the way: there is no proof, there is no stake,6 and it isn’t even remotely comparable to its namesake, proof-of-work.
I have written extensively about proof-of-work in the past, so in the interest of not trying to repeat myself ad nauseam, I’ll try to be brief: proof-of-work solved the problem of telling time in a decentralized system, the problem of random selection, the problem of fair issuance, and the problem of unforgeable costliness in the digital realm. It embeds objective truth into a blob of data directly, which is why it is trustless and reliable. The information “speaks for itself,” to quote Satoshi.7
Proof-of-stake, on the other hand, has no objective truth, no objective time, no random selection, no fair issuance, no outside cost, no operational cost, and centralizes over time. It is the perpetual motion machine of consensus mechanisms, which is to say that it isn’t a consensus mechanism at all. It is rotten at its core because it relies on trust through and through.
Proof-of-stake should be called “just trust me, bro,” and therein lies the problem as well as the linguistic trickery: by calling it proof-of-stake, one might think that it is comparable to proof-of-work: “Ah, this one is just like the other one! Just another one of those consensus mechanisms, just as good as Bitcoin’s proof-of-work.” No. Wrong. Proof-of-stake is make-believe, and it will inevitably lead to all the ills that the make-believe world of the fiat monetary system suffers from, as the various failures of these systems show time and time again.8
Words have meanings, which is why we should choose them wisely and carefully. Bitcoin is not wasteful.9 Bitcoin is not closed source.4 Bitcoin is not controlled by shadowy supercoders.10 Bitcoin is not war. An ASIC is not a gun. If anything, Bitcoin is a Wittgensteinian language-game,11 using words and chance for peaceful conflict resolution.
Allocation follows perception, as does public policy. Perception, in turn, is shaped by our understanding and the very words we use to arrive at and describe said understanding.
In a world awash in euphemisms and blatant lies, calling something by its proper name is rebellious in itself. Bitcoin is about freedom and self-sovereignty, not about asking for permission. It is about independence and verifiable truth; extreme ownership and responsibility; hope12 and human rights.13
The best way to fight bad ideas and bad terminology is with good ideas and good terminology. Thus, we should all make an effort to call things by their proper names, try to understand their inner workings, and explain them in simple terms to others.
Bitcoin isn’t as complicated as it might seem at first. It is just very alien, which is why all metaphors we use to describe it break down at some point. As we have seen, wallets, keys, addresses, coins, and many other words we use are insufficient to truly explain what is going on.
The confusion which inevitably arises out of this misunderstanding is used and abused by Bitcoin’s detractors, be it from the church of “fiat” or the cult of “crypto.”14
Obviously, “honeybadger don’t care” when it comes to most of these attacks. Bitcoin will march on regardless, but that doesn’t mean that we should give in to the various narratives and framings that are set up by those who want to control and oppress (or those who want to make a quick buck). Bitcoin is made of people, and it is individual people that will suffer—either from short-sighted regulations, economic repercussions, poisonous snake oil, or rug-pull-induced concussions.
Bitcoin is a return to sanity, one that is desperately needed in the insane world of QE infinity and negative interest rates. The tragicomedy of our current financial system reads like the introduction to a game show: “Whose deficit is it anyway? An economy where everything is made up and the points don’t matter.”
The points in Bitcoin do matter, as do the words that we use to describe it. Bitcoin is truthful and precise in its speech, and we should strive to be too.
- M. Goldstein (2014). Everyone’s a Scammer ↩
- “The politicians are put there to give you the idea that you have freedom of choice. You don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land. They own and control the corporations. They’ve long since bought and paid for the Senate, the Congress, the state houses, the city halls. They got the judges in their back pockets and they own all the big media companies, so they control just about all of the news and information you get to hear. They got you by the balls. They spend billions of dollars every year lobbying. Lobbying to get what they want. Well, we know what they want. They want more for themselves and less for everybody else, but I’ll tell you what they don’t want. They don’t want a population of citizens capable of critical thinking. They don’t want well-informed, well-educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. That’s against their interests.” —George Carlin ↩
- What is Free Software? by the Free Software Foundation ↩
- Bitcoin is and always was free and open-source software. It is released under the MIT License. “Being open source means anyone can independently review the code. If it was closed source, nobody could verify the security. I think it’s essential for a program of this nature to be open source.” —Satoshi Nakamoto (2009) ↩ ↩2
- Three historical forks that implement what #ChangeTheCode is advocating for are “Bitcoin Oil,” “Bitcoin Stake,” and “Bitcoin Interest.” See this BitcoinTalk discussion from 2018. ↩
- Proof-of-stake suffers from the “nothing at stake” problem. “You don’t lose anything from behaving badly, you lose nothing by signing each and every fork, your incentive is to sign everywhere because it doesn’t cost you anything.” ↩
- “Proof-of-work has the nice property that it can be relayed through untrusted middlemen. We don’t have to worry about a chain of custody of communication. It doesn’t matter who tells you a longest chain, the proof-of-work speaks for itself.” —Satoshi Nakamoto (2010) ↩
- See dergigi.com/pos to understand why proof-of-stake is and always will be a defective consensus mechanism. ↩
- Parker Lewis (2019). Bitcoin Does Not Waste Energy ↩
- Jonathan Bier (2021). The Blocksize War ↩
- Allen Farrington (2020). Wittgenstein’s Money ↩
- Michael Saylor, hope.com ↩
- Alex Gladstein (2022), Check Your Financial Privilege. See also this compilation of videos from the Oslo Freedom Forum 2022. ↩
- One should note that “crypto” is yet another linguistic attack on Bitcoin, making it seem like there are many other projects that are either interesting, viable, or comparable. This couldn’t be further from the truth. Virtually all of “crypto” is a scam. The word “crypto” also leaves out the other half of what makes Bitcoin work, namely the “econ” part. After all, Bitcoin is a cryptoeconomic system. ↩
An analysis of Andorra’s Digital Assets Act and the potential confusion surrounding Bitcoin, blockchain and crypto according to crypto business owners.
By: Joseph Hall
A small light of progress shines from Andorra, a tiny European country nestled between France and Spain. The country’s government, the General Council of Andorra, recently approved the Digital Assets Act, a regulatory framework for digital currencies and blockchain technology.
The act is split into two parts. The first regards the creation of digital money, or “programmable digital sovereign money,” which can be exchanged in a closed system. In effect, this would allow the Andorran state to create its own token.
The second half of the act refers to digital assets as financial instruments and intends to create an environment in which blockchain and distributed ledger technologies can be regulated. For Paul (who withheld his surname), CEO of local Bitcoin business 21Million, the new law could attract new business. He told Cointelegraph:
“The outcome they’re trying to achieve is to actually attract new businesses to locate in the country by offering some legal clarification making it easier and more transparent. They see this as a way to attract talents and entrepreneurs to the new economy.”
Note that cryptocurrencies and digital currencies are not legal tender in Andorra, and the Digital Assets Act makes no proposals surrounding means of exchange. That privilege is exclusively reserved for the preferred currency of the European Central Bank, the euro. It hasn’t stopped Paul, an avid Bitcoiner, from making the case for Bitcoin (BTC) adoption in Andorra:
In a blog post, Paul highlighted that Andorra could adopt a Bitcoin standard, mining Bitcoin with renewable energy, taking on Bitcoin as a reserve asset, and welcoming Bitcoin-centric companies from all around the world.
National newspaper Diari d’Andorra reported that the Digital Assets Act is a step toward “making cryptocurrencies a day-to-day reality.” From a business perspective, Paul said that the level of “crypto-friendliness” depends on the activity.
“I have a friend who runs a mining operation here — no problem —and electricity is cheap. If you do financial consulting, then the same: pretty friendly with a low tax rate. If you wanted to run an exchange, it could be a bit hard to find a bank that works with you; the government itself wouldn’t mind.”
In an interview in May, Andorran Minister of Economy and Enterprise Jordi Gallardo mentioned that blockchain was one of the top areas of investment for the tiny country. However, it is not clear if the minister referred to Bitcoin (the world’s foremost blockchain) or research into distributed ledger technologies that underpin blockchains.
Josselin Tonnellier, co-founder of StackinSat, told Cointelegraph that there is confusion regarding crypto, blockchain, nonfungible tokens and Bitcoin. StackinSat hosts a major European Bitcoin conference, Surfin’ Bitcoin, in Biarritz, France just outside Andorra where the group’s headquarters are also located.
Paul, who is a regular attendee of Surfin’ Bitcoin, confirms that in Andorra, the sentiment and confusion remain similar: “The regulator doesn’t make a differentiation between ‘crypto’ and Bitcoin. They haven’t been ‘orange-pilled’ yet.” To take the orange pill is Bitcoin parlance for when a novice to Bitcoin begins to understand the principles of the seminal cryptocurrency.
Tonnellier emphasized that awareness of digital currencies and technologies is on the rise, but there’s a risk of scams and losses without the right educational tools or frameworks in place:
“According to a recent report by KPMG, there are more French people exposed to ‘crypto’ than to the stock market […] France is known to be a hotbed of ‘shitcoinery.’”
Although there is no “shitcoin” classification chart, such coins are tokens other than Bitcoin, which, according to the latter’s proponents, are at risk of plummeting to zero. Squid Game Token was one of the most newsworthy shitcoins of 2021.
Back in Andorra, Tonnellier explained that the country is best placed to run with technologies such as Bitcoin. “Andorra is one of the few European countries outside the jurisdiction of the European Parliament.” Indeed, in many ways, it could be comparable to Switzerland on a smaller scale:
“Andorra is very attractive for entrepreneurs thanks to its low tax, but Switzerland has a great head start in promoting the development of activities around Bitcoin and cryptocurrencies in general. This could change in the coming years thanks to this text of laws which frames Bitcoin and blockchain activities.”
At under 500 square kilometers of land, Andorra is among Europe’s smallest countries. Contrary to popular belief, Andorra is not a tax haven; the micro-state renounced banking secrecy in 2018. Nonetheless, taxes are considerably lower than in neighboring France or Spain, while financial services comprise up to 20% of the economy.
While it’s unclear which digital assets the government intends to regulate with the Digital Assets Act, the economically motivated movement may help to diversify the Andorran economy and welcome blockchain- and crypto-based companies. For Paul, it’s a step closer to Andorra adopting Bitcoin.
At a Bitcoin-themed escape room in Lebanon’s capital Beirut, it’s all fun and games until you take the orange pill.
By: Joseph Hall
Bitcoin (BTC) sets people free. At least, that was the story at Lebanon’s first Bitcoin-themed escape room in Beirut.
Lebanese Bitcoiners from the group Bitcoin du Liban took on the latest Bitcoin education challenge — Bitcoin Escape the System. The best part? The team of four snuck out of the escape room in the fastest time to date.
For the uninitiated, an “escape game” or “escape room” is a team game where players work together to solve puzzles, clues and conundrums usually based on a theme such as spies, zombies and now, Bitcoin. As per the name, the mission is to “escape” the site of the game within a certain time.
Sooly Kobayashi, MENA advisor for Swan Bitcoin and a moderator at Bitcoin du Liban, told Cointelegraph that “All of us (except one) had never played escape rooms before. We entered the room without relying on our Bitcoin knowledge.”
However, they likely had a slight advantage over those new to Bitcoin. The escape game’s themes revolve around fiat money, time-chain technologies (commonly referred to as blockchain), SHA-256 (the Bitcoin hashing algorithm) and self-custody. The escape artists: @marco_bdl @Sooly_Kobayashi @Thomssmn @al3apodcast @BitcoinduLiban.
While the escape game is a bit of fun, according to Sooly, it’s another example of the Lebanese Bitcoin community’s creative approach to onboarding more Bitcoiners. Sooly, who is also a moderator at Bitcoin du Liban, told Cointelegraph that “education is challenging in a country that hasn’t invested much in this sector.”
“And with a history filled with instability, the Lebanese population has been busy surviving in economic restlessness. Hence, Bitcoin education needed a creative modern approach.”
As shown in the following graph, government education expenditure in Lebanon pales in comparison to that of Argentina; a country that also sufferers from critical problems relating to inflation and instability. It’s therefore on the people to take financial education, and creative orange-pilling techniques, into their own hands with grassroots activities.
Indeed, Bitcoiners from Lebanon to Slovakia are taking Bitcoin education by the scruff of the neck, seeking to spread the word of sound money. Bitcoin books, games and even family-friendly days out are spaces for Bitcoin veterans or those new to the tech to learn in ways that suit them best.
For the escape game, due to the at times high-stress, adrenaline-fuelled nature of escape games (if you know, you know), it’s possible that participants absorb information quicker and retain it longer. As a result, a Bitcoin-themed escape game could be a quirky yet quick way of educating people about Bitcoin. Sooly explains:
“It’s been scientifically proven that humans learn better in two scenarios. First, when we are emotionally driven. […] Second, when we are expected to pass on information to someone else, our minds tend to focus and memorize knowledge better.”
To date, the escape room founder, Said Nassar, an international business engineer, had only seen a “few” Bitcoiners play the game. Despite the Bitcoin-friendly appeal, the game had been enjoyed by newcomers to Bitcoin, or “no-coiners,” as they are sometimes known.
Sooly adds that some of the players are “shitcoiners,” including individuals interested in Ethereum (ETH):
No one would play this escape room and not learn about Bitcoin.”
For some Bitcoiners, there’s an irony to exiting a Bitcoin escape room. To some, the whole world may already feel like an escape room, and Bitcoin is the only way out. The Bitcoin Escape the System joins a fledgling list of Bitcoin-themed escape rooms, including The Bitcoin Heist in Macedonia, and the DIY Bitcoin escape room, Badass Daddy’s Bitcoins.
Analysis of Bitcoin’s proof-of-work and the Lightning Network exposes the banking system as energy-hungry, demonstrating that Bitcoin is better for the planet.
To download the report 👇
June 16, 2022 by Joseph Hall
Fresh figures on Bitcoin’s (BTC) energy consumption, efficiency and scalability serve to expose the banking sector while bathing the world’s largest cryptocurrency in a new light.
A research report published by Michel Khazzaka, an IT engineer, cryptographer and consultant, calculates that Bitcoin payments are a “million times more efficient” than the legacy financial system. Plus, the banking sector “uses 56 times more energy than Bitcoin.”
The report compiles almost four years of research and suggests a new calculation for estimating Bitcoin’s proof-of-work energy consumption. In an interview, Khazzaka told Cointelegraph:
“Bitcoin Lightning, and Bitcoin, in general, are really great and very efficient technological solutions that deserve to be adopted on a large scale. This invention is brilliant enough, efficient enough, and powerful enough to get mass adoption.”
Khazzaka, who founded payments consultancy Valuechain in late 2021, proposes an alternative to the energy estimates provided by Cambridge Bitcoin Electricity Consumption Index (CBECI). The index, often cited by Cointelegraph, estimates that Bitcoin consumes roughly 122 TW/H per year.
Taking into account the average lifespan of Bitcoin mining machines as well as the rate at which new IT materials are created, Khazzaka suggests that Bitcoin consumes 88.95 TWh per year, considerably less than Cambridge’s estimate.
Graph to show total count of mining units over time over 160 months. Source: Khazzaka report
A payments specialist who wrote his dissertation about cryptography in 2003, and discovered Bitcoin in 2011, Khazzaka also puts the banking sector under the microscope to effectively compare the two monetary systems. Khazzaka told Cointelegraph he “really underestimates every aspect of the banking sector,” and contrary to critics, his report is “biased to the banking system.”
Nonetheless, taking into account the creation of money, transporting money, physical banking infrastructure energy consumption, etc, he arrives at a figure of 4,981 TWh. Rounded up, 5,000 TWh is consumed by the “classical payments” sector every year. Consequently, banking uses 56 times more energy than Bitcoin.
The report examines transaction efficiency revealing that currently, “at current block size and if the blocks are filled to their maximum capacity ηmax = 5.7× better energy efficiency than the classical system.” However, that’s without taking into account the Lightning Network. In the interview, Khazzaka explained:
“Lightning will allow the bitcoin protocol to do more transactions without consuming more energy. And this is magic.”
The report concludes that the combination of Bitcoin and the Lightning Network allows Bitcoin to become “194 million” times more energy efficient than a classical payment system.
For Khazzaka, the report lays bare that the “Banking and payments industry needs to adopt blockchain and maybe even Bitcoin.” While Khazzaka’s conclusion may come as a surprise to the cypherpunks and anarchocapitalists who favor the crypto space, Khazzaka believes that Bitcoin could actually benefit banking:
Although Bitcoin’s energy use is frequently critiqued, the investigation into the banking sector will come as welcome news to many.
Central bankers and financial authority members from 44 countries visited El Salvador this week for the Digital Financial Services & SME Finance Working Group Meetings. The countries are all part of the Alliance for Financial Inclusion (AFI) – an organization aimed at the vision of “Making financial services more accessible to the world’s unbanked.”
The first three days of meetings were held at the Sheraton Presidente Hotel in San Salvador and covered a range of topics:
“The week of events is an opportunity to hold technical deliberations on promoting digital ecosystem and financial innovations and providing greater support for micro, small, and medium-sized enterprises (MSMEs), women and individuals with lower incomes, including regulatory frameworks for consumer protection…
…members are examining the position of financial regulators and the emerging approaches to regulate and supervise the proliferation of private digital money (cryptocurrency, virtual assets, digital payment tokens, stablecoins etc) across developing and emerging markets economies.” (full post on afi-global.org)
There was one Bitcoin session. Roman Martinez (Chimbera) and Nicolas Burtey shared the story of Bitcoin Beach and provided an introduction to Bitcoin and the Lightning Network (view and comment on the deck).
Outside the conference room the Bitcoin Beach Wallet team set up tables where attendees were shown how to download and use a Lightning wallet.
Spending sats at Bitcoin Beach
On day four, the group traveled to El Zonte and was welcomed to Hope House, where it all started.
They paid for coconuts and coffee with sats over the Lightning Network.
They learned how to exchange Bitcoin for dollars at an ATM.
And learned Bitcoin is an open network – you can pay a Strike invoice with Bitcoin Beach Wallet.
Through firsthand experience, this group of central bankers is seeing what Bitcoin can do for people left out of the current financial system.
Twitter has been ablaze with posts about whether or not this was a Bitcoin event.
It wasn’t – it was a financial inclusion event.
Bitcoin just happens to be the most inclusive financial network in the world.
Congratulations to the Bitcoin Beach, Hope House and Bitcoin Beach Wallet teams for hosting a great day in El Zonte, and thank you to the whole AFI organization for exploring the potential of Bitcoin.
See you in November at Adopting Bitcoin!
The Central African Republic has adopted Bitcoin as a legal currency, becoming only the second country to do so after El Salvador.
Lawmakers from the central African country unanimously adopted a bill to make Bitcoin legal tender alongside its CFA franc and legalised the use of cryptocurrencies.
President Faustin Archange Touadera signed the measure into law, his chief of staff Obed Namsio said in a statement.
The CAR “is the first country in Africa to adopt Bitcoin as legal tender,” Namsio said.
“This move places the Central African Republic on the map of the world’s boldest and most visionary countries,” he added.
The new legislation covers the use of cryptocurrencies and those who use them, in online trade, “smart contracts… by blockchain technology” and “all electronic transactions”.
It also said cryptocurrency exchanges are not liable to tax.
However, due to the high volatility of the digital currency, some are wary of the move.
Martin Ziguele, a former CAR prime minister who is now an opposition MP, complained the bill was approved “by proclamation” while some legislators intend to file suit against it at the Constitutional Court. “This law is a way of getting out of the CFA franc through a means that guts the common currency,” said Ziguele. “It [the law] isn’t a priority for the country,” he said. “This move raises the question: who benefits from it?”
Regulators around the world share the same concerns. Some also say that transfers using crypto are a perfect tool for traffickers and money laundering as they can be anonymised.
While countries such as India have in the past banned crypto transactions, El Salvador became the first country to adopt Bitcoin as legal tender last September.
But the move by El Salvador was heavily criticised by the International Monetary Fund (IMF).
The IMF warns El Salvador to drop Bitcoin as a legal currency “The adoption of a cryptocurrency as legal tender, however, entails large risks for financial and market integrity, financial stability and consumer protection,” it warned.
The CAR is one of the world’s poorest countries and has been in the grips of a nine-year civil war that developed largely along sectarian lines.
In 2020, a coalition of rebels advanced on the capital Bangui, threatening to overturn Touadera as new elections loomed.
Russia dispatched paramilitaries to help repel the threat and then recover much of the rebel-held territory.
The operatives are described by Bangui as military advisers but by France, the UN, and others as mercenaries from the Kremlin-backed Wagner group, which has been accused of abuses.
In a recent experiment, it was possible to send Bitcoin (BTC) using high-frequency radio and through a snowstorm. Due to fears of government interference and surveillance, developers have been trying to send Bitcoin internationally without using the internet or satellite. The information was released on Twitter by the hardware and software creator Rodolfo Novak.
Bitcoin Sent Through High-Frequency Radio
There have been several tests to transfer Bitcoin without using internet. For example, it was possible to do it via mesh networks and satellite. This is quite important since it would allow individuals to be connected to the Bitcoin network even if there is a country that turns the internet off.
Toronto,CAN => Michigan,USA [40W:#SnowStorm]
Bcuz its a brainwallet made ahead of time, with bearer pk I don’t require internet to broadcast this transaction at the time i’m sending pic.twitter.com/OzcbMEvYw0
— NVK (@nvk) February 12, 2019
This experiment started when Novak asked who would like to receive Bitcoin using WSPR/FT8 (amateur radio). A suitable candidate answered the comment using a SDR and an antenna. Using the application called JS8Call, Novak sent a bitcoin transaction from Toronto, Canada to Michigan, in the United States.
The computer scientist and cryptographer Nick Szabo seemed very excited about it. He wrote on Twitter that Bitcoin was sent over national borders without internet or satellite, but just using nature’s ionosphere.
Although there are some security issues related to a poorly constructed brain-wallet, this is a great way to send cross-border Bitcoin transactions offline. Brain wallets are cryptocurrency wallets that allow users to receive virtual currencies but storing the seed phrase just in users’ heads.
There are several countries that are opposed to virtual currencies, including Bitcoin. Two of these countries are Venezuela and China. Using high-frequency (HF/HAM) radio is a novelty in the space. Although we might never use these methods for transacting virtual currencies, it is very positive to know that they work. In the future, some users or individuals in some countries could have to use this method to remain connected.
According to some reports, the Russian president, Vladimir Putin, ordered the country to unplug itself from the internet. The intention is to check how their economy is able to survive without being connected to the internet. This is a clear example of what countries can do with their connection to the cyberspace.
In case there is a war, Russia and countries should be prepared to be disconnected from the internet. Thus, Bitcoin would have to find new ways to be transacted.
Another way to send Bitcoin without an internet connection or cellular network is through a TxTenna device. Although the transaction does not work entirely offline it offers a secure way to send Bitcoin offline. Users have to rely on the goTenna mesh network and the Samourai Wallet. Mesh nodes receive the transaction until a TxTenna internet connection is found. This is when the transaction is sent to the Bitcoin network.
— ℭoinsure (@Coinsurenz) October 16, 2018
In the long run, soft money (which loses value and debases the savings of the individual) can only be enforced via authoritarianism, if hard money independently exists via either nature (gold) or technology (btc).— Lyn Alden (@LynAldenContact) March 31, 2022
And that soft money system I cannot logically or morally support.
YES! Finally! Looking forward to trying to mine BTC with true quality workmanship!
1> Hodl your Bitcoin leaving only the amount that can be personally dispensed in mainstream finance.
2> Defend free and open Bitcoin markets anywhere and everywhere around the world.
3> Mine Bitcoin only with renewable energy, even if starting with just one miner.
4> Spread the knowledge, awareness and best practices of Bitcoin whenever possible.
5> Consider with others in the community our unit of account in BTC.
Bitcoin teeth, for Bitcoin smiles!
Today in Jan 4th, 2022, where currently our Government and Banking system backing it have lost credibility, having continually been discrediting Bitcoin all these years but now the tables have turned, unfortunately nothing is changing due to the forces of weaponry and financial graft. To adopt today financial alternatives that release limitations from any capital controls on USD or other currencies, a challenge that we have all been collectively facing since 2019, so with Bitcoin legal tender we also all have the capability of avoiding what is being rolled out for us now, the underhanded CBDC schemes attempting to take over all control of our funds. Bitcoin is digital property of which 21,000,000 coins exist, each dividable by 0.00000001, totally independently run, and is globally considered the ideal form of stored energy. The national transition to financial freedom starts through a request for funds, which must instead now come from the private sector, to distribute support from the general community, in order to:
1) Present a 2 hour educational workshop at the Parliament, to introduce and optionally sell a maximum of ₿0.01 to each of the 128 Member of Parliament's recommended wallets chosen from the official bitcoin wallets selector at bitcoin.org/en/choose-your-wallet for introducing them to bitcoin.
2) Ensure guaranteed open market for freely and fairly trading Bitcoin anytime.
3) Lawyers from the community in tandem with BBB Labs will submit this legislation to MPs at parliament to pass eternally Legal Tender status for Bitcoin in Lebanon. We may adopt a ₿3 deposit option for foreigners who want to work or retire in the country, with permanent residency paperwork, to the multi-signature Bitcoin wallet belonging to our mining trust fund, making sure that any donations must not come from any government, political party or corporate party, and any such support received from such entities must be 100% duly returned. The multi-signatures will be held by 1) our founder, 2) our co-founder, and 3) the BBB Labs secretary, among possibly an additional recommended, tightly controlled external ombudsman.
4) A plan for revamping the production of purely renewable resources for the capability of a USD32.5m budget to have sustained Bitcoin mining by the government in order to independently cover all its budgetary expenses. All Bitcoin mining must be produced through renewable energy resources, whose investment requirement must look similar to the Bitcoin mining requirements. We have contacts with individuals at the most renown local and global environmental agencies that can be consulted to provide the latest technologically advanced conversions of renewable resources into energy, such as those still mostly unknown to the mass market, and have it provided at the best value as well. Lebanon has plenty of sunshine and strong sustained wind is found in Lebanon's extreme northern border strip with Syria. Also, enterprising Lebanese are currently devising Magnet Phase Generators which are increasingly being the favored energy production option, as well as also thorium power plants. The dream of “free energy” is the ultimate answer to our pertinent issues.
5) To ultimately have the unit of account in our government denominated in Bitcoin.
For progress to happen on reversing capital controls and other financial challenges that remain unresolved, the solution is now a responsibility of BBB Labs in Beirut, tasking itself to correct the unjustified financial challenges facing our families today. The necessary resources in order to realize this dream: around $65,000,000 in renewable energy investment, complete Bitcoin mining equipment, introductory workshops, and for attorneys among our community to begin writing legislation for submission to our parliament. This legislation brings freedom to us and our entire Nation by enacting it into law by hand signature at our legislature.
BITCOIN BLOCKCHAIN Beirut Labs.
Arabic translation needed please