BTC Sessions - Bitcoin Privacy War, Microsoft likes layered scaling, BTCpay Vault EP011

Episode Date: January 21, 2020

SHOW TOPICS: Microsoft says on-chain scaling degrades decentralization, prefers layered scaling approach https://bitcoinist.com/farewell-bitcoin-cash-microsoft-chain-scaling-degrades-decentralization/ Lightning Network Trust Chain part 2 is on the move! https://twitter.com/hashtag/LNTrustChain2?src=hashtag_click Opendime – physical bitcoin https://opendime.com/ Bitcoin privacy war – will it be worse than the scaling war? https://eng.ambcrypto.com/bitcoins-privacy-war-could-be-worse-than-the-scaling-war/ Wasabi wallet https://wasabiwallet.io/ Samourai Whirlpool https://samouraiwallet.com/whirlpool Joinmarket https://github.com/JoinMarket-Org Liquid Network https://blockstream.com/liquid/ Lightning wallets list https://lightningnetworkstores.com/wallets BTCpay Server introduces “BTCpay Vault” https://blog.btcpayserver.org/btcpay-vault/ SUPPORT THE SHOW: Visit LEDN to check out getting a bitcoin-backed loan https://platform.ledn.io/join/0a00cca3dd61dea5909c95cd41f41685 Get Wasabi wallet and enjoy your privacy https://wasabiwallet.io/ Wasabi Tutorial https://www.youtube.com/watch?v=ECQHAzSckK0 Check out Rise Wallet – the easiest way to onboard your pre-coiner friends to Bitcoin! https://www.risewallet.com/ Rise tutorial https://www.youtube.com/watch?v=X2VUjj6wPM0 Get NORDVPN to protect your online privacy. 75% off a 3 year https://nordvpn.org/btcsessions

Wasabi wallet. I'm fairly private. What's up everyone? Ben with the BTC Sessions here and this is your daily session. Hodel their Bitcoin. Before we dive in, of course, shout out to sponsors of the show, leaden.i.o, this is where you can use your Bitcoin for a variety of different services. They've got their Bitcoin savings account where you can earn interest on your Bitcoin paid in Bitcoin. They've got their Bitcoin back loans where you can use Bitcoin. where you can use Bitcoin as collateral to obtain a Canadian or US dollar loan.

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you can pick one up. They are only in Canada right now but they're looking at expanding and if they happen to not be near you, you can always head over to coincards.ca. to check out and get one delivered to you. And with that, let's dive into the news. So we have a report from Microsoft where they really, really are enjoying on-chain scaling. Sorry, they're not enjoying on-chain scaling.

They say that it degrades decentralization and they prefer layer-to-scaling options. So what they had to say here, This was Director of Program Management at Microsoft's Identity Division. His name is Alex Simmons. And he said, while some blockchain communities have increased on-chain transaction capacity via blockchain increases or block size increases, this approach generally degrades the decentralized state of the network and cannot reach the millions of transactions per second, the system

would generate at world scale. He goes on to say, to overcome these technical barriers, we are collaborating on decentralized layer two protocols that run atop these public blog chains to achieve global scale while preserving the attributes of a world-class DID which is a decentralized identity system. So that's what Microsoft is currently working on. So they basically say that the approach of something like Bitcoin Cash or Bitcoin SV, it does degrade the decentralization of the network and rather that layer

two solutions, light lightning network, is a better way to approach the scaling of the system to allow more transactions per second without degrading the base layer and the hard promises baked into it. And it is worth noting that Lightning Network currently has a higher node count than the entire Bitcoin Cash network itself. And so with touching on Lightning Network there, I want to move into something exciting that I've been a part of and I was a part of last time around, the Lightning Network Trust Chain. Now, this is more of just kind of an experiment to test the limitations of the Lightning Network. It was started by online Twitter personality Hodlanaut, who is just side note being sued by Craig Wright for defaming his name.

But besides that, he started the Lightning Network Trust Chain. and essentially he started with a small amount of Bitcoin on the Lightning Network and then passed it from person to person last year for the first Lightning Network Trust chain. And it went around the world before finally ending once it hit the upper bounds of Lightning Network capacity at the time and was then donated to Bitcoin Venezuela. While this second trust chain was just started a couple days ago, Hodlnott posted this about seven hours ago now. He said the LN trust,

West chain two, torch is ultra fast, made over 30 passes across the globe while I slept, now up to 68 torchbearers and 29 countries in less than two days. Map getting more lit by the hour and he has a nice map of the world and he is highlighting in yellow all the countries it has been to. I will claim that I was the first one to bring it to Canada this time around, very proud of that. And hey, this was seven hours ago, so it's been making the rounds like crazy so if you want to check out where it's at just type in hashtag LN trust chain two on Twitter and do a search and see who has it at the current moment it can

be hard to track because it's moving pretty quick but maybe you can dive in and get a part of it as well and so I wanted to touch on something in regards to the Lightning Network and this is by no means a dig at any individual here this is just a conversation that popped up on Twitter earlier and I had a bit of a rante video yesterday about takes that I disagreed with in Bitcoin and this just happens to be another one. Now this is Ken Bozac. I'm friends with Ken. I've met him at lots of different events and I think he's an all around good guy. I just happen to disagree with this take and he's not the only person that has this opinion and I've heard

it from others but essentially here he's saying that Lightning Network is not Bitcoin. It can be redeemed for Bitcoin but it is not Bitcoin and so this is is my response to that. I'm saying that, saying lightning is not Bitcoin is demonstrably false. It's akin to saying that giving somebody an open dime or if you're not sure what an open dime is, a paper wallet with Bitcoin on it. It's akin to saying that giving somebody physical Bitcoin that way is not Bitcoin. But it is because the Bitcoin is unquestionably there. There's no custodians. There's no pegged token. A Bitcoin transaction is taking place and changing hands. It is simply, simply not on chain. And with Bitcoin Lightning Network, the same is true. Bitcoin is changing hands,

but there's no on-chain transaction yet to demonstrate that. Now, I should clarify here, because somebody did jump in and they said, careful how you present your argument, a Lightning transaction is still more safe than zero confirmation Bitcoin transactions, yet both are not on-chain. And he is indeed correct. A zero-confirmation Bitcoin transaction, or one that has not been added to the Bitcoin blockchain can actually be double spent. And this is the model that Bitcoin Cash is going over, going after, where they're saying that Bitcoin transactions or Bitcoin cash transactions

that are zero confirmation, that haven't been added to the blockchain, are safe, which indeed they are not. Somebody can try to game the system, attach a higher fee, and spend that Bitcoin to a different address. When it comes to Lightning, there is actually a locked amount of Bitcoin between you and another party in what's known as a Lightning Network channel.

And transactions can happen to and from you and that other party. And of course there's a network of these linked parties where I guess like an abacus, you can shift certain amounts of Bitcoin from channel to channel to make a payment possible through multiple parties trustlessly. But the Bitcoin is still indeed locked between you and another part. party so it can't be redirected out of the channel to a separate Bitcoin address. So I guess what I'm getting at here is with something like an open dime, which is more or less a USB stick where you cannot know the private keys, so you can't sweep it until you actually break a circuit and at which point it would warn an individual that is holding the open dime

that you've done so. Anyways, it's like giving physical Bitcoin. So in something like this, there are. tradeoffs versus an on-chain Bitcoin transaction, right? If I give somebody an open dime, then technically, you know, I've given them a Bitcoin transaction. The Bitcoin is there, but technically I could, I could try to reverse that transaction. How would I do that? Maybe I $5 wrench attack them, and I steal the open dime back. But at that point, I am then susceptible to the consequences of doing so, whether it be law enforcement, whether that be the repercussions of somebody actually coming back

and hurting myself, whether it be jail time or fines or whatever. So there is a potential for those funds being stolen back, but odds are I'm not going to do that. Same thing with Lightning Network via something called Watchtowers. And what Watchtowers do is they check the most current state of the contract between you and the other person in the Lightning Network channel. somebody could technically try to close a lightning network channel with an earlier version of the contract where they have more of the Bitcoin that is currently locked in that channel. With watchtowers, they watch for that type of behavior and if somebody behaves badly and maliciously, well, they actually lose all of the money in the channel and that money reverts back

to the opposite side of the channel to the other party. So there is, in this instance, much like if I $5 wrench attack somebody with an open dime in the Lightning Network, the economic repercussions of me acting maliciously can be very detrimental to me, and I'm less likely to do something bad when that exists. And so this is kind of how the Lightning Network is being built out. So anyways, I'm going to finish on that note with that particular thing, but we're going to move on to an article from AMB crypto, and they're talking about Bitcoin's privacy war could be worse than the scaling war.

So the scaling war, you know, we were just talking about lightning and lightning and this is a solution to Bitcoin scaling, more transactions per second. That war resulted in splintering groups of previous bitcoins into things like Bitcoin Cash and Bitcoin SV and other altcoins. Well, the privacy. is all about having on-chain privacy for Bitcoin, which we do not have now. Everything is part of the open ledger. And many prefer to have it that way. So this was an interview of Blockstream's CSO, Samson Mao. And he was, where was he? He was on Block's TV. And so he was saying, so will we get confidential

transactions on the Bitcoin base layer? And this. would be via a soft fork. He says maybe not, but maybe. It really depends and no one can really foresee what's going to happen. I think if you thought the scaling battle was bad, wait till the privacy war starts. That's when it's going to get messy. And then he went on to add, it's a really tenacious period where we don't know which way it's going to go. But my hope is that we do get privacy on the basler eventually. We don't know the future and that's why I think it's okay to have other coins that focus on a specific feature set and Bitcoin may absorb the feature set down the road or it may not. Now he said that some of the biggest pushback that on-chain

privacy would get would likely come from companies that deal with regulators. So they may not like it because it interferes with surveillance capitalism or norms pertaining to money. Because there has been a big push for some privacy coins to be pushed off of exchanges from the regulators. But actually, I don't feel that the biggest push is going to be from them. Yes, it will be a pushback, but I think a lot of Bitcoiners are going to push back against on-chain privacy. And the reason being is if it obfuscates the amount of coins on the base layer, if there is an inflation bug and you have confidential transactions on base layer, then technically you may have some sort of inflation that is invisible to everybody and you can't easily audit how many Bitcoins are in circulation.

So because of that and because that's one of me Bitcoin's main value propositions, I think you're going to see quite the pushback from many Bitcoiners who don't want to risk that in any way, shape, or form. And furthermore, I don't think that the privacy war will be quite as heated as the scaling war. And the reason for that is not because it's not a contentious issue, but because we already have solutions available to us. So we have things like Wasabi Wallet, which is a desktop wallet where you can mix your coins and obtain a higher level of privacy for your UTXOs.

You also have Samurai Wallet, which is a mobile wallet linked to a program that would run on a desktop or a dedicated machine, which again breaks the links between you and your coins you have things like join market which does similar things you also have of course blockstream's liquid network which is a federated side chain so there are trade-offs there but one of the features of liquid network is confidential transactions so you could peg into liquid bitcoin which is a one-to-one peg which is was provably done so and you could then transact completely confidentially on the liquid network and then you could use a decentralized exchange to trade back out to regular Bitcoin if you so chose.

Now it should be noted to actually peg out of liquid Bitcoin you need to go through one of the federated members, one of the exchanges which could compromise privacy. So you'd likely want to trade out through alternative means. if privacy is what your aim is once back on the main Bitcoin chain. And then furthermore, we've already been talking about it, but Lightning Network, Lightning Network definitely improves upon privacy because everything is onion-routed. It goes through the Tor network, and it actually hops between multiple parties and every single party in that link, let's say you're sending to an individual.

There could be 20 hops between you and that individual, and each one is onion-routed, meaning that every hop along the way, that individual does not know if they are the second hop or the 19th hop or somewhere in between. So they don't know where it originated from and where it's going. And there's no real way for them to tell. And look at how many lightning wallets are out there. Now, of course, not all of these are as private. If they are custodial, then you are kind of giving up some of your privacy there. But it is getting better and better.

having more and more options for privacy and so that's why I think it's not going to be as contentious an issue as the scale as the scaling wars were now I'm gonna touch on one last thing here just really quick BTC pay server today introduced something called BTC pay vault so this is a desktop app that allows you to use your hardware wallet and they have a list of a bunch of different ones cold card shift crypto treasurer led your crypto keep key you can use it with your btc pay server and full node anybody who doesn't know what btc pay server is it allows you what's becoming a bit of a technology stack but originally

first and foremost it is a merchant terminal which allow you to be your own online merchant except bitcoin payments via on-chain via lightning network via now liquid bitcoin and any any token that is pegged through the liquid network um Without having to trust a centralized third party and thus giving up some of your freedom there and potentially being subject to Transactional Censorship and so awesome awesome move by BTC pay server these guys are a powerhouse One of the most important projects in the space and they continue to grow and Fill out their software suite. So if you want to check out this I will link down below to the BTC pay server blog in the show notes that talks about the why and the how of this new feature in BTC pay server,

as well as all of the other stories I talked about today. So I'm going to wrap it up there, guys. Thank you so much for watching and or listening. Of course, always hit like, subscribe, share and share out the podcast on their social media if you're listening to this as well. If you want to help out the show in another way, be sure to check out the sponsors down below. There's lead and there's rise wallet. There's also Wasabi Wallet. as we discuss for privacy on your Bitcoin. And finally, you can also check out NordVPN. This also steps on the privacy vein here.

It hies your IP address. It encrypts your browsing data and has a bunch of other added benefits like unlocking geoblock content. So if something's not available in your area, just change your country of origin in the app, and it will be available to you. It's excellent. I love it. I use it on my computer on my phone.

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