The Magic of Dollar Cost Averaging

Image for post
Image for post

Ten years on, and the Bitcoin juggernaut shows no sign of slowing down. To some, the cryptocurrency provides a novel method by which to transact, be it on sanctioned markets or otherwise. To others, it’s money in its quintessential form: a disinflationary asset more scarce and more easily transmitted than gold.

Crucially, the Bitcoin protocol is made up of a thriving ecosystem of equipotent users — arguably its greatest strength, as no single party has the ability to censor, reverse or alter transactions broadcast by another. …


Image for post
Image for post

Bitcoin privacy isn’t something guaranteed at the protocol level. How an individual stores, transacts or otherwise uses Bitcoin is the difference between remaining virtually anonymous and providing motivated onlookers with permanent access to their transaction history.

Unfortunately, achieving greater privacy oftentimes comes at the cost of convenience. Address reuse is a no-no, but to the lazy/non-tech-savvy, generating a new address and sharing it with counterparties isn’t always simple.

Enter BIP47 wallets.

BIP47, Reusable Payment Codes for Hierarchical Deterministic Wallets, was submitted by Justus Ranvier in 2015. As the title may indicate, it adds functionality to the existing hierarchical deterministic (or HD) wallet structures – notably, by outlining a system that facilitates recurring payments between parties (all while protecting their privacy). …


Image for post
Image for post

In our last piece in this series, we took a look at The Glacier Protocol, a rigorous airgapping procedure ensuring next-level fund protection for Bitcoin users.

While certainly one of the most robust cold storage solutions available to individuals safeguarding large amounts of coins, the Glacier Protocol caters to a very specific niche, by virtue of its 'hands-on' approach. There’s abundant documentation, but it’s unlikely that more than a small subset of confident hodlers will implement it.

For those requiring high security assurances without taking matters entirely into their own hands, there’s Casa’s Keymaster.

Casa is already a household name (if you’ll pardon the pun) in Bitcoin security, making it its mission to deliver ‘the friendliest, most secure key system on the planet’ through clever applications of multisig and a focus on customer service. It first came to prominence in 2018 with its white-glove, trust-minimised solution for storage of funds. …


Image for post
Image for post

You may have stumbled across the term Neutrino over the past few weeks following Coinbase’s acquisition of the controversial s̶u̶r̶v̶e̶i̶l̶l̶a̶n̶c̶e̶ ‘blockchain intelligence’ company by that name. The Neutrino we’ll discuss in this article has no relation to the business — it’s a proposed solution for better Bitcoin light wallets.

The Problem: Lack of Privacy in Light Wallets

It’s hard to fathom, if you’re busy crafting a Twitter echo chamber of hardline Bitcoiners, that there exists a future where not everyone will run a full node until it can be downloaded and run as easily as a background app.


Image for post
Image for post

When it comes to Bitcoin, there’s ownership, and then there’s ownership. Some are happy with delegating custody of their coins to exchanges, while others feel relatively confident with their private keys stored on their phones. Generally, the more experienced crowd will tell you that a combination of hardware wallets, assault rifles and steak diets are the only way to ensure the safety of your funds.

However, there’s another level of protection that makes the former sound almost laughable in comparison. That’s the Glacier Protocol.

The project’s website details an extensive guide aimed at Bitcoin holders that want to go above and beyond with their security — those that hold large amounts of coins and/or those that want a self-sovereign and future-proof solution (it’s optimised for long-term storage, and not frequent withdrawals). …


Image for post
Image for post

Get into a conversation about Bitcoin improvements, and before long, someone will inevitably bring up Schnorr signatures, the Holy Grail of Bitcoin upgrades poised to solve two major threats to Bitcoin’s longevity: privacy and scalability.

From the very beginning, Bitcoin has used ECDSA signatures for creating keys and verifying transactions. The alternative (and more efficient) Schnorr signature scheme existed at the time Satoshi was working on the project, but was patented up until 2008 and therefore was not standardised across the board. As Pieter Wuille points out, DSA was specifically designed to circumvent Schnorr’s patent).

Insofar as security, both ECDSA and Schnorr schemes rely on similar assumptions, but Schnorr-based ones boast a number of advantages over the incumbent scheme — notably, signature aggregation and native multisig support. …


Image for post
Image for post

The bitter opponents of off-chain scaling denigrating the evolution of the Lightning Network (LN) have done little to hamper the growth of Bitcoin’s second layer. Since January 2018, LN node count has grown by roughly 60x, and LN capacity by 600x.

Nodes, Channels and Capacity

There’s many reasons why you may choose to establish a Lightning channel with a peer – high transactions per second (TPS) throughput back and forth, negligible fees on microtransactions, or a burning desire to buy Blockstream stickers.

If Alice wants to do so with her local transport company, she would fund a a 2-of-2 multisig address (with the company) with, say, 0.5 BTC. From there, any time she purchases a ticket on her morning commute, both nodes would update a balance sheet to reflect the movement of funds – prior to any transactions taking place, Alice would have 0.5 BTC on her end, and the transport company would have 0 BTC. If she bought a ticket at 0.01 BTC, the revised state would then be 0.049 BTC on Alice’s end, and 0.01 …


Image for post
Image for post

For years, it was generally accepted that increasing the block size was the best way to scale the Bitcoin blockchain – more space available means more transactions can be crammed in and lower fees can be paid due to less competition.

Larger blocks, however, come at a cost externalised to the peer-to-peer network: propagation becomes more difficult, and nodes require higher-end hardware to keep up – in essence, decentralisation is sacrificed in the pursuit of higher throughput. …


Image for post
Image for post

It’s a bitter pill for the self-sovereignty maximalists to swallow, but third party custodians will always exist: it’s more convenient for traders, the technophobic and the lazy to simply have their magic internet money held on their behalf.

Entrusting an exchange with your cryptocurrency, however, carries with it a significant amount of counterparty risk. Not only are you hoping that the service’s security is ironclad enough to defend from cyberattacks (easier said than done, by the looks of things), but you’re also working on the assumption that the company behind the exchange isn’t misleading you.

One of the trade-offs you make when you relinquish control over your coins (aside from control itself, that is) is the loss of your ability to verify the existence and ownership of those UTXOs. …


Image for post
Image for post

This week, we had the pleasure of speaking with Jameson Lopp, cypherpunk and CTO of Casa.

When I think ‘cypherpunk’, you’re the archetype I picture. What got you interested in the movement?

I spent the first several years of my career working in online advertising, so I became very aware of how terrible privacy was for Internet users. Once I got into Bitcoin and started researching its origins, I realized that it didn’t appear out of thin air — it was the result of decades of effort. …

About

Matt ฿

Bitcoin, privacy and cypherpunk stuff www.itsmattbit.ch

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store