Crypto Weekend Review 6/17

Wilson Withiam

Published in

Circle Research

5 min readJun 17, 2019

Curated reads, listens, views by Wilson Withiam and Ria Bhutoria.

Weekly Spotlight 🔦

Unpacking Bitcoin’s Assurances by Nic Carter

Bitcoin’s decentralized nature is often heralded (and appropriately so) for enabling censorship resistant value transfer. However, Nic Carter states the ability to broadcast information without restriction is only one of the guarantees Bitcoin can provide to users. In his latest piece, Carter defines the various guarantees, or “assurances,” offered by Bitcoin — open access, seizure resistance, censorship resistance, counterfeit resistance, and free exit — and assesses the strength of each offering in relation to the potential threats to current processes.

Censorship resistance does not aptly describe the security behind storing Bitcoin, nor the accessibility of verifying payments and inflation schedules as legitimate. Therefore, Carter introduces seizure resistance — the ability for users to retain access to their Bitcoin even in times of duress — and counterfeit resistance — cheap access to tools that can validate on-chain data. The cryptographic primitives used to secure non-custodial cryptocurrency wallets are exceptionally difficult to crack. Further, wealth can be stored in a multi-word passphrase transportable via memory. Both features make Bitcoin highly resistant to seizure, unless quantum computing becomes pervasive or the user shares his or her private key.

In terms of counterfeit resistance, running a full Bitcoin node can be accomplished using standard hardware for a few dollars per year. Transactions and inflation schedules can therefore be monitored at the consumer level — which, as Carter puts it, is “akin to owning a professional-grade XRF spectrometer to check the integrity of your bullion.” These offerings are unlikely to change unless bandwidth costs or network growth were to radically accelerate, pushing node costs beyond the reach of most and into the control of a few well-funded data centers.

Nic also insists the ability to buy (open access) and sell (free exit) Bitcoin should be unencumbered. While neither are guaranteed by the network, the absence of on and off-ramps lessen Bitcoin’s usefulness. Both buying and selling Bitcoin are primarily at the whim of regulated centralized exchanges that cater to developed markets. As a result, countries where Bitcoin could have the greatest impact — those experiencing demonetization or high inflation — often find it more difficult to acquire the sovereign digital currency. Moreover, exchanges conducting on-chain analysis can pinpoint and blacklist specific accounts or coins — either for protective, unintentional, or malicious reasons — decreasing the salability of those coins. Carter sees the rise of peer-to-peer exchanges and privacy measures implemented by Bitcoin wallets (i.e. Wasabi or Samourai wallet) as potential strategies to help guarantee open access and free exit.

Nic Carter presents an excellent framework for evaluating the major assurance Bitcoin provides to users. While it helps realize the strengths of Bitcoin, it excels at highlighting current and potential limitations — for instance, companies enhancing Bitcoin on and off-ramps may be providing the most utility. Carter’s framework can be further tailored and applied to other cryptocurrency networks to recognize their user value adds as well as areas to address.

Reads 📚

Tweets

Listens 🎧

Views 🎥

Panel on Economic and Social Risks with Aaron Van Wirdum, Felix Weis, and Max Hillebrand (Breaking Bitcoin)

Reports, market insights, and other information (“Information”) provided by Circle Internet Financial Limited (“Circle”) or its affiliates have been prepared solely for informative purposes and should not be the basis for making investment decisions or be construed as a recommendation to engage in investment transactions or be taken to suggest an investment strategy in respect of any financial instruments or the issuers thereof. Information has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research under the Market Abuse Regulation (EU) No 596/2014. Information provided is not related to the provision of advisory services regarding investment, tax, legal, financial, accounting, consulting or any other related services and is not a recommendation to buy, sell, or hold any asset. Information is based on sources considered to be reliable, but not guaranteed, to be accurate or complete. Any opinions or estimates expressed herein reflect a judgment made as of the date of publication, and are subject to change without notice. Trading and investing in digital assets involves significant risks including price volatility and illiquidity and may not be suitable for all investors. Circle and its affiliates trade and hold positions in digital assets and may now or in the future trade or hold a position in an asset that is the subject of Information provided. As a result, Circle or its affiliates may be subject to certain conflicts of interest in connection with the provision of Information. Circle will not be liable whatsoever for any direct or consequential loss arising from the use of this Information.