Week of 12.1.19 - Issue #5
Welcome to the fifth edition of the ₿it Economy! Each week, I break down the top stories in Bitcoin in a simple in clear format. Enjoy!
Topics: Lightning, Wasabi Update, & Millennials Stacking Sats
S1: Bitfinex Supports Lightning Payments
What is it? - Earlier in the week, Bitfinex, one of the largest exchanges in the world by volume, announced that it has set up a bitcoin lightning node in a bid to kickstart the layer 2 micropayments economy. With the new feature, users are able to withdraw and deposit bitcoin on the exchange instantly over the Lightning Network.
Paolo Ardoino, CTO of Bitfinex commented on the announcement by saying
“In Bitfinex, we think that it [the Lightning Network] can be the game-changer of our industry, since it enables P2P micro-payments with small fees and high throughput. Its P2P nature carries the unstoppable force of bitcoin. Still it requires more awareness, understanding and adoption from the larger crypto community. A major exchange supporting it will speed up this adoption process.”
To partake, users go to the LN deposit page and generate an invoice for. and then pay it with any Lightning compatible wallet. Bitfinex then credits the respective users account with LNX, its proprietary LN currency, which can be exchanged on a 1:1 ratio for bitcoins. So what so you might be asking yourself, what does one buy with Lightning on Bitfinex? Only one day after news broke, the exchange followed-up that it had partnered with Bitrefill, a provider of digital gift cards and mobile airtime refills, to enable users to instantly shop from Bitrefill's catalog containing over 2000 prepaid voucher products. The payments will be processed and executed directly between the two companies via a payment channel that allows instant transfers in Bitcoin.
Why it Matters? - If you have been following this newsletter from its inception, you are quite familiar with the Lightning network. Checkout this video for a quick refresher. Lightning network is a scaling solution for Bitcoin, built on top of its blockchain, that offers faster and cheaper payments. Bitfinex users will benefit from instant transactions as well as close to nothing in fees to send funds via the LN. This a big business-to-business (B2B) use case for the Lightning network as the two company's look to complete the circular economy. The partnership allows an individual to use the bitcoin funds from their respective Bitfinex trading account to directly pay for any of the services Bitrefills platform offers, eliminating the need for a B2B credit card company. Exchanges will play a large role in the adoption of the layer-two network and Bitcoin as an overall payment method. In an already competitive market, expect more exchanges to follow suit and demonstrate their commitment to building the new digital economy as they unveil new products to capture users and market share.
Final Take - The circular economy is the next big achievement for Bitcoin.
S2: Wasabi Wallet Releases Update
What is it? - Wasabi Wallet, the open-source, non-custodial, privacy focused Bitcoin wallet launched by zkSNACKs Ltd. in 2018 has released v1.1.10. The wallet implements multiple privacy features on several different layers of interactions with the Bitcoin network, most notably, an in-wallet feature to anonymize one's coins by shuffling them with our wallet users in a completely trustless environment. The team's focus for this release was to fix the 'spent' issue by totally refactoring the processing of blocks, transactions, and coins.
Why It Matters? - Many people believe that Bitcoin is anonymous, in the same way, that cash is anonymous as a payment. The reality, however, is that anonymity on a public network is complicated. There is no part of the Bitcoin protocol that demands users to provide their any piece of private information, but this does not mean that a user has privacy. All transactions are public, traceable, and permanently stored in the Bitcoin network. Privacy in Bitcoin is an important element that gives one the control over who knows what about our respective identities, wallets and transactions. For this very reason I explain to you all the important of CoinJoin's and its role in Bitcoin's fungibility.
To start a fungible asset is built so that each individual fraction of it is equivalent to the next. For example, USD is fungible as $50 notes are interchangeable with all other $50 notes. Similarly, one Bitcoin is equal to one Bitcoin, and it is equal to all other Bitcoins. This makes fungibility completely essential to the concept of currency, whether it be Bitcoin or otherwise. Another factor of fungibility is the ability to change that $50 note into smaller denominations and still retain the same overall value. That $50 I had before can be exchanged for two $20 dollar bills and one $5 all while not losing any value along the way.
Ok, moving onto CoinJoin. A CoinJoin (see below) is a trustless method for combining multiple Bitcoin payments from multiple spenders into a single transaction to make it more difficult for outside parties to determine which spender paid which recipient. The technology uses a multisig, which means that no one person can have common control over the transaction. As a result, a CoinJoin, increases privacy. Wasabi Wallet comes into the fold arguing that most people want to use bitcoin for legal purposes, therefore those holders should not have to suffer for those who do not. Therefore, by making Bitcoin less traceable, it appeals in the asset retaining its value, ubiquity, and user privacy.
Final Take - Reclaim your privacy.
S3: Millennials Prefer BTC to Likes of DIS & NFLX
What is it? - A new report from Charles Schawb, which contained over 142,000 retirement plan participants, shows millennials invested more in Bitcoin than they did in the likes of Disney or Netflix over Q3 of this year. The San Francisco's brokerage firm's figures show that millennials, age 25-39 years old, hold about 1.84% of their assets in Grayscale Bitcoin Trust (GBTC). This share of equities was good for the 5th largest single holding among millennials.
In comparison, millennials held 1.68% of their assets in Walt Disney Company and 1.58% in Netflix. The GBTC is an investment product from Digital Currency Group that sells shares in the fund to accredited investors. Moreover, GBTC is the only stock offered on NASDAQ or any United States public exchange that holds bitcoin as its primary asset. The report did go on to highlight that both Gen X and Baby Boomers do not rate the digital currency as highly.
Why it Matters? - There's a stigma around the bitcoin community that it is filled primarily with millennials and Gen Z and the Q3 report from one of the largest brokerage firms in the world seems to prove that. Given the relative newness of Bitcoin, it should not come as a surprise that the asset is popular among younger investors. Oftentimes, the younger generations have a greater appetite for risk. The chart below from Willy Woo of Adaptive Capital shows that while millennials make up a rapidly increasing portion of the adult population, they effectively own none of America's wealth. At approximately 25% of the population, millennials own ~3% of America's wealth.
What makes this all the more fascinating is that BTC is down 50% from all time highs and is still capturing more dollar value than some of the biggest companies in the world. Many forget that millennial's first impression of the financial system was the 2008 recession. The largest decline in global stocks since the Great Depression did not leave a great taste in the mouths of that generation. When investing in GTBC, individuals do not really own the bitcoin for they are buying into the trust. Therefore, they own a note that represents the ownership. Nonetheless this report sheds light into investor sentiment in Bitcoin is in demand, whether they hold the private keys or not. And I have to admit, their marketing department can sure make a great commercial. Just remember that bitcoin is algorithmically, and game theoretically scare and continues to be a speculative store of value for those who have lost faith in the traditional financial system.
Final Thought - Stack sats, and wait for the boomers to come. Allow them to transfer their wealth to the newer generations.
Market Watch
- High: $7,567.56
- Low: $$7,208.82
- ATTOW: $7,5663.98
Bitcoin has remained relatively unchanged for the previous week, as the price fluctuated between key levels of support support at $7,000 and resistance at $7,800. The beginning of the week saw the asset The asset saw about 40% of last weeks rally disappear in the beginning of the week only to sharply increase on Wednesday. In the matter of 20 minutes, the price rose 5.4% which led to an inverted hammer. This candlestick pattern formation occurs mainly at the bottom of downtrends and can act as a warning of a potential reversal upward. Moreover, a descending is beginning to form from the mid year high and the low from three weeks ago. If the price were to break above the $7,500 resistance, the $7,800 is not out of the question. However, if the key support level of $7,200 were to be broken, then $6,900-$7,000 would be in play. Expect the next week to be filled with further consolidation as the bears and bulls fight for control.
Announcements
- Kelly Loeffler, CEO of Bakkt to become US Senator in Georgia - Link
- LA Chargers Russell Okung to wear cleats advertising BTCPAY Server today - Link
- Bottle Pay Chat Sats - Link
- WisdomTree launches exchange traded product - Link
- GiveBitcoin wants you to give Bitcoin this Holiday Season - Link
Interesting Reads
- Guide to P2P Exchange Bisq - Link
- Bitcoin is Not for Criminals - Link
- Coin Metrics State of the Network #63 - Link
- Bitcoin Optech #75 - Link
- A Look at Innovation in Bitcoin's Technology Stack - Link
- Deutsche Bank says crypto could replace cash by 2030 - Link
Final Quote
"Bitcoin is a non-sovereign, hardcapped supply, global, immutable, decentralized, digital store of value. It is an insurance policy against monetary and fiscal policy irresponsibility from central banks and governments globally."
Travis Kling, Chief Investment Officer of Ikigai Asset Management, in response to Russell Okung’s tweet.
Have a great week!