Week of 2.9.20 - Issue #14
Welcome to the 14th edition of the ₿it Economy! Each week, I break down the top stories in Bitcoin in a simple in clear format. Enjoy!
Topics: Taproot Critique & Reward Apps
The Brief:
It has been a crazy two weeks in terms of price movement as Bitcoin surpassed and closed above $10,000 for the first time this year. On a more technical note, an anonymous group of developers have responded to the recent BIPs overseeing the Schnorr/Taproot implementation. As for consumers, the Bitcoin derivative exchange Bakkt has acquired a company as it ramps up the timeline on its very own rewards mobile application. Do not forget to checkout the links below, most notably, Unchained with Alex Gladstein, CSO, Human Rights Foundation.
S1: BIP Feedback
What is it? - An anonymous group of developers, appropriately called "The Group", have relayed the following sentiments regarding the recent BIPs 340-342:
For those who did not read the (highlight technical) responses, I have summarized the general theme. An anonymous group of developers, appropriately named "The Group", believes that it would be safer to implement Merklized Abstract Syntax Tree's (MAST), the technology that empowers taproot as a standalone implementation. As the BIPs are currently written, they require the combination of MAST and schnorr signatures, which then gives way to the taproot implementation. I realize that there were a lot of big words in the previous sentences so let's take a moment to watch some videos that will assist you on your knowledge journey.
MAST
Schnorr/Taproot
If you prefer reading, please refer back to Issue's #10 & #11 for a quick refresher.
Why it Matters? -You still with me? Bitcoins are essentially locked in a couple lines of code, called a script, and when that returns true, the bitcoins are unlocked. A similar process occurs in a pay to script hash (P2SH), where a user must produce all conditions within the script in order to unlock the bitcoins. In recent years, the amount of conditions within a script can make a transaction too heavy. A solution to this "heavy transaction" problem is MAST. It improves the flexibility of Bitcoin smart contracts, increases privacy, and assists in base layer capability.
On the other hand, taproot is a proposed soft fork change to Bitcoin that will allow payments to schnorr public keys that may optionally commit to a script that can be revealed at spend time. The biggest benefit of the enhancement is that it makes the outputs in a transaction indistinguishable from one another. In laymen terms, it makes it very difficult for someone analyzing the blockchain to see the logic behind each transaction. Though it does not provide 100% privacy, it allows layer two solutions to become smaller in terms of blockchain. Even though this advancement in signature design might not be used as often by the average user, one can see the exponential increase over the past few years in multisignature transactions.
Though these critiques have received mixed reviews, this is the beauty in Bitcoin. It operates without the intervention of centralized parties that control the direction on a decentralized network powered by nodes, users, developers, and miners. While the transaction made on the base layer are permanent and immutable, social consensus must be made on how to improve and update the protocol over time.
So one might ask, are these critiques valid? To be honest, I am not entirely sure and will leave that up to the ones working on the protocol. The anonymous nature of Bitcoin allows anyone to voice their concerns which spark healthy and intellectual debates.
Final Take - The BIP process continues to mature and critiques are always welcome.
S2: Bakkt to Acquire Bridge2
What is it? - Bakkt, the Bitcoin derivative exchange and subsidiary of the Intercontinental Exchange (ICE), announced its intention to acquire software service Bridge2 Solutions. The company, a global leader of technology solutions in the rewards and loyalty industry programs has been around since 2006,The acquisition is in preparation for the release of its mobile app which intends to unlock the $1.2 trillion of digital assets that consumers currently hold by aggregating them and empowering users to trade, transfer and pay however they want. Merchant design marketing strategies such as loyalty programs to encourage customers to continue purchasing their products.
Why It Matters? - Customer loyalty programs have been a staple of coffee shops, airlines, and grocery stores for years, typically in the form of credit cards or the ever elusive punch cards. In the past few years, consumers have shifted towards digital and mobile-first payments. The ongoing development of the smartphone has enabled loyalty and reward services to expand their reach to small and medium businesses that before were not able to do so. As of late, Bitcoin rewards has entered the conversation. Companies like Lolli, Fold, and Bitrefill have all taken a stab at cash back rewards for Bitcoin, commonly known as "stacking sats". As for Bakkt, the app gives consumers the opportunity to monetize loyalty points from various ecosystems that range from airlines to video game skins. Oftentimes, consumers are not motivated to redeem the points they accumulate from various merchants. In addition to the current company's tackling consumer rewards, Bakkt's introduction into market provides a sense of security from traditional wall street. The integration of Bitcoin into loyalty programs adds another dynamic that can enhance the consumer experience while also increasing the overall rate of adoption.
Final Take - The emergence and growth of the bitcoin satsback ecosystem is an easy and simple way to on board friends and family to Bitcoin.
Market Watch
- High: $10,352.02
- Low: $9,855.86
- ATTOW: $9,866.22
Bitcoin continues a weekly uptrend, but signs emerged earlier in the week that the bullish charge might be running out of steam. On Monday, the digital asset crossed the psychological barrier of $10,000 signaling bullish support only to fall sharply to $9,700 during Asian trading hours. This ~3% loss was the seconds largest of 2020 yet the bears could not retake control. As a result, the following three days saw bulls attempt to surpass $10,500. Though the price surpassed this resistance level, it was unable to close resulting in a decline. This pullback contributed to the dip in Bitcoin's overall dominance in the cryptocurrency market. Additionally, the Fear and Greed Index has risen to 64 on the quest for $11,000, signaling the early stages that the asset has been oversold. This lack of support allows bears to reclaim momentum and push the price towards the next support near $10,075. As for implied volatility, it has remained relatively flat, albeit trending down over the past 30 days.
Expect power struggle between buyers and sellers over the next week. Keep and eye on RSI which has begun to signal Bitcoin being overbought. Volume has increased over the last month but still do not come close to six-month highs in September. The price remains firmly in an uptrend but looks set to test the bearish channel support at $9,700. If bulls can defend the $10,000 support level then expect the price to test $10,500. However, if selling continues, a drop to $8,500 cannot be ruled out.
Announcements
- Lightning Labs Raised $10M in Series A - Link
- Tails 4.3 Released - Link
- Tor Browser 9.0.5 Released- Link
- ColdCard releases PSBT Faker Tool - Link
- Blockstream Green Wallet v.3.3.3 Released - Link
- BTCPay Server v.1.0.3.156 Released - Link
- Eclair v.0.3.3 Released - Link
- Zeus v.0.2.1 Released - Link
- Ride The Lightning v0.6.5 released - Link
Interesting Reads
- Justice Department Calls Bitcoin Mixing 'a Crime' - Link
- Bitcoin: The Blockchain for Truly Smart Contracts - Link
- A Home Defense Primer - Link
- Self Payments Could Be a Key to Lightning Privacy - Link
- For the Tony Hawk Foundation, Bitcoin Is Radical - Link
- Digital Gold, Scarcity, and Bitcoin Halvings - Link
- An Analysis of Price Discovery in Bitcoin Spot Markets - Link
Great Listens
- Lightning Junkies #23: RockstarDev - Link
- Tales From the Crypt #134: Jack Mallers - Link
- Stephan Livera Podcast #147: Pierre Roachard & Saifedean Ammous - Link
- State of Digital Assets: The State of Bitcoin - Link
- Unchained #158: Alex Gladstein - Link
Final Quote
"If youre not paying attention you should be..." - Brian Sullivan on CNBC's Fast Money this week. Skip 36 seconds in this clip to listen.
Have a great week!
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