The death spiral

Bear markets are for building, it is sometimes said. What is meant: when things go badly (a “bear market”), the most beautiful things are made. People are less worried about the price you are left with the people who have long-term beliefs.

I do not mind that the hype has stalled a bit. All the altcoin and NFT nonsense is starting to calm down a bit. So it’s time to focus again on what bitcoin is really about: better money for the world. Low prices also have advantages in my opinion: more time for FOCUS (and I can buy bitcoin cheaply …).

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In this free Friday edition of Bitcoin Focus you can read a lot about new improvements: silent payments are discussed. There is also money for BTCPayserver, I answer the question if I am worried about a death spiral and more!

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Death and stress? Or great development, donations and more privacy?

  • Great: more privacy through silent payments. What is it?
  • Nice: money for the development of bitcoin software
  • Puha: death spiral among miners? What is it?
  • Sigh: lawsuits against bitcoiners and cryptocurrencies

Read the original article on bitcoinfocus.nl.

Secret payments: first test passed

Signet is a way to test bitcoin. Instead of sending ‘real’ bitcoin over the bitcoin network, you can create your own test network with Signet. Or use the general test network.

This week, the first ‘silent payment’ was made on Signet, ie as a test. The Dutchman Ruben Somsen is also working hard on it.

What is it? Back to normal bitcoin transactions: I create a bitcoin address (these often start with bc1) these days. If you want to send me money, your wallet is actually sending ‘to’ that address. This is also visible on the blockchain and can be tracked.

With silent payments (SP), things are a little different. If I want to receive an SP, I create an SP address. It’s a new kind of address, and sending wallets needs built-in support for it.

What a wallet (that supports SP) does not send directly to that address, but makes a calculation with ‘its’ input (the bitcoin to be sent) and the SP address. This creates a new type of address.

I as a recipient must now review all transactions to see if I have received money. It’s a lot more work than ‘normal’ transactions, where I can just see if my addresses have been sent. In the SP way, I have to check each transaction, do the same kind of calculation as the sender did, and see if I have received money.

The fact that you can no longer just look at the recipient address also means that you (for the time being) can only receive with ‘full notes’. Where ‘easy nodes’ only store relevant transaction info (the transactions your addresses are involved in), all info must be viewed with these SP addresses (and the node must therefore have it).

The big advantage is that it is more difficult for chain analysis companies to track the addresses. Do you want to see the deal for yourself? You can here transaction 50b486aa2f8db4592936284aa7bf88537d571de3adaf33c3849cfaf132990244 on the signet. And do you want to make such a transaction yourself? So here’s an explanation.

Lots of money for the development of BTCPay Server

This week there is again the Oslo Freedom Forum (OFF), an annual meeting on human rights. Guests and activists from many countries were already guests.

This year it’s also about bitcoin. We know that the Human Rights Foundation (HRF) is a fan of bitcoin and lightning.

They have also shown this this year. Builders of BTCPay Server, a way to receive money as a store or individual (with links to online stores), are also present on OFF.

At the conference, it was announced that BTCPay Server from HRF and from Strike (a payment platform) will receive $ 100,000 for further development.

I’m a big fan of the software myself. It works well with payment platforms and it is nice to be able to use bitcoin easily. That money goes to further development is 100% good news for me. More + easier use of bitcoin = great!

Death spiral in miners?

With bitcoin, it is decided every other week how difficult it will be to find bitcoin in the coming 2016 blocks. We call this the degree of difficulty.

If more miners are looking for bitcoin, it will be harder to find bitcoin. And when miners stop, it gets easier again. Everything to make 2016 blocks takes about two weeks to extract.

Why 2016? If you want a block every 10 minutes, it is 6 per hour, ie 144 per. day. Two weeks with 144 blocks a day are 2016 blocks. Interestingly enough: 6102 (so vice versa) was a US law banning gold ownership. Chance?

What is the death spiral then? It sounds like the name of a metal band, but it has something to do with bitcoin.

Imagine a situation where it takes an average of 100 attempts to find a block for miners. 100 is then the difficulty level. This means that in the previous two weeks, there were about 100 attempts to find a block every 10 minutes. And that made the 2016 blocks last two weeks.

If the price suddenly drops enormously (hallows for example), fewer miners will be willing (and able!) To do so. For example, they can not pay their electricity price from the bitcoin found.

This can mean that a large proportion of the miners stop. The idea behind the death spiral is that so many miners stop that now, for example, only 20 attempts are made every 10 minutes.

That would mean that everything takes five times as long (first 100, now 20 attempts). The period of two weeks then suddenly lasts ten weeks. And now, on average, not 10 but 50 minutes pass before a block is found.

This immediately means that the income of the miners falls again, because it takes much longer before they get their reward. The idea of ​​the death spiral is that the whole network stops screaming and squeaking.

In the history of bitcoin, the death spiral has been predicted several times and it has never happened. The chance of that happening is getting (for myself) smaller and smaller: miners are taking more account of price changes.

Small amounts of miners who cancel are not a problem. Then, for example, it takes 10% longer. It will be corrected. In the highly unlikely case that extremely many miners stop (again, I do not see this happening), the network can also ‘fork’ to a version with a lower difficulty: to keep all the rules the same, but simply to lower the difficulty.

In the event of an extreme emergency, there is always a way out. Also read an article from two years ago with four reasons why there was no death spiral at the “halving”.

Going to the hospital for legal stress

Peter McCormack hosts the What Bitcoin Did podcast. He discusses bitcoin news and trends with many guests.

The last few months have been marked by a lawsuit. A known fraudster (Craig Wright) has filed a lawsuit against him.

The trial against McCormack ended on Wednesday, and a verdict will be handed down in a few weeks. He shared his experience on Twitter.

If you read his story, you will notice that such a lawsuit is really an attack on a person. McCormack says he has been to the hospital twice due to stress, just as he has visited his doctor several times for panic attacks.

I will not go into detail about the cause of the trial, primarily because it is (in my view) complete nonsense.

What becomes very clear is that lawsuits have a significant impact on people. The famous twitterer Hodlonaut is also in the same boat (McCormack will now help Hodlonaut).

The cost is also not cheap, having already spent a million pounds on defense, primarily raised by sponsors.

It is therefore not surprising that the administrator of bitcoincore.org (bitcoinsoftware) last year decided to remove the white paper from the site as there was a threat of a lawsuit.

Wright is an annoying man who keeps coming back. Claims on his part have been denied several times, but he continues to push forward. I hope it ends soon and the threat disappears as this will slow bitcoin growth a bit again (a successful attack!).

“Cryptostamp” – sigh

When I saw the news “PostNL launches the first Dutch crypto stamp”, I immediately had to sigh.

I’ve never really been a fan of the whole NFT thing. Cryptographically, it’s a good idea to prove ownership, and it works well when it comes to digital money (bitcoin), but there’s just a lot of nonsense around NFTs.

PostNL is trying to create a new kind of collector with this stamp and get young people interested again.

source: PostNL press release

They are also quite late, interest in NFTs is already declining significantly. The question is also what the added value is here. The idea is that a true physical stamp is attached to a digital version: a digital twin. The digital version is then NFT.

It is not yet clear when the stamp will go on sale. It will cost 9.05 euros. But I let him walk past me …

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