2023.42 - Mixing

IMHO

The Financial Crimes Enforcement Network (FINCEN) is proposing new regulation aimed at destroying your financial privacy. To save us from terrorism, of course.

But, she forgot to include the punchline:

In classic government style, they pervert language in an attempt to fool the citizens, remember the "Financial Responsibility Act"? —the one that allowed them to suspend the debt ceiling and amass $500 billion in debt in record time?— kind of like that.

This time they are leaning on the word "mixing". They want financial institutions, casinos, value-added service providers, all regulated entities, to report all mixing transactions.

I'll summarize below but I do recommend you read the article, it's well worth it:

Mixing is defined to include:

1. “Pooling or aggregating funds from multiple persons, wallets, addresses, or accounts”.
2. “Using programmatic or algorithmic code to coordinate, manage, or manipulate the structure of a transaction”
3. “Splitting [funds] for transmittal and transmitting the [funds] through a series of independent transactions”.
4. “Creating and using single-use wallets, addresses, or accounts, and sending [funds] through such wallets, addresses, or accounts through a series of independent transactions”
5. “Exchanging between types of [cryptocurrencies] or other digitals assets” 
6. “Facilitating user-initiated delays in transactional activity”

Most multi-sigs and lightning channels would qualify for several of these points, arguably all and any Bitcoin transactions would fall under point 2. If you are using standard security best-practices (like not reusing addresses) then that's two strikes for you. Extra penalties if you shitcoin.

The info to be reported includes:

• The amount of cryptocurrency transferred, in native units and USD value at the time.
• The cryptocurrency involved.
• The mixer protocol/service/etc. used, if known.
• Any addresses associated with the mixer used.
• Any addresses associated with the user who mixed.
• The TXID of the relevant transaction.
• The date of transaction.
• Any IP addresses associated with the transaction.
• A “narrative” explaining context, the transaction itself, what the institution did, etc.
• User’s full name.
• User’s date of birth.
• User’s full address.
• User’s email address.
• User’s IRS Taxpayer Identification Number (TIN) or foreign equivalent.

The proposal is, if you'll allow a technical term, absolute bullshit and should be resisted. There is a 90 day period for comments.

The link to comment on the measures is below:

@SSCBryce has helpfully come up with a template to get you started:

Bitcoin News

Assets

Taproot Assets —the protocol formerly known as Taro— has just launched.

It will allow the issuance, management and exploration of assets (tokens, stablecoins, NFTs, etc.) on Bitcoin's Mainnet (and soon on Layer 2). Made possible thanks to Taproot, it will have a minimal footprint on Bitcoin's chain and the flexibility to allow users to ignore it completely or selectively —maybe you're interested in stablecoins but not NFTs, you'll be able to ignore NFTs.

At its core, Taproot Assets taps into the security and stability of the bitcoin network and the speed, scalability, and low fees of Lightning.

Benefiting from Taproot's privacy and scalability features, the assets will be issued on Bitcoin's mainnet and it will be possible to deposit them into Lightning channels for instant transactions

Bear in mind, stablecoins —whether you like them or not— are already huge and global demand for them is unlikely to slow down soon.

It will be exciting to see Taproot Assets evolve, my respects for the team!

Mining USA

Most Bitcoin miners are currently designed and produced in China, Jack Dorsey's Block would like to buck that trend. They just revealed a new Hashboard prototype as oart of their upcoming Mining Development Kit.

They are aiming to provide mining solutions based on open-source code and custom silicon. The current hashboard has intel chips but Block claims they already has a design for a high-performing ASIC. This is requires a strong "lift" but Block may just be able to pull it off.

It would be healthy to have more than one region pushing the envelope on mining.

Exposed

A few months back, Ripple executive Chris Larsen funded a Greenpeace campaign which tried to gaslight people with Bitcoin energy FUD.

The short version goes something like: Bitcoin wastes obscene amounts of energy, changing a few lines of code would fix this by switching to Proof-of-Stake instead of Proof-of-Work.

It was complete BS from day one, but it' especially damning that they never took the time to explore Bitcoiner's rebuttals. Troy Cross does a great job of explaining what they'd have found if the sold-out hypocrytes had bothered to look:

If you'd like to learn mor about some of the other real-life positive effects Bitcoin miners have had, hhis great post by Marty Bent talks about some of his personal experiences at one of the leading edges of mining:

Bugs

A bug was discovered in Lightning. Long story short, if you open channels with a hostile party they may be able to steal your funds. The full extent of the issue seems as difficult to explain / describe as it is to pull off.

No need to panic, but it should be acknowledged there seems to be no easy fix . Mononaut explains:

This attack isn't easy. Pulling it off involves:
- opening two channels with the victim.
- routing a payment through them.
- successfully replacement-cycling the victim's htlc-timeouts for Δ blocks.
- without the victim discovering the htlc-preimage transaction.

If you want to dive in to the details, his thread will be useful:

"Crypto" News

The jokes often write themselves

SBF

The trial keeps on giving.

"I don't always bribe politicians, but when I do, I do it with YOUR money"
—SBF, probably

Eric Wall summarizes it well:

…it’s just overwhelmingy clear that this is turbo giga ultra fraud of the highest order from literally day 1, there was never even an attempt to run this business honestly, it’s all just laughable, shocking and sad how bad it was.

Speaking of FTX / Alameda / SBF, it needs to be said given their egregious mismanagement and fraud, that them being one of Tether's few and largest direct customers raises some eyebrows.

So far, Tether has absorbed every bullet fired in its direction and I'm neither a fan nor a hater, but we would be remiss not to point out this is odd.

There have always been (and always will be) people claiming Tether will blow up. They've been wrong so far, but I would not bet on them being wrong forever. When it comes to Tether I watch from the sidelines.

Stuck

If you had USD on Binance USA well, you kind of no longer do.

Floppening

"The Flippening" —the expectation that ETH would overtake Bitcoin after it switched to Proof of Stake— hasn't quite come to pass yet. Any day now though…

Speaking of Ethereum, co-founder Joe Lubin is a douche bag (and yes, we all knew)

Pour one out for DCG

This is a long thread that goes into some of NY Attorney General's comments around Barry Silbert's Digital Currency Group.

TLDR: They are f*cked and will likely be forced to spinoff their Grayscale fund.

The complaint against them are civil in nature but apparently criminal laws were broken, so it may not out of the question that Silbert and SBF could wind up bunkmates.

Fiat News

Deterioration

China's economy is showing signs of stress / deterioration. A global recession seems imminent, but no country wants to be first so they're doing their best to pretend everything's fine.

But then again, the same could be said for the US

Weak Bonds and Strong Delusions

The bond market is, ahem …unwell.

This would be a problem on any given day, but it's now a bit of an existential issue because the government needs to unload an ungodly amount of bonds over the course of the next few months,

Given diminished appetite from international markets, one group which has stepped up as a big client have been leveraged hedge funds. But they're making the government nervous.

My guess is they want to wean themselves a bit from them. You see, the problem is in the word "leveraged", apparently these funds use leverage levels that would make even the boldest shitcoin casino blush (up to 500x apparently) making these funds very vulnerable to volatility.

Bond volatility, as measured by the MOVE index is on the rise. Consensus is, at 140 volatility is too high. At 150 The Fed has lost control of the market.

Another source of funds have come from "coaxing" some of the funds stashed away in Reverse Repo facilities to buy debt (short-term T-bills apparently).

This is kind of like the Strategic Petroleum Reserve, they can use it to manipulate the market, until they run out.

In classic "Masters of the Universe" mode, The Fed is pretending it can shrink its Balance Sheet (offload some of its debt) while all of this is going on.

Reminds me of that delusional old lady who thinks the US can afford two wars. I wonder what price the bond market will demand for such largesse?

I wouldn't be so cocky, the unusual divergence between Gold price and TLT (long-term bond ETF) suggests the market thinks "flight-to-safety" means Gold, not bonds.

All the while, Americans who can no longer afford rent are settling for parking spaces

Dollar-Me-Not

In small but symbolically significant steps, some countries keep making efforts to fund alternatives to the USD

Hiccups

Last week it was Japanese Banks, this week it was the London Stock Exchange. Odd.

Real Estate

This could be problematic. Why would you buy an investment property if you caoud get the same return from buying US Debt?

Oh, that's right. You wouldn't.

No Chips For You

Can the US starve China of chips to gain a foothold in the AI wars?

Apparently Chinese companies had $5 billion worth of orders with Nvidia for GPU chips. How will China retaliate?

Argetina

The money printer got stuck

Their money needs strong medicine and brash, outspoken Javier Milei is ready for some serious monetary triage. This week we'll find out if he is Argentina's new president.

Viva la libertad, carajo!

Dystopian News

Kaput

More Bankruptcies pouring in. We'll be sad to see you go…

Price News

BTC Surfing

Bitcoin's price jumped clearing the Bedrock ($27k) and Water ($28k) levels. It is now in the middle of dry Sand, which stretches up to $33.6k

Dip Fishing

As Bitcoin's price jumped it cleared through the $29k and $30k but didn't manage to break through $31k, we will see if holds above. It would not be surprising to see it fall back to $28k

Calm Chart

October is now positively green and seems likely to remain that way unless we get a nasty surprise.