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16 min read Newsletter

2024.18 - Captured

TLDR: Has Bitcoin been captured? Avoiding capture is a perpetual game for Bitcoin. The bare minimum is self-custody. but there are other real threats. Are You doing your part?
2024.18 - Captured

IMHO

With all the recent law-enforcement actions, mining centralization news, inscription-induced fee spikes, etc. it seems fair to ask:

Has Bitcoin been "captured"?

Let's start with what that even means. In software projects, to be "captured" usually means to become dominated or controlled by a particular entity, organization, or interest group.

Here are some of the typical ways "capture" of a project can manifest:

  1. Technical control: The capturing entity can dictate its direction without input from others.
  2. Influence: The capturing entity has significant influence over key stakeholders.
  3. Lock-in: Users are reliant on the products. services, or solutions from the capturing entity.
  4. Dominance: The capturing entity has become the dominant player in the project or network.

Before we dive into the above, remember:

  • BTC can be captured in one (or more) of the above ways
  • BTC will always have some risk of capture (the reward is simply too great).
  • If BTC is captured it doesn't necessarily have to stay captured.
  • A useful synonym for "captured" in this case would be CENTRALIZED.

A good deal of "what makes Bitcoin Bitcoin" flows from the fact that it is fairly decentralized —certainly the most decentralized project in "crypto".

But decentralization is not a fixed destination —you're never quite done. Centralization is like a gravitational pull you have to constantly resist, a system naturally "wants" to centralize because it's more efficient. It is faster, cheaper and easier to develop and manage centralized projects, the one big drawback is centralized projects are easy to capture.

Two big concerns have propped up recently:

Mining

Dominance in mining could lead to censorhip —a small group controls which transactions get processed and which don't.

A surface-glance at the current state of mining suggests things are OK, but a closer look reveals several of these "different" pools act as one

Seems no one pool is dominant

In other words, even though there may be millions of different people running "miners", these are better understood as "hashers" which loan their horsepower (but not steering) to a pool. The pool operator decides how to form its blocks, the hashers have no voice.

I won't mince words, this is bad. Not right now and probably not tomorrow, but this is the kind of trend that needs to be corrected with haste.

There is at least one (smaller) pool —Ocean Mining— that is pointing the way to a different approach (they allow hashers to point their engines at one of 3 different block templates) and a possible change

There is also a new messaging protocol —Stratum V2— which would give hashers the ability to choose the blocks they want to work on.

Stratum V2 in currently in beta-testing and we should put a fire under miner's butts to start testing it more enthusiastically.

COMPLY

The other big capture concern has been government(s) using their influence to shape and

Governments, particularly the US were busy cracking their influence whip these past few weeks. Last week they had "Bitcoin Jesus" Roger Ver, arrested for tax fraud.

Roger Ver was one of the first big "BTC influencers". He was before my time, he damaged his reputation by lying about the solvency Mt. Gox and then set it on fire by pushing Bitcoin Cash (this is when I first saw him in action).

Now, I'm no fan of Roger Ver (not a fan of taxes either), but it seems his arrest was egregious (IRS deciding he didn't pay enough a decade ago)

They also threw CZ (founder and ex-CEO of Binance) in jail, on an admittedly light sentence 'cause he sang like a canary, over non-compliance with KYC-AML regulations.

Then they set their sights on Square and Cash App, launching an investigation against them over "compliance failures"

These scare tactics work. Witness Wasabi privacy wallet deciding to close its coinjoin coordination services.

The takeaway from all of this is the government will do their worst to prevent people from transacting in a permissionless, private matter.

Yes, its true that permisionless and private opens the door for bad actors but it's absolutely (and demonstrably) false that KYC / AML helps prevent any of this.

Speaking of influence, Microstrategy announced a new Bitcoin-based DID (Decentralized Identity platform) at its yearly conference last week, leading many already spooked Bitcoiners to rail against Michael Saylor for wanting to turn BTC into a CBDC.

In my opinion, their knee-jerk reaction is wrong.

Yes we can debate the specific technical merits of his proposed implementation, the usefulness of DIDs in general and the market-fit (or lack thereof) for such a product. But a few key points to keep in mind:

  • This is OPTIONAL. If you don't like it just don't use it.
  • Government issued Digital IDs are different to decentralized IDs (where you have far more control of how much information you are willing to disclose and to whom)

It's healthy to be skeptical though, I don't begrudge people for being suspicious of Saylor's (or anyone else's motives). No one in Bitcoin should be considered above scrutiny.

The clip from the Mr Robot (TV show) below shows a fair depiction of what we're up against. The government would love full visibility and control over your financial life, it's up to us to prevent that from happening.

Captured

If you'd like to see what a captured system looks like you don't need to look far.

A small group of people is eroding the value of the USD at breakneck speed by burdening it with ungodly amounts of debt.

To people thinking this is "more of the same", it ain't. We are in uncharted waters.

The situation is so bad that markets cheer for high unemployment, because they believe it means the Fed will have to fire up the money printer yet again.

They're not wrong.

And the bill for all of this is unceremoniously passed on to those citizens who don't have teams of lawyers / accountants protecting their interests.

A quick look at the quick below —which you absolutely should take the time to watch— leaves you with two unsettling options:

  • The economy is in the hands of people who are clueless
  • The situation is so bad they need to hide its reality from you

At its gore the problem is simple: The government can't really print money but by pretending they can, they can steal yours.

If we passively go along as they keep moving forward with their CBDCs our money will become the chains they capture us with.

Even though it may not seem like it, we are still early. Stack hard and self-custody. Don't let yourself be captured!

Bitcoin News

BS

One more in a long line of assertions from Warren that are not supported by the numbers.

Chad

Jack Dorsey is donating $21M to developers working on BTC and Nostr. More of these please.

He also took the time ot explain to his shareholders why Bitcoin is important.

Outflow Week

This was the first week significant outflows for some (non-GBTC) ETFs. Not a cause for panic but worth noticing and a reminder that BTC is never "up-only".

Other Hand

In what some are reading as a "changing-of-the-guard" / "end-of-the-wild-west"moment (CZ out, Larry Fink in) BlackRock hosted a "Bitcoin Investing" conference with industry leaders last week. Apparently it went well

Needle Unmoved

The HongKong BTC ETFs launched last week, they didn't do badly per se, but their size was not size.

Lolz

Bill Maher doesn't understand Bitcoin, which is a good thing (you can front-run all the wealthy Holywood shitlibs). His mining analogy was funny, I'll give him credit for that.

Some Love

Not all politicians hate Bitcoin

Krypto News

"Crypto" can be lethal to your portfolio

Eternal Question

Will the SEC formally declare Ethereum a security or not?

"Wrapped"

Bitcoin on another chain is not BTC. Simple as.

Poison

Someone managed to trick an Ethereum user into sending to a wrong address by replacing the legitimate address with a malicious one but matching a few of the first and last numbers. Have not heard of this happening in BTC, but you should always keep alert. Don't just check the first and last few, at the very least check some of the digits in the middle as well.

Oh, and maybe it's just me, but if you're sending $68 Million, check EVERY digit. Twice.

Fiat News

Stealth QE?

Powell's latest speech suggested a pause on hikes and a harder than expected pumping-of-the-brakes on QT

Also, the Treasury announced its first buy-back operation in 12 years.

Mickey D Disagree

Secretary Yellen thinks the economy is doing fine. McDonald's (and Starbucks) disagree.

Intervention

Japan intervened (again) to stem the rise of the Yen.

Trouble for the Yen could spell big trouble for the US Treasury market.

Buzzcut

Commercial real-estate seems to be moving beyond haircuts.

Dystopian News

El Jefe

This is actually anti-dystopian. Bukele just ordered his entire Executive branch to be investigated for corruption as a pre-emptive hygiene measure.

Cruel and Unusual

The punishment Ross Ulbricht has been subject to is absolutely out of proportion with any comparable case. Infuriating to see him being used just to make a point.

Bienvenidos

Sign of a healthy economy is that a super-profitable company that's exceeding expectations shifts its labor to other cheaper countries, right?

You are the product

If you think your carrier is making a profit on you, you are right. Just maybe not the way you think.

No Privacy

The EU continues to chip away at privacy. With a bulldozer

You should be crystal clear on this: They hate (your) privacy with a vengeance.

Praying on your demise

Appolo group is using insurance policies to gamble on old people's deaths. Absolutely charming.

Need a Squad

After the second Boeing whistleblower died unexpectedly last week, ten more emerged.

Price News

Guest Charts

Corrections and pullbacks of 20-30% are normal in Bitcoin, get used to them.

These are the best buying opportunities you'll get.

Bitcoin Surfing

BTC reached for the Water ($51.8k) last week but fell way short. The Board ($66k) is looking closer now… Can it climb onboard?

Dip Fishing

Did you manage to catch some sats at $60k like I suggested last week? Did you get some even lower??

If we go down again I could definitely see $60k in the cards. I don't see us breaching $56k but it's absolutely within the realm of possibility.

Calm Chart

Now that we have our Red April in the bag, what's next? Summers are usually slow, but maybe we can still some green candles in there.

Published by:

₿ Coach

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