prochronist

This week, Tether issued more USDT-Liquid due to rising demand, tripling the amount in circulation (~100M) to surpass the total USDT in circulation on Tezos, Polkadot, and others. A few points on why @Liquid Network and other bitcoin L2s will continue to eat up liquidity from alts. First, some context, Liquid has accomplished this with effectively: - no speculative markets (governance token, NFTs, memecoins), the main driver of volume on alts. - no comparable marketing budget, eg, Polkadot spent $37M alone in H1 2024 on promotion:

Polkadot Forum

Polkadot's Astonishing Marketing Spending

On June 29, Polkadot community members released the Polkadot Treasury’s operational report for the first half of 2024. The report revealed that t...

Instead, the Liquid ecosystem has prioritized the development of native features and infra for bitcoin capital markets (confidentiality, @Blockstream AMP, legal frameworks, etc) -- resulting in organic growth of securities issuances. (RWA TVL on Liquid recently hit >2.5B). This is further validation of the effectiveness of bitcoin's design philosophy vs crypto, ie the prioritization of security and low-time preference. The downside, however, is that alts can fill these niche, emerging needs faster and extract value from bitcoin in the short term. Alternatively, with the new language Simplicity coming to Liquid mainnet next month (and potentially bitcoin in the future), the gap in developer UX and expressivity will be largely addressed as Simplicity competes directly with ETH's Solidity. It will certainly take longer for the larger-cap crypto L1s to succumb, but we've already started to see cracks and a shift back to bitcoin. Eg: Vitalik wanting to simplify ETH like bitcoin:

Ethereum Co-Founder Vitalik Buterin Wants to Make Ethereum Simpler Ahead of Pectra Upgrade

Buterin put out thoughts for a long-term roadmap that drastically reduces the complexity of Ethereum’s technology.

Hoksinson considering moving ADA treasury into BTC:

MSN

There's still a long way for Liquid to catch up, but as altcoin marketing budgets dry up and they continue to lose value relative to BTC, we will likely see this trend and convergence accelerate, possibly to the point where some re-denominate their governance tokens in BTC and market themselves as L2s. The great thing is you can still front-run them all by buying bitcoin.

Does anyone have more info on the fedimint that went offline (via Fed app) for a certain amount of time a few months back and users were locked out? Was there ever a diagnostic report or anything explaining the incident and how it will be mitigated in the future?

A few months ago I was in BA and met the @La Crypta guys. Their NFC card was the best bitcoin onboarding experience I’ve ever had and turned me into a NFC card maxi. There’s a certain simplicity about just pulling out a tangible card and tapping it - hard to beat that UX with a phone.

Liquid isn't a long-term scaling solution on its own (that's obvious), but federations can and will be part of the solution. Many federations (both off-chain like Fedimint and on-chain like Liquid) will scale #Bitcoin alongside Lightning, which will play a key role as the connective tissue between different protocols. There will be no 'one size fits all' scaling solution but rather a range of complementary protocols that cater to specific use cases and markets, each addressing different challenges with a unique set of trade-offs. In July, I wrote about this and the importance interoperability will play within second layers and think it's even more relevant today with the discussions happening over the past week. Give it a read if you like.

Blockstream

Increasing Interoperability Between Bitcoin’s Second-Layer Protocols

The prevailing wisdom is that, in order to achieve hyperbitcoinization, Bitcoin should scale in layers. The current discussion or debate is mainly ...

More educators and Bitcoiners should be onboarding newbies to Liquid first, with Lightning as a next step, imho. It's not just easier from a technical view to onboard to Liquid these days given the high-fee enviro but conceptually and in terms of natural learning progression it makes the most sense. Sidechains are a far more digestible concept than payment channels/liquidity mgmt after first learning about Bitcoin and blockchains.

Payment failure is a major flaw in all account-based networks, such as Tron, Ethereum, and other alts. The sad irony is that this impacts the demographic most likely to use crypto rails to begin with—those in emerging markets suffering from currency debasement and hyperinflation. Fortunately, there is a better alternative on #Bitcoin. 🧵 Estimates of Ethereum's payment failure rate range, but there was a consistent rate of over 1 million transactions per month during peak periods. A quick search on reddit will garner hundreds of threads like the one below of users losing money due to failures. https://www.reddit.com/r/ethereum/comments/qq5iin/failed_transactions_costing_250_is_not_fine/ Even Vitalik himself cites a ~2.3% failure rate. Note, we shouldn't fault those flocking to Tron or Ethereum with strong stablecoin network effects (there is clear use case) but, instead, encourage awareness of the downsides and the better alternatives that exist on #Bitcoin. With what looks like the early beginnings of a bull market, users in places like LATAM, particularly in Argentina, where stablecoin usage is surging, should expect a similar spike in transaction failures and consider more architecturally sound chains like the Liquid Network. In contrast to #Ethereum or Tron's account model, the Liquid Network, a Bitcoin layer-2, opts for Bitcoin's UTXO model. This enables an "all-or-nothing" transaction, avoiding the possibility of losing funds when sending a payment. Liquid's fees are competitive with the aforementioned account-based models and stay reliably low. There is also the added feature of confidentiality (no one can see asset type or amount).

The Liquid Blog: Tracking the Latest in Bitcoin’s Financial Lay

An Everyday Guide to Confidential Transactions

Confidential Transactions are an exciting and often overlooked feature of the Liquid Network, allowing users to keep the quantities and assets they...

Our CPO Jeff Booetz, recently detailed the tradeoffs between the UTXO and account models in an op-ed. The latter's lack of transaction reliability is only one example of the many downsides: it's also much harder to scale, less secure, and less private. Highly recommended: https://www.forbes.com/sites/digital-assets/2023/11/07/why-bitcoin-may-offer-the-best-foundation-for-blockchain-based-finance/?sh=453db2457ba2

Cool tidbit: other than SeedSigner, @Blockstream Jade is the only fully open-source Bitcoin hardware wallet that is impervious to physical key extraction. You must collect three separate secrets to decrypt your keys: one is in the encrypted blob on the device, the second is the user-generated pin you set, and the third is only accessible via the blind oracle (that you can also run yourself). Only with all three secrets, can you then get and decrypt the private key. So, by not having a secure element directly on the device, but rather this unique security model of three decentralized secrets, physical key extraction is not possible. Bonus tidbit: the Jade is 50%-75% cheaper than any of the other Bitcoin hardware wallet on the market, meaning you can buy two or three of them (or even build a DIY ver for $15) for the cost of the others, allowing you to create your own multisig. Jade definitely doesn’t get the attention it deserves! View quoted note →