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Alright, this is a long post. But hopefully, it is able to further your understanding of Bitcoin. At least, that's the goal! It's an effort to educate newcoiners, and perhaps a few old HODLers as well, on what makes Bitcoin uniquely valuable, the Lightning Network and upcoming Taproot upgrade without overly complicating the conversation. What's so unique about Bitcoin? There's a common misunderstanding that Bitcoin has such great value because it was the first. This is untrue. There were several prior attempts at digital money - B-money, Bit gold and Hashcash (although not technically money) the most prominent among them. Satoshi's PoW algorithm solved a critical flaw in the use of blockchain as a public ledger known as the Byzantine Generals Problem. The concept of blockchain predates Bitcoin by almost two decades. So the value was never in blockchain but the way Bitcoin was able to utilize blockchain as a trustless, permissionless, decentralized public ledger to democratically create, distribute and exchange value. Centralized iterations of blockchain are indeed a waste of time. Permissioned protocols can often achieve greater efficiency using an SQL database instead. Another misconception among newcomers is that you're late to the Bitcoin party. Just as you can never be late to the Internet, you can never be late to Bitcoin. Bitcoin is not just a cryptocurrency. Bitcoin, in the broader sense, is a protocol capable of functioning as the network layer of a decentralized Internet. Bitcoin can therefore fix the Internet's original sin, centralization at the hands of a powerful few, and restore it to its original form - a decentralized P2P network protocol. Bitcoin is capable of remaining decentralized by allowing any participant in the network to access and verify the truth on their own in a very economical manner. Throughout Bitcoin's history, Bitcoiners have staunchly defended the right of users of the network not to be priced out of running their own node. You can host your own Bitcoin full node on a Raspberry Pi. This allows you to be an equal rights citizen on the network and not have to delegate trust to a third party. Without being able to verify on your own, you're just going from trusting bankers to trusting a random person on the internet. That's hardly revolutionary. Samourai Dojo Bitcoin Full Node on Raspberry Pi (cost $40) Bitcoin is not only time-tested but has proven to be doggedly antifragile. Elon Musk remarked at the B-word conference a few days ago that the "average person" is not going to run a Bitcoin node, once again revealing that he probably needs to acquire a better understanding of Bitcoin before passing misguided remarks. What makes Bitcoin antifragile is precisely the ability of the average person to run a full node. There's no locus of power to attack. Every node is equal on the Bitcoin network and they're distributed all across the world on every continent. Every quadrennial cycle, while higher profile individuals and entities attack Bitcoin to further various agendas, these attacks only end up effecting even greater faith in the protocol. Being a pure P2P network allows Bitcoin to withstand state attacks (Satoshi, 2008) Lightning Network Lightning Network is a decentralized layer-2 network protocol that uses a native smart contract scripting language to enable instant, almost feeless Bitcoin payments. On the Lightning Network, both parties to a transaction are required only to have a sufficiently funded open channel on the network. This is done through a single on-chain transaction. If there is a direct channel open between the parties, the transaction is routed directly and incurs zero fees. Without a direct channel, the transaction is routed through routing nodes. Whan a transaction passes through a routing node, it is referred to as a "hop". There are currently 23k nodes on the Lightning Network with 13k nodes having active channels. Three years ago, Lightning Network was admittedly far from ideal for everyday payments. Lightning Network Node Map (March 2018) But the network has seen exponential growth since, particularly this year. Lightning Network is now a fully-fledged global payments network secured by the Bitcoin blockchain. Lightning wallets have also come a long way and are now very intuitive to use for the average user. Lightning Network Node Map (July 2021) Network capacity has doubled this year. Likewise, nodes and channels have grown exponentially, reducing the number of hops and fees incurred for hops through routing nodes, and improving channel lifespan. Lightning Network's remarkable growth has inspired some exciting developments this year, Following the success of the Bitcoin beach project, a pilot for Lightning Network's viability as MoE, El Salvador has adopted Bitcoin as legal tender. Other countries like Tonga, Colombia and other LatAm countries have expressed interest to follow suit. Strike app has introduced a Bitcoin tab with the ability to purchase Bitcoin for a nominal fee of a few cents through the Lightning Network. Twitter CEO Jack Dorsey has stated that the company is looking into integrating a tipping system on the platform using the Lightning Network. Square is building an open-source, permissionless, non-custodial DeFi platform on top of Bitcoin. Feeless payment of 1 satoshi sent from Spain to Tokyo via Lightning Network Taproot Now with Lightning Network's maturation as an instant, almost feeless, infinitely scalable decentralized global payments network, Bitcoin is shifting focus to its next big milestone, Taproot, which is due to go live in November at block height 709632. Taproot brings a set of protocols that further enhance Bitcoin's privacy, scalability and unlocks the path for seamless integration of smart contracts on Bitcoin. Following on from SegWit, Taproot will allow even more efficient use of block space by introducing a new type of output - Pay to Taproot (P2TR). P2TR uses Schnorr signatures, which are more compact than the conventional Elliptic Curve Digital Signing Algorithm (ECDSA) signatures. Schnorr signatures are between 6 and 9 bytes shorter than ECDSA. Perhaps the most exciting aspect of Schnorr signatures is that it enables the aggregation of multiple signatures into a single signature. This opens up infinite possibilities, including being able to execute L2/sidechain smart contracts as a simple regular transaction on-chain. It's a truly game-changing development, as it allows Bitcoin to have smart contracts without bloating the blockchain layer. Smart contracts can be run through L2/sidechain protocols, but on the Bitcoin blockchain, they only take up the space of any other transaction. It ensures that users are still able to economically run their own Bitcoin full node. Schnorr signatures bring more privacy to transactions by making multiple-signature transactions indistinguishable from single-signature transactions, and improve the security of layer-2 protocols by being provably non-malleable, meaning a third party cannot alter an existing signature. Further, Taproot also includes optimization for the Lightning Network called Point Time-Locked Contract(PTLC). PTLC replaces Hash Time-Locked Contract(HTLC). PTLC uses adaptor signatures, which enhance privacy and security on the Lightning Network, enabling escrow contracts in Lightning channels and allowing users to retry stuck payments. These are very exciting times to be a Bitcoiner and that has nothing to do with Bitcoin's price. Cypherpunks write code. Curfew cocktail bar in Copenhagen, Denmark accepting Lightning payment [link] [comments] |
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