Crypto News
Bitcoin As A 21st Century Piece Of Eight
Many commentators compare Bitcoin with gold, the idea being that its finite supply makes it an attractive long-term store of value. There have been historical examples of broad adoption of gold currencies, such as the British Empire’s sovereign and half-sovereign. However, adoption of the sovereigns was often promoted and directed by the British imperial government, much to the dismay of local administrators who often suffered currency shortages. Bitcoin has no nation state to promote its adoption, so the comparison between it and gold sovereigns is a weak one. One of the world’s most heavily used silver currencies, the Spanish silver dollar, may offer a better comparison.
The Spanish silver dollar, or reale as it was originally known, was unusual because it prospered as a trade currency while Spain, its nation of origin, declined. In addition, it was adopted in countries that were never Spanish colonies, thus violating the premise that a currency can only thrive if it has a strong home country promoting its use. The three main factors behind the reale’s success were its availability, quality and verifiability.
The reale was created in 1497, five years after Columbus landed in America, when King Ferdinand and Queen Isabella reformed Spain’s monetary system through the Pragmatica de Medina del Campo. The new silver reale could be divided into eight parts, hence ‘pieces of eight’. Note that it is not to be confused with ‘doubloons’, which were made from gold.
Fifty years later in 1545 the Spanish discovered the Cerro de Potosi in present day Bolivia, which was the richest source of silver in the history of the world. A shortage of coins led to the Spanish crown permitting the minting of reales in New Spain in 1535. At the same time, Portuguese explorers had discovered not only the route to the Indies and China, thus sidestepping the Arabs and the Venetians who traded in gold ducats along the Silk Route, but also that merchants in East Asia preferred silver over gold. Chinese demand was particularly large as a shortage of bronze used in the coins of the Ming dynasty forced merchants to seek alternatives. Demand for silver soon outstripped both Chinese and Japanese supply, creating a ready market for the regular shipments of reales from the colonies of New Spain to the Philippines, another Spanish colony.
Its adoption spread throughout the Americas such that by 1792 it was the de facto currency of the newly independent United States. Indeed, when the US dollar was first issued it was pegged to the reale. 87 years later in 1879 China would do the same thing, pegging its new yuan to the reale or the Mexican peso as it was then known. The growth of the Spanish Empire therefore provided the distribution and availability across both America and Asia, which was the first step towards its success.
The second factor was that the Spanish government ensured the reale’s quality stayed consistent, which in turn meant its value remained stable. Unlike many other currencies of the era, the reale was subject to very limited debasement. However, while the reale remained strong, the domestic Spanish economy weakened. Efforts to combat inflation, some of which involved debasing the domestic vellon coinage, stifled exports and encouraged imports and further crippled the Spanish economy. These policies, when combined with the demands of continuous conflict and profligate royal spending, ultimately led to a great deal of the silver reales being exported to the rest of Europe. The other European nations, particularly the Dutch and the British, were keen to compete with the Spanish empire and so needed the silver to buy tea, silks and spices from China and Asia. The early English East India Company had started out by trying to sell heavy woollen cloth in India and China, unsurprisingly with very limited success. Using silver reales was much easier.
The final factor in the reale’s success was verifiability. Other countries had tried to replicate the reale, but even foreign coins of the same quality and weight were rejected by Chinese and Asian traders, since it was easier to assume that the Spanish reales were consistent. The US was one such unsuccessful competitor. In 1872 the US Treasury noted that while the reale commanded a 6-8% premium in East Asia, American silver suffered a 2% discount. Therefore in 1873 the US Coinage Act authorised the creation of a US ‘Trade dollar’. This new coin came to be known as the ‘Eagle dollar’ owing to its Bald Eagle design. The US expected to profit from seigniorage based on the belief that most of the Eagles would never cross back across the Pacific to where they could be redeemed.
The Eagle had mixed success. Despite an endorsement by the Tongzhi Emperor, it was adopted to a limited extent in the south of China, but not the north. More disappointingly, as the value of silver fell the Eagle started reappearing in the US where its silver content was less than its face value, leading to redemptions. It was gradually phased out and, indeed, from 1873 many countries started to migrate to the gold standard.
So, the question remains whether Bitcoin, which has no nation at all, could ever be treated as a trade currency. Like the Spanish silver dollar it is, in principle, abundantly available since it sits on the open internet. Where the reale was of consistent weight and purity so Bitcoin has a consistent design and structure. The maths that underpins it is the same in any country. Where the reale had earned what was effectively brand recognition, allowing it to be easily recognised by holders, so Bitcoin is easily verifiable because it sits on a public ledger with a hashed immutable structure. It took the reale about a hundred years to gain its recognition and status and the same may be true, in time, of Bitcoin. While there may be criticism of Bitcoin’s suitability as a means of exchange, which the reale certainly had, what is undeniable is that Bitcoin shares several of the features of success that underpinned adoption of the reale in its availability, quality and verifiability.
That one currency achieved wide adoption as its home nation was in decline was remarkable. That Bitcoin has achieved this with no home nation at all is even more remarkable.
This is a guest post by Nick Philpott. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
Bitcoin historically has always been compared to gold, but there are many similarities between it and the Spanish silver dollar.
Today, Russian state-owned domestic news agency, RIA Novosti, reported that State Duma Deputy Anton Tkachev proposed creating a strategic bitcoin reserve for Russia, claiming they have obtained a copy of the document.
Tkachev, from the New People party, sent the proposal to Russia’s Finance Minister, Anton Siluanov, to create a bitcoin reserve similar to Russia’s traditional currencies reserves.
JUST IN: Russian State Duma Deputy Anton Tkachev proposed creating a strategic #Bitcoin reserve in Russia, RIA Novosti reports 🇷🇺 pic.twitter.com/PlwSp24RvF
— Bitcoin Magazine (@BitcoinMagazine) December 9, 2024
“I ask you, dear Anton Germanovich, to assess the feasibility of creating a strategic reserve of bitcoin in Russia by analogy with state reserves in traditional currencies,” the document reportedly stated. “If this initiative is approved, I ask you to submit it to the government of the Russian Federation for further implementation.”
“In conditions of limited access to traditional international payment systems for countries under sanctions, cryptocurrencies are becoming virtually the only instrument for international trade. The Central Bank of Russia is already preparing to launch an experiment in cross-border settlements in cryptocurrency,” the document reportedly goes on to explain.
Tkachev’s document explains that creating a strategic Bitcoin reserve could enhance Russia’s financial stability, noting that traditional currency reserves such as the dollar, euro, and yuan are all subject to inflation and sanctions, and that a new alternative independent of any individual country is needed.
This development continues the trend of countries looking to build a strategic bitcoin reserve, including the United States, El Salvador, Brazil, Poland, and others. An initiative led by the United States and President-elect Donald Trump, the U.S. is looking to build a strategic bitcoin reserve of over 1 million bitcoin, which appears to have caught the attention of certain Russian officials.
Just five days ago, Russian president Vladimir Putin publicly stated that no one can ban or prohibit the use of Bitcoin, and that it will continue to develop. Earlier this year, Putin also signed a new law legalizing Bitcoin and cryptocurrency mining within the country.
BREAKING: 🇷🇺 Russian President Putin says “Who can ban #Bitcoin? Nobody.” pic.twitter.com/6mJ664BZZ8
— Bitcoin Magazine (@BitcoinMagazine) December 4, 2024
The document would see Russia create a bitcoin reserve similar to its traditional currency reserves.
GingerWallet, the fork of WasabiWallet maintained by former zkSNACKs employees after the shut down of the Wasabi coinjoin coordinator, has received a vulnerability report from developer drkgry. This vulnerability would allow the total deanonymization of users inputs and outputs in a coinjoin round, giving a malicious coordinator the ability to completely undo any privacy gains from coinjoining by performing an active attack.
Wasabi 2.0 was a complete re-design of how Wasabi coordinated coinjoins, moving from the Zerolink framework utilizing fixed denomination mix amounts, to the Wabisabi protocol allowing dynamic multi-denomination amounts. This process involved switching from homogenous blinded tokens to register outputs to claim your coins back, to a dynamic credentials system called Keyed Verification Anonymous Credentials (KVACs). This would allow users to register blinded amounts that prevented theft of other users’ coins without revealing to the server plain-text amounts that could be correlated and prevent linking ownership of separate inputs.
When users begin participating in a round, they poll the coordinator server for information regarding the round. This returns a value in the RoundCreated parameters, called maxAmountCredentialValue. This is the highest value credential the server will issue. Each credential issuance is identifiable based on the value set here.
To save bandwidth, multiple proposed methods for clients to cross-verify this information were never implemented. This allows a malicious coordinator to give each user when they begin registering their inputs a unique maxAmountCredentialValue. In subsequent messages to the coordinator, including output registration, the coordinator could identify which user it was communicating with based on this value.
By “tagging” each user with a unique identifier in this way, a malicious coordinator can see which outputs are owned by which users, negating all privacy benefits they could have gained from coinjoining.
To my knowledge drkgry discovered this independently and disclosed it in good faith, but the members of the team who were present at zkSNACKs during the design phase of Wabisabi were absolutely aware of this issue.
“The second purpose of the round hash is to protect the clients from tagging attacks by the server, the credential issuer parameters must be identical for all credentials and other round metadata should be the same for all clients (e.g. to ensure that the server isn’t trying to influence clients to create some detectable bias in registrations).”
It was brought up in 2021 by Yuval Kogman, also known as nothingmuch, in 2021. Yuval was the developer to design what would become the Wabisabi protocol, and one of the designers in actually specifying the full protocol with István András Seres.
One final note is the tagging vulnerability is not actually addressed without this suggestion from Yuval as well as full ownership proofs bound to actual UTXOs as proposed in his original pull request discussing tagging attacks. All of the data being sent to clients isn’t bound to a specific round ID, so a malicious coordinator is still capable of pulling a similar attack by giving users unique round IDs and simply copying the necessary data and re-assigning each unique round ID per-user before sending any messages.
This is not the only outstanding vulnerability present in the current implementation of Wasabi 2.0 created by the rest of the team cutting corners during the implementation phase.
A major vulnerability in Wabisabi has been publicly revealed that would allow a malicious coordinator server to deanonymize users.
Abu Dhabi, December 9, 2024 – MicroBT, a world-leading Bitcoin ASIC manufacturer, has once again showcased its technological prowess and innovation-driven approach by introducing the latest WhatsMiner M6XS++ series at the Bitcoin MENA 2024 Conference in Abu Dhabi, UAE.
During the conference, Dr. Zuoxing Yang, the Founder and CEO of MicroBT, delivered a keynote address titled “Lead Great and Green Mining Forward.” In his speech, he unveiled advancements in solar power mining technology, highlighted the innovative heat utilization in hydro-cooling mining systems, and introduced the new WhatsMiner models.
The mining industry stands at a pivotal juncture, with green mining emerging as a forefront trend for the future. Dr. Yang emphasized the transformative potential of solar mining, predicting a significant reduction in electricity costs for solar power mining to approximately 3.4 cents USD per kWh by 2025. Furthermore, WhatsMiner’s groundbreaking high-temperature water outlet hydro-cooling technology is pushing the boundaries of comprehensive heat recovery. This technology enables the WhatsMiner hydro-cooling system to either minimize mining cooling needs or repurpose heat for advanced applications, such as industrial steam production, seawater desalination, and heating systems, thereby reinforcing MicroBT’s prominent position in the green mining sector.
Subsequently, Dr. Yang unveiled the latest generation of WhatsMiner products. The air-cooled M60S++ boasts a hashrate of up to 226 TH/s with a power efficiency of 15.5 J/T. The hydro-cooled M63S++ offers a hashrate of up to 478 TH/s, maintaining the same power efficiency of 15.5 J/T. The immersion-cooled M66S++, meanwhile, provides a hashrate of up to 356 TH/s, also with a power efficiency of 15.5 J/T.
Additionally, the WhatsMiner line includes the air-cooled M61S+ with a hashrate of up to 236 TH/s and a power efficiency of 17 J/T. The hydro-cooled M64S+ and M65S+ feature hashrates of up to 236 TH/s and 440 TH/s respectively, both with a power efficiency of 17 J/T. Notably, the outlet water temperature for both the M64S+ and M65S+ can reach up to 80°C.
In conclusion, Dr. Yang proudly announced MicroBT’s steadfast dedication to pioneering sustainable and eco-friendly mining practices, heralding a new era of green mining excellence and visionary leadership. With the unveiling of the latest WhatsMiner products, MicroBT stands poised and confident to decisively spearhead the green mining revolution.
MicroBT Unveils New-Gen WhatsMiner M6XS++ Series at Bitcoin MENA 2024
Russian State Duma Deputy Proposes Strategic Bitcoin Reserve
December 8, 2024 Garamond
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