Crypto News

Mercury Layer: A Massive Improvement On Statechains

Published

11 months ago

January 8, 2024

CommerceBlock is releasing Mercury Layer today, an improved version of their variation of a statechain. You can read a longer form explanation of how their Mercury statechains work here. The upgrade to Mercury Layer represents a massive improvement against the initial statechain implementation, however unlike the initial Mercury Wallet release, this is not packaged as a fully consumer ready wallet. It is being released as a library and CLI tool other wallets can integrate. Here’s a quick summary of how they work:

Statechains are essentially analogous to payment channels in many ways, i.e. they are a collaboratively shared UTXO with a pre-signed transaction as a mechanism of last resort for people to enforce their ownership. The major difference between a Lightning channel and a statechain is the parties involved in collaboratively sharing the UTXO, and how ownership of an enforceable claim against it is transferred to other parties.

Unlike a Lightning channel, which is created and shared between two static participants, a statechain is opened with a facilitator/operator, and can be freely transferred in its entirety between any two participants who are willing to trust the operator to be honest, completely off-chain. Someone wishing to load a statechain collaborates with the operator to create a single public key that the creator and operator both hold a share of the corresponding private key, with neither having a complete copy of the key. From here they pre-sign a transaction allowing the creator to claim their coins back after a timelock unilaterally.

To transfer a statechain the current owner collaborates with the receiver and operator to sign a cryptographic proof with their keyshare that they are transferring the coin, and then the receiver and operator generate a new pair of keyshares that add up to the same private key and sign a timelocked transaction for the new owner with a shorter timelock than the original (to ensure they can use theirs sooner than past owners). This process is repeated for every transfer until the timelock cannot be shortened anymore, at which point the statechain must be closed out on-chain.

Owners transfer the entire historical chain of past states with each transfer so that users can verify timelocks have been properly decremented and the operator timestamps them using Mainstay, a variant of Opentimestamps where each piece of data has its own unique “slot” in the merkle tree to guarantee that only a single version of the data is timestamped. This let’s everyone audit the transfer history of a statechain.

In The Land Of The Blind

The big change Mercury Layer is bringing to the original version of statechains is blinding. The operator of the statechain service will no longer be able to learn anything about what is being transferred: i.e. the TXIDs involved, the public keys involved, even the signatures that it collaborates with users to create for the pre-signed transactions necessary to claim back your funds unilaterally.

Introducing a blinded variant of Schnorr MuSig2, Mercury can facilitate the process of backout transaction signing without learning any of the details of what they are signing. This necessitates some design changes in order to account for the fact the operator can no longer see and publish the entirety of a statechain’s transfer history. They are not even capable of validating the transaction they are signing at all.

In the prior iteration, uniqueness of a current statechain owner/transaction set was attested to by the operator through the publishing of the entire transfer history of the statechain with Mainstay. That is not possible here, as in the blinded version the operator learns no details at all about these transactions. This necessitates a new way of the operator attesting to current ownership of the statechain. All of this data is pushed entirely to a client side validation model. The operator simply keeps track of the number of times it has signed something for a single statechain, and tells a user that number when it is requested. The user then receives the transactions of past statechain state’s from the user sending to them, and verifies entirely client side that the number of transactions match what the operator claimed, and then fully verifies the signatures are all valid and the timelocks decremented by the appropriate amount each time. In lieu of publishing the full statechain transactions and transfer order to Mainstay, because it is designed to be unaware of all of that information, it publishes its share of the public key (not the full aggregate public key) for the current user for each statechain user. This allows any user receiving a statechain to verify the transfer history and current state is legitimate against the transaction data sent by the sender.

The operator server keeps track of unique statechains to count past signatures by assigning each statechain a random identifier at creation, stored with its denomination and its private key and public key shares (not the entire aggregate public key). The new coordination scheme for sharding and re-sharding the key is done in a way where the server passes its share of the key to the user, and the data necessary for a resharding is blinded so the server is incapable of ever learning the user’s full public key share, allowing it to create the full aggregate public key and identify the coin on-chain.

The design doesn’t even allow for the operator to know when it has signed a cooperative closure with the current owner rather than a pre-signed transaction for a new off-chain owner; it doesn’t see any details to distinguish the two cases from each other. This is safe however for users who could be attacked by someone trying to “double spend” a statechain off-chain providing a fake transaction that couldn’t be settled. Firstly, that user would see on-chain that the UTXO backing that statechain was spent. Secondly the transaction history, because the operator must sign all state updates, would only have a clear cooperative closure in the chain of past transactions. Both of these things would allow the user to refuse the transaction knowing it was not legitimate.

Statechains also allow Lightning channels to be “put on top” of the statechain by having the statechain pay out to a multisig address between two people, and the two of them negotiating a conventional set of Lightning commitment transactions on top of it. It would need to close the statechain on-chain before closing the Lightning channel so would need to use longer timelock lengths for Lightning payments, but otherwise would function perfectly normally.

Overall with the massive privacy improvements of the new iteration of statechains, and the composability with Lightning, this opens many doors for the economic viability and flexibility of second layer transactional mechanisms on Bitcoin. Especially in light of the recent radical changes in mempool dynamics and the resulting fee pressure.

It offers the same type of liquidity benefits of Ark, i.e. being able to be freely transferable without needing receiving liquidity, but unlike Ark is live and functional today. It is undeniably a different trust model than something like Lightning alone, but for the massive gains in flexibility and scalability, it is definitely a possibility to explore.

CommerceBlock has taken their initial Mercury statechain implementation, a second layer akin to Lightning, and massively improved the privacy for users. The operator now is incapable of learning

Crypto News

Perianne Boring Predicts Trump’s 2025 Economic Policies Will Drive Bitcoin Price to $800K

Published

5 hours ago

December 13, 2024

Bitcoin investors received a jolt of optimism on Fox Business’ Mornings With Maria on December 13, 2024, when Digital Chamber founder and CEO Perianne Boring unveiled a staggering price prediction. Speaking with host Maria Bartiromo, Boring suggested that bitcoin could surge to $800,000 in 2025 under economic proposals set forth by President-elect Donald Trump.

Personnel is policy: Perianne Boring pic.twitter.com/52IPUr2owR

— Mornings with Maria (@MorningsMaria) December 13, 2024

Boring’s insights underscore how policy-driven macroeconomic factors could catalyze bitcoin’s ascent to historic highs. With its fixed supply, bitcoin’s unique scarcity positions it to thrive under conditions of increased adoption and favorable policy environments—a scenario Boring believes Trump is poised to create.

Trump’s Bitcoin Vision: A Policy Blueprint for Growth

The conversation with Bartiromo highlighted several proposals that could act as a tailwind for bitcoin’s growth. “What President-elect Donald Trump has proposed, what he’s outlined to our community, would absolutely solidify the United States’ leadership in the digital asset and blockchain technology ecosystem,” Boring stated.

She pointed to Trump’s famous bitcoin speech in Nashville, where he laid out a vision of building a national bitcoin stockpile and leveraging tax policy to attract economic activity into the space. Boring emphasized the importance of addressing regulatory challenges: “He wants to clear up a lot of these regulatory friction points for the industry. The U.S. has driven out activity under the Biden administration. We need leadership at the very, very top to bring these markets back to the United States.“

Regulatory Clarity on the Horizon?

Boring also addressed the ongoing confusion between the SEC and CFTC regarding oversight, which has driven significant innovation out of the U.S. She shared optimism about Trump’s personnel choices, including potential appointments like Paul Atkins for SEC chair and Brian Quintens for CFTC leadership. Both figures, she explained, bring technical and industry expertise needed to restore clarity and confidence to the market.

“Paul Atkins is absolutely committed to bringing that regulatory clarity,” Boring said. She also noted Quintens’ history of advocating for self-regulation in the digital asset market, adding that both leaders could “put us in the right step.”

A Historic Price Catalyst?

When Bartiromo raised the topic of price projections, Boring delivered the show-stopping prediction that captured investors’ imaginations: “The stock-to-flow model says it’s going to be at over $800,000 by the end of next year. If Donald Trump is successful in putting forth a lot of the proposals that he’s proposed to the community, the sky is the limit because bitcoin has a fixed supply.“

This bullish outlook aligns with models that measure bitcoin’s price trajectory relative to its halving cycles and its immutable monetary policy. The fixed supply cap of 21 million bitcoins contrasts sharply with the inflationary tendencies of fiat currencies, positioning bitcoin as a potential store of value in uncertain economic times.

Market Insights for Bitcoin Investors

While ambitious, the $800,000 price target reflects a growing belief among market analysts that supportive policies, reduced regulatory friction, and a resurgence of U.S.-led innovation could create the perfect storm for bitcoin adoption. Investors should watch closely as Trump’s administration shapes the landscape.

The alignment of fiscal policy, regulatory reform, and institutional confidence could reignite bitcoin’s trajectory. For those holding or considering allocations, the evolving policy backdrop could represent a pivotal moment in bitcoin’s maturation.

Adding to the bullish sentiment, Eric Trump, a prominent American businessman, Executive Vice President of the Trump Organization, and son of President-elect Donald Trump, made headlines at the Bitcoin MENA event in Abu Dhabi on December 10. Speaking to a captivated audience, he confidently predicted that Bitcoin would someday reach $1 million per BTC. This bold forecast aligns with the Trump family’s increasing advocacy for Bitcoin and its transformative potential in global finance. Eric Trump’s statement not only underscores the administration’s pro-Bitcoin stance but also reinforces the positive feedback loop of institutional and policy support driving long-term price appreciation.

With potential catalysts on the horizon, one thing is certain: 2025 could be a defining year for bitcoin’s role in the global financial system.

Perianne Boring Predicts Trump’s 2025 Economic Policies Will Drive Bitcoin Price to $800K In a bold prediction on Fox Business, Perianne Boring, CEO of the Digital Chamber, asserted that President-elect Donald Trump’s economic policies could position the U.S. as a global leader in bitcoin adoption, potentially driving the asset’s price to an unprecedented $800,000 by 2025.

Crypto News

Tando Was All The Rage At This Year’s Africa Bitcoin Conference

Published

6 hours ago

December 13, 2024

Before I even arrived at this year’s Africa Bitcoin Conference, I saw attendees posting about Tando, a new Kenya-based payments app that allows users to spend their sats with merchants who don’t accept bitcoin.

Just arrived in Nairobi 🇰🇪🛬 & the 1st thing I see as I exit is the @tando_me sign

LET’S GO @AfroBitcoinOrg 🙌🏾 pic.twitter.com/zhPSP2dTH8

— OKIN | Nikolai Tjongarero (@OKIN_17) December 8, 2024

“How is this possible?”, you might ask. Well, let me explain.

To use Tando, you simply download the app and prepare to pay any merchant who accepts payments via M-PESA, Kenya’s mobile money service. (Notice I didn’t say you had to go through a set up or KYC process, as neither are necessary — Tando doesn’t collect any identifying information from its users.)

When the merchant presents you with your bill, you simply click on the “Send Money” square on the app’s home screen. From there, you enter the mobile number tied to the M-PESA account to which you’re sending money and then input the amount of Kenyan shillings you want to send.

The app automatically calculates the amount of sats it will take to cover the shilling amount you’ve input. You then click on the green “Create Invoice” button to obtain a Lightning invoice. After that, you copy the invoice and pay it via your preferred Lightning wallet. Tando receives the sats and then settles the bill in shillings with the merchant within seconds.

I can barely count how many times I’ve watched Bitcoiners use Tando to pay restaurant bills or taxi fares since I’ve been here. (I’ve been to a lot of restaurants and have ridden in a lot of taxis since I’ve arrived.)

Now, I know what some of you are thinking: Tando interfaces with a fiat payment system, which means it should be excommunicated from the Church of Bitcoin.

But before you allow yourself to entertain that kind of thinking, please consider the following notions:

You’re a loser.
Here in Kenya, much like in other parts of Africa, people actually use bitcoin for payments.
When you show someone how to use Tando, it provides you with an opportunity to show the merchant what Bitcoin is as you show them how the app works. (I watched Gorilla Sats’ Brindon Mwiine masterfully do this for a waitress at a conference after party.)
M-PESA requires that its users KYC and some Kenyan citizens don’t have the proper documentation to do so, which means they’re excluded from the system. Using Tando, they can be included in Kenya’s broader monetary system.

The excitement around Tando at the conference was part of the broader enthusiasm around apps that make bitcoin easier to use across the African continent — apps like Bitsacco, Machankura, Fedi and Bitnob.

Massive shout out to the devs making #Bitcoin wallets easier to use.@bitsacco @Machankura8333 @fedibtc @tando_me @Loicbtc pic.twitter.com/UhVw5bnBxO

— Frank Corva (@frankcorva) December 11, 2024

African Bitcoiners are far ahead of their counterparts in the United States when it comes to using bitcoin as it is intended to be used — as peer-to-peer electronic cash.

And while many Africans are working tirelessly to onboard as many merchants as they can to Bitcoin, Tando is an excellent intermediary step that allows Bitcoiners to spend their sats even if the merchants with whom they’re spending don’t yet accept bitcoin payments.

Tando Was All The Rage At This Year’s Africa Bitcoin Conference The app lets users pay any merchant in Kenya that accepts digital payments via M-PESA with bitcoin over Lightning.

Crypto News

Early Bitcoin Investor Sentenced to Prison for Tax Evasion on $3.7 Million BTC Sale

Published

8 hours ago

December 13, 2024

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An Austin, Texas man, Frank Richard Ahlgren III, has been sentenced to two years in prison for filing false tax returns that underreported the capital gains from selling $3.7 million worth of bitcoin, the United States Department of Justice (DOJ) announced today.

According to the DOJ, Ahlgren was an early Bitcoin investor who began purchasing bitcoin in 2011. In 2015, he acquired 1,366 bitcoins through his Coinbase account, a year in which the price of bitcoin peaked at approximately $495 per coin. By October 2017, Bitcoin’s value had surged, and Ahlgren sold 640 bitcoins for $5,807 each, totaling a gain of $3.7 million. He then used the proceeds to purchase a home in Park City, Utah.

However, when filing his 2017 tax return, Ahlgren misrepresented the gains by inflating the cost basis of his bitcoin purchases, claiming he had acquired the coins at prices higher than market rates. This misreporting significantly reduced the reported capital gains.

Between 2018 and 2019, Ahlgren sold additional bitcoins worth over $650,000 but failed to report these transactions on his tax returns entirely. In an attempt to conceal his gains, he transferred funds through multiple wallets, exchanged bitcoin for cash in person, and using mixers to anonymize his bitcoin transactions.

In total, the DOJ stated that Ahlgren’s actions resulted in a tax loss exceeding $1 million.

“Frank Ahlgren III earned millions buying and selling bitcoins,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division “But instead of paying the taxes he knew were due, he lied to his accountant about the extent of a large portion of his gains, and sought to conceal another chunk of his profits through sophisticated techniques designed to obscure his transactions on the bitcoin blockchain. That conduct today earned him a two-year sentence.”

The U.S. District Court Judge Robert Pitman sentenced Ahlgren to two years in prison, followed by one year of supervised release. Additionally, Ahlgren was ordered to pay $1,095,031 in restitution to the U.S. government.

“Ahlgren will serve time because he believed his cryptocurrency transactions were untraceable. This case demonstrates that no one is above the law. My team at IRS Criminal Investigation has the expertise and tools to track financial activity, whether it involves dollars, pesos, or cryptocurrency,” said Acting Special Agent in Charge Lucy Tan of IRS-Criminal Investigation (IRS-CI)’s Houston Field Office. “This case marks the first criminal tax evasion prosecution centered solely on cryptocurrency. As the prices for cryptocurrency are high, so is the temptation to not pay taxes on its sale. Avoid the temptation and avoid federal prison.”

Early Bitcoin Investor Sentenced to Prison for Tax Evasion on $3.7 Million BTC Sale This marks the first criminal tax evasion prosecution centered solely on bitcoin.