cryptocurrency – Casey Rodarmor's Blog

Ordinal Theory bitcoin · computers · internet · cryptocurrency · ordinals

I've been working on a numbering scheme for satoshis that allows tracking and transferring individual sats. These numbers are called ordinals, and constitute a numeric namespace for Bitcoin. Satoshis are numbered in the order in which they're mined, and transferred from transaction inputs to transaction outputs in first-in-first-out order. More details are available in the BIP.

Ordinals don't require a separate token, another blockchain, or any changes to Bitcoin. They work right now.

Ordinals can be represented in a few ways:

With raw notation, like so 1905530482684727°. The number is the ordinal number, and the "°" is the Romance language ordinal symbol.

With decimal notation, like so 738848.482684727°. The first number is the block height, and the second is the index of the ordinal within the block.

With degree notation, like so 0°108848′992″482684727‴. We'll get to that in a moment.

A block explorer is available at ordinals.com. You can explore recent blocks, and look up ordinals by number, decimal, degree, or name.

Arbitrary assets, such as NFTs, security tokens, accounts, or stablecoins can be attached to Ordinals.

Ordinals is an open-source project, developed on GitHub. The project consists of a BIP describing the ordinal scheme, an index that communicates with a Bitcoin Core node to track the location of all ordinals, a wallet that allows making ordinal-aware transactions, a block explorer for interactive exploration of the blockchain, and functionality for minting ordinal NFTs.

Rarity

Since ordinals can be tracked and transferred, people will naturally want to collect them. Ordinal theorists can decide for themselves which sats are rare and desirable, but I wanted to provide some hints.

Bitcoin has periodic events, some frequent, some more uncommon, and these naturally lend themselves to a system of rarity. These periodic events are:

Blocks: A new block is mined approximately every 10 minutes, from now until the end of time.
Difficulty adjustments: Every 2016 blocks, or approximately every two weeks, the Bitcoin network responds to changes in hashrate by adjusting the difficulty target which blocks must meet in order to be accepted.
Halvings: Every 210,000 blocks, or roughly every four years, the amount of new sats created in every block is cut in half.
Cycles: Every six halvings, something magical happens: the halving and the difficulty adjustment coincide. This is called a conjunction, and the time period between conjunctions a cycle. A conjunction occurs roughly every 24 years. The first conjunction should happen some time in 2032.

This gives us the following rarity levels:

common: Any sat that is not the first sat of its block
uncommon: The first sat of each block
rare: The first sat of each difficulty adjustment period
epic: The first sat of each halving epoch
legendary: The first sat of each cycle
mythic: The first sat of the genesis block

Which brings us to degree notation, which unambiguously represents an ordinal in a way that makes rarity easy to see at a glance:

A°B′C″D‴
│ │ │ ╰─ Index of sat in the block
│ │ ╰─── Index of block in difficulty adjustment period
│ ╰───── Index of block in halving epoch
╰─────── Cycle, numbered starting from 0

Ordinal theorists often use the terms "hour", "minute", "second", and "third" for A, B, C, and D, respectively.

Now for some examples. This ordinal is common:

1°1′1″1‴
│ │ │ ╰─ Not first sat in block
│ │ ╰─── Not first block in difficutly adjustment period
│ ╰───── Not first block in halving epoch
╰─────── Second cycle

This ordinal is uncommon:

1°1′1″0‴
│ │ │ ╰─ First sat in block
│ │ ╰─── Not first block in difficutly adjustment period
│ ╰───── Not first block in halving epoch
╰─────── Second cycle

This ordinal is rare:

1°1′0″0‴
│ │ │ ╰─ First sat in block
│ │ ╰─── First block in difficulty adjustment period
│ ╰───── Not the first block in halving epoch
╰─────── Second cycle

This ordinal is epic:

1°0′1″0‴
│ │ │ ╰─ First sat in block
│ │ ╰─── Not first block in difficulty adjustment period
│ ╰───── First block in halving epoch
╰─────── Second cycle

This ordinal is legendary:

1°0′0″0‴
│ │ │ ╰─ First sat in block
│ │ ╰─── First block in difficulty adjustment period
│ ╰───── First block in halving epoch
╰─────── Second cycle

And this ordinal is mythic:

0°0′0″0‴
│ │ │ ╰─ First sat in block
│ │ ╰─── First block in difficulty adjustment period
│ ╰───── First block in halving epoch
╰─────── First cycle

If the block offset is zero, it may be omitted. This is the uncommon ordinal from above:

1°1′1″
│ │ ╰─ Not first block in difficutly adjustment period
│ ╰─── Not first block in halving epoch
╰───── Second cycle

Supply

Total Supply

common: 2.1 quadrillion
uncommon: 6,929,999
rare: 3437
epic: 32
legendary: 5
mythic: 1

Current Supply

common: 1.9 quadrillion
uncommon: 745,855
rare: 369
epic: 3
legendary: 0
mythic: 1

At the moment, even uncommon ordinals are quite rare. As of this writing, 745,855 uncommon ordinals have been mined - one per 25.6 bitcoin in circulation.

Names

Each ordinal has a name, consisting of the letters A through Z, that get shorter the larger the ordinal is. They could start short and get longer, but then all the good, short names would be trapped in the unspendable genesis block.

As an example, 1905530482684727°'s name is "iaiufjszmoba". The name of the last ordinal to be mined is "a". Every combination of 10 characters or less is out there, or will be out there, some day.

Exotics

Ordinals may be prized for reasons other than their name or rarity. This might be due to a quality of the number itself, like having an integer square or cube root. Or it might be due to a connection to a historical event, such as ordinals from block 477,120, the block in which SegWit activated, or ordinal 2099999997689999°, the last ordinal that will ever be mined.

Such ordinals are termed "exotic". Which ordinals are exotic and what makes them so is subjective. Ordinal theorists are are encouraged to seek out exotics based on criteria of their own devising.

Archaeology

A lively community of archaeologists devoted to cataloging and collecting early NFTs has sprung up. Here's a great summary of historical NFTs by Chainleft.

A commonly accepted cut-off for early NFTs is March 19th, 2018, the date the first ERC-721 contract, SU SQUARES, was deployed on Ethereum.

Whether or not ordinals are of interest to NFT archaeologists is an open question! In one sense, ordinals were created in early 2022, when I finalized the Ordinals specification. In this sense, they are not of historical interest.

In another sense though, ordinals were in fact created by Satoshi Nakamoto in 2009 when he mined the Bitcoin genesis block. In this sense, ordinals, and especially early ordinals, are certainly of historical interest.

I personally favor the latter view. This is not least because the ordinals were independently discovered on at least two separate occasions, long before the era of modern NFTs began.

On August 21st, 2012, Charlie Lee posted a proposal to add proof-of-stake to Bitcoin to the Bitocin Talk forum. This wasn't an asset scheme, but did use the ordinal algorithm, and was implemented but never deployed.

On October 8th, 2012, jl2012 posted a scheme to the the same forum which uses decimal notation and has all the important properties of ordinals. The scheme was discussed but never implemented.

These independent inventions of ordinals indicate in some way that ordinals were discovered, or rediscovered, and not invented. The ordinals are an inevitability of the mathematics of Bitcoin, stemming not from their modern documentation, but from their ancient genesis. They are the culmination of a sequence of events set in motion with the mining of the first block, so many years ago.

Hell Money Podcast Episode 8 Show Notes: Crypto is Trash cryptocurrency

Crypto History

Prehistory

Lots of interesting stuff here that nobody talks about
Digital Monetary Trust: Private, anonymous, digital bank
eGold
Liberty Trust

2009 - Bitcoin

Bitcoin launches and is the only cryptocurrency for a while

2011 - Early Altcoins

Pure clones of bitcoin with a few parameters tweaked
Changed supply, difficulty adjustment, PoW algorithm
Big lesson was that Bitcoin gets all these things mostly right, no strong advantage to changing them
A few projects tried to do something different and interesting, e.g., namecoin
I would actually include Ethereum in this latter category, however Ethereum has problems

2017 - ICO Boom

In the early altcoin period, launching a coin was relatively hard, because you had to deploy software to computer and get other people to run it
With Ethereum, you could just write an ERC20 contract and deploy it to Ethereum, so technical bar was very low
Ethereum normalized tokens, premines, and presales, so community couldn't fundamentally reject zero-value cash grabs

2020 - DeFi and NFTs

DeFi is basically repackaging of ponzi scheme economics
Huge NFT bubble as people overestimate what NFTs can do and what they'll become

Crypto Psychological Archetypes

Grifters: Incentivized to lie, hype, and overestimate what their projects can do
Astronauts: Underestimate technical complexity, assume all problems can be solved
- Vitalik is an astronaut par excellence. People in this group underestimate need for security, simplicity, aligned incentives
- Probably enthusiastic about complex large-scale social and economic interventions. Remind me of fringe political and economic theorists
- Worst example is economic space agency
The hoi polloi:
- Unit bias (Bitcoin is too expensive!)
- FOMB: fear that they missed the boat with bitcoin, must find new boat no matter how shitty
- Zero technical understanding, ingest radical bullshit from grifters and astronauts alike
- Think bitcoin is a prototype. No, bitcoin is like the internet, has problems but better to just deal with them

What's wrong with…?

Ethereum

Solidity has terrible semantics
Terrible and insecure code, even in major projects, nobody actually audits contracts
Scaling comedy: State channels, plasma, plasma cash, sharding, roll ups. No good scaling story. Everything they're pursuing comes with massive costs.
Massive premime. Fine during PoW, leads to massive centralization post PoS transition
Security comedy: Solidity is phenomenally bad, everything big gets hacked, see rekt.news
Optimism has no fraud proofs yet has $X TVL
Community tolerates tokenization, so everything gets tokenized. Their lighting competitor got tokenized. This is serious karmic rot that infects everything.

DeFi

Almost all ponzi economics
No value creation
No underlying economic activity, all finance
Can't create credit, can only do collateralized lending, so can't serve most useful credit creation function
Insanely complex and insecure

Stable Coins

Actually often pretty high utility. People who want digital dollars can't access them
Algorithmic stablecoins are doomed
Best case scenario is digital, private, fully-collateralized bank on crypto rails

Solana

Wildly centralized
Insanely complex
Terrible incentives: Couldn't resist big blockers in same way bitcoin did
Insane costs to running a full node

NFTs

Most contracts are fully centralized
Contents are fully centralized, just point to some server somewhere
Nobody audits, so each is a special snowflake complexity
Massive overestimate of how useful NFTs are or what they'll become
Nothing actually wrong with making digital baubles and selling them

Cardano

Had a plane ride next to highly technical Cardano guy, very nice, very smart
Fully just following incentives
Technicals are terrible

Proof of Stake

Stake ratchet: Strong centralization pressure
Merges token holders and miners, in bitcoin these are separate groups who keep each other in check

Monero

Relatively non-awful. Fair launch, community driven.
Hard forks mean developers have a lot of power
Has on-chain privacy, but transactions are 8x larger than bitcoin, so 1/8 transaction throughput
Lighting is the way for privacy. Use lightning network to mix your coins. Make big channel with tainted coins, pay someone for inbound liquidity w/lightning, slosh your coins over to channel w/inbound liquidity, close back to BTC.

Grin

Fair launch privacy coin with interesting tech
Absolutely dead in the water because no VC marketing budget

zcash

Centralized, blocks just give money to core devs.
Moon math led to inflation bug. Probably not exploited, but no way to know.

Urbit

Urbit's okay
Some technical problems that make me worried
Noble effort to decentralize social media

Multisig Is Probably Better Than Proof Of Stake computers · cryptocurrency

A large reputable member threshold multisig operating as functionaries for a Bitcoin-pegged deterministic replicated state machine sidechain with as-compatible-as-possible-with-mainchain semantics is probably more reliable and secure that most alternative chains.

Large: The number of functionaries should be large enough to ensure geographic, jurisdictional, and administrative distribution.
Reputable members: Functionaries should be chosen who would suffer a reputational loss in the case of poor performance.
Threshold multisig: A M-of-N multisig. M should be at least ⌊N/2+1⌋, to reduce the chance of equivocation.
Deterministic, functionaries: Discretion is unpredictable and morally hazardous. The semantics enforced by the functionaries should be deterministic and predictable, not discretionary. Semantics should never change, and if they must, changes should be announced long enough in advance to make exit practical.
Bitcoin-pegged: If the currency of the sidechain isn't bitcoin, users of the sidechain cannot meaningfully exit. Ability to exit incentives the functionaries to be good stewards of the sidechain.
Replicated state machine: The state of all functionaries should be the same, and it should be able to recreate and run ones own copy of the state machine.
Sidechain: Functionaries should publish a sequence of block headers where each block header includes the hash of the current state, as well as the hash of the previous state. Previous states should also be made available by functionaries, in order to make the system auditable.
As-compatible-as-possible-with-mainchain semantics: The ability of users to exit should be maximized, and making the semantics of the sidechain as close as possible to those of the mainchain maximizes the ability to exit, by allowing users to destroy atomically destroy assets on the sidechain in exchange for mainchain assets which mimic the properties of the atomically destroyed assets.
Probably more reliable and secure than most alternative chains: Alternative chains suffer from many issues. Proof-of-work suffer from a large global pool of potential hashrate that can attack. Proof-of-stake chains suffer from byzantine consensus mechanisms of ever increasing complexity which must operate in a fully adversarial environment, and have economics which allow and incentivize centralization. A multisig chain operates with a far simpler and more understandable security model: the functionaries periodically agree on a new set of transactions, run the transactions on the old state to produce the new state, and sign and publish the result. Such a system should be more reliable, predictable, and secure.

And not only that, if the functionaries are chosen carefully, such that there is a huge number of them, perhaps greater than 50, and they are all reputable entities, they should be both incentivized to run the chain properly, and with limited latitude for malicious behavior.

Investable Desiderata computers · cryptocurrency · internet · markets

There are a lot of things that I wish would happen, but don't have the time to actually do myself. I complain about such things all the time to basically anyone who will listen. Such efforts are all well and good, and sometimes actually pay off, but additionally, I'd like to materially support people who might actually do these things.

This post, which I'll try to keep up-to-date, if I remember, documents the projects which I wish some talented go-getter would take on, and in which I would invest money in if given the opportunity.

If you are one of these aforementioned go-getters, email me!

Email-based messaging: The only reason we use anything but email to communicate is because email is missing features that could easily be added. Deliver us from multi-messaging app hell!
RSS-based social networking: RSS could easily serve as the basis for standards-based social networking, and would be useful even without taking a significant market share.
Bitcoin-based NFTs: NFTs are getting lots of creative people both excited and paid. Let them suckle at mama Bitcoin's sweet and bountiful bosem instead of Ethereum's shrivled, insecure, bitter, centralized tit. This can't be done on the Bitcoin L1, so should be pursued as an L2. The key here is figuring out how to avoid needing a new token.
Bitcoin-based smart contracts: Much like the NFT item above. Let the degens feast at the Bitcoin board, not at the Ethereum kiddy table. Must avoid needing a new token. The best path forward is to fork Liquid, add smart contract functionality to Elements, and run it as Bitcoin-pegged federation.
Self-hosted block game: There should be a Minecraft-like game that can be programmed and modded from within the game.

Coin IDs cryptocurrency

Good evening list,

This mail is inspired by Chia's coin IDs. Chia coin IDs consist of:

sha256(parent id, sha256(scriptpubkey), amount)

One consequence of this is that outputs in Chia have a dedicated textual ID. This seems beneficial, separate from any larger technical consequences, and made me wonder if we couldn't replicate that in Bitcoin.

Outputs, a.k.a. outpoints, are commonly represented as TXID:INDEX. For example, the first output of transaction c7dd35a4f81977feac0d235d0e77265cacd362bfc2f0246e384a80d3b0a53a9b is represented as c7dd35a4f81977feac0d235d0e77265cacd362bfc2f0246e384a80d3b0a53a9b:0.

I find this representation unsatisfying:

It places outpoints hierarchically beneath transactions, even though after a transaction is confirmed, the outpoint is relatively independent.
It can't be double-clicked to be easily copied.
It isn't popular or widely used. I tried using it in searches in a few block explorers[0], and none of them support it, even though they do support direct searches by transaction ID, block hash, and block height.

I propose a dedicated representation of outputs using Bech32m. Bech32m is especially legible, due to its human-readable part, and is compact, and easy to type and verify. Although having error correction doesn't seem absolutely necessary, it doesn't seem like a downside. The representation uses "coin" as the human-readable part, with the payload being the transaction ID, followed by the 4 byte index.

For example:

c7dd35a4f81977feac0d235d0e77265cacd362bfc2f0246e384a80d3b0a53a9b:A0

Becomes:

coin1clwntf8cr9mlatqdydwsuaextjkdxc4lctczgm3cf2qd8v9982dsqqqqqqqenjt7

Anacdotally, I find that many non-expert users I talk to think and talk about Bitcoin as if it were an account-based system, and tend to think in terms of transactions. I wonder if having coin IDs, in the form I propose or in some other form, would help remedy this, similar to how transaction ids, block hashes, and addresses help reify those concepts. The particulars of the representation are of secondary importance.

Best regards,
Casey Rodarmor

[0] blockstream.info, blockchain.com, mempool.space, blockcypher.com, and blockchair.com

Lightning Mints cryptocurrency · internet · computers · markets

Federated blind mints have attractive privacy, scaling, and security properties that are highly complementary to those of Bitcoin and the Lightning Network.

I originally became interested in blind mints while thinking about Lightning Network wallet usability issues. When Lightning works, it is fantastic, but keeping a node running and managing a wallet present a number of challenges, such as channel unavailability due to force closes, the unpredictability of the on-chain fee environment, the complexity of channel backup, and the involved and often subtle need to manage liquidity.

All of these problems are tractable for a skilled node operator, but may not be soluble in the context of self-hosted wallets operated by non-technical users, hereafter normies. If this is the case, then normies may have no choice but to use hosted Lightning wallets, compromising their privacy and exposing them to custodial risk.

Chaumian mints, also known as Chaumian banks, or blind mints, offer a compelling solution to these problems, particularly when operation is federated. Chaumian mints, through the use of blind signatures, have extremely appealing privacy properties. The mint operators do not know the number of users, their identities, account balances, or transaction histories. Additionally, mint transactions are cheap and can be performed at unlimited scale.

Mint implementations, typified by eCash, have hitherto been centralized, and thus, like all centralized, custodial services, expose users to custodial risk in the form of operator absquatulation and mismanagement. To fix this, mint operation can be federated, with all operations performed by a quorum of nodes controlled by different parties.

Despite these interesting properties, Chaumian mints have largely been forgotten. This post gives an excellent overview of the phenomenon. I believe that Chaumian mints are currently severely underrated in general, and in particular deserve consideration as a potential avenue for improving custodial Lightning Network wallets.

Compared to a naïve hosted Lightning Network wallet, a service operated as a federated Chaumian mint offers excellent privacy, usability, security, and scaling.

Privacy: Privacy leaks from a Lightning mint come in two forms, internal and external, when a mint operator or an outside actor, respectively, observes sensitive information.

Blind signatures protect against internal privacy leaks, making them a strict improvement in that respect over custodial Lightning wallets.

When compared to a single-user Lightning network wallet, Lightning mints also protect against external privacy leaks. If the activity of a single-user Lightning Network wallet can be observed, which is possible but non-trivial, all such activity is preemptively that of the owner of the wallet. However, similar to a standard custodial Lightning Network wallet, any observable Lightning Network activity of a Lightning mint is the aggregate activity of its users, who thus form an anonymity set. If the number of users, and thus the anonymity set size, is large, external privacy leaks are also prevented.

Usability: Compared to a self-managed Lightning Network wallet, and similar to a standard custodial Lightning Network wallet, Lightning mint wallets offer superior usability. A user need not be concerned with the details of node operation or channel management, and can deposit to and withdraw from their account with standard Lightning Network invoices.

Security: The security of a Lightning mint is weaker than that of a self-hosted wallet. A quorum of federation members can abscond with funds. However, compared to a standard custodial Lightning Network wallet, security is greatly improved. Additionally, federation members might be located in different jurisdictions, making the mint robust to regulatory interference. Furthermore, members might be entities with online reputations, such as anonymous Bitcoin Twitter users with an established history of productive shitposting, providing further assurances against mismanagement and fraud.

Scaling: Mint operations are extremely lightweight, similar to Lightning Network transactions, so scaling properties are similar to the Lightning Network itself. Additionally, users need not manage their own channels, so a well-capitalized federation can open channels efficiently, lowering the per-transaction channel management overhead.

Interoperability and market dynamics: Additionally, my hope is that such systems will be developed with a standardized protocol for communication between wallet interfaces and mint backends. This would allow users to use different backends with the same local wallet interface, encouraging competition in the market.

For more discussion of Chaumian mints and their applicability to Bitcoin, see fedimint.org. Elsirion, the author, is also at work on MiniMint, a federated Chaumian mint with Bitcoin and eventually Lightning Network support.

To close with a bit of speculation, I believe that Chaumian mints were never of particular interest or importance because they were limited to interoperating with the fiat currencies of the time. With the ascendance of Bitcoin, mints now have access to a powerful, decentralized, and uncensorable currency , made economical and fast by the Lightning Network.

I believe this layering of Chaumian mints on top of Bitcoin and the Lightning Network will, in the fullness of time, be demonstrated to be enormously powerful, and make Chaumian mints themselves worthy of renewed study and consideration.

Bitcoin cryptocurrency · politics

Bitcoin will greatly reduce the power of the state, which rests entirely on its capacity for violence. This capacity is maintained by paying and equipping people to commit violence on its behalf, and it acquires the resources to do so by printing money, collecting taxes, and issuing debt.