TBC Newsletter 3
TBC Newsletter Cover Image

The Bitcoin Company

Newsletter

 

Hellooo!

 

You’ve made it to the third edition of our newsletter!
We’re super happy to be here with you.

We’re jumping into your inbox every two weeks to help you understand Bitcoin - not only what Bitcoin is, but what it’s doing and what’s happening in the community around it. We’ll explain known concepts as well as new developments.

Let us know what you think!

By the Numbers

Glossary

Each issue we will define a new Bitcoin term.

(Full glossary of past terms coming soon on our new website!)

Coinbase Transaction

 

A Coinbase Transaction is a special transaction that is always the first transaction in every mined block. This transaction rewards the miner of the block with the block subsidy plus transaction fees from the other transactions included in the block (paid to the miner by the sender of the transaction).

 

Coinbase Transaction = [ Block Subsidy + Fees from transaction spends in the block ]

 

The block subsidy was 50 bitcoin for Bitcoin’s first 210,000 blocks, or first 4 years (since blocks are mined every 10 minutes, on average), meaning that 50 new bitcoin were added to the total supply every 10 minutes, or every block that was added. Then, the block subsidy got cut in half to only 25 bitcoin per block for the next 210,000 blocks… something called the halving.

 

Every 210,000 blocks, a halving occurs, and the block subsidy gets cut in half: 50→25→12.5→6.25→…→0. Today we are in the fourth epoch, where the block subsidy is only 6.25 BTC per mined block, and soon, that will decrease to 3.125 BTC after the next halving. Eventually, around the year 2140, the block subsidy will go to zero and the coinbase reward will only include transaction fees from the included transactions that a miner adds to a block.

 

The coinbase transaction does not need valid inputs (like a standard transaction does) because it is new bitcoin being minted. Often, this is where miners will include messages, like when Satoshi included “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks” in the genesis block.

“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”

 

~ Satoshi Nakomoto in the first line of the Bitcoin Whitepaper

Bitcoin Fundamentals

Each issue we will define a new Bitcoin term or highlight an element relevant to the ecosystem. If you want to explore more on your own we recommend checking out Clark Moody’s awesome dashboard.

Censorship Resistance

 

What does it mean? How does bitcoin achieve it? Is it necessary?

Censorship-resistance in Bitcoin means that when you propose a valid transaction with an acceptable fee, it will be processed — no ifs, ands, or buts — That’s it.

 

The transaction will go through, and the bitcoin will move to the destination address. There are no account closures or temporary holds. There are no transaction limits, withdrawal limits, clauses on how or where or two whom you can send your money. There is no asking for permission from gatekeepers… it’s your money, and you can spend it, send it, hold it, or even burn it as you please. You can do whatever the hell you want!

 

It seems so simple, but the ability to withstand an attack from any individual, company, state, or nation is no small feat. The censorship-resistance badge belongs to few systems (if any) outside of Bitcoin. All other systems in our everyday lives rely on some outside individual, company, or state.

 

The man at the toll booth; Twitter hosting your tweet; the state protecting your property; the company sending your emails, the bank imposing an ATM withdrawal limit, Venmo determining the ‘validity’ your transaction, Spotify deciding which songs and podcasts are acceptable are just a few examples.

 

Just last week our email provider, Klaviyo, banned The Bitcoin Company without notice:

TBC_ BIP infographic

Many of us have been fortunate enough to live a life where gatekeepers are only an annoyance. In the developed world, if one company tells us we can’t send emails and talk about Bitcoin, we have other options to land in your inbox. It is easy to imagine a situation bigger than email censorship where the option to transact with unstoppable money may be vital.

 

So, how does Bitcoin achieve this?

 

Bitcoin’s censorship-resistance relies on a free market of transaction fees.

A free fee market? ...

A free fee market.

 

In Bitcoin, special actors called miners compete to add new transactions to the ledger, and as long as the majority of miners are honest, transactions will continue to be processed without censorship. What is key here are the incentives which encourage miners to process transactions honestly.

 

Miners are incentivized with bitcoin to include new transactions in a found block, both in terms of:

 

  • newly minted tokens (which increase the total supply of bitcoin)
  • transaction fees (paid with existing bitcoin by the sender of the transaction)

 

Each time a block is found, a new batch of transactions is accepted by the network. This new block awards the miner that found the block by creating, or minting, a few new bitcoin through something called a coinbase transaction, plus some additional transaction fees (paid by the sender) associated with each individual transaction that the miner chose to include in the block. Miners are usually rational actors who seek to maximize revenue… meaning miners usually include transactions based on their fees. The higher the fee that a sender pays associated with their transaxction, the more likely it is to get picked up by a miner and

included in the next block.

 

The total supply of bitcoin is capped at 21,000,000 and it has a decreasing supply emissions schedule, meaning as time goes on, miners are rewarded less with newly minted bitcoin and more with transaction fees paid by the sender of the transaction.

 

In the future, around the year 2140, transaction fees will be the sole incentive for miners to act honestly, process valid transactions, and protect Bitcoin’s censorship-resistance property. As long as a transaction’s fee is competitive in the free market of fees, it will be included in a block and it will be added to the blockchain. A rational miner will not be able to resist the profitability of the transaction.

 

There is way more nuance to the nuts and bolts of mining and defense against the formation of oligopies in mining, but we’ll leave you here for now. If you don’t want to wait for us, you can read this awesome article from Alex Gladstein on the role Bitcoin plays in freedom, this article from Nic Carter on the settlement of transactions, or this one here from Jameson Lopp on the Key Properties of Bitcoin.

 

Highlight Story

Bitcoin and the Fight Against Tyranny

For the third edition of our newsletter, we’re discussing a topic impossible to ignore right now: Oppressive Governments.

 

This month has proved to be quite a whirlwind for countries around the world. Here's a look into several of the most important headlines right now and how they relate to Bitcoin:

 

We have all watched with heavy hearts the situation changing in Eastern Europe. It has gone from theoretical to real all too quickly. As Russia seeks territorial expansion through invasion of Ukraine, we turn to an earlier event: Russia hacking Ukrainian financial institutions.Through a denial of service attack, Russia was able to prevent Ukrainian citizens from accessing their bank accounts. With so much uncertainty in the region, this could be extremely destabilizing to citizens, but this is what is possible when trusting your savings with an outside source. Bitcoin gives you the option to store your wealth outside of someone else’s system. You can take possession of your own coins and keep them safe in your home or in your head (by memorizing 12 words). In the face of authoritarian regimes, this is vital. You must be able to transfer wealth at will in order to stand up to or to escape tyranny.

 

It isn’t always practical to remove the middle man from situations. In the case of donating to causes we care about around the globe, we have had to accept some sort of centralization to see the funds travel. There is trust in this set-up: we trust our money will make it to supporting the cause. We take for granted this is usually true in our western world, however in Canada last month, we saw the trust inherent in the system. For the people who wanted to monetarily support the truckers protesting in Ottawa, they believed in GoFundMe. As the campaign reached $10 million, funds were frozen and returned. Money did not make it along the intended path because of outside encroachment. In a peer-to-peer network, there is no need for an outsider to approve of your spending - it will simply work.

Even if you don’t support the truckers or , it is absolutely vital that Bitcoin work for everyone in order to elude tyrannical oversight. Today Bitcoin is helping to support protests and projects in Russia, China, Cuba, Afghanistan, Nigeria, Sudan, Ethiopia, and Across Africa. We may live in a system we can trust, but freedom fighters elsewhere do not. For these brave protestors to continue to stand up to their authoritarian regimes, their lives depend on monetary freedom. We cannot ask Bitcoin to disallow what we do not believe in and support what we do: decentralization works the same for everyone - not better for the people you like.

Another danger of trusting a third-party to receive and disburse donations is the information you give them. It is not just a matter of the money getting to where it is intended, but also trusting the service to keep your name private. GiveSendGo - another donation site utilized by Canadian Truckers - was hacked and the information of donors (names and emails) doxxed to the public. Privacy is of the utmost importance in two-sided situations like this. In Canada, there seems to have been threats without action, but a lot of the world lives outside liberal democracies where a lack of privacy could mean disappearance and death. Organizing in the face of authoritarian regimes is something we hope no one needs to face, but knowing they already do, it is up to us to defend their right to transact in a censorship resistant way. Bitcoin is vital in the fight against tyranny.

 

Content Highlights

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Join the Conversation

Tweet thread #1 of the week:

 

@BITCOINALLCAPS

"...Get your #Bitcoin off exchanges! 🔥" Marty Bent Orange Pills The Nation on The Beauty of #Bitcoin for...

8.56 PM · Feb 18, 2022

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Tweet thread #2 of the week:

 

@DylanLeClair_

What the hell is going on in financial markets?

A thread on stocks & bonds, volatility, and #bitcoin.

12:56 AM · Feb 23, 2022

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Technical reads

of the week:

 

1. LN Markets Newsletter

2.Kazakhstan imposes 5x greater taxes on Bitcoin miners

3.Cash App enables bitcoin Lightning Network payments to all users

...Reads Continued:

4. Canadian authorities freeze addresses tied to protestors after bitcoin donations were pledged in support of the so called “freedom convoy”

Third largest US oil producer Conocco Phillips is reducing natural gas emissions with Bitcoin Mining

5.Bitcoin hashrate is booming!