Aggregated Cryptocurrency Web News

Latest and Comprehensive Crypto News Updates: All You Need to Know from the Digital Currency World

In a Keynote address at MicroStrategy World: Bitcoin for Corporations, MicroStrategy Executive Chairman Michael Saylor delivered a masterclass on corporate finance and the power of bitcoin to supercharge corporate balance sheets. Saylor made a point to emphasize Bitcoin as the single solution for capital appreciation in an inflationary environment.

In his speech, Saylor likened the cost of capital to being the benchmark which a company must surpass to increase its purchasing power, arguing that “Bitcoin is the only asset that exceeds the cost of capital. Another way to say that, is everything else is dilutive.”

Further describing the true cost of capital, he noted that the “S&P is the modern surrogate for the cost of capital… If you had to pick one metric and say, what's the metric that gives you a sense of how rapidly the world currency supply is expanding in dollars? Probably the S&P 500… this is another way to see inflation.”

Saylor went on to emphasize his belief that all assets, except bitcoin, are not accretive to corporate balance sheets despite their general acceptance. In particular, he highlighted the relative underperformance of the silver, gold and US government bonds:

“[If companies] invested in T-bills, they're going to get 3% after tax against a 12% cost of capital per year. And so you hold $100 billion of capital, you destroy $9 billion of shareholder value a year… The story here is that the bonds don't hold value, right? They're awful capital assets. Silver doesn't work. Gold doesn't keep up with the cost of capital.”

There Is No Second-Best Crypto Asset

The MicroStrategy Executive Chairman noted key differences between Bitcoin and alternative cryptocurrencies like Ethereum, expressing the importance and necessity of proof-of-work-based consensus in creating a digital commodity.

“You could see the writing on the wall when the spot ETF of Bitcoin was approved in January. By the end of May, you'll know that Ethereum is not going to be approved. And when Ethereum is not going to be approved, sometime this summer it'll be very clear to everyone that Ethereum is deemed a crypto asset security, not a commodity. After that, you're going to see that [for] Ethereum, BNB, Solana, Ripple, Cardano – everything down the stack.”

On the point of Bitcoin’s energy use, Saylor invoked the idea of a “physical linkage to the real world” in Bitcon’s consensus. He described the network as having “raw digital power standing in the way of anybody that would try to undermine the integrity of the network… The network is feeding on electricity, and that creates a decentralizing dynamic that drives all of the network to the end of the grid in the quest of stranded energy.”

It’s Going Up, Forever

Saylor’s conviction and use of physics-based metaphors were present as ever as he spoke on Bitcoin’s price appreciation and continued monetization. “It's never declining. The chart's not ever decreasing. It only goes one way. Bitcoin is a capital ratchet. It's a one-way ratchet. Archimedes said, give me a lever long enough and a place to stand and I can move the world. Bitcoin is the place to stand.”

“There's no more powerful idea than the digital transformation of capital… No force on earth can stop an idea whose time has come. This is an idea. Its time has come. It's unstoppable. And so I'm going to end with the observation that Bitcoin is the best. The best what? The best.”

Watch the full MicroStrategy World: Bitcoin for Corporations Day 2 Livestream on the Bitcoin Magazine YouTube Channel

The last six months or so have seen several proposals for improvements to Bitcoin Script: CAT, 64-bit arithmetic, as well as some older ideas (CTV) and far-future ideas (Chialisp and Simplicity). This activity has largely overshadowed some revolutionary changes in our understanding of the existing Bitcoin Script, changes which form the basis of BitVM but which may also form the basis of other, equally-exciting improvements.

This article tries to summarize and organize research into Script by other people. I make no claim to originality or authorship of anything described here.

Bitcoin Script

As many readers are aware, Bitcoin Script is a simple programming language embedded in the Bitcoin blockchain, which is used to control under what conditions coins may move. By far the most common use of Script is to simply check a signature with a single signature verification key. Though Bitcoin addresses have changed throughout the years, every form of address has supported this use of script in a first-class way: signing keys can be encoded directly into Bitcoin addresses, and wallets know how to expand these keys into full programs that check signatures on those keys.

Script can do many more things: it can check hash preimages, check relative and absolute timelocks, and it can do some simple reasoning to combine these checks in various ways. This is the premise behind Miniscript: we can generalize the notion of expanding a key into a Script to the notion of expanding an arbitrarily-large set of signing conditions into a Script.

Script can technically do even more than this: it can add and subtract 32-bit numbers, it can hash data and check the hash values for equality, and it can rearrange and manipulate a "stack" of values in various interesting ways. However, Script has many limitations: it lacks opcodes to do simple arithmetic such as multiplication, it is (nearly) incapable of reasoning about objects larger than 32 bits, and it has (nearly) no ability to introspect transaction data. The latter limitation is why covenant support appears to require a softfork, and the former limitations are why Script, until recently, was never used to compute any "interesting" functions.

For example, to multiply two 16-bit numbers in Script, using only the addition and subtraction opcodes that Script provides, you need to break them into bits (by requiring the bits be provided as witness data, then doubling and adding them to reconstruct the original number) and then implementing multiplication in terms of additions of these bits. The resulting code would involve several dozen opcodes for a single multiplication.

Prior to Taproot, Script had an artificial limit of 201 opcodes per program, and with individual multiplications taking more than a quarter of this budget, it was impossible to do much of anything. After Taproot, the 201-opcode limit was removed, but every opcode still takes up a witness byte, meaning that multi-kilobyte programs would be prohibitively expensive for ordinary wallets to put on the blockchain.

And without transaction introspection, it isn't even clear what large computations would be good for.

After all, if you can do arbitrary computations on arbitrary values, but those values aren't tied to transaction data on the blockchain, how can those computations add useful semantics to Bitcoin?

Lamport Signatures

Lamport signatures were invented in 1979 by Leslie Lamport -- though they are insecure without modern cryptographic hash functions, which did not exist until the 1990s -- and are one of the few cryptographic objects from that era which endure to this day. Their lasting popularity comes from their simplicity and the fact that their security against quantum computers depends only on sufficiently-random-looking hash functions, unlike more modern and efficient proposals for quantum-secure signature schemes.

However, Lamport signatures come with two large drawbacks: (1) they are horribly inefficient, taking multiple kilobytes of data for both keys and signatures, and (2) they are single-use. This means that if a user signs more than one message, it becomes possible for a 3rd party to forge more messages, making all signatures effectively worthless. This can be mitigated, for example by having your “public key” be a Merkle tree of millions of single-use keys, but this stretches the bounds of practicality..

These limitations have made Lamport signatures popular as a "backup signature scheme" for Bitcoin in case of a quantum computing breakthrough, but have prevented their use as primary signatures in any widely deployed system.

The way they work is simple: assume that the message to be signed is 256 bits wide. This can be assured by first running an arbitrary-length message through the SHA256 hash function. The user's public key consists of 256 pairs of hashes – 512 in total. To sign a message, they reveal a preimage for one hash in each pair, choosing the preimage to reveal based on a bit of the message.

A signature verifier re-hashes the message and preimages to ensure they are all consistent.

In 2021, Jeremy Rubin posted a blog post claiming that Bitcoin Script can directly verify Lamport signatures on 33-bit values. His mechanism was very clever. Bitcoin Script does not have an opcode to read individual bits from a number, nor can it do the bitwise operations needed to construct a number from bits. But Script does have an opcode to add two numbers, and by adding different numbers where each has only a single bit set, it is possible to bitwise-construct or bitwise-deconstruct a number.

Using this insight, Rubin checks a Lamport signature, encoded as a series of hash preimages, as follows:

1. For each preimage, compute its hash and compare it against a pair of target values (comprising the public key) embedded in the Script.
2. If the hash matches the first member of the pair, this is a 0-bit; the script does nothing in this case.
3. If it matches the second member, this is a 1-bit. In this case, add a particular power of 2 to an accumulator.
4. (If it matches neither member, the signature is invalid and the script should abort.)

The final value of the accumulator will then equal the signed number, constructed by adding powers of two corresponding to each 1 bit in its binary expansion.

Already this is interesting: it means that for certain kinds of "oracle signature" applications, you can directly check signatures in Bitcoin Script, assuming you have an oracle that is willing to produce one-time Lamport signatures on specific events and that you know a Lamport public key in advance for each event. For example, a specific sports match outcome can be encoded as a single bit. The particular score can be encoded using a few bits. A particular timestamp can (probably) be encoded in 33 bits. And so on. And of course, by checking multiple Lamport signatures, you can effectively get signatures on as many bits as you want.

Without the ability to sign large messages, you can't get a signature on transaction data and therefore can’t get covenants. (Or can we?)

BitVM and Equivocation

This blog post by Jeremy Rubin was largely considered to be a curiosity at the time and was lost among larger discussions around his OP_CTV proposal and covenants. In December of 2023, it was indirectly cited in the OP_CAT BIP by Ethan Heilman and Armin Sabouri, which gave it a fresh audience among people who were thinking differently about Bitcoin Script.

People were thinking differently because in October 2023, just two months prior, Robin Linus had announced on the mailing list his project BitVM—an ambitious project to do arbitrary computations in Bitcoin Script by splitting programs across multiple transactions. The individual transactions each do a single simple operation, with outputs from one operation hooked to inputs of another via a hash-preimage-revealing construction that looks suspiciously similar to a Lamport signature.

The trick here is that if a user Lamport-signs multiple messages with the same key, the result will be two hashes in the same hash-pair whose preimages are both known. This is easy to check for in Script, which can be used to construct a "slashing transaction" that will take coins from a user if they do this. Such a slashing transaction would then become valid exactly in the case that a user publicly signed two messages with the same key. Slashing transactions are used within multi-transaction protocols to punish users who misbehave, typically by forfeiting a bond that they must post ahead of time.

So these Lamport signatures, rather than merely losing security when they are used more than once, can be configured to actively punish a user who signs multiple times. This has obvious applications for an oracle signature where a signer is supposed to attest to exactly one outcome of a real-life event; we want to disincentivize such a signer from claiming that e.g. both teams won a particular sports match. But this is an even more powerful idea than it seems.

In the cryptographic literature, when a party reveals two values for something that is supposed to be unique, this is called equivocation. We can think of a slashing transaction as an anti-equivocation measure, because it punishes any signer who produces signatures on the same key with the same message.

Then our Lamport signature with anti-equivocation construction has the effect of mapping public keys to specific and immutable values. In other words, we have a global key-value store accessible from Script, with the curious property that each entry in the global store can be set by a specific person (the person who knows the preimages for that key), but can only be set once for all time. This key-value store is also accessible from any Bitcoin transaction (or a transaction on any blockchain, really) regardless of its connection to other transactions.

This key-value store has on the order of 2^256 entries, most of which are not accessible since nobody knows the preimages to their keys, so while it is a "global key-value store" shared by every possible program using this Lamport signature construction, it cannot fill up and there is no risk that data from one program might accidentally clobber data from another, or that a value which should be set by one user might be set by another. Nor is the key-value store actually stored anywhere in its entirety.

BitVM and its variants use this fact to tie the output of one operation to the input of the next: a given program can be split into a long series of basic operations, for example opcodes in the RISC-V instruction set, and each of these basic operations can be implemented by a self-contained Script program which looks up the operation's inputs and outputs in the key-value store, checks that they are related correctly, and somehow punishes the user if not.

The complete BitVM system is much more complicated than this: for each program, it carves out an addressable memory space from the key-value store; each operation needs to look up its inputs and outputs from this memory space; each operation needs to track a program counter and other state beyond its inputs and outputs; and the whole thing is tied together with interactive protocols and trees of unconfirmed transactions to ensure than slashing penalties are correctly enforced and that even a single incorrect step in a multi-billion-step program can be zeroed-in-on and punished. But this article is not about BitVM and we will not explore this.

Interlude: Small Script and Big Script

We take a moment to remind the reader that Script can only do non-trivial computations on values that are 32 bits wide or smaller. Such values are "scriptnums" and Script has many opcodes to manipulate them by interpreting them as signed integers or boolean values, sometimes as both.

Using BitVM or a similar mechanism to split Script programs across multiple transactions, you can do arbitrary computations in Small Script, from ZKP verification to proof-of-work checking to number factoring.

Values that are larger than 32 bits can only be manipulated by a small set of narrow-purpose opcodes: they can be hashed, interpreted as public keys or signatures to check a transaction signature, their size in bytes can be computed, and they can be moved around the stack as opaque blobs. The only "real" general-purpose computation that can be done on them is a check for equality, which by itself provides very little value.

We describe the world of 32-bit values as "Small Script", which is computationally expressive but cannot access transaction data in any way. The world of larger values we call "Big Script", and can access transaction data through the CHECKSIG opcode. It is also possible to check hash preimages in Big Script, and this is essential to implementing Lamport signatures, but that's pretty much the only thing you can do in Big Script.

It is impossible to usefully bridge the two worlds: you can hash a Small value to get a Big value, but you cannot then learn anything about the Big value that you didn't already know. And you can use the SIZE opcode to learn the size of a Big value, but if this value represents a hash, public key or signature, then its size is fixed so you learn nothing new. (Although prior to Taproot, signatures had a variable size, and it is possible that you can extract transaction information from a suitably constrained CHECKSIG-passing transaction.)

All this to remind the reader that, while this new Script functionality is exciting, it provides a lot of computation expressivity without the ability to inspect transaction data, and therefore cannot be used for vaults or other covenant applications.

The CAT opcode provides a mechanism to bridge the two Scripts, which is why CAT is sufficient to provide covenants. This is also why there are so many ways in which Script "almost" supports covenants, or in which non-covenant-related proposals like CAT turn out to enable covenants: pretty much any opcode that takes Small values and outputs Big ones, or vice-versa, can be used to feed Big Script transaction data into a Small Script general program. Even a sufficiently bad break of the SHA1 opcode could probably be used as a bridge, because then you could do "computations" on Big values by interpreting them as SHA1 hashes and finding Small preimages for them.

Interlude: Wormholes

Actually, there is a way that you can get covenants in Small Script, assuming you have enough computational power. By going "outside" of Script, users can validate the Bitcoin blockchain itself, as well as the transaction that contains the Script (it needs to avoid directly encoding its own data to avoid being infinitely-sized, but this can be done by indirect means; see the next section for more details), and then impose additional constraints on the transaction by imposing those constraints on this internally-validated "view" of itself.

This idea could allow the creation of some limited covenant functionality, but it is important to remember that correct access to the key-value store, which is necessary in order to split large computations, is not directly enforced. Instead, some additional mechanism needs to be imposed to enforce slashing penalties on incorrect access. This greatly complicates the implementation of vault-like covenants whose functionality depends on certain spending patterns actually being impossible, not just disincentivized.

Tic-Tac-Toe

Thus far we have talked about the anti-equivocation feature of Lamport signatures, and how this can be used to effect a "global key-value store" in Bitcoin Script, which in turn can be used to pass data between Script programs and to split large computations into many independent parts. But there is another interesting and perhaps surprising aspect of Lamport signatures, which is that they allow committing to a unique value in a script without that value affecting the TXID of its transaction.

This has two consequences: one is that we can commit data in a transaction without affecting its TXID, meaning that we can potentially change parameters within a Script program without invalidating chains of unconfirmed transactions. The other is that we can commit data without affecting the signature hash, meaning that users can "pre-sign" a transaction without first knowing all of its data.

(By the way, these properties apply to any signature scheme, provided there is a check to punish the signing of multiple values. What is interesting about Lamport signatures is that we can use them in Bitcoin today.)

The ability to put data into a Script program without affecting the TXID of the contained transaction opens the door to constructions in which a program is able to refer to its own code (for example, by injecting the TXID itself into the program, which is a hash of all transaction data including the program). This is called Quining, and can be used to enable delegation and to create recursive covenants. This ability is the motivation behind the disconnect combinator in Simplicity. However, since we can only validate Lamport signatures in Small Script, which excludes objects as large as txids, it appears that there is currently nothing we can do in that direction. However, nothing is stopping us from emulating non-recursive covenants with similar tricks.

Let's describe an example due to supertestnet on Github.

Consider the game tic-tac-toe, played between two people who take turns marking a three-by-three grid. The rules are simple: no player may mark an already-marked square, and if either player marks three squares in a row (horizontally, vertically, or diagonally) then they win. Imagine that these players want to play this game on-chain, representing each turn by a transaction.

Of course, in parallel to these transactions, they would have a single “happy path” transaction where both parties would just sign coins over to the winner so that if they agreed on the events of the game, they wouldn’t actually need to publish the individual turns! But it’s important to also construct the full game transcript so that in the case of disputes, the blockchain can mediate.

One approach they might take is to model the game as a series of pre-signed transactions, which each require a signature from both players. The first player has nine possible moves. So the second player would sign all nine, and the first player would sign whichever one they wanted to take. Then for each of the nine possible moves, the second player has eight moves; so the first player signs all eight, and the second player picks one to sign, and so on.

It turns out that this doesn’t quite work – because either player might refuse to sign a particular move, there is no way to assign blame in the case that the game stalls out, and therefore no incentive for the losing player to complete the game. To prevent this situation, each player must sign all of his counterparty’s moves before the game starts. Then a player can only refuse to sign his own moves, and this can be easily disincentivized by adding timelocked forfeit conditions to the transactions.

As an alternative to having each player sign the other players’ moves, a trusted third party could be enlisted to pre-sign each move. But the result is the same: every possible series of transactions must be signed. For the tic-tac-toe game, there are 255168 paths for a total of 549945 pre-signed transactions. This is pushing the bounds of practicality, and it’s clear that such a strategy will not generalize to nontrivial games. For chess, for example, these values are bounded below by the Shannon number, which is 10^120.

The reason that we have such a large blow-up is that we are distinguishing between moves by distinct transactions which each must be set up before the game has started.

However, using Lamport signatures, we can do much better:

• Each game of tic-tac-toe has (at most) nine moves,
• Each of which is a transition between two board states, that are small enough to be Lamport-signed,
• And each transition must obey rules which are simple enough to reasonably encode within Script.

We can therefore approach the game differently: each player generates a Lamport public key with which to sign the game state after each of their moves (so the first player generates 5 keys, the second player 4). They then generate a series of 9 transactions whose output taptrees have three branches:

1. A “ordinary move” branch, consisting of

• An ordinary signature from both players;
• A Lamport signature on the previous game state from the appropriate player,

• A Lamport signature on the next game state from the other player,
• And a check, implemented in Script, that the two-game states are correctly related (they differ by exactly one legal move by the correct player).

2. A “win condition”, consisting of

• An ordinary signature from both players;
• A Lamport signature on the previous ga)me state from the appropriate player,
• A check, implemented in Script, that this player has won the game.

3. A “timeout” condition, consisting of

• An ordinary signature from both players;
• A relative timelock that has expired.

The final transaction, in place of an “ordinary move” branch, has a “draw” branch, since if all moves have completed without a win, there is no winner and presumably any coins at stake should go back to their original owners.

As before, each player pre-signs all transactions, of which there are 27, including “win condition” transactions (which send all the coins to the winning player), “timeout condition” transactions (which send all the coins to the player who didn’t time out) and “draw condition”.

And by the way, while the rules of Chess are a fair bit more complicated, and the board state may require multiple 32-bit values to represent, and there may be more than 9 moves, it is still feasible to carry out exactly the same construction.

Transaction Trees

In the previous example, we took great advantage of the fact that the rules of tic-tac-toe can be embedded in Script itself, meaning that a user cannot usefully sign an invalid game state. (If they sign an invalid move, the transaction representing the move will be invalid, and the transactions representing all future moves will also be invalid because they depend on it. So all the attacker will have accomplished is leaking part of his Lamport signing key, allowing the other player to potentially forge moves on his behalf.

We also took advantage of the fact that our complete protocol was not very long: at most 9 moves. This means that if one player refuses to complete the game, or completes the game but will not acknowledge the result, it is reasonable to publish the entire game transcript on-chain as a recourse. For many games this is sufficient.

It is out of scope of this blog post, but there are many tricks we can play with this model: checking single-party computations as a “game” between a prover and verifier, outsourcing one or both roles, combining multiple steps into single transactions with large taptrees, replacing the linear transcript with a binary search for invalid steps, and so on. These tricks form the basis for BitVM, BitVM 2, BitVMX, and so forth.

Using such tricks, we can reduce the cost of existing protocols that depend on trees of unsigned transactions. A classic 2017 Bitcoin paper by Bentov and Miller argues that stateful protocols in the UTXO model always suffer an exponential blowup relative to analogous protocols in the account model, e.g. on Ethereum. Using Lamport signatures as a global key-value store, we can partially refute this paper. But we are out of space and will need to explore this in our next post!

Acknowledgments

I would like to thank Robin Linus and Ethan Heilman for reviewing an early draft of this post.

This is a guest post by Andrew Poelstra. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Microstrategy’s annual Bitcoin for Corporations conference has kicked off its second day, featuring conversations with leading finance, regulatory and fintech professionals on the future of corporate Bitcoin adoption.

Discussions will center around the financial implications of the recently approved Spot Bitcoin ETFs in the United States, the changing regulatory landscape for Bitcoin, as well as catalysts for other firms to follow MicroStrategy in pursuing their own Bitcoin strategy.

MicroStrategy World: Bitcoin for Corporations is available for live viewing via the Bitcoin Magazine livestream on X (Twitter), YouTube, LinkedIn and Facebook.

Day 2 Agenda Highlights

Bitcoin and Wall Street – 10:00am PDT

Bitcoin has arrived on Wall Street – but how does this affect portfolio allocation, risk analysis, and investment criteria? Hear first-hand how institutions interpret Bitcoin and the role it will play in financial markets, and how traditional finance organizations are adjusting.

Speakers:

• Phong Le (Moderator), President & Chief Executive Officer, MicroStrategy
• Matt Horne, Head of Business Development, Fidelity Digital Asset Management
• Hunter Horsley, CEO & Co-Founder, Bitwise Asset Management
• Puneet Singhvi, Head of Digital Assets, Citibank

Regulatory Roundtable: Shaping Digital Assets — 2:00pm PDT

Regulatory and legal frameworks are essential for any emerging asset class. The digital asset landscape is constantly evolving from regulatory, legal, and accounting standards. Stay at the top of emerging legislation, and acceptance from governments and regulatory authorities.

Speakers:

• Ming Shao (Moderator), Senior Executive Vice President & General Counsel, MicroStrategy
• Dax Hanse, Partner, Fintech, Perkins Coie
• Neel Maitra, Partner, Fintech, Dechert
• Amy Park, Partner, US Audit & Assurance Blockchain & Digital, Deloitte

MicroStrategy Playbook for Corporates – 3:00pm PDT

MicroStrategy is the first public company to adopt bitcoin as its primary treasury reserve asset. Hear from MicroStrategy's senior leadership on the opportunities, considerations, and catalysts for other corporates to follow MicroStrategy's open sourced playbook.

Speakers:

• Michael J Saylor, Executive Chairman, MicroStrategy
• Andrew Kang, Senior Executive Vice President and Chief Financial Officer, MicroStrategy
• Phong Le, President & Chief Executive Officer, MicroStrategy

View the full Bitcoin for Corporations Day 2 Agenda at https://www.microstrategy.com/world-2024/bitcoin-for-corporations

Bitcoin for Corporations Day 1 Highlights

Bitcoin for Corporations Day 1 made headlines when MicroStrategy announced its new enterprise platform for building decentralized identity applications on the Bitcoin blockchain.

MicroStrategy EVP of Engineer Cezary Raczko explained: "Custodial or non-custodial, the obvious thing is every Bitcoin wallet out there should incorporate the capability of creating a Bitcoin-based digital identity. Many messaging platforms suffer from the same challenges that email does. When you get a text message, how do you know the person who sent you the text message… We would want to include an orange check for these different messaging platforms." 

JUST IN: MicroStrategy launches an enterprise platform for building decentralized identity applications on #Bitcoin — MicroStrategy Orange 👀 pic.twitter.com/P5PXz80kSD

— Bitcoin Magazine (@BitcoinMagazine) May 1, 2024

Day 1 also featured “Building on Bitcoin”, a conversation between Michael Saylor and Lightspark CEO David Marcus as the pair discussed the advent of the Bitcoin Lightning Network to enable near-instant final settlement of bitcoin and other assets between counterparties. Marcus also made note of his view that Bitcoin is the only logical monetary medium for artificially intelligent agents.

JUST IN: Former PayPal President David Marcus says #Bitcoin is “going to be the native currency of AI” 👀 pic.twitter.com/kWfGwWTNlw

— Bitcoin Magazine (@BitcoinMagazine) May 2, 2024

Follow Bitcoin Magazine on X (Twitter) for breaking news, announcements and commentary on MicroStrategy World: Bitcoin for Corporations.

Visit https://www.microstrategy.com/world-2024/bitcoin-for-corporations for more information.

UPDATE: Additional blockchain analysis indicates this purchase was the result of a for-profit "sat hunting operation" that was programmatically buying and withdrawing Bitcoin from Binance. The article has been revised accordingly.

One of just four rare "Epic Sats," as defined the Ordinals protocol, was discovered and withdrawn from the Bitcoin and crypto exchange Binance today.

These special satoshis, which do not exist natively on Bitcoin, but can be identified by a companion piece of software, are considered some of the most scarce and significant in Bitcoin's history. While Bitcoin has a hard limit of 2.1 quadrillion satoshis, or 21 million BTC, the protocol does not track them individually. 

This sequencing is only identified in the Ordinals protocol, a top-level meta-protocol built on Bitcoin.

BREAKING: The first satoshi of #Bitcoin’s second halving block was just found by a Binance user.

A $10 transaction worth 33 $BTC. Jackpot 🙌 pic.twitter.com/rLE16ogNsc

— Bitcoin Magazine (@BitcoinMagazine) May 2, 2024

The term "Epic Sat" refers to the first satoshi of each Bitcoin halving era, which occurs about every four years. Recently, the first Epic Sat from the 2024 halving sold for over $2 million at auction, sparking intrigue around these rare units.

In this case, the Binance user withdrew a transaction containing the Epic Sat from the 420,000th Bitcoin block in 2016. Binance failed to identify and retain the UTXO that contained the valuable satoshi for itself, representing a potential multi-million dollar oversight.

While initially believed to be a single exchange user, analysis by Mononaut on X reveals the acquirer was likely a sophisticated operation that was exploring Binance's inventory for UTXOs that may link to rare sats on Ordinals.

Blockchain analysis shows this UTXO, categorized by Ordinals as containing sat number "1575000000000000," moved to the user's wallet after they bought and transferred bitcoin. 

Its rarity compares to winning the lottery, as only four such "Epic Sats" exist until now. (In total, 34 will be released over subsequent halvings). 

The wallet address that now contains the UTXO that points to the coveted satoshi is bc1ptjcsnnycr52ccwg4mvvsczkwzvc0qydlxw6q7pcelxkx8equk3asduuz86. 

Market observers will now doubtless wait to see whether the holder keeps the Epic Sat for themselves or sells it off, potentially for millions.

Sleuths can verify the transaction by referencing Ordinals indexing tools like Ord.io and Ordinals.com. These identify the satoshi's number and position in the chain, allowing its location to be traced via an explorer-like Mempool.space.

While controversial, these Epic Sats create profound digital scarcity akin to rare collectables. The Binance user's good fortune may ignite further interest and intensify the search for the remaining two Epic Sats from 2012 and 2020.

Asset management giant BlackRock says it is seeing growing interest in Bitcoin ETFs from institutional players like sovereign wealth funds and pension funds. 

This comes after a hugely successful debut for BlackRock's Bitcoin ETF, iShares IBIT, which was approved by the Securities and Exchange Commission earlier this year.

BREAKING: Blackrock says “Sovereign wealth funds, pension funds and endowments” are coming to #Bitcoin

Institutions are coming big time 🚀 pic.twitter.com/GLcpMJYkYz

— Bitcoin Magazine (@BitcoinMagazine) May 2, 2024

The U.S. spot Bitcoin ETF market has exploded in 2024, crossing $200 billion in volume since launch. Recent 13F filings have shown major institutional buyers making small allocations to these newly regulated Bitcoin products.

Now, despite a recent cooldown and outflows from Bitcoin ETFs amidst market volatility, BlackRock remains bullish on institutional demand long-term. The firm's head of digital assets, Robert Mitchnick, said in an interview he expects sovereign wealth funds, pensions, and endowments to start trading spot Bitcoin ETFs in the coming months.

Mitchnick stated that BlackRock has been in educational conversations with these institutions about Bitcoin for years. The asset manager is unfazed even after iShares IBIT saw its first-ever outflows this week following 71 straight days of inflows.

Mitchnick believes the current lull will be followed by a new wave of buying from deep-pocketed institutional players. As more giants like BlackRock build multi-billion dollar Bitcoin reserves, it validates Bitcoin as an investable asset class.

The ETF conversations also come as BlackRock CEO Larry Fink has softened his once critical stance on Bitcoin.

With iShares IBIT quickly accumulating over $17 billion in Bitcoin, BlackRock has proven the massive latent demand for regulated Bitcoin investment vehicles.

Despite short-term ETF outflows amid volatility, its long-term outlook remains highly optimistic.

As Mitchnick stated, "Many of these interested firms – whether we're talking about pensions, endowments, sovereign wealth funds, insurers, other asset managers, family offices – are having ongoing diligence and research conversations, and we're playing a role from an education perspective."

All in all, such educated, pragmatic institutional interest bodes well for the continued growth of the Bitcoin ETF market.

BNP Paribas, the second largest European bank, has purchased exposure to Bitcoin via a spot ETF, per recent 13F filings with the SEC . 

The filings show BNP Paribas bought BlackRock's iShares Bitcoin Trust ETF (IBIT).

JUST IN: 🇫🇷 Second largest European bank, BNP Paribas reports exposure to #Bitcoin ETF in 13F filings.

It's just getting started 🚀 pic.twitter.com/4zi1EkAc07

— Bitcoin Magazine (@BitcoinMagazine) May 2, 2024

U.S. spot Bitcoin ETFs have seen immense success since launching earlier this year, crossing $200 billion in cumulative volume. 

Under regulations, large institutional investors managing over $100 million must disclose their quarterly holdings via 13F filings. After their highly anticipated debut, Bitcoin investors have been awaiting these filings to see which institutions are allocating to Bitcoin ETFs. 

Previous 2024 Q1 filings revealed purchases by asset managers, family offices, and banks like Park Avenue Securities, Inscription Capital, Wedbush Private Capital, and American National Bank.

Now, BNP Paribas, Europe's second-largest bank with over $600 billion in assets under management, has joined in. While BNP's roughly $40,000 investment in IBIT is relatively small, it's significant for one of the largest banks in Europe to start gaining Bitcoin exposure via an ETF.

According to analysts, more 13F filings before the May 15 deadline could uncover substantially more institutional participation in spot Bitcoin ETFs. The filings so far indicate a growing acceptance of Bitcoin among traditional finance players.

If more major banks and asset managers disclose Bitcoin allocations, it would further validate Bitcoin as an investable asset class. 

Adoption by old-guard institutions could spur wider mainstream acceptance and additional inflows into regulated Bitcoin investment vehicles. While Bitcoin ETF purchases remain a small fraction of portfolios so far, the fact that traditional giants like BNP Paribas are participating is telling. 

Korok Ray, Bitcoin researcher and Associate Professor at the Mays Business School at Texas A&M University, announced plans to launch The Bitcoin Research Institute to drive academic research at the intersection of Bitcoin and artificial intelligence.

At the MicroStrategy World: Bitcoin for Corporations 2024 event, Ray made note of Bitcoin’s potential to enable secure multi-party computation (MPC), offering the example of poker players agreeing on the state of a particular game as a basic form of computation.

He expanded this example to include deep neural networks and agent-based reinforcement learning, whereby artificially intelligent agents could collectively perform computations in the context of the Bitcoin blockchain. Ray’s vision made note of new developments in the Bitcoin ecosystem such as BITVM, which allows off-chain Turing complete computation, as in the case of MPC, to be verified on Bitcoin.

For more on BitVM read: "The Big Deal With BitVM: Arbitrary Computation Now Possible on Bitcoin WIthout a Fork" by Shinobi, Bitcoin Magazine Technical Editor

Ray went on to propose his thesis, describing Bitcoin and AI combined as "The Undiscovered Country":

"The ultimate use case of Bitcoin in say one-hundred, two-hundred or five-hundred years, will not be humans, but machines...  as we are at [this] wave of massive technological progress, I believe the biggest opportunity will be deep integration between machines and the entire Bitcoin network at different levels."

“The Bitcoin Research Institute is really to connect these two areas of research and development and bring Bitcoin together with a lot of the major advances in AI,” Ray explained. “There is an army of researchers and faculty out there, and we need [to bring] the best minds onto Bitcoin to make this a reality.”

For additional areas of research, Ray noted the potential rise of Chaumin mints as a means of scaling bitcoin payments, as well as the need for secure prediction markets enabled by Bitcoin, an innovation that may lead to more efficient insurance and financial products.

Ray’s speech also acknowledged the legacy of academic achievements in computer science that have led to both the creation of Bitcoin and artificial intelligence, suggesting that the two will build upon this success in research to drive innovation across all sectors of the economy.

Watch Korok Ray’s speech on the MicroStrategy World: Bitcoin for Corporations Livestream hosted on the Bitcoin Magazine YouTube, Twitter and LinkedIn.

MicroStrategy revealed its latest innovation today, a decentralized identity (ID) platform built on the Bitcoin network, named MicroStrategy Orange, at the MicroStrategy World: Bitcoin for Corporations 2024 event.

JUST IN: MicroStrategy launches an enterprise platform for building decentralized identity applications on #Bitcoin — MicroStrategy Orange 👀 pic.twitter.com/P5PXz80kSD

— Bitcoin Magazine (@BitcoinMagazine) May 1, 2024

"Today, I'd like to introduce MicroStrategy Orange, which is an an enterprise platform for building decentralized identity applications on the Bitcoin blockchain," said Cezary Raczko, Executive Vice President at MicroStrategy. "The platform consists of three fundamental pieces. At the heart of it is a service cloud hosted that allows you to issue those identifiers to your users and your organization."

The unveiling of MicroStrategy Orange marks a new milestone in the integration of Bitcoin into enterprise solutions. This platform is designed to empower organizations to use and manage decentralized identity applications utilizing the Bitcoin blockchain, leveraging its robust security and immutability features.

Raczko further explained that this new innovation allows you to deploy prepackaged applications that runs on the MicroStrategy Orange platform. "The orange apps are what's going to be prepackaged, point solutions that address specific digital identify challenges," he said.

"We see a huge opportunity and this is just the beginning," the MicroStrategy EVP of Engineering said. "Custodial or non-custodial, the obvious thing is every Bitcoin wallet out there should incorporate the capability of creating a Bitcoin based digital identity. Many messaging platforms suffer from the same challenges that email does. When you get a text message, how do you know the person who sent you the text message...We would want to include an orange check for these different messaging platforms." 

"And the other opportunity we see and we want to pursue is integrating the digital identity based on Bitcoin with this bigger verifiable credential ecosystem which opens up another large number of very interesting use cases," Raczko concluded. "Where I can now credential my identity anchored to Bitcoin — with a university degree, with a course certification issued by a hyperscaler, with your medical record and present those and have those verified all in a decentralized way. But with the ultimate identity living and being anchored to the Bitcoin blockchain."

Earlier this year in February, MicroStrategy announced itself as "the world's first Bitcoin development company" during a presentation. Since then, MicroStrategy Orange has been the first technological innovation involving Bitcoin that the business intelligence and software company has announced.

The full announcement of MicroStrategy Orange can be viewed here.

Company Name: DEMAND

Founders: Alejandro De La Torre and Filippo Merli

Date Founded: 2023

Location of Headquarters: Lisbon, Portugal and Florence, Italy

Amount of Bitcoin in Treasury: “Currently being bootstrapped”

Number of Employees: 2

Website: https://www.dmnd.work/

Public or Private? Private

Alejandro De La Torre is deeply concerned that Bitcoin mining is too centralized, and he’s on a mission to change that. This is why he started DEMAND, a Bitcoin mining pool that puts power back in the hands of independent Bitcoin miners.

Before getting into how DEMAND works, though, it’s important to understand what De La Torre has learned from his time in the Bitcoin mining industry so as to better understand his motivation in starting DEMAND.

De La Torre’s History In The Bitcoin Mining Space

De La Torre has served as the VP of Poolin, one of the largest Bitcoin and crypto mining pools in the world, as well as the VP of Business Operations for BTC.com, which also operated its own Bitcoin mining pool. What he saw during his time in these two roles made him realize that there was little time to waste in decentralizing the Bitcoin mining landscape.

“The experience I had in the last pools made me realize that we needed a change in the mining pool industry and we needed it very, very quickly,” De La Torre told Bitcoin Magazine. “There's a very clear problem with centralization in mining pools today, and I was able to pinpoint that issue while working at BTC.com and Poolin.”

De La Torre went on to describe how many Bitcoin mining pools are now proxies for a larger pool, which he didn’t mention by name (it’s Antpool), and explained that such centralization has the power to seriously damage Bitcoin.

“The anchor pool is close to 50% of the network now. It allows for a 51% attack on the network, which would be catastrophic,” said De La Torre.

“I don’t think they would ever do it, but the possibility is there, which is already a huge red flag,” he added.

De La Torre also pointed out that such levels of centralization pose risks when it comes to network censorship, highlighting that it wouldn’t be difficult for this major pool to censor half of the transactions on the Bitcoin network.

The potential for censorship and a 51% attack “are a very clear and present danger that we have in Bitcoin right now,” according to De La Torre.

Power To The Solo Miners

In reaction to this, De La Torre and his business partner, Filippo Merli, launched DEMAND Pool in November 2023 with the intention of putting the power back in the hands of solo miners.

DEMAND is the world’s first Stratum V2 mining pool. Stratum V2 is an open-source messaging protocol that enables miners and pools to communicate directly with each other, reducing mining infrastructure requirements compared to its previous iteration, and enabling solo miners to choose their own mining templates.

“Pools today are the ones who are in charge of building the blocks and adding the transactions into the blocks,” said De La Torre. “With Stratum V2 — with DEMAND — the miners themselves will be able to build the blocks and add the transactions that they want.”

Most filtering in mining pools today is done at the pool level, not the individual miner level. De La Torre understands that, especially in the wake of the introductions of protocols like Ordinals and Runes, miners want more control over what types of transactions they include in their blocks. And De La Torre believes miners should have this power, because it adds to the ethos of decentralization. He also added that DEMAND will accept any blocks sent to the pool.

“This gives me less power. That's what I want. I don't want the power. I'm done with that power,” said De La Torre. “I've had it before, and it's too much power in the hands of too few. And that's not what Bitcoin is. Bitcoin is decentralization, and this is furthering that.”

Incentivizing Solo Miners

De La Torre is aware that the odds of mining a block are against small-scale solo miners, but he doesn’t think they shouldn’t give finding one a shot, and he’s also created other ways to incentivize solo miners to come online.

“You’ve got to heat up your home during winter, right? Why not just use a Bitcoin miner as a heater?” said De La Torre.

“If you’re lucky, you hit a block and you just made your wife very happy,” he added with a laugh.

Solo miners who join DEMAND Pool will also have the option to sell the hash rate they produce on a marketplace, ensuring that they receive some income for their efforts. DEMAND has set up a deal with the hash rate marketplace Rigly and plans to establish more partnerships.

De La Torre also touched on how DEMAND payments will be done via the PPLNS (Pay Per Last N Share) system. With PPLNS, profits are allocated based on the number blocks a mining pool mines per day and payouts fluctuate based on the pool’s luck in mining blocks.

This system differs from the FPPS (Full Pay Per Share) system, which is commonly used in the major mining pools. With FPPS, the mining service charge and block reward are settled based on theoretical profit, and miners get paid whether the pool finds a block or not.

De La Torre is aware that it may sound attractive to miners to get paid consistently with FPPS, but he was quick to point out that payouts through both PPLNS and FPPS are comparable over the long term.

“A lot of people have some misunderstandings about PPLNS,” said De La Torre.

“FPPS gives you constant payouts, which is fine. I understand why a miner would find FPPS. However, PPLNS over enough time averages out to about the same,” he added.

“Yes, you won't have constant payouts, but you will have incorrect payouts according to how much hash rate DEMAND has — and we intend to have a good amount. You will still be getting a constant payout, or it would average out to more or less the same. So, there's no real downside to it.”

De La Torre also pointed out that solo mining as part of DEMAND’s pool is one of the best ways for Bitcoin enthusiasts to get their hands on non-KYC bitcoin.

He also stressed the fact that solo miners’ coming online will do something else that’s vital to keeping Bitcoin decentralized — it will bring more nodes online.

Send Nodes

To use DEMAND’s block templates, miners have to run their own nodes. This means that solo miners would not only contribute to the decentralization of Bitcoin’s hash rate but also to the decentralization of its governance.

“Not only do we want the solo community and the home mining community to flourish and to make more money, but we also want node proliferation,” said De La Torre.

“Solo miners will provide hash rate to secure the network and potentially make some bitcoin and also help with maintaining Bitcoin Core or whatever Bitcoin client they want. Nodes are good for the health of the system,” he added.

Looking Ahead

De La Torre also said that DEMAND is currently working on expanding its services to pooled mining, and that DEMAND will actively be looking for miners to come on board.

He’s vowed to make DEMAND a “stable and trustworthy pool with transparent payouts,” differentiating it from the “black box” pools out there.

De La Torre seems to be doing everything in his power to bring more independent miners online, and as he laid out his plans for DEMAND in my conversation with him, there was a palpable sense of urgency in his voice.

“The centralization of Bitcoin mining pools is becoming a very serious issue, and it's up to us as the mining community to do something about it,” said De La Torre. “If we don’t, it’s not good.”

MicroStrategy, a leading enterprise business intelligence firm that has emerged as a pioneering Bitcoin advocate among public companies, is hosting its Bitcoin For Corporations conference starting today. The event is taking place May 1 - May 2, 2024 in Las Vegas, NV will feature industry leaders discussing how corporations can adopt Bitcoin as a treasury asset.

MicroStrategy has bought over 1% of the total Bitcoin supply since first purchasing BTC in 2020. The company recently added 122 more bitcoins in April, now holding an astonishing 214,400 BTC worth billions. Its Bitcoin strategy has multiplied MicroStrategy's enterprise value and blazed a trail for corporate Bitcoin adoption.

Accordingly, the company is hosting an educational Bitcoin conference tailored towards other major corporations. Streamed live on Bitcoin Magazine's YouTube channel and X, sessions will cover the case for Bitcoin as a corporate treasury asset and strategy insights from MicroStrategy's journey.

MicroStrategy CEO Michael Saylor is slated to speak on various topics around BTC for corporations. Other speakers include Galaxy Digital's Head of Research, Alex Thorn, Bitwise's Senior Crypto Research Analyst, Ryan Rasmussen, and Citibank's Head of Digital Assets, among other industry leaders.

River Financial CEO Alex Leishman will discuss Bitcoin adoption trends. Lightspark CEO David Marcus, who helped Coinbase integrate Lightning, will join Michael Saylor to talk about "Building on Bitcoin." Fidelity Digital Assets' Chris Kuiper and MicroStrategy's Shirish Jajodia will share a panel on "Bitcoin and Wall Street."

The lineup of executives from major financial institutions signals growing corporate interest in Bitcoin exposure. As pioneering firms like MicroStrategy and Tesla reap the benefits, others seem poised to follow.

Conferences like this provide a venue for education and idea sharing as more corporations consider adding Bitcoin to their balance sheet.

The overall event is projected to exceed 1,000 executives in attendance, including representatives from Microsoft, Amazon Web Services, Google Cloud, Bayer, Bank of America and Hilton.

The Bitcoin Magazine livestream of Bitcoin for Corporations will be broadcast on X, YouTube, Facebook and LinkedIn from today, from today, starting at 4:30 PM.