“Zhongben Cong round table” is an annual secret gathering of og (original gangster) in bitcoin community. The participants are strictly invited, and there is no keynote speech. The specific venue is not announced before the gathering. It is known as “Bilderberg meeting of cryptocurrency community”.

This year’s Nakamoto round table is the sixth gathering of the event, which will be held in Cancun, Mexico, in early February 2020. After the meeting, the old hard core guns in cryptopunk keys.casa Jameson lopp, CTO of the company, recorded the hot topics he was interested in at the party: legal money channel, bitcoin ATM, BiP 174, charity

Author: Jameson lopp, keys.casa CTO, too statoshi.info And bitcoinsig.com founder

The new year, the new round table of Nakamoto. This annual “non conference” initiated by Bruce Fenton (now executive director of bitcoin Foundation) has become a new year celebration of winter vacation. I have participated in this round table in both bull and bear markets. The atmosphere this year is very optimistic. We are at the dawn of a banner year.

“Non conference” is an open, equal and free conference. There are no distinguished guests, no keynote speeches and no specified break time. The whole conference is free and open.

What are the payment methods of bitcoin related legal currency channels

There are eight different “stacks” in this non conference, and no one can go through all the topics. Here are some of the topics of the first day

What are the payment methods of bitcoin related legal currency channels

In order to learn more, I chose several topics that I was not familiar with. From the discussions I participated in, I got the following insights.

The channel of legal money into gold and new people getting on the bus

Bitcoin related legal channel has two payment methods: push vs pull. Push payments are difficult to cancel, including wire transfers and certified cheques. “Pull payment” includes ach (automatic clearing center) and credit card. There is a risk of refund. Institutions tend to use push payment, while retail investors or retail consumers tend to use pull payment.

One of the challenges of accepting ACh payments is that you may have to wait several days to know if the payment information is valid. Now there are some bank authentication services to help improve the certification process, but they require users to hand over their bank login certificates, which has huge privacy and security risks. You should assume that any service that requires you to provide a bank login is likely to view every transaction you’ve made in the past.

It is rumored that banks often mark any transaction involving “bitcoin” or “cryptocurrency” in the remarks column, and smart businesses will give themselves a name that doesn’t sound like a financial enterprise. Of course, this move is only useful when your enterprise is small in scale and can avoid radar scanning. If it is an enterprise with large-scale cash business such as bitcoin automatic teller machine (BTM) operator, it may face the risk of account closure.

Many cryptocurrency exchanges will process their credit card process through the European Union rather than the United States, because in Europe, credit card payment and card network are handled directly, while the United States requires these businesses to be processed through a commercial bank, which increases the risk of additional review. Another way to deal with the credit card business in the United States is to create a bank escrow account for each of your users and charge them in a way similar to “cash advance”. Its disadvantage is that cash in advance often has a single handling charge of about 5%. If it fails to repay in time, it will charge more than 20% interest.

In order to prevent credit card swiping (someone swipes someone else’s credit card to buy bitcoin, when the card owner finds out and reports the loss, the payment will be returned), a simple way is to add a unique code in the authorization string to verify whether he is the real owner of the credit card. This kind of authorized call will not charge the card. It only needs the card owner to log in to his credit card account to find the unique code. You can also use third-party services such as riskified, which even offer a refund guarantee.

Interestingly, it is rumored that there are very few credit card refunds encountered by coinbase, so once there is a refund dispute, coinbase is lazy to argue with customers, because the more refund disputes, the greater the risk of credit card processing on the platform.

Stable currency is another way for new users to get on the bus, but the trusteeship of stable currency will also bring additional default risk. In many cases, people do not understand the trusteeship of collateral. For example, when the trustee declares bankruptcy, can the collateral be guaranteed not to be confiscated? This may not be legally protected.

Another warning is about Dai, which provides unlimited leverage, and its mechanism may be similar to that of auction rate preferred shares. This is where PIMCO, a well-known US bond management agency, collapsed a decade ago.

I’m not familiar with this concept, so I did some research

The fluctuation of bond interest rate is determined by regular auctions held every seven, 28 or 35 days. During the auction, holders have the option to sell their bonds. By early 2008, such auctions generally failed to attract enough buyers. During the auction process, bondholders are faced with a serious reduction in the interest rate due to the sluggish flow of the securities. In order to stop the auction, some Wall Street institutions began to buy back unsold bonds. But when the financial tsunami hit in 2008, the banks were forced to strengthen their capital reserves, and they withdrew. They were no longer the last straw, and the market collapsed.

Coincidentally, a week after Nakamoto’s round table conclusion, the events in the field of WiFi remind me of this warning; it should be that someone has found a way to manipulate the market by taking advantage of the complex interaction between multiple WiFi systems.

What are the payment methods of bitcoin related legal currency channels

2 / the full details and the post-mortem review of BZX have not been fully disclosed. However, the community considers the following deal to be the initiator:


-What’s troubling is a complex single deal that uses flash loans to borrow 10000 eth’s from dydx, half to compound and half to fulcrum

3 / – 5000 eth deposited in compound for lending 112 wbtc.

-Another 5000 eth were used as collateral on fulcrum to short wbtc

-Then the 112 wbtcs were sold in uniswap to depress the price of wbtc

-Wbtc on fulcrum shortens to cash in, and then repays the flash loan on dydx

Bitcoin ATM

One of the advantages of BTM is that it does not rely so much on traditional bank channels; it only needs to access the two kinds of anonymous assets, cash and bitcoin, and users do not need to worry about the censorship of intermediaries. However, BTM operators still face many problems.

Many BTMS can buy and sell bitcoin, which can realize cash circulation. Smart operators even adjust their rates to promote arbitrage, which stimulates users to rebalance machines. Some even propose a worker bee rebalancing system, which tells bitcoin users that they can move cash from a BTM to a nearby BTM to make money. In the early days, it was difficult for BTM to obtain cash transportation services, but by 2020, companies such as Brinks and Guarda have begun to provide similar services.

From the BTM operators we have actually contacted, we know that the buying amount accounts for about 90% of the BTM transaction, and the selling amount only accounts for 10%. Obviously, the price elasticity of BTM to demand is very small, which means that if BTM increases the service charge from 5% to 20%, the operators think it will not drive away customers. That’s why you see a lot of BTM’s (buy and sell) price differentials very high – because they can.

Another factor may be that BTM doesn’t show the price difference or rate to users; customers just want to put in $X, and they don’t care what the actual market price is. At the same time, BTM operators who trade in stable currency notice that the transaction volume of stable currency is much lower, which can be explained to some extent: when you buy an encrypted asset in US dollars, the handling charge will be particularly conspicuous.

BTM operators are optimistic that, in the long run, the cash flow of buy and sell will be stabilized, and with the reduction of regulatory uncertainty and other business risks, the handling charges will be reduced.

As for anti money laundering / know your customer (AML / KYC) regulatory requirements, different BTM operators have different approaches. When the transaction amount is less than $300, some BTMS hardly require any customer information, and some BTMS set the limit at $3000. This is largely based on state rather than federal law, and depends on the speed and tightness with which operators are willing to enforce regulatory requirements. Now the competition in this field is becoming more and more fierce, and some BTM operators will report that other operators have too lax requirements on customers’ ID.

The demand for Shanzhai coins is very low. It was mentioned that the demand for Laite coins is the highest, probably because the transaction confirmation time is fast. Unfortunately, it is not feasible to integrate lightning network on BTM because its average transaction size exceeds the actual limit of the protocol.

It’s a strange thing. We heard that traditional banks hate ATM more and more because ATM is money losing. On the other hand, due to the saturation of ATM market, it is said that some ATM operators have begun to enter BTM business. ATM installation contracts are basically divided by region and have a lock-in period for many years. However, these contracts do not cover BTM, so if operators extend their business to BTM, they can expand their territory and put BTM machines next to competitors’ ATMs.

As a business still in its infancy, many of BTM’s transactions actually come from the inner cities of American cities with high crime rates. BTM machines facilitate all kinds of scams and crimes, and operators have to deal with the corresponding problems; they have received a lot of requests from law enforcement departments, and generally will quickly solve and comply with the regulations. Some of the most common crimes include:

·For the emotional scam of older women, they are required to remit money overseas.

·Falsely claiming to be the IRS / law enforcement agency and demanding payment to avoid jail time.

·Money laundering by credit card. Some people buy credit card information on the dark net, use these cards to buy goods, and then sell them to a buyer at a great discount. Buyers go to BTM to exchange cash for bitcoin and remit it to criminals, who then exchange it back for cash and use the profits to buy more stolen credit card information.

·There is also a suspicion that some gangs use bitcoin to save the high profits of drug trafficking. There is also a saying that gangs will smash BTM on the territory of rival gangs.

·There have been many BTM theft cases in recent years.

Northamptonshire police are tracking down three men who robbed a costcutter convenience store. One coerced the clerk with a knife, and the other hammered a bitcoin ATM away from the wall of the store. They took the bitcoin machine.


Two men break into a simple delicious food store in Vernon, Canada, and steal cash from its bitcoin ATM. They stole two cash boxes, which contained about $4000, but left a third box, which contained $50000!

WATCH: Thieves smash way into Vernon business

The manager of the store in Philadelphia was puzzled when the thieves blatantly smashed an empty bitcoin ATM and completely ignored the traditional ATM full of cash nearby.


Network of trust, identity and reputation

In the early days, bitcoin was traded through the over-the-counter markets, which built their own network of trust rating systems. Now, a lot of over-the-counter trading takes place in private chat rooms where members have to guarantee access. “Soft guarantee” means that someone only offers his reputation as a guarantee. The “hard guarantee” means that someone promises to take financial responsibility for any transaction that the guaranteed member fails to abide by. So, it seems that we have actually degenerated from a trust network in the strict sense to a network maintained by the administrators of private trading groups.

Generally speaking, reputation is built by the testimony of others, that is, someone proves that your words and deeds are consistent and can or cannot be trusted. Interestingly, it’s impossible to create some kind of global reputation score through a trust network, because it may encounter Sybil attack, which does happen in the over-the-counter trading of bitcoin. However, you can create personalized ratings, which are based on the reputation people share with each other.

It’s also a terrible idea to give everyone a global reputation score, because it may be manipulated by the public. For example, if a person angers the world with a controversial post or action, his reputation will be destroyed for the rest of his life. However, a hypocrite may confuse the public, attract a large number of fans and give him a high reputation. When he hurts an innocent person, he will not be punished, because a little bit of negative evidence will soon be submerged. So instead of creating some kind of global reputation scoring system, you should start from trusting your position in the network and weight the score based on the reputation of the witness.

What are the payment methods of bitcoin related legal currency channels

We should also abandon the idea that one identity has only one reputation. An identity can have unlimited reputations, depending on the type of interaction he / she has with others. For example, a bad taxi driver doesn’t have to be a lazy gardener – your reputation should vary from service to service.

Sovereign status is in your own hands, not in the hands of an authority. In the Internet environment, this is a reasonable explanation of online identity. However, in the physical world, there are also a large number of people who do not have the identity cards issued to them by the authorities, such as refugees fleeing a certain country. These people urgently need such an identity system.

The self dominated identity system is as follows:

· Blockstack

· Handshake


Blockchains are just strange public key databases; their real value is to provide you with a way to unlock the lock, and you don’t need a trusted third party. However, any identity system that wants to run on a large scale needs to be able to handle billions of public keys and the normal operation of these keys. If we rashly put such a large scale of data into a decentralized network, there will be many problems.

How to deal with the challenge of expansion is an interesting topic.

Bitcoin as a revenue generating asset

Almost everyone in this field wants more bitcoin. Therefore, if we design a financial instrument, it is obviously more attractive to generate revenue with bitcoin than with legal currency. It is generally believed that fully managed products will become more competitive in the future, and the competition of products will mainly focus on the yield.

Personally, I am cautiously skeptical about using revenue generating services, because I used similar services in 2016. At that time, there was a way to make money by lending bitcoin to financing traders on bitfinex. As a result, when bitfinex is hacked, the loss is shared equally by all users, with each user losing 30%. Although I was never a bitfinex user, I indirectly put some money there, so I was also affected. As the saying goes, no risk, no return. I believe that in a long enough time frame, similar events will happen in these different lending systems recently.

One particularly interesting thing is that recently, through a margin trading system of my broker, I began to lend out my grayscale bitcoin trust GBTC, although its annual income is only 1% to 2%. However, all of these loans have full collateral at several mainstream banks, and my counterpart is an institution that manages trillions of dollars of assets, so the probability of default on these products is extremely low. Of course, low risk, low return.

Chain note: GBTC, or grayscale bitcoin trust, was launched in April 2018. It is known as “the first public security to invest independently and obtain value from bitcoin price”. It enables investors in the public market to purchase bitcoin in a regulated and protected environment. GBTC is the closest investment vehicle to exchange traded fund (ETF) because it enables investors to invest in bitcoin without worrying about storage or custody.

Another danger today is refinancing. When you mortgage your assets to someone or an organization, they turn around and use the collateral you provide as their own collateral to borrow money, which is called re mortgage. This is obviously risky because it causes these services to become part of the reserve. If too many creditors ask for it, it could lead to a catastrophic “bank run.”.

Another risk is that the loan servicer may not provide security protection for the assets held as collateral, that is, if the lender goes bankrupt for any reason, the assets held as collateral may not be protected and may be involved in bankruptcy proceedings and used for redistribution to creditors. You can easily fall into a situation like mtgox’s bankruptcy, where it takes years to recover the remaining money.

BiP 174: partially signed bitcoin transactions

I’ve been working on bitcoin multi signature wallets for the past five years, and the lack of standards is a nightmare. The good news is that BiP 174 proposes a standard for how to serialize partially signed transactions. Each hardware and software wallet seems to have its own unique serialization, which is incompatible with the serialization of other wallet software. As a result, before PSBT (parallel signed bitcoin transactions), multi signature wallets that can use all kinds of wallet software could not be created, which caused a potential single point of failure.

We have deployed PSBT in Casa as part of our coldcard integration, and we hope to see other hardware manufacturers follow up!

PSBT enables us to separate the transaction structure (and all its complexity) from the actual signature of the transaction, which should be fairly straightforward. As shown in the figure below, the PSBT workflow allows transactions using different software to achieve non interactive signature. Anyone who collects enough psbts can merge the generated partially signed transactions into a fully signed transaction.

PSBT format also has a good additional security function, which allows you to pass the xpub and derived path along with the transaction information, so that the signature software can verify whether the change has been returned to the target wallet.

Looking to the future, we expect that the scalability of PSBT will enable it to support the unique functions of various wallets, but first of all, we must let everyone support the standard!

Another ongoing work is to increase PSBT support for lightning trading of hardware devices. However, some non-standard properties of lightning trading still need more work from hardware manufacturers.


Hodlers, bitcoin’s long-term hoarders, have found that they can now play a bigger role because of asset appreciation. If you donate the value-added bitcoin directly to a charity, there will be tax benefits, because if you first convert bitcoin into legal currency and then donate it, there will be capital gains tax.

In addition, if you donate to qualified institutions, you can get tax relief. If you want to donate bitcoin to charity, please refer to my resource list. Please note that if you intend to donate more than $5000 worth of bitcoin in the United States, you need to fill out the 8283 tax form, obtain the third-party identification of bitcoin (you understand), and have the recipient sign at the end of the form.

Another perspective is that after the appreciation of bitcoin, individuals can play a more direct role than institutions because they are more flexible. Bureaucracy slows the decision-making process, and self-determination individuals don’t need to reach consensus with others.

In addition, bitcoin allows us to remit money to places that were hard to reach before. We can fund people who don’t even have access to traditional financial institutions. They can fund opposition groups fighting for human rights, and financial institutions will block their use of payment networks by government orders.

What’s interesting is that it’s particularly challenging to use bitcoin to fund the work of further promoting the development of bitcoin. If this kind of activity is organized, it is likely to encounter people’s resistance, because they fear that it will cause incentive distortion. So perhaps the best option is for individuals and companies to fund some developers directly.

Return to construction!

If we have to sum up the roundtable of Nakamoto in 2020, let’s say: 2020 will usher in a bull market!

Editor in charge

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