Hacking for Technology Independence

My open source mission is to empower people to be technologically independent; to know that technology is not magic, so that nobody will ever be a slave to technology.

bunnie

Personal journey on hardware

For those who knows me, I am not a hardware guy.

Those who knows me better suffer Post Traumatic Stress Disorder at the sight of me handling a screwdriver or a hammer.

The first ever rockpro64 (device like a raspberry) I ever plugged burst to ashes when I discovered it was possible to “over power” a device.

Swallowing my pride, I considered many things in life are just magical. I am a just a Bitcoin developer.

It is when I discovered a book on the desk of @anditto_h called “Hacking the Xbox: An Introduction to Reverse Engineering” by Andrew ‘bunnie’ Huang… with the real signature of the author himself!

Now, I will tell you: I read almost all of it, and I understood next to nothing, my electronic background limit to basic forgotten high school level. But damn this book got my mojo back! I wanted to learn again about hardware. I dashed to my local library in Tokyo, the selection of book about hardware in English was tight, but one book caught my attention: “Hardware hacker”, the content seems great. Then after buying it, I found out bunnie also wrote this one.

While I lacked the electronic bases to make good use of those books at this point, it ended up re-igniting my thirst for knowledge of hardware, and I ended up buying a bunch of electronic books, gadgets and kits to better understand things. The hack0 we have been working on in DG, is part of this journey as well. My medium term goal now is to repair one of our broken remote control… might take me a few months! 🙂

Hacking mojo of the Bitcoin community

Now, if you have been participating in the Bitcoin community, you probably felt that more and more people have been dipping their toes into small hardware.

This is not a coincidence, despite most of our differences, there is one principle that unite everybody in Bitcoin: Self-Sovereignty.

Using Bitcoin is empowering, as it feels like we can finally have complete control over our money. This feeling of empowerment is contagious, the more you know, the more you want to know, as you feel this knowledge put you back in control of your life. This is the common rabbit hole moment that most of us experienced.

This is why Bitcoiners embrace open source. You can understand everything. You can read the code, you can modify it and you don’t need any credential, you only need the willingness to learn.

Our interest in hardware can be seen in various form:

  • Our crowded market of hardware wallet solutions
  • The success of DIY hardware wallet sessions in Bitcoin conference given by @StepanSnigirev
  • The passion of people like @arcbtc and @21isenough working on many Bitcoin gadgets and the amount of interest it gathers
  • The countless of Bitcoin node in a rockpro/pi projects (shameless plug: working on the hack0 with DG Lab, more soon!)

It is obvious that many of us want to know more. Our hacking mojo is pretty high.

Bunnie’s mission and whole history has been about revealing the magic tricks of technology so you expand self-sovereignty to the hardware territory. This is quite appealing to us.

Bunnie’s new hardware project: Precursor

You know what is a hardware wallet right? For most, this is one of the safest way to store your Bitcoin.

One of the most popular mantra in Bitcoin is: Don’t trust verify!
And yet, after seeing this video from bunnie, I now understand how little we actually verify.

Bunnie wants to make a hardware that his mother can verify.

His attempt at doing so is called Precursor . Now, let me be clear:

  • You won’t run a bitcoin full node on such device.
  • I don’t even know what you will even be able to run on it.
  • I don’t even understand most of the spec of this device.
  • I don’t know if we will be able to sign a bitcoin transaction on it.

But what I know is:

  • I can hack it.
  • I can understand it.
  • I can verify it.
  • Bunnie will work his ass off so we can understand.

Now, we tend to accept that we can’t verify everything. But wouldn’t it be great if you could at least learn enough to increase the scope of what you can actually verify?

Wouldn’t it be great if you can start understanding, through what you will learn with the Precursor, how hardware wallets actually work at a much deeper level?

Preorder a Precursor with Bitcoin

Now, crowsupply, the crowdfunding platform bunnie uses, does not accept Bitcoin.

This was a major turn off for bitcoiners. I complained about it and bunnie contacted me!

With DG Lab we decided to help him accepting Bitcoin. You can use our store (powered by BTCPay Server of course).

Now there are two things:

  • Max 35 orders
  • The crowdfunding ends on Dec 15, 2020 at 03:59 PM PST (11:59 PM UTC)
  • Shipment will be December 2021
  • Shown price is tax exclusive
  • No shipping fee

I really wished we could help more than a few day, but it took us a while to contact bunnie. We hope helping as well after the crowdfunding, but this is not decided at this point.

Crowfunding site if you can pay in credit card: https://www.crowdsupply.com/sutajio-kosagi/precursor

Our store if you want to pay in Bitcoin:
https://lightning-store.jp/product/precursor/

Follow @bunniestudios

How to convert Bitcoin in fiat without selling

Introduction

Prepared for the incoming helicopter money of your central bank, you converted most of your fiat into Bitcoin?
You made a fortune by investing into Bitcoin but don’t want to sell so you don’t pay 30% of tax or more?

But now, you have a big purchase to do. Maybe a house, a car, a business investment, or a sudden tax bill to pay and you are short of fiat?
You think of selling your coins and paying your taxes, but don’t want to take the risk of sending all of it on an exchange and back to your bank account?

What if I told you, you can get the fiat, keep the coin, not answer any question about the purpose, and get some tax benefits on top of it?

** Disclaimer I am not a tax lawyer, so pay for proper professional for advice about this scheme in the jurisdiction you live in **

Making a loan with Bitcoin in collateral

A common way to avoid taxes but still having fiat when you need it is, instead of selling your asset to take a loan and put the asset in collateral.
By doing so:

  1. You keep the asset
  2. You pay very low interest rate, thanks to the central banks policy
  3. You can claim some tax benefits on the payment of your loan in some jurisdiction
  4. You can get the cash
  5. You don’t pay taxes as you did not sell anything

Doing so traditionally raise several issues:

  1. In some jurisdiction, you need proper credit and history. If you are an expat, this is hard to get.
  2. Most loan services ask you lot’s of question about your ability to repay and the purpose of the loan.
  3. Most loan services do not take Bitcoin as collateral, nor would you trust them to get custody of it.
  4. Those services are local to specific jurisdictions
  5. Interest rate are quite expensive, might go between 10 and 20%

The closest ideal is offered by Unchained Capital.
However, it does not work if you are not American and if you want a loan for other reason than developing a business.
Depending on your jurisdiction and purpose of the loan, this type of service might get you what you want

However, you need to consider another downside: Because the company granting the loan may have your holding in collateral, you have counterparty risks.
It is also dangerous for Bitcoin to have too much fund in the hands of custodian.

Lastly, services proposing loans between Bitcoin and any other tokens does not solve our problem. The sell of such token will raise a tax event, thus we can’t use it to pay for making big expenses. You would also need to pass by an exchange and take counter party risk.

Real Peer to Peer loans

What if I told you that it is technically possible to enter into a loan agreement where:

  1. The collateral is locked by the two peers, settled by an arbiter in case of dispute
  2. That the arbiter does not need to know about the deal before there is actually a dispute
  3. That the arbiter can’t steal the funds
  4. Nobody looking at the blockchain can know you are into a loan contract

It turns out that DLCs are specifically well suited for this use case.

If Alice (Borrower) and Bob (Lender) trusts into Olivia’s (Arbiter) integrity, then the only thing Olivia need to do is:

  1. Expose her oracle’s public key
  2. Gives Alice and Bob the DLC nonce for their contract

Then only if there is an actual dispute, Olivia can:

  1. Ask a payment to be the arbiter the dispute.
  2. Decide which side is right and attest the outcome

Olivia would not have to know anything about the contract details of Alice and Bob until there is a dispute.

Now Alice and Bob can enter in a DLC outcomes.
Alice put her Bitcoin in collateral, then Bob gives the cash.

Optionally, with DLC another interest thing you can do:
As Alice pays back Bob with interest, Bob could issue “Options” distributing the collateral to himself and Alice depending on how much Alice paid back.
This would allow Alice to get out of the contract with Bob, effectively selling her collateral to Bob against the rest of the unpaid loan.

** Note there is some attack vectors of the above scheme I left out for the purpose of simplicity, I may go into more details in a future post **

Why traditional 2-3 escrows are inferior

Now why do you need DLC for this? Actually one way of doing this would be to just have a 2-3 escrow.
The problem with this is that Olivia and any blockchain observer would know which that some parties engage into a deal settled by Olivia.

Also, if it was a 2-3 escrow, Olivia would need to sign the transaction to settle the dispute.
With DLC she is not signing anything, she just attests her judgement cryptographically.
This may be a big legal distinction that protect Olivia.
Olivia does not even need to run any server, so it drastically lower the barrier of entry of arbiters.

Olivia does not have to know what transaction on the blockchain she is settling.
She does not even have to know that it is on the Bitcoin blockchain or on another blockchain or if it involves any money transfer at all.

Alice and Bob can decide to divulgue as little information as possible to Oliva in case of dispute.

On top of this, it is possible for Alice and Bob to actually use several oracles to settle the dispute.

Where are we today?

Technically, NDLC can already be used for doing the above (outside the issuance of options).

Practically, it is the beginning of the adoption curve, so you will need to find a Alice, Bob and Olivia tech savvy enough to understand it. But that’s where all great things starts!

However it is clear that we have a tail wind. With ridiculous interest banks offered by banks and helicopter money, and maybe negative interest, you can bet people will be more than happy to lend money in peer to peer for relatively low interest rate.