Jekyll2024-03-20T09:31:12+00:00https://bisq.network/blog/feed.atomBisqBisq 2: Now in Beta2024-03-16T00:00:00+00:002024-03-16T00:00:00+00:00https://bisq.network/blog/bisq-2-now-in-beta<p>After nearly three years in development, we’re thrilled to announce the first in a series of Bisq 2 beta releases. Watch the video below to understand why we’re building Bisq 2 and what’s in it for you. You’ll learn what’s available now and what lies ahead for both Bisq 1 and Bisq 2.</p>
<p><br /></p>
<iframe width="560" height="315" src="https://www.youtube.com/embed/T583ogprpkM?si=CeXKxCz6zupzTxLp" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen=""></iframe>
<p><br /></p>
<p>Getting started with Bisq 2 is easy:</p>
<ol>
<li>Get Bisq 2 from the <a href="/downloads#bisq2">downloads page</a></li>
<li>Try the new <a href="/bisq-easy">Bisq Easy</a> trade protocol</li>
<li>Share your feedback in the integrated p2p group chat</li>
</ol>
<p>Note: If you’re already running Bisq 1, carry on! Bisq 2 is a separate application and will install and run alongside Bisq 1 without issue.</p>cbeamsThe first Bisq 2 beta release is now available. Learn what's new and coming soon and try Bisq 2 for yourself.Bisq v1.5.0 Released: Highlights2020-11-23T00:00:00+00:002020-11-23T00:00:00+00:00https://bisq.network/blog/bisq-v1.5.0-highlights<p>Bisq v1.5.0 was just released, and it’s quite a notable update.</p>
<h2 id="segwit-integration-completed">SegWit Integration Completed</h2>
<p>Bisq v1.4.2 introduced segwit addresses for funding and withdrawing, meaning you could send funds from an external wallet to a <a href="https://en.bitcoin.it/wiki/Bech32" target="_blank">bech32</a> address in Bisq and withdraw funds from Bisq to an external <a href="https://en.bitcoin.it/wiki/Bech32" target="_blank">bech32</a> address. While this was a huge step forward, trade transactions didn’t use segwit, and no Bisq transactions took advantage of fee optimizations enabled by segwit.</p>
<p>Bisq v1.5.0 completes the integration by implementing segwit across the trade protocol and implementing segwit fee optimizations, saving users on fees for every trade tx and withdrawal tx.</p>
<h2 id="special-thanks-toyou">Special Thanks to…You?</h2>
<p>Segwit integration was a considerable, expensive project to spec, implement, review, and test. It was only possible because of a generous donor that Bisq was able to recruit high-quality help to deliver the implementation.</p>
<p>The donor prefers to remain anonymous, but we mention them here to draw attention to what’s possible with the generosity of the community.</p>
<p>While Bisq’s <a href="/blog/bisq-dao-for-bitcoin-maximalists/">colored-bitcoin DAO</a> intends to make Bisq sustainable in the long-term through trading fee revenue, revenue isn’t super-high right now, so Bisq is limited in what it can build in the short-term. External contributions enable the project to do even more—and as you see with segwit, the project will do its utmost to make the most of any extra funds it gets.</p>
<p>So if there’s something you’d really like to see in Bisq, if there’s a chance you can fund it, please reach out to us <a href="https://keybase.io/team/bisq" target="_blank">on Keybase</a> and let’s make it happen!</p>
<h2 id="trading-improvements">Trading Improvements</h2>
<p>There were a handful of notable updates to improve the trading experience on Bisq.</p>
<h3 id="relaxed-and-simplified-trade-limits">Relaxed and Simplified Trade Limits</h3>
<p>For a long time, new fiat payment accounts in Bisq required 30-60 days to accrue higher trading limits. If you created a US Postal Money Order account in Bisq, for example, it would only be capable of trading 0.0625 BTC for the first 30 days, which would then increase to 0.125 BTC for the next 30 days. Trading 0.25 BTC would only become possible 60 days after the payment account was set up in Bisq.</p>
<p><strong>For lower-risk payment methods, these limits are now gone.</strong> You can now trade 0.25, 0.50, or even 1.00 BTC from day 1 (depending on the particular payment method) for payment accounts that do not require signing (e.g., US Postal Money Order, cash deposit, Western Union, MoneyGram, face-to-face, and more). See <a href="https://bisq.wiki/Payment_methods#Fiat_payment_methods" target="_blank">this wiki article</a> for the full list of supported payment methods and their maximum trade sizes.</p>
<p><strong>For higher-risk payment methods, selling limits are also removed.</strong> Sellers using payment accounts such as SEPA, Zelle, Revolut, bank transfer can immediately sell up to 0.25 BTC.</p>
<p>Buying with higher-risk accounts remains the same as before—account signing is still in place, which means new high-risk accounts like SEPA and Zelle are limited to buying 0.01 BTC until 30 days after they are signed. Unfortunately, it needs to be this way to protect the network from fraudsters.</p>
<p>See <a href="https://bisq.wiki/Account_limits" target="_blank">this wiki article</a> for more details and concrete details on how the newer, simpler trade size limits work.</p>
<h3 id="new-payment-methods">New Payment Methods</h3>
<p><strong>TransferWise</strong> was added as a payment method so that users could harness the company’s multi-currency money transfer service to enable cross-currency trading on Bisq. Maximum trade period is 1 day, and maximum trade size is 0.25 BTC.</p>
<p><strong>Amazon eGift Cards</strong> were added as a way to transfer value in a number of markets around the world in exchange for bitcoin. Maximum trade period is 1 day, and maximum trade size is 0.25 BTC.</p>
<p><strong>Australian PayID</strong> was added to enable our friends down under to settle trades of up to 1 BTC in under 1 day. Maximum trade period is 1 day, and maximum trade size is 1.00 BTC.</p>
<p>Account signing is not currently required for any of these payment methods, so take advantage of it! Buyers and sellers can trade the full amount immediately.</p>
<h3 id="edit-payment-methods-of-live-offers">Edit Payment Methods of Live Offers</h3>
<p>Before v1.5.0, traders could edit the price of a live offer, but not the payment method. Now, the offer’s payment method can be changed too.</p>
<p>So if you make an offer for buying bitcoin with Zelle, but decide you want to try the new Amazon eGift card method, you can just switch the payment method without wasting any sats to make a whole new offer.</p>
<h2 id="more">More</h2>
<p>As always, there are many smaller updates listed <a href="https://github.com/bisq-network/bisq/releases/tag/v1.5.0" target="_blank">in the changelog</a>.</p>
<h2 id="installing-and-upgrading">Installing and Upgrading</h2>
<p>To get Bisq for the first time, you can download it <a href="https://bisq.network/downloads/">from the website</a> or <a href="https://github.com/bisq-network/Visq/releases/tag/v1.5.0" target="_blank">from GitHub</a>. We highly recommend verifying the binaries you download using <a href="https://bisq.wiki/Downloading_and_installing#Verify_installer_file" target="_blank">this guide</a>.</p>
<p>To update Bisq, you should get a pop-up in the software when you open it. Otherwise, feel free to download it from the links above.</p>
<p>As always, please make sure to <a href="https://bisq.wiki/Backing_up_application_data" target="_blank">back up your data directory</a> before updating. You can safely update with open offers, open trades, and/or open disputes.</p>m52goBisq v1.5.0 was released earlier today, bringing SegWit support across the trading protocol as well as a slew of updates to make trading better and more convenient.Trends in Trading Activity, August 20202020-09-09T00:00:00+00:002020-09-09T00:00:00+00:00https://bisq.network/blog/trading-trends-august-2020<p>Bisq hit 70,000 trades all-time in August 2020. The past 12 months have been particularly interesting: there were well over 2,000 trades per month for every single month, with many months at or over 3,000 trades.</p>
<p>This sort of sustained trading activity is unprecedented for Bisq. In the past 12 months (from August 2019 to August 2020) there were more trades on the network than in the 36 months before that.</p>
<p>Now that the monthly numbers have been big enough for long enough, it might be interesting to take a look at some trends in trading activity over the past 12 months.</p>
<h2 id="tldr">TL;DR</h2>
<p>The following findings are based on trade data from the past 12 months: August 2019 to August 2020.</p>
<ul>
<li>Top 5 most active markets on Bisq, in order: EUR, USD, XMR, BRL, GBP</li>
<li>Top payment methods, by market:
<ul>
<li>EUR: SEPA and Revolut</li>
<li>USD: Zelle and US Postal Money Order</li>
<li>BRL: National bank transfer</li>
<li>GBP: Faster Payments</li>
</ul>
</li>
<li>Premiums are generally in 1-3% range for active markets; exception is ≤0.01 BTC trades, where premiums can be 6-7% on average for offer takers
<ul>
<li>This is because mining fees and smaller profit margins for smaller trades drive up trading costs for offer makers</li>
<li>Traders can mitigate this by <strong>making their own bids</strong> for <strong>bigger trade sizes</strong></li>
<li>No evidence that account signing contributes to these higher premiums</li>
</ul>
</li>
<li>Selling bitcoin on Bisq can be lucrative</li>
</ul>
<p>See numbers to back these findings below.</p>
<h2 id="most-active-markets">Most active markets</h2>
<p>One way to articulate Bisq’s vision is to become the <a href="https://twitter.com/bisq_network/status/1010168687364657152">fiat foreign exchange layer for Bitcoin</a>.</p>
<p>So while trading fiat for bitcoin is Bisq’s intended function, Bisq’s trade protocol is agnostic to what’s on the other side of the trade, so some altcoins are also traded on the network.</p>
<p>Here are the most active markets on Bisq in the past 12 months.</p>
<p><img src="/images/blog/trading-trends-august-2020-1.png" loading="lazy" alt="Most active markets on Bisq, August 2019 - August 2020." width="400" /></p>
<h2 id="most-common-payment-methods">Most common payment methods</h2>
<p>Which payment methods did people use most often to settle Bisq trades?</p>
<p>This is how the breakdown looks across the network.</p>
<p><img src="/images/blog/trading-trends-august-2020-2.png" loading="lazy" alt="Most popular payment methods, in aggregate" width="500" /></p>
<p>But of course only certain payment methods are useful in certain markets, so here’s a breakdown of top payment methods in top markets.</p>
<p><img src="/images/blog/trading-trends-august-2020-3.png" loading="lazy" alt="Most popular payment methods for EUR" width="440" /></p>
<p><img src="/images/blog/trading-trends-august-2020-4.png" loading="lazy" alt="Most popular payment methods for USD" width="440" /></p>
<p><img src="/images/blog/trading-trends-august-2020-5.png" loading="lazy" alt="Most popular payment methods for BRL" width="440" /></p>
<p><img src="/images/blog/trading-trends-august-2020-6.png" loading="lazy" alt="Most popular payment methods for GBP" width="440" /></p>
<p>Every single trade in the CAD market during this time period used Interac e-Transfer, and almost all AUD trades used national bank transfers.</p>
<h2 id="premiums-paid-to-buy">Premiums paid to buy</h2>
<p>Pricing often discourages new or prospective Bisq users. Many will open Bisq, see few offers, complain that the ones available are expensive, and then leave (and maybe tweet about it).</p>
<p>Let’s see what kinds of premiums people are really paying to buy bitcoin on Bisq. If you’re looking to sell bitcoin on Bisq, you would be <em>earning</em> these premiums.</p>
<p>Below are average premiums for the past 1 year for EUR and USD.</p>
<p>Only data for November 2019 and afterward is shown since this was the first full month with fiat markets open again (new users had been restricted from buying more than 0.01 BTC for much of 2019; <a href="/blog/bisq-v1-2-released/">account signing introduced in v1.2</a> lifted that restriction). This development changed trading dynamics significantly, so comparing metrics before and after November 2019 doesn’t make sense.</p>
<p>Also, only data for EUR and USD are shown since only these markets provide data that is extensive enough to provide meaningful metrics.</p>
<p>To clarify the figures shown below: premiums indicate how much more the buyer paid over the spot price of bitcoin at the time of the trade.</p>
<ul>
<li>“Buy Offers” are trades that originated from an offer made by a bitcoin buyer (aka, a bid)</li>
<li>“Sell Offers” are trades that originated from an offer made by a bitcoin seller (aka, an ask)</li>
</ul>
<p><img src="/images/blog/trading-trends-august-2020-7.png" loading="lazy" alt="Premiums in EUR and USD markets" width="500" /></p>
<p>To make the chart above more concrete, here is an example takeaway. Bitcoin buyers in the EUR market paid an average premium of 1.367% on offers <em>they made</em> to buy 0.01 BTC or less. And buyers paid an average premium of 6.853% when they <em>took existing offers</em> from sellers of 0.01 BTC or less.</p>
<p>As you can see, that high premium to take existing offers goes down significantly as trade size goes up.</p>
<p>So how can one buy bitcoin for a more reasonable price on Bisq?</p>
<ol>
<li>
<p><strong>Make your own bids to buy bitcoin</strong>. Across all trade sizes, buyers who make bids pay significantly less than buyers who take what they see already on the Bisq offer book. Add the <a href="https://bisq.wiki/Trading_fees" target="_blank">differential in trading fees</a> for offer makers versus offer takers, and the premium paid to take existing offers grows even wider. Takers pay 0.35% of trade amount while makers pay only 0.05% of trade amount, if paying with BSQ; takers pay 0.7% of trade amount while makers pay only 0.1% of trade amount, if paying with BTC.</p>
</li>
<li>
<p><strong>Do bigger trades</strong>. Premium paid goes down significantly as trade size goes up. You can enable bigger trade sizes by getting your payment accounts signed and allowing your payment accounts to age. See more on these mechanisms to secure the network <a href="https://bisq.wiki/Account_limits" target="_blank">here on the wiki</a>.</p>
</li>
</ol>
<h3 id="effect-of-account-signing">Effect of account signing</h3>
<p>Some of you savvy Bisq traders may be wondering if the high premiums in the ≤0.01 BTC segment are related to sellers taking advantage the market for account signing (i.e., charging a premium to buyers looking to obtain signed payment accounts).</p>
<p>It’s difficult to determine if this is the case by looking at the EUR or USD markets alone, as signing is required for all major payment methods in those markets. But we can gain some insight by looking at the GBP market.</p>
<p>Although there were only 226 trades in the GBP market since November 2019, GBP is unique in that it:</p>
<ul>
<li>is an active Bisq market, which means account signing <em>is</em> required for payment methods with chargeback risk</li>
<li>primarily uses a payment method which does <em>not</em> require signing</li>
</ul>
<p>As a bonus, there were a nice handful of trades using national bank transfers and Revolut, which <em>do</em> require signing.</p>
<p>Here’s the data.</p>
<p><img src="/images/blog/trading-trends-august-2020-8.png" loading="lazy" alt="Premiums in GBP markets" width="650" /></p>
<p>Sellers using all 3 payment methods asked for premiums in the 6-7% range (on average), and these premiums dropped significantly with higher trade sizes—whether or not the payment method required signing didn’t seem to matter much.</p>
<p>Therefore this GBP data seems to indicate that the phenomenon of sellers asking for large premiums on small trades probably has less to do with signing and more to do with profitability. After all, at current prices, even a 10% premium won’t yield a seller a huge profit on a <0.01 BTC trade. Furthermore, mining fees need to be paid no matter what, and these costs are proportionally larger for smaller trades.</p>
<p>Also consider that sellers asking for higher premiums are also doing the extra legwork of keeping Bisq online and available throughout the day and night so their offers can be available to you. They’re convenient—and convenience always costs.</p>
<p>So if you’re a bitcoin seller, even if you’re not particularly concerned about privacy, trading on Bisq can be lucrative. In fact, some buyers will <a href="https://twitter.com/bisq_network/status/1284179918184755200" target="_blank">bid sizable premiums</a> for buying bitcoin using certain payment methods.</p>
<p>Accordingly, buyers willing to put in a little more legwork are rewarded with better prices.</p>
<h3 id="monero-premiums">Monero premiums</h3>
<p>Last but not least, here is how Monero premiums have looked. The Monero market is driven by wholly different forces than fiat markets, as account signing and aging do not apply, and 2 BTC can be traded at once using new payment accounts (no waiting necessary).</p>
<p>Still, v1.2 also introduced a new trade protocol which affected trading dynamics on all markets, so figures shown here are also for November 2019 and onward.</p>
<p><img src="/images/blog/trading-trends-august-2020-9.png" loading="lazy" alt="Premiums in XMR markets" width="440" /></p>
<p>These figures are provided from the point of view of a Monero buyer. To make this chart more concrete, here is an example takeaway. Monero buyers paid an average premium of 0.494% on offers <em>they made</em> to buy 0.1 BTC or less of Monero. And buyers paid an average premium of 3.685% when they <em>took existing offers</em> from sellers of 0.1 BTC or less of Monero.</p>
<p>So it seems the same dynamics seem to apply across the board: make your own bids and do bigger trades to get better pricing.</p>
<h2 id="other-metrics">Other metrics</h2>
<p>What other metrics would you like to know about trading on Bisq? We’re currently building <a href="https://github.com/bisq-network/projects/issues/41" target="_blank">a whole new markets dashboard</a> and could use your input.</p>
<p>Suggest your ideas to <a href="https://twitter.com/bisq_network" target="_blank">@bisq_network on Twitter</a>, in the <a href="https://keybase.io/team/bisq" target="_blank">Keybase group</a>, or <a href="https://bisq.network/community/">any other Bisq social channel</a>.</p>m52goMost active markets, most active payment methods, and premiums paid across the network for August 2020. If you're wondering how to buy and sell bitcoin on Bisq quickly and cost-effectively, this post is for you.Statement on Critical Security Vulnerability2020-04-08T00:00:00+00:002020-04-08T00:00:00+00:00https://bisq.network/statement-security-vulnerability<p>About 24 hours ago, we discovered that an attacker was able to exploit a flaw in the Bisq trade protocol, targeting individual trades in order to steal trading capital. We are aware of approximately 3 BTC and 4000 XMR stolen from 7 different victims. This is the situation as we know it so far. The only market affected was the XMR/BTC market, and all affected trades occured over the past 12 days.</p>
<p>Bisq v1.2, released in late October 2019, updated its trade protocol. It improved decentralization by removing arbitrators with a 3rd key in the multisig escrow used for bitcoin trading funds. These arbitrators were replaced with 2 new roles: mediators and arbitrators with <strong>no keys</strong> in the multisig escrow. With no more trusted third parties, the new trade protocol also required that trade parties move bitcoin trade funds to a Bisq “donation address” after a hard time limit in order to solve dead-locked trades.</p>
<p>This donation address is set by the Bisq DAO and approved by DAO stakeholders. Bisq software did not verify that the payout address for trades was actually the Bisq donation address set by the DAO before signing and sending the time-locked payout TX to the trade counterparty. <strong>In plain words, this exploit was the result of a flaw in the way Bisq trades are carried out, not in the way funds are stored (i.e., there is no honeypot since Bisq is P2P).</strong></p>
<p>As soon as this attack was discovered, Bisq developers used the alert key to disable all trading on Bisq. The flaw in the trade protocol has been corrected in Bisq v1.3.0, <a href="https://github.com/bisq-network/bisq/releases/tag/v1.3.0">now released</a>. Bisq is properly peer-to-peer, so alert key functionality can be bypassed by users, but this is highly discouraged.</p>
<p>A proposal will soon be created in the Bisq DAO, Bisq’s funding mechanism, that will aim to repay the 7 victims from future trading revenues.</p>
<p>Security has always been a top priority for Bisq, but this incident shows it wasn’t perfect. The project is evaluating several approaches to strengthening security reviews and practices even more, and will detail them soon.</p>
<p>In the past 4 years of operating on mainnet, Bisq has never had to use the alert key to enable “safe mode” on Bisq nodes, and this is an unprecedented case for the Bisq DAO. The Bisq developer community sincerely apologizes for this security failure.</p>m52goA flaw in the way Bisq trades are carried out was exploited in early April 2020.Bisq Q1 2020 Update: Goals and Reorganization2020-02-10T00:00:00+00:002020-02-10T00:00:00+00:00https://bisq.network/blog/q1-2020-update<div class="responsive-youtube-container">
<iframe width="560" height="315" src="https://www.youtube-nocookie.com/embed/oImSdIAsywA" frameborder="0" allow="autoplay; encrypted-media" allowfullscreen=""></iframe>
</div>
<p>The year 2019 was, by almost any reasonable measure, an incredibly successful year for the Bisq network.</p>
<p>Here is a sampling of the milestones achieved:</p>
<ul>
<li>v1.0 launched after 4+ years of work</li>
<li>Bisq DAO launched as perhaps the first and only Bitcoin-based DAO
<ul>
<li>Of 20,100 total trades done since the DAO launch in 2019, 8,589 used BSQ to pay trading fees</li>
</ul>
</li>
<li>New trading records reached
<ul>
<li>USD-adjusted volume up 2.6x (from 5,256 BTC to 13,782 BTC)</li>
</ul>
</li>
<li>New trade protocol deployed
<ul>
<li>Trades are now secured with 2-of-2 multisig escrows instead of 2-of-3 multisig escrows</li>
</ul>
</li>
<li>Account signing
<ul>
<li>Novel mechanism to increase counterparty confidence for fiat trades while maintaining privacy</li>
</ul>
</li>
</ul>
<p>If Bisq just set out to be a successful software project that facilitated bitcoin trading, this would be it. There would be no need to step back and reevaluate anything. Just keep developing, keep growing, and let things evolve as they do.</p>
<p>But the vision for Bisq is a bit grander.</p>
<p>The vision is for Bisq to become <em>the exchange layer for the Bitcoin protocol stack</em>, organized as a thoroughly decentralized DAO that sovereignly manages and funds itself. This requires the project to manage itself in a way different from your typical open software project, with a greater focus on efficiency and effectiveness.</p>
<p>As a result, some challenges emerged as a result of Bisq’s 2019 success that hampered the project’s ability to continue to effectively achieve its vision:</p>
<ul>
<li>Lack of management led to suboptimal resource allocation
<ul>
<li>Overspending on low priorities and underspending on high priorities</li>
</ul>
</li>
<li>Contributor base grew, but developer capacity remained limited</li>
<li>Volatile volumes resulted in revenues insufficient to support more developers</li>
<li>Weak support often left users frustrated, hampering growth and development efforts</li>
</ul>
<p>It’s become clear that while the Bisq DAO provides a solid technical basis for a decentralized operation, the human side of the Bisq DAO wasn’t as solid.</p>
<h2 id="a-new-structure">A New Structure</h2>
<p>To that end, Bisq is reorganizing its operations into <strong>5 teams</strong> with <strong>goals</strong> and <strong>budgets</strong>.</p>
<p>Until now, Bisq’s contributor network didn’t have much structure. Aside from designating people for roles to handle ongoing responsibilities, the project has largely functioned as an amorphous group of individuals who contributed to the project on their own accord—in other words, a free-for-all—with no real management, no formal constraints, and no analysis. This worked well while the contributor group was small, since priorities aligned nicely with the people who were around to take them on.</p>
<p>The following structure was determined as the result of a rigorous, practical analysis of the network’s standing at the beginning of 2020—one we think will help Bisq realize its vision while staying true to its roots of keeping the Bisq contributor network decentralized, voluntary, and meritocratic.</p>
<h2 id="project-goals-and-budget">Project Goals and Budget</h2>
<p>The Bisq network’s project-wide goals as of Q1 2020 are:</p>
<ul>
<li>Increase trading volume</li>
<li>Improve user support</li>
<li>Improve software reliability</li>
<li>Improve new user onboarding</li>
</ul>
<p>The total budget for the project is set to <strong>60,000 USD per month</strong>. This number is based on issuance numbers from previous cycles, adjusted to be the minimum required spending to achieve the goals listed above.</p>
<p>See below for goal details and budget allocations.</p>
<p><em>The Bisq DAO only issues BSQ, but because of the variable prices of BSQ and BTC, we present all budget numbers in USD equivalents.</em></p>
<h2 id="team-goals-and-budget">Team Goals and Budget</h2>
<h3 id="admin">Admin</h3>
<p><strong>Budget: 400 USD</strong></p>
<p><strong>Lead: cbeams</strong></p>
<p>The admin function is made of team leads who collaborate in order to:</p>
<ol>
<li>Determine and accomplish project goals by executing high-priority tasks to achieve team goals</li>
<li>Manage key DAO infrastructure such as roles, proposals, compensation, etc. to ensure they are fit to achieve project and team goals</li>
</ol>
<p>In a sense, the admin function exists to unite and rally the 4 other teams as they work to pursue top-level project goals. Its budget allocation is relatively low since the function is new and unproven—team leads have agreed to defer compensation for their own admin efforts.</p>
<h3 id="development">Development</h3>
<p><strong>Budget: 29,000 USD</strong></p>
<p><strong>Lead: ripcurlx</strong></p>
<p>As a software project, development is a core function.</p>
<p>Bisq shipped lots of significant updates to its software in 2019. Now, the focus is on refining this software to be more reliable and welcoming.</p>
<p>For reliability, solving critical bugs are now a top development priority.</p>
<p>We define “critical bug” to be any issue that:</p>
<ol>
<li>prevents a user from successfully trading or managing funds on Bisq</li>
<li>repeatedly lands users in support</li>
<li>puts user funds or privacy at risk</li>
</ol>
<p>We’ll track progress on improvements by tracking metrics such as <em>critical bug incidents per DAO cycle</em> and <em>critical bug incidents per trade</em>. Known critical bugs will be prominently tracked and displayed, and solutions to such bugs will get the highest priority in the development budget.</p>
<p>For onboarding, we need to make Bisq less imposing for new users. Making your first trade on Bisq is not trivial, and many would-be Bisq users are turned away from the apparent complexity of getting started with it.</p>
<p>Luckily, we already have some excellent mockups for significant improvements. These mockups include a more intuitive interface for the desktop software and (most crucially) a beautiful step-by-step wizard to help new users get started without guesswork.</p>
<p>Moving forward, implementing these new interfaces will be a top priority.</p>
<h3 id="growth">Growth</h3>
<p><strong>Budget: 10,700 USD</strong></p>
<p><strong>Lead: m52go</strong></p>
<p>Growth efforts were intentionally muted through much of 2019 because of the DAO launch, bank account fraud incidents, and other factors that made it unsuitable to attract new users to Bisq. The v1.0 and v1.2 releases solved many of these issues.</p>
<p>As it stands at the beginning of 2020, the Bisq software isn’t perfect, but it’s ready for more users and more volume. We’re looking to hit and sustain 2,100 BTC of trading volume per month as soon as possible. Although this is a big improvement from Bisq’s current monthly volume, there were months in 2019 in which Bisq trading volume far exceeded 2,100 BTC.</p>
<p>We plan to achieve this higher, more consistent trading volume with a smarter, more consistent approach to market-making and community engagement:</p>
<ol>
<li>Develop and promote strategic market-making bounties. The USD, EUR, and XMR markets are strong on Bisq, but volume fluctuates and liquidity is not consistent. We will incentivize consistent, desirable liquidity by making sure Bisq always has offers key markets that people want.</li>
<li>Develop and nurture stronger ties with the community. Bisq already has a good amount of word-of-mouth among those in its key demographics across a range of channels, but it needs to more proactively insert itself into more conversations and give more people more reasons to use Bisq.</li>
</ol>
<p>We intend for this two-pronged approach to spark more supply (availability of attractive offers) and demand (users who take offers). We expect consistent execution of this approach to lead to consistently higher supply and demand.</p>
<p>To measure success, we will continue to measure the usual volume metrics (e.g., total volume per unit of time, trades per unit of time, etc), but we will also add new liquidity metrics to better reflect users’ trading experiences: average spread, offer size, depth, volume, etc.</p>
<p><em>A potentially game-changing priority worth mentioning is the shipment of headless Bisq software with an RPC API, making it easy to run a Bisq node almost anywhere and allowing programmatic access to market makers. A <a href="https://github.com/bisq-network/bisq/pull/3888">proof-of-concept for an API</a> is done, and work on a more comprehensive setup that can be shipped to users is underway.</em></p>
<h3 id="support">Support</h3>
<p><strong>Budget: 15,000 USD</strong></p>
<p><strong>Interim Lead: cbeams</strong></p>
<p>Support has long been a function that contributors helped with on a best-efforts basis. Recently, particularly with issues arising from critical bugs and confusion with the new trade protocol introduced in v1.2, it became clear that Bisq needs a more robust approach to support. A better support experience is also essential for retaining users, so there’s also a growth aspect to stronger support.</p>
<p>To this end, the project is spearheading the following 2 initiatives:</p>
<ol>
<li>
<p>Implement a Level 1 / Level 2 support and escalation process. Level 1 will consist of mediators and arbitrators in the Bisq software remain, as well as knowledgeable support agents who are reliably present in the Bisq Keybase #support channel for prompt responses to questions not answered within the software. For Level 2 support, there will be at least 1 Bisq developer on-call during weekdays for escalations.</p>
</li>
<li>
<p>Deploy a knowledge base as a convenient, easily-editable repository of how-to guides, work-arounds, and answers to common questions so users can answer their own questions over time.</p>
</li>
</ol>
<p>Examples of metrics we will track for the support function include <em>time to first response</em> and <em>time to resolution</em>.</p>
<p><em>You can see more details for how the new support function will work in <a href="https://www.youtube.com/watch?v=4HIbOeLbeds">this support kickoff call</a>.</em></p>
<h3 id="operations">Operations</h3>
<p><strong>Budget: 4,900 USD</strong></p>
<p><strong>Lead: wiz</strong></p>
<p>Although Bisq is a peer-to-peer network that doesn’t rely on any central servers, it needs to maintain a number of nodes for various purposes.</p>
<p>Keeping this infrastructure reliable is critical for achieving the project’s goals of maintaining a smooth user experience (e.g., seednodes, mobile app alerts, etc) and protecting user privacy (Bitcoin nodes, pricenodes, etc) among other things (P2P network monitoring, Matomo website analytics, BSQ block explorers, etc).</p>
<h2 id="moving-forward-contributors">Moving Forward: Contributors</h2>
<p>This new framework of goals and budgets means there will be new guidelines for contributors.</p>
<p><strong>Contributions are not eligible for compensation unless they are allocated a part of the budget.</strong> This is in order to better account for spending allocation. Specifically, we want to make sure that everyone spending time and effort on Bisq is directing their efforts toward work that is high-priority and within the budget. DAO voting remains the ultimate arbiter of BSQ issuance, but a compensation request that doesn’t align with its function’s budget and priorities will be downvoted and discouraged on GitHub with reasoning for all stakeholders to see when voting on Bisq.</p>
<p>Team leads will implement their own ways of determining which contributions are high-priority in a particular cycle and which aren’t, but if you’re not sure if what you’re working on will make the cut, please ask a team lead!</p>
<p><strong>All contributors actively working on Bisq should post entries to the #standup channel on Keybase.</strong> Entries should cover what you worked on during the day and what (if anything) stands in your way of making more progress, and they should be made at 8pm CET (ideally) or at the end of your workday. In addition to helping control costs by letting others know if someone is doing low-priority work, this practice also helps to instill a rhythm of momentum and excitement made of all the cool things everyone is working on.</p>
<p><strong>We will be auditing roles to ensure duties are being fulfilled, bonding is done, and documentation is in place.</strong> This is to reinforce existing conventions for roles are actually followed, and that people not in compliance are made to comply with conventions or replaced with people who will—for example, DAO bonding can only work if people actually post bonds, and it’s difficult to fault someone for not doing their role if their role isn’t documented.</p>
<p><em><a href="https://github.com/orgs/bisq-network/teams/dao/discussions/">GitHub’s discussions</a> feature will be used to communicate project-wide and team-wide announcements, so please watch the relevant sections to stay informed. Keybase will continue to be used for ephemeral messaging.</em></p>
<h2 id="moving-forward-users-and-stakeholders">Moving Forward: Users and Stakeholders</h2>
<p>This reorganization of the Bisq DAO was not an easy thing to do. There is no role model for how to structure a high-performing DAO…yet. Maybe Bisq can one day be that role model.</p>
<p>It’s important to remember that Bisq’s success in 2019 is what required such substantive changes. Without the momentous development milestones, record trading volumes, and growth in contributors, there would be no resources to misallocate or competing priorities to manage.</p>
<p>So we kick off 2020 with the following messages to you, dear users and stakeholders:</p>
<ul>
<li>
<p>Expect progress on project goals, as stated above, but also on reporting and transparency to manage and prove this progress. This project has always tried to be as open and transparent as possible, and that continues—you can expect any proclamations of progress to be backed up by actual no-BS metrics.</p>
</li>
<li>
<p>Better responsiveness and cohesion within functions, particularly support. A lack of stated goals and defined teams—a sort of “tyranny of structurelessness”—sometimes led to confusion of priorities for new and even existing contributors. Often it led to underperformance, with weak support being a prime example. The new conventions in place now seek to dispel this confusion and set a path for team progress.</p>
</li>
<li>
<p>Generally filling gaps in the Bisq experience as it is now, making it more useful and more smooth all-around. Organizational changes and metrics improvements mean nothing if they don’t translate into tangible improvements for end users. Hence our focus on liquidity, critical bugs, support, and onboarding.</p>
</li>
</ul>
<p>We’ve hustled to put these changes in place for Bisq DAO Cycle 10 (the current cycle), so you should start seeing the effects soon.</p>
<p>Don’t hesitate to reach out on <a href="https://keybase.io/team/bisq">Keybase</a> with comments, suggestions, or other thoughts.</p>Chris Beams and m52goAfter a year of milestone events, Bisq is implementing more purposeful management of priorities and funds to continue building its DAO to handle more contributors and more complexity.Bisq v1.2 Launches with New Trade Protocol and Account Signing2019-10-29T00:00:00+00:002019-10-29T00:00:00+00:00https://bisq.network/blog/bisq-v1-2-released<p>The latest Bisq release is a big one with two significant updates: a new trade protocol and account signing.</p>
<h2 id="update-requirements">Update Requirements</h2>
<p>First we start with update requirements because they are especially important. If you’re downloading Bisq for the first time, you can skip this section and head straight to the <a href="https://bisq.network/downloads/">download page</a>.</p>
<p><strong>Otherwise, please make sure to do the following before updating to v1.2:</strong></p>
<ul>
<li>complete all trades</li>
<li>complete all disputes</li>
<li>disable open offers (not delete, just disable)</li>
</ul>
<p>Updating to v1.2 with unfinished trades and disputes will require an arbitrator to intervene and manually make payouts. Downgrading back to v1.1.7 to rectify the situation will not be possible, so please double-check before updating.</p>
<p>Disabling open offers prevents the chance that one of your offers is taken before you close the Bisq program and update, which could inadvertantly cause one of the scenarios above.</p>
<h2 id="new-trade-protocol">New Trade Protocol</h2>
<p>Bisq’s new trade protocol moves to 2-of-2 multisig escrow from 2-of-3. The third key for arbitrators was removed.</p>
<p>In addition to sending funds to the multisig escrow, traders sign a time-locked transaction that pays out <em>all</em> multisig escrow funds to a <a href="https://github.com/bisq-network/roles/issues/80">“donation” address</a>. Either trader can publish this transaction after 10 days (altcoin trades) or 20 days (fiat trades). This transaction is required for the new arbitration process (see step 3 below).</p>
<p>This results in a dispute resolution mechanism that is quite different from before. Dispute resolution now takes place in 3 layers.</p>
<ol>
<li>
<p><em>Trader chat</em>. Introduced in v1.1.6, traders can communicate privately over end-to-end encrypted chat right in Bisq to work out minor issues. Users must follow <a href="https://docs.bisq.network/trading-rules#trader-chat">strict rules</a> to keep chats friendly and productive (e.g., no hyperlinks allowed).</p>
</li>
<li>
<p><em>Mediation</em>. If traders cannot solve issues through direct chat, they can request mediation. Mediators are <a href="https://github.com/bisq-network/roles/issues/83">bonded contributors</a> who examine the situation and suggest a payout. If both traders agree with the suggested payout, the payout takes place and the trade is closed.</p>
</li>
<li>
<p><em>Arbitration</em>. If one or both traders remains dissatisfied with the mediator’s suggestion, they can request arbitration after publishing the time-locked transaction. Arbitrators will re-examine the situation, and if they determine the trader requesting arbitration deserves a payout, they will personally reimburse funds to the trader and request reimbursement from the Bisq DAO.</p>
</li>
</ol>
<p><strong>Note that arbitration with the new trade protocol is vastly different from arbitration from before, and that it is now meant to be exceedingly rare.</strong></p>
<p>Please see <a href="https://docs.bisq.network/trading-rules">documentation</a> for more details on how this all works.</p>
<p>Results:</p>
<ul>
<li>
<p><em>Reduces trust required to use Bisq.</em> Until now, users have had to trust that Bisq’s anonymous arbitrators would make fair and responsible decisions when resolving disputes, as they could sign funds to users at their discretion. Now that no one aside from the 2 traders retains a key in the multisig escrow transaction, this is no longer the case. This also results in the network significantly reducing its ostensible legal liabilities since it no longer has any element of control over user funds.</p>
</li>
<li>
<p><em>More private dispute resolution</em>. Many disputes on Bisq are resolvable through direct communication with the trading peer, and don’t need intervention from a third party.</p>
</li>
<li>
<p><em>More scalable dispute resolution</em>. Because arbitrators held the third key of Bisq’s multisig escrows, they had a high degree of power and responsibility: the roles required high availability, high risk, and high stakes (if they made a payout incorrectly, they were on the hook for making it right). Historically, the roles have only been held only by people who consistently put significant effort into the project over long periods of time to warrant holding such an important responsibility (this also made them uniquely capable of posting the high BSQ bond for the role). But these high requirements made the roles relatively expensive and not scalable (e.g., it’s difficult to find many such highly-trusted people).</p>
</li>
</ul>
<p>Now that arbitrators have lost the third key in the multisig escrow, their power is greatly reduced, required bond is greatly reduced, and the network can more easily recruit dispute resolution agents (mediators and arbitrators) as it grows around the world.</p>
<h2 id="account-signing">Account Signing</h2>
<p>In the recent past, any Bisq user could buy 0.0625 BTC with a higher-risk payment account as soon as they created it, and that payment account would start to age immediately, resulting in 0.125 BTC limits 30 days later and maximum 0.25 BTC limits 60 days later.</p>
<p>A handful of stolen bank account scams earlier this year caused Bisq to impose a 0.01 BTC restriction on fiat trades and carefully reevaluate these account aging conventions for allowing higher trading limits.</p>
<p>The goal has been to devise a method to determine a user’s integrity without compromising the user’s (or network’s) privacy or security.</p>
<p>The solution is account signing. Essentially, account aging for payment accounts that require account signing does not kick in until a user’s payment account has been signed by another trusted user, which only happens when the the untrusted peer <em>proves</em> their intention to trade honestly. Until this signing takes place, the payment account is limited to buying 0.01 BTC (sell limits are not limited to 0.01 BTC and instead follow the traditional account aging convention).</p>
<p>The means to make this determination will vary. The first approach included in the v1.2 release is basic. Users with unsigned payment accounts must buy bitcoin from users with signed payment accounts. If there are no issues (i.e., chargebacks) in the 30 days <em>after</em> the trade was completed, the buyer’s account is signed and the 0.01 BTC limit is lifted.</p>
<p>Of course, this requires a delay, which we know isn’t ideal, so we’re working on offering other integrity “verification” mechanisms. You can follow progress and suggest your own ideas <a href="https://github.com/bisq-network/proposals/issues/93">here</a> and <a href="https://github.com/bisq-network/proposals/issues/83">here</a>.</p>
<p>Please note exceptions:</p>
<ul>
<li>account signing is not required for payment accounts that do not have chargeback risk (i.e., face-to-face trading, cash deposits, or money orders)</li>
<li>account signing is not required for <em>any</em> payment accounts used outside of major national currency markets on Bisq (USD, EUR, CAD, GBP, AUD, BRL)</li>
</ul>
<p>See more details on how this works in <a href="https://docs.bisq.network/payment-methods#account-signing">documentation</a>.</p>m52goNew trade protocol moves to 2-of-2 multisig escrows for deposit funds, overhauls dispute resolution to be more private and scalable, and implements account signing to remove 0.01 BTC trade limits.Bisq DAO: The First 4 Cycles2019-08-22T00:00:00+00:002019-08-22T00:00:00+00:00https://bisq.network/blog/bisq-dao-first-four-cycles<div class="responsive-youtube-container">
<iframe width="560" height="315" src="https://www.youtube-nocookie.com/embed/zjdB5_r3mG8" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen=""></iframe>
</div>
<p><em>The above video is a recording of the live call we had about this topic, but this post includes more details.</em></p>
<p>Four months ago, after over four years of development, the Bisq DAO launched.</p>
<p>The objectives are ambitious. The Bisq DAO offers a new way to fund free software, where users pay for usage directly to developers who produce the software. Users also govern the software, making proposals and voting to guide the software’s strategy and direction. This paradigm for funding and governing the software also absolves the need for a company, which in turn enables the Bisq network to run without a legal entity or jurisdiction.</p>
<p>If those points don’t sound significant to you, here’s another way to put it: the code base for the Bisq DAO is bigger than that of the Bisq exchange itself.</p>
<p>Although development and testing were thorough, it didn’t feel right to shout from the rooftops about the Bisq DAO being a huge success after just 1 voting cycle. It still doesn’t, even after 4 voting cycles. The network still needs to finish some key projects to harden itself, and the DAO itself will likely face continual challenges as it grows and matures.</p>
<p>But it’s our duty to keep you (the community) informed, so it’s about time we provide an update on how things have gone so far.</p>
<p>From now on, updates and communications about proposals and results will be provided more regularly and promptly.</p>
<p>Note that all the details discussed in this post are publicly available; most are drawn from the <code class="highlighter-rouge">DAO > Facts & Figures</code> and <code class="highlighter-rouge">Governance</code> sections of the software and the API of <a href="https://explorer.bisq.network/API.html">your favorite BSQ block explorer</a>.</p>
<h2 id="overview">Overview</h2>
<p>Summary:</p>
<ul>
<li>4 successful voting cycles</li>
<li>144 357 BSQ issued for compensation</li>
<li>59 928 BSQ burned through BSQ trading fees</li>
<li>Almost <em>half</em> of all Bisq trades since the DAO launch have used BSQ to pay trading fees
<ul>
<li>4 284 of 9 524 trades used BSQ for trading fee payments</li>
</ul>
</li>
</ul>
<p>Looking at the numbers above, I would say trader acceptance and usage of the BSQ colored coin has been phenomenal so far.</p>
<p>From a governance perspective, there have not been any significant issues through the 4 voting cycles. Proposal, voting, and vote reveal transactions have functioned as expected to provide proposal decisions and contributor compensation.</p>
<p>One small exception: there were some issues with seed nodes that sometimes caused the DAO state to go out of sync on certain Bisq nodes. This caused an issue in Cycle 4 when a user had two compensation requests available for voting when he should have only had one. In spite of this flaw, voting results were not affected. More details are below.</p>
<p>Code fixes and better monitoring for seed nodes should prevent such issues going forward.</p>
<h2 id="cycle-1">Cycle 1</h2>
<p>Summary:</p>
<ul>
<li>Cycle took place between blocks 571 747 and 576 426
<ul>
<li>Calendar dates: 4/15/2019 - 5/17/2019</li>
</ul>
</li>
<li>26 proposals
<ul>
<li>8 bonded roles (Bitcoin node operators, domain name holder, etc)</li>
<li>18 compensation requests</li>
</ul>
</li>
<li>236 votes cast</li>
<li>69 318 BSQ issued</li>
<li>1 313 BSQ burned</li>
</ul>
<p>The very first DAO cycle was highly inflationary, as Manfred and other key developers worked full-time (resulting in high issuance for compensation), and little BSQ was burned since BSQ trading fees were sharply discounted to encourage adoption.</p>
<p>But adoption was great. Within just 6 hours of the genesis BSQ transaction, there had already been 70 trading fee payments with BSQ. To put that number into perspective, the average <em>daily</em> number of trades that took place on Bisq in April was also 70 (!).</p>
<p>BSQ bonds were locked for several Bitcoin node operators, the domain name holder, and the Bisq maintainer role. BSQ bonds are a mechanism meant to discourage foul play in high-trust roles. In a traditional corporate situation, this function would be fulfilled by legal contracts and human trust.</p>
<h2 id="cycle-2">Cycle 2</h2>
<p>Summary:</p>
<ul>
<li>Cycle took place between blocks 576 427 and 581 106
<ul>
<li>Calendar dates: 5/17/2019 - 6/17/2019</li>
</ul>
</li>
<li>18 proposals
<ul>
<li>2 requests to change parameters (trading fees)</li>
<li>2 general proposals (discussed below)</li>
<li>14 compensation requests</li>
</ul>
</li>
<li>164 votes cast</li>
<li>22 870 BSQ issued</li>
<li>2 789 BSQ burned</li>
</ul>
<p>This cycle started right after a couple key developers stepped back from the project—hence the lower issuance.</p>
<p>BSQ burned increased, not because of fee increases, but because of unbelievable volume. June volume almost hit 3 000 BTC, which was almost 3x May’s volume. Much of that volume was from the XMR/BTC trade, where 1 BTC and 2 BTC trades are relatively common. It seems those traders took full advantage of the ≈90% BSQ discount on trading fees!</p>
<p>Because of continued strength in the BSQ markets and usage, discussions to increase trading fees began. <a href="https://github.com/bisq-network/proposals/issues/94">In this thread</a>, a general consensus seemed to emerge for a slight increase in BSQ fees (to go from a 90% reduction over BTC fees to an 80% reduction over BTC fees). At this point, formal DAO proposals to change the BSQ trading fee parameters were made, one for the taker fee and the other for the maker fee.</p>
<p>DAO voting approved these increases.</p>
<p>This is how the BSQ fee schedule changed:</p>
<p><img src="/images/blog/fee-increases-cycle-2.png" alt="Fee increase for Cycle 2`" /></p>
<p>Couple of notes:</p>
<ol>
<li>Note the combined fee percentages. Calculations assume an 8 000 USD/BTC rate. The long-term target for combined fees is 0.4%.
<br /><br />
Also notice: BTC fees have been 0.4% combined for years. At this stage, despite the increase, BSQ fees are still far away from that target.</li>
<li>BTC fees did not change.</li>
<li>DAO voting takes place at the end of DAO cycles, so the fee changes above went into effect in Cycle 3. The sharp increase in BSQ burned in Cycle 2 was primarily the result of a sharp increase in Bisq network trading volume.</li>
<li>BSQ fees are set manually, and are sensitive to the BSQ/BTC rate. As the BTC price increases, BSQ fees need to be adjusted to follow. In this case, the BTC price had increased from around 6 000 USD to 8 000 USD. So a BSQ fee increase was needed anyway to offset that increase.
<br /><br />
At a price of 8 000 USD, trading fees for a 1 BTC offer maker in BTC would be 1 * 0.001 * 8 000 = 8 USD. If the BSQ maker fee rate remained at 0.5, BSQ fees for a 1 BTC offer maker would be 1 * 0.5 ≈ 0.5 USD. This would put BSQ fees at a 93.75% discount ([8 - 0.5] / 8 = 0.9375). The initial target was a 90% discount. So BSQ fees had to be increased anyway, but moving to an 80% discount meant a slightly bigger increase was needed.</li>
</ol>
<p>One more interesting item to note for this voting cycle: a <a href="https://github.com/bisq-network/proposals/issues/95">proposal</a> was made to increase the maximum trade limit for new accounts to 0.02 BTC from 0.01 BTC. The limit was placed on new payment accounts created after March 01 2019 as a temporary measure against stolen bank account scammers while protection mechanisms are conceived and implemented. Although DAO voting approved this proposal, the change was not ultimately implemented, presumably because of <a href="https://github.com/bisq-network/bisq/pull/2904">concerns over backward compatibility</a>.</p>
<p>This highlights an important distinction between DAO proposal types: proposals to change DAO parameters go into effect immediately upon approval (e.g., trading fees). Other proposals, like this 0.02 trade size increase request, require developers to manually make changes, which means there’s a chance an approved measure might not actually make it into the software. Of course, there are incentives to discourage developers from defying DAO vote results (e.g., voters could reject a rogue developer’s compensation requests, discouraging them from continuing to contribute altogether) but it’s interesting to note the dynamic. Even though it’s called a decentralized <em>autonomous</em> organization, humans can still be responsible for imposing the will of the DAO’s stakeholders.</p>
<h2 id="cycle-3">Cycle 3</h2>
<p>Summary:</p>
<ul>
<li>Cycle took place between blocks 581 107 and 585 786
<ul>
<li>Calendar dates: 6/17/2019 and 7/17/2019</li>
</ul>
</li>
<li>21 proposals
<ul>
<li>4 requests to change parameters (trading fees)</li>
<li>17 compensation requests</li>
</ul>
</li>
<li>302 votes cast</li>
<li>22 730 BSQ issued</li>
<li>13 356 BSQ burned</li>
</ul>
<p>Following the continued strength of BSQ usage and trading, Cycle 3 voting resulted in another fee increase, this time for both BTC and BSQ fees. Full discussion is <a href="https://github.com/bisq-network/proposals/issues/99">here on GitHub</a>, but the basic reasoning was that strong BSQ markets, strong trading volume, and a need for the network to attract good developers made fee increases toward targets appropriate.</p>
<p>The fee schedule this voting cycle approved look like this:</p>
<p><img src="/images/blog/fee-increases-cycle-3.png" alt="Fee increase for Cycle 3" /></p>
<p>Notes:</p>
<ol>
<li>Calculations for Cycle 3 assume a 10 000 USD/BTC rate.</li>
<li>The BTC/USD rate increase meant BSQ trading fees would have needed an increase anyway. See point 4 of the Cycle 2 notes above for an explanation.</li>
<li>Again, note the combined fee percentages. You'll see that BSQ fees after voting are still lower than the 0.4% target. You'll also see that the combined BSQ fee percentage before Cycle 3 voting is different than the combined BSQ fee percentage after Cycle 2 voting. This is because of the USD/BTC rate increase.</li>
<li>BTC fees did change this time. As discussed in the issue, for BSQ fees to reach the 0.4% target, BTC fees will need to increase if a ≈50% discount for using BSQ is to be maintained. This means BTC fees need to reach a combined rate of 1% in the long-term (i.e, with maker and taker fees combined). This increase got BTC fees to 0.8% (0.006 + 0.002 = 0.008).</li>
</ol>
<h2 id="cycle-4">Cycle 4</h2>
<p>Summary:</p>
<ul>
<li>Cycle took place between blocks 585 787 and 590 466
<ul>
<li>Calendar dates: 7/17/2019 and 8/16/2019</li>
</ul>
</li>
<li>22 proposals
<ul>
<li>2 requests to change parameters (trading fees)</li>
<li>1 generic proposal</li>
<li>17 compensation requests</li>
</ul>
</li>
<li>218 votes cast</li>
<li>29 437 BSQ issued</li>
<li>42 470 BSQ burned</li>
</ul>
<p>Fee increases, despite fees still being below targets, resulted in the first-ever deflationary period for the BSQ colored coin. Of course, development efforts were depressed in this period, so issuance was relatively low, but it was still nice to see.</p>
<p>The one <a href="https://github.com/bisq-network/proposals/issues/74">generic proposal</a> in this cycle, for deciding on (and implementing) a testing arrangement for the Bisq software, was approved.</p>
<p>The proposals to change parameters were again for fee increases. The result:</p>
<p><img src="/images/blog/fee-increases-cycle-4.png" alt="Fee increase for Cycle 4`" /></p>
<p>Notes:</p>
<ol>
<li>Calculations for Cycle 3 assume a 10 000 USD/BTC rate.</li>
<li>BSQ fees were overshot. This is likely because the USD/BTC rate hovered around 12 000 for quite a while, at which the BSQ fee increase results in a combined 0.4% rate. When the USD/BTC rate dipped again, the combined rate goes up again. If USD/BTC rate remains at 10 000 as it has in recent days, it would make sense to reduce BSQ fees again. This is a necessary result of the BSQ fee rate being manually adjusted.</li>
<li>BTC fees did not increase.</li>
</ol>
<p>Otherwise, there was the issue of duplicate compensation requests noted above in the Overview. A contributor made a compensation request, deleted it, and then made another—but both requests remained available for voting. The situation was clarified on GitHub, so stakeholders knew to reject the old proposal and approve the new one. But with more voters, as there will likely be in the future, such communication won’t be possible, and there would have been a risk that the contributor could have had both his requests approved (i.e., been paid twice). The hope is that such issues will be addressed while the number of voting participants is still relatively small.</p>
<p>As mentioned above, the underlying issue was with the network’s seed nodes, and was fixed. Vote results and BSQ issued were not affected.</p>
<h2 id="looking-forward">Looking Forward</h2>
<p>In my opinion, the launch of the Bisq DAO has been surprisingly smooth.</p>
<ul>
<li>BSQ adoption and usage is strong</li>
<li>Contributors have been able to sell nontrivial amounts of BSQ for BTC</li>
<li>BSQ market has retained strength in the wake of fee increases, which are needed to make the network sustainable
<ul>
<li>More BSQ was burned in Cycle 4 than was issued</li>
</ul>
</li>
</ul>
<p>With a functioning revenue model, the network’s focus must now be to draw more developers to implement much-needed improvements to the software. <a href="https://www.youtube.com/watch?v=NJKldxdEnEY">Our call yesterday</a> attracted over 20 potential contributors, some of whom identified themselves as developers. Further efforts to attract contributors will continue.</p>
<p>The network’s need for developers is particularly important because it is time-sensitive.</p>
<p>At roughly the same time as the DAO launch in April, it became clear that the network was being attacked with stolen bank account scammers. As a temporary measure, fiat accounts created after March 01 2019 were limited to buying a maximum of 0.01 BTC. The <a href="https://github.com/bisq-network/proposals/issues/93">longer-term fix</a> is to implement an account-signing mechanism that makes it more difficult to use stolen bank accounts in Bisq, but implementation of this mechanism has been slower than expected.</p>
<p>Also needed quickly is the implementation of <a href="https://github.com/bisq-network/proposals/issues/52">a new trade protocol</a> to remove arbitrators and embrace off-chain trading. Getting rid of arbitrators is a crucial step forward in hardening the network. This is a significant project that will require more developers to finish it in a reasonable timeframe.</p>
<p>The successful launch of the Bisq DAO made <a href="https://docs.bisq.network/dao/phase-zero.html">the ambitious vision</a> laid out in Phase Zero real. But big challenges remain, and the network must figure out how to conquer these challenges if it is to really succeed and realize its ultimate vision of becoming <em>the</em> bitcoin on/off-ramp.</p>m52goThe Bisq DAO launched 4 months ago, after more than 4 years of development. It has now completed 4 voting cycles. In this post, we provide an update on how it's worked out so far.Bitcoin and the Store of Value Narrative2019-06-04T00:00:00+00:002019-06-04T00:00:00+00:00https://bisq.network/blog/bitcoin-and-the-store-of-value-narrative<hr />
<p><em>Manuel writes at <a href="https://www.juandemariana.org">juandemariana.org</a>, is a perpetual student of monetary theory, and is a Bitcoin quasi-maximalist (he is almost there).</em></p>
<p><em>If you’d like to contribute a post, please reach out on <a href="https://keybase.io/team/bisq">Keybase</a>!</em></p>
<hr />
<p>Since Bitcoin’s inception, there has been an endless debate about the explanation of its value. What backs bitcoin? Does bitcoin have intrinsic value? Why is bitcoin demanded? To answer these questions many Bitcoin advocates refer to the principles established by the Austrian School of Economics concluding that bitcoin’s main source of value is being a store of value. I believe this conclusion is the result of the toxic block size debate by which both sides of the debate wrongly narrowed the concept of a medium of exchange to money (cash).</p>
<p>To make my position clear about the block size, I absolutely advocate for small blocks. I believe that running a Bitcoin full node should be as easy and affordable as possible so the system is not only decentralized but fully distributed where final users have full sovereignty over their bitcoin.</p>
<p>Going back to the principles of the Austrian school, the most widely followed monetary theorist of this school, Ludwig Von Mises, developed the <a href="https://wiki.mises.org/wiki/Regression_theorem">Regression Theorem</a> in his book titled <a href="https://mises.org/library/theory-money-and-credit">“The Theory of Money and Credit”</a>. The theorem states that for an economic good to be money it must primarily have other non-monetary uses before it can become money. Bitcoin does not fit this description. Some economists like <a href="https://mises.org/library/bitcoin-regression-theorem-and-emergence-new-medium-exchange">Block and Davidson</a> have tried to reinterpret this theorem in order to shoehorn Bitcoin into it by claiming that the Regression Theorem applies only to barter economies and does not apply when there are already monetary prices. I don’t think that interpretation is correct and it is also incoherent in and of itself (see <a href="https://juanramonrallo.com/mises-y-block-se-equivocan-sobre-sus-teoremas-regresivos-del-dinero/">Juan Ramón Rallo rebuttal</a>).</p>
<p>Mises’ Regression Theorem is based on the observations made by Carl Menger in his seminal work <a href="https://mises-media.s3.amazonaws.com/On%20the%20Origins%20of%20Money_5.pdf">“On the Origins of Money”</a> where he describes the process of how money arose from commodities. But, what Menger did was make a historical observation, not a theoretical explanation. It was Mises who wrongly took those observations into theory with his unfortunate Regression Theorem.</p>
<p>In an attempt to dodge the Regression Theorem debate others have retorted with Nick Szabo’s views in his remarkable essay <a href="https://nakamotoinstitute.org/shelling-out/">“Shelling out: The Origins of Money”</a>, using the collectible and store of value arguments. Szabo’s excellent work is also a historical explanation like Menger, but more detailed and precise from an anthropological point of view.</p>
<p>I shall not spend much time rebutting the claim that bitcoin’s source of value at the very beginning was being a collectible in the literal meaning of the term. That was not what Szabo meant and it is not credible at all to say that the first bitcoin owners demanded it because it was a whimsy, rather than demanding it because they thought it could potentially become a medium of exchange. Bitcoin’s first owners knew well why Bitcoin was invented and for what purpose it was intended.</p>
<p>A popular <a href="https://medium.com/@vijayboyapati/the-bullish-case-for-bitcoin-6ecc8bdecc1">narrative amongst Bitcoin supporters</a> that apply Szabo’s views claim that money <strong>always</strong> evolves through the following stages:</p>
<ol>
<li>Collectible<br /></li>
<li>Store of Value<br /></li>
<li>Medium of exchange<br /></li>
<li>Unit of account</li>
</ol>
<p>In my view, the above narrative is scientifically inconsistent and as such, it could be easily utilized against Bitcoin by academia and governments to spread negative propaganda like accusing Bitcoin of being a reckless speculative bubble and that there is no scientific support of its value other than “It’s valuable because people value it”. It’s not that I fear too much that they can stop anything - I believe Bitcoin will thrive or not regardless of what haters and supporters claim - though, they might be able to slow down the adoption process a bit.</p>
<p>The narrative is scientifically inconsistent because it deviates from the <a href="https://en.wikipedia.org/wiki/Subjective_theory_of_value">Subjective Theory of Value</a> as it puts value in front of utility. I don’t want to claim that this theory is set in stone but, if it has to be amended, it has to be very well justified. In my view, there are absolutely no grounds for amendment within the above narrative. As I fully reject the collectible whimsy argument to explain Bitcoin bootstrapping, the only argument left is that the collectible is valuable because it is a store of value, which is obviously circular and therefore explains nothing. Game theory does not resolve that circularity either. Moreover, it is also confusing that the narrative assigns to store of value the properties which belong to medium of exchange (portable, fungible, divisible, quickly verifiable, etc).</p>
<p>Here I will explain how Bitcoin fits very well within the Subjective Theory of Value and also within the historical stages of exchange described by Carl Menger. Leaving apart deferred exchanges (i.e. credit), the basic first three stages of spot exchange are the following:</p>
<ol>
<li>
<p><strong>Direct exchange</strong>: Barter.</p>
</li>
<li>
<p><strong>Indirect exchange</strong>: When exchange is done in two steps using an intermediate good. Szabo’s concept of “collectible” is a particular case within this category, which is using goods for long term indirect exchange.</p>
</li>
<li>
<p><strong>Money</strong>: When a good used for indirect exchange is widely accepted.</p>
</li>
</ol>
<p>We would deal separately with the concept of Unit of Account because this function fulfills the need for economic calculus which is an extremely important need, but different than fulfilling the need for exchange. Regarding the store of value function, it is not exclusive to money or proto-money, as all economic goods are by definition a better or worse store of value.</p>
<p>So going back to Menger, we find that to overcome the problems of direct exchange (barter) humans began to use some goods for indirect exchange, that is, demanding or hoarding a good not for consumption but for exchanging it for other goods in the future. For example, if they had the possibility to decide on hoarding cereal or eggs, it is reasonable that they chose cereal as it is more durable and divisible. As the concept of a medium of exchange is still not imaginable for them, they wouldn’t be able to assess how cereal could be demanded by others to use it also for indirect exchange. They would just rely on others demanding it as food in the future (durable) while they could potentially use it for several different exchanges (divisible). <strong>Once this experience is repeated, the concept of medium of exchange clearly reveals itself and it is immediately picked up by human entrepreneurship to be further exploited.</strong></p>
<p>Each individual might choose completely different goods for indirect exchange depending on what they have available and when they are expecting to need them for exchange, so a convergence between individuals to choose the same good for this purpose is initially not necessary. The convergence would come naturally afterward, once humans have discovered the concept of medium of exchange, and that’s when the most salable goods begin to compete for being a generalized medium of exchange (i.e. Money). The game theory concept of <a href="https://en.wikipedia.org/wiki/Focal_point_(game_theory)">focal point</a> kicks in at this stage reinforcing the demand for the most salable good.</p>
<p>A key concept in this debate is the term of the exchange. For a good to be money it is implicit that it serves well its purpose in the short term. This is also implicit in the words “most salable” within Menger’s definition of money <em>“the <strong>most salable</strong> of commodities”</em>, which <a href="http://www.carlosbondone.com/en/theory-of-economic-time/economic-theory/development-of-concepts.html">Carlos Bondone</a> has generalized to “the most salable present economic good”. If it only serves its purpose in longer terms it might not be money but, it would still be a medium of indirect exchange.</p>
<p>But, in this post, we are interested in the bootstrapping process to achieve that salability. Let’s refer back to the stage of goods being just a medium of indirect exchange. I stated above that humans would rely on cereal’s utility as food to foresee its future demand because the concept of medium of indirect exchange would still be an unknown abstraction for them. If we fast forward to a context where humans already conceptually grasp a medium of exchange, why should they not be able to foresee the monetary demand of any good, regardless if it has other uses or not– that is, its ease of transport, divisibility, durability, and unfalsifiability. This is clearly the case for Szabo’s “collectibles” and also Bitcoin’s case. From a historical point of view, I find it rather unlikely that humans used otherwise useless goods as a medium of exchange without first having discovered the medium of exchange concept through other consumptive goods, but it is certainly theoretically possible.</p>
<p>In the same way that discovering the concepts of adding and subtracting quantities is more natural through comparing physical quantities (i.e. beads, as in an abacus), that does not necessarily prevent humans to skip that step and directly invent written numerals and ledgers. Even though we once used the abacus and its sexagesimal numeral system, it does not mean that all other numeral systems must first be accounted through the sexagesimal system.. We must not confuse the supporting medium by which we historically experiment and discover a concept (i.e. beads or commodities) with the concept itself (arithmetics or Money).</p>
<p>If something arises (bitcoin) that can fulfill the sole use case of a medium of exchange better than the incumbents (barter, salt, gold, fiat etc.), then that is where the demand can be found. Can this demand can be speculative? Yes, it is speculation on the possibility of the good becoming money in the future.</p>
<p>Mises had the following concern regarding new monetary goods that have no other use than a medium of exchange: (<em>Human Action</em> – Chapter 17 section 4 – “The determination of purchasing power of money”)</p>
<blockquote>
<p>“A value judgment is, with reference to money, only possible if it can be based on appraisement. The acceptance of a new kind of money presupposes that the thing in question already has previous exchange value on account of the services it can render directly to consumption or production. Neither a buyer nor a seller could judge the value of a monetary unit if he had no information about its exchange value–its purchasing power–in the immediate past.”</p>
</blockquote>
<p>So, how is it that a completely new monetary good’s price is discovered? That is the least of the problems. The owner of bitcoin might arbitrarily ask for a price and buyers can accept it or bid at a lower price until they agree on the same price. At that point, the first exchange takes place. In the beginning, the price might be totally erratic, but as more market participants are interested, demand and supply builds and the price stabilizes. This continuous auction process is indeed how prices of goods have always been discovered and it is nothing special for money nor anything new that Bitcoin brought. The fact that many other speculators join in later just for the “lambos” without caring about Bitcoin’s monetary utility is completely irrelevant in relation to bitcoin’s primary source of value. A subject for another blog post is whether or not speculators and traders are beneficial for Bitcoin.</p>
<p><strong>Conclusion</strong></p>
<p>Bitcoin’s origin of value can be fully explained on the grounds of the subjective theory of value and Menger’s definition of money. Because the need for exchange is a basic human need, any good that has the qualities to satisfy that need, (even if it only satisfies that one need), is useful and therefore subject to being demanded.</p>Manuel PolaviejaManuel posits that Bitcoin's value cannot be explained with a store-of-value approach.Time for the DAO to take over2019-05-16T00:00:00+00:002019-05-16T00:00:00+00:00https://bisq.network/blog/let-the-dao-work<p>Dear Bisq community,</p>
<p>With the successful launch of the DAO, Bisq is entering a new phase. The bootstrapping phase where founders are steering the project forward is over, and the Bisq DAO is now the infrastructure which enables that Bisq is managed by its stakeholders and contributors. The DAO was envisioned from the very beginning of the project. It was also clear from the beginning that the founders need to step back to ensure that the project can develop to its full potential as a decentralised organisation. We see in all crypto-currency projects where the founder is still around that those projects suffers from some sort of centralisation. Satoshi did Bitcoin a great favour by stepping out. Bitcoin would not be the same if he would be still around as an authority, and Bitcoin developers would not be able to develop their full potential. Of course such events might be a bit disruptive and challenging for some but it really should be seen as that what it is: <strong>a necessary step to enable Bisq to be a decentralized autonomous organization.</strong></p>
<p>So with all that in mind I had planned to step back from most of my roles in Bisq after the DAO was launched. It was planned as a slow fade-out to make it as least disruptive as possible. Unfortunately this plan was interrupted by some exceptionally stressful event just around the time when we launched the DAO: Bisq got attacked by a chargeback scammer. Instead of celebrating and resting a bit after the quite exhaustive work to get the DAO ready for launch, I spent overtime on fighting the scammer. With the stress level that event caused it became clear to me that I have to take more care of myself to not risk any serious health issues or a burnout by constantly working over my limits. Knowing myself to be not very good in handling work-life balance I realised I cannot make my departure as a slow fade-out, but rather I need to make a hard cut, otherwise it would get delayed indefinitely. Of course I will be still around for helping and answering questions but I will step back from all my roles and activities in Bisq (beside a few trivial ones like running a Bitcoin node).</p>
<p>So this moment might be a good occasion to look back to what we have achieved and look forward what is on our roadmap.</p>
<ul>
<li>Bisq is the only really decentralised bitcoin-fiat exchange</li>
<li>We have developed the first Bitcoin based DAO</li>
<li>We built up a strong community of contributors</li>
<li>We earned a great reputation and Bisq became a quite well recognised brand in the Bitcoin community</li>
<li>Already more than 50% of Bisq traders are using BSQ after just a few weeks. So the DAO is not only working on the contributors’ side but is also accepted by our traders.</li>
</ul>
<p>But there is more. Many interesting ideas and proposals are out and waiting for developers to set them into reality:</p>
<ul>
<li>New <a href="https://github.com/bisq-network/proposals/issues/78">innovative</a> <a href="https://github.com/bisq-network/proposals/issues/79">protection</a> <a href="https://github.com/bisq-network/proposals/issues/83">tools</a> against chargeback scam</li>
<li><a href="https://github.com/bisq-network/proposals/issues/52">New trade protocol</a> based on direct communication and mediators instead of arbitrators</li>
<li>Ideas for an <a href="https://github.com/bisq-network/proposals/issues/32">off-chain</a> <a href="https://github.com/bisq-network/proposals/issues/76">trade protocol</a></li>
<li><a href="https://github.com/bisq-network/proposals/issues/85">Decentralised CFD</a> for those who are primarily interested in speculative trading</li>
<li>Automate trading with <a href="https://github.com/bisq-network/bisq/tree/http-api">APIs</a></li>
<li><a href="https://github.com/bisq-network/proposals/issues/87">Automate altcoin trading</a></li>
<li>Integrate <a href="https://github.com/bisq-network/proposals/issues/86">tx proof verification</a> for Monero traders</li>
<li>Add <a href="https://github.com/bisq-network/bitcoinj/issues/33">Segwit support</a></li>
<li><a href="https://github.com/bisq-network/proposals/issues/88">Hardware wallet</a> integration</li>
<li>Add <a href="https://github.com/bisq-network/proposals/issues/89">deterministic build</a></li>
</ul>
<p>So you can see a lot of challenging work is waiting for talented developers who want to become part of Bisq and help to build the infrastructure Bitcoin deserves: <strong>a privacy protecting on-ramp which follows the principles of Bitcoin and not those of the banks.</strong></p>
<p>If you are interested to work in a project that’s permissionless and non-hierarchical by design, Bisq might be your <a href="https://bisq.wiki/Contributor_checklist">place</a>.</p>Manfred KarrerWith the DAO in place Bisq has to evolve its organisational structure without its founders. The departure of the founders was planned from the very beginning. Now it is time to fulfill that plan.Why Some Bitcoin Companies Go Rogue: An Interview with Janine from Block Digest2019-04-30T00:00:00+00:002019-04-30T00:00:00+00:00https://bisq.network/blog/ricardo-janine-rogue-bitcoin-interview<hr />
<p><em>Ricardo writes for <a href="https://coincache.net">Coincache.net</a> and is a Bitcoin maximalist, who lives with his wife and son in Colombia.</em></p>
<p><em>If you’d like to contribute a post, please reach out on <a href="https://keybase.io/team/bisq">Keybase</a>!</em></p>
<hr />
<p>In Bitcoin, reputation means nothing—code and actions is what truly matters. We have seen both Bitcoiners and Bitcoin companies like Bitpay, Coinbase and Bitfury destroy their reputations in the eyes of hard core Bitcoiners, either by attacking Bitcoin or trying to control it and twist it to their own purpose. Bitcoin maximalists are people who have a strong belief that Bitcoin will become the world reserve currency at some point in the future. Their base is made up of cypherpunks, software developers, anonymous Bitcoin enthusiasts and others who believe in the Austrian School of economics, whose principles have been coded into Bitcoin’s deflationary monetary policy. They’re often called toxic because they call out these kinds of shenanigans when they see them, and they pull no punches. We have seen many companies engage in questionable practices that drew the ire of the the more ideological sector of Bitcoin users, and we have seen some of Bitcoin’s most famous personalities meet the same ruthless judgment when they do things deemed harmful to Bitcoin.</p>
<p>I wanted to delve deeper into why these companies who became successful as Bitcoin companies, decide to turn on Bitcoin, the very same thing that made them successful in the first place. I was able to get in touch with Janine of the <a href="https://www.youtube.com/channel/UCb53lXz2IzEFT5JNHSbdvPg">Block Digest Podcast</a>. She was kind enough to let me bombard her with questions for over an hour. She patiently and intelligently answered all my questions and gave me some remarkable insights into rogue Bitcoin companies.</p>
<p>If you haven’t checked out Block Digest, I highly recommend it. It’s my favorite Bitcoin podcast, and one of the best available. They are always covering the most important stories in Bitcoin, from a maximalist perspective. I wanted to interview Janine in particular, because she is a <a href="https://einzelgaengerinmotte.wordpress.com/">world-class journalist</a> with Bitcoin expertise and a stellar track record. Her work for Block Digest as a presenter and commentator of Bitcoin news and current events, together with Shinobius and Crypto Rick, is some of the best in the space. Her privacy-conscious perspective has been huge for my personal process in learning how to use Bitcoin properly. I wanted to give respect where respect is due.</p>
<h2 id="the-interview">The Interview</h2>
<p><strong>Q: Why do companies that became successful because of Bitcoin, decide to turn on Bitcoin, in your opinion?</strong></p>
<p>A: Well, for instance with the #deletecoinbase movement, there was a few people, Roger Ver was the biggest one, that was saying we shouldn’t criticize Coinbase because they made Bitcoin successful. I think that mindset is part of it, because if a company in this space has that perspective, that it’s them helping Bitcoin, not Bitcoin helping them in their business, and obviously to make money, then they get this entitled attitude when it comes to consensus changes, development, etc.</p>
<p>They feel like they have less responsibility to do things which benefit the network and not their business. They feel like they’re entitled to more than they have already been given; most Bitcoin development happens through volunteers. Some developers are sponsored, but a lot of development happens as free volunteer work. Coinbase, for example, is notorious for not giving a whole lot back to the community or sponsoring development, like a lot of other companies in Bitcoin do. So this attitude of “we’re helping Bitcoin, Bitcoin isn’t helping us, is what can turn a lot of companies to becoming rogue or just not being conducive to the consensus process.
As far as Segwit 2x, a lot of those companies were based in or around Silicon Valley. A lot of Silicon Valley companies have a very limited perspective when it comes to privacy, revenue models, for instance, how to fund a startup. They have a lot of local pressures like super high rent, etc.</p>
<p>This incentivizes and pressures them to try to make money a lot more than businesses elsewhere, and so when they don’t have a financial model to generate revenue, they go with a freemium model. This freemium model appears free but isn’t at all good for your privacy or security, or they end up being very closed companies which don’t really build out this open financial system that a company like Coinbase talks about. They keep saying they want to build this open financial system but they end up building something a lot more closed than, say Paypal, they have a lot more requirements and restrictions. That’s due to this Silicon Valley mindset, and the mindset that they are contributing more than Bitcoin is contributing back to their business.</p>
<p><strong>Q: What have been some of the methods they have used to try and undermine Bitcoin?</strong></p>
<p>A: It reminds me of Andreas Antonopoulos’ talk on the <a href="https://www.youtube.com/watch?v=43Ucj6_Erb0">five stages of grief for banking</a>. I think it kind of applies to companies in a similar way, but they aren’t exactly trying to work in opposition to Bitcoin, they are trying to apply their business model on to Bitcoin.</p>
<p>The five stages of grief are:</p>
<ol>
<li>Denial</li>
<li>Anger</li>
<li>Bargaining</li>
<li>Depression</li>
<li>Acceptance</li>
</ol>
<p>Companies go through it as well, so sometimes they pursue strategies that people in Bitcoin might think of as malicious or attacks, but they tend to line up with the five different stages of grief. At first, they go through this denial phase where they say, “our business isn’t working because something is wrong with Bitcoin.” It’s not “there’s something wrong with our business model” or “we’re doing something wrong.” There is this denial there.</p>
<p>Then they go into anger, when they go up against the consensus process, where people have noisy, intense debates for months on end, or sometimes, even years on end, and then they don’t reach a conclusion. I’m reminded of the recent <a href="https://avc.com/2019/03/video-of-the-week-vitalik-buterin-the-unchained-podcast-interview/">Laura Shin interview with Vitalik Buterin</a>, and the first thing they talked about was Fred Wilson. Fred Wilson was saying “I wish I could just walk into the Ethereum foundation, and say Vitalik, you need to hurry up and make a decision, we can’t just sit around waiting, it’s destroying Ethereum.” He comes from that Silicon Valley mindstate, where, a CEO, or board of directors, will come in and say, “OK, you’ve had your discussion, but now we are going to do this. End of debate.” You can’t do this in Bitcoin, because Bitcoin doesn’t have a CEO. A lot of the CEOs of these companies, try to act like they are the CEO of Bitcoin because they run what are considered successful companies in the space. That’s the anger phase, they get angry when they don’t have as much influence over consensus as they imagined, because of their influence in their respective companies, and their success.</p>
<p>So, then they get to bargaining. If we use Segwit 2x as an example, they had the <a href="https://bravenewcoin.com/insights/segwit2x-the-new-york-agreement">New York agreement</a>, where these CEOs said we’ll implement Segwit, but then we’ll also have a 2mb block hard fork in addition to Segwit. It was just reframing the issue because Segwit already was enabling more blockspace. That was the bargaining stage though, and the problem was the way they bargained.</p>
<p>They got this group of CEOs together to write up a document, based on a discussion at a conference, but the NY agreement wasn’t open. It took place behind closed doors and was a lot more restricted. They figured since they were CEOs, and saw themselves as influencers, they thought whatever agreement they came to would be seen as legitimate. Then over the next 6 months, they saw that, no, it wasn’t legitimate. Yes, you may be successful and influential, but just because a few people in a room made a decision, consensus didn’t reach the same conclusion.</p>
<p>Now, they reach the depression stage. Again, to use Segwit 2x as the example, it was already failing and a lot of people dropped out ahead of time because it was failing. Then, with the “off by one” error in the code, it could have potentially broken the network if it had been enacted, they ended up canceling it. It was in the Bitcoin mailing list and I think only 6 people signed it, so they went to the depression phase. In the depression phase a lot of them stopped posting, they were trying to figure out what happened.</p>
<p>Then we come to the acceptance phase. Finally, in the last couple of months, I have seen them (these same CEOs) start talking about it again. From their view, they’re asking things like where did we go wrong? How could we have done better? Their conclusions are a lot different than the people who they were fighting against, who thought the conclusion was good, and that it was a catastrophe we narrowly avoided. All of the doomsday predictions they were making about Segwit turned out to be untrue. I think it’s been about a year and a half and some them still haven’t reached the acceptance phase yet. Some reached the acceptance stage just a few months after the 2x disaster, but others still haven’t reached it.</p>
<p><strong>Q: Why do they structure themselves in a way which leaves them vulnerable to outside influences like regulatory pressure?</strong></p>
<p>A: I think there are several factors that make them vulnerable to actors like governments, or even just very powerful banks, who don’t have an interest in seeing Bitcoin succeed, but in the short term might partner with influential companies in the space. They may do this either to see what’s going on, or because they think they may be able to hurt Bitcoin in some way if they can hurt some of the companies involved.</p>
<p>It also depends on your location, different legal jurisdictions have different sets of rules and tradeoffs, in terms of what kind of legal structure you can set up. It also depends on what kind of business you are, and what kind of customers you’re serving, or what kind of service you’re offering. For example, if you are offering a custodial service, that puts you in the most scrutiny from a legal and regulatory perspective, wherever you’re at. Some places may be less strict, but in general, if you’re running a centralized, custodial service, it’s a big deal, in terms of what kind of pressures you face.</p>
<p>That’s why in Coinbase’s case, we have seen them decide it’s beneficial to be one of the few companies to kiss up to the authorities and say, “yes, we’ll go by your rules”, and if they do that and no one else does, they will become the defacto crypto bank. Then nobody else will be able to compete with them since they spent so many years ingratiating themselves to the financial structure (particularly, the U.S. regulatory structure). This happens over and over in other industries, so it’s not a surprise to see that this is their business model.</p>
<p>So, I think, the location, size, culture, corporate structure (if you have a corporation at all!) of the companies, matters a lot. I know Bisq doesn’t do things this way and tries to stay as spread out as possible, which gives you the advantage of not having a single point of pain to target if somebody were to try and take it down. I am definitely curious about different legal structures, and geography and how they can best be taken advantage of.</p>
<p>A structure that’s more decentralized is better for the employees as well, they can express themselves more, and it’s not as top-down as other organizations. If your organization is centralized and very top-down, if there is one person at the head, this leaves you open to someone either trying to replace you or influence you in some way, so they can influence the rest of the company, and if the service is custodial and centralized then you influence all their customers by default.</p>
<p><strong>Q: Is there any viable solution to the poor governance models of existing businesses to relieve legal or regulatory pressures?</strong></p>
<p>A: Corporate structure is not my area of expertise. I do have an interest, but one thing I think could be really beneficial for me at work is, as an employee, having more control over your work. For example, I have an unusual employment contract, unusual in the sense that I haven’t come across anyone else that has a contract like this. My contract says that I retain any copyright ownership over original, creative work I come up with, but I give my employer a creative commons license in perpetuity.</p>
<p>This means they can use it, but I retain ownership over my work, which is extremely unusual, considering that anything you do on company time, even if it’s not something you were doing for them, an employer can say, “well, you did it on company time or with company resources, etc.” I have met a lot of people that were disgruntled because they came up with an idea or something and the company was like we own this, we can put you on the patent, but we will make all the money from this. This is something I have personal experience with, I have heard a lot stories from friends of mine in the software world, who’ve gone through something like this, and feel disgruntled.</p>
<p><strong>Q: Why do these companies switch their focus to altcoins and ICO/STO coins after they reach a certain level of success with BTC?</strong></p>
<p>A: I’d say it has to do with a few different factors, like what stage of the business cycle they’re in when they were developing. It might also have to do with the people running the company, they might be into other kinds of coins and just try to incorporate that into their business. They may think it’s a good strategy, others might be into other coins and add that in, not even thinking how it will be perceived from a business standpoint. They could also be under the influence of friends or colleagues who convinced them to add them.</p>
<p>I think from a business cycle perspective, it is a very easy thing to do if you mostly focus on Bitcoin, but then, maybe financially you’ve run into hard times, or it’s been a while since you’ve added a new feature people are excited about, and the easiest thing to do, is to say “look we’ve added a new coin”. A lot of their user base might buy it, thinking, it’s worth a penny now, but it might be worth a lot more just like Bitcoin. They think that since bitcoin was so successful, any other coin could be too.</p>
<p>There used to be this phenomenon when a coin would get listed on Coinbase, it would shoot way up in price, and it’s been happening less and less. Who really knows why, but it could be that once you buy one of these coins and don’t get rich, you’re less likely to do it again. It could also be that timing has to do with it. During the bull market, there was a lot more enthusiasm for buying any new coin, and now during the bear market, there isn’t as much, so it isn’t generating as much hype. It’s interesting, with XRP they expected a huge price pump from being listed finally on Coinbase, and it didn’t really happen. It could have been that they caught the wrong end of the Neutrino controversy so people didn’t want to use the Coinbase wallet, or they didn’t know what would happen, so they stayed away.</p>
<p><strong>Q: Do you think the technical disconnect between business owners and the actual devs working on the protocol affects the kind of services we are seeing offered to Bitcoiners?</strong></p>
<p>A: I think even outside of Bitcoin there is a disconnect between the “manager” class and the “developer” class. They generally have different perspectives and incentives. Developers want to be creative and work on things, while employers want to make more money or attract more users. What it takes to make the company successful may not be immediately obvious, but I think there’s always been a pretty big disconnect between the developers and the CEOs.</p>
<p>I think it’s particularly pronounced in Bitcoin because of the ideological aspect that isn’t present with a lot of other technologies. So, developers who work on it, have this ideology, like with Linux and open source software we see this a lot too, that the disconnect is pretty pronounced.</p>
<p>We have a thing where it’s not just being creative but you want to work on things that reflect your values as well. If your employer doesn’t share the same values, it could cause a lot of dissent. This is especially true in Bitcoin. It’s also hard because there are not as many competent Bitcoin developers like there are in other industries. I think a lot of owners of Bitcoin companies are under pressure to make their developers happy because if they are dissatisfied, they can easily go to any other company and get a job. The companies that don’t understand how valuable they are will just stop working after a while if they don’t understand. It may happen slowly over a long term period of time, and they’ll go down.</p>
<p>We’ve seen a lot of companies go away in the last year, and people think it’s the bear market, but I think the bear market was just a catalyst that shows maybe they have been doing things badly for a long time and it finally caught up with them, like Bitmain, for example. They have been going down for a long time but it took this big correction in the market to show that whatever they were doing before wasn’t working for a long time. Now they have no other options left to keep covering that up, or to keep putting band-aids on it.</p>
<p><strong>Q: I was going to ask you about Bitmain later, but since you brought it up, what are your thoughts on Bitmain’s epic decline?</strong></p>
<p>A: Shinobi (of Block Digest) would probably have better answers than me, but the mistake Bitmain has made, is since they’re a mining company, they have a lot more influence on Bitcoin consensus than companies who don’t mine. I think a huge mistake they’ve made is the arrogant assumption that since they’re a big mining company, they’re the ones who’ve made Bitcoin successful.</p>
<p>Then they made the biggest mistake of their trajectory by putting a lot of resources behind Bitcoin Cash, thinking we’re Bitmain, we have a lot of influence, if we do this then Bitcoin Cash will be successful. Then they realized how powerful Bitcoin’s user base is, and when they didn’t get that user base, Bitcoin Cash didn’t matter anymore, if no one is using it, there is no value, and it will go down. That was a huge problem for them because they put so many resources behind it, they couldn’t just trade it back for Bitcoin that easily. Then they got caught in a cycle where they could never catch back up to where they were. This was in parallel with problems they were having with manufacturing mining hardware, I am not an expert in mining hardware, but they were having troubles with their mining chips in addition to backing Bitcoin Cash.</p>
<p><strong>Q: How important is it for Bitcoin users to protect their data from companies who have no accountability to keep it safe, secure & private, in the age of data monetization as a profit strategy in today’s surveillance economy?</strong></p>
<p>A: It’s extremely important. I think it’s not only important for me to do it, but also for others. What one person does in Bitcoin will affect everyone else. If it’s just one person, chances are small, but if everyone has the same bad strategies in terms of caring about data privacy, it will affect everyone else. It goes back to the difference between privacy and anonymity. You can wear a mask in a town square, but it’s a lot better if everyone in the square is wearing masks too. It’s a lot more powerful.</p>
<p>For example with this Quadriga thing that’s happening, it’s more significant than the loss of funds, because we’ve seen that a lot. This is the first example we’ve seen allegations where someone like a co-founder has changed their identity multiple times and had been imprisoned for credit card fraud and identity theft schemes. To me, this is a giant red flag for trusting these custodial exchange companies, not just with your crypto data, and how you’re buying or selling coins or who you’re sending to or receiving from, but also with any other sensitive personal identity information you’re forced to give up to use these services.</p>
<p>It will eventually become clear that the only way to have privacy is not to use any custodial services and to use Bitcoin as it was intended to be used, where you control your private keys as much as possible. It should be a priority to make wallets and decentralized exchanges as easy to use as possible. Data privacy is important, but also it’s important financially because nobody knows who is running these companies, their history or whatever. We also can’t trust the government to actually do the due diligence necessary when they say they are regulating them. If they don’t do it for regular financial companies, they probably can’t do it for companies using technologies they don’t even understand.</p>
<p>People need to be a lot more aware of this especially with Bitcoin, which has irreversible transactions, you better make sure the information in the transaction can’t come back to hurt you. A lot of people using custodial wallets never consider “what if the company goes bad?” or “what if the country the company is in goes bad and the government uses the information against me or others?” I think of data privacy from a long-term perspective. I don’t want to worry if my digital life can come back to haunt me, if I can take precautionary steps which prevent that.</p>
<p><strong>Q: Do you see actually disruptive startup Bitcoin enterprises overtaking companies like Bitpay, Bitfury or Coinbase?</strong></p>
<p>A: I definitely see lots of opportunity for companies competing with companies that have become bitbanks essentially, except with none of the benefits of a bank. I see plenty of areas for that to happen, especially with Coinbase. One of the things I heard during the delete Coinbase movement was, “I’d delete my account, but they have zero fees.” My first thought was “you can destroy your privacy for zero fees, I guess, if that’s what you want to do.” Then about two weeks after that, Coinbase announced that they were adding fees and maker fees and a bunch of other stuff, and it was funny because then everyone got mad. Even those people had to admit, ok now I have to quit Coinbase.</p>
<p>I see a lot of opportunity for smaller less-centralized companies. Any company as big as Coinbase that’s cozy with regulators, they can’t do a lot of things that a smaller more agile company may be able to do. Their whole thing about building an open financial system is impossible to do with how closed-off they are. They did a virtue signaling interview with a lady from <a href="https://www.codetoinspire.org/">Code to Inspire</a>, a nonprofit, that teaches women in Afghanistan to code and pays them with cryptocurrency. One of the points she made, was that many crypto companies build platforms for people who are already privileged. They don’t build things for people in a life or death situation like the women learning to code in Afghanistan. It’s a plaything for them.</p>
<p>Coinbase doesn’t even offer service in S. E. Asia so that the women of Code to Inspire could use their platform. I doubt they were given special access, even if they were, normally no one in Afghanistan can use Coinbase. From Coinbase’s perspective, they can do the interview, but they’ll never take the risk of really offering their services in Afghanistan. Something like Bisq works anywhere in the world. Coinbase is not agile enough to compete with smaller organizations that can do this kind of real open finance, so their gilded cage will just get smaller and smaller.</p>
<p><strong>Q: How do you feel about the Lightning Peach, Bitfury’s Lightning Network Implementation?</strong></p>
<p>A: It was a really interesting incident because I actually challenged them at the Lightning Hack Day in Berlin, last September. They were announcing Lightning Peach, I don’t know if it was the first announcement, but it was pretty early on. I didn’t like Bitfury already, going in, because at the time they were building blockchain analysis software called Crystal which they were selling to law enforcement. I know they were different projects but there was potential for a conflict of interest there. I’m sure plenty of blockchain analytics companies want to have a peek at what is happening on the Lightning Network, and if you’re building a wallet that could do that…I am not saying they were but it is highly possible. So I challenged them about it after they gave a talk.</p>
<p>The question I asked was, would they integrate blockchain analytics with Peach? He never gave me a straight yes or no answer, instead, he went into a long speech about how in order for Bitcoin to be successful, we have to comply with regulators regarding this stuff. I was immediately suspicious because Peach is supposed to be noncustodial, why would that matter? The biggest targets for regulators are custodial services. So it was suspicious and he didn’t seem to appreciate my concerns. Or at least they seemed to value their relationship with regulators more than privacy or security.</p>
<p>That was in September 2018, then in February of this year, Shinobi pointed out a bunch of really concerning language in their terms of service and privacy policy that gave us a ton of red flags. I think their privacy policy may even have been up for a while, but unless I am using a service, or someone tips me off to a privacy policy like this, I am not usually going to read a privacy policy. Most people don’t ever read them so it went unnoticed. You can look up the details online, but it said they would be collecting a huge amount of sensitive data.</p>
<p>Then, their response was initially very dismissive, and they issued a bunch of contradictory statements about what it did and didn’t collect. They said we don’t collect this data, then the policy specifically said they did collect it, and here’s how they plan on using it. There are really only two possibilities for this, they either had the most terrible lawyer who didn’t understand the technology at all and it was their lawyers fault for being incompetent, or they were trying to hide the fact they were collecting all this data and making it as confusing as possible hoping people wouldn’t notice the discrepancies. We made it a big deal, and they ended up changing part of their policies, and kind of went quiet after that.</p>
<p>What was disappointing to me is that I didn’t see other Lightning developers participating with getting that info out. I don’t know why. It could be a PR problem for Lightning as a whole, someone could misinterpret the situation. I was doing it because I am hyper-vigilant about privacy. I just hope it was enough to warn people or to stop them from using it.</p>
<p><strong>Q: What do you think of Coinbase’s Neutrino scandal, and blockchain analysis?</strong></p>
<p>A: With the Neutrino acquisition what disappoints me is that Coinbase initially had three contradictory responses. The first one was issued when it was breaking and people were tweeting about it all. Then was Christine Sandler’s response to Cheddar, which sparked a whole new investigation into whether or not there had been a data leak at Coinbase from a blockchain analytics vendor or if she misinterpreted something. Finally, there was Brian Armstrong’s response on Medium. They were all enraging in different ways, and they all tried to do a PR spin on it, and tried to say it was because of regulatory requirements, completely skating over the issue.</p>
<p>It was like yes, you’re a custodial Bitcoin company facing regulatory pressures to use blockchain analytics, but it’s another thing completely to hire the blockchain analytics company founded by people facilitating egregious human rights violations all over the world. Yes, you claim you chose them for multicoin support, but you value the multicoin support over the safety of all your customers, it just doesn’t make any sense.</p>
<p>Coinbase can’t even say they didn’t know, because they did know. In terms of making the proverbial deal with the devil over blockchain analytics, they chose the absolute worst of the worst group of people to do a deal with. I am glad Brian announced that they would “transition out” the people who worked for Hacking Team, but as people have said, it’s very vague, we don’t know what that means, they could stay on as contractors. We haven’t received any clarity on if they’ve even left, or if they had access to customer info because it’s not even clear what Neutrino’s software actually does beyond blockchain analytics and clustering. Neutrino claims to do stuff with AML/KYC which means dealing with a lot more sensitive data than just blockchain data.</p>
<p>We can assume Christine Sandler’s statement was correct, and they did have a data leak with the previous vendor selling data to outside parties sparking the Neutrino acquisition. We can assume Neutrino took over those duties, so what did they have access to? Coinbase didn’t disclose this and they are being vague about hiring potentially dangerous people. I wouldn’t ever want to be a customer if this is how they handle this kind of situation. Thankfully, I have never been a Coinbase customer, and will never be a Coinbase customer because their behavior is simply unacceptable to me.</p>
<h2 id="conclusion">Conclusion</h2>
<p>This concludes my interview with Janine, from the Block Digest podcast. I’d like to thank her again for her patience in fielding my questions. I had to conduct the interview from an internet cafe with terrible background noise from a busy intersection. It was difficult for us to hear each other clearly, and she was able to give me excellent and thoughtful responses despite the circumstances.</p>
<p>Even though buses and motorcycles were screaming by every 30 seconds, making life difficult, I really enjoyed hearing her take on why companies in Bitcoin sometimes turn to the dark side. Hopefully you learned as much as I did. Please check out Block Digest, it really is the best Bitcoin podcast, in my opinion. They bring the best Bitcoin coverage twice a week.</p>
<p>You can <a href="https://www.youtube.com/channel/UCb53lXz2IzEFT5JNHSbdvPg">find the Block Digest Podcast here</a>.</p>
<p>You can <a href="https://twitter.com/BlockDigest">follow Block Digest on Twitter here</a>.</p>
<p>You can <a href="https://twitter.com/J9Roem">follow Janine on Twitter here</a>.</p>
<p>You can <a href="https://twitter.com/brian_trollz">follow Shinobi on Twitter here</a>.</p>
<p>You can <a href="https://twitter.com/cryptorick">follow Rick on Twitter here</a>.</p>Ricardo MartinezRicardo Martinez interviews Janine of Block Digest. They discuss a peculiar phenomenon—the tendency for people and companies made successful by Bitcoin to turn against Bitcoin—and why it happens.