Bitcoin Privacy Through Statechains with Nicholas Gregory

Sep 28 2022 • 1hr 6m

Show Notes

“We send around UTXOs, at the moment those UTXOs are Bitcoin, they could be lightning channels. Now, there’s a lot of complexity there, but I think that’s where we’re gonna go where you’d be able to move around lightning channels, and that’s like swapping around your checking account.”— Nicholas GregoryNicholas Gregory is the CEO of Commerce Block, the company behind Mercury Wallet. In this interview, we discuss how they have used statechains to develop a virtual version of Opendime, the balance of trust and privacy on layer 2 protocols, and onboarding Lightning users. - - - - One of the most novel innovations to come out of the Bitcoin ecosystem in recent years has been Opendime. The aim was to turn Bitcoin into a version of physical cash. An Opendime, is essentially a USB stick, that can be traded between individuals without the need to confirm such transactions on the bitcoin base chain. The USB can be verified but is only redeemed by the last user, by breaking the device and accessing its private key.Opendime enables people to use Bitcoin as anonymous, untraceable cash. The limitation is that it requires a physical transfer. That was until Mercury Wallet was launched. Mercury Wallet is essentially a layer 2 protocol based on statechains. Statechains enable the offchain transfer of UTXOs (turned into a bearer asset referred to as a “statecoin”) between parties.The limitation of statechains is the requirement for a trusted third party, in this case, Mercury Wallet. The third party is non-custodial; they collaborate as a blind partner in the cryptographic transfer of keys. Whilst there are theoretical security issues, they have been mitigated by Mercury Wallet. The issue to overcome is what tradeoffs people are willing to make between ease of use, value transfer and security requirements. But, this is just the first of a number of growing use cases for Mecury Wallet. It enables unlimited free swaps of Bitcoin UTXOs providing privacy benefits. Through the conversion of underlying assets into statecoins, the transfer of assets using Discreet Log Contracts can be facilitated. Further, by layering the Lightning network on top of statechains, it could even enable the transfer of Lightning channels.- - - - This episode’s sponsors:Gemini - Buy Bitcoin instantlyLedn - Financial services for Bitcoin hodlersBitcasino - The Future of Gaming is herePacific Bitcoin - Bitcoin‑only event, Nov 10 & 11, 2022Ledger - State of the art Bitcoin hardware walletWasabi Wallet - Privacy by defaultTexas Blockchain Summit - Nov 17-18, 2022 | Austin, TexasBCB Group - Global digital financial Services-----WBD560 - Show Notes-----If you enjoy The What Bitcoin Did Podcast you can help support the show by doing the following:Become a Patron and get access to shows early or help contributeMake a tip:Bitcoin: 3FiC6w7eb3dkcaNHMAnj39ANTAkv8Ufi2SQR Codes: BitcoinIf you do send a tip then please email me so that I can say thank youSubscribe on iTunes | Spotify | Stitcher | SoundCloud | YouTube | Deezer | TuneIn | RSS FeedLeave a review on iTunesShare the show and episodes with your friends and familySubscribe to the newsletter on my websiteFollow me on Twitter Personal | Twitter Podcast | Instagram | Medium | YouTubeIf you are interested in sponsoring the show, you can read more about that here or please feel free to drop me an email to discuss options.