Nostr Web Client

First, to address the strawman claim: I'm not misrepresenting anything.

You implied certain market actors reject certain utxos or treat the differently, this often happens to honor lgovernment restrictions (like blacklisting bills) but not always, its also by individual choice and again, all such cases are irrelevant. None of that affects fungibility, as I said.

I know Seth's work, and he is wrong. You shouldn't trust one persons work/article. I'd recommend a variety of sources, historical and acclaimed economists are valuable here.

Seth's point about utxos is half right but misses the mark on fungibility.

UTXOs have unique blockchain histories, so some exchanges or users might reject ones linked to, say, illicit wallets.

But fungibility in Bitcoin applies at the level of satoshis, the smallest unit, not UTXOs.

The market generally treats one satoshi as equal to another in value 100 million satoshis make a Bitcoin, always.

If some market actors reject a utxo, that’s an external preference, like refusing a worn $10 bill or a blacklisted dollar or bank account the government warns you about or tells you not to use, or a bank account you choose not to so business with or money that you know was connected to something you don't want to be apart of. None of that changes a satoshi’s inherent interchangeability.

As Investopedia defines it, fungibility is when units are substitutable with equal value in exchange, driven by market acceptance.

A 2024 FasterCapital article backs this, noting money (or crypto like Bitcoin) is fungible when its units are seen as equivalent, regardless of technical tracking like utxos.

Compare this to cash: even if a government tracks serial numbers (like utxos), a $10 bill remains fungible because the market sees it as equal to another $10 bill in trade.

Bitcoin’s satoshis work the same way, fungibility holds unless the entire market rejects specific units, which isn't common, like with dollars for example.

Economists like Mises (1912) and Hayek (1976) emphasize fungibility as market-driven interchangeability, not negated by specific rejections.

Fungibility’s about equal value in trade, not every single person accepting every single unit.

Hanshan 5mo ago

horseshit

if ANYONE can differentiate between two units of equal value

and refuse to honor one and not the other using ANY arbitrary criterion they may want to use,

those things are not fungible.

Seths is just a list of times it happened.

you can argue it hasnt happened *enough to cross some arbitrary level where we would say fungibility is impaired,

like marked bills dont happen enough to impair cashs' fungibility

but you certainly can't argue that there's no concerns regarding Bitcoin fungibility.

also the "sats are fungible but UTXOs aren't" just means that nobody knows or cares what sats are in the UTXO,

because they retain fungibility with each other.

but they still can care about the UTXO history,

because it does not retain fungibility, with other UTXOs.

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Discussion

Corbin 5mo ago

The article's off base Bitcoin's satoshis are fungible because the market treats them as equal in value, like dollars, even if UTXOs are traceable.

Some exchanges flagging coins is like banks rejecting marked bills-it's external, not proof Bitcoin's non-fungible.

Fungibility's about equal exchange value, per Jevons and Mises, not perfect privacy.

Moreover, the article’s technically right about utxos, bitcoin’s transaction outputs carry traceable histories, so some exchanges or services might flag or reject tainted ones, like those linked to illicit activity. But this doesn’t mean Bitcoin (or satoshis) is inherently non-fungible.

Fungibility, as defined by economists like Jevons (1875) and Mises (1912) and sources like Investopedia, is about units being interchangeable with equal value in a market exchange.

One satoshi still equals another in value, 100 million satoshis make a Bitcoin, and the market generally accepts them as such.

If some actors reject a utxo, that’s an external market choice, like refusing a worn $10 bill, it doesn’t change the intrinsic equivalence of the satoshis themselves.

Compare it to cash: a government could track serial numbers or digital dollars, but a $10 bill or $10 in your online account remains fungible because most people treat it as equal to another $10 bill or that $10 digital dollars generally equal to all other $10 in trade.

The article’s 34 cases of flagging or censorship reflect specific service policies, not a universal market rejection of Bitcoin’s value.

Monero’s privacy by default makes it harder to track, sure, but that’s about privacy, not fungibility.

Even if every Bitcoin user mixed transactions (like with CoinJoin), fungibility wouldn’t depend on that, it’s already there in satoshis’ equal value.

The article’s pushing a narrative that Bitcoin’s traceability equals non-fungibility, but that conflates practical use with economic properties.

Monero's base layer is private, but that's a separate issue.

We could have a conversation about privacy and how bitcoin's ever advancing and adapting secondary layers address privacy in a way that allows for much more robust, integral systems and defenses including transparency thus audibility, the ability to react, respond and assemble etc i'll add more below.

And i'll include why base layer transparancy is way more important than base layer privacy.

Corbin 5mo ago

Again, no one deems something fungible or not, including governments or individual actors, value is subjective always.

Privacy is not equal to fungibility.

This isn't my opinion, this is objective fact.

Now more on why transparency is important, why privacy is on secondary layers instead of the base layer is critical (tied to transparency), early iterations of secondary privacy layers on bitcoin that allows for privacy in perpetuity.

And worth noting up top here that these secondary protocols will only continue to advance, because of the critical base layer properties.

Transparency, far from a liability, enables verifiable auditability, reinforcing trust, integrity and resilience - a feature absent in opaque systems like Monero.

Bitcoin’s transparent, auditable blockchain lets everyone see there’s nothing nefarious going on, like double-spending or attacks, and enables proactive countermeasures if something shady pops up.

The transparency ensures the system’s integrity (no hidden manipulation) and resilience (ability to withstand or respond to threats), which fosters trust among users.

For example, anyone can verify the blockchain to spot a 51% attack attempt or confirm transaction legitimacy, and miners or nodes can adjust to counter threats, like rejecting invalid blocks.

More layer twos will be built of course, maybe some will outdo lightning.

To state the obvious, like Nik Bhatia in layer money talks about money is built on layers. Gold takes too much energy, it's too costly - not possible to move fast hence paper money and wire transfers.

Critical aspects of a base layer being robust security, transparency, immutability, decentralization and proof of work; it's a feature to have privacy and near instant transactions on secondary layers.

Once you open a payment channel and commit funds, it can stay open indefinitely as long as both parties keep it active, no need to settle on the Bitcoin blockchain.

This lets you transact privately off-chain, potentially forever, creating a kind of self-contained, circular economy within the channel.

The base layer only gets involved if you close the channel or someone tries to cheat, triggering the on-chain settlement.

It’s a powerful setup for privacy and efficiency, as long as the channel stays funded and both sides cooperate.

Lightning channels do involve a degree of trust, but it’s minimal and technical rather than interpersonal.

Both parties need to trust that the other won’t try to cheat by broadcasting an old channel state, but this is deterred by the protocol’s penalty mechanisms-like the watchtower feature or timelocks that let honest parties reclaim funds if someone tries to close the channel maliciously.

But yeah, if someone unilaterally closes the channel, it settles on-chain, and that privacy layer shifts.

Trust in Lightning Network channels often ties to reputation and incentives, especially in practical scenarios.

If you're running a channel with a big player like a mastercard or visa equivalent (some entity with a strong track record) they're heavily incentivized to keep the channel open and act ethically to protect their brand and business.

Same goes for smaller, private setups; reputation and the promise of ongoing business creates a strong motive to avoid screwing over a partner by closing a channel maliciously.

Plus, legal recourse, adding another layer of deterrence. Even in off-grid or remote cases, mutual benefit and social trust can keep things stable. It's less about blind trust and more about reputation and track record and or aligned incentives backed by the protocol's safeguards.

Bitcoin’s transparent blockchain enables countermeasures by anyone seeking to support or protect the network, including those holding Bitcoin, ensuring robust, self-sustaining security through incentivized participation.

Transparency allows for awareness and protection, not only from within (people holding bitcoin) but from outsiders or newcomers who learn about Bitcoin when threats like a nation-state, corporate or central bank attack becomes known.

The transparent blockchain makes any nefarious action-like a 51% attack or regulatory overreach-obvious, which can spark action from people who aren’t yet in the ecosystem.

They might buy Bitcoin, run a node, or even push back politically, all because they see the threat, learn about it and want to protect or support the network’s integrity or the ideas and or the associated implications (private property rights, free speech, sound money etc).

This underscores Bitcoin’s strength: its openness turns potential vulnerabilities into a call to action, growing its resilience and adoption.

Tools such as CoinJoin, Lightning Network, and eCash, alongside platforms like Nostr, enhance practical fungibility by enabling private, uncensorable transactions without sacrificing the base layer's integrity.

External interventions, like government restrictions, may attempt to distort market behaviors, as seen historically with gold bans or cash tracking, but these do not undermine Bitcoin's intrinsic properties.

Rather, Bitcoin's decentralized, unalterable cap and nation-state-resistant design erode centralized control, defunding mechanisms of arbitrary regulation.

This ensures its sound money properties-scarcity, portability, divisibility, fungibility, durability, verifiability, and universal demand-sustain unmatched global adoption, outstripping alternatives prone to centralized risks.

Corbin 5mo ago

*practical usability