Avoiding posting on Twitter at the moment. I’m just watching there. There’s enough overnight-expert Middle East hot takes and emotions are running high. The violence and scenes are terrible, and my heart goes out to all victims involved and those who will be caught up in it going forward.

I’ll instead post a few things in my lane here as it relates to global finance and todays actions relating to things I’ve already been covering but that now obviously have updates. Helps me get my thoughts together for what will eventually be my next client report.

-Actions like this show the difficulty of multinational currency agreements. Saudi Arabia and Iran have been having more peaceful relations lately as China brought them together (“enemy of my enemy is my pragmatic financial friend”, and so forth). They are both set to join BRICS+ in January 2024.

-But, Saudi Arabia has also been working with the US and Israel on normalizing relations with Israel, in exchange for US arms deals and such. Saudi Arabia was also making promises to raise oil output to alleviate oil prices if they grow too quickly, which the US wants.

-So this attack (w/ Iranian involvement and public support) puts Saudi Arabia in a weird place. Lots of division and competing goals within BRICS+. Has all sorts of implications for Saudi/Israeli relations, Saudi/US relations, and what happens in the coming weeks will affect how those go.

-Egypt and Ethiopia are also joining BRICS+ in January 2024 and they have had a multi year ongoing feud regarding the Grand Renaissance dam on the Nile.

-China and India are well known as not being on good terms. Border disputes and all that.

-Building trade and currency and military agreements between so many different cultures is a bigger challenge than doing so between US and West Europe.

Actuaries had this factored in.

I wonder what kind of psychopath would put that in Swan’s codebase

We cheer for Assange and Snowden, in part because we don't have the courage to do what they did.

Why doesn't any company make a compact citrus squeezer anymore?

This relic is now irreplaceable.

fortress lost customer funds and ripple bailed them out 💩

say no to rugs folks, learn how to hold bitcoin yourself, become unruggable 🫡

“We should change Bitcoin now in a contentious way to fix the security budget” is basically the same tinkering mentality that central bankers have.

It begins with an overconfident assumption that they know fees won’t be sufficient in the future and that a certain “fix” is going to generate more fees. But some “fixes” could even backfire and create less fees, or introduce bugs, or damage the incentive structure.

The Bitcoin fee market a couple decades out will primarily be a function of adoption or lack thereof. In a world of eight billion people, only a couple hundred million can do an on chain transaction per year, or a bit more with maximal batching. The number of people who could do a monthly transaction is 1/12th of that number. In order to be concerned that bitcoin fees will be too low to prevent censorship in the future, we have to start with the assumption that not many people use bitcoin decades out.

Fedwire has about 100x the gross volume that Bitcoin currently does, with a similar number of transactions. What will Bitcoin’s fee market be if volumes go up 5x or 10x, let alone 50x or 100x? Who wants to raise their hand with a confident model of what bitcoin volumes will be in 2040?

What will someone pay to send a ten million dollar equivalent on chain settlement internationally? $100 in fees per million dollar settlement transaction would be .01%. $300 to get it in a quicker block would be 0.03%. That type of environment can generate tens of billions of dollars of fees annually. The fees that people pay to ship millions of dollars of gold long distances, or to perform a real estate transaction worth millions of dollars, are extremely high. Even if bitcoin is a fraction of that, it would be high by today’s standards. And in a world of billions of people, if nobody wants to pay $100 to send a million dollar settlement bearer asset transaction, then that’s a world where not many people use bitcoin period.

In some months the “security budget” concern trends. In other months, the “fees will be so high that only rich people can transact on chain” concern trends. These are so wildly contradictory and the fact that both are common concerns shows how little we know about the long term future.

I don’t think the fee market can be fixed by gimmicks. Either the network is desirable to use in a couple decades or it’s not. If 3 or 4 decades into bitcoin’s life it can’t generate significant settlement volumes, and gets easily censored due to low fees, then it’s just not a very desirable network at that point for one reason or another.

Some soft forks like covenants can be thoughtfully considered for scaling and fee density, and it’s good for smart developers to always be thinking about low risk improvements to the network that the node network and miners might have a high consensus positive view toward over time. But trying to rush VC-backed softforks, and using security budget FUD to push them, is pretty disingenuous imo.

Anyway, good morning.