Monetary properties of trust

Part of a collection of essays on TRUST by @futurepaul


Bitcoin’s blockchain is widely replicated, so there’s little fear of the record of your UTXOs will disappear. But how do you secure your private keys to those coins? Someone you trust can help you secure your coins, perhaps with a simple YouTube tutorial about how to use a Coldcard, or perhaps a whole company that does multisig as a service.


You move Bitcoin by signing transactions with your private keys, which means you need some way of accessing your private keys to move a transaction. If you don’t trust the people you’re around you need to be highly vigilant about revealing where and how you store your private keys. Anything leaked information bout your security setup can be a potential weakness in malicious hands. When you’re around people you trust it’s less stressful to use your setup.


When governments “freeze” Bitcoin addresses, seize bank accounts without warrant, and rug pull Russian oligarchs, they reduce the fungibility of money. It’s a betrayal of (misplaced?) trust and a proof of the arbitrary nature of the “rules” of fiat. Bitcoin has a fungibility problem despite being pseudonymous because every transaction is backed by a fully public history. Therefore it’s up to the receiver whether or not to honor any given Bitcoin as “good as Bitcoin.”


The whole reason we Bitcoin is because we can’t trust governments not to inflate their fiat currencies. But while it’s nice to be able point to the lines of C++ in the source code that define Bitcoin’s supply schedule, most people are non-technical and will have to take someone else’s word for it. Whether or not people feel confident in the scarcity of Bitcoin will greatly depend on whether or not they feel like they can trust people who claim Bitcoin is scarce.


Bitcoin is divisible down to 100,000,000 “satoshis” per Bitcoin. But Lightning takes that divisibility further with a “millisatoshi” unit, one one thousandth of a satoshi. The catch? There’s no real base layer, cryptographic way to enforce the movement of millisatoshis, because Bitcoin only understands the satoshi. Therefore you’re trusting your counterparty. It’s small, but it’s trust!


For most users it’s hard to tell different cryptocurrencies apart. Famously when the BCash hard fork was happening, some companies in the industry attempted to fool their users into thinking BCash was “the real Bitcoin” despite the fact that it was BCash that had hard forked. This was a betrayal of trust, and Bitcoiners responded appropriately:

This is lies, my trust in you is broken, I will make you obsolete

Posted Sep 5, 2022