Full stealth addresses and confidential transactions on L2. If you take your BTC back out to L1 then you get an effective new UTXO history (details matter here of total anonymity size etc).

🔥 TODAY: Brazilian crypto-friendly digital bank Nubank launches in the US and unveils Nu Global, a multi-currency account that converts deposits into USDC or EURC stablecoins.

"Liftoff! We have a liftoff." 🚀

Thoughts on the Liquid whitehat incident: Background: - Liquid is a Bitcoin L2/sidechain, launched by Blockstream in 2018. 4,000 BTC from their bridge was taken by a whitehat yesterday (and then mostly returned). - You can think of the Liquid network as running a fork of Bitcoin Core (called Elements). Elements added new features such as confidential transactions, other assets, BTC peg in/out, and new opcodes. - The bug seems not to be a cryptography one but in integration logic. Bug A was there for years, was recently patched, and the patch likely introduced Bug B, which was exploited. - I’m glad this was a whitehat, and most of the funds have been returned. Could’ve been much worse if an actual attacker. Learnings: - There should’ve been rate limits in place both at the swap service and peg out. There likely were some limits that didn’t trigger. Such rate limits and time delays can drastically reduce the potential damage. - It’s clear that we’re in the age of AI-driven security wars. The new capability of these models is forcing us to discover bugs that went undetected for years. Overall, this will be a net positive, even if short-term painful. - Both the earlier Zcash bug and this Liquid one reinforce how keeping Bitcoin simple and hardened is the right call. If anything, we should be pushing for Bitcoin ossification. Stacks security: - I got several questions about Stacks. We also have a bridge for sBTC. The exact Elements bug isn't applicable here, as Stacks doesn’t use Elements. For any bridges or DeFi apps, security should be priority #1. Stacks devs actively run frontier AI models (both open-source and from frontier labs) on our repos. We also have active bug bounty programs with Immunefi and others. Our regular security audit reports are also available publicly. - Even with the emphasis on security, AI model testing, audits, etc, for over a year, Stacks devs have been pushing in the long-term direction of self-custodial solutions. The Bitcoin bonds/staking upgrade keeps the BTC deployed fully self-custodial (no bridge or smart contract risk). Further, new approaches to self-custodial lending and other areas are in the R&D stage right now. Summary: Running the absolute latest AI models on sensitive repos is job #1 for crypto devs. We’ll see a short-term increase in discovered bugs but get hardened systems and healthy practices in the long term. Stacks is now heavily focusing on self-custodial solutions for bitcoin capital markets, while relentlessly doing defensive security testing/audits on existing infra. The Liquid incident should be a wake-up call to take AI threats extremely seriously, even at Bitcoin Core (we’ve done some work on this). We should ossify Bitcoin Core and keep it as simple as possible; all new bitcoin functionality can be built on layers like Stacks. Forward!