Daily Trade Ideas & Trends


18 May 2020

Doc's Daily Commentary

4/29 ReadySetLive with Doc and Mav

Checkmate's Corner

The Path To Privacy Part 2

Let’s pick up where we left off yesterday:

Option 2 – Liquid and Confidential Transactions

This one is a new and very experimental system which I have not explored outside a handful of test transactions.

Liquid is a sidechain to Bitcoin developed by Blockstream that allows Bitcoin to peg in and peg out. It is intended as a faster settlement network between traders and exchanges and allows for many Ethereum like features like tokens, NFTs and also has confidential transactions (you cannot see transaction amounts). The trade-off is that it is a blockchain hosted by a trusted setup of Federated nodes. Most of them are business partners with Blockstream (including exchanges).

Liquiditi – An exchange system which allows BTC to be converted to L-BTC (Liquid BTC). It is as simple as sending BTC to an address, providing a Liquid address (Use Green Wallet on your mobile) and this system exchanges automatically. When you want to peg out, you just reverse the process.


Once your coins are exchanged to L-BTC, all transactions are confidential meaning you cannot see the coin amounts sent. Think of it like private bitcoin….just on a trusted federated network. The trade-offs… I cannot honestly answer for how safe or secure this is nor how private it is (what can the federation see?). However it is a potential option and I am impressed how simple the process is.

I have experimented with the minimum amount (plus 10% to pay for peg-out miner fee) and I can see this as an option to personally mix some of your coins without a CoinJoin. The secret is in doing staggered peg-in and peg-out transactions.

An example workflow for anonymising two UTXOs of 0.1BTC and 0.05 BTC could be:

Step 1 – Send 0.1BTC via Liquidity to convert to L-BTC into your Green Wallet Liquid address. Wait a few days (this allows others to do the same increasing the anonymity set).

Step 2 – Send 0.05BTC using the same approach (different Liquid address). Wait a few days (you now have 0.15 L-BTC)

Step 3 – Peg out maybe 0.025 BTC one day, wait a few days. Then Peg out 0.03542 BTC a few days later. Then 0.01156 the next week until you have gradually returned all to the Bitcoin mainchain in a staggered and random arrangement.

What this does is it allows other peoples transactions to peg in and out making it hard to determine which ingoing 0.1 and 0.05 BTC relate to which outgoing amounts. The time delays are most critical as longer delays allow a larger anonymity set to build up (but remember, the more time in Liquid, the more you expose your coins to a federated side-chain).

It is also not possible to determine whether you were the only person doing this. If you are, then this whole process failed because it is trivial to identify you as unique. Perhaps in the future there will be more options and user interfaces to do this and check. But for now, it is a potential option taking advantage of confidential transactions.

Option 3 – Privacy Coins

For Privacy coins, I will focus on Monero which I personally believe is the top dog in this regard, you have a different set of trade-offs to Liquid. First of all, Monero is decentralised, has great bones and overall is a solid project. XMR has confidential transactions by default and a widely distributed mining network.

The biggest risk and problem is that you need to buy it somewhere. This usually means KYC exchange or, not at all. It also means you are now exposed to XMR price fluctuations. This makes it not ideal for mixing other coins until something like Decred DEX shows up and Monero implements atomic swaps. This is a while off to have seamless exchange but is again something for the future.

The alternative here is if you honestly believe that privacy is a fundamental flaw in Bitcoin’s design (I do), then a privacy coin like Monero or ZCash could very well be a strong long term hold. I have covered both of these coins in RSC newsletters dated 3/Nov/2019 and 17/Nov/2019 respectively for more details on the individual coins and the trade-offs.

I personally hold some XMR as I believe that there is a possible future of BTC/DCR savings and XMR cash. I could be wrong and sidechains like liquid become better options and benefit BTC only. In either case, a small hedge makes sense to me. Do remember, exchanges where you buy the coins are often KYC. All XMR transactions will anonymise themselves (which is great) but for ZEC, you need to use their wallet and create a shielded transaction. Ive not tried it but it sounds like a hassle…

Option 4 – Tornado Cash for Ethereum

The final tool covered today is Tornado Cash which is a new privacy protocol for Ethereum. It functions similar to a CoinJoin but instead of mixing, uses zk-Snarks (like ZCash) and a secret to connect deposit and withdrawal.


The system works as follows:

Step 1 – You deposit ETH, DAI, USDT or USDC into the TornadoCash smart contract and it provides you with a secret code. Your deposit must be an even denomination like 0.1, 1.0, 10 or 100 ETH.

Step 2 – Wait. The longer you wait, the more people deposit. Every person who deposits after you is another potential suspect for who withdraws. If you withdraw too soon, it is pointless. At the moment, you need to wait for around 2-3weeks to get 50+ people which is the ideal anonymity set.

Step 3 – From your target wallet, you input the secret code and are now able to withdraw your coins. You can select to pay the gas fee from your target wallet (if you have ETH in there already) or you can choose to pay from the deposit (like a fee).

That’s it, you pay a hefty gas fee and have to wait for a few weeks to do it properly but this should anonymise your coins. Not very user friendly due to the time delay but much more intuitive than Bitcoin CoinJoins and it is a step in the right direction.

There is of course smart contract risk and zk-snarks have a trusted setup process to create the seed that the protocol uses. There is currently an admin key which has unknown powers so you are trusting the protocol developers.

Concluding thoughts

Privacy is extremely important….and immutable ledgers are really not great at it.

It is very clear from how many steps and time delays you need to factor in, coupled with just shocking user experience, that we are a long way from a good solution.

By far, Monero is the best answer to this problem. In fact, it’s solution is so good, I find myself continually drawn to study the coin in more detail. Decred has the next best solution in my opinion, especially in the context of showing Bitcoin how it is done. This makes me very bullish on those two projects because I believe privacy is Bitcoin’s Achilles heel.

Ethereum’s Tornado Cash mixer is interesting and I like where it is going. I have used it before without an issue, just be aware it is not cheap and I don’t suggest moving 0.1ETH, the fee makes it very expensive. It is more palatable for 1ETH and above.

For Bitcoin, CoinJoins in Wasabi are horrid, I truly hate them. I have not tried Samourai but plan to set up my node to run Whirlpools and give it a test to report back. The Liquid approach is interesting and I prefer it to Wasabi by many magnitudes. The biggest problem is I do not have a good grasp on what the trade-offs are on the Federated sidechain model. I also can’t check how effective the system is so it is somewhat of a guessing game.

Bitcoin…old boy…pick your game up.

The ReadySetCrypto "Three Token Pillars" Community Portfolio (V3)


Add your vote to the V3 Portfolio (Phase 3) by clicking here.

View V3 Portfolio (Phase 2) by clicking here.

View V3 Portfolio (Phase 1) by clicking here.

Read the V3 Portfolio guide by clicking here.

What is the goal of this portfolio?

The “Three Token Pillars” portfolio is democratically proportioned between the Three Pillars of the Token Economy & Interchain:

CryptoCurreny – Security Tokens (STO) – Decentralized Finance (DeFi)

With this portfolio, we will identify and take advantage of the opportunities within the Three
Pillars of ReadySetCrypto. We aim to Capitalise on the collective knowledge and experience of the RSC
community & build model portfolios containing the premier companies and projects
in the industry and manage risk allocation suitable for as many people as

The Second Phase of the RSC Community Portfolio V3 was to give us a general idea of the weightings people desire in each of the three pillars and also member’s risk tolerance. The Third Phase of the RSC Community Portfolio V3 has us closing in on a finalized portfolio allocation before we consolidated onto the highest quality projects.

Our Current Allocation As Of Phase Three:

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The ReadySetCrypto "Top Ten Crypto" Community Portfolio (V4)


Add your vote to the V4 Portfolio by clicking here.

Read about building Crypto Portfolio Diversity by clicking here.

What is the goal of this portfolio? 

The “Top Ten Crypto” portfolio is a democratically proportioned portfolio balanced based on votes from members of the RSC community as to what they believe are the top 10 projects by potential.
This portfolio should be much more useful given the ever-changing market dynamics. In short, you rank the projects you believe deserve a spot in the top 10. It should represent a portfolio and rank that you believe will stand the test of time. Once we have a good cross-section, we can study and make an assessment as to where we see value and perhaps where some diamonds in the rough opportunities exist. In a perfect world, we will end up with a Pareto-style distribution that describes the largest value capture in the market.
To give an update on the position, each one listed in low to high relative risk:
SoV/money == BTC, DCR
Platforms == ETH, XTZ
Private Money == XMR / ZEC / ZEN
DeFi == MKR / SNX and stablecoins
It is the most realistic way for us to distill the entirety of what we have learned (and that includes the RSC community opinion). We have an array of articles that have gradually picked off one by one different projects, some of which end up being many thousands of words to come to this conclusion. It is not capitulation because we all remain in the market. It is simply a consolidation of quality. We seek the cream of the crop as the milk turns sour on aggregate.

Current Top 10 Rankings:



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