Rabbit Hole Recap: Week of 2020.10.26

— FinCEN proposes lowering the travel rule threshold from $3,000 to $250 for financial service provider data sharing, representing an erosion of financial privacy in the U.S.

— Bitcoin hash rate dropped significantly as Chinese miners transitioned between seasonal hydroelectric power contracts, creating a 15% expected difficulty downward adjustment without indicating a network attack.

— Mempool fees surged to historic levels (281 sat/byte median) due to the combination of hash rate departure and increased transaction demand, with fees now representing 30%+ of block rewards.

— State chains emerged as a viable second-layer scaling solution with Commerce Block's Mercury Wallet launching on Bitcoin testnet, enabling off-chain UTXO transfers with privacy benefits.

— Glenn Greenwald's forced resignation from The Intercept over censorship of his Hunter Biden laptop reporting signals the death of corporate journalism and shift toward independent media and self-published content.

— Actionable strategies for Bitcoin holders include waiting for difficulty adjustment, consolidating UTXOs during low-fee periods, and using Lightning channels and CoinJoin before sustained fee increases.

— Do not rush to transact on-chain during this fee spike; wait until after the November 2nd difficulty adjustment when fee pressure is likely to decrease, then consolidate small UTXOs to reduce future transaction costs.

— Open large Lightning channels now (few channels, high capacity) before sustained fee environments make channel management prohibitively expensive; implement CoinJoin on existing UTXOs during low-fee windows rather than waiting until fees remain elevated indefinitely.

— If you hold Bitcoin on an exchange, transfer to cold storage in one or two large UTXOs; for unconfirmed transactions, use child-pays-for-parent (CPFP) spending to yourself via coin control wallets (Specter, Electrum, Samurai, Wasabi) rather than waiting for sender RBF replacements.