#207: Tom Trevethan

— Tom Trevethan, CTO of CommerceBlock, discusses statechains—a second-layer Bitcoin scaling and privacy solution that enables off-chain ownership transfer of fixed-size UTXOs without touching the blockchain.

— Mercury Wallet, CommerceBlock's implementation of statechains, launched on Bitcoin testnet and will include a GUI wallet within one to two months; currently available as a command-line client requiring Rust compilation.

— Statechains solve the capital lockup problem in discrete log contracts (DLCs) by allowing position ownership to transfer without on-chain transactions, enabling derivatives to be freely traded off-chain.

— A key trust tradeoff: the statechain entity must hold one key and be trusted to delete old private key shares after transfers; compromised by hardware trusted execution environments (Intel SGX) and remote attestation, but fundamentally relies on coordinator reputation.

— Privacy applications center on blinded coin swaps using zero-link protocols similar to Wasabi and Whirlpool, where users swap fixed-denomination UTXOs via a coordinator that cannot see which coins swap with which counterparties.

— Fee structure charges on deposit and withdrawal only; infinite swaps within the same session are free, limited only by timelocked backup transaction constraints (approximately 500 transfers per UTXO before mandatory on-chain settlement).

— Test Mercury Wallet on testnet if you run Rust; early feedback on a novel protocol implementation helps identify bugs and builds confidence before mainnet launch expected in early 2025.

— Statechains offer a regulatory advantage over custodial mixers by being "preemptively non-custodial"—the coordinator cannot freeze or seize funds even if subpoenaed—making them potentially more legally defensible than services like mixing pools.

— Privacy improvement via statechains comes at the cost of trusting a coordinator; evaluate the business model and reputation carefully, as this sits between fully trustless CoinJoin (Wasabi/Samurai) and custodial mixers in security trade-offs.