On The Brink with Castle Island Weekly Roundup 12/05/25 (The trouble with Taproot, a prediction market paradox, HFSC OCP.2 report) (EP.689)
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Dec 5, 2025 Quantum risks loom over Bitcoin, raising questions about Taproot's vulnerability. The hosts dissect MicroStrategy's dollar reserve tactics and the troubling state of digital asset trusts. Prediction markets face scrutiny, especially with concerns of insider trading on platforms like Polymarket. Regulatory actions heat up as Vanguard embraces crypto ETFs. The episode wraps with alarming discussions about AI's potential to exploit crypto vulnerabilities and the need for enhanced security measures.
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Taproot Introduces Quantum Risk
- Taproot's default address format introduces quantum vulnerability in Bitcoin's current signature scheme.
- BIP-360 offers a soft-fork path to enable future quantum-resistant signatures and should be prioritized.
Prediction Markets Attract Big Capital
- Kalshi raised large on-chain ambitions and Paradigm led a major $1B valuation round.
- Prediction markets are consolidating significant capital and attention.
Prediction Markets Create Perverse Incentives
- Prediction markets surface leaked proprietary information, creating both value and crime incentives.
- That same signal-discovery property makes them prone to monetized insider leaks or data arbitrage.
