Across the entire crypto ecosystem, Lightning is the fastest and cheapest way of transacting. Like, period. It's faster than Tron. Coiners are going to lose their minds.

I know there's very few people in the world that understand Bitcoin. But there's even fewer people in the world that understand layer 2 technologies like the Lightning Network.

In the beginning of this year, Tether announced that they're going to be issuing Tether on top of Lightning. And so, that is, I think, one of the big unlocks to kind of solve the problem of people not wanting to spend Bitcoin.

Is there any way that the powers that be could censor payments on Lightning?

I think mining pool concentration is a risk to Bitcoin decentralization. This is the biggest problem that we have in Bitcoin. Um, and no one's really talking about it.

I'm curious your thoughts on the Bitcoin Core versus not controversy that we're watching unfold.

AI agents are so much faster than humans that they need a payments network that is similarly as fast, which is Lightning.

[Music]

There's very few people in the world that understand Bitcoin. Um, I don't even know if it's possible to fully understand Bitcoin. But there's even fewer people in the world that understand layer 2 technologies like the Lightning Network. Um, which I guess is still the biggest layer 2 Bitcoin technology. So maybe we could just start there, like broad strokes. What is, you know, Bitcoin is a layer 1, and what are these layer 2 technologies, and what is the Lightning Network?

Mhm. Yeah. I think it's also a really relevant question just because we've seen a lot more Bitcoin layer 2s pop up in the last 6 months to a year. Um, so what ultimately, like a layer two on Bitcoin is, is it's just an additional layer, whether that's a peer-to-peer network or an additional blockchain or some other mechanism that is made to help scale the Bitcoin blockchain. And so when you think about Bitcoin layer 1, there's some things that, um, are natural trade-offs to keep the security of the network. It has to by nature kind of be a little bit more expensive to transact because you have to pay the miners to validate, you know, the transactions, do the blocks, produce blocks, all those things. Then you also have to have, um, the slower block creation time, um, to keep that, you know, to keep the security of the network. So with those things, it naturally is, you know, it can be expensive and slow to transact. That's one of the biggest gripes that people have about Bitcoin. "Oh, it's slow and expensive." Um, well, that's what a layer 2 is made to do is to make it cheaper, faster, easier to transact, um, and more real-time. And that's what the Lightning Network is made to do. Um, it is made, it's set up in a peer-to-peer, um, payment channel network. So what that means is you basically, you know, you and a counterparty, um, create a Bitcoin on-chain transaction that locks a certain amount of funds into the Bitcoin layer 1 that takes, you know, the 10-minute block confirmation times. But after you have that, that payment channel created, you're able to transact in this, uh, in this layer 2, virtually, you know, infinite amounts of time, um, and do it in a very, very quick succession. So you could do, you know, millions of payments, you know, at very low latency and do it, um, at at enormous scale. And so what that does is it removes that 10-minute, you know, time for a block to be produced for your transaction to get confirmed to we see Lightning payments succeeding in about, you know, a quarter of a second or so. And so it radically reduces that time. Then you can also have those fees, have no fees or those transactions have no fees at all or have, you know, very, very low fees on them. And so it enables you to kind of cryptographically move your transactions up a layer and do those without having to touch that base layer. Um, you can come back to that base layer whenever you want. That could be in 6 months, it could be in a year. It's whenever you and your counterparty decide, um, to come back down to that base layer. And so it ultimately just enables so much more, um, you know, security, keeping the security of Bitcoin, but doing it and be able to transact much faster, much cheaper than you would just on the base layer. So it can, it can help the network scale by solving for the blockchain trilemma, like, like a ledger on top of a ledger.

Yes. Yeah. It, it, it, it is made to solve, yeah, some of those, those challenges, like I mentioned, and it is, um, that's one of the unique parts about Lightning is that it is not another blockchain, 'cause that's something that we see in a lot of, like Ethereum or other layer 2s. It's just another blockchain on top of a blockchain. Well, you move it up one, that's going to get congested. You got to do a layer three, and you got to keep moving it up, and it just doesn't make a lot of sense. That's one of the great things about Lightning is it's, it's strictly peer-to-peer. So when you're transacting on Lightning, the only people that matter for the most part are you and your counterparty, and you can ignore everyone else. And so it has far more scalability given the peer-to-peer nature rather than having just another blockchain that's just built on another blockchain, and then, you know, you don't actually solve a problem in that scenario.

Yes. Um, the metaphor I've heard that I liked was it something like opening a, like a fully funded bar tab or like an I've also heard like an abacus bar between two people where you can just sort of slide the beads back and forth.

But both parties have funded the channel to the same amount.

I don't know if that's always the case in, in the Lightning.

It doesn't have to always be the case. It can, yeah, you can do one person or both or any configuration.

Right? But you're probably limited and in, like, so if you only fund it with half a Bitcoin, right? You would only have half a Bitcoin capacity with a counterparty, I would assume.

Yeah. Right.

That, that's correct. You can basically, you can also add and remove funds from the Lightning channel, but that takes an on-chain transaction. So it's kind of like something, you know, you should strive to kind of get it right in the first go because that's the most efficient way of doing it.

So it's kind of like you've pre-funded this channel. So it's like a prepaid payments channel, and then either party can settle to the chain whenever they want.

Yep. And so it's that, so it's facilitated by a smart contract, but then the option to settle to the chain anytime you like is what keeps it honest. Is that something like how it works?

Yeah, that's right. And like the, the bar tab analogy is a really good one, honestly, of just, you know, you basically, you know, you and I have a tab between each other. You know, we're writing like on a piece of paper, you know, who owes what, and then once we, uh, once we finally want to settle up, we just go to the bank and say, "Hey, here's what Robert gets, here's what Graham gets," and we are able to to go from there. And so, um, that's a really good analogy for how it ultimately works. There's obviously, in Lightning, all the cryptographic assurances that you get inside of like, you know, the Bitcoin layer 1 still exist inside of the Bitcoin layer 2. And so there's a lot of methods to prevent, you know, cheating or someone running away with the money or any of those things. Um, either party can just exit at any time and go back to the base layer. So it's the, as we look at a lot of these other Bitcoin layer 2s, it's the most secure and most trustless layer 2 that exists on Bitcoin today. And that, you know, keeps in line the the values that Bitcoin as a layer 1 presents. Lightning is the only one that maintains all of those, and we can get into why the other Bitcoin layer 2s don't, but ultimately that's one of the important aspects of it.

Right, because you are giving up, you are trusting a little, you're trusting the smart contract.

You're not trusting the counterparty so much, but you are trusting that that smart contract will operate correctly.

That, that, that's correct. You know, like the, the, yeah, the contract, the cryptography that exists inside of those Lightning payments, you got to make sure that that is correct so you have those exit scenarios, you can get your money back, and all those things. Ly, with Lightning Network as an open source protocol, has lots of devs on it. So it's not like, "Hey, one company is making this and you got to trust it." It is the same as the Bitcoin protocol. The Bitcoin software is open source, auditable by anybody. Same exact thing with Lightning, where, you know, by now we would have found that, "Oh, this, you actually can't get your money out," or something. You know, we, we've, us at Voltage, have tested that, you know, time and time again. Um, and so, you know, you have that assurance of the same assurity of Bitcoin being open source. Lightning is open source, open protocol, all right.

So you just get slightly more technical risk, I guess, because you're not just on main chain getting. So there's a slight decrease in the trust minimization, but you get a giant gain in terms of transaction throughput, anonymity, etc. The other thing, the, so the bar tab analogy works, except there's like, it's almost like there's an escrow. The channel is like an escrow, basically, right? Like we've both put money into this thing, and then the escrow will settle at either of our discretion at any time.

So, you know, slightly different than a bar tab where you're just trusting, you know, the bartender's trusting you to pay your tab at the end of the day.

Right. Right. Yeah. Bar tabs generally like one way of like I'm only paying the bar tab, really never the bartender never pays you like in a tab scenario. So, it is similar to escrow, however you want to say it, of we both kind of like, you can think of it. Yeah. We both put up money and we kind of just agree on the changing that balance back and forth, and then at some point in the future, we can close it out and get, you know, the hard cash that is Bitcoin on-chain. But the escrow is algorithmic rather than a counterparty.

Yep. Which is a big, big gain. Yeah.

So, am I thinking about this wrong? I mean, I think about Lightning channels kind of like banks and Bitcoin is gold. So, I'm going to deposit my gold or my Bitcoin into this bank, and then I'm going to transact within the bank. And what keeps that bank honest is my ability 24/7 365 globally to take possession of the underlying asset.

Yeah, that's correct. The only thing that I would just kind of caveat there is whenever you use the term bank, people think of like a centralized entity. Like, you know, you deposit, there's no centralized entity in Lightning. There's no one. When you're opening, like, you, you two can open a channel to each other. You can open up a channel to Kraken or Coinbase or whoever it is. Um, and so there's no like central party in in that scenario. So you're correct. I would just caveat when people, when people hear bank, they kind of think of like,

There's no, there's no counterparty there, really.

But doesn't it require a node, a Lightning node to run that channel?

Yes. Yeah. And like to run a Lightning node, like that's something we do at Voltage. We run Lightning nodes for people. You can run it yourself. There's people, people like Start 9 and, um, Roll and some of those at-home nodes. You can do it on your own hardware. So like you, you have to have like what's a quote node, and there's even kind of as we've looked at things like the Lightning Development Kit by the Spiral team, like really abstracts that away to like, you know, you have to have a mechanism to transact and manage these channels. What that is is kind of, um, generally conceptualized as a node, but that's kind of like that could be a node on your smartphone that's just like the software to communicate is really what it is.

Okay. So then you said twice that there's, um, a lot of other L2s that have hit the market recently or come on.

What are those?

Yeah, so there's some like, um, the, like BitVM is like one of the more popular things, a little buzzwordy that maybe people have heard of. Um, and there's like, there's a bunch of other ones like, um, like Spider Chain or something like there's, there's an increasing amount of them. I, I looked at the, the Bitcoin layer 2 market similar to like the ICO market in 2017. Little less scammy. They're trying to solve a problem. ICOs didn't solve a problem. Um, and so they're, uh, it's, it's more attempt at solving a problem, but there's just been a proliferation of them because that's what venture capital was looking for at the time. And so people were kind of just trying to solve, scratch that niche. Um, but the, the problem with some of them is they just naturally come more centralized for the most part. There's some that are working on keeping that trust minimization, but a lot of them come with more like, you have to trust like, okay, two or three companies to run the chain or something like that, rather than having it being truly decentralized where it is a peer-to-peer network or something like that. So, um, there is been an increasing amount of people trying to do Bitcoin layer 2, and some of them are trying to solve different problems. Lightning is very focused on payments, of trying to make the payments use case on Bitcoin succeed. Some of these other ones are trying to bring like tokens to Bitcoin and make that more prevalent or do things like NFTs and make it more scalable and things like that. So, um, they're kind of trying to solve different problems as well, but like, to date, there is nothing, there's no layer 2 that has been bigger or more successful than Lightning.

How would you describe the difference between Lightning and Aqua or like Fedi?

Yeah, so that's a good question. Like, so Aqua, Aqua uses Lightning. They use the Liquid sidechain to facilitate, kind of, I think, a lot of their transactions inside of the Aqua wallet. Um, so Liquid is another Bitcoin layer 2. It's a sidechain, though. So it does have some of those like blockchain-like, um, characteristics. Um, it's not exactly, you know, one:one, um, blockchain, but it has a lot of the, a lot of similar characteristics. Um, Aqua uses, uh, Liquid to facilitate a lot of their transactions on the back end, and they do like atomic swaps in and out of Lightning. And so that's basically being able to have like trustless, kind of exchange of like, "Hey, you pay this Lightning invoice, you get like funds on the Liquid network." So it's more like they, um, that's just a way, it's an implementation on top of like Liquid and Lightning kind of together. Fedi, however, that is a totally different kind of, um, like collaborative custody type model that is a different way of scaling where it's like more community-based. And so that's one of the, um, it's, it's, I would say Fedi is definitely focused on like the lower level, kind of community of not like a global payment system. It is a little bit more like, "Hey, we have a community here, um, and we all want to like have, kind of, each kind of sharing custody of like this big pool of assets and being able to transfer in between this big pool." So it is another way of scaling payments for sure. Um, I would say it's a little bit more focused on like that lower level, not a global payment system, but more of that lower level community-based. Um, and they actually use Lightning, the Fedi protocol uses Lightning to facilitate in between those communities. So, if you have like a community in Africa wants to pay a community in the US, they use Lightning to facilitate the, kind of, the exchange, the payment in between those two pools. So, um, it's kind of less like global state, more like local state in that.

Is Fedi optimized for privacy?

Yes. Um, Fedi is definitely pretty optimized for privacy. Um, the way that I understand is that it's very, like, those, those transactions in between, like, people inside of the, the community are not really known, like this. It's kind of, I think, impossible to really figure out who is going to and from and things like that. So, it is very focused on privacy, at least inside of the community. When you go in between communities, I think you kind of degrade a little bit of that, but not a whole lot, because there's like, there's kind of a responsible party for doing that swap. But, um, ultimately Fedi is very focused on the, on the privacy aspects as well.

And so does that make it more of a layer three at that point if it's these Fedi communities interlinked by Lightning channels?

Yeah, I mean, like potentially. I think that as you move up the higher the layers you go, the more abstract. Yeah, it gets blurry on like definitions and things like that. You could probably think of it like that. Um, but ultimately, like, there's, it, I think it's like, I would maybe call it like an adjacent layer 2 that is not necessarily competing with Lightning. It maybe to a small extent, but it is more so, uh, it is, I would say call it a still another layer 2 because you don't have, you go from Bitcoin layer 1 into Fedi, and so, um, for that reason, maybe it's a layer 2. It is, I see.

The terms really do get, abstractions get blurry. Um, okay. So, you said earlier, you can create a payment channel, Lightning payment channel between any counterparty, right? You can open one. I assume they have to reciprocate, right? You can't just unilaterally create one.

You could, you could unilaterally create one. So like, I could create one into, you know, Kraken myself, assuming they would just accept like the channel and I could have funds only on my side. So that means basically I can only pay them. They couldn't pay me, 'cause when you think about that bar tab or the abacus example, you can't slide beads that aren't there. Um, so that, so you can do it in just one particular direction. Um, but it's, you know, there's limits to that on what can actually happen. So, but then the network itself is not every node or every every user linked to every other user, right? Aren't aren't payments hopping to between these different users, and how, so how does that interlinking of payment channels work?

Yep. So, I, I, I didn't want to jump right into that because, you know, you can easily get inundated with too much of the information on the technicals of Lightning.

But this is important, like structurally, to understand how it works. I think this is very important.

Yeah. So one of the big, um, so when, so, you know, Lightning scales for the transactions and that peer-to-peer mechanism, like I talked about, one of the big unlocks as well is the ability of routing through other nodes. And so you don't have to have a payment channel to every single person that you would want to transact with. You can do routing inside of the Lightning network where, let's say I have a channel to Kraken, you have a channel to Kraken. We don't have a channel with each other, but I can still pay you via that Kraken node. Um, and it can route the transaction on my behalf. Um, and it still is completely trustless in the middle. Kraken couldn't run away with the money in in the middle, um, because of the way that the protocol is designed. And so ultimately, you don't have to, that's one of the big efficiency unlocks is, you know, people like, like us at Voltage, we run a big, like what we call like an LSP node, Lightning Service Provider, and we connect into all the big exchanges, Coinbase, Kraken, Binance, Bitfinex, whoever that is. We have channels to all those people. Our customers don't have to redo that every single time. They can just connect to us, and then they can have connectivity to all those people via routing inside of Lightning. So it really, you know, uh, explodes the amount of scale and the efficiency of it. Um, when you think about actually being able to connect into a lot of these big providers and not having to redo that every single time.

And what's the incentive for that? There's obviously routing fees that are being paid to some of these routing nodes. Like how does, how does that work? And then how, I don't know if it's too early to jump into that, but you know, Bati has talked about this as being like the risk-free rate for Bitcoin.

Yeah. Um, yes. So like in routing, the nodes that route transactions can charge a fee for it. So it's just like, "Hey, I'm helping you, you know, pay your friend or whatever. I can charge a fee for that." That fee can be, you can charge a ridiculous amount, like 10%, and you probably won't get that because people can kind of opt to pay that or not. If they don't want to pay 10%, they just find a different route. Um, and so you can set a fee on what you want to charge for routing on, like, a per-channel basis. So yes, like there is incentives to having like a well-connected node and charging fees for the routing because you can earn some amount of money from that. Um, that has been a popular topic here recently is the amount of like yield potential for running a, a well-connected Bitcoin Lightning node. Um, just at the Bitcoin conference this last year, um, Cash App announced that they were earning like 10% return on their Lightning node, which everyone was like, "Pretty, like, that's a, that's a very high amount of like, that risk-free rate," because all that capital is in their control. They can, they can exit at any time. They have control of that. You think about back in the yield potentials of like BlockFi and Celsius where all that blew up and people lost a lot of money. This is getting, um, a good, very strong return for, you know, a much different risk profile.

No counterparty, no collateral, really. I mean, the collateral is in a Lightning channel, but you control the Lightning channel.

Right. Right. Yeah. You maintain control of that at all time. Um, so it's been very interesting. Um, people have been getting really excited about that potential, and like Ambos, um, is a tech company and Lightning that recently announced kind of a product that is specialized in yield on Lightning. Um, and so I think that we've seen a lot of, um, increased opportunity for people to be earning yield on Lightning via routing and also like selling channels into other people and kind of providing liquidity in general to the market. And that's, I think it's, it's a perfect timed, um, tech, I guess, technology or or a new kind of product because there's an increasing amount of like these Bitcoin treasury companies, people buying it in large, you know, a large amount of Bitcoin is being bought right now by a lot of different people, and a lot of those folks are looking at like, "Okay, I have it, um, that's great. What else can I do with it?" And Lightning is a great opportunity for that. If you put it in, you still maintain that control, and you can earn some amount. We see like a more realistic rate that we see people earning like between 1-4%, um, but that's still a pretty good rate for having basically no like very low risk comparatively to lending it out to somebody.

Yes, for sure.

And how are, I'm hung up on this 10% yield by providing liquidity to the Lightning channel. Like, how is that even possible?

Yeah. So, it's basically the, the way that Cash App did it, you know, specifically is just having like a lot of Bitcoin in channels into the Lightning network connected to popular hubs. And so anyone that is doing payments inside of Lightning for the sake of just, you know, paying person A to person B, they are routing through the Cash App node, and Cash App's taking a percent of that, 1%, 2%, I don't know what their, you know, exact fee rates are, but they're just kind of taking a cut of a bunch of transactions, and they're such a large and well-connected node, they have a lot of volume going through it that they can, you know, 1% of a million dollars, you know, adds up like if that's on a daily basis, weekly basis, whatever it is.

Okay. And are they setting the prices for that, or that's, it's market-driven, though, isn't it? I mean, I guess they set their price, but if it's too high, people won't route through their.

Okay.

Yeah, like they, like they set their own price. And anytime you, you can set your own prices on all routing of any node out there. And so, you set your own prices, but yes, it is kind of market-driven and that you set them too high, well, you're not going to get any traffic because people don't want to pay that. And there's a lot of like, you know, when you're sending a payment in Lightning, there's a lot of like pathfinding algorithms that kind of automatically decide, "How do I get from point A to point B in the, like, fastest and cheapest way possible?" And so, you know, if you charge too high of a fee, you're not going to get any payment. So, it's like, it's, there's a huge amount of kind of like market dynamics that go into that of, you know, pay charging a high enough fee where you can earn the maximum, but also not too high where you're not getting any volume at all.

Sure. Interesting. And are there algorithms for that dynamic pricing process, or is people just doing this manually?

I think for like the pricing of routing fees, it's a little bit more manual. That Ambos product is doing a little bit more automation around it. Um, but it's, it's, it's been more manual. Um, I think from like just kind of a discovery standpoint. I think that we're going to see more and more automation and more, um, especially as we see more liquidity coming into the market, there'll be more kind of automation and, you know, I think more dynamic fee setting as well of like, you know, rapidly changing that rate where, you know, right now it's kind of very like, "Set it and check once a week or something," and, you know, adjust based on that, where I think we'll have more algorithms that are adjusting on the fly, um, to to really squeeze every every amount of, uh, opportunity out of it.

Revenue optimization. So what are your thoughts about that? Like, let's say looking at Bitcoin a bit more over a distant time frame. Does this become a risk-free rate for Bitcoin that supplants, you know, the US Treasury yield as the quote unquote risk-free rate in a global economy?

Like, yeah, I mean, yeah, I think I think it's interesting. Um, I think it's a little, I would say it's from my perspective, it's a little too early to know for sure how exactly it will play out because there's a lot of dynamics at play in Lightning, which is one of the really fascinating parts about it is we're talking about, you know, the, this peer-to-peer network, channels, routing fees, like all these things are pretty new, um, especially in like the crypto space, even just outside of Bitcoin, there's not a lot of things like this, and so there's still a lot of discovery to be had inside of these things. Um, and I think that it will be really interesting to see how that plays out because there's also the, um, I think that there, the amount of liquidity that goes into the network also needs to kind of scale with the amount of payment sizes and payment activity that happens in the network. We could put $500 million into Lightning from a liquidity standpoint, but if we don't have that much, you know, need for it, well, then it's probably just going to be kind of idle capital that's not really earning a lot. So, those two have to kind of like scale in tandem. Um, that I think will just be interesting how those things match up as we continue to progress. And, you know, again, a lot of these people buying Bitcoin that want to put it into Lightning. Okay, cool. And we have a lot of like increase in the payments, um, happening as we've seen more and more exchanges adopting it and things like that. So they are seemingly to go in tandem right now, and we'll see if that continues.

I see. I see.

If you're anything like me, you understand that Bitcoin is something we can use every day to connect, to collaborate, and to build stronger, freer communities. As true Bitcoiners, you all know we are each responsible for onboarding more Bitcoiners. That's why I chose to partner with Cowbolt, an expensing app that settles in Bitcoin. It can be as simple as splitting a dinner bill. Your friend covers dinner and you reimburse them, but you send it back to him in Bitcoin. Now, your friend has their first sats. And as I always say, where your money goes, the mind follows. By using Cowbolt to get Bitcoin into the hands of your friends and family, you can help us orange pill the world. Cowbolt is built to let you split costs, share expenses, and settle instantly while always keeping full control of your keys. Cowbolt is simple, social, non-custodial, exactly how Bitcoin was meant to be used. If you're serious about Bitcoin, it's time to act like it. Download Cowbolt today on iOS or Android. To learn more, go to cowbolt.com. Again, that's cowbolt. C-O-W-B-O-L-T dot com. Forget multivitamins and other supplements. Animal organs are the most nutrient-dense foods on the planet. You can get 100 times more nutrients from organs than you can from muscle meats. But the problem with eating organs is that they are difficult to find in stores. They are difficult to prepare. And even when they are prepared well, they often don't taste great. Thankfully, Heart and Soil Supplements has made consuming organ meats so much easier by providing powderized organs in capsule form. Organ meats include everything your body needs to thrive. Vitamins, minerals, peptides, proteins, and growth factors. This is why organ meats were the most prized foods for our ancestors. Fortunately for us, Heart and Soil makes these treasured foods easily accessible. So, go to heartandsoil.co today and use discount code BREEDLOVE to get started on your journey to optimal health and vitality. Again, that's heartandsoil.co discount code BREEDLOVE.

Is there something with, uh, the network density on the Lightning network as it grows? As there's more interconnections, there's, uh, I guess there's shorter, cheaper paths for people as that network density sort of increases? I don't know if network density is the right term, but also network, uh, extensivity plus density, maybe? So you get shorter, cheaper paths? Is that increasing transaction throughput as well? Like, uh, someone had told me once that the Lightning network kind of improves as it grows, and I don't know if that's accurate or not.

Yeah, I mean, I, I think it is accurate and that, like, you know, as it grows, the more connectivity, the faster you can get your payments there, and like,

More competitive the pricing.

Yeah, more competitive the pricing, and it's just like, it kind of, that, the value of Lightning just continues to increase. So if you can have like really high success for larger payments, you, it just kind of like all the numbers go up, the more usage that happens, both on liquidity provisioning as well as payments. Um, so that's definitely the case of it continuing to, uh, the more usage that happens, the better that it gets. Um, and we, we've definitely seen that over the last several years. Um, and that it's, we've seen volumes definitely increasing and like, you know, things like success rates, higher payment sizes, all that is going up as well.

Interesting.

What are the biggest hurdles to overcome for the, with the adoption or in pertains to the adoption of Lightning?

Yeah, I think there's, there's a, there's a couple there. One, it's like historically been pretty technically challenging to like understand Lightning and then also implement it into a business standpoint. That's something we're, we at Voltage are helping, you know, bring down that barrier so it's easier to to understand. Um, and then additionally, a lot of people have kind of have in their minds that Bitcoin is a store of value. It's not for payments. We have to use these other things for payments. We have to use Ethereum for payments. We have to use Solana for payments. We have to use stable coins for payments. And so, there's kind of been like this, the, the challenge of the, the difference in wanting people not wanting to spend their Bitcoin. Well, Lightning is the best way of spending your Bitcoin, but if there's people that are not wanting to do that, that's kind of a hurdle to get over. Um, and then the other thing is just really around like the things like stable coins and whatnot that are, you know, really dominating the crypto space. You know, that hasn't been possible on Lightning. And I think that that's something that in the, basically in the beginning of this year, Tether announced that they're going to be issuing Tether on top of Lightning. And so that is, I think, one of the big unlocks to kind of solve that of the, the problem of people not wanting to spend Bitcoin, but then also being able to, uh, do bring this, you know, really popular use case that is stable coins into the, into the Lightning network because across the entire crypto ecosystem, Lightning is the fastest and cheapest way of transacting. Like, period. It's faster than Tron. Coiners are going to lose their minds.

I know. And look, we, we had the, music to my ears, which by the way, I don't know if I can hear that in that moment. I hear the XRP [ __ ] army starting their battle drums.

Yeah, I'm sure, I'm sure they're going to be out at this one. Um, but like, yeah, I mean, ultimately, like, we, and we did a report with Fidelity earlier this year that really demonstrates the, you know, how fast and how cheap and how good the Lightning network is for the payments system. That's why people like Tether originally, like, you know, really grew on Tron because it was faster and cheaper. No one really cared about what the thing was that it was being used for or what the blockchain was that was being used to transact Tether. Now we see more and more people like having a, having not wanting to use things like Tron. They like, people love Bitcoin from, it's the, the hardest, you know, most secure, most understood cryptocurrency that exists. If they can transact on it and it is faster and cheaper, like they're going to do that, and we see that with a lot of like demand that we've seen across, um, our customer base. And so stable coins are coming to Lightning, which are going to help really, um, strengthen that story of being able to facilitate these payments that are, um, not not only denominated in Bitcoin, that are denominated in these other things, uh, like stable coins, and then being able to really, you know, bring the value of that cheaper, faster transaction mechanism with stable coins is going to be a big unlock. Um, so I think that like over time, those things are being, you know, kind of knocked down one, one by one of the hindrances of of the growth of Lightning. And then the final thing I'll say is like, really being able to facilitate, um, transactions for even fiat on Bitcoin and kind of like on-off ramping on either side is something that is becoming more and more popular because again, going back to, if Bitcoin is the fastest, cheapest way of moving money, um, we want to use that instead of the SWIFT network or ACH or any of these traditional payment rails. Um, and being able to kind of convert into Bitcoin on the fly, send it over the Bitcoin network, and then convert into euros or pesos or whatever it is on the other side, um, still offers a huge advantage over the traditional rails. You can get that money there, you know, in 1 second rather than a week. Wow. Um, and so we see that in continuing to, uh, to strengthen, you know, the growth of Lightning overall and,

That use case becomes more and more valuable as you know, fiat rail transactions get more and more subjected to scrutiny.

Mhm. Yeah.

You know, I've noticed just in the past, really since the pandemic started, all of the questions around wire transfers, like even wires that I send out periodically, you know, like once a month, it's the same amount to the same guy. The bank all of a sudden will start asking you questions like, "What's this for? Who's this for? Show me an invoice." And it's worse in Europe and other countries than here in the US, but it's gotten a lot worse here. So I would imagine as that scrutiny ramps up, people are just going like, "Fuck this." Like, "I'll just go through, uh, alternative rail, right, that doesn't get subjected to all of that."

So, yeah. Yeah, definitely. And I think like ultimately, like, yeah, the, the amount of, um, uh, scrutiny that goes on inside of, you know, a lot of the like, a, a wires and all those things. And then additionally, it's just like, I think that even it gets really messy when you go across border, you know, going in between institutions and things like that. Like, it's, it's a mess. Like, it's, it's kind of, I'm surprised at how messy the, the fiat system is in regards to cross-border payments. And we, they haven't figured out something better yet. Um, and they really haven't, which is the prime opportunity for Bitcoin to come in and really add a lot of value there.

Yeah.

Or they're incentivized to not figure that out.

Yeah. So what, what, uh, vulnerabilities or concerns do we have any concerns about Lightning being co-opted, shut down, you know, censorship? Like, let's say, you know, I'm in trying to send a relative in Iran a Lightning payment in the future. Is there any way that the powers that be could censor payments on Lightning? It's a free, it's an open source protocol.

Yes, like, not, not really. And that, like, you know, if you're trying to, going back to the routing thing, if you're trying to route through Kraken, maybe they detect that and say, "Hey, we, you know, we're not going to let this one fly." And so, but you always have the ability of opening a direct channel to your family member in Iran or anywhere like that. And so, you, you can still kind of always opt for that route to get it there. Um, and maybe it's, maybe it's a little harder, you know, just like, you know, Bitcoin on-chain, if you have to use some kind of, um, like mechanism like a Whirlpool or something, being able to do that, um, is still always there. The opportunity is always there to do that. And so it has the same kind of censorship-resistant properties that Bitcoin on-chain does. Um, you know, again, maybe you can't route through certain people or things like that, but ultimately, it, it maintains that aspect of that peer-to-peer decentralized, um, standpoint. It's even kind of like, quote, more decentralized than Bitcoin because it's peer-to-peer. You know, Bitcoin right now kind of faces a little bit of a challenge in the centralization of mining and too many miners are in one place or a pool has too much control. Um, where Lightning has no, no central party at all, and so it is still maintains a lot of the same properties.

Gosh, it's so shockingly and mind-blowingly disruptive.

Yeah. Concerning. Like, I just,

It's wild.

You think so mining pools on, just to go to layer one Bitcoin for a minute. You think mining pool concentration is a risk to Bitcoin decentralization?

Yeah, 100%. And Matt Carallo has talked a lot about this over the last like six months to a year. Um, and there is a big kind of problem in mining centralization, specifically in mining pools. Um, like miners themselves are, you know, are fine. It's kind of all of them connecting into like too few of pools where that same, that one pool can, you know, censor transactions at that point if they get too much hash rate combined into their network. And we also, there was a discovery that there's multiple pools were actually the same pool behind the scenes where people thought that they were decentralizing their connections, but it was all the same pool. I wish that I had more, more data around that, but like, you can look it up for Matt Carallo. He did a whole, um, presentation either this, I think it was this, this Bitcoin conference, he did a presentation around mining centralization, um, and the need for things like Stratum V2 and these protocols that allow block template creation to be pushed down to the miner level. Right now, it can only happen in the mining pool. Um, and so when a mining pool has too much hash rate, then they can decide what transactions go in and what don't. If we push that down to the miner level, they, you know, kind of miners can decide at that point, and then it thus, like, really distributes the creation of what goes into a block.

Wait, maybe you just answered this, but what is Stratum V2?

So Stratum V2 is like the protocol and the way that, you know, miners submit their, like, the hash rate into the pool. I think I may, maybe that is not a perfectly, you know, exact definition, but it's ultimately the way that miners can, you know, submit the, the information into the pools to then, uh, confirm blocks and submit their hash rate. With Stratum V1, like, basically the, the way that most pools use it today is that there's no way for the miner, the person running the machines, to decide what goes into a given block. Only the mining pool does. And so if there's a mining pool that is just an entity kind of combining all this hash rate into one and then submitting it, you know, into the, into the Bitcoin, um, blockchain, they can decide what goes into a transaction and what doesn't, which is very bad. That's that's horrible. That's, you know,

Gatekeeping.

Yeah. Yeah. We're, we're into centralization at that point. Um, and censorship and all these things. Um, and so with Stratum V2, that pushes it down to the miner level, the people running the machines, which is far more decentralized than just who is actually operating the machines. And so at that point, if they can decide what goes into a block, then we're kind of back into the more decentralized spot.

You're disintermediating that submission from the mining pools back to the miners.

Yeah. Yeah.

What, um, so that's interesting because I'd always, I was under the impression basically that it is, first of all, it's in the mining pool's interest to not do that because then the miners that participate in that pool will just quickly exit, right, and and join a different one.

Um, and then the cost of attrition is very low. It's near zero. Like, it's easy for these miners to switch pools. So there's not a self-regulatory mechanism there that if one, like, I saw someone the other day posting, "Oh my god, a Bitcoin mining pool has just hit 51%." "51% attack imminent on Bitcoin." I'm like, "Well, that's [ __ ]." You know, I, I don't think it's that severe, but maybe I'm wrong. Where, where is it?

I think it's like, it's, I think we're it's kind of interesting that I do think that we are approaching like a level of severity, but not a lot of people really talking about it. And that's again what Matt was kind of surfacing is like, this is the biggest problem that we have in Bitcoin. Um, and no one's really talking about it. And one of the challenges is is it also like, both the mining pool needs to support something like Stratum V2 and also the miners themselves. So it's kind of like,

Both people need to upgrade their software to support it.

And so that's just kind of a lot of work. Like, that's, that is work on the pool, that is work on the miners themselves. And so it's kind of like, um, it, it is and

It doesn't really increase profits for miners or for pools or anything. So it's kind of like you have to be virtuous in what you want to see happen to go and do those upgrades. And that's something that we are, you know, I think Matt called for people to just kind of advocate towards these pools and these miners to support it because it's it's not going to increase their profits, but it's better for Bitcoin in the long term.

So you think this goes to a point of pain perhaps where there would be like a 51% attack or a threat of it before these miners and mining pools started to update their software? Because at that point, it does threaten profits, right?

Yeah. It's like when Bitcoin is not functioning as it's meant to function, well, then all of your profits are at risk. So maybe you should update your software.

Yeah. I mean, I I I think so. I think I think it's alongside of both. Um, continuing to make it like easy for the upgrades to happen, like helping miners upgrade, like doing more to make the actual upgrade like super easy, as just straightforward as we can make it. Um, that's more in the development side, but then it's also on. Yeah, I think that as we until it's like hurting somebody, until until it's affecting profits or it's like, you know, a threat to your business, um, people are seemingly not caring, which is, you know, which is unfortunate that we're in that situation. But to your point, I think that that is when people start to care is when it's like affecting the business.

Makes sense. Well, um, I would hope that would be enough, but maybe we would get to a critical threshold where that would present more problems than we anticipate.

Yeah. And like, I mean, the the really like it it gets kind of down a little bit of a rabbit hole, but like one of the really hard um opportunities for like really kicking people to make them do some switch like this. It's like what Matt was talking about was switching the the hashing algorithm that Bitcoin uses, which would cause a hard fork and be like, we're over here now. All the machines that are running no longer work towards Bitcoin and we have to like kind of start over from a hashing perspective. That's like the atomic like big, that's a obviously nuclear option, nuclear option, very big deal. I don't think we would ever get to that point. I think that that's like that is the nuclear option that I don't think we'll get to. But it's kind of like just kind of highlighting the challenge in actually getting these people to do these upgrades that are necessary for the decentralization of Bitcoin. Um, and just to care enough to go and do it.

Indeed. Wow. So, speaking of uh software updates and decentralization, I'm curious your thoughts on the Bitcoin Core versus not controversy that we're watching unfold.

Yeah. I mean, it's I think it's a little, I don't know. To me, it's a little childish and like the like, I mean, people people can run whatever they want. Like, that's great. Like, go if you want to do one or the other, like go do it. I think that there's um, I'm not so hard on the debate where like, yeah, we have to be running knots because we need to censor and we need to like filter and do all these things. Like, it's kind of like, I think that um, ultimately these people that have historically used the problem, go always boils down to like the data availability of Bitcoin and putting things into the blockchain that aren't payments, and do you care about that or not. I think every time we've seen um, people putting things into the blockchain that aren't payments, fees have spiked, you know, enormously, and it has driven the the adoption of Lightning like super fast because people are like, shoot, I can't transact on Bitcoin on-chain anymore, or I'm going to pay a ridiculous amount of fees. So it helps Lightning. So like for for that reason, like go ahead, do whatever you want, you know, cuz we I want to see Lightning grow, but at the same time, I don't want to like actually hurt Bitcoin to see Lightning succeed. That's kind of antithetical, that it's not really going to work out in the long term. Um, so I mean, I think it's kind of like if people have opinions, it's great that they have options to run what they want to run. Um, but I I ultimately see this as like this is um, a super super small comparison to like block size wars. It's not as catastrophic, not as big of a deal that is ultimately going to pass. In six months, we'll probably won't be talking about this and we'll all be like, you know, back into um consensus, or maybe people run these the whole time, but it's just not a big deal. It's just kind of like, you know, what's your preference on sparkling water versus, you know, normal water? And it's just, you know, you just do what you want to do.

Gotcha.

That was always my broad view, too, is that it's just going to spur so much Layer 2 plus development that it will it will be solved there, basically, right? Rather than people wrestling over the Layer 1 solution. It's like, you'll just get more people on Lightning, and then that there's a there's a feedback loop, right? I don't know that even Lightning, you were saying like, you don't want to see Lightning succeed at the expense of Bitcoin, something like that. But that's actually kind of a tricky thing to imagine because if Lightning is succeeding, it sort of presupposes the success of Bitcoin and enables it in some ways.

Yeah. Like it it does. I guess what I was meaning is like, I don't want to see like, okay, Lightning is succeeding because Bitcoin Layer 1 is such a [ __ ] show of like, just a mess of kind of junk being put into it. But whether it's like people having legitimate use cases that maybe you disagree with, or just literal spam of people just trying to attack Bitcoin from, you know, driving fees up and things like that.

Which isn't that happening, though? I mean, to a certain degree. There's a lot of Bitcoin diehard maxi purists that are concerned that that's happening.

I I mean, I don't think it's happening today. Like, I mean, our the block usage is pretty low, and our fee rates are very, very low. Like the lowest they've been in a long time. So, I don't think it's happening right now. It can happen. We see it spike and like it all of a sudden is happening for two months and then it goes away. Um, so like it's kind of like the threat is almost always there. Whether people are executing on that threat is like, you know, it kind of comes and goes. Um, but I mean, ultimately like that that is why we have Lightning and things like it, is to give people the option of like, okay, if you if you're trying to use payments on Bitcoin, you still have a method of doing that, even in this everything that's happening, you know, kind of down below, you still have that optionality.

Doesn't this all boil down to the subjective value judgment of what is spam and what is not? Like, if someone's paying for it, like, well, maybe that's spam to you, neutral third-party observer, but the person paying for it, clearly it's not, right?

Even if they are attacking the network, like, well, they're spending money to attack the network. So.

And that's one of the beautiful parts about the incentive mechanisms in Bitcoin is that, you know, miners love the spam. Like they're like, shoot, we're just raking in money. Like people are paying ridiculous fees on these transactions that are ultimately nothing, but they're making the highest profits they ever have. And so it's like, yeah, I think that there's um, as long as they're paying a fee for it, it's kind of like.

I mean, you're.

Strengthens the network.

It strengthens the network and it helps these, especially when you think long-term where the block subsidy goes away and miners only have fees. Well, it's like, well, I mean, we got to make sure the fees are are substantial enough to to support them. Um, and so it's like, well, shoot, this, if people are willing to pay, I mean, I'm not gonna stop someone from, you know, just like gambling at a casino. You want to go, you know, play the roulette wheel and like waste a thousand dollars, like go for it. I'm not going to stop you.

It's the same argument that Bitcoin wastes electricity. It's like, well, waste according to who, right? Like, we're spending, if I'm buying the electricity to mine the Bitcoin, well, then it's not waste to me. Like, you environmentalist or whatever may call it waste, but it's not waste to the individual. It's, you know, one man's junk is another man's treasure.

Mhm.

So it's almost like the act of paying for it legitimizes it to the payor, at least.

Yeah. I mean, yeah. Like, yeah. And I think that ultimately it goes down to people that like, are they don't like the the content of it. If I paid $1,000 for a transaction to send Bitcoin to someone else, they love it. If I pay $1,000 to send to inscribe an image into the blockchain, they hate it. Well, I'm still paying $1,000 to the transaction fee. It's like, yeah. It's kind of, it is like, who cares?

Um, so, oh, yeah.

And if that doesn't if that's not profitable long term, the people who are paying those high fees to inscribe garbage on the blockchain are going to stop doing it.

Natural selection takes care of it, right?

Yeah. There's been so many of these stupid [ __ ] moral like debates in Bitcoin. I'm like, just let nature do its thing. Like, it's just going to work its process out. It's almost like complaining about evolution. You're like, ah, this shouldn't be happening like that. I don't like long-tail platypuses. It's like, just shut up. And like, if they're not fit to the environment, they will die.

I can I can relate a little bit. It's fear. I had just have.

Stupidity. It's fear and stupidity.

I get sucked into it from time to time and just the concern. It's just the fear around like, we just not mess this up.

Well, your dis is so important. I don't know if there's ever been anything as important as this. We just don't want to [ __ ] it up.

Yeah. I mean, like I I I hear that and I I get it and I think that ultimately I don't think that these things will like ultimately screw up Bitcoin or have like an ultimately negative effect. The negative effect that happens right now is that like you, if you're trying to transact on Bitcoin Layer 1, you either have to wait a long time or pay a really high fee, and like that sucks. That's why we have Lightning. You can still transact and have a way of doing that. Um, or like there's things like it bloats the blockchain. Like the data required to run a node is larger than it would have been otherwise, which is like, that's kind of it's kind of getting hard to run. Like, it takes a lot of data to run a Bitcoin node in general anyway.

Load like a terabyte these days.

Yeah, it's around that. Yeah. And so that's, I mean, that gets into the spirit of the block size wars, right? It's that was compromising the possibility of decentralization by bloating.

Uh, but increasing the cost necessary to run a node, basically. So that becomes.

That decentralized.

Yeah. Well, that was an aspect of it of making it harder to run a node, which yes, like makes it more harder to for every individual to run a node and and do all those things, which is like, it's kind of you can run a Bitcoin full node in like in like what's called like prune support, only have the last like 10 gigabytes of data, you know, it kind of um, it gets a little challenging in that you, there's the purists that are always like, you have to have every single block or it's not real and like all those things, but like realistically, you can still run a Bitcoin full node with 10 gigs or whatever it is. So like that option will always be there. Um, you know, maybe it's not as pure as some people want it to be, but it, it, it can happen. And like that was one of the challenges of the block size wars is, you know, increasing the amount of blocks or just kind of altering how we fit transactions into the the existing blocks. It's kind of like, do we want to, the way that I see it, which is kind of an oversimplification, you're trying to move and you've got a a a truck to put all your boxes in. Do we make those boxes just fit into the truck more efficiently and just like space them, right? Or do we just buy another truck and just, who cares? Just let's just buy two trucks and we're just going to fit everything in it, cuz that's easier. That's kind of the way that I see it. And we opted to not increase the block sizes, not get a second truck, but just to more efficiently put the stuff we got into the truck itself or the block.

And so do you think this, well, if there is some of that residue and this current contention, then this is a valid contention, the whole nodes versus core thing?

The community at generally speaking seems to think it is, from what I can tell.

Yeah, it's like the block size wars 2.0 and maybe not at the same to the same degree.

Yeah. I I don't I don't think it's to the same degree for the reason that the block size war is worth talking about literal consensus change and like the protocol itself. Knots is more like, well, you're just running a modified version of core, which is like, it's not exactly consensus. We're not looking at a soft fork or a hard fork when you run Bitcoin Core versus knots or anything. So for that reason, the severity kind of decreases a little bit. But I think that there, the community probably sees it, well, I would say the community from the Bitcoiners see it as equivalent. But when we looked at the block size wars, like people like Coinbase were weighing in. People like the really big players in the industry were having a say in trying to push things in a particular direction. Um, we don't see that in the knots versus core debate. Like, no big exchange is weighing in on one or the other. They don't, this is kind of this is outside of their purview. They don't really care about this. So.

To the Bitcoin community.

That's the case. I'm seeing stuff that, you know, people are concerned that Bitcoin Core has been co-opted or gone rogue. And it's my understanding, and correct me if I'm wrong, I don't I'm not a tech guy, but that filters core has removed filters. Is that correct?

Um, I don't I'm I'm not familiar with any filters that they would have removed. I couldn't say like a yes or no. I don't I'm not familiar with them removing filters. I can't I don't know of anything that core has done to like, you know, aid in a bet these like the spammers necessarily. I think that they've been like more like this is the way that, you know, the Bitcoin works that allows for that to happen, but we aren't like, oh, we're going to remove a filter so that they can do it. I think it's just more like this is what it is. You know, people can do what they want with it, rather than not is taking the perspective of, we don't want that. So we're going to change this to prevent that from happening. That's the way that I understand it.

Okay.

Could you put inscriptions or JPEGs or wills or endowments or whatever you would could possibly want to inscribe onto the Layer 1, just onto an L2 or L3? Yes. And that you you can in an L2 sense. So things like Liquid, which is a side chain, which is still like an L2 on Bitcoin. You can do some of those things. Like I call it like Ethereum like tokenization of whether it's a a will or a or a shitcoin or whatever it is. You can do that on things like Liquid. Um, you can't really do those directly on Lightning. Um, Lightning is very focused on just payments. Um, but with the Tapered Assets protocol, which is a newer protocol that facilitates those stable coins coming to Lightning like I talked about. Um, with that protocol, you could do more of that kind of encryption type stuff to put different things that aren't Bitcoin into Lightning. So, that's becoming more, you know, possible with things like Tapered Assets. And so, ultimately, whether you would, depending on kind of what you want to do, you could use a Liquid, you could use a Tapered Assets. You could use things to do more of those inscription type things on a on a Layer 2 that's not the Bitcoin base layer.

Yeah. So, we're back to the free market working it out. If it gets too expensive to do so on the on the Layer 1, then you're going to incentivize people to do this on another layer.

Exactly. And I think that that's where like the these people that maybe maybe like inscriptions, for example, some people saw that as spam. Some people thought of it as this is a legitimate thing that I want to do and trade and do all those things. If there is a mechanism for doing it on a Layer 2, like Liquid, for example, they should do that because it's cheaper and faster for them to do it too. They save money by doing that. So, it's kind of like the natural selection of if if there is a legitimate use case that some people disagree with, it should go to a Layer 2 anyway because it's going to be better for that that community that wants to do the thing anyway. So, I think that for anyone that is doing, you know, legitimate data availability stuff on Bitcoin, it will go to a different spot um because it's going to be better for them as well as Bitcoin. I think I just don't believe in market failure.

And so I think market mechanisms and incentives sort this out no matter what. And maybe that's a bit of an idealism on my part. But I can't imagine a scenario unless there was some like that's the whole Bitcoin Core is co-opted thing. Some massive psychological operation and intervention that's you know like a metap fraud inside of Bitcoin. But that, you know, those things don't seem to work in the real world very well. Uh, I just can't imagine them working in open source communities and open source software.

I mean, I I I think, yeah, I think that that goes like an earlier point of just, I think it'll work itself out like over time. Like, I I don't see that the these issues are, you know, detrimental to Bitcoin. Same thing is like, you know, we people during the soft block size wars really like did I think they saw it as like, you know, the ultimate threat of like, it's going to succeed or fail based on the decisions that we make here, which like I don't I don't know if it was even to that level. I think it's like, how do we just scale this more efficiently? How do we do better? Um, I I see this as similar of like, it's not, it's this isn't going to be like the success or failure of Bitcoin right here.

Yeah. There is this sort of like Malthusian impulse in humans where they just want to be like, oh, this is the thing, like the, you know, Armageddon is here. You have to decide right now. Oh, are you with us or against us? And all this like psychotic behavior.

And I think you just got to take a step back sometimes and have breathe, have a little patience, faith.

Relax and religious.

And I to I somewhat understand like you don't want to be completely complacent like, oh, no, it's just going to work itself out. Like, I don't give a [ __ ]. Like, obviously you don't want that.

Apathy.

You know, Jameson Lobs often said that he thinks apathy is the greatest threat to Bitcoin. So there is a middle ground. But then I think the opposite side of the pendulum is also true that people get overly zealous about the existential crisis they're facing about whatever thing they're into.

Yeah. And I think.

And the truth's often somewhere in the middle.

Right. Right. Exactly. And I think that that's where like, you know, Bitcoin is here for the long term. We got to think in like decades, not like months. And so I think that that's something that people get caught up into is like, okay, this is a problem right now. We need to jump in and like really debate this and solve it when it's like, you know, over the long term, over the decades that Bitcoin is going to exist, centuries, whatever it is, like this is nothing. This is not a big deal. We can't be completely apathetic of like, it's just all going to work out, but at the same time, it's not hair on fire all the time.

Then I think some people do get in the habit of being.

Would you rather have one Bitcoin today or two Bitcoin a few years from now? Bitcoin mining is a tried and true strategy for accumulating Bitcoin over a two to four-year time frame. Successful miners have consistently accumulated more Bitcoin than they otherwise would with a traditional dollar cost average strategy. Blockware mining as a service enables you to start mining Bitcoin from your laptop. Blockware handles everything from securing the miners to sourcing low-cost power to configuring the mining pool. They do it all. Plus, with Blockware's one-of-a-kind mining marketplace, you can buy and sell live Bitcoin miners with just a few keystrokes. In this marketplace, buyers get to purchase live machines at vetted facilities, enabling them to mine with zero lead time, and sellers get the opportunity to liquidate their machines and hosting contracts at will. This means you can mine Bitcoin with zero long-term commitment and high liquidity on your mining rigs. Blockware will even cover your energy bill for one week per mining rig when you sign up at mining.blockwaresolutions.com/breedlove. blockwaresolutions.com/breedlove. Again, that's one free week of Bitcoin mining at mining.blockwaresolutions.com/breedelove. And on top of this offer, you can also use code breedlove to get $100 off your first mining rig with Blockware Solutions. Bitcoin custody is evolving. On-ramp is pioneering a new model, multi-institution custody, which eliminates single points of failure and adds fault tolerance to your setup. With On-ramp's multi-institution custody, your funds are auditable on chain, cannot be rehypothecated, and can only be moved with your explicit direction. Multi-institution custody simplifies private key management, providing unparalleled peace of mind for you and your loved ones. On-ramp also helps you seamlessly tap into financial services like trading, inheritance, loans, and more, all without compromising on accessibility. So, schedule a consultation with the On-Ramp team today to learn more at onrampbitcoin.com/breedlove. Again, that's onrampbitcoin.com/breedlove.

So, you've been in Bitcoin for a while. You experienced the block size wars. Can you unpack a little bit what that was like? Did you come to the conclusion early on during that time that the small blocks and layers were the solution, or were you confused? Because at the time when I first got into Bitcoin, I was like, okay, you know, I get on Coinbase and there's all this stuff and it was like it was overwhelming trying to make sense of it all. What's the difference between Bitcoin Cash and regular BTC? And so what was your experience in that?

Yeah, I mean, I think I I was I was like at the time like a pretty just big hobbyist and and I I wouldn't say that I was super involved in like block size wars generally, but like it was interesting to watch from like the standpoint of like, I think the biggest thing that was surprising to me was these larger corporations like Coinbase, like having a really big like impact and like trying to push things in a particular direction. Um, where it was kind of like the first like, you know, uh company corporation trying to like really put their thumb on the scale on how Bitcoin should work. And so that was like kind of eye opening and like one, well, holy cow, like Bitcoin is getting mature and that we actually have people caring about it in this way, but then also like just looking at it from like the development of, you know, long-term Bitcoin success and what are we actually trying to do here. So I mean, it was really interesting. I think that I I just learned, I think it's kind of like as an observer learning a lot about like, you know, really intelligent people debating on like, you know, the the values and the merits of one one situation versus the other. Um, and I think that, you know, if if we would have done the bigger blocks, I'm not sure Lightning would have been maybe maybe developed as quickly as it was, or or even the success that it has been today. I think ultimately increasing the blocks was kicking the can down the road where we would just hit, you know, the problem at a later date. And I do I think that in hindsight, I think that a lot of people agree with that, even the people that were for bigger blocks at the time. So ultimately, like going through that was just a really big kind of education like experiment for me. Um, just to really see and like listen to a lot of like the really smart Bitcoin Core developers like debating these topics and then out coming from that, the Bitcoin Cash, Bitcoin Satoshi's Vision, like all of these things, which was like that was just crazy too.

And I was really I I love that because I I had Bitcoin on-chain at the time and when that happens, you get the equivalent amount of Bitcoin on these new forks. And so I would just every time someone made a fork, I would just go sweep keep that wallet, go sell it on an exchange for Bitcoin, and just be like, I'm just making money. Like, keep doing this stuff. Like, it's so ridiculous. Um, so I learned.

So, you knew at the time to dump the Bitcoin Cash.

Yeah. I never like in in 2017, I got like a little bit of like dabbling into like, you know, altcoins and things like that, but in in the block size wars, I knew from the get-go, Bitcoin Cash and all these things were just total BS. Like, they were not going to stay around. Um, it was just people being Craig Wright being mad and just trying to, you know, have his way. That just it just didn't work out at all.

Such a testament to the decentralization of Bitcoin as well, right there, because there was a lot of money and influence behind the big blocker agenda.

Mhm.

But it was ultimately like nodes and the people basically that sort of won out.

Yeah.

And so that was a really, I mean, that's a very telling dynamic about Bitcoin that it is.

It's sort of like a proof point of its decentralization in a way.

Yeah. No, I def I think it definitely was um at the time of like really showing like the the ability of the participants in the network, the literal participants in the network having the say and being able to do what they think is best versus, you know, the corporations that just have opinions that are trying to, it's like it was almost like lobbying in a way um in a weird like Bitcoin community.

It felt like there may have been a bit of social attack agenda behind it too. I don't know if it was state money or something like trying to put because you you brought up Coinbase and some of these other institutions, they were all big blockers, right? I don't think any ones were.

Any of the none of the big influential players were going the way of the community, they were all going for larger blocks.

I think so. Like I don't want to say all of them, but I don't really remember. I can't think of one off of my head there's like a bigger corporation that was for, you know, smaller blocks.

And even some of the bigger voices in Bitcoin at the time too were also. And so like I don't know my conspiracy theory tinfoil that perks up and I'm like, "Oh, they were probably getting paid to do this social because it was a viable social attack on Bitcoin."

Mhm. Yeah. I mean, like I, it could be like, I I'm I've learned by now, you can't, you know, never say never, like anything's possible. Uh, so I mean, I think that was really interesting to see the the difference in like the the opinions on who's on who side and like, you know, ultimately like, I think thinking about like, you know, corporate interest versus like the betterment of the network and thinking long term and like how those two came together. So I, it was it was and I think that that was a big um experiment experiment and experience for the Bitcoin community and Bitcoin as a whole to like go through this. This is the first time we've had some kind of like corporate involvement really from like um a policy or consensus level change in Bitcoin. And so now, I mean, we we continue to do things like, you know, the Taproot upgrades and things like that that, you know, continue to go on and we're seeing more and more kind of participation um for from these corporations like Sailor getting involved and just like kind of just the debates around like, should we do X Y or Z? Um, I think that's going to continue. So that was a good like test run. I think that's going to like when we think about, okay, the next time we have one of these big debates, we'll be like BlackRock, you know, coming in there that's got a [ __ ] ton of money.

Like, you know, how are they going to try and, you know, sway particular things in in their direction. And so, um, you know, we'll see how that plays out, but it was a good test run at the time.

Where do you think the next significant contention will be? Will it be anonymity? Like, what do you think the next, does this not Core thing blow up into the next one? Like, what, what do you.

Let's put your Whitney Web hat on.

Yeah.

Where's the battleground?

Yeah. I mean, I I I think it could go a couple ways. I think the mining centralization thing, like I mentioned, could it could bubble up to a point where that needs to have something done about it if people aren't willfully, you know, doing Stratum V2 and things like that. I think it could bubble up to like, it's kind of like the fight for Bitcoin's decentralization. That could be something where like, yeah, it needs to be a consensus level change or something to enforce uh more decentralized like block template creation. That could be one of them. Um, and then I think like just continuing to increase on the, I think that we've had an interesting amount of like uh interest on like the programmability of Bitcoin, looking at things like um, the the BitVM debates and things like that around there's there's a huge amount of like proposed like op codes, basically, you know, codes in the Bitcoin consensus protocol that allows you to do things. Um, and there was a when Satoshi originally created Bitcoin, he had a lot of them in there that he ultimately took out later on. Um, for he kind of I think that he felt it was unsafe of like it was just too experimental. He didn't feel comfortable about having all of these things in there. He wants to reduce the kind of attack surface to have the really strong foundation and then maybe enable them as we go. There is things that are both like turning some of those back on as well as just developing out new ones that help on help in a lot of different ways of the kind of the programmability of Bitcoin of being able to do more um in terms of what could be done with on-chain transactions in Bitcoin, which ultimately help that cascade into the longer term effects of things like Lightning. If we have things like L2, which is a proposed kind of um op code like change that would enable us to do more inside of Lightning, have more things like being able to do more like offline receives and just a lot more protocol enhancements. Um, a lot of those things have been debated for a long time. Um, we have things like um like OP_CTV and like there's just there's kind of a whole list of like really, you know, debated op codes that I think I don't know if it'll reach the level of like um uh fighting that had that happened in the block size wars, but there's a lot of things that have been debated for years that will continue to be debated that it's kind of like ultimately I think a lot of that you can boil down to those people that want Bitcoin to not change at all. Like it is digital gold. Don't touch it. It is what it is, versus those people that, well, we need to evolve. We need to add more functionality. We need to continue to do more with it. And I think that those are the two dynamics that are just going to be constantly a battle.

And those are fundamentally in tradeoff relation, right? So like as you increase the, I don't know if expressivity is the right term, but the more things that you can do at Layer 1, the more attack surface there is.

And so there is a large, and I think this is right, actually. It's like, you do want Bitcoin to be that unshakable bedrock.

And then as much, now this would be a question, I guess, can you do more of that expressivity again, if that's the right word, at Layer 2 and just not, you don't need to do it at Layer 1. Like, is there a way for Lightning to pick up a lot of this and, you know, build Lightning apps and I don't know, do Turing complete stuff and all the things you can't do at Layer 1? Can you abstract that up to Layer 2 plus?

Like, yes and no. There is some things that you can add into like a Layer 2 that you couldn't do on a Layer 1 um and just continue to push that up the stack. There are things that, you know, if we did like, okay, this one change into Bitcoin, like Layer 1, it unlocks like huge amounts of possibilities and continuing to scale in these Layer 2s. So there is some amount of like pushing things up the stack and just doing more programmability on these Layer 2s. But there is like some amount that if we had like, you know, this one change to Bitcoin, you know, Layer 1, it unlocks huge amounts of potential down the road. Um, so it's, it's kind of like, it's a little bit of both. We don't need to, I'm definitely one that we don't need to add everything to Bitcoin Layer 1. It needs to do all these things. We need to match Ethereum and like the amount of, you know, things that you can do on smart contracts. I'm not I'm not to that level. But I think that there are some natural progressions that if we did some small changes, like it unlocks huge amounts of opportunity down the road to do even more at these Layer 2s. So they do go hand in hand, but it's not like there's a lot we can do in the Layer 2s.

Got it. Okay.

How does that scalability affect the altcoin value proposition? Because I've over the years kind of thought a lot about, I, you know, call them shitcoins. I won't censor myself here.

Yeah.

Like, if you if you can build, if the market wants it, wouldn't you be better off building some of these protocols on top of Bitcoin?

Mhm. Yeah. Yeah. I mean, yes, 100%. Um, and I think that that's where like that's why that's why Ethereum got created in the first place, is because, you know, Vitalik and others wanted to do things that just weren't possible on Bitcoin. So they're like, "Okay, we're going to do this stuff over here." If you can do more of like those the value, the valuable services in those on top of Bitcoin, why would you not? Especially as you look at, you know, us trying to push Bitcoin into more the hands of more people. When people are evaluating, okay, I want to do, you know, X Y and Z. I want to have a new project. When you're evaluating Solana or Ethereum and then Bitcoin, Bitcoin is the natural one from the this trust and security that exists inside of the Bitcoin network. People know Bitcoin. Bitcoin doesn't have, you know, the only bad reputation Bitcoin has is the energy stuff, which like we all know is just.

Well, that's actually why it's so secure.

Yeah.

It's the same thing actually. It's like the.

I I don't think that the energy stuff is bad. I'm just.

But that's what I'm saying, like that the fallacy of the energy when people say, "Oh, Bitcoin uses too much energy." It's like, that's why it's so secure. That's why it's number one. That's why it's the best. That's why there's no second best.

Right. Right. And so like when you when people are looking at, okay, if I want to do something, are they going to choose Solana or Tron, or are they going to do it on Bitcoin? If it can be done on Bitcoin, they'll want to do it on Bitcoin, like unless you're an insider dumping your pre-mined coins on retail.

Yeah. Well, I guess maybe I'm talking about like, you know, actual value, honest honest users here. Yes. 100%. If you are looking on like, yeah, trying to do an ICO and just kind of have a get-rich-quick like scheme of some sort, then like, yeah, it probably m maybe maybe they do do it on Bitcoin, but for the sake of it has more users and they're trying to scam more people. Like, that's, you know, that's the the unfortunate like reality of that. But ultimately, like, yeah, I think that people will, anyone that is creating a net new chain today, I think is doing it for the sake of money, of trying to get more for themselves.

Because as we continue to enable more and more things to be built on Bitcoin, there's no reason you shouldn't use Bitcoin for that unless you're trying to do nefarious like other things.

Yeah. Because there's less retards on Bitcoin. You're going to get more retards to scam via these other chains and.

[ __ ] But isn't that the case for during the ICO era and, you know, the development of Ethereum? Was it like, you know, Vitalik's impatient and wants to be able to put all this, I don't know,

Utility on a new chain as opposed to just waiting and working it out, put it on Bitcoin.

I I think Yeah, I think that it is. I think opportunist. I think that he's all coin to have all this functionality. I'm going to do it now. But I think he's also probably, he was like, he wrote for Bitcoin magazine before he started um Ethereum. And so I think that he he probably had conversations with people in the Bitcoin space and people were like, "We're not going to do this because it's dangerous to the security of Bitcoin." And so I think for those reasons he went and was like, "Okay, well, I'm going to do it over here because it's going to take too long or they're just not going to do it at all." Um, so that is why and I think that like he, you know, the the the Ethereum started out as like, you know, just trying to do more in a different, you know, mechanism, but it's all obviously since like, you know, diverged into like proof of stake and all these things that are like, you know, completely kind of um going off the rails in terms of the actual, yeah, so like it's um, I don't want to say it started out virtuous or not, but like it has definitely diverged in what it was originally created for. And then you think on top of that, okay, all these other chains that are being created, like those are just not adding value at all. Like at that point, they're just trying to, you know, gain money. Uh, you know, whether that's for, you know, token holders, whatever it is. Like, it's just it's just kind of a money grab.

Yep. That makes sense.

Scam city for sure. And it's um, I I wanted to ask you this earlier. So there have been examples of upgrades to Bitcoin. I was it was either Taproot, I think it was Taproot, may have been Schnorr signatures that actually introduced some unintended consequences, right? So people were trying to introduce upgrades to Bitcoin Layer 1, correct me where I'm wrong on any of this, and then they thought it would add these benefits, did not see it would also add these negative consequences.

Uh, what, you know, how do we navigate, how should.

Is it just a matter of trial and error? Like, we do need to occasionally add these experimental features to Layer 1 and then see what breaks and then try to walk it back, or like, what's the right approach to that?

Yeah, and I mean, I think like there there have been some, you know, unintended consequences in in the past. Um, some things like some of the changes that went into Taproot enabled some of the spam to be easier to do. Um, and so I don't know if that was an unintentional consequence or they intentionally did that to to for the sake of better payment efficiency, but then people took advantage of it for this other use case. But ultimately, I mean, I think that it is somewhat of like, you know, like just doing it and testing it. That being said, like I think that doing it more like on like Bitcoin has like, you know, various levels of of kind of test chains of like Regtest, um, Signet, and then Testnet, and then Mainnet, and being able to just continue to test out these things on like, you know, the lower levels is what should be done and continuing to just like beat these things up, figuring out what is working, not working. Um, I don't think we should be like, you know, going to Mainnet with these changes without having at least like feeling really confident and understanding what the the positives, negatives are, what like what can happen there. It's impossible to know everything. Um, but at least having a good like a good stance on what we feel is, you know, possible. Um, so I think that there is a level of, you know, we need to get them out in the wild to figure out what is possible, but trying to do that more and more on these like lower levels before just, you know, yoloing into Mainnet.

Mhm. And that responsibility just falls with the development community.

Yeah. I mean, for the most part, um, I mean, yeah, like it's, it's kind of one of those things of like, you have to, you know, to know, okay, what does OP_CTV do to, you know, Bitcoin transactions? What can you do with it? What can you exploit with it? Like, that's such a technical thing that there's a limited amount of people that can really um, kind of test and get their hands dirty with it. So ultimately, it does kind of fall into that development community.

And that limited amount of people who can who understand such things, isn't isn't that a vulnerable point within this whole ecosystem?

Yeah, I mean, I I think so. It was it was we were at um, the Tabcon, the Atlanta Bitcoin conference, like I don't know, 2022 or something um, and we had that conversation of like, there was so many Bitcoin Core developers there. We're like, we need to have like security at these events because if like something happens, like we've lost like so much of Bitcoin knowledge and the the, you know, people working on the protocols. Luckily, I think there's been a lot of work done to to spread that knowledge out around um, much more things like BTC++, which is a kind of a technical developer conference for Bitcoin. Um, things like that that really help kind of distribute that knowledge so you can get more people contributing to core knowledgeable what the systems are, cuz I mean, it's kind of one of those problems when it first started, there was five people that really understood like the protocol and the technology really, really well. Um, and we're, you know, over time it's going to continue to evolve and and spread out. And that's the goal. You know, you don't want to have like the knowledge of how Bitcoin works.

And any testing or protocol change that could happen in the hands of, you know, a couple people. So, it's kind of like the work of the community to keep enticing new developers in, um, to work in Bitcoin, whether it's in a corporate job or just open source or anything like that, to keep that knowledge being, you know, spread around, um, then passing it on to new people.

And I think that the current Bitcoin Core, like developers, the OGs are doing a pretty good job at kind of trying to get more people in and distributing that knowledge. Um, because over the last couple years, people like Craig Wright have been like actively attacking them, like suing them, um, and really, you know, really hurting their lives, um, to the point where they're like, "Okay, I can't even work on Bitcoin anymore because like it is threatening, like my family, of like all these court costs, all these things."

Um, and so, you know, that, that's it's it's an attack vector that people like Craig Wright have tried to take advantage of. Luckily, he was unsuccessful. You know, there, um, I think through donations and things that kind of like those went away. And then also the courts deciding that he was a lunatic and his case wasn't valid. Um, and so ultimately, trying to distribute that knowledge the best that we can is going to be very, very important.

"Yeah. It's important that the node runners understand these kinds of, uh, updates. It's like I don't vote for governors or mayors because I don't understand their policy."

"Like I don't know. So it's, it's almost feels like it would be irresponsible for me to make a decision. So when it comes to like core versus not or whatever, it's like I'm apprehensive to pick a side because I don't actually know really what's happening."

"Yeah. Well, I, I think that that's all honestly like a fairly good stance because that was something like going back to the block size wars of like some people that were just like, 'Oh, Coinbase is saying that this is bad.' Well, okay. I'm going to think that it's bad, too, without actually doing any kind of research around it. And so it's kind of like the groupthink problem of just like, 'Okay, I'm going to go along with this because these people have a compelling point. I don't know anything about the, this the thing that's being debated, but, you know, I'm going to go with them.' I think that's that's very dangerous and not just Bitcoin, but just society in general. Like having, you need to have your own thoughts and opinions about these things and then advocate for them 100%. But like don't just advocate for things on a headline or just like, 'Oh, I that guy looks better,' or whatever it is."

"Yeah, that is a real problem. I mean, we have to do that, right? We can't be experts in every domain. So, we do have to outsource our judgments to others who we perceive to be experts."

"But that opens you up to counterparty risk, right? Not so much in a financial sense, but more in like an ideological sense."

"Yeah. Yeah, that's true. I mean, it's, yeah. It's it's a, it's a really challenging problem just in general, like just to really be, yeah. We, we can't all be experts in everything, but finding, I think the, doing maybe doing enough research on a particular topic where you can at least be like, 'Okay, this guy is, you know, has the good virtues that I'm going to, I believe that he is of good faith and, you know, he's he's going in the right direction.'"

"Yeah. Yeah."

"One of my highest health priorities is keeping my brain in top shape. To take care of my brain power, I do many things such as striving to read, write, exercise, and meditate daily. One of the latest tools in my brain power toolkit is Mind Lab Pro. Mind Lab Pro is a nootropic supplement that is scientifically proven to enhance your brain power. When I take Mind Lab Pro, my mind feels like it has a better grip on the world. My thinking is more lucid and the articulation of my speech is radically improved. Mind Lab Pro has been tested in rigorous double-blind, placebo-controlled human trials and has been proven to enhance brain power for users in every age group. Mind Lab Pro is an advanced formulation of 11 nootropic ingredients and is backed by research from over 1,400 human trials conducted over the past 32 years. So if you're looking to enhance your brain power, Mind Lab Pro is an excellent solution. Go to mindlabpro.com/breedlove to start enhancing your brain power today. Again, that's mindlabpro.com/breedlove."

"If you're listening to this podcast, you probably get it. You get that Bitcoin changes everything. For those of us that get it, it is important that we use a smart way to buy and hold Bitcoin. My friends at CoinBits, the oldest Bitcoin-only exchange in the United States, have recently pioneered the concept of roundups, which lets you turn your spare change into Bitcoin. Simply connect your payment cards and all your purchases will be rounded up to the nearest dollar, letting you stack sats without even thinking about it. My favorite feature is CoinBits Plus. For $10 a month, you get the best spreads on Bitcoin, which lets power users save on fees and buy even more Bitcoin. All that, plus peer-to-peer payments, target orders, price alerts, and more means you can do almost anything you want to do with Bitcoin using CoinBits. So go to coinbits.app/breedlove to sign up today. Again, that's coinbits.app. Coinbits.app/breedlove."

"All right. So tell us, uh, tell us about Voltage."

"Yeah. So Voltage is a company I started about 5 years ago. Um, and what we do is we just try and simplify the experience of integrating and using Lightning, um, into products and services. So, we're a B2B platform. We work with businesses all over the world to help add in Bitcoin, but mostly specifically Lightning Network into what they do. So, we work with people like exchanges, wallets, neo-banks, payment processors. Basically, anyone today that is moving Bitcoin can use our platform and do it faster and cheaper than doing it on-chain. Um, similarly, we help, we work with a lot of like traditional fintech companies to add in Bitcoin as just a net new, um, experience as well and help in the facilitation of like, you know, fiat on/off ramping and things like that. So ultimately, trying to bring the Lightning Network into more people by solving a lot of those problems. You know, we started talking about all the technical intricacies of it. That's one of the things as businesses are like, 'Cool, I want to take advantage of Lightning from the cheaper, faster payments, but like I don't want to go hire a team to go and like figure all this out, run all this stuff in-house.' So that's what we do. We're kind of experts in Lightning. We give a really simple API integration to our customers to be able to just hook in and be able to leverage that for payment. So really, just trying to simplify the experience of integrating Bitcoin and Lightning into their products and services."

"And how, how, um, how many of these big players within the game and exchanges are using Lightning?"

"Yeah, I mean, quite a few of them. Like, it's really exploded over the last, like, 12 months where people like Coinbase, Kraken, Binance, Bitstamp, uh, Bitfinex. There's, there's a large, large amount of these larger, uh, exchanges leveraging Lightning today. Um, we see that happening from user demand, people asking them that like, 'Hey, we need Lightning because, you know, withdrawing or depositing with on-chain takes so long and it's so expensive.' Um, and so it's been a growing number and we see that continuing to grow. We have several people in our pipeline that we're onboarding right now that are continuing to be large exchanges that are wanting to add it in."

"Okay. Um, another question. I got hit up by an individual who put together a payment protocol, I believe it's called Taproot."

"That uses ICP and he contacted me. 'Hey, I got this cool payment thing. I want to talk with you.' I had a short call with him. And when he brought that up, I was done. I'm checked out. I'm like, 'What do you mean you're using ICP? Like, we have Lightning.' And he's like, 'No, Lightning. Lightning isn't going to work. We have this other protocol. You need to spend 100 hours learning about ICP.' And I said, 'No, I can't do that.'"

"Is there any reason why you would need a sidechain like ICP to scale, or is Lightning got us covered?"

"I mean, it depends on what you're trying to do, but for the most part, Lightning has us has us covered. Um, because, you know, when you're think about purely, you know, moving value from person A to person B, Lightning is is fantastic at it. And it does a very, very good job at doing that faster and cheaper than the other, other protocols. Like I mentioned, if you're trying to look at things like tokenization or like things like that, like that's kind of newer that we'll see how that plays out with tapped assets. I think that'll be really, really great for stablecoins, whether you're trying to do like, you know, mortgages on the blockchain. We'll see how that kind of goes. Um, but ultimately, it really does, you know, have us covered from a lot of the different angles and we see it as the best way of scaling Bitcoin."

"I, I have, you know, since I've started the company, I've been very open-minded about all these new L2s and things like that. I want to see if there's something that was truly better than Lightning. You know, we would use it, we'd adopt it, we'd do it. Um, but that just really hasn't come about yet. And we still see Lightning is the most used, most largest, most popular L2 on Bitcoin. And like, you know, I'm I'm open to that changing, but there's just never been anything compelling, um, to see that change."

"Is there a similar dynamic with Lightning as an open-source layer 2, that if a competitive layer 2 established some feature set that was market-proven or or useful, that the Lightning Network could inherit that feature set or adopt that feature set, sort of like we see at layer 1 with Bitcoin, like if some, you know, shitcoin makes a cool new thing, Bitcoin can adopt that?"

"Is there a same dynamic there?"

"Yeah, like yes and no. Like for the most part, like yes, we can bring in new functionality into Lightning. You know, if there's something cool that's like net new that's really valuable, you know, we can bring it into Lightning. For the most part, there are some things of like how the protocol is written is maximizing for like the trust and security that exists in Bitcoin and maintaining that through. Um, there are things that could compromise like that, that aspect of Lightning that probably would be incompatible. So like if there's a new feature that requires a lot of trust where like there needs to be like, you know, a couple, like, you know, validators or something in the middle, like maybe there's a way of kind of shoehorning it into Lightning, but like it would be a little antithetical to the Lightning protocol natively because like, there, and that's something that we've seen people adding in, you know, in some of these new Bitcoin L2s, um, new functionality that doesn't exist in Lightning, but it comes at the cost of centralization almost all the time where like, 'Okay, now you have to trust these, like couple people in like a multi-sig or something that is just inherently more more prone to censorship and just less decentralized.' And so we can definitely bring in new functionality into Lightning and continue to expand it. And we've seen that happen. Um, you know, as far as like new things happening in other layer 2s or new blockchains, they can somewhat be brought in, but the Lightning Network is created to be to keep the same assurances that Bitcoin layer 1 has and not compromise on those. So, if it if it's going to conflict with those, then there might be a little bit of a problem."

"I see. So, if it's something that's like architecturally different, that can be a problem."

"Yeah. Valid, because there's no validators on the Lightning Network, for instance."

"Right. Right. And like maybe maybe you can have it as kind of like, um, like a layer 3 or something that incorporates with Lightning, but they're a little bit separate in that regard. Um, just because like if we, I think that's one of the problems that we see a lot of people running into in the Bitcoin L2 space is like, you're really, if you're creating a new L2 that is more centralized, you can censor it, you can do all the things. Well, then what's the point? Like, what is the point of doing this thing in the first place? If we created this fantastic new financial system that gives people more freedom and power, and then you create a scaling mechanism that just removes all of that. I'm just going to use my bank. Forget this. Like, I this is no, there's no point in this. And so I think that's one of the problems us as an industry are really battling is people wanting to do all this net new stuff or solve all these problems, but they compromise every step of the way, which just, it just, it's not interesting to me at all. That's why I, we stuck with Lightning so far is it's the only one that is doing all of these enhancements but keeping the same principles as Bitcoin along the way."

"I see. Yeah. And that's an inherently tricky path, right?"

"You got to do new things. It's very easy to just maximize transaction throughput by putting it all on one node."

"Yeah."

"You know, trust one group."

"Problem. And that, one of the, the harder parts of that too, is like getting people to care. Like, because I think that if you're thinking about broader, like ecosystem, people maybe outside of like the Bitcoin space that really understand the value here. If you're trying to go to a traditional financial company, they don't, they maybe don't care about the decentralization and censorship resistance and all those things. You got to kind of help them understand why it is important. Um, and so that's kind of the other aspect of it of like making sure that not only, you know, we keep those same properties, but people actually care about it. If you stop caring about it, then we're just going to go into centralization all over again. You know, we got to kind of talk about the values that it brings and those things along the way."

"Is it, do you think Lightning Network is already set up to be something that would be a viable replacement to things like Visa, Mastercard, American Express network, or is it still something that needs to be built towards that end?"

"I mean, like, yeah, I think that ultimately, like it is the mechanism of that can be, you know, a replacement for those things. Um, because, you know, when you think about, you know, doing a transaction in Visa, there's not a lot, this is just Visa's database. You know, they're going to send the merchant the money in 3 days, they're going to, all those things. With Lightning, you can do the same thing. Um, and you can do it faster and cheaper and get the money into their, that person's hands, you know, instantly. Um, so there's a lot of value there and it's set up for that today. You know, some of the things that, you know, depending on how are you talking about or incorporating it. You know, you might need fiat on/off ramps if you're trying to still maintain, you know, fiat currencies on either end and things like that, but ultimately, it's set up for that and it's also set up to scale with that. You know, Visa does a huge amount of volume. Um, same with Mastercard, all these networks. Um, Lightning is set up to be able to scale and reach that with with relative ease. Um, it's set up to be able to handle that kind of load today. And we're continuing to, you know, increase the amount of transactions that are going through Lightning that, you know, ultimately it can be a replacement for that. As well as things like SWIFT, like being able to send money, um, you know, through the banking system that's not like card-based, but just kind of sending person A to person B, um, and doing that faster and cheaper than that as well."

"Gosh, I wish we could get that out to all the XRP fans."

"So, uh, Jack Dorsey was on a podcast in the last six months and he said that if Bitcoin isn't adopted as a medium of exchange fast enough, he's concerned it will fade into irrelevancy. Do you share that concern as somebody?"

"Jeff Booth as well?"

"Yeah, Jeff Booth is he's also very concerned about that. And I think Jeff Booth is uh working."

"I think he's helping to develop Fetti, if I remember correctly. He's, his fund is an investor in Fetti for sure. Um, and so yeah, I mean, I, I, I think that there, there is merit there. Um, I wouldn't say that it, I'm not sure it fades into irrelevancy, um, necessarily. I do think that like, you know, Bitcoin was created originally for a method of payment. That is what it was created for. Now, the 21 million hard cap really, you know, helped it come as a store of value as well. Um, and that this Bitcoin is the first thing that can really satisfy the method of payment and the store of value at the same time. You think about gold, good store of value, but you can't transact with gold that easily. Fiat money, horrible store of value, but it's easier to transact with. Bitcoin can do both of those things. And so, it's really hard for people to wrap their heads around. It can do both and it can do both well. Um, and I think that for the the method of payment inside of Bitcoin, being it used for payment strengthens the the investment thesis for it as a whole. So, if you're just a person that's holding your Bitcoin treasury company, I'm just going to buy thousands of Bitcoin. I'm just going to sit on it. It being leveraged for a medium of exchange only helps it increase in value for your investment because more people need Bitcoin to facilitate the transactions. It's used for more things. It naturally enhances the investment thesis for Bitcoin itself and it increases the usage. Think about minor subsidies long-term, we still need that activity to be happening on, you know, Bitcoin layer 1 that then is, you know, feeding into the layer 2. So ultimately, there it's incredibly important, I think, for the overall thesis and the long-term, um, I don't want to say viability, but it's important for Bitcoin long-term for it to be used as a medium of exchange. If it, if the medium of exchange stuff kind of completely falls on its face, does Bitcoin fail? Does it go away? I don't think so. I think that it will still be there, um, from the store of value aspect, but it's just kind of, it's not living up to the full potential that Satoshi created it for. And I think that it kind of, it hurts the investment thesis a little bit in that regard."

"And what's the biggest hurdle to get over to get more people to use it as a medium of exchange?"

"As a Bitcoiner who has been in Bitcoin for some time now, the reason I try not to use Bitcoin too often to like pay for random things and when I do, I use Strike and I'll send dollars or cash out of my cash and I'll send it to a Lightning or to a main chain address. It's a taxable event. It creates an accounting conundrum."

"Yeah, I mean, I think there's a couple things. I think one is is some tax reform that allows for, you know, Bitcoin under $500 to be, you know, not to not be subject to the tax of capital gains and things like that because it is like, it's it's horrible to send $5 and have to pay tax on it. It's just, it's a mess. Um, so we need to have some tax reform around that, which I think they're, you know, government leaders right now are kind of hinting at that, which would be great. But then I think also, I think that the problem will always exist of, you know, transacting in Bitcoin versus transacting in dollars. And that's where things like stablecoins come in and I think will help a lot, as well as, you know, fiat on/off ramping that we've been working on, um, to help kind of bridge the gap between the two. Because if you can, if you can send like, you know, go dollars out of your bank account, convert it into Bitcoin, send it over Lightning, and then convert it at the other end, you're still doing that much faster and cheaper than you can with the traditional rails. Now, you lose some, some of the advantages. There's maybe a fee on either side of that exchange. Maybe you have to, like, probably trust a third party to do that conversion for you. So you don't get, you know, 100% of the pure power of Bitcoin in that scenario, but it still enhances the ability of transacting far faster and better than you could otherwise. So it can still, I think that being able to continue to build out that functionality of stablecoins and, you know, better on/off ramping, um, will help a lot and being able to leverage it for a method of payment. And it might not be, I think when people think of Bitcoin as a medium of exchange, they think about literally transacting with Bitcoin, which is like, you know, that can happen, that's great. But we can also leverage it, you know, you're using fiat to the consumer, but it's using Bitcoin behind the scenes. And that's where I think a lot of unlock happens."

"That reminds me of when Jack Mers, he told a story about he was talking, I forget it was some super baller, and he was breaking down to him using peanuts as an analogy to send fiat on the Lightning Network to somebody else. I think what he did early on is, is he sent dollars via Lightning to a bar and then converted them to back to dollars like instantaneously back in like 2013 or something like that."

"Mhm. Yeah. I, I think I remember some, some."

"Yeah. Yeah. Yeah, I mean, like I think that that's like I think that that's, um, a great example of like, you know, what's what's possible and Bitcoin being in the middle of it. Even if either end is not even using Bitcoin, Bitcoin being in the middle of it helps. It's still a method of of exchange at that point. It's still a method of moving money. Um, so it's still kind of, you still get the value of it, you know, relatively speaking. And so I think that continuing to build out those things that, um, you know, maybe use different, different currencies on the on either end, but still using it in the middle is is increasingly interesting. And we see a lot of customers looking at, you know, leveraging that for especially things like cross-border. That's where I think is really, um, has a huge amount of opportunity. So I think that's going to continue to evolve and that continues to strengthen the investment thesis of Bitcoin and it as a medium of exchange."

"Yeah, that's actually very interesting because it will function, it'll be a more highly functional medium of exchange when it's serving those end-to-end transactions you're describing, right? Even you're converting from fiat, you know, one local fiat USD over here onto the Bitcoin network and then offloading into, you know, the Yuan over here, whatever it may be."

"Um, because again, that's going to be all of that demand is going to go to Bitcoin. There's no other network that that would go to, right? You're gonna want this neutral settlement layer, decentralized settlement layer, um, you know, global Lightning liquidity, all of these things."

"And so that all seems like a really important use case for Bitcoin. So are the"

"Yeah."

"I mean, are Tether was saying they're building stablecoins on Bitcoin. I don't know where that stands. Like, are we going to see more of that down the road, do you think?"

"Yeah. I mean, yeah, like Tether is working on issuing, um, Tether on top of Lightning, you know, now. It should be here by the end of the year. Um, and I think we'll continue to see more of that. I think it goes back to what we kind of talked about on, you know, if you're going to use a stablecoin in general, do you want to use it on Tron or do you want to use it on Bitcoin?"

"Exactly."

"Um, and, you know, nine times out of 10, people are going to choose Bitcoin because it's the one, you know, that that, uh, they know and they trust and all those things. When you're think about someone that has never used a stablecoin before or is, you know, looking at incorporating stablecoins and then, you know, the the provider tells them, 'Okay, you can do it on Tron or you can do it on Bitcoin or Solana.' You know, they're going to Google Tron and they might, you know, research those and the headlines about Solana are not that great. You know, it's really, it talks about downtime and like all these things and they're going to be like, 'Well, that doesn't sound good. That doesn't sound like that's going to work very well for my business.' And then they research Bitcoin and it's, you know, it's the the prominent, um, you know, leading cryptocurrency for all the reasons that we know and love. And so they're like, if you can do both, you're going to choose Bitcoin, you know, all things equal. But then if you add in Lightning, that is cheaper and faster than something like Solana, why not? Why would you go to anything else?"

"Yeah, makes sense. So, there's a very special place called The Farm at Oki Finoi. It's a 1,000 acre regenerative farm community about 45 minutes northwest of Jacksonville, Florida. The Farm is a completely off-grid community. It has total food, water, and energy independence. Everything on the Farm is 100% organic and it even features wild boar and bear hunting. The Farm at Oki Finoi is right next to the Oki Finoi National Wildlife Refuge where you can do camping and canoeing tours. So, if you're like me and you're interested in the self-sovereign lifestyle, then you can get your own lot on The Farm at Oki Finoi if you tell them that I sent you. Once you get a lot, you can build one of three custom cabin options. So, if you value freedom, self-sovereignty, and living in touch with nature, then join me and my family. We have lot number 21, and we're going to be building a cabin there starting December 2025. To learn more about The Farm at Oki Finoi, go to okifarm.com and make sure to tell them that I sent you."

"If you're a Bitcoiner, you need the Orange Pill app. It's where you can connect with other sovereign individuals locally and globally. It's great for when you travel to meet local Bitcoiners, to go to Bitcoin meetups, and to find local merchants that accept sats. No distractions, no noise, just real Bitcoiners. So, download the Orange Pill app today and find your local Bitcoin tribe."

"We haven't talked a lot about privacy. Mhm."

"Uh, what, so you know, we don't have perfect privacy at layer 1 as I understand it. There is"

"a computer science trade-off between the auditability of Bitcoin's fixed supply and having privacy, right? So like Monero, for instance, makes the opposite trade-off, and that you get perfect privacy or near-perfect privacy at layer 1, but you don't get auditability of the supply. You don't even know what the supply is."

"in Monero. uh, is that the case? And then second, second to that, uh, what kind of privacy gains do we get on Lightning or other layer 2 plus technologies?"

"Yeah. Um, layer 2 in general, it just depends on, you know, what it is. Um, but there is like, most layer 2s come with privacy improvements. Um, so things like Fetti, um, you like if you're, you know, entering a Fetti, uh, pool or, you know, community, you, basically your on-chain entrance into that would be like, you know, see viewable on-chain. You can see, you know, person A sent on-chain to to the Fetti, you know, community there, but then once it's inside of that, it's more, it's it's very private from what I understand about Fetti. Fetti is it's very private and that you can go from person A to person B and no one knows about who sent what, who has what. Um, so it's very untrackable at that point. It's kind of the entering and exiting that is a little bit more, you know, you would be more careful about, um, because anytime you're touching the base layer, that's where your privacy, you know, kind of degrades. Um, but enter inside of, um, a Fetti, uh, community, um, very good privacy from what I understand."

"For Lightning, it's it's a little similar in that, you know, when you open up a channel, that is on-chain footprint where you can see, you know, the the funds going into a Lightning channel, but as soon as the the channels are are open, those transactions are purely peer-to-peer. So, that's one of the one of the disadvantages of the privacy on Bitcoin is that it's global state. Everyone can see every transaction and that's that's how we get the verifiability and things like that. With Lightning, only you and your counterparty know and care about, you know, your balances. And so there is no global state for anyone to go look at or view payments or anything like that. So the payments that you do interoperable in between each other in a Lightning channel are inherently private to just you and your counterparty. Um, and even then, like, you know, the the the bits of data that are around and kind of like the the viewable aspects of a Lightning payment are pretty minimal and you can even kind of, you know, set, you can add a memo to it, for example, you know, and that can, you don't have to do that. You can do whatever you want with that. And so naturally, it is more private. You could do, you know, a thousand transactions on Lightning and close it back down into one. Um, and then, you know, all of those thousand payments that existed in the Lightning channel are not on-chain at all. Like they don't exist at all. Um, and, you know, things like, you know, identifiability and Lightning is based on like a node pub key. Um, and those can be even ephemeral where you can just generate them, um, you know, on, uh, on the fly and things like that. So there's a lot of, there's a lot more you can do on the privacy realm inside of Lightning and just other layer 2s in general, um, than you can on the Bitcoin based layer because, you know, with Lightning being peer-to-peer, you just, you have a lot more flexibility when you're doing a global shared state where it's like everyone needs to know about everything so we can trust the system."

"With Lightning, it's just you and your counterparty trusting each other and that opens the door for a lot more privacy enhancements."

"And is that also the case for the routing nodes that people are routing payments through, that they're not, are those transactions also opaque to the routing nodes, or they getting payment information about the counterparties that route through them?"

"Yeah, routing does have a little bit of information in them. So, you know, if you're if you're in the middle of a payment routing from person A to person B, you can see where it's coming from and where it's going to. Now, in a Lightning payment, you could go through 10 hops. You can chain those together. So when if if I'm receiving a, if I'm routing a payment, all I see is where it's coming from and where it's going to. That could have been the original sender and the original or the original destination, or it could just be other hops in the network. I don't know. There's no way of me knowing. So it could be I'm just, you know, step three in a chain of 10, or this could be a direct sender to a direct recipient. I just don't know. So there is a little bit of information when you're routing a payment, but it's kind of, there's no way of knowing are these the ultimate sender and recipient."

"So is it fair to say you'd also get more obfuscation the more hops there are?"

"Yes. Um, like generally speaking, yeah, I mean, you you get more, um, the more steps in between, you know, the fewer people know about it. But with with more hops comes, you know, there's slower payments and there's just more fees because you have to pay the routing fee for every single person inside. But yes, it is a little bit more, I guess, obfuscation."

"I guess I was just curious if like the possibility of people using the Lightning Network as a means of anonymizing coin or something like that instead of a mixer. Would they ever use the Lightning Network in some such capacity?"

"Yeah, I mean, I don't think it's a great like anonymizer like that because when you, you know, say you open up a channel, you're doing transactions and you close it, you still kind of have that traceability for, you know, entering the channel and exiting the channel. So there's still some traceability there that it's not like completely, you exit it and it's like, you know, you get different coins than when you started with."

"There's still, there's not, it's not exactly a good on-chain off like mixer in that regard. It's just that those payments that happen inside of Lightning are not on-chain."

"Got it."

"Um, but it doesn't like give you someone else's coins that are all mixed together or something like that."

"Okay, that makes sense. You know, and speaking of like core versus knots and the block size wars, like is there different factions amongst the developers within Lightning where some are really trying to optimize for privacy, and then you got maybe some state-funded actors or maybe people paid by Tether or who knows what who are trying to eliminate that and make it really surveillable?"

"Yeah. I mean, like, yes. Like, ultimately, it's kind of interesting, even like we have like these factions inside of Bitcoin, and then every layer 2 has factions. It's like an endless rabbit hole of people, you know, in disagreement about how things should develop or be created."

"Sounds like Bitcoin."

"Yeah, it's, it, it never ends up the, up the layers. So, it never ends. Um, but like, yes, ultimately, there is like these different groups of people wanting to optimize for privacy or optimizing for payment success or cheaper routes or other enhancements. And so, um, there's naturally kind of there's sometimes those are at odds where you can't have both. Both, you have to choose one or the other, or sometimes they're both possible and it's just a matter of like development and, you know, which one is a higher priority and things like that. Um, but ultimately, there are people that want to see like, you know, kind of different things happen, um, and, you know, evolving the spec to what is possible, what are we pushing towards, and things like that. So, ultimately, there's a lot of people, you know, have a lot of opinions, uh, in developing on Lightning."

"And then you also think about like, it's kind of interesting for Lightning being the most popular, biggest L2 on Bitcoin, it also receives a lot of hate and a lot of FUD about like, 'Oh, it doesn't work, but people no want to use it,' all those things. And most of the the FUD, the people that are, you know, discounting it are people that have a different L2 or a different thing that they're using."

"completely different entire swan of fans or insiders or whatever. And so, so, so people, the people that are dissing it have some other motive that they're trying to promote. And so it's not kind of a, an a completely independent view. They're like, 'It sucks because my thing's better.' But then at the same time, with Lightning being it so private, there's like that's one of the the the problems in quantifying it is, you know, you look at Bitcoin layer 1, Solana, Ethereum, you can see everything on-chain. You know exactly how much transa, how many transactions are happening in a day on Bitcoin. What is the volume of those? You know, everything about those transactions. With Lightning, all that is hidden. You don't see how much volume is going through the Lightning Network in a day. You don't see how many transactions are happening in a day. You don't see any of that data. So, it's easy to FUD it because there's no way of pointing to it on-chain. Like, Solana, I can say Solana is doing this much volume in a day. You can't do that with Lightning. And so, people are, it's so easy to throw shade at it because"

"it's so much p"

"because it's in the shade."

"Yeah. There's no way of like, I, like, we, we know, you know, how much Lightning payments go through our system, and that's all that we know. Um, we don't even know how much is happening in in other people's systems because it's all directly peer-to-peer. So, um, that's one of the things that it's like, it's hard to kind of throw back, um, at that kind of criticism because there's no on-chain data to provide. It's kind of data that people are willing to share. Like, people like Cash App saying, I think they said that 25% of all Bitcoin transactions on Cash App are done via Lightning now. And that's increasing month over month. And so, just people sharing data like that is all that we really have because of the privacy is an advantage, but it's also a disadvantage where I can't see like, 'Look, like this is how much it's doing while your chain's doing this.' Um, but I'll take that privacy advantage over that."

"It's a major feature, not a bug, except when it comes to optics, right? Because we can't"

"Sure. Yeah. Yeah. And showing like, you know, we, we know the success of Lightning, how good it's doing, the volumes, all those things, but it's hard to, um, really share that because it's not like a publicly verifiable source with these, you know, with chain XYZ that does have that."

"What about, um, user experience, user interface? Like, how is that with Lightning? Is this, I mean, I assume every application that makes use of Lightning obviously is different, but like, are there, are we, I know with Bitcoin, like prior to hardware wallets, man, it was like really brutal, right? People to interact with Bitcoin was like, you had to be an expert in some, some capacity. Where are we at with Lightning? Like, is the UX good? Like, what's it like?"

"Yeah, I mean, I think it's, it's definitely, we're, we're improving on it, um, day by day. And I think it, it was in a spot similar to like early Bitcoin where it was hard to use. Like with Lightning, you get one-time invoices to pay. With Bitcoin on-chain, you get an address. You can send as much as you want to that address. You know, it's always there and it's easy. With Lightning, you get a one-time invoice and so you send that to someone, they pay it, it can never be paid again. You have to generate a new invoice to get a new payment."

"Um, that has advantages and disadvantages. From privacy, it's really good because you can't, you know, an on-chain address is a liability."

"Um, and so it has a lot of advantages in that way, but there's a lot of, you know, uniqueness and, you know, 'Okay, I want to just pay to my friend over there. I don't want to first ask him to send me an invoice to be able to pay to him.' And so there's been advancements in the protocol to make that easier and easier as we go. Now, to we're to the point where there's things like Lightning Addresses, which look like an email, um, that you can just put into most, a lot of wallets are supporting it now. It's continuing to get better support. You can just say, 'Hey, I want to send to this person. Here's like, it's like your Cash Tag in the Cash App or something like that. Here's their identifier. I want to pay to that.' And then there's, you know, some magic that happens, you know, in between, like the two providers that helps, you know, facilitate that. So the experience is getting better and better every day. Um, and with things like Lightning Address, um, it helps it a lot. There's a new thing called like Bolt 12, which is a new spec around invoices that can be reused if you want to, um, and things like that. So, we're continuing to evolve the UX of using Lightning day by day. Um, but ultimately, it's, it's in a really good spot, especially compared to it was like 2 years ago. Um, so we're, you know, it's, it's an evolution, just like Bitcoin on-chain was, but we're in a really good spot, I think."

"Is the Lightning Address similarly a liability as a Bitcoin address, or is it still, there's still you have anonymity there that you don't have with a Bitcoin address?"

"It, it kind of depends on how it's implemented and how you use it. Like, behind the scenes of the Lightning Address, it's still these one-time invoices, but like, it's an identifier. So if I have like, you know, Graham@voltage.cloud, like, well, that that's an identifier to me and like, you know, I'm I could get docs on that, you know, based on certain things. So it's not necessarily a liability. Just kind of depends on how you like have it set up. If you're using a third party, third parties are just kind of like always a liability. So, it just depends on how it's set up."

"Yeah, every third party is a security hole. I think."

"Yep. I think that's Odell."

"No, that's Zabo."

"Okay."

"Yeah, Odell's ripping him off."

"Okay."

"Like he does with a lot of things."

"Okay."

"So, Tether's talking about using Lightning for his payments."

"Lightning is secure, censorship-resistant, provides a lot of privacy. This is getting very close to the apparatus that is against all of that."

"Like, what are your concerns there? This is, see, it seems like this Trojan horse is coming into the castle and you have this, you know, it's better, faster, cheaper, um, this incentive for governments and, you know, large actors to use Lightning, but it's disrupting power that they have."

"Mhm. Like, do you, when you think about all of this, like all, what are your concerns around like what potential issues could we have?"

"Because I, I feel like if you look at the global overlords, if you will, like the last thing they want is people to be able to send money without censorship and to do so anonymously."

"Mhm."

"So we have two worlds colliding here."

"Mhm. Yeah. And I think that that goes back to like some of my concerns around people caring about, you know, the censorship resistance of Lightning and and whatnot. And so if we can, if we, you know, start to give up on that and we make it even more like centralized from the network, the protocol level, then it makes that that case even easier where it's like, it's only a matter of time before it gets, you know, over taken by, you know, some people that want to have that control. And so I think that there's, um, I, I think that there's some people that also think that there might, like ultimately be like two Lightning networks. The one is like the more, you know, cypherpunk, like, you know, individuals like running their nodes and having kind of no, no, um, connectivity into these like larger financial institutions. And then there's the other Lightning network that is financial institutions connected to each other, um, and just, you know, transacting with each other and all of those things. Um, and that's one of the great parts about Lightning is that can exist. There can be like, they can be interconnected, and that it's both just Lightning, but since it's such a peer-to-peer network, you can kind of have these two, two different kind of bifurcations of the same network, and they can be interoperable, but ultimately split them apart. And so I think that there's naturally going to be as more financial institutions adopt Lightning, there is going to be that like, 'Oh, we got to add compliance now. We got to do all these things that go into it because of just who they are.' But that's one of the great parts about Lightning is that you can kind of opt out of that. You can still just like you and I can have a channel in Lightning and we can transact with that all day long. No one can stop us. And even if, you know, Kraken, Coinbase, Bank of America, all these."

People over here are having their like KYC lightning over here. You and I can continue to transact, and it doesn't those don't matter. Like the two don't have to cross at all. So that's an like there is that threat, but there's also the optionality to opt out of that.

>> Interesting. And so you could have like this this post-Mad Max world where you've got people living in the dust using the Lightning Network, and you've got people with the mark of the beast living in these big mega-cities using the same payment protocol systems because they're effectively using different channels.

>> Yeah. Yeah. That's why and like as as long as as long as Bitcoin, the layer one, stays the way that we we want it to and it's like not controlled by any particular party, then like, yeah, that can like that can totally exist.

Interesting. There have been similar opinions expressed about Bitcoin, actually, that at some point we'd have like black market versus white market Bitcoin, you know.

>> Yeah. Yeah.

>> For instance, Bitcoin that had been seized by whatever three-letter agency and then auctioned off, you know, that would presumably be white market.

>> And then Bitcoin that was uh not AML/KYC would be black market, and they might trade at a premium or discount to one another.

>> Yeah. Yeah. I mean, I think I think that that could exist ultimately. I mean, I think that there is there is people that like I know people that like solo mine because they don't want to like just buy it from an exchange because that KYC on the exchange and then it's trackable from their where they want to have more, you know, less traceable um assets to to what they to their Bitcoin ultimately. So, I think that that that that will exist. I think that the the challenging part of like the market dynamics there is like how do you transact with black market, you know, Bitcoin? You got to go like, you know, down into the caves to like, you know, to do the transactions and things like that. But like ultimately, yes, I think that there is the the split between people that um just buy it off Coinbase and it's KYC and you know, this person owns this and that's all that there is versus the people that want, you know, I don't want anyone to know how much I have or what it is or any of those things.

>> Yeah. What about this might be a silly question, but um is it possible that Lightning transaction fees can somehow contribute to Bitcoin's security budget? Like is it additive to Bitcoin security?

>> Not like not exactly. Like it's the the way that Lightning interacts with like the security budget and Bitcoin on-chain fees is just by basically those channel openings and closings and people going in and out. It's not even necessarily channel openings and closings. It can be like swaps in basically adding more of a balance to your Lightning channel or taking some out.

>> So that's the way that kind of Lightning interacts with like on-chain from the fee subsidy stuff. There's nothing in Lightning on the on the the fees that get you know generated in Lightning via like routing and things like that that ultimately go back to like the security budget of Bitcoin. It's just going in and out of Lightning in from layer 1 to layer 2 that is the kind of the thing that go ultimately contributes to the security budget. Um, and so I think that that's where it's it's really interesting of being able to have um that split um between the two. Um, which I think is like I think it's ultimately really good and that we can still contribute to the security budget by going in and out of Lightning, but then it's also a completely we're independent where high fee environment and on-chain doesn't affect Lightning where like you're paying an a high fee in both.

>> Yeah. So it would be safe to say that the larger the Lightning Network becomes, the more it is contributing to Bitcoin security budget just by having more in and outs basically.

>> Yeah. Yeah. I I think that's definitely true and I think that that's something that some people get worried that like Lightning is going to kill the security budget because oh all these transactions could have happened on-chain, now they're on Lightning. Um, but I don't think that that's the case at all because we're contributing to the security budget by adding more funds or taking them out and all those things. But it's also like, you know, with Lightning, you can do one payments that like you cannot do on Bitcoin layer 1 because of like dust limits, they're just too small. And so some of those, not all the transactions, but some of them wouldn't even be viable on Bitcoin layer 1. And so it's kind of like silly to think that we're like taking away from the layer 1 security budget because ultimately I think it is contributing to it the more that it gets used.

Yeah, I guess I perhaps a related concern is that if there were a risk-free rate, you know, risk-free yield on the Lightning Network, that all the Bitcoin would just move into the Bitcoin Lightning Network and then just be transacted there. But, um, I it seems like there would always be demand for people to settle to main chain to, you know, put things into treasuries or cold storage or whatever it may be.

>> Yeah. And that's and that's one of the things like Lightning kind of the way that it exists today is like naturally more of a hot wallet than it is like Bitcoin layer 1 cold storage. You can have a three of five multisig all around the world. It doesn't really work the same way in Lightning. It's a little bit more of a hot wallet scenario. And so for that reason, like yes, people are not going to put, you know, 100,000 Bitcoin in Lightning in just one node. They're going to have like, you know, if they did that, they'd have security around it. But most people that are just storing it for cold storage, they're not going to put in Lightning. They're going to have it in, you know, their secured cold storage.

>> And as you said earlier too, there are limits to the amount of Bitcoin that could go into that network to earn yield.

>> Right? It's >> Yeah. Like growing alongside those transactions. Um, and I think that that's like that will ultimately be interesting to see how those play out. Um, and being able to, you know, have those come together, but yeah, we aren't going to exist where like all all 21 million Bitcoin or whatever is not lost is in Lightning. I don't think that'll ever happen. We're going to have like, you know, the appropriate amount for the sake of >> the payment volumes that exist and that will scale up over time, but I don't think it'll ever be all of it.

>> Yeah. Yeah, that makes sense. Uh, what do you think the most underappreciated use case of Lightning is? Like I've I've heard people talk about this term lapse was going around for a while, like Lightning apps.

>> Oh yeah. Yeah.

>> What like where does that stand? Are we going to see a whole Cambrian explosion of these Lightning-based applications at some point?

>> Yeah. I mean, I think that some people have like worked on developing some like applications around Lightning. So things like the add-in Lightning is more kind of ingrained into like the experience. So you think like things like paywalls of like, okay, you want to read a news article, you get slapped with the paywall of you got to subscribe for five bucks or whatever. With Lightning, you could like, okay, maybe it's just like 5 cents for this one read instead of having to subscribe and like being able to just transact instantly with Lightning to unlock that one article. Um, or more like in like gaming or something, having more like rewards dished out in real time in games and things like that. I think there's still like valid use cases there. Those haven't really taken off and maybe they will eventually. Um, but I think ultimately that's one of the great things about Lightning is it has more of that programmability aspect to it than you can on Bitcoin layer 1. Like doing, you know, doing there there's value for value of like, you know, streaming stats for podcasting and things like that. That just does not make sense on layer 1. You could never do that. It doesn't make sense. Um, and so being able to unlock more of those use cases, we're seeing people do more and more of it, but I think that the the line share of usage today is for like payments of moving value from point A to point B. Um, I think that that will continue for a while. Um, but I think that the that's one of the great things about Lightning is you can, you know, evolve and do more in the program programmability of it. You know, building more apps, doing more things that, you know, ultimately some of it is like, you know, things that you could have done on Ethereum, but now you can do on Lightning because it just makes more sense. It's more economical. Um, so I think those will continue to evolve. Um, we haven't seen a big explosion of those so far.

M are there any particular ones you think are especially attractive like gaming versus

>> I don't know anything else.

>> social media?

>> Yeah. I mean, I think Nostr is definitely interesting and it's been able to kind of um like it's kind of like the zapping aspect of Nostr like saying like, you know, it's been liking someone's, you know, post on Nostr and sending them, you know, five sats instead of just the like. I think that that's been really interesting just to see that continue to be like having the more um value transfer ingrained into you know, the internet from like, you know, these activities that we have already done but adding a monetary aspect to it which like didn't make sense in any other world. You would never swipe your credit card or enter your credit card details to send three cents, you know, all day long to your friends or whatever. Um, similarly with on-chain Bitcoin. So I think that those kinds of things of ingraining Lightning payments into more of like the native internet experiences is with things like Nostr has been really interesting and I think that that will continue. I mean, the people that are into Nostr are very into it and they I've been using it like crazy. Um, so I think that those those things will continue.

>> Is building an app in Nostr that's not a Lightning-based app though, right? That's a different.

>> Nostr itself is not has nothing to do with Bitcoin or Lightning or anything. It's a completely kind of independent protocol.

>> But when you're zapping people sats is it's using Lightning.

>> It is using Lightning. Yeah. It's like using Lightning to send the payment.

>> Okay. Yeah. So, Lightning, I guess I'm confused now. If you build an app in Lightning, obviously it has nothing to do with Nostr, but if you built an app in Nostr, it could make use of Lightning to to zap sats still.

>> Yes, that's right. And like if you're building an app in Lightning, you could still kind of cross over and use Nostr for like Lightning Address or something. You could build a Lightning Address that leverages Nostr for some of that, like, you know, the communication back and forth and things like that.

>> Okay.

>> So, you can kind of play off each other and building like the experiences.

Interesting.

>> What happened with Phoenix and uh I believe it's Nunchuk wallet or was it Samurai? Anyways, they got shut down. They're banned in the United States. Was that because they're non-KYC?

>> Yeah. Um, so Cash App.

>> Yeah. I mean, if Phoenix Well, so so I think that there's a couple there's a couple differences there. Phoenix and like Wallet of Satoshi willingly left the United States from like the app store and things like that. They didn't get banned. They just willingly left.

Wasn't that because the Nunchuk or the Samurai guys got basically arrested?

>> Well, I think the Samurai got I I can't remember all like the mixer like um coin join implementations, but some of those folks did get like did get did get arrested. Um, I think Nunchuk got like a notice or something. I don't think they got arrested, but they got like a hey, stop doing what you're doing kind of thing. Um, and so based on that, those people, those kind of wallets left the United States because they were like, well, even even though we feel good about our like regulatory stance, it's obvious they're like being way more combative than they were previously and we don't even know what what they're going to do. So, they kind of just willingly left. Um, I think both of them have come back into the US now. Wallet of Satoshi definitely has. I think that Phoenix did too. um based on basically the shift in in administration here in the US where you know Biden administration was very anti-crypto was prosecuting people just left and right for kind of no reason or shutting down banks doing all kinds of stuff. Um, with Trump it's definitely more friendly. They're they're being just not not as you know combative and really going after people. Um, really more figuring out a way to make it make it function. Um, and so I think that people feel like they have uh more ability of just doing business like they were previously. So, it was more on leaving voluntarily out of fear of the previous administration coming down on them where now I think they feel more comfortable and they're they're starting to enter back in.

>> That makes sense.

>> That whole like how I mean that's important, right? It's an important aspect of Bitcoin to be able to anonymize your coin. So, like are we going to

>> I guess how much that's a weak point obviously that's a that's a proven weak point. That's a proven centralized weak point of Bitcoin is when people create these applications that help people anonymize their stash, they get attacked by the state. So like what are what paths forward are there to deal with that weak point?

>> Yeah, I mean, I think that'll be a really interesting one to see play out because there's like things of like the centralized mixers and things like that were like obviously, you know, not going to fly. They people that were doing that got arrested and all those things and then there's people like the Tornado Cash type implementations that they were not doing anything. They wrote software to help people like do that and so, you know, them as individuals, they're just writing software.

>> But they're getting treated like they were doing the activity. And that I mean that was a big battle. I can't even remember where that's at in the legal system right now, but

>> like continuing to draw the delineation between software and the actual activity and being able to like they they were, you know, administration was trying to kind of say that, oh, even if you're writing the software, you're doing the activity when it's like, well, no, that's not that's not really the case. Like, we're, you know, just writing software is not a crime in and of itself. And so, I think that it's going to be a battle. I think it's going to be a continued battle for a while of like really the the two different ones like that. That's why that's the utmost importance of the open source, you know, versions of these things where, you know, if it's a centralized, you know, closed source thing, it's going to get shut down all day long. There's no way of stopping that getting shut down just over and over again. If it's an open source thing, just like we're talking about these two different Lightning networks, if it's something that you can run and no one can stop you from running on your own computer, you know, that is much more interesting and much more resistant to those kinds of things. And so that's the importance of the open-source nature of this is that um maybe it it continues to be a little bit more um prosecuted and just the way that you know certain governments look at it, but if the if the software is there, that's what matters. You know, that's what is ultimately going to be the thing that gives people the ability of doing what they want to do.

>> This is maybe one of the most fascinating philosophical aspects of the digital age that it's blurring the line between speech and action.

>> Yeah.

>> And so you can literally write things that do things.

>> Right? Well, and you think about taking it into AI and all these things like it it we're continuing to um it's it's just a new age where we really have to it's not even about Bitcoin. It's about like things that you know are not direct human action but like if they are created whether it's an AI agent or open source code or whatever that can do things, you know, is the person liable? Is the is the agent liable? Like where does that fall? And I think it's going to be a a very interesting thing to see play out over the next like 5 years um because it's something that we're just scratching the surface on right now.

>> Yeah. And it seems like it'll be unenforcable, right? It's like almost trying to penalize the guy that invented mathematics for the guy that used mathematics. It's like what do you mean I'm just using numbers like

>> you know the guy that made the numbers like I don't know like I just made it up and this guy used it to whatever defraud you like that doesn't make me bad.

>> Right? Or like the chemistry behind like nuclear weapons. It was like it's just chemistry, but then like someone took it and did like this this thing with it. It's like well

>> you know who where where does the culpability lie and it's just it's it's going to be really interesting to see that play out in the digital age.

>> Yeah. Yeah, especially when you get into printing guns and drones and like

>> super fascinating.

>> Um, what is there anything we haven't hit on about Lightning? Like, you know, we talked about the apps, we talked about payments, obviously the anonymity, like what else should we be thinking about in terms of Lightning? What else is it going to change?

>> Yeah. Is there an intersection between Lightning and AI? Sorry to derail you there, but I'm going to throw that in there.

>> Yeah. I mean, I think like intersection between Lightning and AI. I think that there there definitely is um and the increasing opportunity for that in that you know, we AI is you know, AI agents doing more things on behalf of people is you know, it's already happening, it's going to continue to happen. Um, and I think when that happens and people need uh AI doing more commerce, being able to transact between each other, um, people are already trying to do that with Ethereum and, you know, you name the blockchain. There's probably blockchain specific for AI payments. You know, they make a blockchain for everything. Um, and so I think that that the use case of AI agents paying each other is is super valuable. They naturally should use the Lightning Network for that because of the speed. You know, AI agents are so much faster than humans. They are, you know, so so fast that they need a payments network that is similarly as fast, which is Lightning. And so being able to incorporate like AI agents and any kind of commerce that happens there over the Lightning network, whether it happens in Bitcoin or a stable coin or whatever it is, I think it's the the best spot for those payments to happen. And so I think that there it's a little bit early in that kind of that that experiment of AI agents doing more commerce. Right now they do a lot of like actions, but doing more commerce. Um, I think that there's going to be a natural fit there. Um, and those two are going to collide for sure.

>> That's interesting. Yeah. Since we lost the Turing test, um, I really think that the new Turing test is just the AI that

>> admits that Bitcoin is the superior money. Like that's that's the only artificial intelligence that's actually intelligent.

>> And if it doesn't if it doesn't come to that conclusion, then how can you trust its intelligence, you know?

>> Yeah. Yeah. Yeah. Definitely. I mean, I I think it'll be really interesting to see how like just the the the digital age plays out as we look at you know, this new form of money um this new form of transacting and then this new way of you know, building things, interacting with things like all that with it with AI. I think it will be a very interesting um spot to be in as we see these things collide and it'll also raise you know, a lot of challenges like we talked about like, you know, the regulatory aspect of it, like the human aspect of it, like there's just there's a whole new whole new world that we are experiencing which is very interesting to be a part of, but it's also like there's a lot of things to figure out that we are going to have to figure out over the you know, over the course of time.

>> So true. So true. Anything else? Yeah, I don't know any any other important areas uh in pertains to Lightning that we should cover. I mean, I feel like we've covered a lot there, but yeah, I mean, I think I think we've covered quite a bit. Um, I think um, I think that really I think that that that that does it. I think that what we're, you know, what we're looking at over the next um, you know, several months into leading into years is just really being able to bring Bitcoin and Lightning into the hands of more traditional finance and being able to broaden the scope because if it's if Bitcoin's only used in the Bitcoin community, well, that's, you know, it's limited in in the value and what it can ultimately do. And that's something we're doing at Voltage is trying to bridge that gap into traditional finance and get more people into the network and leveraging it for, you know, transactions. And so I think that's going to be a really exciting thing over the next coming years is it's really like it's taking all the things that we've talked about and just you know furthering the adoption of that and making it, you know, even more valuable for us as uh Bitcoin from a price perspective, from a value perspective, from the usability, all these different things.

>> Graham, thank you, man. This has been a very

>> very deep dive on Lightning. I think probably the most intricate conversation I've had about it. And here

>> it's been helpful. So thank you.

>> Awesome. Yeah, thank you both for having me on.

>> Yeah. Uh, where can people find you on the internet?

>> Yeah, so our website is voltage.cloud. Um, pretty easy to find. Our Twitter handle is voltage_cloud or X now. Um, I still call it Twitter.

>> He's pro-Bitcoin. I'm going to call it Twitter. Yeah.

>> And then my personal handle is Grez. G K R I Z K. Um, that's on X. And yeah, I mean, hit us up if you're interested in Lightning or you want to incorporate it for your business, anything like that. You know, we're we're the Lightning experts all around.

>> Awesome. We'll put all that in the show notes. And thank you again.

>> All right. Thanks a lot, guys.

>> We lock our doors, we encrypt our hard drives, and we use strong passwords. But most people leave one thing wide open, their phone line. SIM swap attacks are one of the fastest growing methods of digital theft. In minutes, a hacker can clone your accounts, reset your passwords, and drain your life. Unfortunately, this is not science fiction. It happens every single day. Afani is the only mobile service protection designed exclusively to protect you from SIM swap attacks. Afani offers military-grade encryption on their product and offers up to $5 million of SIM swap insurance. And to date, there have been exactly zero SIM swaps on any of Afani's over 50,000 protected accounts. So, you don't need to live in fear. You just need to protect your weakest link. Go to afani.com/breedlove to secure your phone line today. Again, that's A-F-A-N-I.com/breedelove. For the past 25 years, I've been reading roughly one book per week. Almost entirely difficult non-fiction books, the kind that really shift your thinking. Books on physics, money, power, psychology, spirituality, and philosophy, the real stuff. But I get it. Most people don't have time to read 50 books per year. So, I hand-selected my favorite non-fiction books and distilled each one of them into a course that you can take in 50 to 100 times faster than it would take you to read the entire book. Each course gives you the key insights, mental models, and frameworks that matter. We launched with 15 book courses and we are building toward a library of 100 by the end of year 1. So if you are a seeker of truth, wisdom, and personal growth, then my book course is for you. To sign up, go to course.breedlove.io. Again, that's course.breedlove.io. Thanks for watching. If you enjoyed this episode, click here to find more just like it. and here to find our most recent episode. Also, make sure to like this video to help shine light on the corruption of money. And be sure to subscribe to this channel to stay connected. [Music]

Get Our Mobile App

Core vs Knots, Lightning Network, and the Fight for Bitcoin’s Future w/ Graham Krizek

Transcription