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Payment giant Visa conducted a study indicating that almost a quarter of small businesses spread across nine nations intend to introduce the crypto payment option this year as cryptocurrencies continue gaining steam across the globe.
The research surveyed 2,250 small business owners and 5000 adults from the nine countries, such as Canada, Singapore, Brazil, and the United States.
Per the report:
“13% of consumers in those countries expect retail stores to begin offering crypto payments this year and beyond.”
These findings suggest that cryptocurrencies are becoming an uprising payment method.
Jeni Mundy, the global head of merchant sales and acquiring at Visa, echoed these sentiments and stated:
“I think more people are feeling more confident with crypto.”
Crypto payments have been lagging behind partly because of frequent fluctuations in value, but this narrative is changing.
Mundy added that nearly three-quarters of businesses interviewed worldwide alluded to the fact that diversifying payment options was fundamental for business growth. Therefore, incorporating crypto payment seems to be a natural evolution for smaller companies.
The Visa study also pointed out that at least 30% of small businesses in Brazil, Singapore, Hong Kong, and the United Arab Emirates intended to roll out the crypto payment option in the coming months.
This correlates with Paysafe’s research that noted 60% of the respondents believed crypto purchases would become widespread in a year. Moreover, 55% of the crypto community was willing to be paid in crypto if an opportunity emerged.
On the other hand, crypto payment emerged as the top suggestion by Airbnb customers based on the flexibility rendered. These findings were relayed by the company’s CEO Brian Chesky after he asked his Twitter followers how the accommodation booking platform could improve in 2022.
Image source: Shutterstock
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[0:00:07.7] P: Tim, I appreciate you jumping in on such short notice. You are the creator of LNPay.co, which is, in my view, a herald of the future, where we will have more and more, the surprises. No one, of course, that I’m saying this, but we’re going to have more and more businesses and infrastructure built out on top of the Lightning Network. For the audience, of course, we’ve got Bitcoin, which is layer one technology, sound money, it’s extremely decentralized, very censorship-resistant. Then on top of that, we’ve got layer two technologies, like the Lightning Network, which allows us to transact in Bitcoin very quickly, is to say, almost instantaneously for very, very low fees.
In the same way that TCP/IP is a communications protocol that underpins the entire Internet, the Lightning Network stands to take a similar place, not only in terms of financial systems, but also in terms of communication protocols. I think, that the systems that you are building, accelerate that future in a really exciting way. Can you give us a brief description of what LNPay.co is and what service it provides?
[0:01:12.1] TK: Yeah. I think, it was a good description of where we’re at with the Lightning Network, or where in the bigger picture, where it fits in. LNPay, a brief history will help clarify where the angle that LNPay is coming from. I got involved in Lightning Network in early 2019. I was just general frustrated with paywalls. I was trying to find a micropayment solution, which led me to the Lightning Network.
I started by trying to build a small paywall solution, which was called paywall.link, which turned out, it took the form of a Bitly type link, where you clicked on it, and it would take you to an invoice that you would pay and then would forward you to the destination, like an article or something. As I was building that out, it was so early that there weren’t a lot of tools to build what we’ll call LAPPs, Lightning apps. Paywall.link was a LAPP. I started building out other little LAPPs. One was Faucets, if you remember those, they’re still around for micro-engagement, all micro-payments focused.
After building both of those, I realized that I just rebuilt the same tools again. I started iterating into what is now LNPay, which is a set of tools, a toolkit that empowers developers to build, manage, maintain, operate LAPPs for any application, really. I’m really trying to focus on micro-payments, because I think that’s the big ocean there that’s new, and nobody knows how those models will evolve, and where the value chains will flow. Yeah, that’s so that’s where I’m focusing on; micro-payments and developers and trying to help them build more in the ecosystem.
[0:02:57.9] P: More specifically, I run a routing node. Again, just for the audience, you can interact with the Lightning Network immediately today, by just going and downloading a Lightning wallet, like Breez, or Muun wallet, or BlueWallet, or any number of other extremely effective UX Lightning wallets. That just means that you can send Bitcoin, essentially, instantly, and for very, very low fees. You can do that today.
What we’re talking about here is people who want to be building on top of the Lightning Network, people who are interested in building businesses, people who are interested in in creating services, LSPs, Lightning Service Providers on top of that. What LNPay.co does is it abstracts away some of the lower level complexity and provides API endpoints that any software engineer, or business can connect to.
More than that, it allows you to go in – I was messing around with LNbits. I was trying to give a demo for somebody of creating a Faucet that had certain parameters set and was resistant to spamming and stuff like that. That’s actually how I came across LNPay.co. I was like, “Oh, my gosh.” I think, it’s the first of its type, right? Where basically, you’re providing this service that empowers developers and businesses to implement this technology very, very easily.
[0:04:18.1] TK: Yep. A lot of the times, it’s invisible to the end user with the BlueWallet, or Wallet of Satoshi, or those. It’s the other end of that. It’s the service that you’re interacting with that you’re sending or receiving SATs to. A good example is stacking SATs back, Leon, he’s here. He uses LNPay to power rewards. When you claim your reward, your SATs back, LNPay is underneath helping the service manage balances and keeping the accounting right, and some of that other mundane stuff that businesses still have to do. Bridging the gap between the Lightning Network and the business world.
[0:05:01.3] P: Sorry, who was that? I’d love to pull them up.
[0:05:03.0] TK: Leon with the lightning BOLT right there.
[0:05:05.6] S: It’s okay. You can call me Shinobi, just so you don’t get in trouble.
[0:05:10.0] P: I mean, in trouble with who? Shinobi, welcome to the stage. You are currently going by the name of Lightning in the blunt smoke. Tell us, what inspired you, as a human to take the name Lightning in the blunt smoke?
[0:05:24.0] S: Well, you see, somebody has to be a beacon of brain cells that still function in the cloud of blunt smoke.
[0:05:30.9] P: That’s fair enough. Fair enough. As usual, your microphone does sound like you are communicating with us from the distant past. I’ll ask you to try to over-enunciate your words. Somehow, your audio was always the worst of anyone I know.
[0:05:42.7] S: Well, I’m outside and there’s cars driving by. Tim, this is pretty much like the logic here. It sounds like, what you’re working on is pretty much having a system set up that you can just bridge with an existing business. Let’s say, a web shop doesn’t have to completely redo their backend. That’s pretty much the gist of it, right?
[0:06:03.7] TK: Yes and no. I mean, that’s one use case. That’s the most basic use case. There’s going to be different ways that layering micro-payment, like payments and micro-payments are fundamentally going to be treated differently, or at least, that’s my thesis. It’s starting to happen with things like streaming payments, and stuff like that, with podcasting 2.0 stuff. There’s different features and tools that are needed to accommodate that style of usage. There’s a market slowly coming up to handle those cases. Yeah, the basic payment stuff covers that. I’m not as interested in normal web shop payments. It’s more micro payment focus.
[0:06:48.0] P: Got it. Got it. Shinobi, please feel free to jump in and offer comments as we go. You have a depth of knowledge around Lightning that is, I always appreciate. Are there any privacy concerns that are worth mentioning in using a service like LNPay.co?
[0:07:03.2] TK: For who?
[0:07:04.7] P: Any of the actors involved. Mostly, I’m thinking for businesses. Are there, if someone, is someone who cares about privacy, cares about maintaining the anonymity of their users, is there anything there that’s interesting, and we’re talking about?
[0:07:16.3] TK: Yeah. That is definitely some concerns there when you have a centralized system like this. We can go into more detail and cut up how the “custodianship” and stuff works. Yeah. I mean, when you have a central repo of data, there’s definitely some risk there. Inherently, the Lightning Network abstracts a lot of that away with pub key and stuff like that.
I mean, if you tried, it’s still pretty hard to drill down on that stuff. A lot of that burden falls on the developers in how they wish to use the service. They can store a lot of metadata if they want, or they can keep that on their own. It’s definitely a topic and it’s one to balance with the building a business and maintaining a good level of hygiene, privacy hygiene.
[0:08:13.6] S: That comes down to any privacy risks of the business itself, though. Not derived just from using LNPay, right?
[0:08:21.7] TK: Yeah. It’s just in general. Yeah.
[0:08:24.9] P: Yeah. I think that is a very important distinction. I wouldn’t want to accidentally give the impression that there was a privacy risk there, because it’s definitely with the business and as we all know. The number of notices that I’ve gotten over the years that my social security number, or personal information has been essentially liquidated and put on the dark web is more than I care to admit.
[0:08:43.7] TK: Yeah. I think there’s an interesting problem there for businesses to solve, which is keeping track of users and certain, just for accounting, if you’re trying to make sure balances are right and things. You build a trail of user history. You don’t have to necessarily tie that to any PII. It’s still important for you to run a functioning business to have those things straight. That’s where you have to think about those concerns. How every business handles them is different. Some of the more privacy-focused ones handle it in one way. Especially, being in this – as I go down further and further in the Bitcoin and Lightning rabbit hole personally, it’s – you have to put it top of mind. A lot of people just put it to the side. If that’s a priority of yours, you can make it pretty good for your users and yourself when using third parties.
[0:09:39.4] P: Yellow, I see you have your hand raised. What question do you have? Please keep it focused to the Lightning Network and building businesses on the Lightning Network.
[0:09:46.7] Y: Sure. Yeah, man. I have a question for Tim, because I heard that he’s focused in micropayments. I was wondering if there is any development in a so-called Lightning Network app that is around micro-loaning, small amounts of loans, maybe using some collateral, or something like that. Is there something like that? We know, is that possible?
[0:10:11.3] TK: Yeah, that’s a good question. Micro-loans in general, I have somewhat heard about in Africa is popping off. In terms of a Lightning app to do that, I have not heard of anyone pushing that for, but I think that’s a good idea.
[0:10:29.3] Y: What if in our wallets, the Lightning Network wallets, if that’s possible, right? I don’t know if it’s possible. I’m just brainstorming here. You’re going to have a wallet, like Lightning Network wallet, any wallet. It has a function that when somebody sends you a collateral, like that 10% of a loan that you’re going to take, then only the other person can send the loan, basically. Then you can stream the interest in that loan, if that’s agreed upon. Is that possible?
[0:11:00.3] TK: Yeah. You could use what’s called HODL invoices for that, to unlock the funds when first part is paid. You would take the 10% when and exchanged a loan at the same time. Yeah.
[0:11:15.1] Y: Yeah. Because I knew that function, I know so many people that are going to use that, even here in Greece, the so-called first country. Imagine guys in El Salvador, we can basically give them incentive to take loans in the best money there is. I don’t know if that’s a dream, I guess.
[0:11:34.9] TK: You should do that bro. That’s a good idea.
[0:11:37.4] Y: I in a programming and can meet me about it. Start it.
[0:11:42.2] S: Do you really want people not making a lot of money to take out a loan denominated in Bitcoin right before the price moons?
[0:11:50.4] Y: Yeah, that’s another story.
[0:11:56.2] P: Yellow, I was expecting you to come up and ask a question about banana bread. I’m both disappointed and also elated. It’s a good point. I think –
[0:12:03.7] S: Teasing on the conspiracy to be serious and natural.
[0:12:10.0] P: I hear you. This is exciting stuff. It’s a serious topic.
[0:12:13.6] S: I mean, it wouldn’t be useful for quick payday loans, instead of long-term things. Just imagine, you need money to eat, that you know for a fact you can get tomorrow and pay back and you just don’t want to wait till tomorrow to eat.
[0:12:27.6] TK: I didn’t think about that, but the micro-loan doesn’t have to be over a long period of time. A micro-loan, micro-time, too.
[0:12:35.9] P: Yeah, absolutely. I mean, payday loan style thing, where it’s a loan over two weeks. I mean, that thing is incredibly valuable for a lot of places in the world. I’m currently in the US, I think a lot of prevalent Bitcoiners are based in the US, and it makes it easy to forget that there are very, very different and important problems that Bitcoin solves, that is not as prevalent and as obvious for those of us that are lucky enough to live here in the short-term.
[0:13:03.6] Y: Yeah. The point is that if you’re going to be saying, let’s bank the unbanked, or got to build stuff more than just payments, right?
[0:13:13.7] P: Yeah, absolutely. I mean, one of the things that for me, was so exciting about – LNPay.co, is that I was playing around with basically, setting up Faucets, setting up withdrawal links. Again, basically, you have BOLT 11, which is the current standard for Lightning payments. Basically, if Shinobi and Tim and I go for pizza, and then I put the cost of the pizza on my credit card, and then I want to split it three ways, in BOLT 11, which is the current standard, I have to basically, generate what’s called a Lightning invoice, which can be represented as a QR code.
Then I show that to them, they would scan it with their Lightning wallets. It would say like, “Okay, you owe P this amount of SATs,” and they could sent it to me. LNURL, how would you describe it, Tim? What’s the term for it? It’s not an improvement upon?
[0:14:03.6] TK: I would say, it’s a user experience protocol. Fiat Jack came up with it and I agree with that.
[0:14:10.2] P: Yeah. Fiat Jeff is amazing. He, basically, came up with, again, LNURL. You can check it out if you Google Awesome LNURL, you can see all the functionality that’s available there. Essentially, it adds all this additional functionality, like the ability to log in, or authenticate as a user via Lightning, associated with your specific Lightning Node, the ability to do what’s called an LNURL withdrawal, which is where you basically, have a QR code and everybody that scans it gets sent a certain amount of SATs.
Instead of having an invoice where you have to say, “Pay me this amount,” they have to scan it and then approve it. You can basically, have QR codes where people can either send you money, SATs directly, without you having to generate an invoice, or you can do the inverse and basically, you can provide Faucets where they can scan the QR code and then be sent SATs from you. I was playing around with that with LNbits, and then came across LNPay.co, which provides that functionality as well in a more developer-friendly format. How many businesses are built on top of LNPay as of right now?
[0:15:14.4] TK: Before I answer that, I want to go back to your LNURL, and go from there. LNURL started, LNURL withdrawal was the first biggest aspect of LNURL that started, because there’s a fundamental UX problem with the way BOLT 11 and the Lightning Network works with the invoices. If you need to receive something on the web, you have to basically, paste an invoice to get paid. That hurdle, that’s some serious friction if you have to go to your wallet, and then people have wallets on their phones. Is it impossible in 2019, to do that easily?
LNURL surfaced as a solution to that, where it basically, instead of having to paste in an invoice that you generated, there’s a QR code that you can scan and the wallet and the server talk behind the scenes and handle that invoice exchange, so you don’t have to paste it in there. That was one of the first things that LNPay implemented way back, that was really necessitated the need for a server/service to process those. Leon if you’re here, it’d be a good time. Leon was one of the first to use LNURL in stacking, as a easy way for customers to get their SATs back.
[0:16:44.4] Y: Yeah, exactly that. LNURL withdrawal and within LNPay.co was most perfect for us. Perfect UI to hand out the Satoshi, so the SATs that our users are in on our platform, so they only have to scan a QR code and they had their SATs directly in their wallet. What we do is we let people earn SATs by shopping online. What you know in the US, a platform like Lolli, to say what we do here in Europe, what our thing was that we don’t want to hold the funds for the user and pay out every SAT that is available for us directly to their wallet. Now, with LNPay and LNURL withdrawal, that was the perfect solution for us.
[0:17:29.2] L: What Yello said before about short-term lending, that sounds a lot like the current repo market. They could be something in the future that goes in that direction. Say, if you had –
[0:17:39.2] S: I think, Yellow more meant like, payday loan type stuff.
[0:17:43.7] L: Well, I’m just thinking if you had a lot of capital, and in the future, there’s more regulation around Bitcoin and you didn’t want to hold it on your books. It sounds a lot repo, doing that short-term lending. Look, it’s not relevant now, but I just think that could be something in the future that becomes relevant.
[0:18:00.3] P: Got it. Alex, I know you’re sitting there in the audience. You’ve refused to come up, but I just want to acknowledge, you have a blue checkmark now. Congratulations. That is quite an accomplishment.
[0:18:09.2] CK: We got to get blue checks for all the Bitcoin mag people.
[0:18:12.8] S: If you ever get a blue checkmark, I will disown you, P.
[0:18:16.4] Y: Thanks, P.
[0:18:18.5] CK: We need to infiltrate the blue checkmarks with Bitcoiners. I think, it’s actually a great attack vector.
[0:18:23.9] S: Yeah. I’m on undercover check mark, fake journalist.
[0:18:26.8] CK: Shinobi, writing up articles and he might get a blue check soon one day.
[0:18:30.3] S: I will refuse it. You’re never putting a blue mark on me, man.
[0:18:34.3] CK: Mark of the devil. P, where are we taken this convo? I was enjoying the talk about LNURL and all the applications. I didn’t know that was being used on stacking either.
[0:18:44.1] Y: A long time.
[0:18:45.0] PARTICIPANT: Yeah. For us, started using LNPay and LNURL withdraw from the start was the idea that we want to use us to take custody and responsibility over their Bitcoin themselves as fast as possible. When someone has earned Satoshis, we want them to have it in their own wallet and take responsibility for the Bitcoin directly, that they start thinking about it, what are this? What this entail you? Start learning about it. Because we onboard a lot of no-coiners, I think.
We bring them to Lightning and to Lightning wallets, and then they start thinking about it. Then they earn Bitcoin, they own Bitcoin, and they start educating themselves. That was the first, when we started the project was one of the main topics we want to focus on.
[0:19:35.8] L: Tim, do you believe that the work currently being done on contracts and DeFi and the other derivatives in the alt coin market, this is from a coding perspective. Do you believe the work done on that and the code that developers have been making in that in the future can be implemented into Lightning through contracts here? Or do you believe, it will need to be recreated for Litecoin specific code?
[0:20:02.3] TK: I think, all the things you see happening in every altcoin universe can be built on Lightning, one way or another. It might be really far out. We might haven’t figured it all the way out yet, but I’m a pretty firm believer that it’ll all be able to be done on Lightning.
[0:20:22.8] P: I agree, 100%. I think, that the shitcoins are basically affinity scams, right? It’s how closely can you associate with Bitcoin, in order to leverage its legitimacy in order to promote your own scheme to basically, take Bitcoin from people into buckets? There are some specific projects that are actually trying to do interesting technological things, but the vast majority of them are just trying to do that.
Take Bitcoin out of people’s pockets, put it into theirs. I agree with you a 100%, Tim. I think the vast majority of it can be done on Lightning, or will be possible in the future, but the things that are not will be implemented on Bitcoin over time.
[0:21:02.7] TK: Yeah. I think, from just the technical perspective, too, I’m not sure how. The more and more I learn from some of the guys pushing stuff forward in the space, like Lightning Labs, and like Springshot Paul, I believe in even more that between Bitcoin and Lightning, or another layer on top, the things will be able to be done. We just might not know it all the way, but it will all be possible.
[0:21:28.3] S: I mean, look at DLCs. Most of the stuff going on in smart contract land, they’d still requires an Oracle. They just tried to obscure that. BOLTing a DLC into a Lightning channel, anything dependent on an Oracle, you can construct that.
[0:21:46.9] P: Dustin, welcome to the stage.
[0:21:48.5] D: Hey, what’s up guys?
[0:21:49.7] P: We’re talking about Lightning. LNPay.co. It’s legit.
[0:21:53.5] D: Lightning’s one of my favorite things.
[0:21:55.5] S: Autism.co, not PlebNet, right?
[0:21:58.3] P: Sorry, did you say autism not PlebNet? Yes, that’s correct. One thing that I –
[0:22:03.1] S: Autism net.
[0:22:04.4] P: No, that’s not a thing. That’s the thing you’re trying to create. It’s not actually a thing, Shinobi. We’ll talk about this later at home. One thing that I want to make sure that people understand and the audiences, Tim, can you walk people through the use case for LNPay.co, versus running your own routing note? What specific value does LNPay.co provide to people who are interested in building on top of the Lightning Network? What’s the value prop there?
[0:22:33.0] TK: Well, there’s two things to unpack. Routing nodes and routing is not really something that this should be used for. I don’t really help with routing and the purpose –If anything, LNPay is routing, and the fees are negligible, or not really paid attention to. We optimize for delivery. That sometimes means paying ridiculous fees, just to make the experience better. Yeah, routing is a separate thing.
The value prop for developers is that some of that stuff is abstracted away for you, and you’re given the tools to work through that. Right now, LNPay operates in two forms. There’s a full custodial form, and then there’s “custodial.” There’s a semi-custodial form, where you plug in your own node, and just use the application layer of LNPay on top. The value there is you bring your own node, and you can still get the application layer of an easy to use API and general tools to help with micro-payments and managing user wallets and stuff, which includes setting fees, and at a high-level, or adjusting those, and for certain users, setting limits and stuff like that. You can even do that on a per user basis, when you get into the more mundane things of managing a service with lots of users. Got off on a tangent there, but it’s where it goes.
In general, it’s just helping people get started. I mean, that’s the toughest part is just getting started and being able to build on the Lightning Network easily and learn what’s going on. That is, I would say, that chief value prop now. It’s just getting started with normal, web-friendly things, like web hooks, and standard API rest formats. You don’t have to interface directly with your node, which is low key, a huge pain in the ass. Don’t have to deal with GRPC.
[0:24:38.0] P: How dare you?
[0:24:40.2] TK: Don’t have to do all these things, if you’re trying to just test out a tiny, little service to see if there’s anything there. That’s why it started as custodial. Now over time, that was used to help bootstrap it over time as the tools and things. People have nodes now, so you can – it’s easier to spin up nodes on voltage or Umbrels and things, and they’ll slowly move away from custodianship as you get more advanced. It’s easier to abstract away the complexities of running a node, which has always been the core problem.
[0:25:12.0] P: Absolutely. I think, looking at your website, you offer direct integration with Zapier. That’s a very powerful feature, right? There’s so many apps that are connected via Zapier, as they like to say. To be able to integrate Lightning into one’s business app workflows via Zapier, it’s pretty fucking huge.
[0:25:31.8] TK: Yeah. Just general integrations that people are used to, from a normal – when you go build your normal SaaS business, everyone plugs into all these things. It’s pretty much by default, right? That ecosystem is not really – just is not built yet in Lightning. That’s how you know it’s early. It’s like, all these things will exist, these integrations, all this stuff will be there. It’s just not there yet.
[0:25:57.1] P: On the website, you’ve got SAT mailer, and create Lightning Network into your emails, reward your readers with loyalty SATs via LNURL, or include Lightning invoices directly in your emails for purchasing. Is that a specific integration that you provide? Or is that something that somebody can do via something like Zapier?
[0:26:13.8] TK: I don’t know if Joe Rogers is here.
[0:26:16.6] P: Probably not.
[0:26:18.0] TK: Yeah, probably not. He was the first one to actually use – First, was obsessed with putting Lightning in emails, because you can put an invoice and an email and you could, as a static QR, and you could just pay it and something could happen. Then with LNURL, you could actually give people money in an email.
[0:26:39.6] P: That thing, it’s pretty amazing.
[0:26:41.6] TK: Yeah. I got obsessed with that. Joe and I worked together on creating the probably, the first loyalty newsletter, like SATs newsletter, when he was running his Bitcoin words, where every user would – when he would send out his journal, there’ll be some SATs there that you could pull. You could pull the SATs. If you pulled the SATs, you got another email, because Zapier would trigger to send another email to you, that you pulled the SATs. This is another way, too, where you could buy something. You could pay, or tip, and then it would send you an email with like, “Oh, thanks for tipping.”
[0:27:19.1] P: That kind of functionality is so important in terms of adoption, right? Because all of us are really – At least, I don’t want to speak for everyone, but I – something that I spend a lot of time thinking about is how could we make Bitcoin and the Lightning Network more approachable for the vast majority of people? I think, that’s a super important thing. I think, integrating with Zapier is one of those things, where it’s like, everybody just goes to Zapier; programmers, non-programmers alike go to Zapier, and they’re like, “Okay, what can I integrate with?” To have that functionality available is pretty powerful.
[0:27:50.2] TK: Yeah. Another thing with emails in general, email is a very – I come from the traditional, say, traditional startup world, where email marketing is done and stuff like that. There’s a lot of metrics, open rates, click-through rates, impressions, all that stuff, people use to engage with their audience. If you can add another layer in there, which is money, you can start getting cost per things, like a real cost, like cost per open. Or if you pay, you pay people, you can see if your readership goes up, because you paid people. Maybe you can ditch ads. It actually is a win-win for everyone.
Those metrics are cool to see if it’s going to work, like we think it’s going to work, with micropayments, micro-engagement, if that stuff actually plays out. It’s unclear, but it’s cool to think about and test out.
[0:28:47.3] L: I think, we’re seeing a little bit of that here in Spaces. I looked this morning, there was some paid spaces in here. They run on this same system, Tim, on the Lightning system?
[0:28:57.3] TK: Yeah. I haven’t actually played around with much of the functionality in Twitter with tipping and stuff. Yeah, exactly.
[0:29:04.9] P: I’d be surprised if paid Spaces were already in native Lightning. That would be amazing if they were. I want to open the floor to the people that are on stage first. Are there any comments, thoughts, questions you have about the future of the Lightning Network, the work that is being done that we’ve discussed so far, or any ideas that you have? Then following that, I want to open the floor and bring some people up to ask specific questions, voice ideas, and then we’ll tear them apart, unless they’re good ones. Dustin, Shinobi, Alex, everyone else. Leon.
[0:29:38.9] A: Last time, I see something interesting, and that’s the connection between digital payments. In this case, LNURL pay and physical actions, physical events, so that you can pay a Lightning invoice and that triggers a physical event. Been experimenting with that myself, but I think, we will see what use cases come up in the next months and years, because I think there’s a lot of possibilities there.
I experimented myself with just doing a Lightning payment, and that’s triggered some sprinkler in the garden. You could also think about air-conditioning in hotels in other events in the physical world that can be triggered by digital payments. We’re very early with that. Yeah. I think, a lot of ideas will come up in the next year.
[0:30:24.7] P: I’m not going to tell you that that will definitely be at Bitcoin 2022. I’m going to strongly imply it. There may or may not be Lightning, Tesla coils that can only be activated by direct payments to Lightning addresses that donate to charities. These are things that are possibilities, but it’s going to be exciting for sure.
[0:30:42.8] A: Yeah. Very cool. We have to stay experimenting with that.
[0:30:46.4] P: Yeah, absolutely. I think, one thing I’ll just say as an aside is, I continually have the experience of having to explain to people why it is so significant that the Lightning Network allows you to send value to another person instantaneously for essentially low fees, with no intermediaries. It is continually surprising to me that I have to articulate to people, do you understand what happens when you send money through Venmo? Do you understand the number of actors that are in that chain that have insight into your information, your data, and can block that transaction from happening, if they choose to?
People just don’t get it. I think in a lot of other countries, to something we’re talking about earlier, that’s very, very front of mind. In the US, at least, which is where I’m currently based, people are just completely oblivious to it. When you talk about that functionality, or the Lightning Network of Bitcoin, people are like, “Yeah, but why do I really need that?” It’s like, “Oh, you will. You will need that.”
[0:31:50.4] D: It’s inevitable that eventually, everything will be a Bitcoin Lightning payment. I appreciate Tim, so that you’re working on the last mile effort to really get Bitcoin to more places. I think, that’s a really important piece of the whole picture.
[0:32:02.7] S: I’d actually like to hear Tim and Leon’s thoughts about any friction, or timetables, as far as BOLT 12, replacing BOLT 11 will go, given how many services have integrated LNURL, which is pretty much built out specifically, because there wasn’t something like BOLT 12 already. Do you guys see that taking a lot of time, just because of how much has already built up around that LNURL? Any frictions or pain points in that transition?
[0:32:34.2] TK: I think, it’s still a little wild west, man. I think, it’ll be a while before we see a real dominator. Yeah, LNURL’s got did the move, first mover advantage and has a lot of traction. BOLT 12 solves the same thing. Also, you got this extra layer of LND and c-lightning politics. You also need the nodes to implement BOLT 12, which is an extra hurdle. LNURL’s outside of all that, on the application layer?
[0:33:09.5] P: How much overlap is there between LNURL and BOLT 12?
[0:33:14.5] TK: Zero, right?
[0:33:15.7] L: When you look at our solution, we send a payout to the user, but we cannot pay out a user fee at BOLT 12 at the exact same time, because at the time that we sent the LNURL withdraw, we don’t know if the user is online, if it’s not connected to the Internet. I think for us, the LNURL withdrawal is always the preferable way for now.
[0:33:39.3] S: You guys see a lot of wait and see. Even if the politics between implementations is sorted out, it’s probably not going to – we’re not going to see services jumping over really quickly.
[0:33:53.9] TK: It’s like, what is jumping over me. I think, if anything, it’ll just be dual support, or it’ll be, “Oh, BOLT 12, oh, LNURL support.” I have a hard time. It’s tough to see where it’s going to go, but I can see – it’s been a hot topic lately at some of the conferences and things, where that’s all going to fall. Because you can even make the argument that both LNURL and BOLT 12 are unnecessary by just using key send app, and some special custom parameters that define what you need to do. You don’t need –
[0:34:27.6] P: The Bosworth hypothesis.
[0:34:29.6] TK: Yeah. Then, it stays all contained on the Lightning Network, too, which LNURL takes advantage of HTTP. Then you have issues with DNS. It’s actually very complex.
[0:34:43.4] L: Yeah. I think, the hardest thing, the hardest nut to crack now is, how do I send Bitcoin via Lightning in a non-custodial way to a user that is not online? There’s no solution for that yet.
[0:34:54.9] D: There was one I heard talked about fairly recently. I suspect it’s coming.
[0:34:59.0] P: Can you elaborate, Dustin?
[0:35:00.9] D: I forget. I was just by speculating on this in Austin a couple weeks ago. With Greenlight, with a c-lightning, as far as I can tell, it should be totally possible to receive stuff and not send it while your key is offline. Greenlight is the thing that separates your key from your actual – all the rest of the Lightning Node. I can’t tell you how they – the theory this person had, just turned to second hand. I believe, it’s theoretically possible. If that’s true, expect it will be in a little while, you’ll see it come out.
[0:35:30.6] TK: I think, how that works is you have a central node. I think, Breez did this for a little bit. I don’t know if they still do it. Basically, you have someone like Breez, you’ve got a spoke-hub situation. Then all the lease are connected the hub and the hub will hold the payment until the node comes online, and then send it. That’s how Greenlight also works. I don’t know if they do it the same technically, but that’s the general idea.
Greenlight is a pretty hot topic lately, too, because of the separation. The key there is the separating of the signer, which is a pretty interesting concept. Basically, you can pull your keys. You just need your keys to receive and send, but you don’t necessarily need the node software in the same spot. You could have a node in the cloud and have a USB drive plugged into your computer somewhere, and you could assign and receive payments when that USB drive is plugged in, but when you unplug it.
[0:36:37.2] D: There’s no theoretical reason you couldn’t receive while the signer’s offline, right? There’s no SATs at risk for the other side. It’s just on your own, since there’s no risk to that.
[0:36:46.4] TK: Yeah. Sure. Just sending.
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[0:38:49.6] D: There are some weird cases that prop up that you might need a watch tower. You might need a little more than other cases. I have more through all the details. Anyway, I just think it’s theoretically possible.
[0:38:58.0] P: Theoretically possible for someone to receive SATs, while their node is offline, while their Lightning Node is offline.
[0:39:03.9] D: Yes.
[0:39:04.5] P: Okay. Got it.
[0:39:05.1] D: Yeah, some variant of offline. The keys are offline.
[0:39:08.4] P: Yep, totally. Again, I know I say this constantly. I feel it’s the most common thing I say. For the audience, what we’re talking about here is with a Bitcoin Core node, which is layer one Bitcoin, sound money, decentralized, censorship-resistant, all that stuff, you do not have to be online in order to receive payments.
If Dustin wants to send me money for a pizza that I baked him, or for putting his boat out when he set it on fire, because he’s doing emergent mining, whatever it is, he can send that payment. It gets set in the blockchain, and then basically, I can move my node back up after six months, catch everything up, and then be good to go. In the Lightning Network, your Lightning Node by default, or in general, has to be online all the time, because the Lightning Network is extremely dynamic. There are services that are fully custodial.
As to say, they hold your keys for you and run all the systems in place to basically, maintain your liquidity and your availability, like BlueWallet. Or you can use systems, like Breez, where you’re actually running a full node that is a neutrino node. It’s not a full note. It is a pruned node on your phone in real time, that basically, will give you alerts, if you don’t open the app frequently enough. It’ll say, you got to open your app, because your node needs to be online, in order to make sure that you’re not missing anything.
What Dustin is talking about is on the Lightning Network, how can you have full custody of your private keys, and then also be able to receive payments without problems if you are not available?
[0:40:49.6] S: If you tweak what full custody means, you could have the other side of your channel, just keep signing updates that update the balance, and then waiting till you come back online to have you sign and then exchange the revocation keys. You would be in a weird Limbo, where none of that was enforceable, until you did that. Obviously, would have to trust your channel comes –
[0:41:16.9] D: It’s exactly that, but you wouldn’t trust anybody though. As long as you’re receiving, the other side has no risk. You can’t steal any funds. The trust all works out. Well, that’s exactly correct. You would have them sign their half of the updated state, and then relay it to the online portion of the Greenlight service. Then when you come back online, then you would sign the new states and stuff and you wouldn’t be able to send to that channel again, until you caught up the signatures.
[0:41:42.9] S: You wouldn’t be able to enforce that until you exchange the penalty keys for the most current state. You know what I mean? Any of those –
[0:41:52.5] P: Wait, wait. I think, we’re getting too in the weeds here. We got to define our terms. When we talk about penalty keys just as transactions, things like that, you got to provide context for the audience.
[0:42:02.1] S: The only way you can enforce the current channel balance is having the penalty key to effectively steal the other party’s entire channel funds, if they try and do that.
[0:42:12.0] P: Exactly. Again –
[0:42:13.0] S: This offline receiving system, you could have that go through, but all the recent payments that happened while you were offline, your channel counterparty could still use the channel state to close the channel before those payments, until you come online and sign everything and everybody exchanges penalty keys. Because, unless you’re online to get that, you can’t really enforce those things.
[0:42:40.6] P: To be clear, what we’re talking about here is the Lightning Network is basically, it’s like a spiderweb. You run a node, or you can run a node if you choose to. Basically, just because I do not have a direct connection to Shinobi, I can still send in payments. If I have a channel to Dustin and Dustin has a channel to Shinobi, I can basically route payments through Dustin to Shinobi. Then, all the people that I have channels open with, which are two of two multisig contracts. Whenever anybody says like, “Oh, you can’t do smart contracts on Bitcoin. They’re totally full of shit.” It’s absolute garbage. You want 100% can.
Bitcoin was the first blockchain to implement them. Though people get weird around Turing completeness, which is not a feature. It is a bug. There is a risk if you go offline as a Lightning Node. If your Lightning Node is unavailable, because essentially what a channel is, is it’s basically, it’s like a bar tab that is updated in real time between two people. If Shinobi and I have a channel that we’ve opened between our two nodes, which by the way, Shinobi, I’m furious that we do not yet have a channel open.
[0:43:48.4] S: Or do we?
[0:43:49.1] P: Oh, shit, dog. Okay. Well, that’s a possibility. The point is, if I take Shinobi out for beers, and I buy him a beer, and then I say, “Okay, you owe me $5, or whatever.” Then, he basically, updates our channel state, and then we go back and forth, that’s fine. Then, if my node goes offline, and I’m down for the count, Shinobi can, in theory, publish a false channel state, which says something like, “P owes me all the money that was opened in this channel, and he can go fuck himself.”
There are systems that mitigate that type of behavior. They create incentives, because that’s what Bitcoin and the Lightning Network is all about, right? It’s all about these incentives that basically, drive optimistic, or I would say, correct behavior. One thing is there’s watch towers, which are basically, systems that you can set up that allow you to send your channel state to third parties, so that if something goes wrong, they can publish what is called the justice transaction, which is my favorite term in Bitcoin to full stop and no scrubs.
The justice transaction allows someone who has been cheated in terms of channel state, to not only reclaim the funds that were rightfully theirs, but also, to reclaim the funds that the other person had that were previously on their side of the channel. You want to be very careful about trying to, or not even you want to be. No one tries to screw each other, or very few people do, because the threat of the justice transaction is so great, that it’s just not worth it economically. That’s what we’re talking about here. Would you add anything to that, Shinobi or Dustin?
[0:45:26.0] S: Yeah. I just want to clarify that until you come online, in this example of receiving a payment while you’re offline, and sign things and exchange those penalty keys, you can’t consider those payments finalized or enforceable. Nobody can go back and steal all your channel funds. They could theoretically do that with the little amounts that you’ve received in payment.
[0:45:51.4] D: You’re getting there half of the insurance keys. This would require restructuring the protocol and having a special justice transaction. As I understand it, there should be no reason you wouldn’t be able to get those funds, just their half of the signature keys, even though you haven’t updated your side.
[0:46:08.2] S: Well, like think about this. They can’t give you their penalty key, until you give them theirs. Otherwise, they’re screwing in the –
[0:46:16.8] D: It would require a protocol update, where they did give you the penalty key, without getting yours yet.
[0:46:21.1] S: Yeah.
[0:46:22.1] A: I had one thing to say before I’m going to step down and let some other speak. It was a question for you guys who are very tech savvy around Lightning. Excuse my ignorance here, if it’s a stupid question, but I’m going to ask it anyway. With the standard Internet protocols and things that go on around censorship and things, with people running Bitcoin full nodes, and running Lightning Nodes and Lightning channels, are we going to see a future where there’s a decentralized Internet, too, where if I’m currently in a jurisdiction that blocks me, like China, from communicating over the web, that I could possibly send SAT and attach to the SATs was information, and they would be able to interact again, with the web, even though I’m censored?
[0:47:01.6] TK: It sounds like, you’re describing the Tor network.
[0:47:04.8] A: What I’m trying to say here is if I’m running a Bitcoin on a Lightning Node and a Lightning Node, and my country’s censoring me from most HTTP, or stuff, Google and stuff like in China, can I send information and data through the Lightning Network and reroute around those centers?
[0:47:22.6] S: Yeah, you definitely could.
[0:47:23.5] D: I would probably send it through the Tor network. That’s what I would do. Lightning can be run over the Tor network, and a big portion of it is actually. Tor Network was really the solution for that.
[0:47:33.2] L: Yeah. I got I got a real-life example on this, because we got a we got a user in our community, or in the Netherlands. He lives in China and he sends the nations do a podcast of realizing on a weekly basis. He runs his own Tor Bitcoin Lightning nodes, and he just sends it all from China.
[0:47:53.0] D: Yeah. You could totally send a network, a message over Lightning that’s also over Tor, which is fine that works today. Tor is useful for people getting around there. There is the great firewall of China today, and used actively for such purposes. It’s old tech. It’s already been solved, but still very cool.
[0:48:12.8] P: I just want to welcome Rindel.
[0:48:14.3] TK: You can put arbitrary data in Lightning memos or something. You don’t actually want to do that. Years ago, the thing to do to impress your friends was to tunnel HTTP over DNS. You go to a hotel, and the hotel has a captive portal where they want you to pay for the Internet. If you say, “Fuck you. I’m not going to do that.” Instead, I’m going to have a DNS server that acts as an HTTP proxy and tunnels all of my HTTP responses over DNS.
Yeah, you can do that, but it’s not very scalable. It’s going to be even worse on Lightning. Lightning bandwidth is very constrained. If you want to do interesting network protocols with Lightning, the thing to do is use Lightning transactions for coordination, or signaling. Then you use normal other Internet protocols for the actual payloads.
[0:49:10.2] P: You’re talking about something, like impervious?
[0:49:11.5] TK: Yeah, like impervious. Or if you wanted to do some video calling application, you would use, or audio calling for that matter, you would use Lightning to trade a bunch of SIP parameters, and then you just do normal voiceover IP. If you’re worried about censorship, use Tor, or ITP, or any of the other systems for doing the Internet, or the web over censorship-resistant networks. Please don’t try to serialize arbitrary web responses into Lightning messages. You’re going to have a bad time and you’re going to cause problems for the network.
[0:49:47.8] PARTICIPANT 1: Is Tor allowed in China? Is that not banned?
[0:49:50.9] D: It’s unstoppable. You can’t stop it. That’s the point.
[0:49:54.4] P: Well, it’s unstoppable as long as the US government supports it, right? My understanding is that Tor is dependent on the US government, in order to function reliably.
[0:50:05.7] PARTICIPANT 2: What they say is the vast majority of the relay Tor nodes are operated by the CIA or something, right? Something like that?
[0:50:12.7] Yeah, but you shouldn’t be using those anyway. You should use native –
[0:50:15.5] P: 100%.
[0:50:17.9] S: I mean, the whole core node, you are implicitly trusting a bunch of hackers, mostly in Berlin and Europe who run the directory servers, or their servers, which actually filter out all the relay nodes that you build circuits from. Tor and of itself is inherently centralized around those group of people.
[0:50:39.7] TK: In fact, the other main Tor team is almost all women.
[0:50:42.5] P: No shit.
[0:50:43.3] S: I would say, half spooks.
[0:50:45.7] P: That has nothing to do with their gender, or their biological sex. Sorry, I’m eating a loaf of bread right now.
[0:50:52.3] KP: To the earlier question, though, you have the ability to attach and message to a payment, like in a key send. Those are short messages. You won’t be able to download a page, or something like that. You can see a message to –
[0:51:04.2] PARTICIPANT 2: Yes. AB characters, I think.
[0:51:06.9] TK: Yeah. The idea would be that you use the key send to coordinate something to Clearnet, wherever you can.
[0:51:13.4] PARTICIPANT 1: You can send to a pub key, small amount and a message. You should be able to coordinate at least messaging part of it.
[0:51:21.4] PARTICIPANT 2: Thunder hub has this built in. It’s a little bit wonky, but it works.
[0:51:24.6] P: Yeah. I mean, just to go all the way back to something we were talking about, probably 30 minutes earlier. There’s the question of what should be built with the app layer, versus built at the protocol level. There was a great conversation with John Carvalho and Lisa and Vivek and Alex Bosworth from Blockstream, that was basically going back and forth about this topic.
[0:51:44.1] S: Whoa. Alex is not Blockstream.
[0:51:46.1] P: No, no, no. Sorry. Alex Bosworth is Lightning Labs. Alex Bosworth of Lightning Labs, Lisa, and Vivek of Blockstream here, and then John Carvalho of the stealth startup that he’s been promoting for forever. That is an interesting topic. It’s basically, what should be built at the app level, which is Alex Bosworth has built this incredible tool called Balance of Satoshis, which most of use, who are running routing nodes. It uses key send, in order to facilitate a bunch of pretty amazing functionality, very relatively seamlessly that is not available currently on the Lightning Network at the protocol level. That’s Lightning Lab’s position.
Then the block stream position is that, “Oh, no, no, no. That should all be built at the protocol level.” That should be something that we all agree on, so that we can all be on the same page. It’s an ongoing debate, but it’s an interesting one, for sure.
[0:52:33.1] N: Did Alex, or anyone bring up the LSAT idea, authentication token? Because I’ve been looking at that lately. I feel like, people aren’t doing anything with that. Even though it has a lot of really cool concepts that you could do with it.
[0:52:47.4] KP: Can you elaborate, Nate? What is it?
[0:52:49.4] N: Yeah. March of last year, Lalu from Lightning Labs talked about the Lightning Service Authentication Token, the LSAT. The LSAT is used a little bit in their pool, but it’s also an open library of functions and stuff. You can essentially have a Satoshi different from all the other Satoshis on the Lightning Network. You could sell tickets. It would solve a problem of the Bitcoin conference. All you need is an email. Nothing’s really stopping you from selling your ticket five times.
[0:53:26.6] S: LSAT was based on macaroons for authentication.
[0:53:30.1] N: Yeah. The way that it’s pay for an API token, right? It’s like, you hit an API, and it sends back, God, what is it? It’s like a HTTP, what is it? 402 or something.
[0:53:42.4] TK: 402. Yup.
[0:53:43.4] N: Payment required, which it’s hilarious that we have an HTTP error code for years, which is payment required, like nobody’s done anything with it. The idea is you have the server send back this payment required and attached to it is a Lightning invoice. The client pays the Lightning invoice. I think, the way that LSATs work also is the Lightning invoice also comes with an auth token. You pay the invoice, and then that auth token is good for whatever metered, or prepaid amount of API access that you pay for.
[0:54:53.0] TK: I think the easiest way to describe that LSAT that I’ve heard is it’s a macaroon with an invoice attached to it. That’s pretty much it. The macaroon can have complex permissions embedded in there.
[0:55:04.3] N: Are there any projects that are using this? Or is this a problem of foundational development?
[0:55:10.7] P: I like to imagine that that was you making that noise, not your child.
[0:55:14.1] N: Hey, P. I’ve known you since she was born, dude.
[0:55:16.8] P: No shit. How old is she?
[0:55:18.2] N: Seven months.
[0:55:19.2] P: Wow. Congratulations, man.
[0:55:22.3] N: Yeah, she’s a goofball. I was talking to somebody earlier today about it and we were like, yeah, it’s a problem – You’re thinking it was a problem with foundational development. People that want to use LSAT can do it easier.
[0:55:32.8] TK: Yeah. I think that there’s a couple different chicken and egg things going on. It’ll get resolved one day, either by LSATs, or by something else. One of the things that would be awesome to see with LSATs is really good integration into open API/swagger. For people who don’t know, there’s a set of libraries called swagger, or now they’re called Open API, where the idea is like, you define a web API with interface definition file. You say, these are the API calls that I allow, these are the parameters, these are the responses, these are the errors. Then it generates a stub server for you and it’ll generate clients in whatever language you want.
Another thing that they’re probably going to have to just figure out to get more adoption is better integrations with middleware application servers. It’s like, what you really want to be able to do is go to some API gateway and just check a box that says, “Monetize my API,” and it uses LSATs. That just doesn’t really exist yet. There’s that thing. There’s also just services, like voltage or LNPay are probably going to be important with this, because if all you’re trying to do is monetize your API, you might not want to deal with the care and feeding of a Lightning Node and dealing with inbound liquidity and all that stuff.
Instead, you just check a box that says, “Monetize my API,” and you want to be able to get payments for it and not have to deal with a Lightning Node. There’s a bunch of steps that I think we need to get through before we really see LSATs take off, but they’re going to be really, really cool. I mean, if you think about the world that the SaaS ecosystem is in right now, the way that all this stuff works is you build software as a service company, and then you build a metering system, where people sign up for an account, they register a payment instrument, they use the service for a month, and at the end of the month, you add up all of their usage, and you hit their credit card for it.
You’re taking counterparty risk. They don’t necessarily know what their bill is going to be till the end of the month. They have to set up an account. They have to give you a bunch of payment information. There’s a minimum, where you don’t really want to charge them less than a $1, because it’s not worth the credit card processing fees. LSATs flip all that on their head, where you can say, I’m going to give you programmatic access to my service, or I’m going to give you access to my SaaS business, and you don’t need an account. You don’t need to give me payment details. You just use it as much or as little as you want, and you just pay as you go. It’s the same way that Lightning payments, lower the payment barrier to entry and hurdle rate for person-to-person payments. LSATs are going to do that for APIs. It’s going to be incredible.
[0:58:53.8] N: Another cool thing about the LSATs is you can create children from them. If you have an LSAT, and you have access in the scope of what you’re talking about, you had access to API, employ A, B and C. You can make another one and give your friend just access to C and then revoke it at any time, which is pretty cool.
[0:59:12.8] S: The cool thing is you can attenuate that though, so that you don’t have to just give them full access. You can give them a small subset of access to things which they can further delegate, but only delegate within their subset. You can just spread that around and infinitely sub-delegate API access. Whoever goes to delegate it further to someone else, can only delegate what they’ve been delegated, and so on and so forth.
[0:59:40.2] N: Yeah. You can delegate to what you have, or smaller. You can never delegate bigger.
[0:59:50.0] CK: Bitcoiners, I am so excited to tell you about the Bitcoin 2022 Conference. You guys, Bitcoin 2021 was absolutely a smash hit success. It was over 13,000 Bitcoiners coming together, breaking the barriers on who can come together and celebrate freedom, celebrate Bitcoin. The energy was absolutely electric.
Unfortunately, it was just oversubscribed. There’s just people flowing out everywhere. This year, we are learning, we are making the conference bigger and better. We are moving over to the Miami Beach Convention Center, and we are going to be throwing a massive four-day festival for Bitcoin, celebrating Bitcoin, bringing together the greatest minds in Bitcoin and the greatest businesses in Bitcoin and lastly, the culture of Bitcoin all together.
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[1:03:49.2] M: I have a question. Speaking on developer experience for Nate and Tim. It seems like, your companies are focused on making the developer experience easier. I was wondering, how do you guys see the future of Lightning Network as far as developer and consumer experience, versus keeping the Lightning Network decentralized? Because everything you do to make the developer experience, or the consumer experience easier, also takes away from the decentralization part of it. Lightning is going to be successful. The question is, how centralized it would be?
[1:04:30.1] N: Well, I think, Greenlight is a step in towards decentralization. It’s a way to instead of having custodial Lightning, you can do something similar, but hold your keys. I think that’s pretty cool.
[1:04:41.2] TK: I think, Greenlight is somewhat different for services companies. Greenlight is good for end-user nodes. If you’re a wallet, or something small. For an enterprise running high volume, lots of sends and receives, Greenlight is probably not going to fit the bill for that. They’re trying to hit a different market. LND, c-lightning are the products for bigger services, which developers would probably be building against for let’s say, most applications now.
I think, there’s a balance there. That’s a good question, Mike, because that’s something that I’m sure voltage, and I think about a lot, the macaroons and the permission stuff, there’s a difference between – this is slowly becoming a difference between the key – holding the keys and having access to nodes, so two different things. Then, you also have the open source tools, like LNbits and stuff like that. There’s always going to be a trade off when you want a hosted service.
Hosting the node is the core problem. This is always going to be, yeah, like what you’re talking about. As the space grows, and those tools grow, it’ll trend towards more self-custody.
[1:05:58.1] N: I think, there’s also a lot of times, people who are related to Bitcoin conflate a lot of things and lump it all into calling it centralized, or decentralized. There’s parts of decentralization that I think people should really care about, and there’s parts that I don’t think people should care about. One of the things that gets conflated is centralization and tenancy. Saying that the network is going to be decentralized is not the same as saying, there will never be multi-tenant services.
[1:06:27.7] P: Wait. Can you define tenancy and multi-tenant services?
[1:06:31.4] N: Tenancy is how many people are on the same hardware, or in the same administrative domain. Bitcoin Beach, they have a community bank. God, I can’t never remember the name of the open source project. That’s fine. Somebody up here knows it.
[1:06:47.8] S: Galoy.
[1:06:48.7] N: That’s it Galoy. Galoy is like an open source project to do community banking on top of Bitcoin. That’s a multi-tenant system, right? There’s a bunch of people that are all running on the same underlying system. I don’t think anybody would look at Galoy and say, “Oh, my God. Bitcoin’s becoming more centralized.” The thing that you really care about for Lightning being decentralized, is that you don’t have to trust some central, authoritative entity to make all of the decisions about what transactions are final, or who gets to make transactions, gets decentralized, and different nodes on the network have the same primacy on the network.
They might have different centrality, but no node is more authoritative than another node from a protocol perspective. We can have a very decentralized network that still have providers that are providing managed services. I was talking about LSATs a second ago. If I’m running an online widget store, the thing I want to focus on is how to sell widgets and delight my customers, and I want to accept Lightning transactions, I probably want to go to a Lightning service provider that’s going to manage all of the muck of uptime, and channel health and all of that for me, so that I just don’t have to deal with it. It’s not my core business.
As long as I can switch providers, and as long as there’s lots of providers, and no one is more important from a protocol perspective than another, you can still have a decentralized network, but I, as a customer, as a user of the network, get to choose how much of the care and feeding of nodes I want to do.
I don’t know. I guess, that’s all a long way of saying that centralization is important, but you can definitely have a decentralized network that still has multi-tenant managed services. That’s actually a good thing for the network, because it lets more people use the network productively, instead of having every single human in the world worrying about inbound liquidity.
[1:08:51.8] KP: There is pros and cons to that. Some may want to use it for some purposes for certain period of time. That’s what you’re trying to highlight.
[1:09:00.8] TK: Yeah. I just want to say for voltage, voltage, I can make an argument for pretty much every type of Lightning user, why voltage might be good for them. Yeah, there’s going to be trade-offs and stuff. What’s really great about voltage is that merchants and stuff don’t need to worry about uptime on their nodes and things like that. They’re important to the business side of, the commerce side of Lightning, just as an example.
[1:09:25.8] S: Well, I mean, I think Rindo just hit a really important point on the head. That’s receiving liquidity. Until you’ve actually build up a business model and have a lot of consistent demand with that, it’s not going to be the easiest thing in the world long-term to get receiving liquidity from somebody to actually receive those payments, because that liquidity provider is taking a gamble on allocating their liquidity to you on how successful your business is going to be. Because that’s where they’re going to generate their revenue from.
The simple reality, I think, in the long-term, is because when you’re starting out, you’re going to need to go to a custodial, or third-party service that already has that provision liquidity and get an account with them. You’ll use that at first, until you’ve demonstrated enough consistent volume and success with whatever your business model is, to be able to take that and go directly source liquidity from someone.
[1:10:27.8] TK: People will always give you inbound, but it’ll just cost. There’ll be a market for it. It’ll just have to factor that in to your cost of doing business, especially at the beginning, though, I agree, it’s, it’s a lot to take on when really, you just want to focus on whatever your business is not operating in Lightning Node.
[1:10:48.8] N: I’ve got a feeling, there’s going to be some really interesting inbound liquidity generation methods coming out soon. I feel like that’s something that’s just ripe to be taken advantage of, whether it’s leveraging pool, or whatever, could get interesting.
[1:11:03.7] S: I mean, you’re increasing the cost of trying a new business model there, where you don’t have that cost using a custodial service, you know what I mean? Now, you have to go pay whatever channel leasing fee. You only have that guaranteed for the lease terms. I know, a lot of people don’t want to hear this, but the simplest, least headache, most cost-effective thing, trying something new is going to be go find a service.
[1:11:31.1] N: Yup. I’ve ran multiple routing nodes. The easiest I’ve had it is just using loop. Just opening up a ton of channels, and then looping out as much as possible just once. Then after that, you just open and rebalance. That’s good. It’s my own personal strategy.
[1:11:48.4] TK: There’s other services popping up, where you could just buy inbound, right?
[1:11:53.9] P: I want to welcome Justin to the stage. Justin is one of the people behind Zion. Welcome, my friend.
[1:11:59.9] J: Hey, bro. How you doing? Thanks, so much for having me.
[1:12:02.5] N: Zion’s got a bunch of notes that has to deal with liquidity, right?
[1:12:05.7] J: Yeah. We have about two – As of today, we have about 1,800 nodes and 1,800 channels running inside the network. I was just on a three-hour call about liquidity. It’s a thing that we manage. I do think that there’s ways to be able to help customers manage in a non-custodial environment, because we are non-custodial, and we help manage liquidity. We do it with our root nodes in particular. There are ways to balance the best of both worlds is allowing people to have full control of their funds, and then having a service, AKA, like what we’re doing internally to help manage that liquidity.
[1:12:43.3] M: Future’s exciting. There’s so many ways all this stuff can go. They’re all going to be great.
[1:12:47.6] P: Well, those take a moment and elaborate what those are. I know you’re speaking generally, Dustin, but what do we feel the various paths are that are ahead of us and what are the trade-offs that are associated with each of them?
[1:13:01.1] D: Well, sir. That depends on what type of new base layer functionality we get. Because that’s a limiting factor there.
[1:13:08.6] P: Go on.
[1:13:10.7] D: Well, I’m going to be a little bit of a buzzkill here, and I’m going to say that if we don’t get what’s needed on-chain to make channel factories, the Lightning Network itself is just going to become a settlement mechanism that most people can’t afford to directly interact with. Channel factories or bust.
[1:13:30.6] J: Sounds like you’re pitching for CISAg, which is my favorite upgrade.
[1:13:35.7] P: I think, the first thing Dustin ever said to me when we’re started hanging out, oh, so long ago was –
[1:13:39.9] D: He’s trolling me, because he knows that I do not just want to gag without some questions answered.
[1:13:47.6] J: I actually realize now that – I didn’t mean to. I forgot that you hate CISAg, but I’m remembering.
[1:13:52.8] P: Wait. I have an important thing. We got to we got to define these terms, because there’s 300 people in here. I feel like, most of them don’t understand what we’re talking about when we say CISAg.
[1:14:03.9] D: Cross Input Signature Aggregate.
[1:14:06.4] P: There you go.
[1:14:07.2] J: I think, the challenge is there’s a bunch of potential Bitcoin upgrades out there. They have code names. The code names can even change over time. CISAg my code name for this particular upgrade, but there’s other names for it, too.
[1:14:20.1] P: What are the other ones and what is CISAg, Cross Input Signature Aggregation competing against? How do they relate to the Lightning Network?
[1:14:29.1] J: I don’t think CISAg actually has a competitor. Do you know of one, Shinobi?
[1:14:33.0] S: Yes. L2 and OPCTV, which are going to happen first, or until my questions about crossing input signature aggregation –
[1:14:42.1] P: Oh, shit, dog. Wait, let’s be more specific.
[1:14:45.0] J: It’s not a competitor to the feature. It’s a competitor for any upgrade at all. It’s a different thing.
[1:14:50.7] P: Wait, wait. Let’s be as specific as possible. What BIPs, Bitcoin improvement protocols are we talking about specifically, by number, please? Oh, shit, dog. I didn’t realize that.
[1:15:01.0] J: You can’t just demand an exact BIP number out of people like that, dog. What about people who hate math and don’t think in numbers?
[1:15:09.2] P: Yeah, but you’re not one of those people. Yes.
[1:15:14.6] D: [Inaudible 1:15:14.8]. OPCTV and he pointed CISAg, and then there’s a fourth one I’m blanking on that’s also important.
[1:15:22.1] Wait, wait. Dustin, Dustin. I’m going to force you to define each of those terms. What are the things that each of those BIPs provide, and why are they valuable? Relate it back to Lightning if you can. But if not, go ahead.
[1:15:37.9] D: For Lightning, we’re getting, really stretching the brain cells here. The easy ones to explain are ANYPREVOUT and OPCTV, these, I think, are very much competing with each other, because they’re both ways to, how to explain without using jargon, to sign a transaction before it’s used, and then have it usable once funds arrive somewhere, without defining where it is. It sounds wordy, but the big way to think about it is that it allows you to say, build a Deadman switch.
If you think about airplanes today, the pilots in the front they have a locked door that you can’t break in, since 9/11. In case the pilots die for some reason, the flight crew can still get into the cockpit, but that they press this button and then they have to wait five minutes or so, and within that five minutes, the pilot has a little light blinking and they can cancel it. as long as the pilot’s alive, you can never get to the door. If they’re dead, then five minutes will expire, the door just automatically unlocks.
This is the thing that’s made possible by OPCTV and ANYPREVOUT. You can do that with instead of a door, you could do with Bitcoin. You can do a thing where someone can press – my air is can press this button saying, Dustin’s dead. Maybe I have six months to notice and be like “Wait, I’m not dead.” That’s the category of thing that’s enabled by ANYPREVOUT, OPCTV. Well one, that’s just really cool, but it also enables a bunch of really more sophisticated and nuanced things in Lightning, because Lightning benefits from this Deadman switch quite a bit. It actually uses a very different tool already. This will allow us to use more sophisticated events, which will enable Lightning to be bigger, faster, better, stronger, basically.
[1:17:20.0] P: What we’re talking about here is proposed BIPs, which are Bitcoin improvement protocols. It is the system by which the Bitcoin Core implementation is upgraded. There’s a lot of politics and implementation behind it. Essentially, what we’re talking about is upgrades to Bitcoin Core, which is one of the most, if not the most peer-reviewed software package in existence.
These may sound trivial, or unimportant updates, but they have far-reaching implications. People correctly spend a lot of time thinking about and investing in what is the most secure and effective way to implement the functionality that is needed, or is desired in order to improve Bitcoin. Most recently, we’re talking about taproot and schnorr, which I forget the BIP numbers off the top of my head, but those are – that we went through a whole thing of trying to figure out like, “Okay, how do we effectively decentralize the decision to upgrade to these systems?”
Eventually, what was decided was something called speedy trial, which was a shortcut, and taproot and schnorr. There’s actually one other BIP that is associated with that as well. They go live in November. Cross input signature aggregation, and all the other stuff we’re talking about are what is the next Bitcoin improvement protocol, or BIP that will be implemented on Bitcoin? What will it empower and why is it important?
[1:18:48.7] N: Well also, how you supposed to farm Twitter followers if you just agree on things? You got to drag it out.
[1:18:57.1] J: I disagree with that.
[1:18:58.4] P: I feel attacked.
[1:18:59.2] S: P, I’m going to need those BIP numbers. I’m going to need those actual BIP numbers for the three taproot BIPS, sir.
[1:19:05.7] P: Yeah, yeah, yeah. Give me a second. Give me a second. I’ll call it up.
[1:19:08.7] M: I want the prime roots of those BIP numbers only, please.
[1:19:12.4] S: I’m going to be autistic right real quick.
[1:19:14.2] P: Uh-oh. Here it comes.
[1:19:15.8] S: BIP 118, ANYPREVOUT is effectively a weird trick where you can make a signature that does not have to actually specify a specific unspent UTXO. Just in the script –
[1:19:29.8] N: Also called a previous output.
[1:19:31.6] S: Just the amount. This lets you play games where you can take a signature from seeing older Lightning channel transaction and just take that and attach it to the most recent one, and it will still be valid, and can just spend the old transaction. Both would confirm the new one would spend the old one into the correct channel balance, and we wouldn’t need penalty keys anymore. That also lets do channel factories with multiple people, because you don’t need to deal with the penalty key stuff, which gets very complex.
BIP 119, OPCTV is an opcode that lets you spend coins to a commitment of how they will be spent in the future, and you can chain them together. Instead of making a pre signed transaction that could be replaced, it’s doing the same thing, but it’s enforced by consensus. Once you commit to something, you can literally never change how it has to be spent in the future That will let you do channel factories in a different way. That actually lets you do safe Lightning channels where you can open them and pay people without the other person having to be online. Decentralized mining pools, a whole bunch of other fun stuff. Also, P the taproot BIPs are BIP 340, 341 and 342.
[1:20:58.1] P: You beat me to it. I’m going to link [inaudible 1:20:59.5], you son of a bitch. Wait. Hold on. Hold on. Rindo, go for it. Then Dustin can –
[1:21:05.6] R: I was just going to say, the T in CTV is template. It’s check template verify. The way to think about this is that when you – a Bitcoin transaction, what you’re really doing is you’re taking coins from an input and then you’re locking them, or encumbering them to some set of spending conditions. When you normally just send it to an “address,” you’re saying, in order to spend these in the future, you have to produce a signature that corresponds to the private key that’s represented by this address.
What CTV lets you do is it lets you say, these are encumbered by a template transaction. If you think about templates, it’s like, you have a bunch of stuff that’s filled out and a bunch of stuff that’s left blank. Imagine, if you could encumber a future spend to a future be in a transaction that matches a particular template. That’s the model that you should have in your head for CTV.
[1:21:58.8] J: I find CTV so confusing, especially when I think about check time log verify, versus existing opcode, but that’s neither here nor there. I was going to say that there’s a third competitor now. That’s all. Come on and manage this, just off on covenants. I wouldn’t be surprised if we start seeing more competitors within the same space if ANYPREVOUT will verify now of covenants, because it’s like, there’s a lot of ways to skin this cat and I think it’s not objectively clear what the best one is.
[1:22:23.6] P: Sorry, I just want to be clear. I studied anatomy in college. Contrary to popular belief, there is only one way to skin a cat. I just want to throw that out there.
[1:22:35.4] V: I want to defer back to the autist, Shinobi here. As you said, it seems like CTV was the general consensus way of going about L2 after ANYPREVOUT lost some steam on what would be potentially the next soft fork. Now there is a tap leaf update verify that’s getting quite a bit of steam. Then after that, another PTLCs, BOLT 2 and 3 changes on the mailing list. If anyone has read it and actually digested that, I love them to speak up. I think, Shinobi’s autism may really pay off here. With that, I’ll retreat back into the –
[1:23:17.6] P: No, no, no. Don’t you dare. Don’t you fucking dare. Stay up on stage. You’re an amazing curator. I see you trying to hide and rescind back into the darkness. If you leave the stage, I’m going to ban you from the room. You stay here. Oh, goddammit. Vivek is the head of BD at Blockstream and an incredible –
[1:23:37.2] J: P, you have to ban him now.
[1:23:40.8] P: I can’t. It was an empty, fucking threat.
[1:23:43.8] M: Well, then now, we know all your stressors, P. How are you going to troll us with threats now, huh?
[1:23:51.1] P: I’m moving you to the audience, Shinobi. I just moved you to the audience for doubting me. I’m inviting you back up. Contain yourself. Never doubt me again. No, I just want to give Vivek some serious props, because he is the head of BD at Blockstream. He loves to sell himself short and define himself as someone who’s like, “Oh, I’m just some sales guy.” Really, he understands a lot of the stuff more than – follow Vivek. He’s an OG and he has helped me make a lot of these spaces amazing. Vivek, please come back up. If you don’t, I’ll hide you forever. Let’s proceed.
[1:24:23.4] R: While we’re on this issue of controversial Bitcoin upgrade, there’s all this talk of Coinbase commitments. Maybe we should have Coinbase catered to the most influential Bitcoiner in every block.
[1:24:33.4] P: I also just want to acknowledge, we’ve gone very firmly off track from build shit on Lightning. Tim, I appreciate you for sticking around through all of this.
[1:24:42.8] TK: It’s a lot of good info, man.
[1:24:44.3] P: It is. I mean, the people up on stage are incredible. Y’all should follow them. Also, shameless shill, you should seriously consider, if not immediately, buy tickets for Bitcoin 2022. I’m head of programming for that. It is going to be spectacular, to be blunt.
[1:25:02.0] S: It’s going to be really fun sabotaging all of P’s fun.
[1:25:05.2] P: I wish you had that power, because then it would be interesting. You will be there, I hope. We’re going to have some fun. Justin, I’d love to hear your thoughts. I know you came in here. I pulled you up on stage against your will. Do you have any thoughts about everything we’ve been talking about so far, the trade-offs in terms of the various BIPs that have been suggested, or that are in flight? Also, the Lightning Network as a base protocol that empowers so much more?
[1:25:37.3] J: Yeah. I mean, I think it’s a great question around enabling the future of the creator economy at large. I think, a lot of these improvements, I think, are going to help tremendously, because it allows us to be able to scale to millions of people. The idea of the one member, the one person, one node model is very challenging. There’s exciting things coming out with DOD 14 on LND, that allows for multiple people to share a channel.
All of these improvements at the base layer just allow us to scale with the same peer-to-peer qualities that we think the future of the Internet should hold. I mean, if you just take the social media aspects that we’re trying to tackle, is that people should have access to all their information on private keys. The same way that we encrypt private keys for Bitcoin transactions, we want to use that for messaging and for data. Taking all that into account.
All these improvements of the base layer help us scale. That’s our biggest thing is we want to help more people use Bitcoin, not just as a monetary network, but as an app store. Because I do believe the Lightning Network is the future base layer of a new type of app store. We’re just seeing the beginning of a few apps being created. We’re just one of them. Obviously, you have amazing apps, Sphinx. You have amazing apps, like the wallets that are being created. Ultimately, using this base layer of Bitcoin is the new Internet, to me is what we’re most excited about.
[1:27:09.5] N: Are you guys looking at, or have you looked at Ion, or other decentralized identity, things that anchor back to Bitcoin?
[1:27:18.2] J: We haven’t looked at that in particular, because the way that we prefer to think about identity is related to a Lightning pub key. Because if you can start using a Lightning pub key address, not only as your identifier, but then you use it as your wallet, your credit card, you can use it for many different things. Then it’s universal. It can be universal across different applications. One thing that I find really cool about what we’ve been able to build is that if you have a pub key inside of Sphinx, and then you have a pub key inside of Zion, you can communicate interoperability across two different applications, because you’re using Lightning addresses as the core way of these two things to communicate. We haven’t used something else. We’re just using the protocol layer things that exist right now.
[1:28:05.1] N: What happens when somebody needs to roll their key, either because they’re running a node and it craps out, and they build a new node, or they’ve got a rotated or something, right? If you don’t have [inaudible 1:28:17.6] in direction between your identity and a literal key on your Lightning Node, then you’re really pinned to the identity of your Lightning Node. Have you guys thought about that?
[1:28:27.8] J: We haven’t thought about that in particular, because what’s also related to the pub key is also your channel. If you’re abandoning your node, you’re effectively also abandoning the channels. You’re abandoning the liquidity. You have to close channels. We think that this pub key identifier will be something that will be used for a long time. We want to compare it to almost a cellphone number, because you’re not going to – you might change service carriers, but you’re not necessarily going to change the digits of that phone number.
[1:28:57.7] S: Doesn’t trying to use your node pub key as an ID in as many cases as you can, isn’t that a huge potential privacy concern?
[1:29:06.7] J: I’m not sure I understand how it could be a privacy concern, but I’m open to understanding how it could be.
[1:29:12.8] S: Well just correlating, all the activity that you would use that identifier for to specific Lightning Nodes, like specific Lightning channels, with the UTXOs that can be followed on-chain.
[1:29:25.6] J: The question is tying a pub key as an identifier to the channels. Is this a question of anonymity, or?
[1:29:36.5] S: No. I’m saying, using that in other use cases, as a general digital ID. Given that it is inherently tied to those things.
[1:29:45.5] R: I think, it would depend on the person, right? I think, I think there’s some people that generally have more public lives. They have more things that they like to share. I obviously understand the anonymity of how someone would be in this world in particular, and that’s their choice, right? They don’t have to actually disclose who they are. They never have to tie this pub key to who they actually are in the real world. We’re not tying names, for example, inside our application to the person.
You make up whatever name you want. You can be whoever you want, related to your pub key. I think, it’s up to the member, or to the customer to decide on their own, what they’re willing to share, what they’re not willing to share.
[1:30:24.3] S: I mean, it’s just the fact that you’re correlating all of that digital activity to that single identifier. All it takes is one data breach, one week, one dude you know who’s a scumbag, and all of a sudden, you do have a real-world ID tied to that. That can still even be pretty damaging, even if you never have a real name tied to that. Just seeing the correlation of that.
[1:30:49.3] J: Yeah. I think, just to remember, that the information that we’re talking about is actually encrypted on the device itself. There’s a private key that encrypts all the information on the device itself within a database on the node. I think, getting to inside of that particular private key to access all the information related to that, we don’t even have access to it as a company, even though we provision some of these nodes. I think, there would be a really – it would take an incredible type of an attack to be able to, and if I’d show you how long our private keys are, it’s like scrolling down on your phone for 10 seconds to export that information. I think, that the type of attack that you’re talking about would be very challenging to do.
[1:31:32.4] S: I mean, it’s all tied to your pub key. If you go use that pub key to interact with other services to create an account, they still see that public key. All of that is tied to a single identity. Any type of data breach, any information loss from any service you interact, any protocol you conduct using that pub key, now all correlates all of your behavior in all of those different contexts to your single identity.
[1:32:03.9] P: I don’t disagree with you, Shinobi, but I do you feel compelled to acknowledge that we have the same problem in PlebNet. All of us have clearly named our nodes on Amboss, and we have also registered with cheese robot, which basically means, that every single thing we do for the nodes that we have registered in PlebNet, are fully doxxed. Maybe what you’re saying is just – maybe you’re saying like, hey, it’s important to acknowledge these trade-offs, rather than trying to obscure them, or claim otherwise.
[1:32:39.3] S: Well, but P, do you go take your Lightning Node on PlebNet and go log into a porn site with that? No, you don’t. [Inaudible 1:32:49.8].
[1:32:50.3] P: I mean, look, that’s a personal question. Also –
[1:32:52.8] M: Sign me up.
[1:32:54.6] TK: It’s a slightly different thing, right? Because PlebNet –
[1:32:57.3] P: What is that background? Dustin are you choking a duck? Or is that zip ties? Or what’s going on?
[1:33:05.0] D: We don’t call it choking the duck anymore. It’s inappropriate language. Now, we call it using a porn site with your Lightning –
[1:33:10.8] Okay. Apologies. Apologies.
[1:33:12.0] D: Yeah. It’s my Lightning node in the background. I mean, so on PlebNet, we’re a bunch of people who get together to talk about running Lightning Nodes. We are associating our identities with our Lightning Nodes, because we’re talking about Lightning Nodes. I think, the thing that Shinobi is pointing out is there’s a lot of other behaviors that gets tied to your Lightning pub key.
I can look up your Lightning pub key, see your channels and go look at on-chain UTXOs. I can probably find a bunch of other addresses that belong to you, because they’re part of funding transactions to your Lightning Node, based on your pub key. If you’re talking about getting together and talking to people about Lightning and doing Lightning transactions, you know what you’re doxxing yourself into, right?
I’m exposing information about my Bitcoin activity to my Bitcoin hobbyist group. If you’re talking about hey, I’m going to go and do some photo sharing and talk to people about recipes, or politics, or whatever, it’s probably a little bit surprising if then all my financial activity is doxxed. I think [inaudible 1:34:11.7].
[1:34:15.1] J: What’s really important about the point that you’re making is particularly, how we’ve nested some of this stuff inside the application. Inside of communities, for example, no one has any idea what your pub key is. You’re actually an anonymous name of whoever you want to be. You can actually change your name for each, whatever community. The only people that know your pub key are people that you’ve allowed to actually begin a conversation with you and they know your pub key already.
It’s not something that’s available for everyone to see. It’s not an open on any a ledger, at least in our application, it’s not open to the whole world. If you want to decide to verify it, like people are verifying in Amboss, you can potentially verify it later on. It’s giving you the choice. It’s giving you the choice of what you want to do, but I I hear you, I hear you in the anonymity point.
[1:35:02.7] M: Cool. Yeah. This is the first I’ve heard of Zion. I’m just looking at your website on my phone right now. It looks super cool. I’m totally going to check it out.
[1:35:10.2] S: I’m just really hesitant to see that kind of connection get made. Can you do a derivative key scheme that you could disconnect from your actual node pub key, like have proof systems that don’t necessarily reveal things entirely?
[1:35:31.1] J: Also, at Zion, right? Or I’m sorry, not Zion. Ion. Both have Ion is the little tail of the thing. It’s literally identity that you can put other stuff in front of and have a layer of indirection between your identifier and the actual auth token.
[1:35:48.4] R: I think, that just to lighthouse, what’s your name, Lighthouse? Sorry.
[1:35:54.0] B: You can just call me, Brian. I changed my name.
[1:35:56.5] R: Okay. Brian. I think the beautiful point about what you’re making, and I received this is that we just launched 60 days ago. We’re still very early in this entire process. Feedback from the community of things like this are just things we add to our roadmap. We say, “Okay, you know what? Inside of the relay on these nodes, we need to add this special code that allows this, for allowed to one abstraction layer of anonymity for particular types of customers.” We can do that. It’s all it’s all part of the building process and the feedback. I’m definitely take into account what you’re saying and writing it down and saying, “You know what? That might be a good idea for certain people,” and creating that.
I think, that’s the whole point of these discussions is that I’m not the type of a founder or CEO just to take like, “Oh, this is the way and this is the only way.” It’s all about as a community. We figure out better ways to work with each other, because we’re building it for you. We’re not just building it for ourselves and echo chambers.
[1:36:46.6] S: I just want to say, sorry, if it seems I’m really grinding on you. It’s just especially with Lightning, which has the potential to have a very high base level of privacy. Whenever I hear anything that relates to privacy, or potential leaks and stuff built on Lightning, that’s immediately where my head goes. Because what gets built out in these early days, that’s really going to inform what there is that people have to interact with, or build on successfully, or successively in the future.
[1:37:21.0] R: Totally.
[1:37:22.4] M: I thoroughly enjoy [inaudible 1:37:23.2], working in the best Bitcoin chamber for my life that I can.
[1:37:27.4] S: It’s called Bitcoin [inaudible 1:37:28.3]. You should drop in some time.
[1:37:32.5] B: What is that? That’s exciting.
[1:37:34.3] P: All right, my friends. We are at almost two hours now. I think, I’m going to close this out. What I’d like to do is go around the speakers, and ask for your thoughts on Lightning, some prompts, or things you are particularly excited about, things you are particularly concerned about, and things that you would like to see explored further, in general. You can take all three of those things, or one of them, or none of them. It’s up to you. Justin, since you’re on my screen immediately to my right, let’s start with you.
[1:38:11.5] J: I think, I’m most excited for creators to finally be able to develop a one-to-one relationship through money with their audiences, and not have an arbiter in the middle of deciding what can be said, what can be paid for, how they can transfer value. I’m most excited about that. Because for the first time, we’re going to be able to build that peer-to-peer Internet on a monetary layer. That’s what I’m most excited about that Lightning provides.
[1:38:36.8] P: I love it. Shinobi?
[1:38:39.3] S: I want to see DLCs dropped on everything for fancy smart contracts. We need to get those channel factory things going. We can really do some fun stuff with routing, if we make state chains play nice with Lightning. Should I continue being autistic, or can I stop?
[1:38:54.5] P: No, you got to choose the top three. I’ve already forgotten what the first thing you said was.
[1:38:59.5] S: Well, it’s just like, here’s what I want to see Lightning go in the direction of and what I find exciting. All this literally is is a bunch of pre-signed transactions that have smart contracts linking them together and enforcing different outcomes.
[1:39:18.5] P: A 100%.
[1:39:19.3] S: If you stop thinking about things, like pipes connecting buckets or nodes, you can do a lot of interesting things programming pre-signed transactions interacting with each other. You can file the transaction, not the graph of pipes and stuff.
[1:39:39.5] P: I just want to let you know, I feel attacked. I feel like, you are deliberately sabotaging my analogy, which is a spider web with a bunch of channels in between them.
[1:39:48.7] S: I am. I actually gave a professional talk at a conference a few years ago, just to troll you, P.
[1:39:55.4] P: Perfect. Perfect. We’ll talk about this at home later. Dustin, what you got?
[1:39:59.4] D: What’s up? Okay, we’re talking about Lightning. That’s a very open-ended prompt. I’m excited about Lightning in general completely. I think, it’s the future of everything. I thought that for a while. I’m excited that more and more people keep being excited about Lightning. I think, that today, we did talk about some centralization, decentralization, decentralization, tongue twister concerns. I think, we should think about that. I think, that things naturally gravitate towards centralization. It comes to just money and finances in general.
The better we can build tools that make decentralization easy, convenient, or, dare I say, even more convenient, the decentralized counterparts, the better off, I think, everything will be in the long run. I’m a huge proponent of anything in that direction. I don’t care what CTV or PREVOUT, or whatever. I think, that anything that goes in that direction, I’m excited about.
[1:40:49.8] P: Tim, the guest of the hour, creator of LNPay.co, what you got?
[1:40:55.2] TK: One thing I’ve been thinking about lately about the Lightning Network is just how early it is still. If you’re paying attention now, then you’re already early. Don’t underestimate how much influence you can have. Constantly think about that, and how, right now, people like us are just setting standards by just talking about it. Super bullish on it, and it’s just going to keep growing. It’s already grown so much, just in the two years I’ve been in the space. Yeah, it’s important to recognize that and realize that like, this is something special, and it’s bullish all around.
One thing that I’m particularly excited about is a lot of the podcasting 2.0 stuff. Been working a lot with Adam Curry, and Dave Jones, and those guys. The thing that I think is the most special about it is that it’s one of the first in my experience in the Lightning space, it’s one of the first use cases at scale that came looking for a solution. They weren’t just like, “Oh, I’m going to build this on Lightning.” They’re like, “Yo, we need to solve this problem. We want to come decentralize the money flow amongst podcasts.” They already use RSS, so it’s already somewhat there. They were able to you actually use Lightning Network in a useful way with micro-payments, and it’s working. That adoption is growing in the real-world. It’s real market validation. I think that stuff is cool and something to keep an eye on.
[1:42:25.9] P: I love it.
[1:42:26.8] TK: Thanks, man. Thanks, man.
[1:42:29.1] P: Hell, yeah. KP, you’re up next.
[1:42:31.3] KP: Hey, so channel factories, I would love to see more, and at least read upon that more and see channel factories actually take off and get implemented in some way. The other thing I’m excited about is Lightning addresses. I wish, they get embedded in web pages, where you hyperlink, you click on it and just say, “Hey, these many Satoshis to this person, I’m paying.” One click. That will be awesome.
Then podcasting 2.0 stuff, streaming SATs for real life stuff. Just for example, if I want to support a family, their electricity bill in another part of the world, directly peer-to-peer, I just go stream SATs and their electricity for that month is paid off, based on the consumption basis, or water bill or something like that. I think in future, some of those use cases will be fantastic. Those are the things I’m pretty – it is coming. It is going to happen. It is a matter of time. Streaming SATs with Lightning will bring a lot of use cases in the future. Those are the things I’m excited about.
[1:43:40.9] P: Yeah, that’s a fantastic answer. Again, it goes back to the thing I was saying a minute ago, which is that when you try to explain to people why the Lightning Network is so significant, people are so embroiled in the traditional financial system. They’re so used to having to wait four, five days to fund their fold wallet, or their Venmo, or whatever it is. It’s just anathema to people to be like, “No, no, no. This is final settlement. You can have that in seconds. I’m going to send you some SATs, and they are yours forever. There’s no way for me, or anyone else to reclaim those.”
More importantly, they didn’t go through some central bank, or they didn’t go through worse, a credit card company to your bank account, to my bank account, mediated by some central bank. It’s just such a powerful thing. I’ve been spending a lot of time. I don’t mean to harp on it, but I’ve been spending a lot of time thinking about how can we educate people more effectively on how significant that is, specifically in the US? Because in other countries, it’s like, people get that immediately.
They’re like, “Oh, shit. Yeah, this is a thing that can’t be fucked with by the government. I’m in. I’m in. I’m a 100% in. A 150%.” In the US, when you talk to people, they’re just so lulled to sleep by the status that the US has as the producer of the world reserve currency, that I am constantly thinking about the fact that US citizens are probably the ones that are going to get the most screwed over by the US bending over backwards to support the build back better. Everyone has nothing and is happy.
[1:45:13.6] J: US citizens just benefited from inflation so much. Anyone who wants a home, just whether they realize it or not.
[1:45:19.7] P: Well, they don’t. That’s the problem.
[1:45:20.6] KP: From the US citizens. The assets that are lost.
[1:45:25.5] P: Yeah, exactly. I think, that’s the problem, right? Most people don’t like to acknowledge, “Oh, yeah. This has nothing to do with me.” This is because the federal government, the Fed printed massive amounts of money and will do anything to keep the ball rolling. Most people are, this isn’t comfortable realization to have, right? People love to say, “I am a genius. I made a good investment in property, or corn, or whatever it was.”
[1:45:49.0] J: Yeah. It’s hard to see facts that go counter to what made you wealthier.
[1:45:54.0] P: Well, I mean, I think even it’s even harder to see facts that – Well, maybe not harder, but it is as hard to see facts that remove the agency from yourself, and put it squarely on powers that you have no control over. That’s a really, really challenging thing for most people to accept and strategize around. It’s so much easier to be like, “I’m a genius. That’s why I’m rich.”
Leon, you’ve been relatively quiet. You are a user of LNPay.co, which is a platform that I love, as you were talking about earlier. What are your thoughts on the Lightning Network? What are you excited about? What are you terrified of? What do you wake up in the morning, pumping your fists in the air about?
[1:46:36.1] L: Yeah. I think, the most has been discussed, but we as application builders, we have to keep in mind, the decentralization and the privacy topics, we’re building our application. On top of that, I’m excited to see a lot of experiments with value transfer, human to human, human to machine, machine to machine. There’s a lot of happening in the space. I would love to see a lot more developers working on the Lightning Network, just to start experiments and see what happens and where we can go.
On the higher level, yeah, I’m very excited to see the extra layers that will be built on top of the Lightning Network and the smart contracting and the other things that will happen. I think, it’s exciting times ahead and we can all do our best.
[1:47:25.4] P: I love it. I’ve gotten a few questions. Was the space recorded? Will it be released? The answer is yes. This is Bitcoin Spaces live with Bitcoin Magazine. I’m at Bitcoin Magazine as the head of programming for the Bitcoin 2022 conference. I would highly suggest everyone research that and probably buy tickets. It’s going to be absolutely incredible. There’s going to be a bunch of fun stuff, specifically related to open source and the Lightning Network.
In addition, this specific conversation and all the other ones we have in the Bitcoin Magazine Spaces are released on Bitcoin Spaces Live, which you can search for on whatever your favorite podcast app is. Or you can go to Bitcoin Magazine YouTube and find it somewhere there. You don’t have to search around, but you’re all smart, you can figure it out.
Australia’s top cyber spies are set to gain greater powers in the event of ransomware or other cyber attacks on critical infrastructure.
The Australian Signals Directorate (ASD), a government agency in charge of cyber warfare and information security, would be able to take over control of critical infrastructure — including energy, communications and banking systems — under new legislation introduced into Parliament.
The legislation even includes health care and grocery businesses under the definition of critical infrastructure and imposes new positive security obligations.
For ASD operatives to provide assistance, operators from the affected infrastructure would have to report a serious cyber incident.
According to The Australian newspaper, the Critical Infrastructure Bill will be introduced to parliament, on Wednesday, with bipartisan support from the committee that examined it.
Home Affairs Minister Karen Andrews stated the measures proposed will ensure the safety of essential services that Australians rely on:
“Recent cyber-attacks and security threats to critical infrastructure, both in Australia and overseas, make these reforms critically important.”
But a coalition of Australian and international tech industry groups is opposed to the new law. “Without significant revision, the bill will create an unworkable set of obligations and set a troubling global precedent,” they wrote in a joint letter.
There have been a string of high-profile ransomware attacks this year, including the Colonial Pipeline cyber attack in the United States in May, which forced governments around the world to rethink their vulnerabilities and highlighted crypto’s role in the attacks.
Another ransomware attack in May, on Australian meat processor JBS, pushed Australian lawmakers to take a tougher stance. A new Ransomware Action Plan, which was released last week, will allow Australian authorities to seize or freeze financial transactions in cryptocurrencies that are associated with cybercrime, regardless of the country of origin.
The Parliamentary Joint Committee on Intelligence and Security said the “threat of cyber security vulnerability and malicious cyber activity has become increasingly evident in recent years” with about a quarter of reported cyber security incidents affecting critical infrastructure organizations.
Don’t you love giving away 3% or more of every sale to Visa and Mastercard? And isn’t it even better when people whip out their Amex? Who doesn’t like those fees? Oh, that’s right. Business owners don’t.
Would you offer your customers a payment method which eliminates those transaction fees? If so, keep reading.
Hopefully by now you’ve heard of Bitcoin, if not this article isn’t for you. But if you have, let’s walk through using Bitcoin’s Layer 2 payment solution known as the Lightning Network for your business. The Lightning Network will work for you regardless of whether you sell donuts or fix mowers or cut hair. If you can create an invoice, your customer can pay it with their cell phone.
Your first question is probably, “Why should I add Bitcoin as a payment method?”
Assuming you’ve been accepting credit cards for a while, you’re well aware of the drawbacks to credit cards:
Bitcoin reduces or eliminates each of these pains:
Your next question might be: “How am I going to get the money into my bank account so that I can pay bills?”
While some of you might want to keep some or all of the bitcoin collected as bitcoin, most businesses spend a large percentage of their gross income on bills which can only be paid with dollars, so converting between bitcoin and dollars is the most important issue.
The flow will go like this:
There are several exchanges that support Lightning. What follows is a walk-through using either Strike or River Financial. You’ll only need to work with one of these two companies, but hopefully seeing two options will give you the sense for what is involved.
Strike is included because what they are trying to achieve — hyperbitcoinization — both in El Salvador and world wide, is worth supporting with your business.
River Financial is included because they support Lightning Network and would be simple for you to integrate into your business.
Additionally, this guide is going to describe working with something called an Umbrel. At this point you only need to know that it is an inexpensive computer which you’ll want to purchase to be the center of your new payment system. Umbrel will be described more fully in the section “Set up a node.”
Creating an account starts out lightweight. You only need to give them an email address and a cell phone number, but to transfer higher dollar amounts you’re going to need to prove your identity with them by sending pictures of your government identification.
Once you’re all verified you should be able to connect your bank account. On the “Profile” tab, there is a “Payments Method” button that you use to connect Strike to your bank account.
You’ll need to create a Lightning invoice in the Strike mobile app.
On their website they have a “Sign Up” button. You’re essentially creating another bank account, so be prepared with your address and other identifying information.
Everyone’s favorite, right? You must love paying the correct amount of income tax, if only because it keeps the government off of your back.
You’re going to be reporting sales in dollars both for income tax and sales tax, however, you’ll be receiving funds in bitcoin. You’ll have to keep records of the sales as well as the conversions from bitcoin to dollars.
You’re already keeping records of all of your sales, maybe with a point-of-sale (POS) system. The easiest solution will be to ring the customer up on your POS and close the transaction as settled with cash. Then collect the bitcoin as described below. This will keep your sales numbers all in one place for tax purposes, but your bank balance will be split between cash register receipts and your bitcoin balance on your Umbrel.
While it would be great if it weren’t true, you’ll be creating a taxable event each time you convert bitcoin into dollars.
When you collect the bitcoin, you record the sale as having been in dollars. This is essentially an instant purchase of bitcoin with the dollars from that sale. So, naturally, your cost basis for that bitcoin is the amount of that sale.
You could report each and every Lightning Network sale independently, but a far simpler approach (which you can defend in any audit) will be the use of your average cost basis.
Whenever you convert from bitcoin to dollars, you’ll record:
This will be all the information you need for you or your bookkeeper to fill out your taxes.
These will be short-term capital gains, which are currently taxed at your income level, but you’re not paying tax on the whole amount. You already recorded much of the value in your cash sales receipts. You’ll only be paying tax on any gains that might have happened after you received the bitcoin but before you converted it to dollars.
Everyone loves examples, right?
You want to know “What if the value of Bitcoin goes down before you sell?” Great question.
If you have a mix of gains and losses, you’ll add them together at the end of the tax year and pay taxes on the total.
“What if I lose money on every transaction?” you ask.
If the total of all of your transactions result in a negative number, the first $3,000 of these losses can be written off against your sales income. Any additional losses can be rolled into the future to reduce future gains.
But if these losses are so large that they pose a material threat to your business, you can add a “spread” to the conversion on each Bitcoin transaction to insulate yourself from these exchange rate fluctuations. This is essentially like charging your credit card customers more than your cash customers, and savvy customers may not appreciate this practice. Use this power wisely.
If you’re still interested in what it would take to get set up to receive payments over the Lightning Network, the rest of this article is for you.
The high-level steps are:
You’ll want to have an account with an exchange like Strike or River Financial, which is outlined above.
The Lightning payment network is really a bunch of connections between many Bitcoin Nodes. You’re going to need to set up a node for yourself, and this walk-through will point you toward Umbrel. You could do this with several other easy-to-set-up node providers such as RaspiBlitz or myNode, or even running Bitcoin Core directly, but Umbrel is very easy to use, even for people not too comfortable with technology.
The setting up of an Umbrel involves purchasing around $300 worth of computer parts. Available at places like Amazon.
The full list of items can be found on their website but a quick summary:
Once the gear arrives, you follow Umbrel’s instructions or you can watch a good walk-through on YouTube from BTCSessions.
Once you have it set up, you leave it running 24/7/365. It will download the full Bitcoin blockchain and keep up with future blocks. The full blockchain will take a few days to complete.
There are things called Lightning channels, which are described under the heading of “Set up inbound liquidity” below.
Umbrel has an App Store from which you can install BTCPay, which lets you easily accept payments over the Lightning Network.
Once you install BTCPay and launch it from your Umbrel, you create an account with email and password and set up your store.
Setting up your store has these high-level steps:
Additionally, you’ll use BTCPay to determine your cost basis for the bitcoin you’ve collected.
Creating the store is a one button step. Just type in a name and click “Create.” (You can change the name later.)
Associate with the node’s wallet
Create the app
Here is where you could get fancy and have several different ways to see the store you set up in the first step. Let’s keep it simple and just create the cash register experience.
Set up the keypad
Create a bookmark
On the “Apps Settings” page, or on the list of “Apps” page, you’ll see “View.”
Bitcoin Cost Basis
At some point, perhaps at the end of every day or the end of the week, you’ll move your bitcoin to an exchange to convert them into dollars as described above. When you do this, you’ll want to record your cost basis.
BTCPay makes it very easy to see a list of all paid invoices and export them to a CSV file.
From the “Invoices” page:
Lightning Network moves bitcoin between nodes on private one-to-one ledgers called Lightning channels. It is very similar to how you and your friends keep track of who paid for lunch or drinks last time, but channels keep track right down to the penny.
You open channels to a few other nodes on the network. You can do this with the “Open Channel” button on the Umbrel’s “Lightning” tab. This is an interesting process, but let’s skip it because all it will get is “outbound liquidity,” which is the ability to send bitcoin out. We’re talking about how to get you the ability to receive bitcoin, which is also known as “inbound liquidity.”
Inbound liquidity may be the most challenging thing about the Lightning Network because you can only receive as much bitcoin as your total inbound liquidity. If you have 0.01 bitcoin of inbound liquidity and someone wants to pay you 0.011, the payment will fail. It would be like your customer wanting to pay with a big stack of cash, but you had to refuse the sale because your cash register drawer was too small. Your customer could open a channel to you as a part of the transaction, but that makes the process last minutes instead of seconds.
So, before you prop up your “Bitcoin Accepted Here” sign, you’ll want to make sure you have enough inbound liquidity.
Pay for liquidity
The easiest way is to pay for it. Here is a list of places you can buy inbound liquidity. Services like LNBIG work well, but the open channel is only guaranteed to remain open for one month, so you might start to question whether the credit card fees were really all that bad.
Liquidity from Customers
If you see paying for inbound liquidity as similar to paying credit card transaction fees, you might spend a little time trying to develop some inbound liquidity organically. Bitcoiners are often enthusiastic supporters of others trying to learn about or make use of bitcoin. If you post a sign in your window asking people to open a channel to your node, you should soon have a few channels giving you inbound liquidity. Additionally, this could give you a reading on how interested your customers are in paying with bitcoin.
Liquidity from Bitcoiners
If you went on Twitter and tweeted something like:
I’m adding #LightningNetwork payments to my store. Any #Bitcoiners out there willing to help me out with some inbound liquidity? #Bitcoin
You’ll receive plenty of new channels offering inbound liquidity.
You could go on Plebnet on Telegram and ask for inbound liquidity for your business. Plebnet is full of friendly Bitcoiners who would love to help you out.
If you were willing to invest a few hundred dollars (in bitcoin), you could join a ring with other Bitcoiners on LightningNetwork.plus. Here, you open a channel to someone else and in return another user opens a channel to you, forming a triangle- or square-shaped ring where bitcoin can flow back and forth, giving you inbound liquidity.
At some point, a Bitcoiner is going to ask you what size channel you need and what is your node’s address.
Most Lightning Network users will be OK with giving you a channel of between 1 million to 5 million satoshis (sats). This is 0.01 to 0.05 of a bitcoin, which is a few hundred to a couple thousand dollars.
To be clear, they’re not giving that money to you. They’re opening a shared ledger with you. The bitcoin can flow to you, from your customers, through them. They will do this because they get to keep a small percentage of each transaction, paid by your customer. They’re taking the place of Visa and Mastercard, but they take far less. As an example, $50 dollars (approximately 110,000 satoshis) can be sent for around 2 satoshis, which is less than one one-hundredth of a penny.
Your Node Address
For anyone to open a channel to you, they’re going to need your Lightning address. You get it from the “Lightning” tab on your Umbrel.
This Lightning address is not private and giving it out does not expose any private information about your business or your physical location. People can see how many Lightning channels you have open, and the total liquidity available to you, but not the per-channel balances.
Your node is going to be receiving bitcoin, so much like protecting your cash register, you’re going to want to protect your node.
Protecting your node from theft
If the device you plan to use as your BTCPay Keypad has access to the internet, even if it is through a cellular network, your Umbrel does not need to be located at your place of business. You could keep your Umbrel in a closet at your house, assuming your house has good internet access. If you do locate your Umbrel offsite, the bookmark to your BTCPay Keypad will need to be different.
To get the remote access address:
Recovering from a damaged node
Your Umbrel can be recreated from a series of 24 words, and the channels can be recreated from a backup.
If you plan to leave any significant amount of bitcoin on your Umbrel, you should write down the 24 words and keep them somewhere safe. To get to the secret words:
Also, you should download a backup of your Lightning channels each time you open a new channel. To get to the channel backup:
Restoring the backup is a bit too technical for this article. If you need to know how this will work before you start accepting Lightning Network payments in your business, DM me or look for my upcoming article on the topic.
Protecting your channels from dishonesty
If your node stays offline for more than a few hours, an unscrupulous person might try to close the channel they share with you with information from another time when more of the bitcoin was on their side of the ledger. While Bitcoiners are honest and upright people, the Bitcoin motto is “Don’t Trust. Verify.”
In the spirit of this motto, you will want to set up something called a watchtower to verify that your channels are not closed while you’re offline. Though easy, setting up the watchtower on your Umbrel is too technical for this article. LightningNetwork.plus has some instructions on setting this up, but if you need a less-technical walk-through DM me or look for my upcoming article on the topic.
If this omission leaves you concerned, keep your Umbrel online or send the bitcoin to your exchange frequently.
Let me apologize for the U.S.-centric aspects of this article. As a U.S.-based person, many institutions that are available world wide are not available to me. For this reason, I chose exchanges that I have personal experience with. Once I’d made that decision, I bent the instructions toward a U.S.-based reader. There should be many parts in there which will be applicable to you in your country.
I did not intend anything in this article as financial advice. I am not a financial advisor. I am just a pleb trying to help people learn something about Bitcoin and the Lightning Network.
I’m not a tax professional so take this article as hearsay from an experienced business owner and self-filing taxpayer. If something doesn’t sound right, you can use this as a guide for discussing this with your accountant.
This is a guest post by Raymond Walsh. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.
An article discussing a speculative attack on the carbon credit system to sustainably rebuild the U.S. food supply chain and redenominate fiat into bitcoin, cattle and topsoil.
There is a lot of interest and discussion among the Bitcoin community surrounding our food supply chain, its fragility and solutions to the problem. There is a general consensus on what needs to happen: resilient, independent genetic cattle stock need to be reintroduced en masse into the U.S. to provide a more robust meat supply. Regenerative ranching techniques need to be used with said cattle to rebuild the topsoils of the country and stop the desertification of the Midwest. Citadels with independent water and energy resources need to be built that will use those techniques to responsibly manage large tracts of land, producing a food supply chain that is not dependent on inputs to survive.
The debate, then, is not about the what but the how. I argue that the most potent play (and, really, the only realistic one) is a speculative attack on the corrupt system of carbon credits and environmental, social and governance (ESG) standards. In short, Bitcoiners can use the cantillionaire system the cronies have established to beat them at their own game.
We fully understand and respect that many Bitcoiners may disagree with our position here, perhaps strongly. But a look back at the major civil and human rights struggles in modern history (India, South Africa, the United States) shows that success has often required both strong external resistance and internal destabilization.
Profit margins in ranching are extremely slim.1 Traditional ranching requires knowledge and expertise in genetic testing, artificial insemination, calving and disease control. Throughout its lifetime, a cow will need regular vaccinations, antibiotics, antiparasitics, vet visits, pest treatments, etc., not to mention the significant annual investment in supplemental feed — anything from hay to brewer’s mash to reject skittles.2 The four mega-meat processors require arbitrary phenotypic traits (which amount to a bovine beauty contest) for a rancher to receive reasonable returns, and processors are known to engage in price fixing in order to force the ranchers to keep their rates low.3 The situation has produced a ranching monoculture, leading to less robust genetic stock, dependency on external inputs and a perilous fragility of the overall food system.
Meanwhile, heritage breeds of cattle exist that can live exclusively on scrubland, are naturally pest and parasite resistant and don’t need human assistance with reproduction or birth. Unfortunately, however, they are currently few and far between. Even if a rancher wanted to use these breeds, they command only a third of the price of the “popular” cow breeds, making it economically unfeasible for all but a few. Most ranchers simply do not have the profit margins to switch from current industrially accepted breeds to the heritage breeds, with the net revenue even for standard cows averaging less than $75 in profit per cow in a good year.4 There’s simply no way the average rancher can afford the transition costs and time.
Regenerative farming is a process of dense rotational grazing of the cattle to mimic the historic effects of bison grazing. Techniques developed by Allen Savory and Joel Salatin mimic natural patterns of how predation forces migration of native animals. The cows are kept in dense formation and continuously rotated across a ranch at high frequency, while allowing the grasses to fully recover before the animals revisit a particular location. The resulting trimming of the grass stimulates more growth and denser roots, aeration of the soil by dense hoof trampling and significant deposition of fertilizer (manure and urine) to rebuild topsoils.
In contrast, traditional ranching leaves the cows to roam on thousands of acres at a time. This leads them to eat only their preferred grasses, which in turn allows the undesirable grasses to go to seed and propagate, slowly taking over. The leftover grasses also cover the soil in the winter, blocking sun and water and causing a thinning out of the field. The cycle repeats until there isn’t enough nutrition to sustain the herd, the topsoil washes away and the land deteriorates in a downward spiral. Regenerative ranching ends this destructive and unsustainable pattern.
Yet regenerative farming has one significant drawback: it is extremely hard to make it profitable in the near term. It is already difficult for a rancher to make a living using traditional practices, especially after taking on the debt that most will find necessary to acquire land. Add in the fact that regenerative farming will require a much longer “runway” before it starts to generate appreciable revenue, and it just isn’t practical for the vast majority of people who don’t have significant resources to fall back on.
The solution is simple to describe, but rather difficult to execute: Bitcoiners can pool resources to buy large tracts of land in attractive areas, establish ranches with heritage cattle, farm them regeneratively and incorporate self-sustaining energy and water resources to maintain them independently.
But how do we actually do it? Buying a ranch large enough to make financial sense is out of the reach of most plebs. One potential solution would be for wealthy Bitcoiners to buy ranchland and altruistically involve plebs in its operation. With determined participants this could work, but in our opinion, given the difficulties in scaling altruism as well as the significant reluctance to part with bitcoin to buy land, this model is not widely practical. The landowner would not only need to part with their bitcoin (or leverage it), they would also need to be content with a near-zero return, at least in the short to medium term.
Thankfully, there is another option. To beat the cantillionaires at their own game, you first have to join it. And the name of that game is “carbon credits.”
Let’s first talk about the overarching philosophy of ESG and carbon credits. The vast majority of Bitcoiners are in agreement that the “ESGniks” are peddling farce and fallacy. They have created a fabricated system that they have then overlaid over abusive practices in order to perpetuate the generation of dirty fiat by the government and funnel it into cronyistic businesses, mega-corporations, and the establishment.
And to be raw and realistic for a moment — we can’t stop this system. It is the result of a global movement, decades in the making, with tremendous government and financial institution support, that is only going to have an increasing amount of fiat behind it in the coming years.
Large investment funds are beginning to require that portfolio companies report their ESG impact.5 Loan rates and access to favorable capital have started to become dependent on how close a company is to “net carbon neutral.”6 Canada’s supreme court recently upheld a law requiring that by 2030, companies must reflect their “carbon impact” on their balance sheet as a liability at the rate of $170 per metric ton for any excess impact.7 To put that in perspective, carbon credits trade right now at between $10-$100 per metric ton. This means any Canadian company that doesn’t buy credits to become “net carbon neutral” will have an accruing negative liability that will steadily erode access to the investment funds and/or leverage needed to survive. While Canada is the first country to do this, they are unlikely to be the last, meaning that policies like this will continue to artificially inflate the price of carbon credits. After all, it’s a no-brainer for a company to pay $150/metric ton instead of having a liability of $170/metric ton. This effectively creates a floor on carbon credit prices.
While we can’t stop this absurd and corrupt system, we can accelerate its demise. Bitcoin itself will do this, but in the interim, Bitcoiners can use the system to provide the financial support to build citadels, turning the dirty fiat into both BTC and large citadel ranches to support other pleb citadels. Ultimately, this will allow the whole ecosystem and supply chain to be rebuilt on solid first principles.
The linchpin of this plan will be gaining the financial backing of like-minded investors and investment funds. These will be backers who, like it or not, still live in today’s fiat world and need to see returns in fiat. Without them, none of this is possible — there will instead only be a small group loudly protesting the current system with no ability to effect change. (Even if it were to be a large number of people, they would still have no real power to influence legislation or the financial markets compared to the influence of the cantillionaires.)
Therefore, we propose that we use the ESG system against itself. We use the system to build and support a return to first principles that function to rebuild the world with a resilient food supply. Properly constructed, we can provide ranchers with the financial freedom to acquire and invest in the right land and animals, and to manage it all in the right ways.
How could you make this work in practice? Consider a large ranch in an area extremely favorable to ranching — say, 10,000 acres. The land is as cheap as possible because it’s been totally over-grazed and is not much use to traditional ranchers, so it sets you back $5 million. After a year of ownership, the property would become eligible to apply for a conservation easement. In Wyoming, for instance, the state will pay a one-time fee to compensate you for the loss of residential or commercial development opportunities.8 This payment will range from $600,000 to $6 million, depending on specific details of the exact parcel. Not a bad start!
Now that the easement is in place, you the owner will also receive some significant federal tax credits (up to 50% of your Adjusted Gross Income per year, with a carry-forward of 15 years), so any money made ranching doesn’t incur federal Income taxes any time soon — and there’s no state income tax in Wyoming.
Next come the carbon credits. For putting the easement on the land and preventing development, the ranch can earn 0.75 metric tons of carbon credits (tCO2) per acre per year, or 7,500 tCO2 in this example. Currently, the credits command $60-$100/tCO2 in the U.S. market. That means $450,000-$750,000 per year in revenue in perpetuity (or, rather, until the system implodes). But at these numbers, you will have paid off the land in less than five years. And, as discussed above, the nominal price of credits is likely to rise significantly in the next few years, increasing returns even further.
But wait, doesn’t the easement prevent productive use of the land? Not for this use case! In much of the Midwest, the easement program was designed as a way to protect generational land, helping ranchers get out of debt and giving them peace of mind that they’ll be able to pass along the ranch to their children (with no mortgage, so they can afford to feed their families on the ultra-slim net profits of raising cattle). The easements allow development of ranch buildings, cattle grazing, water and infrastructure improvements — really, everything necessary to run a successful cattle ranch. Again, like ESG, it creates a completely artificial system, this time built to subsidize the unsustainable traditional ranching model.
The next step for the ranch is to get some genetically robust heritage cattle stock. This is now possible because the ranch has the financial freedom (due to the carbon credits) to buy the best cows, despite their long payback period, and not simply the ones the mega-processors want. As the cattle are grazed using regenerative principles, the ranch will also earn additional carbon credits. This provides income to build out some energy resources that are independent of the grid. My current favorite model, if deployed in the right spot, is to install a handful of small vertical-axis wind turbines to power the citadel, as well as 20 or so BTC miners.
Heat from the miners (captured using off-the-shelf technology) and excess power from the turbines can be used to heat the ranch house and hot water tank, to keep outdoor water from freezing (if needed), to get a second harvest from a greenhous, and to become natural-gas independent and power-grid independent. Additionally, those wind turbines earn even more credits. The ranch not only doesn’t pay for power, it gets paid to create it, and it in turn mines BTC. At the end of the day, the ranch is redenominating dirty fiat and carbon credits into BTC, robust cattle and new topsoil.
With their leftover fiat money, the rancher can then partner with a few other like-minded ranchers doing the same thing and build a co-op meat processing plant — the last piece in the puzzle needed to remove the mega-corps from the system entirely. The co-op doesn’t need to price gouge, apply market pressure or impose the arbitrary phenotypic traits that bring fragility to the system. Ranchers realize the gains from providing quality meat and taking it to market instead of seeing the processor realize all the profits. In the end, the ranchers have essentially used the fiat and ESG system to totally insulate themselves from the ravages inherent therein, and removed all the negative incentives that the current system has created.
This opportunity won’t last forever. In fact, I personally hope it dies sooner rather than later. But for now, in the immediate term, I believe that we have an opportunity to use the dying system to lay the groundwork needed to foster and grow real, solid foundations and ecosystems. We have a chance to turn the cantillionaire system against itself and to rebuild from first principles for the future.
Let’s take this opportunity to rewrite the rules and remove the mega-corporations from the system. Then we can sit back and watch the system implode. But we can’t afford to wait too long. If the inevitable implosion comes before we’ve built a new system and have enough robust genetic stock, everyone will suffer, and any solutions will be too late.
 The Cost of Ranching
 Yes, cows eat Skittles. But it gets a lot weirder than that. And American farmers secretly feed cows defective Skittles because they are cheaper than corn, truck crash
 Major Meat Corporations Pay Millions to Settle Price-Fixing Suits
 Cow-Calf Profitability Estimates for 2020 and 2021 (Spring Calving Herd)
 Environmental, Social and Governance (ESG) Funds – Investor Bulletin
 Green loans: Financing the transition to a low-carbon economy
 Canada Supreme Court Rules Federal Carbon Tax Is Constitutional
 Wyoming Conservation Easements: Lands, Services, and Economic Benefits
Colin Crossman’s Twitter profile can be found here.
This is a guest post by Colin Crossman. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.
Local Nashville company encourages their clients to pay in bitcoin due to inflation concerns.
Another day, another company accepting bitcoin as payment.
Close to Bitcoin Magazine here in Nashville, a local contracting company is encouraging their clients to pay for their services in bitcoin by offering them a 10% off discount, reports News Channel 5 Nashville.
“The reason we do this is the cost of lumber is up, the cost of labor is up, and we are hedging our bets due to inflation, in order to get paid in cryptocurrency to put within our cash reserves.”
– Stratton Exteriors CEO Shane Stratton
It seems the CEO has been doing some proper economic calculations, realizing that the company would be better saving in bitcoin than dollars because of the increasing inflation. The company benefits from the hardcapped 21 million supply that the Bitcoin network offers, to help protect and increase the company’s value.
Keeping bitcoin on their balance sheet allows the company to not only keep pace with the cost of lumber and labor, but to beat it. Stratton can now afford what the company needs to buy, and still have bitcoin left over to save. This is what many CEOs have been figuring out over the past year including the many other benefits of adopting a Bitcoin standard.
“I see great value in purchasing and holding crypto assets. We are in the very early stages of cryptocurrency,” he added. “So, if you think about when you first heard about the internet, 20 years ago to where we’re at right now, it’s a huge leap.”
While cryptocurrency can be very volatile, Stratton says he recognizes any risk that holding it may impose on the company and chooses to accept it anyways, as he believes it will be worth way more in the future. He also shared that 10% of the company’s transactions are being dealt in cryptocurrency right now, and one can only expect that number to rise as paying in it gains more popularity.
They also score some extra cool points for owning a Blockclock mini!