LQWD’s Strategy: Lightning Network and Bitcoin Treasury

Hi everyone, and welcome back to Stephan Livera podcast. Today I am gonna be chatting with Shone Anstey. He is the CEO and, founder of Liquid, which is a Lightning company, a Lightning infrastructure company, but also a Bitcoin treasury company. So, Shone, welcome to the show.

thank you, Stephan. It's, it's- Yeah, it's great to be here. It's, it's back from Hong Kong, so it's been a busy stretch here, a lot of flying. thankfully, I, I slept through the return trip for 13 hours, almost all of it. I woke up and the trip was almost over, so. Small, small graces for those, but, great to get the message out for the, for the team, for the company, and for our shareholders, and, and, yeah, just really excited to be here. Yeah.

Excellent. Look, look, let's just get a quick reaction on, Bitcoin Asia while you're here. Like, obviously, you and I were both there, but just curious to hear your perspective. What was different? What were you noticing, in Asia? Yeah, so yeah, the Bitcoin for Corporations within,

within the, you know, cor-conference within the conference, it was incredible, you know, the amount of just retail that were there and excited people, so, you know, people are looking for options and just wanting to learn. for me personally, a surprise number of people came up to me after my talk, I was like, "Hey, we've been following Liquid for last year and studying your model," and that really surprised me, just the kind of outpouring, and also just even some of the maybe

You know, the sector for Bitcoin treasuries is being given a bit of a kick in the teeth. It's a bear market short term, in my view, there's some consolidation within an uptrend, and hey, we all talk about volatility, but it goes both ways, and that was talked about, so I actually found that kind of refreshing, and I thought there was, you know, Matt Cole from Strive, he had a, really interesting talk there about, you know, how some companies just, you know, they shouldn't take uncertain debt things, Necessarily the meta plan, it's the micro strategies that I've broken through, but we can get into them more as we go along here. But, yeah, it was a exciting time to be there.

Excellent. And, let's hear just a bit of an overview from yourself, about the company, Liquid, because now I actually met you now, for listeners, I met Shone, a couple years ago, actually at Bitcoin for Corporations. Two or three, two years ago, in twenty twenty-three, now this is before the whole treasure company craze had really kicked off. That's right. And so, do you wanna just give us a quick background overview on the company, you know, how it started and, you know, what you're doing now? Sure. And,

and also we met in, Bitcoin Lightning Network conference in El Salvador, first one. Oh, okay, cool. Yeah, it was just a whirlwind, but, we had, we had a chance to briefly talk there. So

I should have done a lot more two thousand and eleven when I got into it very early and, and I came by it honestly, the fact that I worked in internet tech up to that point, of course you would like, well, of course we're gonna have a, a native digital currency for the internet and all that kind of stuff. So at that point I didn't have a, a big, jump in terms of my understanding afterwards you go down the finance rabbit hole and what is money and all these things and you become a bit of a philosopher and it's its own, own thing Exchange, and it is fully regulated, fully licensed. We've worked with compliance, we've worked-- done a lot of hard work in the industry about, you know, breaking the barriers down to getting it, getting things listed and, and, and being fully regulated to open that part of the market. And in late 2019, I've, I've kept a close eye on Lightning Network. I've always felt it's the, it's gonna be the payment layer of the internet itself, and it just go back to my old philosophies and my upbringing in tech. And certainly, it's, it's one of those things. So, you know, we, we started that and, in two thousand and nineteen, I started that two thousand and nineteen, and then we just kept building out, and then we leveraged the success we had in the public markets, and by June twenty twenty-one, we were able to, to leverage the Canadian junior markets and go public again, raise, a chunk of money, buy Bitcoin, and the model has never changed. So we had a, a, a, an offering, a, a prospectus, And that, came in very handy recently because, as we raised our last round, questions came up from the Securities Commission, "Are you a change of business? Are you an actual investment fund? Or are you, you know, why are you willing to be just going to our perspective from four years ago? We're doing exactly the same thing. We're not, we haven't changed a dime." And so we, we got our letter and it halted our financing for twenty-four hours and, and it was cleared up pretty quickly. And, and so we just, you know, stick to Lightning, and we really look at it from the technology standpoint of, you know, how do you build out the internet? And everything that we do here, and I, I like to talk about this, like everything that's going on with Bitcoin and Lightning and all these things, just a continuation of the revolution of the internet. This is just the next big massive phase of the internet. And, and yes, money is being changed and the world of finance being changed, but the internet's just, it's come along and it's done that, and I've always- Going back to the, the philosophy that Bitcoin is a trust protocol first and foremost, money isn't first use case, and it extends the very plumbing of the OSI stack, the plumbing of the internet, the eighth layer, by adding the trust protocol that extends the capabilities of the internet itself. And when you look at that from that perspective, you start to understand it's deep value beyond just, hey, if enough people believe or there's adoption, that's all interesting and all, and there's, there's a place for that, but just simply on, on On a technical level, I go back to my history. Here I am, fifty three, working in internet tech since mid ninety, nineteen ninety nine. Internet's worth two hundred billion dollars. Remember laughing? I'm like, and you were telling everybody then how it's gonna change the world, and nobody-- Why would I wanna use email? Why would I shop online? The internet will never scale. You'll never do video. You'll never do voice. You're never gonna stream music. You're gonna-- All, blah, blah, blah, all the nonsense. Bank account, your bank accounts get taken Down or figuring what to do with it, 'cause they couldn't understand it, and 'cause, you know, tech always outpaces regulators. You know, fast forward in twenty ten, the internet's worth twenty trillion dollars, and then, what's the internet worth today? That's seven layers of- Layer 1 is the Wi-Fi, layer 7 is the website, all the other layers that were built over 40 years that came together to make the internet that we're literally using this second. What's that worth?

I, I

don't know.

I,

I wouldn't-- A quadrillion dollars society runs on, right? And there was a time we put a price on it. And when you start to understand that Bitcoin extends that very plumbing for the digital age, and it will be leveraged for, you know, AI and robotics and payments and this massive-- We think it's two point seven trillion. I mean, come on, we're gonna be twenty trillion before you know it, and two hundred trillion before you know it, and it will happen faster than we think because time is compressed. And so-

Yeah, okay. So let's, let's dive into the company a little. So as I, you know, pre, let's say the most recent, let's say treasury company hype of the last I don't know, year or so, something like this, maybe eight, eight, nine months. I knew you guys as more like a Lightning, you know, LSP, right, from Lightning context. Right. so can you just walk us through a little bit about that transition? I guess, and actually, you know what? Let's just give some of the high, high level stats just from looking online. You tell me if I'm getting this wrong or anything. As we speak today, it's the second of September, twenty twenty-five. Right. The price of the company Is about forty-four million, and you currently hold about two hundred and thirty-nine BTC. So can you just walk us through a little bit about kind of that transition from like being more, I guess, I knew you as a lightning company, and now it's kind of become like a lightning company and also a treasure company.

Ab- absolutely. And so yeah, I, as the CEO, I have to say we're tragically undervalued because that's what we always say, although I believe we're tragically undervalued. And the mar- and that's in Canadian dollars, so the market,

Pretty short things, who knows. it'll do what it will do, we're just gonna stay focused on what we do. But certainly, you know, just for those who don't know what the Lightning Network is, the Lightning Network is Bitcoin's layer two, in other words, a really fast payment infrastructure that can handle millions upon millions of transactions per second in this peer-to-peer type network that allows for micropayments or all kinds of stuff in Bitcoin, and it rides on top of Bitcoin's ultra-secure layer one, and, we operate infrastructure within that to have nodes and channels

Running the open-source Lightning Network software, and we established payment channels with other node operators. But here's the catch, why are we, why are we a treasury company? You must have Bitcoin to open those payment channels. It is the marker that is required. You can't do it without it, it is a technical requirement. So for us, it was always about stacking Bitcoin, and even when we went through the FTX meltdown and all those things that happened there, our number one goal was to protect our Bitcoin as best we could, and we really had to slug it out during, during that time During that time there, because we knew that the, you know, we, we felt strongly that Bitcoin was gonna continue to march its, do its thing and would re-- you know, re-inflate our balance sheet and bring our market cap back up to something there. Now, so that, that's kind of the Lightning Network in, in itself, and for us, we help route transactions across that network. And so they make-- we have twenty nodes all over the world, Hong Kong, Indonesia, two in Japan, one in Canada, and thousands of channels. And so the, the, the network itself This path, most reliable path, the only path, and we happen to have an amazing reach across that. So we started off with that, and we've always said, "Look, you know, in many ways, we are ju- we are simply a treasury company. I mean, let's just imagine if somehow we managed to mess our entire company up..." By, by making bad decisions, which, you know, we fight hard to, to, against or against nature and to do the right thing, but ultimately you still have Bitcoin in your balance sheet. And so this is an asset that continues to matter for it. So we've been a treasury company from day one, it's just it became a hot topic, and we slightly changed our message to say, you know, we're a Bitcoin Lightning Treasury Company. And so, you know, if you, people wanna take a position in our company, you know, you get exposure to our balance sheet of Bitcoin, Lightning network, and as we announced recently, we've been earning, earning some yield, and we've been focused on, on the yield aspect of it.

Gotcha. So just one thing before we get into the lightning and, you know, the treasury company side of things, sure. Can you just, I guess outline for us? Do you have like some of those coins in the lightni-in the lightning network nodes because, versus some of that in cold storage? Because obviously there's very different security properties of those things, and so, you know, people will have a different view on that. So can you just explain the split there of the two hundred and thirty-nine BTC, what's like just cold storage and what is actually, let's say, the private keys are hot on, lightning node somewhere?

Absolutely. Probably about seventy Bitcoin on lightning right now, and the rest remains in, in Bitcoin cold storage, and we A lot of controls, of course, under Bitcoin, we are an audited company, we've been audited for three years, our nodes are audited, which is, you know, we had to do a lot of reporting, a lot of build out around that because that's difficult, because, you know, the layer one blockchain, like, you know, layer one Bitcoin, I hate to use the term blockchain, it's been bandied around way too much, but ultimately, people get, the, the auditors get audited out of that, straightforward. And, but then

Security controls and, and two-factor authentications that happen to even just access certain things and, along the network, I won't get into all the security aspects just for, you know, there's no reason to, to have that in public, but ultimately we do take that very seriously and, and, we-- But the software itself, the Lightning software, it's been out there for a while, there's quite a bit on it, in terms of like the network itself, there's quite a bit that's roaming around, in terms of Bitcoin that's on

So, you know, a tight feedback loop with the engineers in the space and, we keep an eye on it and, and, you know, we, we do our best to minimize any attack plane and, and that's all you really can do. Yeah,

yeah. Yeah, and look, so yeah, certainly, let's try to, you know, I, I think, just, 'cause I'm, I'm guessing probably there'll be listeners who are new and they're kind of more focused on the treasury company side of things, so let's keep it there

for The strategies there, like, are you looking at equity ATM, would you consider debt and convertible notes, what, what's your kind of Bitcoin accumulation, strategy?

Yeah, so we actually have an ATM that is in place, and we have what they call a, a base shelf offering, so we put in a couple years ago in anticipation of the cycle breaking higher, up to fifty million Canadian, and you can, you can renew that thing over, you know, relatively quickly, once it gets-- because it has to be, gone up from the BC Securities Commission and the TSX. So we have up to fifty million in this, this, and we ten, ten million of that is being allocated towards

an ATM, and we, We have, currently, the company has no debt. We have had offers of convertibles and different loan structures that we just looked at and said, "This is just gonna be an anchor around our, our neck. We don't need the capital to second or yes, we want Bitcoin as fast as we can, but we won't take it at a cost to, to potentially, damage the company in the future." You know, I, I've put a lot of my own money and terminevers time in for years. We have great shareholders, and UTXO is backing us as well,

Till the, till the debt models become more appropriately priced. The thing is, unlike other companies in the space, we don't have to take on, we don't have to take on debt, we have a business model. That, you know, in terms of like not just MNAV and that kind of stuff, which is interesting and all, but we have to recognize that, that is an arbitrage on the bond markets and all the other things that are going on in the finance space. And the Canadian junior markets, we, we're just not big enough to tap that realistically. And so you may get equity terms for twenty million at, you know, ten percent or something that will eventually come back to haunt you and potentially destroy your treasury. And there's really no, no reason to put the company in that kind of risk.

and, and thirty, forty-five days, I'm just deploying a lot more Bitcoin into our yield structure a-and prove that we can continue to stack Sats by, by earning Sats, and, and then take that model back to the street and say, "Hey, look, you know," We're a great little treasury company, we're a pink diamond in this market, clean structure, you know, thirty, you know, thirty-four million fully outstanding, including options and warrants and everything else, no debt. earning, earning yield in Bitcoin, earning sats, increasing our sats per share, and we now we wanna, we wanna get up a much bigger financing underway and support in the market to buy another big chunk of Bitcoin, and as the market improves, we'll, we'll

use the ATM. I see. And so, yeah, I guess that was gonna be one of my questions around not having debt, because for some listeners, now, again, there's different treasury company investors, and maybe for some of them, it's attractive that the company has leverage, because for them, now, within a certain range, right? They don't want it to be over levered, but within a certain leverage range, they see that as that's how this company can help outperform just holding Bitcoin. but of course, to your point, it also matters the terms that you can get on that. That debt, because obviously you don't wanna take on debt terms that are too restrictive or maybe too costly or, you know, just, just bad structure or bad terms, this kind of thing. So maybe if you could just comment on that aspect of being a treasury company that has literally zero debt versus having, let's say, a leverage ratio of, you know, ten percent or fifteen percent.

Yeah, I mean, there may be a time then where that leverage makes a lot of sense as the markets certainly straightens up here and, and, you know, we, when things were- Really hot, even just eight weeks ago, all kinds of offers rolling in. They've certainly slowed down, you've seen a lot less announcements from Canadian companies in the space with Bitcoin purchases, and I think you've seen, in my view, you've seen some companies in the space that have- Taken on terms, just simply to get a press release out, in hopes that they would pull back the ocean, without recognizing that there's a shift in the industry, and, and sometimes you just have to be patient and, and work your way through it. And, you know, we're not, we're not here just to, you know, try to get a press release out and feels good for about a day or two, and then you get sold off again. I'm not, we're not interested in that. So, you know, we'll, we'll, we'll see how Treasury aspects, but we're working on our own metrics like LNNAV, you know, and things like that. And, it won't be a treasury play, but we're gonna march the beat of our own drum, be our own treasury play, and be unique in the market and be true to what we've been doing, and we'll leverage the best of both as it makes, you know, it makes, as it makes strategic sense. Right now, it's, you just have to look at the share prices in the sector and realize that, hey, everyone's getting kicked in Focus, prepare all the stuff in the back end in terms of like, you know, what you can do for financings and get all that paperwork and everything lined up as best you can, and we're working on that, and we've come a long way in a lot of things, but, and, and be ready for the next upswing 'cause when the, if it plays out like we've seen, you know, like we've seen a number of times in the market, the window will open Drastically and again, and, and for a period of time. And I remember years ago, it was 2017, first company I took public, and all the stress that went around with that. The, I remember one of the bankers saying, "Look, here's what's gonna happen. The first five companies out of the gate are gonna get all the money. They're gonna get all the attention. And then, and the window, and, and the Canadian market, US market, it's gonna be hot for a stretch. And then suddenly, for whatever reason, the market's just gonna close. The window will close, and you don't even know why, and there'll be some stragglers coming in, they might get some financings, but that'll be it. Just poof So you need to get, you know, get, keep going hard and, and get it done. And then, this is the-- we see the same thing here that we're preparing ahead of time, and I think the same thing's gonna happen. And so for us, yeah, just keep promoting the, the name, let our people know what we're doing, and I don't like to call myself a promoter 'cause I'm a builder. but we just, you know, let our, let our work do the talking and be prepared for the next upswing Got it,

yeah. yeah, I think it makes sense. in terms of the Canadian market, I guess just generally, are there any idiosyncrasies or specific things to the Canadian market that you wanna spell out, for people who are assessing you as a treasury company?

Sure. I mean, the Canadian markets are actually really amazing for some junior startups, and one of the reasons is, is that traditionally, Vancouver, Toronto are resource capitals of the world. If you're a resource, a gold company or a silver company You will probably have an office in Vancouver, Toronto or something going on. There is the gold capital of the world, and, and so there's a lot of, ways that the, the bankers in the market here de-risk themselves and they're used to the risk profile of, of junior companies, and so that actually serves very well, for these type of things that are going on for, for companies like ours. So That, that is unique. it has, you know, whole infrastructure around it. I think for us, we'd love to, if possible, get up listed to the TSX Big Board, we're on the Junior Board, the Big Board will open up the doors to more.

financing some different companies, different, firms that can only invest in BigBoard, but it also requires that we meet certain requirements, excuse me. A-and, what, what will happen then is, and then you have shorter reporting times and all these other things that come up there you gotta be prepared for. And that's kind of, you know, one of the things we are working towards, and we know that uplisting creates more volume, there's more volume on the NASDAQ, et cetera, but, there's only so much time in

stuff to get there. And, sometimes it's, you know, be careful what you ask for, you might just get it.

I see. Yeah. and on the treasury company side of things, MNAV is, you know, a very big metric that lots of people like to, you know, assess. Now it's one of many things that you would look at. So as an example, strategy right now, as I'm looking on a dashboard, it's about one point three seven. And then as an example, you guys, let me just get the exact

One point six, maybe this one's out, or wrong. Okay, gotcha. so I can tell you right now,

I can tell you right now, I've got it. We have our own dashboard, treasury dot l q w d tech dot com, and I think it's, you know, we're one point two four x our Bitcoin NAV. Let's see what the MNAV is. If I can find it, we'll, we'll, yeah, now if it's one point two four. So, you know, we're a little below, little below strategy there. For me, the number one stat that I like, and I like this 'cause I look at, you know- I'm obviously a major shareholder is sats per share. Yeah. All I wanna know, sats per share and how much, if the company was liquidated tomorrow, how much Bitcoin would I get? That's like the brass tacks, the most hard look at everything you could get down to. I'm not suggesting we're doing that, that's not, that's not what I'm saying. I'm just saying that's just a really tough, direct way to look at it. If everything was liquidated, how much Bitcoin would I get? That's it. Yeah. And so that's my And, and just continue to stack it, and we'll, we'll stack it through, you know, equity, ATM, debt when it makes sense or if it makes sense, and, and the, the ultimate for us is, continuing to earn actual Lightning Network yields, Sats on the Lightning and put it back, you know, and have that compounding effect too, just put it back to work and continue just to turn it over.

Yeah. And so can you offer us, I guess, like a BTC yield percent or a number that people can think about or what, what have people want to know what's the BTC yield been like recently?

Yeah, for sure. And certainly we did our last press release. This is public information here where we, we had nineteen point nine, just a little under twenty Bitcoin, we had a, a twenty-four percent, you know, yield off of, off of a stretch of, you know, three to four weeks here. We-- the, the details are, are out there, people can look it up. We used a weighted, a weighted, volume because not all channels were open at the same

A year like a straight APR, the numbers are about two point five percent, but not all the channels open on day one. And so you need to look at like, how are we gaining velocity? Like, what are we actually earning? not, yeah. And how are the-- We wanna make the numbers as accurate as possible, and we'll have a m-- over the next stretch here, we're gonna have a much more information coming out that we're gonna share, and, and so, and I'll try to share it, you know, we're gonna try to share it as model that we have, and we have a unique model because of the global network that we built with all these nodes and all that infrastructure, the data that we've gained from that, 'cause we're very data analytics centric, and we've been able to pull a lot of transactional data from our network over the last number of years and use that to our advantage to help earn this kind of a yield.

Gotcha. Okay. So just for the treasury focused listeners, let's give a bit of a lightning overview just so people, are all following along. So I'll try to offer just a And you can elaborate further. So in the Lightning Network, it is literally a network of bi-directional payment channels, but it's not just, you know, let's say I open a channel with Shone, it's not just the sats that I would fling back and forth between me and Shone, it's actually the routing as well. So let's say I have a channel with Shone, he might have a channel with someone else, and then I could pay through that channel. And so the way things work in Lightning is, you know, you open channels and you close the channel, These, these Lightning nodes will set their fees accordingly, and then, I guess, generally speaking, in the Lightning Network, you want to be in the middle of the flow, right? Like if you, people are routing through the channels that you operate, then obviously they'll be paying you some routing fees on that. And so in the Lightning Network, there's different ways, people do the fees. As my understanding, there's like a base fee plus a, like a percent of the, you know, the transaction fee, and that's kind of the general model that people use And it's somewhat competitive in the sense that, you know, being central in the Lightning Network matters because if you have bigger, more central nodes, other people will kind of know you and they'll more be maybe they're more likely to route through you. so I guess that's kind of my kind of high level how I would explain that for somebody who's a bit new. So obviously, if you're an end user, you just pick up your Lightning wallet, you scan or you type in the amount and you hit send. But what we're talking about is kind of- What's going on under the hood. So, do you agree, disagree, or where do you wanna maybe you wanna elaborate a bit? No, no, that's a great way of putting it.

Yeah, that's a great way of putting it. I would say to people who, you know, familiar with internet service providers, you know, you may go to Google dot com, your, your tr- your, your data will and requests will go through Verizon and AT&T and eventually to Google servers and back. It's kind of in the long line same concept where it's a, it's The end customers. We don't onboard anybody. We are an infrastructure company. We connect everybody behind the scenes, and we make, we make, we earn SATs for doing that, and so we're just gonna continue to stay focused on that. But it is, I mean, one of the things that always interests me about Lightning Network is Lightning Network, in my view, is it is the payment layer of the internet itself that we wanted to do in the nineties and didn't exist. It's a true open source payment layer that can scale at the level of the internet, that is not controlled Third party, not Google, not Microsoft, no, no, nobody in the way, and anybody can join it, anybody can use it, anybody can build off of it. There's absolutely no restrictions. If that sounds familiar, that's because that is the internet. And there's already report standards, built into the internet waiting for a payment network. You know, four two payment required. We all seen four four payment, you know, web, you know, page not found. Those standards are built in in the late eighties and the nineties, and they're built into every web server and

We're something here, a true, the true payment layer of the internet that can just have unlimited scaling. And where I've always thought is extremely exciting that we, we, we don't talk about a lot is we talk about, you know, people paying people, but ultimately it'll be machines paying machines, and they're gonna use micro-transactions to do it, and they use it for authentication, they use it for validation, they use it for straight payments, all kinds of things are gonna happen in the world of AI and robotics, and it'll happen way quicker than we realize. And people, I Influenza Japan, and they gave them hard drives to rebuild, rebuild their data on the other side, right? Where you wouldn't even think about that, right? So like, but then you couldn't send it over the wire, it wasn't, there was just, it just wasn't there. And so now time is super compressed and these things are happening faster. And, and, and one of the, I can't remember, I heard this years ago, but just remember. Tech when it hits that kind of fifteen year mark, it's like it's always been there. Can you think of a time when you didn't have an iPhone or an Android?

Yeah, I mean, it's, yeah, you

gotta, you gotta go back a while for that. Right. Right. It gets past fifteen years, it's like it's always been there, and you're at that point for Bitcoin, it's like, hey, yeah, it's almost like, hey, it's always been there for a lot of people. It's, it's a thing. And so It's a, a, a, a technical breakthrough and a computer science breakthrough and a discovery and really is, is something special, but now you're starting to see it. And one thing on the Lightning Network I wanna talk about is you brought up here, like end users just use it. And so what, what has happened in the last year is you have, you know? So the next phase of the tech with Lightning Network, we won't get into too many details, but effectively, it works like magic. You don't need to know anything about it, you don't need to know open channels or all the complications, you don't even have to have Anything, you just, I wanna send Sats to you, and you can do, oh, sure, I wanna send twenty dollars in Sats to, to Stephan. And, and it, it just happens behind the scenes with channels and time and all the technical reasons, but as an end user, you, it just works. And it works like magic, and that is when you start to see that curve and the adoption take off here because, i-it's easy to use. Yeah.

So look, we should chat, I think the treasury listeners might be interested to understand a bit about so there's a few things we've got to kind of discuss because there's the yield, and then there's also the cost of operating and the cost of, you know, those aspects of it. So, from your, I think from the tweet, I think I saw, it says deploying nineteen point seven five BTC from treasury over twenty-four days to achieve about twenty-four percent annualized yield through routing fees, right? So as we explained earlier, when you're on the Lightning Network, you pay fees to access that, or either you or the service provider who you are using, they are

A little bit about that yield and, you know, do you expect that to be sustainable even as you grow the Bitcoin number of shreds that you've put into the nodes to do this yield initiative? Absolutely.

So cost to running the network, it's really just the, the, the build-out cost, 'cause it's unlike Bitcoin mining where we have this massive infrastructure, we're running servers, and so we have them, you know, data centers all over the world. There's a cost to maintain that and host that, but it's relative compared to, say, a major Bitcoin miner where you've That. so, but with that said, it's all about the, the build out, the reporting around it, all the automation, how do you run a, a-- For us, twenty plus nodes, how do you run that as a global network with large levels of-- basically try to have fully automated systems that are self-learning and adapt accordingly. And so that's been what we've been building out. To do that and do it intelligently. Just on that,

would you say, let's say, and obviously you don't have to disclose everything, but I'm just saying, is that like part of the, quote unquote, secret sauce of like knowing where to open channels? Is that kind of a secret sauce thing that's like, part of the technical knowledge, or are you saying here it's more like Liquid has business partnerships with, I don't know, li-lightning wallets and exchanges like that side of things?

We do have, you know, we're integrated with Lightning, some Lightning And we actually have our own, version of a sort of Google bot where, you know, it, it'll, in the sense that it'll look out there and scan the network and see if there's a node operator that meets the requirements. Maybe it's a new node, but it's been up for a period of time, it has a certain number of channels, and we'll automatically open a channel with it. And we'll do that because it makes sense. And, and we have our supernode in Canada, and we're looking to deploy more supernodes, ac-across other

a node operator in Indonesia, our, our Indonesia node will actually automatically open a channel, make sure that, that we have the best connectivity, that we can possibly get at any time and support the network, as aggressively as we can here and, and, and then, and, and capture that, that market share. And so- Gotcha.

Because I guess the other follow-up point people might have is, okay What if it gets competed away? You know, like now of course it'll kind of settle to a certain level, but I guess, maybe because people will be interested to understand, is there some kind of competitive edge or some kind of moat that allows Liquid to still, be a very competitive Lightning node, you know, routing operator, you know, or multiple nodes, not one node? Yeah, it takes time

to establish the, all this kind of stuff in the network. It's not a straight, you can't just do it in twenty-four hours. If you're a Straight shot either. And then you have to have the, all the-- We have a massive amount of data that we use for analytics as well that makes things a lot smarter. Now, I expect competitors come along, but you need competitors to make an industry. And I think the, the network itself, you know, some of the things I'm seeing it's growing, you know, twenty-five percent a quarter. you know, it's hard to know 'cause sometimes Lightning, some Lightning nodes are private, but we see, you know, rapid growth within the space. certainly stable

You know, we're as Bitcoiners and the team are, are hardcore Bitcoiners.

Yeah,

of course. The, and so yeah, there's a bunch of stuff there that you would have to do in order to, to break into the industry and say, okay, this is what we're gonna do it like we did and just, and turn it up in a week. That's not gonna happen.

you know, you need technical competence and you need, you know, there's a lot of these things that are required to actually make it happen. so I, I'm curious as Around is, oh, the Lightning Network capacity has been coming down over time. Now, by what, what they mean by this is the public network capacity. Of course, there's private routing, private nodes and so on. looking on the dashboard on mempool dot space slash lightning, as I can see today, the public capacity is three thousand eight hundred and forty-five BTC, right? And so that's come down, I think the peak was maybe five thousand, six thousand BTC, something like this. But a common, I guess, argument is, oh, there's not that many Bitcoin locked up Therefore, you know, it's failed. That's kind of, common narrative. Now, of course, that's looking at the stock, but we also need to consider the flow, the what is the actual amount of volume flowing? So can you shed some light there on the flow aspect of that?

Yeah, the flow of the amount. That's really what we're, you know, we're turning overflow, and that's part of the, the, you know, the difficulties that you have to solve and the magic that we do, you know, the rebalancing and how do you manage

And, and, and my view is you're going from, it was grassroots supported by, you know, people, random node operators, random node operators, very passionate about the space, maybe they can make some yield, maybe they can, maybe they were just, they were, they were super interested, to now it's becoming, you know, professionalized where companies like LQWD and o-others in the space are, are, are managing it at a, at a higher level, in, in terms of what the capacity and they have the resources to do so. So I think Getting a little, a lot more mature, the code itself and, and the stability of all that stuff, you know, years ago, thirty percent of the transactions would work, most would fail, it was very experimental. Now it's, you know, it's majority ninety-nine point nine, unless there's edge cases that just go through, no problem, you don't even know you're using it, and that just continues to get stronger and stronger as we've, we've crossed that, we've crossed that bridge.

Yeah, I think it's a, yeah, so we have seen, we-- that's maybe the surprising thing that, let's say, outsiders to this industry, they don't realize that, that there's actually been a huge growth in the actual flow number, because many of them are looking at this stock number and thinking, "Oh, what? It's going down, must be failing." No, it's actually-- you could argue it's actually becoming more efficient, right? It's more efficient use of that, of smaller amount of capital to actually route these payments. And, as I'm

Surprised by when, Miles from, Block, aka the company behind Cash App, came out and said, you know, we've been routing all this money, you know, and we made all this yield on it, and it's, I guess, Lightning insiders would know, yeah, he's, he's correct, but outsiders didn't really know

that. Hundred percent, yeah, and that's kind of, well, you know, it, it lost some attention and there's other things going on in the space here, and, and that's perfect 'cause we were able to But it's also exciting because you get a clear runway and less distraction. So yeah, the, the network itself, a lot more flow, we're seeing a lot more integrations, a lot more adoptions, and, and the groundwork is laid for the next thing, you know, which will be o- other assets will go across it through Taproot Digital Assets, whether you're a Bitcoin Maxi or not, it's-- I'm not, I'm not here to argue that, I'm just pragmatically saying there will be other things that will go across it. It is an open And just like, you know, Bitcoin and Lightning, you know, it is a morally agnostic trust protocol that doesn't care who you are, what you are, what you do, it just works. Anyone can use it, just like the internet, whether you are a good person, bad person, or indifferent, it doesn't care. And, and that's where you're gonna see this as, you know, continued adoption here of Lightning for used in ways-- And my, my prediction, I've said this, I've said this to Visa, you will use the Lightning network. Someday, whether you like it or not, it is the sound of inevitability because it is the internet. And it reminded me of a time when back in the, you know, the mid-nineties, where, you know, the-- the-- I remember we had the R3 stuff for blockchain, I think that came up a few years ago, but ultimately, back in the mid-nineties, the banks were like, you know, we really like the idea of the internet, but it scares us 'cause it's full of hackers and crackers and it's terrible. So we're Connecting banks, of course, nobody could get along or understand it, and that failed, and inevitably, that TCP/IP thing, that, that internet thing seems to be quite interesting, because it is a, you know, morally agnostic network that just opens the doors to anybody. You don't have to onboard anybody to your private network, you just, you're onboarded in open source, and the same thing with Lightning, where it's just, you know, that's what we're seeing here, and we want to continue to see that, and we'll keep a close eye on it Beyond, and then, and to make sure we have as much of it deployed as possible. And we're gonna be very curious what's gonna happen over the next thirty, sixty days here, as we continue to pour more Bitcoin onto our nose and continue to see what the yields look like, and we'll be very transparent about, of course, as a public company, and we'll share the information, and, and tell people where we're at and what we're earning, and, and how it's working. So, so far, so good, and we're very excited for what we're seeing

This episode is brought to you by CoinKite, the makers of my favorite Bitcoin hardware wallet, the Coldcard Q. Now, some people think self-custody is too hard, but it's really about taking responsibility for your Bitcoin wealth and understanding that self-custody gives you a true feeling of liberty. The Coldcard Q has a full keyboard and big screen, it's got two secure elements and a true air gap, allowing you to go fully air-gapped using QR codes from seed generation to transaction signing. You can power the device using three triple-A batteries, so you don't even have to plug

Faro wallet for PC or Nunchok on mobile, and you can dial it into the right level of security and complexity that you choose. If you want a simple setup, just use twelve words and single signature. If you want passphrases, easy. If you want to add multisig or co-signing features, you've got those too. So go to coinkite dot com, use code livera to get ten percent off on your cold card or other devices and level up your self custody today. So I guess the probably a big question for a lot of people, whether they're on the treasury investor side of things or the Lightning nerd side of things, as your stat says, nineteen point seven five BTC over twenty-four days to achieve twenty-four percent annualized yield. I mean, these are some pretty big numbers, and I think the question mark from a lot of people will be Okay, it's one thing to do that with, let's say, twenty BTC, but could you do that with two hundred or a thousand BTC? What are your thoughts there? Or do you think that number comes down? Instead of twenty-four percent yield, is it, I don't know, fifteen percent? Is it ten percent? I don't know. Yeah, I

don't know. I-- Well, it really depends 'cause that's a weighted APR. Because we didn't open all the channels at the same time, but we needed to get a metric that let us understand the velocity, like how that's our, that's our velocity, our torque, how quickly we're opening channels and how quickly we're earning yield on, and how quickly we could deploy, all that kind of stuff, you know, that gets down to our LNAV, as we call it internally. And really, so I, I do think there's a lot more capacity in there. So far, it looks like that we can deploy quite a bit more. But I, I don't wanna give any forward-looking statements to the market as a public company. We will see over the next thirty, sixty days here, and we will report back as quickly as we can to our shareholders of, you know, what we've done and how it's working, what you've done, what's possible, and just be in the world of reality. but at the same time, like as a treasury

It's a Bitcoin, it underpins our balance sheet, and you get, you get also the potential upside of Lightning, which w-- in my view, and of course I have a very biased view, but I think it's very undervalued and very underrated, and there will come a time, and we're potentially seeing it play out now, where that starts to actually be, it, reflect on our share price and everything else that's going forward. That said, we're in, we're in a, we're in a consolidation phase in the sector. it's one of these things I always like, you know, you're, you're holding back the ocean. It doesn't matter what you do sometimes, everybody was racing to get news out to support their stock, and that just never works. You know, the sector is just taking its beating and- You just gotta work your way through it, you-- and you can't hold back the ocean, so you just gotta, you gotta be tactically smart here and just be, you know, just have some thick skin and get through it. So

But it is interesting then that, having this lightning based operational business is actually allowing you to yield even, even if you are in a quote-unquote bear market, because what matters here is actually the flow, right? Like we were talking about, if there's enough lightning flow, and of course, assuming, you know, LQWD nodes are in the Then you're earning yield in the bear market, so that's actually an interesting, kind of point. so I'm curious your thought there on, you know, are we seeing like a secular growth in the flows or is it kind of correlated with bull and bear market?

No, I think we're seeing a secular growth in, in, in, in actual flows itself. I think it's much more structural. I think it really started with the, you know, the, the, the technical stuff just hitting its inflection point as we talked about, and we're seeing more structural Actually, where I'm, why I'm excited about it, it's not sort of reliant upon, you know, bowl or number go up, number go up kind of thing, it's just there's a structural, structural change here, and that's what I wanna keep a close eye on to see how quickly that part is growing and, and how correct we are or incorrect, but ultimately we feel we are correct and take it from there. So for us, yeah, like you said, we grow our sats per share, you know, a-about every thirty-five million sats we earn, our, And, a-and, and grow that, and then between, you know, using the traditional, you know, the MNAV, it's traditional MNAV, it's, it's treasury model raising capital buying Bitcoin, potential debt to buy Bitcoin, we would be interested in the debt, provided that our yield on the network outpaced the what we'd have to potentially pay back in, but in the meantime, that's not on the table because that's not reality, the terms that are coming in are unacceptable and we wouldn't, we wouldn't never, we We're just gonna focus on what we can control and, you know, that's exciting space here, and I think this is a, a chance for things to break out. So in terms of Lightning and everything else, and we hope that other companies will come along, but we, we intend to remain a market leader and have the brand that people recognize and trust, and that's one of the reasons we're leveraging the public markets to do so.

Yeah. Okay. now speaking of Lightning Network, and as you mentioned, you know, increasing that flow of, transactions so that you, you know, now over time, That is growing, as you said, and it's interesting to see, as an example, even in the transactional space, things like, Breeze SDK kind of plugging in more wallets, so now there's more flow. We're starting to see things like Arc, so the Arcade guys from Arc Labs rather, Arc Labs guys, I should say, with their technology, Arcade, they're trying to, you know, have Arc that can speak Lightning per se. So that kind of, it sort of spells out to me that Lightning is

starting to be-- get a bit of, way that mult- you know, various L2s speak, right? Whether they're not just Lightning, but Ark or Spark or even the eCash or Liquid, it's sort of the-- it's being seen as the way that they speak, and so as more people get using any of these L2s, it sort of that volume ends up coming to Lightning

It's a great way of putting it, and, you know, it's something I don't talk enough about, and I think I probably will after, after you bringing up that point. So I'm gonna, I'm definitely gonna borrow that for future, for future discussions. But you are correct, and, and certainly, it's a uni- it's like a unified layer for all these, you know, everyone, all these different LQWs speaking together running across Lightning. And so yeah, they, as they grow, we grow, and that's the one thing we'd like to talk about, Lightning, which is, you know, some of the stats are it's growing twenty-five percent a quarter and probably beyond and, and, and hyper-accelerating, and certainly have on the other L2s and the like Ark, all the things you talked about there, just in using it as well as a unified layer, just continues to accelerate what's going on. And so our job is just to, you know, be in the middle of the money flow and help support the network for a lot of reasons. One, we wanna make money for our shoulders, we wanna establish our spot, we

In your life to leave an impact or something that will truly change how the, the, the world will work. I've been fortunate in my career to be able to work on internet stuff, which was all about, you know, freedom and, and, and, and, and democ-- democratic voices and, and learning and knowledge and ultimately e-commerce, and it was used in ways that we, we didn't even see in the beginning, we knew would come. And it was interesting 'cause I remember back in, that time there where if you put a, a, an ad on your website And I was like, "Look, the internet will be used in ways that you don't necessarily agree with, but it is an open network, and it'll be analyzed, it'll be used in things you like, things you don't like, but it will change the world for the better ultimately. A-and, and so you just have to get out of here. Same thing with Bitcoin, it's some people will use it in ways we don't agree with. They may, a-and, and ultimately the, you know, I just hate to say the free markets, but the markets Thanks for Lightning. We have things like streaming money coming down the line, we have in a machine-to-machine payments, we have all kinds of things that we can't even imagine yet that'll just be leveraging the current strength for the next strength and, and, and taking that forward. Yeah.

Now, one other area we touched on this earlier, Taproot assets as an example. So- I guess I'll just offer a very quick kind of-- the idea is the Lightning Labs guys came out with their, protocol and Tether, I think as of January or so this year, Paolo from Tether announced that basically Tether would be coming to Taproot assets. So this is one example. Obviously, the largest stablecoin in the world is now available on Taproot assets, and so- What we're going to see is various wallets that will start speaking to each other, even if the, like, the sender or the receiver don't necessarily care about Bitcoin BTC, they may be interested in earning, let's say Tether, in this example, or paying with Tether, and it could be like different assets on either side of that exchange. So let's say the merchant, he wants to earn something else, or, you know, some other coin or some other stablecoin. And these-- this is one example. Now, I know also there's RGB, which is an Another, you know, smart contract and asset, protocol, but I guess the, the point here is Taproot assets represents another thing that may bring in people who aren't necessarily Bitcoiners, right? These may be people who want the stablecoin aspect of it. So What do you think that will do in terms of driving volume? Do you have any thoughts on that or where is that definitely?

Yeah, we've done some preliminary work on it in Canada, the Tether is still classified as a security where USDC isn't. there's some weird things going on there. I recently wrote a paper called the Maple Act, which was put in front of, the shadow finance minister and, and stuff like that, basically to try to move these things along and, and, and give our view on how it can unfold. But it's, you know Nobody using a stablecoin off of a wallet, it's gonna expose them to the whole digital asset space and make-- and then, and the comfortability of, of using it will just enhance Bitcoin's, you know, reputation. But the US dollar's not gonna go away tomorrow, a-and Bitcoin's not a threat to it per se, it's bad policy, which is the, being the threat, which is really the threat to any of these fiat currencies. a-a-but ultimately we'll see, hopefully we'll see the US dollar continue to be backed by Bitcoin, a-and but it It will traverse the Lightning Network, we think it's a huge opportunity, there's a lot of money to be made there. it will have last mile reach. I've never understood why the Elizabeth Warren to the world and stuff could never wrap their minds around the fact that if you allow stablecoins like Tether, who have to buy unbelievable amounts of US Treasuries to continue to back the US government, and has last mile reach to every single person in the planet, direct to consumer, that's very powerful for the United States. But they couldn't get out of their own way. For whatever banking arrangements who were backing their part, backing their elections or who, I don't know what was going on behind the scenes there, but they simply just couldn't get themselves out of the way of understanding this is, this is very powerful for whatever nation can, can leverage it, and certainly the US dollar will, will, will be the driving factor across that. But Bitcoin will, you know, it's still a marker going across there, people are gonna get a lot of exposure to it, it's gonna continue to be that hard asset that people

We talk about volatility in Bitcoin and because, you know, we're, we're here in North America or Dubai, we have, you know, relatively stable currencies, even though it's melting away. but if you're in other parts of the world, you know, what do you want? Do you want to have Lebanese dollars? Do you want to have Bitcoin? And we, we forget that about our little bubble that a lot of the world is just that, there's high corruption, there's, the money is highly corrupt, this, the, the governments are highly corrupt. And this is one Imperialism, corruption, and the rise of Bitcoin, where, you know, we, we have these, these nations that are mired in corruption for a long, for as long as I can remember. And, and, and, and what do we do as nations there? Well, we strip mine their intellectual capacity by bringing them over to Canada and North America, by offering them a better way of life, because it's less corrupt here, you can get ahead, you don't have to play the game. And so we're, we're all excited that we, we give these people opportunity, but

And their, their leaders, a-and they're just mired in systems that are broken forever. They have broken money and broken governance. Now, my hope is with Bitcoin and these, a-and all the trust that can come out of this thing, that over the course of a couple generations, you're gonna see their money system will be solidified, their government will have transparency. I, you know, why do we send the United Nations into a war-torn area? Because when people have visibility, you're less likely to have war crimes. If you have Bitcoin in these nations, you're less likely to Move them up the corruption index, you know, Finland being at score ninety-two, Somalia with eight, dead last, and everything in between. The, you, you can have an entire generation and entire population with a better chance at, at, at being successful in life. And so this is the hope for Bitcoin, is, you know, fix the money, fix the world, but also reduce corruption, allow for trust to happen there in the digital age. And as the internet still continues to roll out, it doesn't have a higher hundred percent penetration around the world yet, far from it. We're gonna see a chance for these countries to do a lot better, and Lightning will be a big component of that, and it's the, you know, amorphologically and anyone can use it, and that's, that's one of the hopes of You know, if that's what I get to leave behind and we as a team get to leave behind, and we can look back, that, that, that would be amazing. and so we'll, we'll work to see that happen, but that's kind of where we see these things going. I don't know, I went, I went off on a tangent there, but, you know, that was on my mind over the last few days here.

Yeah, right. I, yeah, I, I think I, you know, I think many, you know, Issues of the day, will be in-enhanced with Bitcoin, at least. Maybe it's not gonna fix every little thing, but, you know, so be it. I guess zooming out with treasury companies, do you- I guess one of the, maybe one other question I was thinking about is some of the treasury companies haven't really been, quote unquote, rewarded with a big MNAV premium.

Now,

I'm curious, is that, you know, and, and in some cases that was like the Bitcoin mining company, so for example, Marah, they've got, you know, a big stack, they've got fifty thousand plus BTC, but and yet the market's not really kind of rewarding them with much of an MNAV premium per se. Now, is that because of the risk and the up- Operational costs associated with the mining business, is it some other, is it just people are, maybe struggling to sort of disaggregate, let's say, the pure play Bitcoin treasury side of things with the the operation spot on there. Yeah, I think there's a lot of things. I think

you're spot on there, yeah. I think it's, you know, you've got all the mining stuff that's interesting, but it's been associated with high cost. You know, the gear gets, gets outdated qu-quickly. At the end of the day, in my view, and I've done Bitcoin mining from early on, I've helped set up, you know, Bitcoin mines and, and I'm, I'm, I'm solo mining right now off my Bit

And I've always said this, you know, the, the BC government here, all, all the, all the institutions of BC Hydro, if they were smart enough in the day, they would have taken excess power and mined it, they can mine indefinitely, their, their cost for power is zero, and so really you're gonna have to look at what Bhutan

did or some of these other countries. Exactly,

exactly. And so if you're gonna be a, a Bitcoin miner in the future, you need to basically buy the power company or the power company buy them, and, and that's where the

That's kind of it, and I think, yeah, you're definitely seeing that, that risk pri- in my view, that risk priced in for, for, for Mara and stuff like that, which is, you know, that may, that may change over time, certainly as the market st- you know, strengthens and if Bitcoin breaks out to a hundred and forty, then, you know, our bets are off, but it's, the pure plays, and some companies aren't getting the love in the spacer, but i- in my view, it really depends what market they're Of course, MicroStrategy is very interesting, they tapped into the bond market, they've, you know, very, very clever in the way they've done that. But Medipolinet also tapped into the Japanese market, which is very unique, you have a market that can't get access directly to Bitcoin and the different, you know, accounts

they may have. Or there's like a tax arbitrage or something like that.

Absolutely, and they have a, they have a massive bond problem and they can't get yield in the bond, so they're in this real sweet spot where, you know, in And so there's options to get, to list it there. So, you know, for us, it's about, you know, in the Canadian market, and we're, we're listed in the US as well, is to be unique that we're a treasury company with, an operating angle that we, we're passionate about. And so I think some markets just may be stronger than others simply because of that, and they may be bigger, they get more exposure. but structurally, you know, as a junior company, we're not gonna get access to preferred shares of the

bond

And, and that may happen over this next cycle here, you may see some other, you know, other metaplanets, other smarter web companies to kick in here, and then so, you know, we're, we'll, you know, we're gonna, you know, be in that race, no question, but we also have our, you know, our, our, our operating business where we earn Sats and, and we continue to, you know, buy Bitcoin, deploy Bitcoin, earn Bitcoin, that's our, that's our playbook. And that's it, you know, we're very straightforward to understand. Get as much Bitcoin in the balance sheet as we possibly can coming up here, and deploy as much as we can on the Lightning Network, and earn as many sats as we can on the Lightning Network, rinse and repeat. Simple as that.

Alright, well, I think that's a good spot to finish things off. So I guess listeners should, you know, think about that, assess the, the different risks of different companies, what are the pros and the cons. I guess on one side, yeah, you have to assess, okay, what's the operational capability of the company? Are they, can they secure the coins? Can they secure the sats, especially in the Lightning Network? but- Once they've been operating for some time, you, you think, okay, well, they've been doing it for a few years now, and, profitably growing. So, so yeah, I guess let's leave it there. Any, final, call out or where, where can people find you online?

Yeah, you can find, well, you can find myself at shone anstey on, on X, and then certainly, you know, lqwdtech dot com, that's our website, and also on X as well. You know LQWD is our ticker symbol on the Toronto Stock Exchange, LQWDF on the OTCQX. but feel, you know, feel free to reach out, check us out. you know, I, I'd like to think you'll, you'll like what you see here. we're very unique, we're very trans-- well, we're very transparent as public company, but we're very upfront about what we're doing and how we're doing it, and we haven't veered off into some other chasing the next shiny thing here. We are As you mentioned, Lightning Network, sure, there's, you know, we secure coins there. There's, what I like about Lightning is there's, you earn yield, there's no counterparty risk, we don't give up our keys, we don't, we're not, you know, we're not dealing with a Celsius where we're, we're earning that. There's technology risk as technology moves forward here, potential, you know, things that we may not know, though, it's been out there for quite some time, so that, that there's a lot of maturity in Stay tuned to what we're doing over the next thirty, sixty days here. We are aggressively deploying more Bitcoin here to see, to see, just ramping up our, our yield insats, we call it Project YIS, Y I S, you know, yield insats. I don't know if that was a clever name or not, but it's just an internal name, and we're working on some of our other metrics like LNAB and, and, and marrying it with the MNAV and everything else that we're doing here. So we're gonna create, continue to work MNav and LNav and the things that we're doing here to be, you know, very specific in what we do here, and, you know, if you, you should, you should check us out, and if you have questions, feel free to reach out. Excellent. Well,

thank you for joining me.

Thank you, Stefan. Appreciate it you having me here.