{ "episodeId": "SLP230", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "stephan_livera": { "name": "Stephan Livera", "role": "guest", "tag": "STEPHAN" }, "guest_2": { "name": "Guest 2", "role": "guest", "tag": "GUEST" } }, "segments": [ { "speaker": "stephan", "time": "00:09", "start": 8.99, "text": "Hi, you're listening to Stephan Livera podcast. For episode two hundred and thirty, we're talking about Lightning and is it the future of Bitcoin transactions or will there be some other layers and technology used instead? Udi Wertheimer and Eric Wall join me to discuss. This show brought to you by swanbitcoin dot com, the best place to auto stack your Bitcoin. Bitcoin in the US with incredibly easy setup and low fees. Swan recently announced availability in New York, so they are now available in all fifty US states. 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For example, suppose a fiduciary wants to hold two hundred and fifty million dollars of Bitcoin with Knox. Knox will seek to obtain two hundred and fifty million dollars of insurance dedicated exclusively to that account and adjustable to volatility, no fractional coverage or narrow scope. Insurance for what it's worth, a tool to transfer risk. If you are a Bitcoin Company, investment fund, trust, or family office, check out Knox for your insured custody. The website is knoxcustody dot com. Buddy and Eric, welcome to the show. Hey. So guys, we've got this little, you know, discussion, debate, whatever we wanna call it. I think it's gonna be a bit more of an informal, discussion. I think it might be best if we actually let Eric set the context. Why is this, little debate happening?" }, { "speaker": "stephan_livera", "time": "02:58", "start": 177.85, "text": "Yeah, so, it, it all started with, I, I wrote a, a, a blog post, it's called Eric's November Thoughts, where I, I'm extremely bullish, on Bitcoin And it took, I, I, I mean, in that blog post, I go through all the catalysts that we've had recently that's driving up the price and how for, for the, first time when people say, \"You know, this time it really is different,\" I don't feel like that's a a joke in any way, I fi- I really do feel like we are at the point in time now where Bitcoin has entered the world stage in a much more confident way, and also, also in a way that feels like it's, it's not gonna go back from here. Like once you get the level of endorsements and acknowledgments from the mainstream industry, and I'm talking about investors such as Paul Tudor Jones, Bill Miller, Stanley Druckenmiller once we reach that point, it's going to be extremely hard to put the Bitcoin genie back in the bottle. But it, it took me a, a couple of days after writing that post, and I just woke up one morning when I had this Holy shit type of moment where I realized that all these dreams that we've been having in Bitcoin for such a long time, and I've been in the Bitcoin industry for eight years now, and I, I just got extremely excited because the store of value proposition of Bitcoin is getting cemented in a way where we see that Bitcoin is becoming a, a, something that every hedge fund in the world is currently looking at. I mean, I, I just previous to this, call, I was just on a call with a major hedge fund, hedge fund that were seriously looking in, into Bitcoin, and I met them a couple of years ago, and the, the type, the type of discussion that we're having about Bitcoin is no longer, you know- So how does the technology work? Is this something used by criminals? Is it a tulip bulb? It's just like, how do we get exposure in the best possible way? And is the liquidity sufficient for us to enter this asset? So I just got extremely excited about this, and I w- once I s-sort of fully took it in, the full effects of what's going to happen once Bitcoin becomes established as this type of asset class, then the next, I can sort of leap forward from that and understand that, you know, if Bitcoin is going to succeed as a store of value that is going to be on par, with gold, then the, natural evolution of that thought process is that, you know, the Bitcoin is, an internet-ba-based asset. once you have it as something that people store their value in, the, the next, the next step, which is for Bitcoin to- Start to transition into a medium of exchange. It's very natural, I mean, once you use it to store your value, then why wouldn't you just accept payments in that same asset directly if the currency is specifically built for being transferred eas-easily across the world? and that, as soon as I, I mean, then, then these sort of, hints of hyper-bitcoinization, really start to feel real. And it's in, in that moment when I think about that, you know, hyperbitcoinization isn't this weird dream, it's just a natural progression of Bitcoin succeeding as a store value asset, that these, these negative thoughts come to me. And these negative thoughts are that we haven't really solved how we are going to conduct this medium of exchange use case. You know, I, I, I wrote in the chat, I have a chat with Udi. And a couple of other guys where I said like, \"Oh my God, things are just so bullish for Bitcoin right now, but, it just sucks that Lightning isn't where we- Hope it would be. so Udi joined that conversation and we started talking about Lightning and My issues with Lightning, I can go through them, like the, the weaknesses and the challenges and the reasons why I'm not as optimistic and bullish about Lightning as I-- I mean, and don't get me wrong, I, I mean, I, I was, when Lightning was new with my company, we were one of the five hundred first Lightning nodes, I- I try to contribute to the Lightning cons-discussion and, I am like in my heart a, a, a, a Lightning bull, but I just don't see that the challenges, the technical challenges with the protocol, make it such that it is going to be the ideal transfer mechanism for the masses. So Udi came into this conversation and, well, maybe it's best for you, Udi, to go into this yourself, but what I took away from It was that Udi basically envisions a future where Lightning is going to be conducted custodially, and that, like, when I start to think about that, that's when, you know, I, I start to get bearish on, on it for-- like, I start to get bearish on Bitcoin, and I want to think about like, how do we-- how are we actually going to conduct Bitcoin transactions in the future? So, yeah, maybe it would be good." }, { "speaker": "stephan", "time": "08:45", "start": 524.66, "text": "Yeah, let's, let's hear a little bit from Udi." }, { "speaker": "guest_2", "time": "08:47", "start": 526.8, "text": "Right. So, I wouldn't say necessarily that I think that Lightning would be used consolingly, but here, here are my thoughts on this. So I, first of all, I think I need to be nicer to Eric because if he's been in Bitcoin for eight years, then he can probably buy me out. So, Eric, you're, you're my best friend from now on. this is, this is the first thing. Second thing is, I ag- like, I'm, of course, I agree with the bullish side of this analysis. I am not convinced that we necessarily need a payment system at all for Bitcoin to succeed. I think it can be great, it would be awesome to have it, but I'm not sure we need it. It seems like so far, and I, I don't know all of the Bitcoiners in the world, but it seems like so far Bitcoiners aren't necessarily very big spenders? I think, of course, some pe- some Bitcoiners are, but I think if, if you-- I don't have any data on this, but it looks like, you know, Bitcoiners tend to think about, you know, saving, they tend to think about having equity in things and not necessarily consuming. It's, it's a kind of a big thing in the Bitcoin story. And I think that's why, you know, a payment system right now doesn't, just doesn't seem to have a lot of demand in, in the Bitcoin community. I mean, we all love Lightning, I think, I, I think so. I mean, I get excited by it. I've been excited by it for years. I've been, you know, building it on it in various ways from twenty sixteen. And I, I, I think it's great as a technology, it's very, it's innovative and it's exciting, but I'm not sure there's demand for it right now, and I'm not sure there's going to be. maybe, I don't know, I honestly don't know. So it looks like one Bitcoin is a Some of them at least, probably a bigger, you know, bigger percentage of Bitcoiners is kind of frugal, when compared to just the general population I think that, you know, a lot of people who spent Bitcoin in the past, probably most of them, tend to regret it nowadays. So, you know, it's the, it's the usual story. You open up your wallet or whatever, and you look at, at some transaction when you bought something three years ago, and you're just, you're just devastated. So usually Bi- Bitcoiners are just not, you know, they regret spending money, so they're really not looking for a payment system right now. Some people are. There are some use cases. I'm not saying They are, and definitely people are using Lightning. I think the, it looks like the, the, the usage is growing, but, you know, it's still, I, I think the demand is pretty small. And even if there's going to be demand for a payment system at some point, and it's possible, I do think that it's most likely that people will choose a custodial system for it, regardless of the state of Lightning. So You know, I can imagine, people who, you know, maybe Bitcoin becomes this standard, you know, store value and everyone holds a few sats, and then people will choose to maybe use PayPal to transfer bitcoins, because maybe the merchant wants to accept bitcoins as an asset, they don't care about the custody, they just don't care about it, just like they don't care about custody right now, but maybe they just value the Bitcoin asset And they want to receive it as payment. So PayPal is gonna allow people to pay custodially with, with Bitcoin, or, you know, it can be a currency that you can pay with, with your Visa card or your Mastercard or whatever. So I'm, I'm, I'm not necessarily saying that it's great. I mean, I, I obviously I see the benefit of using, you know, systems that, that let you be in self-custody, but I, I'm not sure that the people are gonna care about that. But, you know, let's say, I don't know, I don't know what the future holds. So let's say there is demand in the future for the centralized payment system for a self-custody system that allows for payments. in that case, I think Lightning will get there. I think that, the, you know, a big part of why Lightning is, kind of developing in a somewhat slow way, although, you know, if you're really involved in the developments in Lightning, I don't think you will say that it's slow because it's, it's so keep up to date with the, the, the changes. but, you know, the growth isn't very, fast and, and, so, so you could say, that, that it's not Just it's not growing really fast, I guess you could say that. And, and I think a lot of the reason for that is just that the demand isn't there right now. And if it will be there, then I think that you'll see the, the, the Lightning products improve very quickly, much quickly than they did now. Now, i-in the last year, just in the last twelve months, I think that the u-user experience in Lightning, in the new wallets like Phoenix and, and, Breeze and some of those like kind of next generation- Lightning wallets, I think they're amazing. They're really easy to use, they're really great, they solved a lot of the problems, and there's already this roadmap of how other problems are gonna be solved." }, { "speaker": "stephan", "time": "14:02", "start": 841.96, "text": "Ordi, if I had to summarize your point there, it's essentially that, you know, essentially a lot of Bitcoiners are mostly hodling, and so from your point of view, if they're only spending a small amount or not spending at all, well, it's, it's maybe it's not a huge deal that they're using some of these not perfectly self-so Sort of things, but I, I guess I wanna probably, I think we should go back to Eric here and get Eric's view on exactly what are the problems that he sees with Lightning transactions, you know, today and why Eric believes that they wouldn't be overcome in future." }, { "speaker": "stephan_livera", "time": "14:39", "start": 878.96, "text": "Yeah. So first, I would just like to address this point where Udi talks about there not being demand for Lightning transactions. And I mean, It feels to me like you're already in, now in this conversation, having a way too restricted view of the future that I want us to talk about in this conversation. So what I-- the, the reason that I want to have this conversation, is to explore what happens after Bitcoin succeeds as a store value asset, and I, and I think that, I think that I, I mean, the reason that I am leapfrogging to this later stage Of Bitcoin's, lifeline is because I feel like the hurdles in order for Bitcoin to achieve a store value status have already been passed. It's just a matter of time now before the meme spreads and it gets into sufficient, amount of people's portfolios. That's why, and, and the situation we're going to be in at that point is going to be completely different from now. I believe that once Bitcoin has grown to such a stage where it is- It is something that most people have experience with and are comfortable using as a store of value. The natural progression of that is that we're going to start to want to use it also for transactions. And The store value and the medium of exchange use cases, those two have synergic effects between each other that allow Bitcoin to transition from so much more than it would have just been if it was just an asset that we just stored our value in. It's essentially like if Bitcoin just becomes a store value asset, then it's limited as a gold or alternative, and that's an asset class in the range of ten trillion dollars. if Bitcoin becomes what I want Bitcoin Going to become, which is universal hard money, and I've talked a bit, to you about this. Universal hard money, it's basically, a money that we use that is as scarce or scarcer, scarcer than gold. once you start, ha- using that asset that is scarce, that is finite, that is appreciating in value over time as also the form of money, then it's going to be, it's going to spread even more as a store of value because it's going to be like the lazy thing to do You, you receive some payment from, somebody and you just keep it there, that's how you get Bitcoin to transition from being worth ten trillion dollars to two hundred trillion dollars. but in order for us to reach that point where, Bitcoin can become universal hard money, not just a store value asset, we need to have a system, to transfer Bitcoin with that preserves-- well, at least has the possibility to preserve the properties of Bitcoin that makes it useful and interesting in the, in the first place. so actually, I would like to kick back the question to you, Udi, because you were the one-- I think that you are better at- Neil Manning, why you think that Lightning will be used custodially? I mean, I can, to answer your questions, Stephan, I can, I can answer why, why I think that there is a strong likelihood that Lightning will not, be suitable for this role, and I think it's because, I'm not sure what type of transactions Lightning is good for. Is it good for small payments? Because I don't really think that it's good for small payments Because, if, if, if, if the, if your counterparty signs an invalid state and puts it on the main chain, you have to make a justice transaction. You have to, and then the, if the fees on the main chain are very high, it's not going to be worthwhile to, try to rescue, a smaller amount than what the fees are on the main chain. so I think that like inherently, you, you, you, you can't expect Lightning to work well for the end user For small payments, unless it's using a custodial channel which can, w-uh, that can do this for you. so I, I, I really do, and I don't see that it's good either for large payments, because inherently Lightning is made up of, out of channels, and if you want to route, large payment throughout a large network that is consisting of multiple tubes, if just one of those tubes are too- Too small, your, transaction won't make it to the endpoint. And it's also difficult for large payments if you are, let's say I'm selling tickets or something over Lightning and I need to, like, let's say I'm, I'm selling tickets for a total of ten thousand dollars, I need to have ten thousand dollars of liquidity pointed towards me in order for-- in order to be able to, aggregate all those payments. And then you have a issue like, who's going to direct- That liquidity to you, are you going to rent that liquidity? I mean, that's pricey. So I don't know what type of payments are Lightning good for. They're not-- This doesn't seem to me that it's very good for small payments. It doesn't seem to me that it's very good for large payments, and I'm not even certain that the-- for the payments in between that Lightning could potentially be good for, I'm not even sure that, it's going to be good for that because, We haven't really understood yet, or we haven't really addressed, like, what are the fees going to be? If you are using liquidity that isn't your own, how much are you gonna pay for that liquidity?" }, { "speaker": "stephan", "time": "20:16", "start": 1215.96, "text": "Okay, so I guess before we, yeah, I guess there's, there's probably a few answers I guess we would just wanna clarify from Eric before we go back to Odi here. So I think with the small payments, there, I mean, you mentioned there, okay, you might need to do what's called a penalty close or a justice transaction in like the Lightning Labs terminology. I, but my understanding is that kind of thing doesn't really happen that often. It hasn't been a big deal right now, so I guess my question would just be, why do you think that's going to become such a huge thing? and also around large payments, I mean, I'm sure you're aware, but I guess the typical answer would be, hey, look, a lot of people now have MPP and route retrying, meaning they can try the route in different ways. So I guess, Eric, do you have any kind of counterarguments on that, or is" }, { "speaker": "stephan_livera", "time": "21:05", "start": 1265.18, "text": "Your counterparty, if he can close the channel, in a way that benefits him, like he earns money by doing it, and, it's too costly For you to make a justice transaction and prevent that behavior. I don't see, I mean, I think that the, the reason why this isn't happening so much is because right now Lightning isn't consisting of that many adversarial actors, but that's going to become a problem once the masses start using it, this. I mean, I may be wrong about this, I'm very happy to, I mean, the, the reason we're having this call is not like I don't want to be," }, { "speaker": "stephan_livera", "time": "21:47", "start": 1306.76, "text": "this This person that, has this negative agenda about Lightning, I want us to sort of reach a mutual conclusion about what the future could look like. So if, if I, if I'm wrong in, in thinking that way that Lightning isn't perfectly suited for small transactions, and I'm very happy to learn, and then we can sort of identify what Lightning is good for and what it isn't." }, { "speaker": "stephan", "time": "22:09", "start": 1328.59, "text": "Yeah. Okay. Odi, did you wanna, respond to anything there?" }, { "speaker": "guest_2", "time": "22:12", "start": 1332.21, "text": "Yeah. So, You know, Eric, specifically to your kind of pain points with Lightning, you know, I think the issue with, first of all, with small payments. So the way I think, you know, the way I think about Lightning is that you- Like the Bitcoin base layer protocol is just not very good for payments. It's, not just for the scaling reasons, the, it's a big reason, but it's not the only one. you know, just keeping track of UTXOs is weird, it has weird privacy concerns, that are very counterintuitive for, for normal people. And, I don't know, it's just a mess the way that you're gonna send, you know, just sending money to an address is, is pretty messy. you really want to have invoices That specify amount and you want someone to, to kind of confirm that this is the amount they asked for, and it's great if it's part of the protocol. So Lightning Kind of gives you a lot of nice features that are just missing. They could be done on base layer Bitcoin, but it's, it's, it may-- they make more sense on second layer. and then what you end up with is you end up with a balance, which is something you don't really have on, on base layer Bitcoin, but you end up with, because you have UTXOs there. But on Lightning, you end up with a balance, and you change this balance over time, and if something goes wrong Wrong, on the main layer, then you can do this, just this transaction process and get something that is approximately that balance back to you. Now, it's possible, it's, it's likely that, you know, one, you know, if you're gonna use Lightning to make transactions every day, then it's possible that like the last transaction that you make, you might lose its value because the fee might be bigger, right? So maybe you made a five dollar payment in the- Last day before someone tried to cheat you and you caught them and you had to pay the, the mining fee and those five dollars are now lost. But you also had a history of hundreds of days, days before that that are accounted for. So, you know, you, you pay the mining fee once, the whole point is that you, you kind of- You get to use that mining fee for many transactions and not just one. So I think it's still valid for small payments, I think it's still okay. If you're making one small payment, then it's obviously not useful, but if you're gonna make a lot of them I think it's fine. Stephan brought up AMP, which should, you know, alleviate the, the, the issue of, of, you know, what happens if on the way you have just channels that are too small. I-- well, I'm saying alleviate, alleviate is a big word, but it's, it should help mitigate it, should make it less common. And, you know, similarly with liquidity, so if you're gonna look at, at, again, those newer consumer wallets like Breeze and, and Phoenix, like the experience there is amazing, you don't even know, they don't tell you about the channels if you don't really look into it, and they just make sure that you have a channel, and when you get a payment, they're gonna open a channel for you if you don't have one. and it's seamless, like you're not even told about it. It really works great. Like," }, { "speaker": "stephan_livera", "time": "25:37", "start": 1537.4, "text": "if you're gonna try, is that customer acquisition, acquisition strategy, or is it, is it really something that is scalable? Like, can they really do that for the long term, for, for hundreds of thousands of users?" }, { "speaker": "guest_2", "time": "25:48", "start": 1548.46, "text": "Well, they might, they might need to charge for it in some way, for sure. It might, at some point, this service might be charged, you know, something that they charge for, or, They might have some other way to monetize, but, but yeah, for sure they can't, you know, they can't do it for free, it's costly. But, you know, that's fine when you're connecting to the internet, the, the, the your ISP has some expenses, that's fine. but they're able to do it because you, they have a monetization strategy. I, I don't see anything wrong with that. The important thing is that anyone can be an ISP. Now, that's Not necessarily true in the internet world, at some, you know, some places you're gonna need a license for that. I guess it depends on the jurisdiction. the question is, if you wanna be, s-- you know, a Lightning service provider that's gonna open channels to its users, what are the challenges to becoming one of those? And I think I think it's a pretty low bar, I think that, that probably anyone could be one, you know, if as long as you have a way to, to attract users or customers, I think you can do that. Because, you know, you just need to open channels basically, you don't need to ask for anyone's permission. And, you know, if you're in a jurisdiction that requires you to ask permission, then you can go somewhere else. That's, that's, that's the beauty of Bitcoin, right? So I, I think, I think that it's pretty good. it's not, you know, it's not this magic bullet that just works and not this switch that you just turn on and everything works. But I think that it's pretty good, it's already pretty good. And, you know, things like, you know, the, Lightning Labs just introduced the Lightning Pool tool, I think it was a couple of weeks ago. Obviously, it's very early right now. I would say that it's, you know, what, kind of a testing thing right now At least that's how I would define it, but, it's obviously gonna grow. This specific product or something like it is obviously gonna grow, and people are gonna use it, and eventually there're gonna be good tools to use it. And I guess this, this goes back to my main point, I think You know, if you wanna use something like Lightning Pool right now, you're probably gonna need to be an expert. But if there's going to be an actual real demand for merchants to, to have significant incoming liquidity, then people are gonna supply tools to do it, because, you know, there's gonna be money in doing it, so someone's gonna do it. It's just right now You know, you're gonna see a lot of, developers kind of arguing about what's the best technical way to do stuff, just because there's not a ton of, of demand right now. And when there's gonna be demand, there's gonna be urgency, then, you know, things are gonna start falling into place quicker." }, { "speaker": "stephan_livera", "time": "28:37", "start": 1717.31, "text": "Well, you know, it, it sounds to me like you're saying that, you know, many of these pain points with liquidity and having reliable counterparties to, to have your channels with are going to be alleviated by peering with, these Lightning service providers, these trusted, these, well-defined, good actors that help you, get onboarded to the Lightning network. But I wouldn't say they're very trusted" }, { "speaker": "guest_2", "time": "29:03", "start": 1742.92, "text": "Well, they are, they're a wall, but I wouldn't say they're trusted. Like, what are you trusting them with?" }, { "speaker": "stephan_livera", "time": "29:08", "start": 1748.2, "text": "Well, w-what you're creating is essentially a dependence on specific actors in the Lightning Network that you will need to be connected to in order to have a good experience while using the network. While in the same sentence that you said all that, well, in, in the same, in the same, ear-earlier in that sentence, you were talking about how Bitcoin wasn't really good as a, a transaction layer, but Lightning was good because it had all these privacy feature. Now, I wanna ask like, what level of privacy do you think you're going to get on Lightning if you are, if your gateway to Lightning are these established Lightning service providers? Don't you think that the amounts can be linked if you pay through a Lightning service provider, if all the payments goes through the specific gateways in the system and you pay specific amounts and they re- they end up at endpoints? those transactions can be linked. I mean, I don't think that, Lightning has-- I think that Lightning has even, poor, more poorly understood privacy features than, I mean, we know that Bitcoin base layer privacy isn't good, but at least we know how bad it is. I think Lightning is worse in a way because people expect the privacy to be good, when in reality, you know, I can come to think of so many different attacks on, Lightning from a privacy perspec-perspective, from, you know, just, figuring out how much, how much is in a channel. I mean, you can see all the channels that are being-- there's too much met-metadata that is being leaked when you open, lightning channels. you can also, figure out like how large is in someone's, lightning channel, and you can try to figure out what their node is, and since everything needs to be online all the time, that comes with a whole- Other category, I mean, you can't even receive a payment in Lightning without being online and leak-- and then you're gossiping data about who you are in the network. I mean, yes, those are things that you can get around, but it's like you're creating this larger ship with a much larger attack surface, surface to attack from a privacy perspective. so I don't think that the Lightning is a good solution to privacy at all. I think it's like, y-y-obviously it's not worse than, than Bitcoin," }, { "speaker": "guest_2", "time": "31:28", "start": 1888.38, "text": "but it's not- I think it's very Great solution or not, because there's a not enough usage yet to really analyze it seriously. B, there hasn't been a ton of research into it, there's been some, but not a ton of research into it. I think it's very early to tell, Even though it's early to tell, I think we can all agree that it's better than, than, than just Bitcoin is, just base layer Bitcoin is. But, yeah, it's, it's, it's, it's, it's hard to tell. I think, you know, generally when it comes to privacy, I am kind of pessimistic on, The possibility of the existence of some tool that, you know, you just press a button and it's, makes you private. I think you're probably gonna need to be, whatever you choose to use, you're probably gonna need to be kind of involved and at least have some idea of what's going on if you're hoping to achieve, privacy. So with Lightning, you know, you're gonna need to use, Tor probably for your node or your wallet or whatever it is, and you're gonna need to use it intelligently too. there's, there's a" }, { "speaker": "guest_2", "time": "32:39", "start": 1958.62, "text": "and I think the nice thing though is that Lightning creates the opportunity for you to do it. So in Bitcoin, if you're gonna pay someone to a standard address, it's gonna be very hard for you to do it privately, it's just difficult. with Lightning, if you know what you're doing, you have an opportunity to tap into this liquidity pool that is, potentially kind of dark. You know, you can make a payment through, you know, you can make Make sure that you're not connecting to a very popular, Lightning node, that you're connected to a smaller one, and to have a route that isn't, you know, doesn't stand out too much, and that the participants in that route can't, grasp all of the information. You have that option, and you're connected to the same network, so you're still, you know, you can still be accessible. So what I'm trying to say is, you can choose, you can pick and choose. If you wanna be that consumer that wants the simplest solution Then you can go with one of those simpler solution and maybe sacrifice some, some privacy. And we know, you know, even the, the, those two wallets, I, I, I remember, I don't, I'm not sure about Breeze, but I think that Phoenix, made some statements about how they know that privacy isn't great right now with Phoenix and they're gonna improve it in, a few ways, but it's, it's not amazing right now. But the nice thing is, you can pay someone who's using Finix with your completely, involved custom setup that you made on your own, so you can have your own setup and you get con-get to connect to the same network and pay to someone who's using those simple consumer wallets. So that's, I think that's where the real value is. Like everyone's connected to the same network and the protocol allows for privacy. of course, some people aren't. be private, maybe a lot of them, but the protocol allows for it, and if you're careful, you can participate while, while, while keeping your privacy. So I think that's the, the, the biggest benefit. Now, how it's gonna look like, what's, you know, what the stats are gonna be, how many, what's the percentage of actually private transactions, gonna be, it's very hard to tell right now, really hard to tell. But I think that if someone wants to, they can. So I guess we'll know how many people want to." }, { "speaker": "stephan", "time": "34:56", "start": 2096.1, "text": "Yeah, I think, it's also, it's a, it's a complicated thing to talk about, but it's probably fair to say that we can't let, we shouldn't let the perfect be the enemy of the good, and the fact that we use Lightning enables dramatically more transactions for far less of a fee, even if there's still some risk of things like penalty close or justice transaction or, in this case, privacy leakage, which, you know, I think some of these things are openly admitted by some of the developers, and, you know, if you look back at some earlier episodes with, say, Rusty Russell or Christian Decker, they'll talk about some of these things openly and say it's possible right now, if, you know, i-if you have like a really well-connected big Lightning node, then yeah, you might have some ability to try to- Understand what's going on in terms of, you know, where likely, the payment, you know, is coming from, a-and things like that. But it's not, I think, you know, also if you talk to them, they'll say, \"Well, there's other technologies coming and things like, hopefully, once we get Taproot, then we'll have, you know, point time locking and we'll have some of these, you know, more, fancy technologies that will improve our privacy also.\" So it's kind of Yeah, I think also it's fair to say, it's probably fair to say that, you know, if you're doing an on-chain payment and you're not using any kind of coinjoin and privacy techniques, that is on the chain forever, whereas at least to surveil a lightning transaction, it kind of takes a bit more than that, right? You have to actually have the nodes set up and you have to like have routing, and it's not as easy to just simply surveil, as compared to Bitcoin, right?" }, { "speaker": "stephan_livera", "time": "36:40", "start": 2199.67, "text": "Alright. so I, I wanna take this conversation to the logical next step, and this is, very difficult for me for how to bring this up, but," }, { "speaker": "stephan", "time": "36:51", "start": 2211.32, "text": "sure." }, { "speaker": "stephan_livera", "time": "36:52", "start": 2212.3, "text": "From listening to the two of you, and, and from having had this conversation for a long while now, it feels to me that there are quirks of the Lightning protocol that make it difficult to- To, maintain your privacy and, harm the, user experience for normal users, that will either require users to be very sophisticated and know what they're doing when they're interacting, with Lightning or they will need to make trade-offs in terms of, you know, maybe they'll, they'll accept completely custodial, Lightning wallets in order to get their, chal- their, their channels, perfectly balanced and to be immune to certain- types of attacks. I think that these categories of solutions, like either having to be, a sophisticated Lightning user, which is a hard thing to be, or being a completely custodial user, which I don't think is good either, I don't think that those two options that we have are the only options that we have for transacting Bitcoin in a trust-minimized, scalable and private way. So this is the whole reason, I mean, nowadays, people, they don't think of me as, of, of, as a proper Bitcoin anymore, because I've started to pay attention to things that's going on inside o- other protocols. so I'm gonna just go out and say it, I've- if you have been following my Twitter, you have perhaps seen that I'm doing this experiment called the ZK Sync Torch. Now, the reason that I'm doing that is, is that I believe that perhaps, you know, if we zoom out a little bit and we think Lightning isn't the only solution, maybe the best way to transfer Bitcoin was, was after all, to do it on a side chain, because on a side chain you don't have these issues with, channels. I mean, you can, you can send your bitcoins to whoever you want, Who has an address on a side chain, there is no, there aren't no channels, there aren't no hot, there aren't no online requirements, there aren't no liquidity, requirements, you can transfer to whoever you want. But, I mean, side chains are the, the side, the two side chains that most people are aware of, which is the, completely, custodial multi-sig based custodial, the federated custodial model that Liquid has is one. the other one is where instead of having a federation, in a multisig being in custody of, of your Bitcoin, you have the miners being in custody of your Bitcoin, which is the drive chain, option. I don't think that those two options are the best way to have a, a side chain. I think that the, the, TBTC, the Trusted Bitcoin on Ethereum, which uses, it uses an SPV proof, like the, the Ethereum, Ethereum runs a, an, an SPV wallet basically where It, looks at Bitcoin blocks, and is able to, based on, based on an SPV proof coming from the Bitcoin chain, that's, that's how it allows Bitcoin tokens to be minted. And how the funds are protected, or that, you know, there are people who, there are, there are people who receive the real Bitcoin on the Bitcoin main chain, but those, people that are holding the real Bitcoin, they are, they are unable to steal those. Bitcoin's, because if they do, they will lose a bond of Ether, and doesn't have to be Ether, it can be any asset on, on Ethereum, right now it's Ether. They will lose that bond. So I think that's, that's, that side chain model where you, you tokenize Bitcoin on another chain using an, a, a SPV logic, and where the, the, the assets that are held on the main chain are being protected from being stolen because they are, bonded, they are bonded by Ether on, on the other chain. I think that's, A genuinely interesting side chain, chain solution, because you don't have the, the, the multisig, the federation, the liquid feder- federation can't run away with the bitcoins. the miners in drive chains, they can't run away with the bitcoins. this is a, is-- this is a better model to protect, bitcoins on a side chain, and we have that on Ethereum now. And what we also have on Ethereum Are, other sc- scaling, technologies, and the most popular one, one right now are called rollups. and In, in a rollup, you can, you can transfer around these tBTC, tokens. That's what I, that's what my zkSync Torch experiment was about. You can transfer around these tokens in a rather scale-- not as scalable as I think, but rather scalable, transaction system. you don't have any channels, so I can, I can send these tBTC, tBTC, tokens to, your address, without you having set up, a channel Channel without you having any inbound liquidity, without you being online. that's why I wanted to do, to do the experiment just to show people how easy it is to accept payments without having to deal with all these other, complicated things that we on the Bitcoin, in the Bitcoin world, associate with layer twos. and we can also solve privacy in these layer twos because we have a fantastic, category of technology called zero-knowledge proofs. And zero knowledge proofs can be made to anonymize, I mean, that's how Zcash does it, right? That's how they, get perfect anonymity of both the sender, the recipient, and the amount. We can have that technology inside, a rollup on Ethereum. And if you're saying that we have to either deal with this messy Lightning solution or we have to do it custodially, like if those two aren't the ideal options, I mean, I'm not saying that the Rube Goldberg, Rube Goldberg machine that I just mentioned The, the side chain peg on Ethereum and the roll up technology, I mean, that's also a complicated solution, of course. But is it any worse than the two other options that we have talked here about here today?" }, { "speaker": "guest_2", "time": "43:19", "start": 2599.05, "text": "Yes. So, so it's, it's, I, I'm sorry, Eric, but I think it's a ridiculous proposition that this is somehow, you know, an easier, solution. And, and there are a few reasons for that. One, first of all, you know, I think that your torch I think experiment is cool, I think it's a, you know, it's a cool idea. I, I think that TotalNode doing it with, Lightning was cool, and I think that trying it out with other tech is also cool, that's great. but, you know, you have to, when you see, you know, when you get those user experience that are pretty good, you know, we have those on Lightning too. So as we just said, you can download, Breeze or Phoenix and just start using it, and it just works, it You don't need to mess with channels, you don't need to think about them, you don't need to do anything, it just works. Now you're gonna say, but privacy, but this, but that, okay. So look, you're gonna use the, the tools that you used, right? You're gonna use, a web page that someone made, you don't know what's in the web page, you're gonna connect it to some web extension that you don't know anything about, it's gonna connect to some server probably on AWS that stops working with, when Amazon is down" }, { "speaker": "guest_2", "time": "44:37", "start": 2676.64, "text": "Because it's still in development, but it's always in development, so it's just, you know, it's not better in any way. So in, in, in Fin-Finex and Breeze, they have their trade-offs that they chose to use in order to give you a better user experience. And in the same way, those experiments and they are experiments, like something like ZK-Sync isn't anywhere as advanced as Lightning is right now. It's, it's, you know, it's an idea. It's not implemented anywhere to the same level that Lightning is, which is fine But anyways, they chose trade-offs too, and their trade-offs are, for example, you are not, you know, you're gonna trust that AWS doesn't go down or whatever server backend they're using, and, and so on and so on. And the, the-- I'm not gonna go through the entire way that it works. Similarly for tBTC, which is, you know, an entirely different construct which you have to, to believe in and trust. tBTC, you know, you mentioned the ETH, collateral. In order for the ETH collateral thing to work Work, you need to have some source of, of a, a BTC to ETH price, which is very hard to do in a decentralized way. I don't wanna get into how TBTC does that, but I, I, I hope that it's obvious that it's at least, a concern. And just today, as we're recording this, just today, I think, a, a Compound user lost about fifty million dollars, not a lot, just fifty million, five zero and then six more zeros. so he lost fifty million dollars because of, of, Oracle that was exploited basically. or, I don't think it was a technical exploit, it was a, it was a, it was a, Monetary exploit or financial exploit, but, but the point is they trusted an oracle which they probably shouldn't have trusted and, and lost, lost just fifty million dollars. So, Those things happen. The, the, the, the, the, the, the thing, so when you're using something like tBTC and when you're using something like perhaps those, second layer networks on Ethereum, you're kind of putting all of your eggs in the same basket. You, you have this, all of those risks on top of each other and which are very hard to evaluate, and you end up with something that, you know, with Lightning, if something goes wrong in one channel, then that's it, that's what's lost. This one channel with tBTC and with the zkSync stuff, if something goes wrong, then potentially everything is lost, everyone's money, which is why they're huge targets. And it's just, you know, just saying that they're somehow, you know, better or easier is just, I think it's absurd. I think there, there are cool things there, there are ideas that are interesting. I think that the, the notion that someone will choose to use that for Bitcoin payments I find it absurd. I mean, it's so out there. I, I can see people use it for, you know, they're gonna use tBTC for, for loans, for lending, for whatever, to, to, to say they're gonna use it for payments. I mean, maybe, of course, you know, but I don't know what the future holds. But I think that it's really not easier than Lightning anyway. And, and I wanna say one last thing about the, the whole trade-off, issue. So there are always gonna be trade-offs. I think that, that, you know, right now with merchants, let's take the most extreme, Bitcoin merchants in existence, okay? The ones that really care about self-custody, there aren't a lot of those, right? Most, most of the merchants that accept Bitcoin are just gonna go to some payment service and have them handle everything and pay them with fiat in the end. That's, that's, that's the majority. But let's go to the most extreme of them who are gonna host their own- Own like a BTC pay server and, they're gonna have the BTC pay server send the funds to a, to a public, to, to, to a cold wallet that isn't even connected to, to the server itself, We're gonna take all of those steps to set everything up. These people are still trusting the server, those merchants are still trusting the server because most of them aren't gonna have the server at home, right? Because they need to, you know, they want to serve customers and they want to make sure that they have a very good uptime, so they're probably gonna ser- host the BTC safe server on Amazon or whatever it is. And Amazon isn't gonna hold their keys, but Amazon is gonna generate the addresses that, that customers- They're gonna send money to. So, you know, if, if, if Amazon turns evil, they could just show you addresses that are, actually going somewhere else. So, you have to have the trust, merchants will almost always have the trust on with, if, with someone, with some service provider, just because they, you know, they do the calculus and they're saying, okay, it's a business deci-decision, I can host my own server, but it's gonna be costly, or I can outsource it, and then I take some risk there And I can, you know, I can take the, the, the, the 0.1% risk that, that, that a limited, something bad happens in a limited way and affects a small amount of my sales, then, hosting it myself and then it goes down for five percent of the time and I lose more sales. So it's, it's, you know, it's a very basic calculus there. so merchants are almost always going to trust some service provider in some way. So to, to say that they'll go through This, you know, very convoluted system on Ethereum that has you trust all weird people just to avoid what? To avoid having a service provider. Merchants love service providers, they want someone to take care of it, they don't wanna do it themselves." }, { "speaker": "stephan_livera", "time": "50:32", "start": 3032.06, "text": "Okay, so let me, let me stop you there because you said, you said that this was a completely ridiculous notion. So I wanna ask, is using a side chain, like any side, like if, if we can just think of a random hypothetical side chain, is, do you think using a side chain to- To conduct Bitcoin transactions. Is that absurd?" }, { "speaker": "guest_2", "time": "50:53", "start": 3052.99, "text": "I think very often it is. it-- again, it depends on the use case. I don't know if you can come up with, with a good use case maybe. I think that to do it for payments, it's, it's kind of, it's kind of absurd because it's, it's so convoluted that, that I can't see it." }, { "speaker": "stephan_livera", "time": "51:09", "start": 3069.29, "text": "Okay. Well I don't, I don't think that using a side chain to make Bitcoin payments is absurd, and I think if you look at most of Bitcoin history, where we were, a couple of years ago, I mean, everybody wanted and envisioned that we would make, Bitcoin transactions on side chains. I mean, that's what, that's what's why Blockstream, the company, was founded on. so I think it's a niche opinion that you have that side chains would be sort of an absurd, way to make tran-- to make transactions. I'm not" }, { "speaker": "guest_2", "time": "51:38", "start": 3098.17, "text": "trying to Opinion." }, { "speaker": "stephan_livera", "time": "51:42", "start": 3101.59, "text": "All right. Sure. But if we, if we, if, if it's possible for me to maintain that making Bitcoin transactions on a side chain isn't absurd, and I think that I'm not the only one that believes that, then if you have a side chain and you're gonna make Bitcoin transactions on it, wouldn't you want the most trust-minimized pegging mechanism that you could have for it? Well, the, the construction that I've just explained, the TBTC, mechanism, it is the most trust-minimized. I" }, { "speaker": "guest_2", "time": "52:10", "start": 3130.09, "text": "don't know what I have to tell you, Eric, I wouldn't use a sidechain for payments, so I, I really don't know what to tell you. I don't think that it's, it's a good idea. And if you're gonna-- you, you know, if you can say maybe the TBTC construction is better, I honestly don't think so, but, but maybe it is. I, I, you know, I, I'm not-- I don't have the tools to judge that. But I, I really just wouldn't do it. I wouldn't use any sidechain. I Liquid Bitcoin, so maybe I'll send them. The tr-the same can be true for TBTC. Most likely it's not gonna happen. Neither of them are probably gonna happen. So I don't know what to tell you. I mean, I, I don't see that this scenario is likely." }, { "speaker": "stephan", "time": "52:53", "start": 3173.16, "text": "Yeah, and I, I just wanna add one point in here as well, guys. So Eric, you're saying, okay, using tBTC on Ethereum might be more trust-minimized, but ultimately, and I think to the point Udi was making earlier, anyone using that is also taking on platform risk of Ethereum, whereas if we just stay in Bitcoin and Lightning, we, we understand that model more and we're not taking on another whole platform worth of risk. What would you say in response to that?" }, { "speaker": "stephan_livera", "time": "53:19", "start": 3199.0, "text": "Well, I think that, Lightning, which is- The option here, it's, it also comes with, number of, specific risks, and I don't, I don't agree that these risks are only isolated to specific channels. I think that Lightning as a protocol, I wish I, I wish I had a list of examples of the different, design attack, the, design-based attacks, that aren't only, it's not only griefing attacks that you can make, it's not only DDoS attacks. There are actual attacks that you can burn, your counterparty's balance, and that, that attack isn't isolated only to, one channel. I mean, we could, we-- and we could have bugs in Lightning code bases just in the same way that we have bugs in, in any code base. I don't think it's fair to say that, you know, this one solution has, a, a, a, a platform-specific risks that encompass all the transactions being made there and the- The solutions that you guys have described are somehow immune to that. I think at the end of the day, if you want high security, the only way we're gonna get high security in open source protocols is to have something that is frequently used by everybody and that has a lot of eyes on it. And how do we get a lot of eyes, on something? How do we get a lot of people investigating and testing out, a, a, a single tool? Well, it needs to have good, a good fundamental user experience Experience, once you get the u- once, once you get the users using the thing because they like the properties, like let's say, you know, it ha- it has good privacy and easy ways to make payments that doesn't have all these complex, ways to make them. Once you have that, you'll attract a large user base and then That transaction, transaction layer is going to have the most eyes on it, so whatever the bugs that could be in there are, they'll get discovered in that protocol first. I think that the easiest way that you end up with having a buggy system is by building a solution which has hurdles to entry so that nobody's using the thing, people are barely looking at it because it's not a popular solution enough. So I think popularity in open source, that's the best way to attain a high degree of Security." }, { "speaker": "guest_2", "time": "55:44", "start": 3343.62, "text": "the popularity of, Bitcoin payment solutions on Ethereum is, somewhere between zero to one users. it's, it's-- Because maybe Eric, you're using it, but, but that's it. No one, no one is using--" }, { "speaker": "stephan_livera", "time": "55:59", "start": 3359.11, "text": "Yeah, but it's always gonna be the case with cutting edge technology that, you know, nobody's using it in the start. Like, I'm, I'm looking at the fundamental properties of these technologies, and I'm seeing that, we have the- from like from a completely objective and when I'm, when I'm not looking at, you know, usage sta-statistics, I'm lo- I'm only looking at the properties of what it could become, then I see, tremendous potential in that you have a transaction system which isn't based on channels where you don't need to be online, anybody can receive a payment, and you can implement zero-knowledge proof technologies which anonymizes both the receiver and the sender and the amount. I mean, the properties that I'm talking about there, that could-- I think that's what First, it's, it's gonna, it's going to attract usage for stablecoins, and I have, I have a long thesis about why I think that stablecoins will be the first thing that we will use a lot for medium, medium of exchange transactions, and once you win that use case, then other cryptocurrencies are gonna start latching onto that transactional system, and I think that Ethereum is, is the, network today that is making the most, stablecoin transactions. Those stablecoin transactions are gonna migrate to the layer two solution systems In Ethereum. And that's-- those technologies are gonna get perfected because there's a lot of demand for making those types of transactions. And one of the-- But" }, { "speaker": "guest_2", "time": "57:19", "start": 3439.16, "text": "there's not, there isn't demand for payments in USDT right now. There isn't. There's demand for trading with USDT, there's demand for speculating with USDT. There isn't demand, that's the point, that's my point from the beginning of this discussion. There isn't demand, not for Bitcoin payments, but definitely not for stablecoin payments. It just doesn't exist right now. Now, it, it might Might tell the future, I don't know. It might happen in the future." }, { "speaker": "stephan_livera", "time": "57:44", "start": 3464.44, "text": "Yeah. But in on that, why do you think that stable coins? I mean, why, why do you think, why would you even conceive that stable coins? I mean, it, it's a dollar without a bank account, and it could be made, almost completely, perfectly private. Why wouldn't that, in the future become a very attractive, like, wouldn't you use it? Wouldn't you use if you had a bank balance, if you had a dollar" }, { "speaker": "guest_2", "time": "58:09", "start": 3488.57, "text": "account? first of all, you know, it's not without a bank, there's an issuer that you trust. And, and I think that's, that's, that's a pretty important part of this. So if account, not without, you don't have to have the" }, { "speaker": "stephan_livera", "time": "58:24", "start": 3504.0, "text": "account. No," }, { "speaker": "guest_2", "time": "58:25", "start": 3504.73, "text": "it's true, you don't have to have an account for now. Maybe regulations change, but for now, you, you don't have to have an account." }, { "speaker": "stephan_livera", "time": "58:30", "start": 3509.53, "text": "There are, there are other stablecoin models where, which circumvent these prob- there aren't perfect ones existing right now, but" }, { "speaker": "guest_2", "time": "58:41", "start": 3521.4, "text": "you know, I can only talk about what, what I see, and, and I, I, I think that the, the reason that you're not seeing demand right now for stablecoin payments is because, you know, PayPal and Venmo are good enough. I think that's the reason why. Now you're gonna say, well, some, you know, some things you can't use Venmo for, and that's true. and I think that for them, they're gonna be their own custodial services. So if you accept that USDT is a good medium of I don't wanna judge that myself, but if you believe that it is, then you can go ahead and deposit your USDT, on Binance or whatever, and use that to transact, and people do that. So So the, when you're gonna have this second layer solution, it's gonna have to compete with that, and you're gonna have to convince people that they should install, I don't know, a node, that should, a wallet, I don't know what they have to install, and that they should trust the oracle, and that they should, trust the, the compression system, and they should trust all of those things because why? Why is that better than just using Binance to, to send stablecoins around? And I believe that most people aren't gonna care that much. Some people will, especially a lot of the, the, you know, loudmouths on Twitter might, I think most people aren't. especially when you see that the, the stablecoin is already trust-based. It's not like, you know, it's not like if you, you're using it without Binance, the trust disappears. It's already trust-based. So I think that most people are gonna be okay with, with trusting, some, you know, trusted party to facilitate those payments, they already do. you know, most people, don't-- I don't wanna say most, a lot, a ton of people don't ever let their stablecoins touch their self-custody wallets because there really isn't much of a point. They move them between exchanges. some people seem to like having them on their own wallets on their ledger or their phone or whatever it is, but a lot of people don't. so" }, { "speaker": "stephan_livera", "time": "01:00:47", "start": 3647.61, "text": "Oh, okay. You know, I'm fine with, I'm fine with saying, let's keep, Eric's, Ethereum roll-up, TBTC. Let's, let's, let that remain be my, pet theory, if you will. I'm, I'm, I'm okay with, us not seriously entertaining that idea. But if we go back then, because I, this whole stablecoin discussion is just, another pet theory of mine that is, how I think that, The system will end up gaining popularity. So it's not really to the main, the core of the point. If we go back to the core of the point, because I really want to reach some kind of conclusion here, which is, if it's not, on a side chain, and Do, how do you think that we are going to be, if, if, if we reach a point of Bitcoin hyper, a point of Bitcoin, hyperbitcoinization? How do you think that the, the majority of transactions are going to be conducted? Do you think it's going to be custodial systems? Is that how, how we're gonna to make Bitcoin transactions?" }, { "speaker": "guest_2", "time": "01:01:55", "start": 3715.97, "text": "I think the most likely, option is What's that? Sorry?" }, { "speaker": "stephan_livera", "time": "01:02:03", "start": 3723.05, "text": "Is it Lightning or-- No," }, { "speaker": "guest_2", "time": "01:02:05", "start": 3725.46, "text": "no, I think it's gonna be custodial. I think the most likely option is, you know, what Hal Finney predicted back in twenty ten or whatever it was, that people would just use Bitcoin banks for payments. I think that's the most likely option that most people will use. I'm not, you know, I'm not sold on it for one hundred percent, I think it's the most likely option. I think that's what, assuming that people are gonna want to spend their Bitcoins at all, I think that that Streamer at least, Lightning can still coexist in this, so, you know, y-you can have those networks, interoperate if you want, a, a custodial service can implement some of, of the Lightning technologies, it can, it can implement the invoicing protocol for example, it can implement LNURL, it can implement even the, the, the way the channels work just custodially, the, the, the, the, it can be like- Like this mix, right? And then you could choose, some people could choose to use Lightning in a, in a, in a self-cast, custody manner. So I think that's, that's something that is likely, again, if people even wanna pay with Bitcoin, you wanna spend Bitcoin at all, which isn't something I'm entirely sure they will, but if they do, then I think that's a possible, scenario, the most likely one, I would say. I think also Lightning is pretty, you know, it could happen. I just, I'm just not sure This hard enough, but if they do, if there's demand, if you know, if people actually like you think here, Eric, if people actually prefer, self custody, solutions, then I think Lightning can get there. I really think it can. I think that, you know, we al-again, we're already seeing that the, the apps that exist today are really user friendly, they're really great, they, they just work, you download them and they work, they're really good. And they're gonna get better. So yeah, you're gonna have a service provider there, you're not gonna do it on your own, you'll need someone to manage channels for you probably. but it can be done in a self-custodial way. I think it's, you know, I think it's pretty good. I think it's a pretty good way." }, { "speaker": "stephan", "time": "01:04:14", "start": 3854.38, "text": "And we might also see this kind of in-between model as well. We might call it the uncle Jim model, right? So we might see like a person, one person in the family who runs a lightning They all have, they're kind of all on board to that, right? And maybe, for example, even today, if they're running, Blue Wallet and LND Hub, or if they're running, I think there's CoinOS as well, so they can like kind of run a CoinOS instance and like the technical guy can like manage the channels underlying, and then everyone else in the family or, you know, close friends might just use that, and it's kind of custodial but with a semi-trusted, you know, it's like a family member or a close friend. So" }, { "speaker": "guest_2", "time": "01:04:57", "start": 3897.07, "text": "kind of the, this, the, you know, the, the property of Bitcoin being permissionless allows for all of those funky setups, and people are just gonna form their own communities to do that. Some of them are gonna be technical and offer that service to close friends or family or more than that, and some aren't, but that's, you know, that's fine, that's how people choose to. Do their business." }, { "speaker": "stephan_livera", "time": "01:05:19", "start": 3919.32, "text": "Yeah, I mean, I, I think I kind of agree. I mean, I was, before we had this conversation, I was sitting last night on my balcony and I, I have, I have personally, most of my net worth in Bitcoin and, and then I have my regular salary, which is, you know, Norwegian kroner on a, on a bank account. And how do I feel about that? You know, I'm, I'm, you know, as long as I can have the majority of my funds, like the store- value portion of my capital, s- stored non-custodially, then I'm happy and if I can use my salary and everyday spendings, you know, that's I suppose, you know, that's an acceptable way, and I think that's is indeed how most people are gonna choose to, to, to do this. But I do think like if, if If my, if my conclusion is that most people are gonna be using Bitcoin custodially, then I think wanting to experiment with Bitcoin on a side chain where you have better privacy, that, I, I think that's definitely, I mean, if the option is to do it custodially or a funky Lightning solution, I think that we shouldn't think that people who want to try a different way are necessarily weird or, you know, absurd for thinking That there might be a third way that we can explore before we accept that these are the two only solutions." }, { "speaker": "stephan", "time": "01:06:48", "start": 4008.02, "text": "Right. so I, I think one interesting point that might be good to discuss now is just what kind of data points would we look at? So let's say, you know, a year from now or five years from now, what sort of data points would We externally look at to say, \"Oh, okay, yeah, that was kind of the story there.\" So a couple examples that I can think of, I know Eric, you've done, bets based on total value locked. Another one we could look at, you know, how many Lightning nodes are there? How many Lightning payments are there? How many stores use Lightning? What kinds of, yeah, what kind of external data points would you guys look at here?" }, { "speaker": "guest_2", "time": "01:07:24", "start": 4044.05, "text": "That's a great question. I, I, it's funny because, you know, with Lightning, you can" }, { "speaker": "guest_2", "time": "01:07:30", "start": 4050.67, "text": "almost move the goalposts in a way, because you can say, \"Well, but maybe the channel is private and maybe, you know, we, we just won't know about it.\" And with, you know, with Taproot, it's gonna be even harder to know about those channels. so, and, and it's, I mean, it's, in a way, it's moving the goalposts, in another way, it's also true. Like, in theory, if it could exist, like a huge Lightning network now that we're not aware of, probably not," }, { "speaker": "guest_2", "time": "01:07:58", "start": 4078.65, "text": "And, so it's hard, I think that, you know, when you're gonna look at things like total value locked, I, I know, I think I know the bet that you're referring to that Eric made, I think with Giacomo, if I remember correctly," }, { "speaker": "stephan_livera", "time": "01:08:08", "start": 4088.3, "text": "so Brian Gentry, yeah." }, { "speaker": "guest_2", "time": "01:08:10", "start": 4090.77, "text": "Yeah. So the thing is, I think I, I don't remember what the, the bet was, but if, if we're, if the, the idea is to compare the size of value locked on, on second, layer solutions on Ethereum to, to, to money locked on, on Lightning, that's not a good comparison because there's probably gonna be more money on Ethereum simply because this is, you, you know, the Ethereum stuff is used for speculation, while the Lightning stuff is being used for payments, and the demand for payments is just much lower. if you're gonna look at Payments on second layer solutions on Ethereum, I, I, I'm not sure how to measure that, but I believe it's gonna be roughly zero for the next five years at least. I don't think people are interested in making payments on, on Ethereum, in Bitcoin payments on Ethereum. I don't think it's something that- You know, anyone has any interest in right now. I don't know how to measure that, but, you know, I can, I can imagine that there's gonna be some meaningful usage of Bitcoin on Ethereum second layers, but it's not gonna be for payments." }, { "speaker": "stephan_livera", "time": "01:09:16", "start": 4156.15, "text": "Yeah, I think we just fundamentally disagree there. I think that the, a private dollar, that is I mean, I, I, I, I just, I just think that it's this, it's a really, really, big use case, and I think that I personally would want, a wallet that I have where I can transfer my, dollars privately and there's no, One that can see which transactions I'm making, I think that, you know, with the whole way that the internet is going, that everybody starts to care more about their integrity, I think that people will start to prefer those, types of solution. But, I mean, that's, will, will, will be, it, it, it, it's just something that we're gonna have to see develop, I think. regarding which data points, to measure, I also think that that's very hard. I think that the bet that I made" }, { "speaker": "stephan_livera", "time": "01:10:10", "start": 4210.88, "text": "The best one that you can do, but I also kind of agree with Udi that it was, it was a bad bet for them to make because there are so many other reasons to put in, Ethereum funds in a layer two than there are to do it for Bitcoin. So I think they're gonna lose that bet, and it's not gonna be a, a super good metric. But I think, like in general, I'm not sure that we need so many metrics to understand where this place is headed. I mean, we know, like, just from, just interact with your fellow Bitcoiners I know that Lightning usage is pretty low right now, or extremely low even. You could say, I think that we're gonna know, a few years from now if it's, if it's picking up, if it's becoming a big thing that people are using, if you're using it with your friends, then you can bet some other people are also using it with their friends. so I don't know, we'll just have to wait and see, I think." }, { "speaker": "stephan", "time": "01:11:05", "start": 4265.18, "text": "Yeah, my speculation would just be that, look, most people are hodling Bitcoin, but there small percentage of the Bitcoiner population out there who are either all in Bitcoin or they only earn Bitcoin, so they need to spend. And then, given that they need to spend, they might-- they probably would look at using Lightning, but even as a driver there, we probably need, we, quote unquote, need the fee spikes to happen. And so that might happen. Let's say this next year or so we see this kind of bull run happen, there's a lot of on-chain, you know, usage, maybe at that point that's where, that's the driver. Over for these people to start using a lot more lightning transactions, that's kind of my speculation, but I think also just to add to kind of the point we were talking about with like how many people are gonna be on these stablecoins and so on, like it just comes down to It, we, we're all fundamentally bullish on Bitcoin, and so we see the world is, you know, repricing into Sats, you know, whether that's over the next ten or twenty years, people are going to want to hold Bitcoin, and so then, as we see that network grow, then, only then will we see more people who actually want to spend it, because as Uri pointed out, and I think Eric, you probably agreed, there's not a huge amount of people spending right now, but that will change, right?" }, { "speaker": "stephan_livera", "time": "01:12:20", "start": 4340.43, "text": "Yeah. Of course, that's when Bitcoin becomes universal hard" }, { "speaker": "stephan_livera", "time": "01:12:26", "start": 4346.89, "text": "There's, there being a demand for making transactions. And I think, I think just to wrap up at least the points that I had in this, this conversation is that I do accept that, most people will probably want to use at least the transactional port of their Bitcoin in a completely custodial system. And I think that if that's the case, then what we should perhaps focus on, what, where the real fight is going to be, is making sure that those custodians abide by proof of reserve Like that they, we can audit their funds and we make sure that they aren't inflating the Bitcoin supply by making more internal tokens than they actually have in their, in their holdings. I think maybe that's An easier thing to, I mean, maybe that's what we have to fight, yeah. So, yeah, maybe that's the conclusion that, proof of service is, is what's gonna matter." }, { "speaker": "stephan", "time": "01:13:22", "start": 4402.87, "text": "Yeah, for sure. and, do you have any, kind of closing thoughts for the listeners? And also, actually, while, while we've got you here, maybe give us your thoughts on, whether you've really left Bitcoin Twitter for good or are you coming back?" }, { "speaker": "guest_2", "time": "01:13:35", "start": 4415.36, "text": "so, okay, to, to sum up my thoughts, I agree with Eric on everything, because he's been on Bitcoin for eight years and, I disagree with him on everything. So, and, and about Twitter, yeah, I left, it's over, it's over. If anyone wants to, still follow my escapades, they can go to havefunsteampool dot com and sign up, and they'll find me there. And that's it, I'm gone. No more Twitter. Twitter is" }, { "speaker": "stephan_livera", "time": "01:14:04", "start": 4444.06, "text": "terrible. You can also mention that, your account is up for sale, as I understood it. How much, how much is it?" }, { "speaker": "guest_2", "time": "01:14:11", "start": 4451.75, "text": "Well, I'm not sure I, I'm not sure I can sell it anymore because I think it's apparently deleted at this point, but if someone really is in a super, super fast, then I, I think that, seventy thousand dollars is a good price." }, { "speaker": "stephan_livera", "time": "01:14:23", "start": 4463.47, "text": "Okay. Alright. Can you also just give one explanation, because you tell me that i-it is my fault that you have deleted your Twitter." }, { "speaker": "guest_2", "time": "01:14:32", "start": 4472.04, "text": "I Yeah, you blocked me or something for a few seconds, and, and it broke my heart, and I deleted my account." }, { "speaker": "stephan_livera", "time": "01:14:39", "start": 4479.84, "text": "So now I can hear the tone of your voice that you're being sarcastic, so I don't have to live with the guilt." }, { "speaker": "guest_2", "time": "01:14:45", "start": 4485.51, "text": "True." }, { "speaker": "stephan", "time": "01:14:47", "start": 4487.15, "text": "No, it's not really your fault. A-and Eric, just for listeners who want to follow you online, where can they find you?" }, { "speaker": "stephan_livera", "time": "01:14:53", "start": 4493.45, "text": "it's E R C W L on Twitter." }, { "speaker": "stephan", "time": "01:14:56", "start": 4496.64, "text": "Well, look, thanks very much, guys. I think you guys both made some great points. really interesting discussion, Thanks for having us. Thanks. Get the show notes at stephanlivera dot com. See you in the citadels." } ] }