{ "episodeId": "SLP474", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "henrik_skogstr_m": { "name": "Henrik Skogstrøm", "role": "guest", "tag": "HENRIK" } }, "segments": [ { "speaker": "stephan", "time": "00:09", "start": 8.63, "text": "Hi, you're listening to Stefan Livera podcast, a show about Bitcoin and Austrian economics brought to you by Swan Bitcoin. With Swan Bitcoin, you can add Bitcoin to your corporate or business balance sheet, and it's never been easier. Swan Bitcoin treasury solutions makes it easy for you to incorporate Bitcoin into your financial strategy. You can automate your Bitcoin investment, custody, and management strategy, and you can get expert guidance. Every step along the way. Also, if you have employees, consider Swan's Bitcoin benefit plan. This makes it easy for you to recruit, reward, and retain top talent with Bitcoin. So Swan handles all the heavy lifting like creating wallets, converting currency, and routing payments, and like magic, your employees receive Bitcoin and world-class financial education monthly as a benefit from you. So if you want dedicated access to a Bitcoin-only expert and you wanna be onboarded really quickly, go to swan dot com slash business. Next is CoinKite. As As you all know, not your keys, not your coins. It's important to think about self-custody and CoinKite are making hardware products and tools that you can use to easily self-custody. The Coldcard is my favorite Bitcoin hardware device. It's really reliable and very practical, and it just makes it so easy to self-custody your coins. You can use it in airgapped mode with NFC or with a microSD card, or you can directly plug it into a computer if you are a beginner, and you can use it in all kinds of configurations, whether it's single Or with a passphrase, or as part of a multi-signature setup, or with BIP eighty five, there's so many options, and you actually learn more about Bitcoin as you explore some of those. So if you wanna get your cold card with a discount, go to coinkite dot com and use the code livera for a discount on your cold cards. Mempool dot space is my favorite Bitcoin blockchain explorer. You can go there and view the multiple layers of the Bitcoin ecosystem. You can view the mempool, you can see the blockchain, you can see second layer networks like the Lightning Network. With Third party. It's free and open source software, and you can easily host it yourself. If you are with an enterprise, Mempool.Space has special features available for you, such as a customized mempool instance where you can have your company's branding there, you can have increased API limits, and access to the team for feature requests. So go and learn more over at Mempool.Space/Enterprise. So for today's episode, if you've wondered what it's like to manage large Lightning nodes and what are some of the challenges, today I'm speaking with Henrik Skogstrøm. He is the founder and CEO of LN Capital, and they are producing Torq, which is a Lightning management software. So we talk about some of the challenges, routing, monitoring, notifications, tools required, as well as broader thoughts around where Lightning network is, the development of it, privacy versus reliability, and new technology coming. Here's my chat with Henrik. Henrik, welcome to the show. Thank you. So, I've been watching some of your threads and things you guys are working on over at LN Capital with interest and, thought it would be interesting to have a chat with you. So, do you wanna just tell us a little bit about yourself and, you know, what you guys are doing at LN Capital?" }, { "speaker": "henrik_skogstr_m", "time": "03:07", "start": 187.14, "text": "Yeah, sure. so yeah, I, I've been in lightning, industry since 2019, and through that, I've watched all this, the entire network grow and, As, the first sort of, time there I was working with Arkeen and building like a payment system, and, after I was done there, I realized just the, the lack of tooling and the, when I started playing around with routing node, for example, I saw that we had a, a very hard time managing as the node grew. So, so that's where we started and, and started building a, a proper, scalable node management system. So," }, { "speaker": "stephan", "time": "03:47", "start": 227.39, "text": "gotcha. And so then, I guess- That's how you got started in Lightning, and then in terms of what you are working on now, what's the main thing? As I understand, is it Torq? That's the main thing you guys are-- That's the main product you guys have, right? Yeah." }, { "speaker": "henrik_skogstr_m", "time": "03:59", "start": 239.11, "text": "Exactly. So we're building, Torq as a very powerful, scalable node management system for really large node operations. So if you have multiple nodes and you have thousands of channels and, millions of dollars on your nodes, you need something that really gives you that control, that you need to run a Imagine doing that with just command line tools or simple Python scripts, it's, it's not a safe" }, { "speaker": "stephan", "time": "04:25", "start": 264.97, "text": "way to handle that. Right. And I can recall from my earlier chat with people like ZeroFeeRouting, where he was talking through his difficulties with that, and I think from his perspective, at least at that time, he, he didn't want to run a lot of extra software because he was worried that, that's introducing vulnerabilities and security flaws. So he had a, you know, a concern from that perspective. but I think maybe if we were Let's zoom out a little and think about the Lightning Network broadly, and I'm curious to hear your thoughts as well, because we see a lot of back and forth online about how much payment volume is going through on Lightning, right? Because people could argue to you and to me, and now of course, I'm a promoter and a supporter of Lightning, and obviously as you are. But people come to us and say, as an example, \"Oh, look at the data on, let's say, Bitrefill or Coincard. There's not that many people paying with Lightning, as an example.\" so perhaps the argument could be It's not that popular yet. I'm curious what you, how you see that." }, { "speaker": "henrik_skogstr_m", "time": "05:24", "start": 324.21, "text": "Well, it depends. I mean, not sure if Bitrefill is the, the best source to say how popular it is, because that's one use case, right? but yeah, we've, we've seen the network grow, steadily over, the last years, and especially last year, you can see that the allocation towards the big nodes, the, the large destinations, exchanges, merchants, all this, that is increasing. so- That also indicates that there is usage there. There is no point for routing nodes or small operators or, or the other operators to allocate capital to nodes where it's not being used. So I think there is an increase in transaction volume, and you can see that from wallets as well, like wallets Satoshi, transaction volume is increasing. yeah, there's been some reason one Kevin Rook is mentioning some of them, periodically as well. So it is definitely increasing." }, { "speaker": "stephan", "time": "06:14", "start": 374.29, "text": "Yeah, and I think that's good to see, and part of that As I'm seeing it, is more integrations, right? So we're seeing if, if a big exchange turns on Lightning, then maybe we start to see more volume coming from their customers who maybe they aren't ready to, let's say, run their own Lightning node or use, some of the more, non-custodial Lightning wallet, applications, but they maybe are more willing to just use the in-built integration that comes with their exchange, whether it's Bitfinex Necks or Kraken or etcetera, and I, and I believe, Brian Armstrong from Coinbase has mentioned that they will it be implementing Lightning, and of course, as much as, you know, you can say what we can, we can say, our criticisms of Coinbase, but having them implement Lightning would be, I think, a good thing as well in terms of building and growing the network and the possibilities there." }, { "speaker": "henrik_skogstr_m", "time": "07:08", "start": 428.27, "text": "Absolutely, yeah, and I think there is going to be a wave of new exchanges, especially adding Lightning in the coming year. I heard multiple places- Different people are working on this, so it's, I think we're getting to the point where the technology and the, the main challenges are starting to get mapped out and people are starting to implement this, on larger scale, and this is of course where we come in as well. We're starting to, to address this problem of running large node operations, where until now people had built sort of this all this small tooling themselves. So I think, yeah, we're going to see a, a lot of new exchanges and, and places adding lightning." }, { "speaker": "stephan", "time": "07:44", "start": 464.31, "text": "So let's talk a Challenges. So can you talk us through what are some of the key challenges that, let's say, I would face if I, if I am an LSP, a Lightning Service Provider, or let's say, a routing node, what are some of the key challenges that I would face, or we would face?" }, { "speaker": "henrik_skogstr_m", "time": "08:01", "start": 481.18, "text": "Yes, they, in, in some way they are similar, that they're both trying to optimize stability and reliability of payments or forwards. So, depending on, on what you do, but, for an LSP, the one of the main things is of course having So you need to monitor and make sure that the channels are, well suited for that. You need to close, peers or channels with peers that aren't reliable. you also need to automate changes in, in, rebalancing or opening closed channels or, or the fees depending on what's happening with your, with your node. So these are some of the things where, automation is going to be an increasing factor, in order to solve this." }, { "speaker": "stephan", "time": "08:46", "start": 525.72, "text": "Yeah. And so let me just give a quick explainer for people who are new. I'll try to, let's try to keep it accessible for people. So for people who aren't really familiar, the way Lightning works is we open channels. It's a network of payment channels, that's what Lightning is, and you can think of it like it's an abacus, and there are beads on that abacus. And then, let's say I open a channel with you, Henrik, and, you know, as, as payments go through, we're pushing a-beads on that abacus back" }, { "speaker": "stephan", "time": "09:15", "start": 555.3, "text": "Manage that balance because you might have an abacus, not just with, you know, one person, but with many. You might have a hundred channels, you might have hundreds of channels, or in some cases, thousands of channels, and so- This is then about managing the liquidity, as in the balances on both sides, because in some cases you may have too much of the balance on my side of the abacus, or maybe there's too much on your side of the abacus, and then we need to do operations to sort of swap some of that in or swap some of that out. And so that's where some of this node management software comes in. So do you wanna tell us a little bit about how, firstly, we monitor what's going on? So as we said, we- Might have lots of channels, but maybe they are into a bad location, right? That, you know, it matters where your channel is because in Lightning, you, you-- if you're trying to earn, as an example, you want to have your channels in the direction that lots of other people are going to pay towards, and you wanna ideally kind of be in the middle because you're, you're clipping the ticket as a middleman, as an example. Now, that's if you're trying to earn as a routing node, but if you are a service provider, as you" }, { "speaker": "stephan", "time": "10:27", "start": 627.17, "text": "You are operating a wallet service for somebody else and they want to have a nice payment experience, well then you need to be able to deliver a nice payment experience and have, let's say, a high reliability, as in a, a high percentage chance that that payment is going to go through, you know, quickly and with reasonable fees, let's say. So I think those are probably some of the key components that the routing node operators are thinking about, those are some of the key challenges. So can you tell us a little bit from a- Monitoring, monitoring perspective, what does that look like for a routing node operator?" }, { "speaker": "henrik_skogstr_m", "time": "11:02", "start": 662.07, "text": "Yeah, sure. So essentially, a lot of the tools that has been out there, it's like you can ask for what is the balance in each of my channels right now, but it's an important factor as well to see like what has the history of the balance been. So if, if you open a channel and sort of the entire liquidity is drained and then, all the money is left on, there's the other side of the channel, for example, indefinitely, then you, you need to The same with if sort of whenever you gain a bit of inbound, outbound liquidity, it's immediately drained again. So having sort of this history of how a channel has behaved and also how a node has behaved over time is, is an important, part to have. But I think it's, it's important to remember that we have a lot of different, companies trying to simplify Lightning for the end user, either it's a wallet or it's, a shop or individual users, directly, but at some point it, it's Stops by how lightning network works, and somebody needs to manage the channels in the end. And this has a tendency, I think, to grow and, and sort of become a business of scale. So when you have thousands of channels, you, you can't go through, manually and look and inspect on every single channel. you need to be able to see, an aggregate of this happening. You need to, to be able to quickly navigate through this mass of channels. So this is an area where I think we're, we're still seeing a lot of development. How these large companies are operating on behalf of others, and that's the entire sort of, development in the LSP space, lightning service providers space, we're just starting to see that really catch, catch up speed now, like with the Lightspark coming on the market, yeah." }, { "speaker": "stephan", "time": "12:44", "start": 764.46, "text": "I see. And just as a quick example The idea then is that you could presumably have tools that tell you if, let's say, a lot of your channels are getting exhausted, rather than-- because if you have hundreds of channels, manually managing that, I mean, it's possible, but it takes a lot of manual work, and over time, this is-- this needs to be automated, correct? So could you tell us a little bit about how that kind of monitoring would work?" }, { "speaker": "henrik_skogstr_m", "time": "13:11", "start": 790.66, "text": "Yeah, so, what we're doing is we're building an automation, workflow setup so you can actually automate anything the node can do. So right now we have, we have channel data coming in, we have, op- we have, rebalancing and fee changes, and you can tag channels in order to group them. but we're adding more and more, so the goal is to automate absolutely everything a node can do. so what we're seeing is that they can look at the history of the channel automatically and have certain decision, factors to this and act on that. so you can open channels on request, or if in given scenarios, and you can, close them in, in, certain scenarios, all based on sort of the experience that you build up as an operator over time. and of course, this will evolve even further and more automation and, and this days with AI, everything is going to be AI at some point. So, so, but still to do this, you need some sort of tool to- To have the, the means to change this even with AI." }, { "speaker": "stephan", "time": "14:11", "start": 850.99, "text": "I see, yeah. And so with Torq, could you tell us what implementations it's supporting, right? Because there's, there's LND, there's Core Lightning, there's, Rust Lightning, there's Eclair, I think Electrum has an implementation, there's different im-implementation. So what's currently supported with Torq?" }, { "speaker": "henrik_skogstr_m", "time": "14:28", "start": 868.06, "text": "So currently we have LND, but we started and we're pretty far along with CLN, so, yeah, it's pretty soon we're going to release that" }, { "speaker": "henrik_skogstr_m", "time": "14:38", "start": 878.28, "text": "So Rust Lightning. Yes, and we're building more towards the, the higher sort of bigger operation, nodes, so those are the" }, { "speaker": "stephan", "time": "14:46", "start": 885.95, "text": "three we have on the map so far. I see. And, can you give people an idea of the cost as well for those of you, those people who are interested? right now" }, { "speaker": "henrik_skogstr_m", "time": "14:54", "start": 893.97, "text": "Torq is, is free, so we're not introducing any, paid plans yet, but, we're going to soon." }, { "speaker": "stephan", "time": "15:00", "start": 900.1, "text": "I see. Yeah. And, but as you said, this is more of an enterprise level, Retail individual who just wants to run his lightning node, and so I guess that might be interesting as well. Could you contrast some of the different tooling that exists today? So as an example, how does Torq differ from, say, RTL or LND Hub?" }, { "speaker": "henrik_skogstr_m", "time": "15:22", "start": 922.01, "text": "Yeah, so what we do is we, we collect all the data from the node in real time, and make sure that all that is stored in proper way in a Timescale database or Postgres, database with Timescale, plugin and makes it possible for us to aggregate and pull that information from any point in time and see what happened with your node at any point in time. almost instantly. You can also see that with, with your channels, if you have thousands of channels, those other tools, they can't load them. Essentially, you, you try to refresh the page and it takes like thirty minutes. with Torq, you can see that instantly, and it's because we, we build Torq to be able to handle any size node," }, { "speaker": "stephan", "time": "16:01", "start": 961.32, "text": "like that. I see. And one other question with Torq, I guess, put it this way, is it running, is the software running all locally on that node or is it sort of requiring on, let's say, calling out to, like, a service that you are operating? You know, does, do you understand what I'm asking? Yeah." }, { "speaker": "henrik_skogstr_m", "time": "16:17", "start": 976.75, "text": "Yeah, yeah, sure. So yeah, Torq collects all data directly from the node, but we, with LND and with different implementations, there are some weaknesses. For example, with LND, it doesn't give you information retrospectively about when a channel And there's also some other scenarios where you can't get certain types of information from the nodes, that in that case we have a server that they reach out to and get some additional information, in order to sort of boost that and fulfill it." }, { "speaker": "stephan", "time": "16:44", "start": 1004.11, "text": "Right, to sort of give them more information about how to run their node, as an example. And, I'm also curious if you have any thoughts on this, or maybe there's a part, part of the product deals with this. As you were saying, there are different kinds of nodes out there, right? That there might be some nodes who tend to be, a sink, right? They tend to receive a lot of coins, and then they end up being, and that could be like a merchant maybe, or maybe, some of the swap servers, maybe, maybe some Is there an element there where you are categorizing nodes and saying, \"This node tends to receive a lot, this node tends to send a lot, and this is how, let's say I, as the routing node operator, need to adjust for that or at least plan my strategy around how I'm, how I'm going to interact with that particular node\"?" }, { "speaker": "henrik_skogstr_m", "time": "17:30", "start": 1049.96, "text": "Yeah, exactly. So there are multiple ways of doing that. So of course, the most basic is you can tag, nodes or channels. You can tag actually a node to being like a sink. So you can do that, for example A, a sync channel. and you can use that in the automation of course as well to act upon that in different ways. but we also have very advanced filtering systems, so you can set up filtering just like you would do with SQL basically, saying different criterias, categorizing nodes. You can either use that to tag them directly or to act upon them in, in terms of, for example, rebalancing. so this, I think, is a very important aspect as well, like as you have thousands of channels, there's no longer like It becomes sort of categories of channels, like they behave differently. Are you open to a shop or an exchange or a wallet or a, like a, looping provider, and, and these of course have distinct behavior So, yeah, having sort of that system in order to, to, and to quickly, label them is really important." }, { "speaker": "stephan", "time": "18:36", "start": 1115.56, "text": "I see, yeah. So being able to categorize the different kinds of nodes or channels out there, as you, as you mentioned, and so then, yeah, it just means you have to-- Because you might, depending on who you are as well, because you might be a merchant, let's say you're a large merchant who's running this kind of software, you yourself might be kind of like more like a, a sink, let's say," }, { "speaker": "stephan", "time": "18:58", "start": 1138.16, "text": "From Lightning out to take that money on-chain, let's say, so that you can, you know, do something with it or, you know, although I guess as more exchanges start to support Lightning, well, then you may actually be able to receive on Lightning and then, sell for fiat on an exchange if you're a merchant who needs fiat, let's say, to pay the bills. So I guess it, it is a constantly shifting, game in that way, whereas maybe in the earlier years of Lightning, you had to do that, whereas now maybe not as much. We'll" }, { "speaker": "henrik_skogstr_m", "time": "19:28", "start": 1168.1, "text": "Interesting part with the, with the industry as well, it's evolving quite quickly. new additions, new possibilities are adding, added constantly. So it is, having a tool that's a bit dynamic to this and, and constantly being sort of on learning side of it is important. But, yeah, as I said, with, with merchants as well, they, they often end up being either a main sort of sink or a, a source. So that creates its own sort of problems and how you deal with that. Right now, we're, we're seeing this increase in service providers selling liquidity or trying to offer that in, in different ways, and I think for a lot of merchants, this increase in services is, something that's really going to drive adoption" }, { "speaker": "stephan", "time": "20:08", "start": 1208.16, "text": "as" }, { "speaker": "henrik_skogstr_m", "time": "20:08", "start": 1208.26, "text": "well." }, { "speaker": "stephan", "time": "20:09", "start": 1208.78, "text": "I see. And so there are different kinds of LSPs as well. So I guess some LSPs may exist as like a wallet backend, let's say, and maybe others are operating as a swap service. So they are helping people swap off-chain to on-chain, like as an example, BOLTs Dot Exchange, I think, is one good example with the swap as a swap provider. And then there are, yeah, just different kinds of services that exist in Lightning. So could you talk a little bit to that or elaborate on the different kinds of services?" }, { "speaker": "henrik_skogstr_m", "time": "20:42", "start": 1241.67, "text": "Yeah, like this landscape is just growing in complexity. we-- I think also we're seeing the, this sort of line between routing nodes and LPs is starting to blur a bit, where a lot of the, the larger routing nodes are looking into becoming like, liquidity providers, service providers in that sense. And yeah, I mean, there are some who, who just focus on selling on-demand liquidity, and some aren't like It feels like all this right now is just a bit unclear. you have the, the, payment processors who are leading into the LSP space as well, depending on like how much of an UI do they have. So it is still, in, in sort of, quick development here, but I think the, the commonality among all of them is that they're focusing on making it easier for people to just use Lightning and not care about the entire complexity and to try to hide that layer from them. and of course, that involves different things for different, users of that, those products. So I think it's natural, I think we're just going to see an, increase in the vocabulary around, what an LSP is, like LSPX, LSP- LSBY." }, { "speaker": "stephan", "time": "21:50", "start": 1310.22, "text": "I say, yeah, maybe it'll be f- becoming more specific over time, but for now, people are sort of being a bit general in a way. And I think that can happen where, let's say, a particular company is doing multiple roles. So a quick example would be Coin Corner or Bitfinex, where they are both an exchange and a merchant services provider. So they sort of also provide that sort of service of- Helping the merchant take lightning payment and then swap it for fiat or on chain if they want Bitcoin on chain. and then you have other, you know, people like, I, I think probably eBEX, eBEX Mercado is another example because they have eBEX Pay and then eBEX Mercado, and then maybe someone like Open Node is more, they're probably known more for the payment side of it, they're not really an exchange per se, so they just deal more with like helping merchants take the payment and then receive either fiat or, you know, Bitcoin Today, but as you said, it's constantly evolving and changing, and we may see more individuals, or maybe large routing nodes who just have their own reason, maybe they just wanna be a routing node, or maybe they are selling channels. That's like another whole concept as well, right? Because I know, Bitrefill sell channels, LNB sell channels, there are, and, even LNB or Lightning Labs has, their pool service as well, so you might be a, a, a channel sell-seller." }, { "speaker": "henrik_skogstr_m", "time": "23:11", "start": 1391.16, "text": "Exactly, and that- That again is into the Lightning service provider space, and I think some routing nodes are going to notice the, the difference when they enter that, like service provider, they have these obligations to keep these channels open, they, the customers, rely on that inbound liquidity, for example, to run their business, and it, it turns that sort of, a routing node from being almost like a fund who invests in sort of, their own portfolio of channels into being somebody who- Like they have a service agreement, i-in a way, they have to give that, that liquidity. so I think that is also something where the, the routing nodes doing that, they're, they're entering much more into a profession, professional operation much quicker than they maybe think." }, { "speaker": "stephan", "time": "23:54", "start": 1434.15, "text": "And is that a service or like a, or maybe there already is something in that for, in Torq in terms of your product? So let's say an LSP wants to use Torq as how they manage their channels, they might then need to tag certain channels as saying, \"No, no, Let's say one month or two months of guaranteed uptime on that channel, therefore don't sh- don't close this channel down and don't include it in the automations that may automatically close the channel if it's not performing." }, { "speaker": "henrik_skogstr_m", "time": "24:21", "start": 1461.2, "text": "Yeah, exactly. So this again is where we can use tags. we're going to expand this even further, but what you can say is that, you can, you can open a channel and then immediately tag it as being a channel you sold. So you can give it, for example, a tag that means that it listens for being open for X amount of months or days or ever before it's being closed. so we're going to add more like, automatic closing of channels that can of course use these criterias, but also, having that interaction, The features that we're focusing now on are more, towards the LSP space where we increase, exactly what you explained there, so you can automate these types of, interactions." }, { "speaker": "stephan", "time": "25:04", "start": 1503.63, "text": "I see. and I also know that at the larger Lightning node level, there are sometimes people who are actually running multiple Lightning nodes, as part of their, you know, their, overall operation. They may have one at the front and some sort of, sort of shadow nodes in the background. I'm curious how Torq is going to deal with that and how you're thinking about that." }, { "speaker": "henrik_skogstr_m", "time": "25:26", "start": 1526.41, "text": "Yeah, exactly. And I think that's- Yeah, it's necessary for our reliability reasons. So Torq is built, to handle multiple nodes, so you can add multiple today, and you will see all channels in one, you can of course filter and see just data for each of the different nodes. But it's, yeah, it's inherently built into, to be, serving that enterprise market that needs at least two nodes, often four, uptime reliability. And as we see with River, for example, they have four, like two public and two private nodes. Yeah, so it's, It's bo- a" }, { "speaker": "stephan", "time": "25:59", "start": 1559.19, "text": "really important, feature for us. Yeah, and as I understand, the recent part of the reason for that is that if they need to do up- upgrades or things like this, they, they sort of need to be able to have one up and the other down while they're doing upgrades on this and still keep the availability going, as, as Lightning Network professionalizes over time and become, you know, it needs a certain level of reliability, they can't just sort of say, \"Oh, we're down for half an hour,\" you know, \" Well, so I think that's something you're looking at, in terms of the routing node operator being able to receive notifications when things go wrong or things go down. Obviously, if you're a professional routing node operator or even a sevni pro, you may need that." }, { "speaker": "henrik_skogstr_m", "time": "26:42", "start": 1602.16, "text": "Yeah, exactly. So we had, we had for some time have, had this feature where you can get notified, of course, if your node is down, but also if the, the blockchain, is out of sync, on your node or if the, the gossip of the node and we just now added a feature to, to have that connected directly from your Torq instance to your private, Telegram bot or your, Slack channel as well. So, yeah, having that notification immediately, it's important we're also going to boost that more with the different types of alerts that you need, again, through automation, so you can actually build, workflows that says like if this channel, closes, then open, send a message on Slack, and warn us about that." }, { "speaker": "stephan", "time": "27:26", "start": 1645.59, "text": "I see, yeah. So then the node operates Can quickly get a notification and go do some operation and try to fix things." }, { "speaker": "henrik_skogstr_m", "time": "27:33", "start": 1653.17, "text": "and exactly, and there's, there's cases where you can't, do anything automatic, you just need to, to see like, oh, this edge case happened, okay, we need to deal with it. And if we try to define all those edge case rules, it's, it's never gonna work, so that's why we again, we build it into this workflow where they can define this themselves." }, { "speaker": "stephan", "time": "27:49", "start": 1669.18, "text": "Yeah. And when it comes to operating a routing node, there may be those individuals who are trying" }, { "speaker": "stephan", "time": "27:59", "start": 1678.61, "text": "because they may be thinking, well, okay, how much is it going to cost me to do a rebalance, or how much is it going to cost me to do a channel operation to close the channel and reopen? how much is it going to cost me for swap in or out? So could you talk to us a little bit about monitoring the costs of a routing node for that operator and if Torq is offering anything around that?" }, { "speaker": "henrik_skogstr_m", "time": "28:20", "start": 1699.62, "text": "Yeah, so this is actually where we started. We, we focused on routing nodes in the beginning, and we have a lot of historic metrics they can see cost throughout, a given time period, so you can select a month or whatever days you want, so you can see then sort of rebalancing costs, the open and close cost, so that for now we're going to increase this as well. we haven't looked into sort of prediction of cost yet, but I think it's, it's something where, as a routing node operator, opening and closing, cost prediction is, is something that you, you check the mempool and, It's, it's not necessarily that easy to, yeah, I mean," }, { "speaker": "stephan", "time": "29:01", "start": 1741.23, "text": "that's, that's just inherently going to be hard because of the mempool shifting as well, right? Like even with all this crazy, you know, the ordinals inscriptions stuff, which of course I discourage, but it's there, but it seems to wax and wane. So it seems, you know, the mempool cleared again recently, whereas people were betting on whether it would not clear, and of course, you know, I think many of us have hypothesized that we won't Market or block space market, although that said, even without the fee, even in a low fee environment, it is still a better UX when you're paying online to pay with Lightning, or especially in person, if you're paying in person, Lightning is just so much better. So I think there is an incentive there, but I think the real push for Lightning will come when we see high fees." }, { "speaker": "henrik_skogstr_m", "time": "29:49", "start": 1788.88, "text": "Yeah, it might be. I think we, we have seen sort of a steady increase, in capacity, and I think that sort of steady increase of use as well, of course When we see this huge increase in, in fee costs, I think that might push, more providers to, to start working on it, and might be why there's more providers working on it right now even, but of course, in the next hype cycle, the, the fees might shoot through the roof and then like everybody just has to go on Lightning. But, yeah, I'd- I just think that the, the user experience is so much better on Lightning anyway, so just happening with time anyway." }, { "speaker": "stephan", "time": "30:26", "start": 1825.88, "text": "I see. Yeah. Yeah, I agree with you, but I think it's probably fair to say my expectation for the last cycle was to see more Lightning because of the-- I thought the fees would go higher, basically, right? Like I, you know, I was probably like many of us saying, \"Yeah, I think, you know, at that time in maybe twenty nineteen and twenty twenty, that, you know, the kind of next cycle would see a lot more Lightning.\" In use, where I would say comparatively or just relatively, it was a bit less than what I was expecting, because, and maybe for that, for different reasons, maybe more people were using custodial things or stablecoins as opposed to using Bitcoin and Lightning as I was anticipating. But, you know, every now and again we get humbled, right? Yeah, yeah. But I also think that" }, { "speaker": "henrik_skogstr_m", "time": "31:08", "start": 1868.21, "text": "you gotta remember the, the state that Lightning was in at the time. It was hard to do transactions, right? To try to buy a five dollar postage for stickers and it's- Stock right, transactions again. At that point, it was very, very early in like twenty nineteen, I mean, and I think the, the development that has happened between now and, and then is, is a huge factor to making it a reality and, and making-- Like we, we gotta remember that Lightning scales Bitcoin, but we still need to scale Lightning, right, for, for the companies operating and using it. So, yeah, I think that's the difference, going to be a difference between then and the next cycle." }, { "speaker": "stephan", "time": "31:45", "start": 1904.85, "text": "I see, yeah, and I think you're right that, to be there as well for, for the benefit to come. And if exchanges aren't playing ball, then it's hard to get the benefit out of it. Now, of course, there are some that are very forward, so for example, a Bitfinex, as an example, because they were very early with Lightning, of course, they were kind of plugged in and ready to go, but maybe other providers weren't so ready. Now, now we are starting to see more, of course, we have, you know, CoinCorner, River, Strike, Cash App, you know, Lightning" }, { "speaker": "stephan", "time": "32:18", "start": 1938.44, "text": "See, more actual lightning use in that because people might already have integrations. I think the other aspect of it is that people just, you tend to just use wallets that they already have. They're not as inclined to shift over to a new one. So maybe there's an argument there that, let's as an example, you might be less inclined to spend lightning unless you're already earning over lightning also, because that's, you know, it's just, it just a lot of people would just stick with the wallet they already have." }, { "speaker": "henrik_skogstr_m", "time": "32:45", "start": 1964.79, "text": "Yeah, I think, of course, some of Adding Lightning is benefit, but, yeah, it just, like you said, we, we're seeing sort of some of these, exchanges, starting to integrate it. We have Bitfinex, we have Kraken, we have these, OKX and, and such. But, River had, Alex from River had a talk, on advancing Bitcoin about, how they operate sort of the nodes, with four different nodes, et cetera, and like that, that is sort of a topic that is still new, is sort of telling a industry was a few years ago. So I think just that makes a huge difference that this is becoming more, people are more knowledgeable about how to operate this." }, { "speaker": "stephan", "time": "33:27", "start": 2007.4, "text": "also curious your view around centralization in lightning. So this has been a common criticism, this idea that it'll be a hub and spoke model or it'll be very centralized into very few providers, and will that be some kind of flaw in the lightning network? I'm curious what you think or how you would respond to that kind of criticism. I mean," }, { "speaker": "henrik_skogstr_m", "time": "33:49", "start": 2028.84, "text": "there's, there's nothing sort of in the centralization that blocks others from participating in the network. So that's one thing. The other is that you have a ton of large businesses and exchanges and, and wallets around the world who will operate large nodes. and these will be quite decentralized in, in that term. But if you look at the liquidity, so a lot of people are concerned about liquidity centralization or capacity centralization. So you can- You can see that some of the biggest nodes, I think if you take the, the very, very top, nodes, like two percent of the entire network, holds eighty-five percent at least of the capacity. This is actually much less of a problem that you might think, because as an individual user, you don't have twenty thousand dollars on your node. Like, doesn't make sense at all. But for a, a operator and exchange or whatever, like having twenty, twenty thousand dollars on your node is, is tiny. You might have millions, right? so of course, sort of the, the liquidity distribution there is going to be seem insane and seem very centralized, but as a user and as a shop and whoever needs it to be truly, truly decentralized, they can still- We'll use it and it works perfectly. We have enough routing nodes everywhere, and there are businesses around the world with, sufficiently different jurisdictions for this not to be a problem. So if we see a ban like, like mining ban in China or something, these nodes and large businesses operating them are going to move them. so yeah, I don't see it as a big problem." }, { "speaker": "stephan", "time": "35:18", "start": 2117.67, "text": "Yeah, and I think that's totally fair to be honest. I think, it's more just, it's a common criticism that I see and just, you know, wanted to get your perspective there. Also, in terms of new Lightning technology, is there anything you're particularly excited to see come? Yeah, I mean," }, { "speaker": "henrik_skogstr_m", "time": "35:36", "start": 2136.04, "text": "splicing is, is really exciting. I think that gives a lot of options in order to handle liquidity for these large operators and also, of course, improve handling- Of, opening, closing multiple channels and collaboration among channel opening and closing. And there is a lot happening, as, as you see, we write a lot of threads about future technology and, and lightning and explaining different concepts simply. And I think it's, it's like, it's really hard to keep up. So, yeah, I think splicing is, is one of the coolest things on the," }, { "speaker": "stephan", "time": "36:06", "start": 2165.7, "text": "on the" }, { "speaker": "henrik_skogstr_m", "time": "36:06", "start": 2165.86, "text": "horizon." }, { "speaker": "stephan", "time": "36:06", "start": 2166.48, "text": "Right. Yeah. And so for listeners who aren't familiar, my understanding of a splicing is that instead of, let's say, closing and reopening One on-chain transaction that resizes the channel. So let's say, you know, say I'm operating a, a node and I have a channel with you, Henrik, and I need to resize it larger, I could have a splice transaction that does that. And then I guess the real power also could be where maybe operations could be batched, and maybe that's where the real sort of big benefits start to come, because let's say you are running a big node and you wanna re-- you know, do a lot of operations at once Maybe there's more potential for that also. So do you wanna just explain a little bit about what that future could look like?" }, { "speaker": "henrik_skogstr_m", "time": "36:50", "start": 2209.53, "text": "I mean, it's, it gi-just gives more optionality, as you say, like opening multiple channels, distributing, channel capacity or, aggregating it back again. So, it's just that, the toolset is increasing, so I think that's the most important part of it. But yeah, it, it needs to be built into each of the implement- implementations on the, yeah, LDK and all this, and I think that's one of the areas where I would wish to see that we had even more resources, that, these, like everybody wants the technology today, right now, right? but of course, this is financial, infrastructure we're building and it takes time and it, it is something you need to be careful with," }, { "speaker": "stephan", "time": "37:34", "start": 2253.66, "text": "Yeah, and that, actually that reminds me, I need to get Dusty on and talk, talk with him about splicing. I know he's been working on that over at, in the Blockstream Core Lightning team. He's been working on splicing a lot, and, I guess it's probably fair to say that the Core Lightning team, are probably furthest ahead on the splicing technology, so that would be interesting. I'm curious if you have any thoughts on peer swap. That's something also coming out of Blockstream, which is an interesting technique, and as I understand, you, you might have a node, and instead of, put it this way, instead of using LND or Lightning Labs pool server, you are becoming your own swap server, and so these different nodes could pair swap with each other and say, as an example, you know Maybe our channel is a little bit lopsided. Let's say I have a channel with you, Henrik, and it's lopsided to maybe your side. And so then maybe what I would do is, you know, I could pay you some on Lightning, and then you could pay me on chain, and we could balance it in that way. And so that's an interesting concept, and it's quite decentralized, so it'd actually be a pretty big benefit. I'm curious if you have any thoughts on that and, maybe if there's anything you're planning to build out for that also" }, { "speaker": "henrik_skogstr_m", "time": "38:50", "start": 2329.62, "text": "Looping and, and sort of transporting liquidity other places, without rebalancing in sort of circular way is something that, I think with, with PeerSwap, I'm not sure where the protocol is at now, but It needs to be quite efficient in sort of pooling transactions, et cetera, which, essentially Loop is doing now when they close channels, or they do loops out, they often batch them together in, in, larger transactions, and I think, for something like peer-to-peer work, we need to have sort of that handling as well. So I think this is something that we're going to see development in together with the LSP space, and it's going to be part of the LSP, LSP space as well. So I think what's-- Build out the services and the part of the software where, these operators need solutions the most. But I think it's going to be really interesting to see how this parallel, these, protocols are developing that aren't part of the core Lightning, sort of the main Lightning protocol. And I think this is a really crucial point in, in sort of the history of Lightning, where to what degree do you define these protocols, or to what degree do companies sort of define their own thing, and we, we might end up with a lot of solutions like we have a chat today where there's no- There's no protocol for it, it could be, but there's not, so we have all this ton of different chat protocols. So yeah, I hope that we see more of these general protocols in Lightning get acceptance and adoption." }, { "speaker": "stephan", "time": "40:13", "start": 2413.48, "text": "Yeah, you're right. And, by the way, I ac- accidentally, I think I said the wrong one. I said, pool, actually, loop. I should have said loop, as you said. Loop, yeah, yeah. what we were talking about is loop. Yeah. Is, you know, you said it" }, { "speaker": "henrik_skogstr_m", "time": "40:33", "start": 2432.98, "text": "Yeah, I think so. gotta be honest, I haven't had time to look deeply into it yet. Jack on our team is writing some excellent, stuff on that, but, yeah, not sure if I have too much to add on it. Should check out the threads." }, { "speaker": "stephan", "time": "40:46", "start": 2446.37, "text": "Right. Yeah. And as I understand, it could help in terms of today, when you open and close Lightning channels, you can see, or I think specifically when you close the Lightning channel, you can see that it's a two-of-two multisig on chain, but It all looks like a single signature standard transaction in the cooperative close case. Now, in the uncooperative case, then you, you have to reveal some certain things about the transaction, but I think that, that could be an interesting privacy, or at least one aspect of privacy. It's not, it's not the be all and all of privacy, so that's an interesting area. Also, on the privacy question, I think maybe there's a bit of attention here because I'm, I'm starting to notice some of this in the discussion. There are people in the community Perhaps rightly so, they're saying we should care more about reliability than privacy. And then there are the privacy guys who are saying, \"No, that's so bad, you're doing all this stuff that's gonna result in surveillance and decreased privacy.\" It sort of comes to that question of what is the Lightning Network's purpose, right? Is it there to make reliable and cheaper payments, or is it also a pur-- you know, a point or a purpose that it should be making transactions more private? I'm curious if you have any thoughts to add there." }, { "speaker": "henrik_skogstr_m", "time": "41:59", "start": 2518.98, "text": "I mean, privacy is very Built into it retrospectively, so it's like we should focus a lot on the privacy aspects of this, the new sort of development in, like, gossip v2 eventually and, yeah, Taproot opening of channels, et cetera, it's really important. of course, it takes time, and I think the commercial interests are pushing towards, adoption of technology as fast as possible, which have some side effects, so myself, for example, not the biggest fan of For LNURL compared to actually building Vault 12 and, and I think that again, it's just this constant battle of somebody says, \"We wanna use it immediately,\" which I also support, right? I want people to use Lightning immediately, but, but that constant battle with privacy and, and then later on as well, we're, we're going to see that privacy battle rage on, right? Everybody wants privacy for themselves, but then regulatory aspects or for society, they want sort of The bad guys to be caught. So it's," }, { "speaker": "stephan", "time": "43:03", "start": 2583.39, "text": "yeah, it's going to be a war. And I, it's also fair to say that sometimes what people say and what they do is very different, right? So there may be people who say they want privacy, but when it comes to, when the rubber meets the road, are they willing to pay the extra price or have a less convenient experience? Maybe not. And so they'll say they want privacy, but actually in practice, they may not care that much. And so then it sort of goes to that question of if there are multiple competing providers The ones that maybe don't care as much about privacy will might win out just because people say, you know, if people say they care about privacy but don't really, then, you know, it just kind of leans a certain way, and I think we're seeing- Yeah," }, { "speaker": "henrik_skogstr_m", "time": "43:43", "start": 2622.96, "text": "exactly. And I, we see that in with the LSP space and with the custodial wallets, et cetera. Like people love to pay for convenience and either with money or with sort of privacy, and, this is just part of reality that we have to take into account. So also Lightning, like having that option of, or actually not having an option of sacrificing privacy is really a cool way to, like, some of the core principles in Lightning is built that way that it isn't possible to see other people's transaction going on. so I think we need to focus on that when we develop the core protocol." }, { "speaker": "stephan", "time": "44:20", "start": 2660.22, "text": "Yeah, I see. But it does come to that question of what price are people willing to pay? So for example, Are people willing to go Tor-only? Because that can have s-reliability concerns, and, you know, people like Warren from Blockstream have been speaking about how with all these Tor-only node operators out there, it's slowing down the overall network, and that people are trying to make payments, and it's, you know, it's slowing it down, and there are, you know, that's where maybe that tension is coming because some people are saying, \"No, look, privacy is nice to have, but actually what's most important is the reliability and being able to, you know, quickly send Make this lightning payment, and because of everyone doing Tor, and, you know, it's, it's going really slow, and I can't, I can't get the payment through. You know, you can sort of understand the, the concern from their side also that if it's not reliable, people won't use it. Yeah," }, { "speaker": "henrik_skogstr_m", "time": "45:08", "start": 2707.99, "text": "that's true as well, but also like more people should run Tor nodes like Tor, like this offering of relaying Tor messages, right? so yeah, it is in every aspect, there's a convenience, privacy trade-off all the way, and People to try to do more good, but also I believe in building in defaults, defaults that enhances people's privacy and benefit, sort of altruistic mindset in building the protocol. It's, I think it's the only way to solve this. Like commercial interests are always going to push for the cheapest, fastest, most beneficial to them. So I guess the, the sort of the world of protocol developers aren't necessarily motivated by money in the same way and have that ability to push the industry towards the" }, { "speaker": "stephan", "time": "45:54", "start": 2754.0, "text": "right direction. Nice to hear. And that's a fair point. And as you say, corporate providers for Lightning have an incentive to be less private, right? So they have an incentive. So as an example, you may be a wallet provider who is trying to deliver high reliability, and as part of that, you may do more probing of the network. and so then maybe there's an argument there that, oh, you're making the network less private if you're doing all this probing. But at the same time, as you said, there could be new technology that comes, whether it's a gossip v2 or something else, that lowers the possibility or decreases the possibility for using probing and doing probing. so there's kind of all kinds of arguments there, but it's, it's just there are so many moving pieces here, it's hard to, I guess, concretely speak about it, but I guess we're trying to, Of this discussion of what's possible and what's maybe unrealistic. So on the privacy conversation, also, did you have something to add there?" }, { "speaker": "henrik_skogstr_m", "time": "46:53", "start": 2813.08, "text": "No, just again, I think it's just hoping that people do good is in a business sense is just not, I think it's not gonna pan out. It's just we, we need to, to build technology" }, { "speaker": "stephan", "time": "47:03", "start": 2823.0, "text": "that is resilient to it. Yeah. And in, on that, theme as well, government regulation, right? There have been concerns raised about this kind of thing saying, \"Look, if a lot of people are building out custodial...\" Services is that opening the door for more government. Now, I know you, you're, your business is in, Norway, right? Yep. Or I am. Alright, I see. Yeah. But as an example, I know the EU, or I think Norway's not in the EU, but it's in the EEA or something. Yeah, it's a bit complicated. I, I, I sometimes struggle to understand the exactly all that, but I understand in the EU there's a lot of regulation coming, things like MiCA and, you know, EU crypto asset Or, you know, do you see what kind of, risks do you see there from government regulation, whether that's in the EU or, let's say, in Norway? I mean," }, { "speaker": "henrik_skogstr_m", "time": "47:54", "start": 2873.95, "text": "it's a very interesting topic. I'm, I'm not completely sure. it, it, there's going to be some crazy attempts at regulation, of technology that they don't understand. It's going to take time before they understand it. I mean, for people who hold assets or money for other people and who transact on behalf of other people, they're going to be subject to the same regulation that every other indus- like payment industry, participant is going to be. But the, the border sort of, it gets muddy and, and difficult, of course, when you enter into self custody or sort of these, halfway self custody and, especially routing nodes, routing nodes, essentially they, they don't know anything about who they're forwarding for. And this is really interesting space to regulatory, i-in terms of regulation. And yeah, I, I think it's just going to- It will take a few years until there's clarity on it, and I think basically the conclusion is going to be that it's not possible to really regulate a routing node in that sense, so" }, { "speaker": "stephan", "time": "48:55", "start": 2935.0, "text": "or custodial nodes either. Interesting, yeah. And so then, yeah, because I, I've seen different arguments made that, you know, it's better if it's more self custody because it's harder to regulate that. That component of it, whereas if you are a custodial provider, maybe there's more regulations that could apply and hit you, whether that's on the AML side or something else. so do you see any possible responses like, should the community be out there trying to advocate, should people be building tools, what, what kinds of things do you see as helping on that particular front? I think there, there is" }, { "speaker": "henrik_skogstr_m", "time": "49:27", "start": 2967.04, "text": "sort of a natural balance in the development there because there is a lot of people concerned about this that are building self-custody, setups. And solutions that make it easier and easier for people to, to opt out in that sense. And you gotta remember that if you don't need it, sort of right now, it might be okay to use a, custodial wallet or, exchange partner, et cetera, but if you have an efficient way of- Opting out and jumping into alternative, the alternative of self custody, that's really important factor because then you get a lot of the efficiency benefits but still don't, not locking yourself out. The worst case scenario is if we're building towards a world where everything is custodial and everything, just because convenience, everything ends up in only custodial services, then we're in really bad spot because then we no longer have the alternative for the case where the world turns bad. So in Norway, for example, we're We're fortunate and have a very stable, predictable, government, we have a lot of trust, very low corruption, all this, so the custodial sort of system, financial system for us works really, really well, which is also why we see lower lightning adoption, of course, and Bitcoin adoption in Norway in users, use cases, but yeah, I mean, it's not likely to change quickly in Norway, but a lot of other countries. Could very quickly change. So yeah, we need to account for both and build towards a world where we have self custody." }, { "speaker": "stephan", "time": "50:52", "start": 3052.07, "text": "The other angle I'm curious to hear your thoughts on is around stablecoins, right? So there's been, now, I know there was a legal battle about Taro, so Lightning Labs have- I don't know if it's still called Taro or not. I, I'm, I'm just gonna call it Taro for now. I know there was a legal battle between them and Tari Labs, which is like some Monero L2 shitcoin whatever thing, but basically There's this question of, and, in fairness, as, as I mentioned, Taro also RGB is out there. do you have any thoughts on whether if they are, if bringing, quote unquote, bringing stablecoins to Lightning? And I, I will note here that some people challenge that notion, whether it's, quote unquote, on Lightning, is it just, you know, but anyway, let's just put that to the side. Does bringing stablecoins to Lightning create unwanted attention, government risk, or do you see that like it's an opportunity because there may be more users of Lightning and that's gonna grow our network?" }, { "speaker": "henrik_skogstr_m", "time": "51:44", "start": 3104.5, "text": "Yeah, I think it's just, it's positive. It, it brings more opportunities, as I say, more, more use of it, and whenever we see, When we, we get to a certain level where the number of users and the-- we're just going to bring enough attention to this at some point anyway that there's going to be this sort of scramble for regulation and, I mean, it happens to anything. Like AI now is going through this massive, like, people screaming in regulation and, and want sort of, something limited because it's scary, right? It's something new, that changes society around us. So I, I don't see sort of the, the RGP and, and stablecoin on Lightning as something that Sort of makes that worse in any way." }, { "speaker": "stephan", "time": "52:25", "start": 3144.73, "text": "Yeah. Okay, fair enough. okay, so, yeah, I think we've, we've spoken through a lot of things, but, essentially the Lightning Network is growing, people need tools to manage that, whether, you know, if you are an LSP or a routing node in particular, obviously, if you are just more like a, a retail or, you know, individual user, maybe you are just using You know, apps that deal with the complexity for you. so do you have any closing thoughts then for listeners on, Lightning Network and where you think things are going?" }, { "speaker": "henrik_skogstr_m", "time": "52:56", "start": 3176.11, "text": "Yeah, I mean, it's, it's just- Growing in, in incredible speed, and I think in order to join this industry, either as a company or as an individual, you need to jump in and start learning because it takes a bit of time to really wrap your head around all the different aspects like liquidity movements and how the network operates and works, and just the, the earlier you start to learn this, the, the better. So if you are an exchange or a wallet provider who doesn't have Lightning yet, you, you need to start experimenting and, and learning about the network at the very least. So So yeah, I just recommend everybody to start running a node if you're somewhat interested in Lightning, just to get that exposure to, to technology." }, { "speaker": "stephan", "time": "53:38", "start": 3217.6, "text": "Fantastic. Well, listeners, I'll, put the links in the show notes. So it's LN dot capital and the Twitter account is LN underscore capital. So links will be in the show notes. Henrik, thank you for joining me today. Thank you for having me. I hope you found that episode educational. And before we finish up, also note there is Bitcoin and Lightning for Corporations. This is an event, a conference on by the MicroStrategy On May third and fourth of twenty twenty-three. This is going to be in Orlando, in Florida. So I'll be actually one of the MCs for the event along with Natalie Brunell. There's a cast of awesome speakers there, Michael Saylor himself, obviously, Elizabeth Star from Lightning Labs, Jack Maless, and many more. So there is a discount code available, code Livera, gets you, a price of nine hundred and ninety-nine dollars versus the standard price of fourteen ninety-five dollars. So use code Livera for a discount there, and I'll put the link in the show Thanks for listening, and I'll see you in the citadels." } ] }