{ "episodeId": "SLP596", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "roy_from_breez": { "name": "Roy from Breez", "role": "guest", "tag": "ROY" } }, "segments": [ { "speaker": "stephan", "time": "00:11", "start": 11.27, "text": "Hi everyone, welcome back to Stephan Livera podcast. Rejoining me today is Roy Scheinfeld, the founder of Breez. Roy, welcome back to the show. Happy to be back, Stephan," }, { "speaker": "roy_from_breez", "time": "00:21", "start": 20.91, "text": "thank you for having me." }, { "speaker": "stephan", "time": "00:22", "start": 22.07, "text": "So lots of things going on in the world of Bitcoin and Lightning. I think on one side you could say, look, there's some Lightning startups who are- Are shutting down or closing up. So as an example, Mutiny Wallet recently sort of put out saying, put out an announcement saying that they're, they're shutting down. but on the other hand, you know, companies like yourself with Breez out there landing new partnerships, there's, you know, people like Lightspark are out there doing partnerships with, you know, big, big companies like Nubank, with like a hundred million customers and Bitsy and things like this. So What do you make of it all? Is it, you know, because you could make either case right. Someone, an outsider could say, \"Oh, look, see, Lightning is dead, and look at these companies who are shutting down.\" On the other hand, you could say, \"No, hang on, there's actually more partnerships and companies who are plugging into Lightning as well.\"" }, { "speaker": "roy_from_breez", "time": "01:07", "start": 67.47, "text": "yeah, you-- we're starting off easy. I see. I think we should take a step back from Lightning. Lightning is a manifestation of a specific use case, which is," }, { "speaker": "roy_from_breez", "time": "01:25", "start": 84.64, "text": "and I saw a discussion in Twitter the other day, whether Bitcoin is money or Bitcoin is being used as money." }, { "speaker": "stephan", "time": "01:33", "start": 92.56, "text": "The" }, { "speaker": "roy_from_breez", "time": "01:33", "start": 92.7, "text": "ju- the jury's still out. that's, that's, that's one hundred percent clear. if you go, I just came back from Nashville, the place of Lightning in, in the conference was relatively small. People Use Bitcoin mostly for trading right now, and they're using Bitcoin mostly as an asset. That's the current, status of, Bitcoin. And I think what you see in the Lightning ecosystem is reflections of that, that, fact, that people, that still mostly use Bitcoin, ninety percent of the use cases are, Bitcoin is used for trading, and people are swapping one token for another, and, and Bitcoin is, is, is primarily used as the primary token or kind of the, the, the flagship, token in the crypto- Landscape. companies like Breez, companies like Mutiny, Lightspark, and others, sought out to change that. we think, I think the, the value proposition of Bitcoin is, Peer-to-peer electronic cash. I want people to be, to use Bitcoin as money. I think if Bitcoin will kept, as, as a trading asset, it will eventually die, because if you kind of dig deep into how this all trading infrastructure works, it's kind of a story over another story, but at the end of the, of the day, in order to generate yield with Bitcoin, you need Bitcoin, to be used. and I think the best way to use Bitcoin Is used as a currency. so it's hard, let's just b- touch on mutiny, it's hard, from a technology standpoint to do, lightning, because there's, some limitations of, Bitcoin scalability using lightning, and it's very hard to do, a wallet that is customer facing and end user facing, and to serve the user and make sure, reliability, user experience Experience at a, at a high quality. so I'm not surprised there are attempts that are, failing. it's part of the maturity of the ecosystem as well. Mutiny contributed a lot to the Lightning ecosystem and to the understanding on how people are using, Lightning. They added a lot of stuff to the technology stack, that didn't exist previously. the use of WebAssembly, the use of LDK in the browser, even, Muti- Muninette, which is a replacement to testnet, so they brought a lot of, contributed a lot to the, to the, Bitcoin slash Lightning stack. And, and, and yes, I'm not surprised that, that are, there are failed attempts, and maybe in the next, reincarnation of Munin, we'll see a better attempt. I don't think, it's easy to, to just walk away from, Bitcoin, so I think we'll see, we'll, we'll witness a comeback of, Community team with, with an upgraded, direction and vision. And, and yes, there's, there's still many companies in the space that are, are still, operating Big picture, ag-again, we need to, to discuss the regulatory landscape, and we need to discuss the use of custodial lightning versus non-custodial. Breez, from the get-go, we were prominent, advocates of non-custodial lightning. I think it's evident right now that non-custodial lightning is the only thing that will prevail, and we see more and more companies, trying to build, self-custodial solutions, which I think it's a, it's a It's, it's the right, it's the right direction, the, the, the, the value, the value proposition of Bitcoin is, is, is manifested if you use it as peer-to-peer electronic cash, and that, that can only be manifested in a self-custodial solution. So I'm very happy that the ecosystem, is showing, support for self-custodial solution, and more companies are building on, self-custodial, and this, and, and And, and the regulatory landscape is, challenging because, people, are trying to fight, Layer 2, and people are trying to, prevent, users from using Bitcoin as a medium of exchange. That's also very evident." }, { "speaker": "stephan", "time": "06:09", "start": 369.01, "text": "Yeah, I'm curious what you mean when you say people are trying to prevent. Do you mean individuals or you mean the state or do you mean, who, who are you referring to there?" }, { "speaker": "roy_from_breez", "time": "06:18", "start": 378.49, "text": "yeah. So I think, again, let's take a step back and take a look at the bigger picture here. what's going on with Bitcoin in the last year? we saw new financial instruments like, ETFs, that are put in place in order to- to offer retail users to buy Bitcoin, but they're not actually buying Bitcoin, they're buying, an asset that is controlled by someone else. so it's all a question on who is purchasing the Bitcoin and whose money they're using in order to purchase the Bitcoin. Big picture, there's, I think th-this, this trend is, what we call the dollarization of the Bitcoin. There's A lot of interest from multiple parties, governments, but also private companies that are kind of extension of, government, to allow Retail users to buy and sell Bitcoin only if they're using the dollar, meaning the dollar is still the, the purchasing power and, and the dollar is being used as the medium of exchange and, and the unit of account. And as a result, system of control. so I think we're, what we're witnessing, recently is, is a replay of the petrodollar, meaning- Yes, you can have an access to an asset only under specific conditions. One of the condition is to use the dollar. And, and, and we see, we see, I think, what I'm seeing, we're seeing a, a adoption of stable coins in order to encourage that, meaning you can have access to Bitcoin. If you use a stablecoin which is pegged to the dollar, that serves, the interest of not only theater, but only also the US government." }, { "speaker": "stephan", "time": "08:20", "start": 499.75, "text": "Yeah, okay, so yeah, I mean, this sounds like, very similar to, or maybe it is exactly the same as, like, Mark Goodwin and Whitney Webb's. Sort of Bitcoin dollar thesis idea. Now, I have some agreements and disagreements there, because on one side, yeah, of course, the state wants to control all kinds of things. So of course, they have AML and sanctions laws, and of course, they wanna do all kinds of surveillance. So obviously, zero argument from me there. The point where I'm not quite sold on is this idea that- That there's some kind of relation between making people use the dollar to buy Bitcoin kind of thing, because ultimately, it just matters what, what do people want to hold, right? Like, even-- I guess I'm kind of rejecting, in a sense, this kind of petrodollar kind of-- In, in a sense, I'm rejecting that idea because I think it's more like, what do people actually want to hold right now, today? Obvi-obviously, we have to be honest about where we are today, right? Bitcoin is a one, one trillion dollar asset or one point one, bonds and the treasury market as an asset is maybe twenty-five to thirty trillion, something in that range, right? That's, that's kind of the relative size we're talking about. And so to me, it's more just a question of getting more people to, you know, hold Bitcoin, and of course, I'd love for people to use Bitcoin in commerce as well. But to me, that's probably the, the relevant question. But I think to, to me, the point that you were making though is that, that there is this element of state control, state surveillance, the government The government wants to sort of have an insight." }, { "speaker": "roy_from_breez", "time": "09:50", "start": 590.09, "text": "The government wants to, the government, it's not just the government, but, the control, there's definitely control, and we see that, in, in, in Finsta, and we see that with the MiCA regulation Currently, the state of things, is that the governments is down on the on-ramps and off-ramps, so they want to control the on-ramps and off-ramps, and, they're willing to give you access to an asset under specific, conditions that they decide, what the conditions are. so when you say you want to give people access to Bitcoin, my question is, when they buy an ETF, do they have access to Bitcoin? That, that, that's the, that's, that's the big, that, that's kind of the, the, the, the, the question here. exposure, is exposure to Bitcoin has the same characteristics and the same value proposition that Bitcoin carries? what I claim is that it doesn't, because Bitcoin is a permissionless, borderless, open monetary system. The, this value, for position isn't being manifested if you have ETF holding or, or if you hold, USDT and you can use Bitcoin in, in as rails inside the Lightning Network. for me, Bitcoin is, is freedom money. for me, Bitcoin is, is a bearer asset that users should hold if they want to capitalize and want to utilize the characteristics of Bitcoin. And This doesn't exist in this, in this pseudo Bitcoin tools." }, { "speaker": "stephan", "time": "11:37", "start": 697.14, "text": "I see, yeah. So when it comes to things like the ETFs and other custodial platforms Yeah, I think there will be a lot of people who ultimately are, are risking getting robbed, but at the same time, for a lot of people, that's maybe their first step. And, you know, and I'll, I'll give an example. I think, in Australia, obviously a much smaller example, but there is a Bitcoin ETF called the Monochrome ETF, and they actually have a really interesting setup where people can buy the ETF, but then when they want to redeem, they can actually redeem Bitcoin out of it, right? So you could imagine that could be, as" }, { "speaker": "roy_from_breez", "time": "12:12", "start": 731.59, "text": "in, Of course, of course," }, { "speaker": "stephan", "time": "12:14", "start": 733.81, "text": "but I mean, that's how is that any different to buying it on an exchange and withdrawing from the exchange, you know? Or, I mean, obviously there's legal and so on differences, but it's at least- But, you know, that's at least, you know, better than what we're seeing in some of the large, you know, American Bitcoin ETFs that I, I believe don't have that kind of option. Maybe for legal reasons they can't offer that yet, maybe in the future they will. I think maybe that comes to like this whole cash create and inspbc redemption question. so, you know, I think, but I think the point where I definitely would agree is I think it's important that We have a, a good amount of people who are really using Bitcoin themselves, right? Like actually non-custodial, ideally running your own node and all of these things. Those things are important, but I guess that's what I call Bitcoin. Yeah, yeah. That's" }, { "speaker": "roy_from_breez", "time": "12:58", "start": 778.43, "text": "what I call Bitcoin. Yes, exposure to Bitcoin is also important. Yes, I'm not completely against, ETFs, and yes, everything is market education, and definitely everything is good for Bitcoin, however. We need to understand that when we talk-- when I, again, there are multiple definitions of bitcoins. When I talk about bitcoin, I talk about, peer-to-peer electronic cash, because also from an economic standpoint, I think that's the only use case that will make bitcoin valuable. so a good medium of exchange, makes, bitcoin a better store of value. I think if, if we, we take the utility out of- Bitcoin, there's not, not much left, so that's why me, Breez, but other companies are investing a lot of energy In order to make a Bitcoin a utility, but, I one hundred percent agree, the, the, the, that's not what the market, shows us today. currently, Bitcoin mostly is being used as a trading speculative asset. I want to take the, the, the, I want to take the speculative and make it a lit-a little less speculative. And get people, using Bitcoin, and I think, if Bitcoin, Bitcoin will be used as a utility, then there will be a feedback loop, and, and, and, and, and, and, and the manifest, the manifestation of Bitcoin value proposition will, will have a, a huge economical effect on Bitcoin itself." }, { "speaker": "stephan", "time": "14:39", "start": 879.11, "text": "It wouldn't" }, { "speaker": "roy_from_breez", "time": "14:40", "start": 880.21, "text": "no longer be a one trillion asset." }, { "speaker": "stephan", "time": "14:44", "start": 883.59, "text": "Back to the show in a moment. This show brought to you by CoinKite dot com, the creators of the best Bitcoin hardware security devices such as the Coldcard Mark IV and the new Coldcard Q. Now, we use Bitcoin hardware security devices to keep our keys offline, our private keys offline. Now, the way these work is you can do that setup, write down your twelve or twenty-four words on those, the seed word cards, and you can Keep that secure. Now you can use this device to interact with the Bitcoin network using software such as Sparrow Wallet, Electrum, or Breez Desktop or Nunchuk as a few examples. Now you have a range of security features that you can use with these devices, such as passphrase, you can use seed x or, or my favorite is multi-signature. Now if you're starting in a basic way, just start with the device and the USB-C cable, plug it directly to the computer and use it that way, and then later improve your- Your setup, but I believe these devices are great at helping secure your coins, especially as you start to migrate up into multi-signature security. But don't be disheartened or don't be, scared away, they are accessible, and I think you actually do learn about Bitcoin in the process. So to get yours, go to coinkite dot com, use code livera to get a discount on your cold card. And now, back to the show. Right. I see. Yeah. And so, I mean, the way I'm thinking about it may be slightly differently to you, I Legitimate use case of Bitcoin, but where I agree with you certainly is that, having the ability to easily earn and spend and receive and do all these things with Bitcoin using ideally Lightning or some other layer is, is, is a good thing, and we want, we want more people to be able to do that, and it helps all-- it all, it all helps each other being able to have good tools for hodling and good tools for earning and spending and so on." }, { "speaker": "roy_from_breez", "time": "16:33", "start": 992.8, "text": "Exactly, exactly. I, I, I, I want to touch on, on the hodling. I don't spend Bitcoin unless I have to. I think, there's a false dichotomy between-- People are trying to create a false dichotomy between store of value and medium of exchange. When you hodl You find huddling valuable because you know that when you'll b- need to use your Bitcoin, you'll be able to do so. That's why Bitcoin as a, as an asset is so valuable because of its- A, a core value proposition that applies to store value and also applies to, Bitcoin being used as a medium of exchange, meaning the, the ability to use Bitcoin in a permissionless, censorship-resistant manner It, it applies to, to why Bitcoin is valuable as a store of value and as a medium of exchange. And if you take a look at the ninety percent, on, on, on how people are using Bitcoin Which is trading. This value proposition and Bitcoin is being used, as a trading asset because of these characteristics, so, so the fact that they can trade anywhere, openly, permissionlessly. That's what makes Bitcoin valuable as a trading asset, and when you trade Bitcoin, when you buy or sell Bitcoin, what exactly, how exactly are you using Bitcoin as a store of value or as a medium of exchange? You're actually using it for both. you trade And, and, and the fact that you were able to trade mean, means that you used it as a medium of exchange, you exchange value, but you buy or sell it as an asset because you're interested in its store of value characteristics. So I don't think, I think people are trying to intentionally and, and, and, deliberately create this dichotomy in order to- To prevent, and yes, there is some sort of an attack on Bitcoin in a sense that there are parties that don't, that aren't interested in giving you direct access to Bitcoin because they want, they, to control the direct access to Bitcoin and they want to- Hold Bitcoin themselves." }, { "speaker": "stephan", "time": "18:49", "start": 1128.8, "text": "Right, yeah, as, as the eternal, saying goes, \"Not your keys, not your coins.\" And, exactly. Let's talk, let's go on to a great article you wrote recently. So, listeners, that will be in the show notes. It's called, I think it's \"Lightning as the--\" Lightning is the common language of the Bitcoin economy. So, can you talk to us a little bit about this idea? And I really liked the analogy with the English language you made. So, can you just explain a bit about" }, { "speaker": "roy_from_breez", "time": "19:15", "start": 1154.6, "text": "Sure. I think it's becoming very evident that, that Lightning is the, the language that sub-networks that are being built on top of Bitcoin, but not not only on top of Bitcoin, are starting to, to interface with. if you take a look at, at projects like Fedi did an, an amazing launch, yesterday," }, { "speaker": "roy_from_breez", "time": "19:42", "start": 1182.21, "text": "one, the core interface of Fedi, which is using the underlying technology is Fedi Mint. the, the, the core interface that they're exposing in the Fedi app is Lightning. so although when you, interact, and you exchange, mints, Fedi mints between In Fedi users, you're not actually utilizing the nat- the, the Lightning network. Fedi itself, the app externalized the interface as a Lightning interface, meaning you can receive funds using a Lightning invoice, and you can send funds to, Lightning destinations that accept, Lightning invoices. so when I say Lightning i-is becoming the common language and/or Lightning is the common language of, Bitcoin Is basically seeing, solutions like FedMe, solutions like AR, solutions like Cashu, solutions like Liquid, all starting to interface. Between themselves and, and externally using Lightning as, the protocol and, and, and, and And if you, if you, take a step back and think about, how to articulate it, it's very clear that Lightning is the railroads. Lightning is the highways between all these sub-networks, so all these sub-networks can communicate, internally and externally by using, the Lightning railroads. so, so I think, that we'll only see more and more solutions That are," }, { "speaker": "roy_from_breez", "time": "21:29", "start": 1289.27, "text": "that will try to create, this sub-network effect, but eventually all of them will interface using Lightning and will use Lightning, the liquidity network, which is called Lightning, will use the liquidity network, build using the Lightning protocol to interface, between them. So there, it will be end users, it will be enterprises, and it will be sub-networks that kind of offscate a different token or a different federation model. yes," }, { "speaker": "stephan", "time": "22:02", "start": 1321.96, "text": "and as you said, there's all these different ways that people are building out methods to use Bitcoin, and obviously, you can use Lightning just natively, but of course, there are people building things like ARK and Liquid. And Fedimint and Cashu and single, you know, single mint, style. And I guess the point that you're making as well is that even different Cashu mints, as in single custodian mints, some of them are, quote unquote, talking to each other using Lightning, right? Because the eCash across those two mints isn't the same, right? It's literally different eCash tokens, but nevertheless, the trading between them is happening over the Lightning network. and so I think" }, { "speaker": "roy_from_breez", "time": "22:43", "start": 1363.26, "text": "same goes with, same goes, same applies with With, with Fedimint and same applies to Ark. I'll, I'll explain why, Lightning is so successful as, as, as, an interoperability protocol First, it uses Bitcoin as a bearer asset, meaning you don't need to maintain another token, you don't need to maintain any global state if you're using Lightning. Using Lightning is using Bitcoin literally. When you make a Lightning transaction, you're actually making a Bitcoin transaction. Maybe it's not published to the chain, but the artifact The core, infrastructure that Lightning is built on is a UTXO. you open a channel, you're using a, a Bitcoin transaction, you're changing the state of the channel, you're using a Bitcoin transaction, and the fact that you don't need to maintain a global state, the fact that, Lightning is an extension of the main chain in terms of state, a global state, not private state, because there are, there is private state inside Lightning nodes, means That it's very easy, to interrupt using Lightning because all you need to do is to speak that language. You don't need to bring, users to your network, you just need to create an extension, an interface using, Lightning and, and, and again, Lightning is Bitcoin, and it's very easy to interface with-- they're all, all these protocols are already interfacing with the Bitcoin mainnet, so interfacing add-in, adding another extension that, speaks Lightning, it's very easy if you- If you're using Bitcoin as a bearer asset, that's, that's, one very key differentiator, of Lightning. The other thing is that Lightning inherently is very transactional, meaning- the incentives are geared, into moving Bitcoin. you don't, you don't make any, any, any ROI if you just stake. your Bitcoin. The Bitcoin needs to, need to be used, if you want to generate yield, and that makes the entire Lightning Network geared into amplifying the movement of Bitcoin. so there's an incentive layer behind, the Lightning Network that encourage you to speak Lightning, because if you'll be effective in speaking La-Lightning, you'll be able to move Bitcoin and to generate ROI as a result. Of moving, your Bitcoin. Yeah, I see. And" }, { "speaker": "stephan", "time": "25:29", "start": 1529.19, "text": "it's also just this idea that people building different, even different networks and other layers, they have their own incentive to try to speak Lightning, because they can kind of plug into the network that's already there, right? Because they can now, quote-unquote, speak to the other users on that network, monetarily speaking, right? As in send and receive money. Yes. So that's an interesting aspect of it. I, I presume, you know, and, and, and as you speak, spell out in the article, it The dominant business language. People just assume you're gonna do business in English, mo-- for the most part. but I guess there are elements where sometimes it breaks down, and maybe even in English it can sometimes break down, right? Like, but as an example, even today in Lightning, there's Bolt 11 invoices, there's Bolt 12 invoices, there's, you know, Lightning address, there's UMA, there's, you know, I, I'm sure, and then there's kind of like- Different forms of QR and there's different ways that people can try to talk to each other, and some people are trying to pay each other on chain, and some people are trying to do some other thing. So how does it all blend down together? Do you just see it as like, over time, developers are just gonna have to- Figure out how to make these things talk to each other or what, what does it look like?" }, { "speaker": "roy_from_breez", "time": "26:43", "start": 1603.44, "text": "yeah, basically yes. I think, first let's differentiate between vaults and extension on top of the Lightning protocol. So the Lightning protocol is defined as vaults and, and when I talk, when I say that, Lightning is, the common language, I mean it already achieved some kind of, critical mass. Around a specific vault, and, and, and today it's Vault 11. if you take a look at Coinbase, if you take a look at Binance, if you take a look at Kraken, if you take a look at," }, { "speaker": "roy_from_breez", "time": "27:19", "start": 1639.44, "text": "at, at, All of the wallets, all the Lightning wallets, the, the, the, the basis is the ability to speak Vault 11. I think there's, there's a consensus, around Vault 12, and just, it's, it's just now a kind of a question of, chicken and the egg. we're waiting for LND to support, Vault 12, but they already expressed their, their, their support and, and, and, and, and- stated that Vault12 is part of the roadmap, until we'll have like a consensus on the implementation layer, that Vault12, and Vault12 will We'll enter all the implementations and people will start, using that, in their nodes. I think we'll, we'll, yes, we'll have, hiccups in user experience. it will be challenging, it will, you-- we will have to be creative From a user experience standpoint, you can't externalize to users, okay, that's Vault eleven and that, that's Vault twelve. Yeah. If you're explaining, you're" }, { "speaker": "stephan", "time": "28:27", "start": 1707.07, "text": "losing here, right? Like you have to-- it has to just be, you know, simple." }, { "speaker": "roy_from_breez", "time": "28:30", "start": 1710.11, "text": "W-what is that? Like, why do I need to use Vault twelve instead of Ellen URL, and, and, and so on? yes, it's, it's, it's complicated. Maybe we'll see meta protocols like Slashdads that is kind of, integrated Negotiate, what, what protocol, to use, but essentially the value transfer will be in the Lightning Network. we're trying to improve Vault 11 to expand the use cases, to support the ability to send without an invoice, that's the primary use case of Vault 12. I think it will happen. I think this year, you already started seeing, solutions like, Phoenix implementing that. I think other solutions, including Breez, will follow suit. But, but that's just, it takes time till the market consolidate to, to, to s- to, to a specific, to a specific, user experience. what matters to me is the fact that by the end of the, of the day, when you move the Bitcoin, the Bitcoin are, are being moved in payment channels." }, { "speaker": "stephan", "time": "29:40", "start": 1780.0, "text": "And so let's talk a little bit about the liquid integration that I know you guys are doing, and you've just recently announced that, So as I'm understanding, this is a nodeless integration. So I guess just maybe just for listeners who aren't familiar, I'll just give a very kind of quick, kind of one minute explanation of what Liquid is. So Liquid is a, think of it like a Sidechain with multiple other parties, like Blockstream and some other parties, I think it's fifteen functionaries, and there are other, you know, members of the federation, of the liquid federation, but the ultimately on chain, I think it's, basically it's an eleven of fifteen multisig that requires, you know, it's like a sidechain external to Bitcoin, and people can peg in Bitcoin and peg out Bitcoin, but in practice, what a lot of people are using instead is a swap provider who kind of handles the technical details for you, for a fee, obviously. And So that's kind of high level what it is. Now, on one hand, you can say, \"Look, blockchains don't scale, therefore it's gonna hit its own limits,\" but on the other hand, you can also say, \"Look, there are different trade-offs, there's different components and different characteristics that Liquid has as an example. So it has confidential assets, confidential transactions, it has, you know, faster block times, it has no mining, so it's got different qualities to it that...\" Make it useful for some people, because as an example, if you are a, you know, now that's kind of the explanation of what Liquid is. What are some of the implications? There's no routing on Liquid, not like in Lightning. It's, it's just you're just making like an on-chain payment, just like you would in Bitcoin, but instead you're using LBTC instead of BTC. So those are some of the key, I guess, just kind of the, you know, what you need to know for the new listeners. Roy, do you wanna just explain" }, { "speaker": "roy_from_breez", "time": "31:28", "start": 1888.17, "text": "Yeah, definitely. I'll have to take another step back, just to give the big picture here. there's definitely an issue, in Bitcoin and Lightning as a derivative of Bitcoin, that also is, is manifested in Lightning, the fact that, UTXO cost money, and sometimes a lot of money. so in order to onboard to the Lightning network, you need to open a payment channel, and you need to make an on-chain transaction. when you close a channel, you need to do the same, you need to publish the channel state to, to the chain, and to pay for an on-chain transaction in order to redeem your funds, sometimes two on-chain transaction if the channel was force closed. that, that aspect of, of, Lightning creates, a lot of friction, and we see that when we're, we're starting to scale to more and more retail users, the Breez is very focused on the Breez SDK right now. It's not just the Breez wallet, which is geared toward Bitcoin, Bitcoin enthusiasts, we're also now being integrated into retail products. we definitely see a friction When it comes to this aspect of Lightning and, and what we call channel management and the cost of onboarding and offboarding from the Lightning network. so along the line of, Lightning is the, as the common language and the fact that you can use Other sub-networks and just speak Lightning as an interface. we took a deeper look at Liquid, and we, we came to a realization, that, right now, you said it correctly by the way, Liquid doesn't solve Bitcoin scalability issue, and generally speaking, You can't scale a blockchain by using another blockchain, that's, that's true. But it's a pragmatic, first step, and maybe in a world where there are Multiple, side chains and multiple federation, because when, when it comes down to it, from a technical standpoint, what Liquidity isn't, isn't, isn't that different than Ephemium or Ark. All of this solution, on a high level, they're trying to share the cost of a UTXO. They're trying to cause, the ability to, to participate In a UTXO instead of just, owning, solely a UTXO," }, { "speaker": "roy_from_breez", "time": "34:18", "start": 2057.83, "text": "we decided, to implement, Liquid as a nodeless implementation of Lightning, meaning our Liquid implementation is an implementation of our Lightning SDK. It's not a separate Liquid protocol. The Liquid SDK speaks and have a, a, a very similar, if not identical, interface to our real-life- SDK. so from a, development, from a, from a developer, from a user experience standpoint, both speak Slack Lightning. one, the Greenlight implementation speaks Lightning natively, meaning you're actually, using only the Lightning network, you're allocating your Bitcoin in Lightning channels, it comes with, with, with a pro that you don't need to-- The trust model is, the same as the Bitcoin trust model. with, with the Lightning caveats, the fact that you need to use a hot wallet and you need to be online to make sure that you're not being frauded, but it also has the downside of, UTXO, may cost, a lot of money to onboard and the fact that you need to handle, channel management in one way or, or the other, even if you, if, even if you'd use like advanced technologies like Splicing, it's friction. when channels are getting closed, it's friction. and the liquid implementation, because you have a different trust model when the, when the UTXOs are federated as part of the liquid, you can, you can think about, if you want to have a mental model on what is liquid, liquid, liquid is a global federation. It's a global federation. When, where you as a user, you need to trust the functionaries of this federation, and your, you said Correctly, you, you need eleven out of fifteen functionaries right now, by the way, it's gonna change next year, once, Liquid will upgrade to Taproot, the, the number of functionaries will, will, will increase in an order of magnitude, but if you accept the, this trust profile, you can have a much better, smoother, seamless user experience. There's no, channel fee when you open, when you onboard to Lightning, and you don't need to- Deal with channel management at all, which makes it much easier to handle from a user experience standpoint, and you can send and receive Lightning transaction using atomic swaps. That's kind of the magic be-be-behind our Liquid SDK." }, { "speaker": "stephan", "time": "36:55", "start": 2215.35, "text": "This show also brought to you by Mempool dot space, the leading Bitcoin and blockchain visualizer. I use it all the time when I'm checking transaction fees and trying to understand what is the state of Bitcoin's mempool. You can search transactions, historical as well as unconfirmed ones, and also see a great way to visualize things across the Lightning Network, Liquid, mining, and so much more. Also, for those of you with an enterprise, they offer a mempool dot space enterprise program. So for those of you as part of that enterprise program, you might wanna get increased API limits, and you might wanna have increased access to the team in terms of feature requests. You might wanna have special branding in terms of how your custom instance of mempool dot space Looks, so to sign up for that, go to mempool dot space slash enterprise. This show also brought to you by Nomad Capitalist. Nomad Capitalist is a leading provider in terms of offshore tax and lifestyle strategy planning and implementation. They can help you go overseas and legally lower your taxes. As many of you know, I grew up in Australia, but I left, I was sick of it in terms of the taxes and the COVID tyranny and all these other things. And so that's why I left, and now I live in Dubai, but that's not necessarily the place for you. You have to think exactly what works for you, for your family, for your business. And Nomad Capitalists have worked across dozens of different countries. They've helped people get passports, residences, bank accounts, and all kinds of other things. And importantly, it's not just about choosing one place, it may be multiple places, and it may be also about making the pieces fit together in terms of how your business fits with your family and you as an individual. Nomad Capitalists have helped many, many people in terms of going overseas. And if you're interested, go to nomadcapitalist dot com slash apply. This is applicable for people with a net worth above one million US dollars. That's nomadcapitalist dot com slash apply. And now back to the show. Yeah, and so listeners interested in, in learning a bit more about some of these, swap providers, one example is BOLTs dot exchange. I have an, I have an episode with Killian from the team there. And I-- Are you using BOLTs dot exchange as part of this as well? Yeah, you are. Okay, gotcha. We are," }, { "speaker": "roy_from_breez", "time": "39:07", "start": 2346.58, "text": "we are, and shout out to the wonderful team at, BOLTs dot exchange. I, I, agreed, and, and, and, and I'm willing and happy" }, { "speaker": "roy_from_breez", "time": "39:23", "start": 2362.81, "text": "yeah, right, on the Breez side, yeah, yeah, on" }, { "speaker": "stephan", "time": "39:25", "start": 2364.69, "text": "the app side, yeah, yeah, yeah." }, { "speaker": "roy_from_breez", "time": "39:27", "start": 2367.15, "text": "but, but even more than that, I didn't want to use Vault as long as it was closed source. and, and, and Kilian, recently changed the license of, the Vault's backend server to be an open source, completely like, open source, I mean, free open source, not Not, not, not, not, not open source. It's not open source if it's not free to use, the way that you want. And so, Kirian, changed the, the license. That means that we, as, as an entity, we can run, Swapper, whenever we, we want to, and we can use other Swappers as well, because we don't want to create a single point of failure or to, to be centralized and vendor locked to a specific, a specific solution. so once they change it to, to, to open source license, there's no reason we won't use both because the, the team is top notch and, we love, we love Kili and we love Michael, we love the entire both team." }, { "speaker": "stephan", "time": "40:33", "start": 2433.38, "text": "Cool. So I guess just for people to understand then, summarizing, there's, you know, in the old days it was Breez just the app, right? Now we've got Breez SDK, but you kind of have different versions. So you have the green light version, which is the pure Lightning, you know, you're actually setting up your own channel, but there's downsides to that. It means you need to make sure you've, you've got the right channel liquidity, maybe what direction that channel is pointed in. You're waiting for the channel to open and so on" }, { "speaker": "roy_from_breez", "time": "41:03", "start": 2463.02, "text": "This, this was addressed by zero confirmation channels and, using an LSP, I think we, we were able to successfully mitigate these challenges of, of user experience, but what we inherently can't mitigate is the fact that, UTXO cost Money and in the hypha environment, it, it will always-- and we want it, to, to, to cost, a lot of money. So it's always gonna go" }, { "speaker": "stephan", "time": "41:31", "start": 2491.3, "text": "that way, right? Yeah." }, { "speaker": "roy_from_breez", "time": "41:32", "start": 2492.24, "text": "A-and we want it that, to the listeners, the, to, to, to whoever, listens, you want to own a UTXO as early as possible. and, and, and one of the, part of hodling is to own a UTXO because UTXO gonna get very expensive, If everything goes right for Bitcoin, UTXO is gonna cost a lot of money down the line. So for people who can afford it, yes, use pure Lightning, open a channel, buy a channel. but, there will always be people that can't, buy channels and, and, and due to the limited, and, and, and, and, and Lightning will always require channel management, meaning, adding inbound liquidity, closing channel. This friction of channel management will always exist in a pure Lightning solution. So in order to mitigate these challenges, we've added a new Liquid implementation that, compromise on the trust profile. You need to trust the Liquid, sidechain, but once you accepted this trust profile The user experience is, is, is great, because, you're essentially using atomic swap to talk, to speak the lightning language." }, { "speaker": "stephan", "time": "42:53", "start": 2573.32, "text": "I see. And so in this case, so like as you said, so there's the greenlight implementation and there's the liquid implementation. So users on the liquid implementation, are they effectively holding, what balance do they hold? Are they holding an LBC balance? And then when they make or take payments, it's using this BOLTs dot exchange in the back end to kind of- Make the lightning payment or take a lightning payment, right? And then the user holds LBTC in that model, and as we said, currently that means you are trusting eleven of fifteen functionaries not to rug you and so on, but the idea is this might be more for your spending balance, not for your, you know, and over time maybe you can graduate up to full self-cust-- or full, you know, Bitcoin chain sovereignty." }, { "speaker": "roy_from_breez", "time": "43:33", "start": 2613.06, "text": "That's another, that's another key, key element, there's no- We provide more options right now with the SDK, and, and I think the future is hybrid, meaning I think you'll see, you'll see, hybrid solutions popping up. We, we started to see that with, Mutiny, by the way, when" }, { "speaker": "stephan", "time": "43:54", "start": 2634.46, "text": "you," }, { "speaker": "roy_from_breez", "time": "43:55", "start": 2635.2, "text": "you were able to do Fedimint and upgrade your, your Fedi-Fedimints to a self-custodial Lightning channel, you can do the same with the, with the Lightning, meaning Even take a look at the scenario of closing a channel. right now, if you use the Breez wallet, you know that after a period of inactivity, we may close your channels because we want to reallocate the liquidity to other users that are more, that, that are transacting, and, and we generate more ROI for, from, from them. but when you close the channel, maybe you can fall back to a liquid implementation. Meaning the user still maintain the ability to transact in Lightning under a different trust profile and everything can be seamless, to, to the user. Meaning, users don't necessarily need to understand what's the underlying, how the, the, the underlying, implementation actually works. Right, right. So the end" }, { "speaker": "stephan", "time": "44:54", "start": 2693.55, "text": "user doesn't necessarily have to care. It's more like service providers and things who are dealing with, you know, the complexities and the technicalities, right? Like as an example, maybe there are- You know, gaming users, and they don't really care, they're not like die-hard Bitcoin or Lightning guys, they just kind of wanna have a small balance that they're using in some game, something like that. Maybe that's an example where, this could make sense for them, because they just have a balance of something. You know, yeah." }, { "speaker": "roy_from_breez", "time": "45:20", "start": 2719.97, "text": "I, I think, I think, I'll, I'll give you another example which, which maybe will be a bit clearer. So when I say hybrid approach, and, and I think we have more, more tools now to provide a better user experience, with cashew, with FedMe, with Liquid, and with Lightning of course. Essentially Everything will be lightning, the question is, how much compromises you take along the way in order to, to achieve the lightning interface. But take a look at, the feature that, a very nice feature that Phoenix, added, which is a fee credit. so in Phoenix D, you- If you, you can receive payments even if you don't have a channel open. you actually are paying directly to the LSP, and you-- until you accumulate enough funds to open A, a, a, a Lightning channel. And they call it fee credit. Imagine that we can implement fee credit using Cashu, meaning instead of, paying, an LSP, the LSP can mint A, a, a, an eCash token, and, and, and users can accumulate eCash tokens until they have enough funds to open a Lightning channels, and this eCash token can be redeemed at any time and can be exchanged for other eCash tokens, and it is always auditable, so when it comes to eCash, I think every time you have a, a trust element implemented in your solution, if you replace it with eCash, you're always in a better state. Meaning, if, if people will implement a, a wallet of Satoshi now, I, I'm sure they would implement it using eCash, because that's a more audit-able, more transparent way to implement a custodial solution. You can do that with fee credit, you can do that with zero confirmation channels, by the way. There is an element of trust in zero confirmation channel. So imagine that, that- The solution like Breez and LSP like Breez can mint eCash and credit the user, give the user eCash token until the, the, the, the, until the, the The transaction is confirmed on the chain and burn the eCash when, when, once the transaction is confirmed. So I think there's a lot of room for kind of hybrid approach, as I said, like you can fold back to liquid, you can start with liquid, you can upgrade to liquid, but I think on the base layer, like if you use our liquid implementation, you, you get a very, a very, nice seamless user experience." }, { "speaker": "stephan", "time": "48:09", "start": 2888.81, "text": "I see, yeah. So as you were saying, it's, potentially very useful for developers and people who are making a product that's not necessarily-- they might not necessarily be willing or, or, to go and code up everything themselves, the idea is that they're kind of using your SDK to sort of give them, an easy way to get it started and to make it work. And then, as you're saying, this hybrid vision of the future of Bitcoin is that people might be using all kinds of different things, whether that's e-cash tokens, whether that's LBTC, which is pegged in BTC into the li-into the liquid network, or obviously Bitcoin and Lightning on-chain, and using some combination of these to kind of- Swap around and sort of use these things to give a better experience for the end user. so that's kind of the, I guess, the high level, idea. I'm curious as well, I know, some of the Blockstream guys have spoken about the idea of doing Lightning on top of Liquid. We will, and maybe that's a future idea as well. Is that something you would look at? Yes. With that, what would that mean? We" }, { "speaker": "roy_from_breez", "time": "49:12", "start": 2951.93, "text": "are working with the Blockstream team in order to make that a reality. if you take a look, The, the notion of federating a UTXO. And at the end of the day, if you, if you federate a UTXO using a liquid transaction, when like, that on an abstract level, it's a, is a federation of a UTXO. If you take a look at something like Ark that is using a VTXO as an artifact instead of UTXO, as a way to federate, multiple entities into UTXO, you can build a lightning channel On the federated artifact, not just on top of a UTXO. So there's no reason and Lightning is very powerful in that regard, it's already working, if you, you can use Core Lightning, on top of Liquid and run a Lightning node on top of Liquid, it, it doesn't exist in, in Greenlight right now, but we're working with the Greenlight team in order to bring support for Lightning artifact in, in, sorry, in elements. Greenlight needs to speak elements in order to support, Liquid. We're working with them in order to do that, and then you can have Even better experience than swaps, you can have instant, instant, instant transactions, using, Liquid. You can do the same on top of ARK. You can think about ARK as a way to do channel factories and, and, and think about a channel you open a channel on top of a vTXO instead of a uTXO, that's also an option. so yeah, I think the, the, the possibilities are endless, and I'm excited to, to, to explore what coming, what's, what's coming next. But, but we need to keep in mind that, this will be a constant, improvement, process, and the tools that we have now Are great. I think we've made a lot of progress, in order to achieve a, a seamless, Lightning integration, and every developer out there can just take our SDK and, and start building with that. Knowing anything about Lightning, we have design partners that don't, aren't coming from, Bitcoin and they have no idea what Lightning is, they're just using the API to send payment, receive payment, and, and, and, and, and it's going very well for them. So there's no reason not to build right now. You know, you know, I, I, I don't like wallets. Like, I, I don't like the term wallet. I don't, I don't like the user interface that is, is a wallet, meaning if you need to go to a dedicated app To, in order to make a Lightning transaction for me, that's, that's the ultimate friction. If Lightning would be integrated into our day-to-day apps, into our day-to-day experiences, then I think we'll be able to manifest the utility of Bitcoin much better." }, { "speaker": "stephan", "time": "52:08", "start": 3128.23, "text": "I see, yeah. And, and I, obviously I'm aware you've, long held that view about, this idea of not having, you know, making another Lightning wallet, but actually building Lightning into various existing services, you know? And, you know, maybe in the future that means, as an example, there was a recent news, I'm sure you saw, Proton, Proton Mail or Proton came out with a Proton Bitcoin wallet, and, you know, potentially in the future, they could, they could use something like Breez SDK to give Lightning access to all those users just like that. And so you can kind of just plug this in and turn it on for, who knows, how many hundred thousand or millions of users, and I know you have a bunch of partnerships" }, { "speaker": "stephan", "time": "52:53", "start": 3173.18, "text": "Lipper. so maybe you just want to give a bit of an update on how it's gone, with the partnerships there?" }, { "speaker": "roy_from_breez", "time": "52:59", "start": 3179.36, "text": "Yeah, we have, I, I would say the, the, the product is still beta, and even with the production, production releases, we're still in a, in a, in a beta phase where, there are There, there's still, friction from a user experience standpoint and from a process, standpoint, meaning, the, the, the ability to convey lightning to End users that are not necessarily aware of Lightning is still a challenge, we're trying to simplify it from a technology standpoint, but there's always a friction from a product, standpoint. So integrating Lightning, like a credit card, where users aren't familiar with the Lightning interface creates fr-friction because Lightning, isn't, isn't, isn't, adopted among mainstream users. And that- That's kind of the chasm that we're crossing, right now. I think, reducing the friction from a technology standpoint will help in that regard, but we also need to kind, kind of cultivate, more solutions to use Lightning that people will understand what it means to, to speak Lightning as a common language, and they will be, they'll have more option to use Lightning instead of just using Bitrefill or playing a Thunder game. so I think we need," }, { "speaker": "roy_from_breez", "time": "54:28", "start": 3267.95, "text": "more of that, but it's kind of the chicken and the egg, tools like the Breez SDK will make it easier for developers to integrate Lightning, so we'll see that, cycle, cycle, provides, provides, a utility and provides benefits to, to end users. in terms of, kind of the Breez go-to-market, what we're trying- To do, we're actually trying to, expand beyond the Bitcoin ecosystem. I think, as I said, I think the future lies in integrating Bitcoin into existing applications, meaning, It can't only be wallets or people that are trying to build wallets. What we're trying kind of to unlock is, a larger go-to-market. We started with crypto, by the way, and we've integrated into, Cake, wallet and we'll see other multi-coint wallets using the Breez SDK to provide lightning functionality, to their users, and, and, and I think the next wave of, of expansion will be to fintech solutions, and the Holy Grail. Is mainstream application, to, to that, that will integrate, Bitcoin as a means of payment. That's, that's kind of where I, I aspire. There, there's kind of a market maturation, a process that we're going through right now. The SDK was very well accepted inside the Bitcoin ecosystem. We're seeing great signs of, acceptance in the crypto, in the multi-coint, wallets, e-ecosystem. now we're trying kind of to bring self-custodial Bitcoin To fintech solution and hopefully afterwards to mainstream applications." }, { "speaker": "stephan", "time": "56:15", "start": 3374.53, "text": "Yeah, that's really fascinating to see. I think, what we are going to see is Lightning get hooked up to more and more services, and that's obviously for those of us who hodl Bitcoin and use Bitcoin and use Lightning, in a way, it's good because then we can more natively interact with things, instead of having to use, let's say, some place doesn't take Lightning, then you end up having to use credit card or bank transfers. Well, now if, if, if they can be plugged in to take Lightning Another area where you can just start now being more natively, you know, earning and spending Lightning, which is where obviously many of us would like to be, but obviously there's, there's work required, and, you know, a lot of people have to get out there and, build things into- Non Bitcoin apps, let's say, and then that's gonna actually enable this vision. So, you know, I think it's a great, it's a great, vision of things as we've spoken about, you know, this idea of lightning as the common language, and where things are going with- Some of the different technologies that will maybe play a role alongside Bitcoin, whether that's Liquid and, you know, Ark and FedMe and things like this and Cashu, and whatever else comes in the future. so let's, yeah, let's finish up there. Listeners, make sure you find everything over at Breez dot technology and, Roy, thanks for joining me today." }, { "speaker": "roy_from_breez", "time": "57:33", "start": 3453.02, "text": "Thank you, thank you, Stephan. I just want to leave the, the listeners with one, thought. we need, the world need the ability to move, value the same way we move information. And, and what we're trying to do with Bitcoin Lightning is exactly that. We're trying to create a, a tool that has the ability, encapsulate the ability to move value the same way we move information." }, { "speaker": "stephan", "time": "58:00", "start": 3479.64, "text": "Fantastic." } ] }