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Alright everybody, welcome back to the Built on Bitcoin podcast. This is my first
debate,

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so this will be interesting. We'll see how this goes. We're talking about Lightning
and we have

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a couple OGs in the house. We got Harsha Goli, who is trained as an engineer, did a
bunch of

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Lightning stuff at Fold, at Swan, a couple others names you've known. Traded that
hat in for a CEO

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and doing a bunch of boring compliance stuff at a company called Magnolia. And then
we got Paul

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Sztorc, also OG, started writing about Bitcoin stuff in 2014, I think, Paul, with
Truthcoin.info

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and a creator of BIP300/301, also known as Drivechains. And yeah, so we got a
debate on where

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does Lightning stand today? Is it a failure in 2025? And we got a few points to kind
of hit on.

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And we got Harsha taking the affirmative, Paul taking the negative. So we got the
basics out of

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the way, let's just jump right in. And maybe you, Harsha, could start with just like
a two,

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three minute opening on how do you view Lightning today? Yeah, I mean, Lightning's
doing great,

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you know, like we've gotten it implemented at a lot of exchanges, a lot of huge
direct to like

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retail, like customer facing, like, you know, platforms have kind of exploded with
usage. I

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think like the big, you know, like headliners, right, is that Lightning over at Cash
App is like

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taking up 25% of the total, like crypto volume compared to Bitcoin, right. And
that's like,

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obviously massive right now people are releasing like, if you have like a massive,
you know,

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Bitcoin node on Lightning, you're probably getting between nine and 10% yield. And
this isn't just

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like if you're super well connected, like Boz, which I think he gets like even more
ridiculous.

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But like, if your blocks like Lightning routing node, or if your AMBOSS is Lightning
routing node,

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you get like, you know, a pretty significant amount of revenue, which is awesome. I
think

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Lightning is in a pretty good spot. From a technical point of view, it's probably in
the

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best spot it'll ever get, right. There are some like optimizations we can make, but
all the tech

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pretty much exists already for the best case, like a consumer wallets out there. So
you can have a

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unified balance, which has always been the holy grail in Lightning land between like
your on

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chain and your Lightning balance. So you can receive via, you know, Lightning or
receive via

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on chain Bitcoin, have it be in one unified balance and send the exact same way
without

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making any sacrifice when it comes to capacity. Pretty big deal. But yeah,
Lightning's in a pretty

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good spot. And I was, I think specifically really interested to like chat with Paul
about this,

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because, well, there's a lot like, I think Paul is not the most pro Lightning
person.

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Um, but, uh, there's also like a lot of thoughts in regards to, there's a cult that
ensures

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Lightning's dominance. And I'm, I want to talk more about the cult in particular,
because

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like I meant to be frank, I shit on Lightning all the time, you know, like I'm ready
to,

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it's been my space for like a long time. Uh, so I want to, I want to, as someone
who's, I guess,

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in the cult, assuming Paul, am I like, am I in the cult? I'd love to hear that.

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I don't know, but maybe if you're, if you're willing to defend Lightning in 2025,
you probably

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are. So I'm probably, I mean, like, listen, listen, I've worked at Lightning labs.
I've,

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I've like worked on Lightning protocol, like a lot, you know, I'm probably in the
cult here.

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I shit on Lightning all the time though. And I'm happy to like,

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In my experience, the engineers who work on Lightning are not in the cult.

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Like Tadge Dredge is not in the cult at all. Right. Tadge Dredge is not in the cult.
I don't

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think, I don't really think Matt Corallo is in the cult. I don't think, you know,
like all the,

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if you, if you're brought up on stage to defend Lightning at a Bitcoin conference,

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you're usually not in the cult. Even like, you know, someone like John Seth going on
stage and

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saying, we know about the problems in Lightning. They are voluminous, not in the
cult. So I think

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there's a huge difference between the engineers who work on Lightning every day and
like the fan

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club on Twitter who are in the cult and people who are far removed. You know,
Michael Saylor goes on

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CNBC and says, he says like a bullshit line. He clearly has no idea what he's
talking about.

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Bitcoin is great. And then he says, and all this other stuff will be on Lightning
and on these

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other layer three protocols, which is a real quote from him. You know, this is just,
you know,

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Madison Avenue salesmanship, and this is not serious. The words don't actually mean
anything.

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So that's great. I mean, maybe that's a great idea, but.

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Now this is perfect jumping off point for point number one. But first, before we get
into our

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Paul, give your kind of opening statements on how you view Lightning right now.

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It's very difficult, but I'm going to try to give the audience some idea of where
I'm coming from.

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And I'm going to try not to repeat too much of what I said with Alice Gladstein. But
yeah,

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in 2015, I heard about the Lightning Network. I thought it was really big. Everyone
was talking

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about it both positively and negatively. There was a whole debate about it back
then. But there was

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this YouTube video describing what Lightning was from Joseph Poon and Tadge Dreiser,
the inventors.

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And it only ever had like 300 views, like over a year. So not a lot of people were
actually

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watching that. This is the first sign of trouble. And then I wrote some Lightning
tech. I did this

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peer-to-peer Oracle thing back in the day, and I wanted to see if you could do Hive
Mindana,

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which presented like a unique challenge. You want to do Lightning with this thing?

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So I actually wrote some spec and some diagrams and technology involved using a
Lightning network

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on that. I think that was in 2016, a long time ago. So I was originally very excited
about

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Lightning. I thought doing SegWit and Lightning was a better idea than doing
Drivechain back in

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2015, 2016. I don't feel that way now. This is interesting because Drivechain was
invented in

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2015, right before Scaling 2. It was in November 2015. So I knew a lot about both.
And over time,

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I've learned more about both. And now I have flipped my opinion. And then over time,

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it's just become more and more clear that the people who love Lightning know the
least about

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it, which is part of my point about the cult. And I guess the only real way to give
people

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some idea of what I'm talking about is there used to be this company called
Theranos.

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That was a scam blood company, but it was really, really big. It had this famous
female founder.

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There's a Netflix documentary about it that's really good, that I highly recommend.

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It had all these people, like generals were on the... Henry Kissinger was on the
board,

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and there was photos with presidents and stuff. So it was incredibly prestigious,

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and it was worth a lot of money. And of course, from the outside, it looked great.
And from the

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marketing department side, it looked great. But then the actual engineers working on
the technology

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knew it didn't work. One of them actually took his own life. He was a Stanford
professor who

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had quit Stanford to work for this biotech startup. And he couldn't live with the
lack

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of integrity, and he killed himself. And then there are other people. This is a
fantastic story

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that everyone should look into. But basically, they would do demonstrations where
they'd bring

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people in and have them prick their finger with the blood and put their blood in
this little

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machine. And then they would give them a tour of the facility. And while they were
giving them a

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tour, they'd have people from Theranos come in, take out the blood from the Theranos
machine,

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do blood tests on older traditional machines that had nothing to do with the
technology they were

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working on, the pre-existing Siemens machines. And then they would come back and
present

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as if this had been done by their own Theranos technology. So for example, when
someone does

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a Nostr, does a zap, and they click a lightning icon, that is fraud in a way,
because it's very

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likely that people are using a custodial app like Primal or something. And if it's
custodial

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to custodial, then zero lightning transactions have actually taken place and zero
Bitcoin

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transactions have taken place, especially if it's the same custodian. So when I hear
stories

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about people say, oh, lightning is great, and my friend used lightning last week, I
don't know if

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they really used the real lightning network or if they were just a gullible person
who fell for the

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fraud and fell for the demonstration of the machine. So that's just where I'm coming
from,

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and that's why I'm totally unfazed. In 2025, I just think, well, maybe this is one
of your later

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questions, like what would it take to change your mind? You can imagine like in the
Theranos point

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of view, you would want to see some kind of accountability for this mass lying that
had

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been going on, some kind of separation in the app of like, this is custodial, this
is really using

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the lightning network, this is really not, we are not going to bundle these things
together anymore.

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Or at least if we are going to do custodial, we're going to explain that you are not
using

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the Bitcoin network, you do not own any Bitcoin, you do not have your keys, not your
coins,

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you are not using, every custodial lightning is someone who is not using lightning.

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So if that were made clear, then I would be, but now I don't even know, when someone
says I use

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lightning, I just freely assume that they are just being tricked. And I just, I
don't believe that,

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even though they say I have direct firsthand experience with lightning, I know that
many of

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them really do not. So it's just a tragedy that they think that they are having a
great time on

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lightning. And that does nothing to change the fundamental issues with it being
unable to reach

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8 billion people. So I'm sorry that went on for like more than two minutes. But the
comparison,

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and Theranos really was like a pretty big deal for a lot of reasons, right? But the
comparison

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between like Theranos and like people, how people implement lightning is a bit
disingenuous, right?

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Because like, you know, in those like meetings with investors where it was quite
literally,

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like this isn't like the crypto usage of fraud, it was like actual financial fraud,
right? Like

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investor fraud is what happened with Theranos, they would literally say it did one
thing,

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and then go backstage, and then have it all be done manually. This is like, like the
worst case

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scenario version of fraud. But like in the lightning case, specifically with the
example of

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Nasr, that's not really fraud, I do hear the frustration, right? Of like, people
feel like

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they're using lightning. But there's real reasons why various different like, you
know, apps like

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Primal or whatever have a, I think, more of a self custodial, like take on this,
right? Like,

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are you familiar with Stacker News? With Sorry, I didn't hear you said.

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Stacker News. It's like a forum website that uses like lightning and you know, kind
of like this

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Nasr like zap idea, but it's more based on Reddit really is what it is.

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Yeah. I thought it was pretty cool, but I haven't really been.

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It's pretty cool. Yeah, yeah, yeah. It's a little bit, I think a little bit.

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Network effects are tough. Network effects are really difficult.

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They are. They actually, I think, hit like, started really running into like usage
problems

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after they rolled out a completely self custodial model for their lightning zapping
stuff, right? So

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like now when you get on there. Yeah. And so like, and this part of the problem is,
yeah,

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well, it's not, I think the highlight, you know, from a product standpoint, what
actually happened

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is there's like this new, you know, friction point, right? Like this, it's not
really lightning

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makes the whole thing bad. It's now in order for someone to use this website where
basically before

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you just go in, you log in with your Twitter profile. Now I have to like get my
wallet,

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somehow attach my wallet to this setup, my wallet, which is typically on my phone.
Now,

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this is like a huge friction point. As someone who's used lightning since the
beginning,

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this was like kind of annoying to me, you know, and I had like figured out how to
like close a

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little like window. Cause I don't want to deal with this. Right. And frankly, like,

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yeah, yeah. I don't care. I didn't care about the self custodial aspect. I just
didn't,

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you know, I want to get on there and make my comments, you know, but that's not
really like,

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like fraud when it comes to the usage of lightning. This is just like one company's

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a specific approach to how they brought self custodial lightning to their website.
And

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primal went about it a different way. Primal went about it. It sounds like where if
you go from,

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you know, primal user to primal user post or whatever interactions, it just does
that in

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house. Cause that's just way easier, way simpler. And I bet the primal team doesn't
have the,

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like the infrastructure or the team like in place to get like self custodial

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zapping going. I'm not really a big nostril user. I don't know if you guys could
tell, but.

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Sure. But the thing is this is in the Theranos documentary.

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Yeah. I'm specifically pointing out the parallel to Theranos being a little
disingenuous,

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just so it's clear. Yeah. I don't think that it is that disingenuous. I mean,

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of course, no analogy is perfect. And I'm just trying to give people more of a, you
know,

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a first approximation of like where I'm coming from. But the Theranos people really
thought,

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you know, fake it till you make it. And they thought, sure, it doesn't work now,

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but right around the corner, we're going to get it to work. Or many of them did. And
that is what

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people think with lightning also. They just think once we get timeout trees, once we
get CTV, once

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we switch from HTLCs to PTLCs, you know, once we do this, once we have op expire,
they just think

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it's right around the corner. And I don't think the Theranos people are quite, it
was a huge fraud,

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but I don't think it was the worst fraud ever. And this is again in the documentary,
which is

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like, you need an delusionally optimistic person to be an entrepreneur, to be a
scientist or to be

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anyone who wants to change things, an artist, you know, a musician, a performer. So
you need

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delusionally optimistic people in the world. And that that's in a way a good thing.
So I actually

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kind of think Theranos, I'm trying to say Theranos wasn't so bad. And I'm saying
lightning's not so

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good. And I'm saying they kind of overlap a little bit. And so this is just a
reality of trying to

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change the world that it's very difficult and that you are tempted to, for the good
of the troops,

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say one little white lie after another. And then after 10 years, it adds up to a
massive delusion.

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You know, let me, let me jump in for a sec, because I see both sides. Because
there's

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definitely the people who think that you'll be able to buy coffee on lightning,
self-custodiality

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is going to be super easy. And I think that's for anybody who has a brand that's
pretty much dead,

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or there's friction, like you said. And I've had that same experience with Stacker
News,

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where it's like, this was easy. Now it's not easy. And I'm not using Stacker News
because of it.

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It's interesting that you mentioned, Paul, that people who are more technical are
not in the cult,

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which to me speaks to, if you understand the hurdles, you're more clear-eyed.

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So I guess the question might be, how technically feasible are overcoming the
hurdles? And I think,

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Harsha, you said at the outset that when it comes to the technical side, we push it
about as far as

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we can go. So it's kind of like, how fundamentally broken do we think lightning is
to a scale to the

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masses? How far along are we? Because then that can kind of hopefully illuminate the
people who

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still think that you'll be able to, you know, buy burgers and whatever on the
lightning,

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self-custodially. So I actually, I want to ask one question for Paul on this topic.
I think that'll

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help frame the conversation going forward. What is lightning's big problem
currently? What is the

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big issue currently with lightning, just so everyone's on the same page? Well, I
think it has

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quite a few problems, but one for me is that you need layer one bytes in order to
join. And also,

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you need, in order for it to remain secure, you need a very credible option. You
need a very

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credible ability to access L1 bytes. But there's not enough L1 bytes for 8 billion
people. That's

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the whole reason we're doing the whole scaling and layers thing. So it's just kind
of a flat

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contradiction to me that, so, and then the fact that that's what required to onboard
people and

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keep their usage in the non-custodial safe zone. As a result, it's misleading when
people say,

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oh, I joined the lightning network and it's been, I've been using my channel for a
year and it's

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been working great for me. Because that's not the point. That's already expected.
The problem is

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that we can't have 8 billion people do that. So I think the L2s, they will have
their own network

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effects and people are going to want to use some L2 that like their friends are on,
their trading

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partners are on, and they are not going to want to use one that only less than 1% of
the earth's

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population can use like in a given year, which would be the lightning network. I
really think,

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truthfully, though, I do think the bigger problem is the cult itself, that it's now
impossible

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to criticize lightning and it is impossible, you know, anyone who tries to tell the
truth about

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the lightning network is actually sort of shamed and tried to, dealt with it in an
aggressive way.

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This is, to me, this is all just further proof that it does not actually have the

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the will to succeed. It is defensive and shallow.

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Well, it sounds like if they're like the cult, right, which we have seems to defend
it pretty

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well. It sounds like there's a lot of people behind this technology, one way or
another,

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that that allows it to have some level of staying power, right? I guess, like, just
to point that

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out for just a second, which which is valuable when it comes to like surviving.
Because really,

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like, you know, for any product, really what you have to do is you have to survive
as long as it

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takes until you get your golden moment. That's when you thrive. It's really just
like surviving

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as long and as long as possible up until a luck moment. Investors call this the
hockey stick,

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you know, thing, right? It's just flat, flat, flat and then shoots. Right. But
hasn't it been

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10 years, though? It's been like seven, not even right, like beta, but like we left
beta and like

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what, 2018, 2019, something like that. The original idea was from 2015 and maybe,
you know,

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the network effects are a prison and also a kind of life support. They want creative
destruction

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also. Many, many, you know, many different ideas. And is success like onboarding the
world?

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Yeah, yeah. In particular? Yeah, it is. So, OK, onboarding the world. And so, you
know,

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maybe shrinking down that goal right before we onboard the world is we onboard a
significant

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portion of folks in general. Right. Yeah. Yeah. Do that. Whatever that looks like.
So,

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yeah. Call it 100 million. Right. Which is probably I think that someone's on the
map

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on this and I have in front of me, but I'm going to be very taxing on the Bitcoin
network. Bitcoin

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hasn't scaled to this amount either at all. Right. And I don't think lightning is a
deep peg

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for Bitcoin. So if Bitcoin hasn't scaled this amount, then lightning surely isn't.
So I think

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like for this conversation, it's not lightning has failed to onboard the masses. It
is Bitcoin

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has failed to entice the masses. I think that's a fair categorization. Correct.

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Well, I would say that they are far more interrelated than that. Frequently, when

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the price of Bitcoin goes up and it seems like we have a new wave, like a new era,

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a new all time high, and then you get new people. This has happened to me many times

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in my life as a Bitcoiner. The price will go up and then all kinds of friends will
message you

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and say they'll send you a text and they'll say, you know, you're into Bitcoin. The
ideal thing

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would be able to send them like five or ten dollars worth of Bitcoin, like
immediately,

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so that they can start playing with it. But you actually can't do that.

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But that didn't happen this cycle, right? Like this cycle is different. It's like

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I'm worried that we're going to decay. Yeah, that's a big concern of mine. I'm
actually

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worried that we the opportunity to actually cause a chain reaction of adoption is
maybe we missed

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the window of opportunity over the last 15 years. And now people have decided that
they just

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they're not going to have an open mind to this Bitcoin thing anymore. And it's just

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a weird thing that governments and corporations do. And it's not for them.

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Maybe or they're banking on Bitcoin going up again. Right. And instead of like, you
know,

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spending Bitcoin, they're just buying it on exchanges and these never moves from

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these exchanges. That seems to me like what all my friends have been doing.

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People are doing that. They will continue to do that, I think.

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I think like my like what I'm what I'm calling out here is it seems like lightning's
failures

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aren't really lightning's failures, but rather like the concept of self-custody and
Bitcoin's

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failures, if not even Bitcoin's failures to attract more retail this way. Right.
Which we don't have

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insight into the difference between retail buyers and institutional buyers. I think
like self-custody

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as a whole, I don't want to say it's failed because that sucks quite a lot. But it
certainly

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is on the back foot. Right. With this recent wave of like industry news that we've
been seeing,

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self-custody is not winning. But that's not a lightning problem. Right.

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I think it's well, part of it is that lightning makes it so much easier. It's so
much more

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enticing to trick people into going the custodial lightning route. So lightning
actually competes

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with the self-custody and makes it relatively look more difficult than it would
normally be

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if we had never invented the lightning network. We could just tell people, you know,
this is what

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you have to do. You have to run this node or you use Electrum and, you know,
whatever, Electrum

245
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will turn on and sync in, you know, two minutes. If we did that then, but instead
everyone's

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pushing the lightning network. So actually the lightning network is not only does it
not work,

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but it is like a virus that is like a zombie virus that people get flipped to the
other side.

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They leave really the Bitcoin team because lightning is aligned with not having
self-custody.

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When you show the lightning network, you're really shilling people not using
Bitcoin.

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And so that's, we have this parasite inside of the Bitcoin community that's robbing
it of its

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blood, all blobbing is energy and it's, you know, a brand and it's what would
normally be the steps

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that we would need to take to make Bitcoin a success. This is kind of like the
Novocain that

253
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just papers all this over and says, well, just, you know, just go on Oster and zap
someone. And

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then people have no idea, you know, this takes, this also makes it less likely that
people will

255
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be interested in taking a real engine. It's kind of like if you had, let me use a
different

256
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metaphor. Well, let's stick with the Theranos metaphor. Like let's say you're really
interested

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in blood testing from a young age, and this is an obsession of yours. You're, you
know,

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you're like 12 or 13 years old and you read all these books about blood and you're a
really weird

259
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guy or girl or whatever. And you're so excited and you hear about this company,
Theranos,

260
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and you're so inspired. And then you, you want to, you know, change the blood. Well,

261
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what are you going to do when you, as you start to get older and you need like an
internship or

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you need, everyone's going to tell you to work for Theranos in that world. And then
you're going to

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show up to Theranos and you're going to realize that it's all fake. And it would be
much better

264
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off for the world if, much better off for the blood testing world if Theranos didn't
exist at

265
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all. So does that make any sense? This whole self-custody thing is a chicken and egg
problem

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to some extent. If more people were doing it, more people would talk about the
problems,

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more people would solve the problems. The whole thing would be a flywheel of
success.

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Instead, it's going the other way. More people are in denial about the problems in
lightning.

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More people are shilling fake lightning that's not real. And more people are driving
away

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any smart person who actually investigates the facts will be driven away by this
reality. So

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that's very unfortunate, I think. I don't, I don't think I really understood. I
don't think I

272
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understood. You said a couple of different things that seemed like they conflict.
One thing in

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particular you said is lighting tricks folks into like custodial solutions, right?
And then later

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you said people who get into like the lightning space as engineers or whatever, they
dig into it

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and find out it's fake. Are you talking about how most lightning usage really is
like a custodial

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setup instead of like a non-custodial setup or most lightning usage doesn't actually
happen? Is

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that what you're trying to say? I don't think I understood fully. Well, I was at in
2019,

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but this has happened many times since. But, you know, I was in a big group of
people and they

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were all so excited about a new lightning wallet that came out and they're sending
each other

280
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10 Satoshis or four Satoshis or one Satoshi. And they're all they can talk about is
how amazing

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this is. And of course, while it is completely custodial, zero Bitcoin transactions,
you can just

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download the app, make an account and receive one Satoshi. Now, I know that that is
not possible

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because in order to join the lightning network, you need to open a channel with
someone. You need

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a L1 transaction, the funding transaction. You need to wait for it to confirm. But
none of these

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people know that. So this is the fake, you know, this is a fake world that people
are getting

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excited about. And now this is the thing that when Michael Saylor goes on CNBC and
says this

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will be solved by lightning and other layer three protocols and other whatever stuff
that he's going

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to say, he is now a participant in this delusion. And this is what will be
disappointing to the

289
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people who really want to scale Bitcoin. They'll think, well, actually, Bitcoin is
just a fraud

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because what gets what gets high on the totem pole is lightning, which is fake. And
so that

291
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little person, the new genius is 13, 14, 15.

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We'll think, first of all, I got to get out of here because these people are all
crazy and then they're going to think I'm going to have to my job now is going to be
even more difficult, because if you want to do your blood testing company, not only
do you have to do well on your own, but now you've got to compete with Theranos,
which is tricking people.

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So it's clear to me that the overall effect of the lightning network has been to
make Bitcoin less likely to succeed. That is still the case today. This has been the
case for a very long time. The fact that people think like we added Bitcoin to an
exchange or that some people believe that they're using lightning, in many cases, a
false belief, that all that is just making the whole situation worse, in my view.

294
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OK, how do you feel about the increased usage from Cash App with lightning? What do
you make of that?

295
00:25:43,717 --> 00:25:58,717
I haven't. I've got I've reached such a point that I have to confess, you know, to
the audience that I'm not familiar with that. But you can imagine why, hopefully,
because remember, I wrote like my lightning limitations post back in like February,
April 2022.

296
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So this is like me saying that the blood machine doesn't really work. And so, you
know, in the ensuing years, it's possible that one of two things have happened. One
is that more people have been tricked and that they just don't realize that they've
been tricked or that maybe everyone got their act together.

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In which case, I don't know why the custodial Zaps are showing up as with a
lightning icon and why they're referred to as Zaps, which would mislead people into
thinking that they're lightning transactions. But it's possible that this Cash App
data is unbelievably bullish for lightning.

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It's also possible that it's very small. Numbers are very small. So 20 percent is
just a small percent of a small number. I don't actually know. I have to say, you
know, I throw myself at the mercy of the audience because I don't I don't because
this is this isn't what matters to me anymore.

299
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What matters to me is the lightning that we're going to stop lying to everyone. And
the answer is probably no.

300
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So I really I really want to tackle the lying thing for just a second because
lightning has so many flaws. Don't get me wrong. Lightning has been caught up in so
much like bullshit at the regulatory level. Right. And it's stuff that nobody knows
about for some reason.

301
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And it's stuff that, you know, like does stop up lightning. I would love to talk
about it. But this comparison to Theranos, it like fundamentally breaks down in a
couple different ways.

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Let's talk about one way in particular. The Theranos thing was a complete fraud
because fundamentally, like at an atomic level, there is not enough information in a
drop of blood to be able to perform a thousand different tests.

303
00:27:30,717 --> 00:27:57,717
That is like fundamentally that like just just, you know, you can't sample that.
That's just not how that works. Right. And that was always going to be a failure
with Theranos. With the lightning network, it's a very different problem. But
fundamentally, this concept of using HTLCs and this like crazy Mexican standoff way
to ensure unilateral exit where people can like, you know, route transactions
through each other is fucking crazy and wild.

304
00:27:57,717 --> 00:28:14,717
And it does work. Right. Like the crazy part. I think it's actually a good analogy
to the blood density thing. Actually, let's let's talk about the HTLC for the
intermediate nodes that need to use the HTLC to route if you have A, B and C.

305
00:28:14,717 --> 00:28:40,717
The whole point of the lightning network was something like a six degrees of
separation type of a thing where maybe you don't know your counterparty, but you
guys both know someone along the route. These people use the HTLCs to route. This
was the big invention. I'm glad you brought up HTLCs because HTLCs are the big thing
that makes it the lightning network versus just the bidirectional payment channels
that preexisted the lightning network.

306
00:28:41,717 --> 00:29:05,717
So it's annoying when people say bidirectional. But anyways, the HTLC expands the
size of the transaction by a certain amount. Yeah. So if you want to brought if the
people on the other parts of the route try to scam you, the HTLC provides you a
recourse. But the problem is the HTLC requires like a couple set up bytes. It
requires a 32 byte hash.

307
00:29:05,717 --> 00:29:20,717
Then you have to spend it. You have to spend that output later. So you have to have
the preimage. You have to have selecting it. There's eight bytes for the value. So
just to get this money back into your account, it consumes a certain number of
bytes.

308
00:29:20,717 --> 00:29:41,717
And a long time ago, in 2022, when I wrote my Lightning Limitations post, I have a
whole section on the HTLCs. I don't remember the exact number, but it's something
like at least 60 or 70 bytes. And it's possible to shrink a regular L1 Bitcoin
transaction to something like, theoretically, I think you could get it down to like
92 bytes or something.

309
00:29:42,717 --> 00:30:01,717
So actually, the reason I bring this up, like why do I bring this up? The HTLCs are
the additional ink you would need to write to the blockchain. So the fee in the
failure case, the fee you have to pay is comparable to what you paid to do an L1
transaction anyway.

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So in a world where the L1 transaction, the fees are prohibitive for L1 transaction,
they also are prohibitive for HTLC. So if the L1 fee rate is a $5 transaction, you
can't use the HTLCs to do a $5 transaction.

311
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What if I did 500 transactions over the lifespan of that channel? Would it not be
worth it?

312
00:30:20,717 --> 00:30:44,717
You cannot safely route a single payment. If the current fee rate is like $5 per L1
transaction, this is the rate that just comes from the usage. If it costs $5 to make
an L1 transaction, you basically can't route safely an HTLC that's less than $5. So
this is a fundamental problem with the HTLCs.

313
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Yes, I can. It'll cost me my whole channel for sure, but if someone tries to rip me
off or the channel fails—

314
00:30:51,717 --> 00:31:11,717
If someone tries to rip you off, you'll be better off not having the HTLC because
you could take them to court, so to speak. You drop it to L1. You will get the $4
payment or whatever it is out of the HTLC. But my point is by the time you're done
with all that, it will have cost you $5 worth of L1 transaction fees.

315
00:31:11,717 --> 00:31:22,717
So you'd actually be better off not enforcing the HTLC. You would be better off not
enforcing the HTLC. But then you see without the HTLCs, the whole Lightning Network
idea is kind of just a big smoke and mirrors, which is exactly what it is.

316
00:31:23,717 --> 00:31:36,717
Wait, but the HTLC thing still stands, right? So you're talking about if a single
small HTLC fails, right? And then let's say it's $0.01 and the cost for me to
remediate this is $5. Fine, sure, totally.

317
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Right.

318
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But there's a cost.

319
00:31:38,717 --> 00:31:39,717
Yeah.

320
00:31:39,717 --> 00:31:48,717
But if it's a channel set up by them, they're the one paying that cost, not me,
right? Because they set up the initial amount or whatever that they set aside in the
multisig. That's how this whole thing works.

321
00:31:48,717 --> 00:31:49,717
Yeah, you have a—

322
00:31:49,717 --> 00:31:50,717
So I don't even pay the cost.

323
00:31:50,717 --> 00:31:56,717
The intermediate person is routing from—let's say you have A, B, C, D, and you're B
or something.

324
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Your thing is you're taking the HTLC from—like Alice wants to pay Dave or however it
is, and Dave is going to have a—I don't remember which one someone's going to
create. Someone creates R and someone creates H.

325
00:32:15,717 --> 00:32:29,717
And then the B and C nodes, what they will do is C will take their money from B, and
they'll say, I have this money coming in from you, which is $0.01 on this HTLC.

326
00:32:29,717 --> 00:32:36,717
And if it times out, then we'll just—but once we have the HTLC, we'll then update
our channel balance and delete the HTLC.

327
00:32:36,717 --> 00:32:45,717
So the HTLC is only for temporarily during the period when they have not yet updated
to the final amounts because you don't want to just front someone the money.

328
00:32:45,717 --> 00:32:52,717
I don't know if this is the best way of explaining this, but basically let's
say—okay, Alice has—are we really going to do this with actual numbers?

329
00:32:52,717 --> 00:32:55,717
Maybe we should. I don't know if it will be helpful or confusing to people.

330
00:32:56,717 --> 00:33:02,717
If you think this is a real flaw, honestly, I think you should take this to the
mailing list because people should talk about it and know about it.

331
00:33:02,717 --> 00:33:06,717
But I don't think this is a flaw in the slightest because from my point of view,
there isn't too much of a reason for someone to do this.

332
00:33:06,717 --> 00:33:12,717
And if they were to do this, then other nodes would ban them, which probably happens
because this is just gross abuse of channels.

333
00:33:12,717 --> 00:33:25,717
And then lastly, if this does somehow escape how nodes police each other, and if
this somehow does result in an actual griefing attack that is costless for the
attacker, then why aren't we seeing this actually happen online?

334
00:33:25,717 --> 00:33:36,717
Well, I think there are many griefing attacks. That's the issue is that ultimately
the Lightning Network actually does rely on who you have chosen to open a channel
with.

335
00:33:37,717 --> 00:33:44,717
So at the end of the day, it does kind of rely on brand and reputation, and that's
part of why it makes it not work.

336
00:33:44,717 --> 00:33:52,717
It's not like a cypherpunk anonymous crypto thing. It is very much kind of a trusted
brand type of a thing.

337
00:33:52,717 --> 00:33:55,717
I think I just noticed the goalposts moving a little bit.

338
00:33:55,717 --> 00:34:02,717
It's not, though. It's just that the HTLC part doesn't work. So it's why pretend
that we're using HTLC.

339
00:34:02,717 --> 00:34:05,717
But it clearly works. Like, I don't—it clearly works.

340
00:34:05,717 --> 00:34:08,717
There's this thing called the dust limit in Lightning.

341
00:34:08,717 --> 00:34:10,717
It's a Bitcoin thing.

342
00:34:10,717 --> 00:34:16,717
Yeah, and when they do that in that case, they do not use the HTLC for exactly the
reason that I mentioned.

343
00:34:16,717 --> 00:34:22,717
But then they still call that Lightning. But in my opinion, now we're watering it
all down. But this is an official part of it.

344
00:34:22,717 --> 00:34:24,717
What are you referring to?

345
00:34:25,717 --> 00:34:34,717
If you route a payment that is beneath the Lightning dust limit, which is different
than the Bitcoin L1 dust limit, and it will not use it.

346
00:34:34,717 --> 00:34:38,717
And it will not use. There will be an HTLC. There will be no hash. There will be no
time lock.

347
00:34:38,717 --> 00:34:41,717
There will be no additional output. So there is no HTLC.

348
00:34:42,717 --> 00:34:44,717
And it's below the dust limit?

349
00:34:44,717 --> 00:34:48,717
You send one stat over the Lightning network, you think someone makes an HTLC? They
do not.

350
00:34:48,717 --> 00:34:51,717
Yes, it's called updating the commitment. That's exactly what happens.

351
00:34:51,717 --> 00:34:53,717
There's no HTLC.

352
00:34:53,717 --> 00:34:56,717
The dust limit is a consensus thing, dog. Like, that's not a Bitcoin thing, right?

353
00:34:56,717 --> 00:35:00,717
Like, you can get a transaction mined below the dust limit. It's totally fine.

354
00:35:00,717 --> 00:35:03,717
I'm not talking about the L1 dust limit. I'm talking about the Lightning dust limit.

355
00:35:03,717 --> 00:35:06,717
On the L1, you can have zero value output committed.

356
00:35:06,717 --> 00:35:07,717
Yeah, totally.

357
00:35:08,717 --> 00:35:12,717
You can send a single Satoshi over the Lightning network, and that'll be like...

358
00:35:12,717 --> 00:35:17,717
I agree that it will look like that's what happened, but there was no HTLC.

359
00:35:17,717 --> 00:35:21,717
So that's just part of my own view of the sort of delusion.

360
00:35:22,717 --> 00:35:29,717
When you say HTLC, are you referring to all the metadata that is actually
communicated back and forth in the roundtrip communication?

361
00:35:29,717 --> 00:35:33,717
I'm talking about B and C have a transaction that spends...

362
00:35:33,717 --> 00:35:39,717
The channel between B and C is a 2 of 2 multisig output on L1, right?

363
00:35:39,717 --> 00:35:42,717
So let's say maybe they each have 5 Bitcoin in there.

364
00:35:45,717 --> 00:35:49,717
Just for one second real quick, because the high-level explanation...

365
00:35:49,717 --> 00:35:50,717
I'm sure you know this, right?

366
00:35:50,717 --> 00:35:57,717
But the high-level explanations of how things work fundamentally are very different
than how things actually work in the implementation.

367
00:35:57,717 --> 00:36:01,717
Because we're talking about communicating bits of information to each other.

368
00:36:01,717 --> 00:36:05,717
Things happen at specific times, and HTLC is not actually communicated.

369
00:36:05,717 --> 00:36:07,717
That's not something that's actually going between two peers.

370
00:36:07,717 --> 00:36:14,717
It's just specific little bits of information that allow each peer to create the
HTLC if they needed to.

371
00:36:14,717 --> 00:36:16,717
Just so the listeners and everyone kind of know this.

372
00:36:16,717 --> 00:36:23,717
So when I say update commitment, I'm referring to a specific message that's sent
between B and C.

373
00:36:24,717 --> 00:36:27,717
And this also might be a little too deep in the weeds here for listeners.

374
00:36:27,717 --> 00:36:29,717
And so happy to kind of move on.

375
00:36:29,717 --> 00:36:35,717
And I do push back that one Satoshi does result in an update commitment message.

376
00:36:35,717 --> 00:36:39,717
What would normally happen is they each have 5 BTC, B and C.

377
00:36:39,717 --> 00:36:48,717
And then if A wants to pay D one Satoshi, then A and B have a transaction where they
update.

378
00:36:48,717 --> 00:36:50,717
Let's just assume that works perfectly for some reason.

379
00:36:50,717 --> 00:36:53,717
B and C, they're going to take some steps where they make a –

380
00:36:55,717 --> 00:37:03,717
B and C will say something like, I will pay five back to my own account, five to
your key.

381
00:37:03,717 --> 00:37:08,717
And I will pay – they'll change the five to like, you know, 4.9999.

382
00:37:08,717 --> 00:37:11,717
And then they'll have one Satoshi go to this HTLC.

383
00:37:12,717 --> 00:37:19,717
That will allow them to claim the one Satoshi from Alice in the event that C goes
AWOL.

384
00:37:19,717 --> 00:37:24,717
Now my point is that that is totally pointless for them to do because this third
output uses more –

385
00:37:24,717 --> 00:37:28,717
would use more L1 space if you actually had to broadcast it.

386
00:37:28,717 --> 00:37:31,717
So you would regret ever having it in the first place.

387
00:37:31,717 --> 00:37:33,717
You would prefer not to have it.

388
00:37:33,717 --> 00:37:39,717
So you would just rather do something else, either wait for Alice to just give you
the one Satoshi

389
00:37:39,717 --> 00:37:45,717
or front the one Satoshi from B to C without any recourse going to the blockchain

390
00:37:45,717 --> 00:37:50,717
because you don't have any, because it's not worth it to go to the blockchain for
one Satoshi

391
00:37:50,717 --> 00:37:54,717
when it is going to increase the size of all the stuff that you have to write on L1

392
00:37:54,717 --> 00:37:58,717
to get your purchasing power back by, you know, whatever that was.

393
00:37:58,717 --> 00:37:59,717
I don't remember the exact number.

394
00:37:59,717 --> 00:38:01,717
It was like 75, 76 bytes or something.

395
00:38:02,717 --> 00:38:08,717
Sure. So are you saying that this specific end scenario in this specific edge case

396
00:38:08,717 --> 00:38:14,717
that results in a suboptimal, like, cost to you is a reason why Lightning is a
failure?

397
00:38:14,717 --> 00:38:15,717
Is that what you're saying?

398
00:38:15,717 --> 00:38:18,717
It is not the number one reason. The number one reason is the onboarding bytes.

399
00:38:18,717 --> 00:38:23,717
But this is a reason that says if the HTLCs will not work in an environment of high
fees,

400
00:38:23,717 --> 00:38:28,717
but yet people say the response to high fees is the Lightning network.

401
00:38:28,717 --> 00:38:30,717
So that is a core contradiction.

402
00:38:30,717 --> 00:38:33,717
But it does work in high fee situations.

403
00:38:33,717 --> 00:38:38,717
Remember, this is a very specific – like, what if it's a payment that's a large
payment?

404
00:38:38,717 --> 00:38:39,717
Like, is this not all –

405
00:38:39,717 --> 00:38:41,717
Yeah, in that case it would work better.

406
00:38:42,717 --> 00:38:45,717
What if it's many payments of large payments?

407
00:38:45,717 --> 00:38:49,717
Like, what I'm saying is it's a very specific end case.

408
00:38:49,717 --> 00:38:54,717
The large payments, though, are more difficult to route, so they fail for a
completely different reason.

409
00:38:54,717 --> 00:38:56,717
Let's talk about an actual failure case in Lightning, right?

410
00:38:56,717 --> 00:38:58,717
Here's something that Lightning is actually fucking fresh at, right?

411
00:38:58,717 --> 00:39:02,717
And this is something that Carla is working on over at Chaincode and it's channel
jamming, right?

412
00:39:02,717 --> 00:39:07,717
Like, right now, if you have a Lightning node, you open yourself up to the possible
of a griefing attack

413
00:39:07,717 --> 00:39:09,717
because there are certain resources that can be constrained,

414
00:39:09,717 --> 00:39:14,717
which is a number of HTLCs that you can fit in a given channel at a given moment,
right?

415
00:39:14,717 --> 00:39:19,717
That's a real problem with Lightning right now, and it's definitely a protocol
limit, like, currently, right?

416
00:39:19,717 --> 00:39:23,717
And I don't know what Carla's approach here is, and I assume that she's got a great
one,

417
00:39:23,717 --> 00:39:25,717
but that's a real issue here.

418
00:39:25,717 --> 00:39:27,717
Like, maybe we should talk about that and how, like, you know –

419
00:39:27,717 --> 00:39:28,717
We can.

420
00:39:28,717 --> 00:39:34,717
But it's kind of, like, not worth it, though, because there are so many fundamental
problems.

421
00:39:34,717 --> 00:39:37,717
Any single fundamental problem will kill the project.

422
00:39:37,717 --> 00:39:38,717
You know what I mean?

423
00:39:38,717 --> 00:39:40,717
We haven't talked of a single fundamental problem.

424
00:39:40,717 --> 00:39:44,717
You brought up an edge case of a specific failure case while ignoring all of the
possible –

425
00:39:44,717 --> 00:39:46,717
It's not an edge case, sir.

426
00:39:46,717 --> 00:39:50,717
It is – I said whenever you want to pay below the L1 fee amount, which is –

427
00:39:50,717 --> 00:39:54,717
that is potentially very high, and it's not a theoretical thing.

428
00:39:54,717 --> 00:39:56,717
During the Ordinal's phenomenon, the L1 fee rate spiked,

429
00:39:56,717 --> 00:40:03,717
and all of the legit Lightning channels, like, had to close or experienced some kind
of disruption.

430
00:40:03,717 --> 00:40:06,717
This is what pushed people further towards custodial Lightning,

431
00:40:06,717 --> 00:40:09,717
and this is also what pushed a lot of the Lightning people to give up on Lightning

432
00:40:09,717 --> 00:40:13,717
and switch to stuff, other stuff, ARK, Federman, whatever.

433
00:40:13,717 --> 00:40:16,717
Because, like, this is – and that's what started Bitcoin Season 2,

434
00:40:16,717 --> 00:40:20,717
which is, like, instead of – we're no longer just going to run the same playbook
from 2015,

435
00:40:20,717 --> 00:40:23,717
which is just Bitcoin plus Lightning.

436
00:40:23,717 --> 00:40:26,717
We're going to do ZK rollups and all this other stuff.

437
00:40:26,717 --> 00:40:27,717
So –

438
00:40:27,717 --> 00:40:28,717
Okay.

439
00:40:28,717 --> 00:40:29,717
So, like –

440
00:40:29,717 --> 00:40:31,717
I don't agree with any of that that you said.

441
00:40:31,717 --> 00:40:32,717
Let me amend what I said.

442
00:40:32,717 --> 00:40:39,717
Yeah, another problem with Lightning is that it is this endless make-work program
for developers.

443
00:40:39,717 --> 00:40:43,717
They can collect the salary forever to fix the next tiny little screw.

444
00:40:43,717 --> 00:40:48,717
The whole thing is not worth it because we have to complete the whole circuit of
getting to 8 billion people,

445
00:40:48,717 --> 00:40:50,717
and we don't want an endless –

446
00:40:50,717 --> 00:40:52,717
So, there's more work to be done.

447
00:40:52,717 --> 00:40:54,717
We have to get to 8 billion people, but it's also a make-work project.

448
00:40:54,717 --> 00:40:57,717
I do want to talk about that for a second because that didn't make sense to me.

449
00:40:57,717 --> 00:41:03,717
But let me amend what I said because I have to be pedantic, right, which is fair.

450
00:41:03,717 --> 00:41:09,717
In the specific case where a transaction that I want to send might be lower than the
on-chain fee,

451
00:41:09,717 --> 00:41:11,717
that is currently the – like, the current cost –

452
00:41:11,717 --> 00:41:15,717
which, by the way, it doesn't really matter what the current on-chain fee scenario
is.

453
00:41:15,717 --> 00:41:18,717
It's more about, like, how much I set aside, like, in the channel to begin with,

454
00:41:18,717 --> 00:41:21,717
which is a problem in Lightning we should talk about, right?

455
00:41:21,717 --> 00:41:22,717
That is an issue.

456
00:41:22,717 --> 00:41:23,717
It is an issue.

457
00:41:23,717 --> 00:41:25,717
It is partially solved with ephemeral anchors,

458
00:41:25,717 --> 00:41:31,717
but, like, it will be just costly in general during any of these, like, exit
situations, right?

459
00:41:31,717 --> 00:41:33,717
That's just generally a problem with Lightning.

460
00:41:33,717 --> 00:41:34,717
And we've had, like –

461
00:41:34,717 --> 00:41:36,717
You get another different problem.

462
00:41:36,717 --> 00:41:39,717
I'm so happy to talk about the problems.

463
00:41:39,717 --> 00:41:41,717
You know, let's talk about them.

464
00:41:41,717 --> 00:41:42,717
Those are valid issues to me.

465
00:41:42,717 --> 00:41:46,717
But in this specific scenario, yes, it is suboptimal.

466
00:41:46,717 --> 00:41:51,717
You don't lose money, but it's suboptimal to try and, like, do a justice
transaction.

467
00:41:51,717 --> 00:41:52,717
Right.

468
00:41:52,717 --> 00:41:53,717
For your sub-transaction.

469
00:41:53,717 --> 00:41:54,717
Right.

470
00:41:54,717 --> 00:41:55,717
Sub-fee thing.

471
00:41:55,717 --> 00:41:56,717
Exactly.

472
00:41:56,717 --> 00:42:01,717
However, the cost of that justice transaction needs to be amortized over the course
of the lifespan of that channel.

473
00:42:01,717 --> 00:42:05,717
If I've had that channel for five years and it's routed thousands and thousands of
transactions,

474
00:42:05,717 --> 00:42:07,717
think of all the fees I've saved, right?

475
00:42:07,717 --> 00:42:12,717
Yes, this justice TX cost me $5 this time, but, like, what about all the fees I
saved?

476
00:42:12,717 --> 00:42:13,717
Like, why are we ignoring that?

477
00:42:13,717 --> 00:42:14,717
I disagree.

478
00:42:14,717 --> 00:42:15,717
I think what you would actually –

479
00:42:15,717 --> 00:42:17,717
The past is the past, so this is, like, the sunk cost fallacy.

480
00:42:18,717 --> 00:42:24,717
What you actually want to do is compare, do I want to bother keeping the Lightning
Channel open for how many –

481
00:42:24,717 --> 00:42:26,717
how much future use do I –

482
00:42:26,717 --> 00:42:28,717
so you would amortize it on all the future use.

483
00:42:28,717 --> 00:42:31,717
But if you think you're going to get scammed on the very next transaction,

484
00:42:31,717 --> 00:42:34,717
why wouldn't you get scammed on the very next 10 transactions in a row?

485
00:42:34,717 --> 00:42:36,717
Why wouldn't you get scammed on all of them?

486
00:42:36,717 --> 00:42:38,717
And why wouldn't you just say, I'm just going to close –

487
00:42:38,717 --> 00:42:41,717
I'm going to cut my losses and close immediately?

488
00:42:41,717 --> 00:42:43,717
So I kind of almost would flip that around.

489
00:42:43,717 --> 00:42:50,717
If you know that somehow being able to broadcast to L1 would give you magical
protection for two years,

490
00:42:50,717 --> 00:42:52,717
then I would agree, but it does not.

491
00:42:52,717 --> 00:42:53,717
You don't know.

492
00:42:53,717 --> 00:42:56,717
You have to make your decision today on the very next –

493
00:42:56,717 --> 00:42:57,717
the transaction you see right now.

494
00:42:57,717 --> 00:43:00,717
If you – you don't even want to have the HTLC.

495
00:43:00,717 --> 00:43:05,717
It would be a bug if they implemented the HTLC, which I think fortunately they have
not.

496
00:43:05,717 --> 00:43:07,717
It makes no difference to me either way.

497
00:43:07,717 --> 00:43:09,717
It's just, like, one mistake or another.

498
00:43:09,717 --> 00:43:11,717
So it doesn't even make any difference.

499
00:43:11,717 --> 00:43:16,717
This is fundamental to the design of the HTLC, that it requires L1 bytes in order to
work,

500
00:43:16,717 --> 00:43:19,717
and the L1 transactions are actually pretty small.

501
00:43:19,717 --> 00:43:23,717
That – this is not even a big – would you want to talk about the onboarding?

502
00:43:23,717 --> 00:43:24,717
That's my number one thing.

503
00:43:24,717 --> 00:43:25,717
Let's talk about the onboarding.

504
00:43:25,717 --> 00:43:26,717
Okay, okay.

505
00:43:26,717 --> 00:43:29,717
So, like, okay, I'm happy to talk about what I think is the biggest issue in
Lightning,

506
00:43:29,717 --> 00:43:31,717
which is not enough people support it.

507
00:43:31,717 --> 00:43:33,717
That's, like, to me, the biggest problem, right?

508
00:43:33,717 --> 00:43:35,717
Like, top – like, number one, right?

509
00:43:35,717 --> 00:43:37,717
What are your thoughts on why people don't support Lightning?

510
00:43:37,717 --> 00:43:40,717
I think it doesn't work, and they can tell that it's badly designed

511
00:43:40,717 --> 00:43:43,717
and that it requires liveness.

512
00:43:43,717 --> 00:43:47,717
It requires people to, like, connect to you and know your IP address.

513
00:43:47,717 --> 00:43:52,717
I know they don't literally need to, but in practice it requires, like, a highly
active connection.

514
00:43:52,717 --> 00:43:55,717
You need to sign money in order to receive.

515
00:43:55,717 --> 00:43:59,717
I think the user interface is – the user experience is bad because you have a hot
wallet.

516
00:43:59,717 --> 00:44:01,717
You must sign to receive money.

517
00:44:01,717 --> 00:44:05,717
When you compare it to the way Bitcoin works, you can just post the address,

518
00:44:05,717 --> 00:44:08,717
and then you can have your computer be off, and you can go on vacation,

519
00:44:08,717 --> 00:44:11,717
and people can be sending you money, and it's very secure.

520
00:44:11,717 --> 00:44:14,717
It's very – you know, it's cold storage, like, by default.

521
00:44:14,717 --> 00:44:17,717
So I think these are reasons, and also in practice it's pretty –

522
00:44:17,717 --> 00:44:18,717
Bitcoin is actually pretty fast.

523
00:44:18,717 --> 00:44:20,717
It is not instant.

524
00:44:20,717 --> 00:44:25,717
Whenever I send Bitcoin, I always find the blocks are so slow, slower than average.

525
00:44:25,717 --> 00:44:27,717
Ten minutes, yeah. It ain't enough.

526
00:44:27,717 --> 00:44:29,717
It's not instantaneous.

527
00:44:29,717 --> 00:44:31,717
Like, yeah, the ten minutes in Bitcoin suck.

528
00:44:31,717 --> 00:44:34,717
Like, the thing is most people don't even realize that their transactions take three
days

529
00:44:34,717 --> 00:44:37,717
to 90 days to settle in fiat land, but, like, it looks like it settles.

530
00:44:38,717 --> 00:44:39,717
Right.

531
00:44:39,717 --> 00:44:41,717
Okay, fair enough.

532
00:44:41,717 --> 00:44:44,717
What, like – so what about the companies that are super bullish on anything Bitcoin,
right?

533
00:44:44,717 --> 00:44:46,717
Like, Swan, for example.

534
00:44:46,717 --> 00:44:48,717
Swan is a super bullish company.

535
00:44:48,717 --> 00:44:50,717
You'd assume that they'd implement lighting.

536
00:44:50,717 --> 00:44:51,717
Why haven't they?

537
00:44:51,717 --> 00:44:53,717
And they've got, like, Swan.

538
00:44:53,717 --> 00:44:57,717
I think that Swan – I think that Corey is, like, a sociopath liar.

539
00:44:57,717 --> 00:45:01,717
I've seen him lie many times about things for which it doesn't even make any sense

540
00:45:01,717 --> 00:45:04,717
why you would lie about them, and they would be easily caught, et cetera.

541
00:45:04,717 --> 00:45:07,717
So I don't – you know, I don't know what Swan is doing.

542
00:45:07,717 --> 00:45:11,717
I know that Swan is some kind of beef with all kinds of people who are just funny

543
00:45:11,717 --> 00:45:16,717
and just don't take themselves too seriously, which would include Eric and Udi and
Jonsef

544
00:45:16,717 --> 00:45:18,717
and all these other people that I like.

545
00:45:18,717 --> 00:45:22,717
So I just assume that Swan is just, like, a deranged, insane place, and I – you
know,

546
00:45:22,717 --> 00:45:28,717
I don't know why they would do or not do any rational or irrational thing is –

547
00:45:28,717 --> 00:45:31,717
you know, it's beyond my skill to perceive.

548
00:45:31,717 --> 00:45:36,717
I have absolutely no idea why they would or would not implement lightning or
anything else.

549
00:45:36,717 --> 00:45:37,717
Okay.

550
00:45:37,717 --> 00:45:38,717
Fair enough.

551
00:45:38,717 --> 00:45:39,717
Like, personalities aside, right?

552
00:45:39,717 --> 00:45:44,717
Like, personalities aside, I know exactly why Swan didn't implement lightning,
right?

553
00:45:44,717 --> 00:45:45,717
And they really wanted to.

554
00:45:45,717 --> 00:45:47,717
They really, really wanted to.

555
00:45:47,717 --> 00:45:52,717
See, in the U.S. – and I was also at Voltage as well, so I, like, help onboard tons
and

556
00:45:52,717 --> 00:45:53,717
tons of people to lightning.

557
00:45:53,717 --> 00:45:56,717
In the U.S., in order for you to be in the flow of funds in any way, shape, or form,

558
00:45:56,717 --> 00:45:58,717
you've got to be regulated, right?

559
00:45:58,717 --> 00:46:03,717
Like, most people who have a Bitcoin node, they – like, they probably shouldn't be

560
00:46:03,717 --> 00:46:08,717
posting Bitcoin transactions by themselves, but, you know, the SEC and all these
state

561
00:46:08,717 --> 00:46:12,717
empty, like, you know, banking divisions haven't gone around people up yet, so it's
probably

562
00:46:12,717 --> 00:46:13,717
fine.

563
00:46:13,717 --> 00:46:16,717
But the way that the rules are written right now, if you interact with money, if
you're

564
00:46:16,717 --> 00:46:19,717
in the flow of funds and money, you've got to be regulated.

565
00:46:19,717 --> 00:46:21,717
Being regulated is a BFD.

566
00:46:21,717 --> 00:46:22,717
Oh, my God, right?

567
00:46:22,717 --> 00:46:26,717
Our company is getting regulated right now, and it's a huge problem, right?

568
00:46:26,717 --> 00:46:27,717
It really is.

569
00:46:28,717 --> 00:46:29,717
I agree.

570
00:46:29,717 --> 00:46:34,717
Like, if you – if you interact with lightning, that's a lot easier for you to get on
the

571
00:46:34,717 --> 00:46:35,717
regulator's radar, right?

572
00:46:35,717 --> 00:46:38,717
It's not the most – it's not the worst thing in the world, but it is.

573
00:46:38,717 --> 00:46:44,717
And typically, most of the, like, folks who want to integrate lightning, they
probably

574
00:46:44,717 --> 00:46:48,717
have, like, some level of exchange functionality, right?

575
00:46:48,717 --> 00:46:52,717
SWAN is an exchange, kind of, but they're not regulated like an exchange.

576
00:46:52,717 --> 00:46:56,717
They rely on partners who are actually regulated like exchanges.

577
00:46:56,717 --> 00:47:00,717
The thing is, those partners, these custodians, they don't support lightning.

578
00:47:00,717 --> 00:47:05,717
And because these custodians don't support lightning, SWAN can't support lightning.

579
00:47:05,717 --> 00:47:07,717
That's the reason why SWAN couldn't support them.

580
00:47:07,717 --> 00:47:08,717
Okay, fine.

581
00:47:08,717 --> 00:47:10,717
Maybe SWAN is a terrible company that, you know, you personally described.

582
00:47:10,717 --> 00:47:13,717
I know a lot of people don't feel super positively about them, right?

583
00:47:13,717 --> 00:47:14,717
But what about Fold?

584
00:47:14,717 --> 00:47:16,717
I mean, everyone loves Fold.

585
00:47:16,717 --> 00:47:19,717
Fold is pretty much the exact same way, like, set up the exact same way.

586
00:47:19,717 --> 00:47:22,717
And many, many other companies in our space operate in the exact same way.

587
00:47:22,717 --> 00:47:25,717
Because here's the thing about these MTLs, about this licensing.

588
00:47:25,717 --> 00:47:27,717
It's very costly to go about.

589
00:47:27,717 --> 00:47:31,717
So unless you want to bankrupt your entire company, like, raising $3 million, $10
million

590
00:47:31,717 --> 00:47:34,717
isn't enough to, like, get the MTLs for these, like, for this kind of business.

591
00:47:34,717 --> 00:47:35,717
Money can't pay the license.

592
00:47:35,717 --> 00:47:36,717
Yeah, exactly.

593
00:47:36,717 --> 00:47:37,717
Yeah.

594
00:47:37,717 --> 00:47:39,717
And then on top of that, you have to have, like, banking relationships and these
compliance

595
00:47:39,717 --> 00:47:41,717
folks, like, love to keep people out, you know?

596
00:47:41,717 --> 00:47:43,717
It's a monopolist guild.

597
00:47:43,717 --> 00:47:44,717
It's corrupt, of course.

598
00:47:44,717 --> 00:47:46,717
That's part of my viewpoint.

599
00:47:46,717 --> 00:47:48,717
No, for real.

600
00:47:48,717 --> 00:47:52,717
This morning, we got our banking application rescinded from a big bank, right?

601
00:47:53,717 --> 00:47:57,717
This is from their digital assets team, because we had assets that were too risky
for them.

602
00:47:57,717 --> 00:47:59,717
We only support Bitcoin.

603
00:47:59,717 --> 00:48:01,717
Like, what are you talking about?

604
00:48:01,717 --> 00:48:03,717
I mean, it's often a pretext.

605
00:48:03,717 --> 00:48:05,717
It's often a lie, of course, also.

606
00:48:05,717 --> 00:48:07,717
They say there's an X.

607
00:48:07,717 --> 00:48:08,717
That sounds nice.

608
00:48:08,717 --> 00:48:10,717
And really, it's a completely different reason.

609
00:48:10,717 --> 00:48:15,717
So all these companies in this space are hyper-reliant on these custodians that have
these relationships

610
00:48:15,717 --> 00:48:16,717
already.

611
00:48:16,717 --> 00:48:18,717
For a myriad of reasons, these custodians don't support Lightning.

612
00:48:18,717 --> 00:48:20,717
It's not because Lightning is bad.

613
00:48:20,717 --> 00:48:23,717
It's because these custodians are fucking falling apart.

614
00:48:23,717 --> 00:48:27,717
Like, I can do an entire episode on that, how that world is going.

615
00:48:27,717 --> 00:48:29,717
But they're falling apart, and it's really bad.

616
00:48:29,717 --> 00:48:31,717
But is this what you mean by adoption?

617
00:48:31,717 --> 00:48:35,717
Because what I'm talking about, the L1, I mean, you cannot physically join the
Lightning

618
00:48:35,717 --> 00:48:40,717
network without first acquiring some Bitcoin or opening a channel on L1 or doing
some

619
00:48:40,717 --> 00:48:45,717
extremely fancy and convoluted thing where someone opens a channel for you in, like,

620
00:48:45,717 --> 00:48:46,717
a big batch or something.

621
00:48:46,717 --> 00:48:53,717
There's just not enough space to actually join the Lightning network in the true
non-custodial

622
00:48:53,717 --> 00:48:54,717
Lightning network.

623
00:48:54,717 --> 00:48:59,717
You cannot fit more than, like, 1% of the population of the Earth.

624
00:48:59,717 --> 00:49:01,717
Let's fit 1% in.

625
00:49:01,717 --> 00:49:04,717
I agree that 1% is better than 0%.

626
00:49:04,717 --> 00:49:05,717
I would agree with that.

627
00:49:05,717 --> 00:49:10,717
But I do think that, actually, it's something where we are all going to want to be
using

628
00:49:10,717 --> 00:49:12,717
the same thing in the end.

629
00:49:13,717 --> 00:49:20,717
And so, if something maxes out at 1% and something else maxes out at 100%, then that
second thing

630
00:49:20,717 --> 00:49:25,717
is what should get more attention than the first thing.

631
00:49:25,717 --> 00:49:26,717
Maybe.

632
00:49:26,717 --> 00:49:27,717
Maybe.

633
00:49:27,717 --> 00:49:28,717
Maybe.

634
00:49:28,717 --> 00:49:29,717
Genuinely, maybe.

635
00:49:29,717 --> 00:49:35,717
But, listen, something I've learned in my, like, career in tech as a whole is,
frankly,

636
00:49:35,717 --> 00:49:37,717
tech means nothing, right?

637
00:49:37,717 --> 00:49:41,717
It only gets you so far in terms of, like, how excited people get over it.

638
00:49:41,717 --> 00:49:46,717
After a certain point, you get to the moon through hype and marketing alone, right?

639
00:49:46,717 --> 00:49:50,717
Like, that might be the cult that you're describing, because Lightning is very much
in the, like,

640
00:49:50,717 --> 00:49:53,717
hype and marketing phase, right, where the tech has plateaued.

641
00:49:53,717 --> 00:49:54,717
Like, tech is cool.

642
00:49:54,717 --> 00:49:59,717
It's not going to onboard, like, 8 million people or whatever this population is
right now, you know?

643
00:49:59,717 --> 00:50:02,717
But it's going to onboard a significant amount, and we've got to do a lot of things
to get

644
00:50:02,717 --> 00:50:03,717
to where we need to go.

645
00:50:04,116 --> 00:50:04,876
That's not a bad thing.

646
00:50:05,196 --> 00:50:08,476
That's a necessity to get anywhere, right?

647
00:50:08,676 --> 00:50:09,836
Like, that's just the truth of it.

648
00:50:09,836 --> 00:50:13,796
Right now, I'm, we're a custodian, we're a Bitcoin custodian, and we're going
against

649
00:50:13,796 --> 00:50:17,916
behemoths that have literally billions of dollars in funding, and our edge, we don't

650
00:50:17,916 --> 00:50:19,036
need to get billions of dollars in funding.

651
00:50:19,036 --> 00:50:21,796
Our edge is purely just going to be hype and marketing, right?

652
00:50:21,796 --> 00:50:22,636
Our tech is great.

653
00:50:22,636 --> 00:50:26,756
It's phenomenal, but that's not even the focus of our company anymore, you know?

654
00:50:26,796 --> 00:50:30,276
We have good stuff, but we've got to do a lot of things to get to where we need to
go.

655
00:50:30,276 --> 00:50:34,876
We have good stuff, and I hope to, like, you know, like, slip pills of self-custody

656
00:50:34,876 --> 00:50:37,676
to people's food without them realizing, but, like, they don't give a shit about

657
00:50:37,676 --> 00:50:39,436
self-custody. Let's just be roms here, you know?

658
00:50:39,476 --> 00:50:42,756
They don't care. So my goal is just from a, like, hype standpoint.

659
00:50:42,756 --> 00:50:47,476
And so, like, I guess toward that point, like, Lightning does well because of the

660
00:50:47,476 --> 00:50:48,316
cults, right?

661
00:50:48,316 --> 00:50:51,436
Like, it seems like the folks that you're talking about are, like, the Nostr Twitter

662
00:50:51,436 --> 00:50:53,156
people who scream loudly without understanding.

663
00:50:54,036 --> 00:50:56,236
Yeah, I call them the NGU people, right?

664
00:50:56,476 --> 00:50:58,316
But that's, like, LinkedIn and Bitcoin, too.

665
00:50:59,036 --> 00:51:01,676
They're going to take this stuff to the next level and they're going to keep this
stuff

666
00:51:01,676 --> 00:51:04,236
from dying when it's during, when there's a bear, you know?

667
00:51:04,236 --> 00:51:06,356
So I am thankful to them, you know?

668
00:51:07,836 --> 00:51:10,556
I mean, I hear what you're saying, but it does sound in a way like I showed up to a

669
00:51:10,556 --> 00:51:15,436
Lightning debate and I just heard my opponent say tech means nothing and everything
is

670
00:51:15,436 --> 00:51:20,676
about hype. And that almost is almost like what I was hoping to convince the
audience.

671
00:51:20,676 --> 00:51:26,916
So, I mean, I'm happy that we agree that the Lightning tech does not work and that
is

672
00:51:26,916 --> 00:51:28,636
bullied by irrational hype.

673
00:51:28,636 --> 00:51:30,596
But that's what I thought I would dare to say.

674
00:51:30,956 --> 00:51:34,436
Wait, well, what about all the things I pointed out about all your callouts and
stuff?

675
00:51:34,436 --> 00:51:36,076
But, like, what about all that stuff?

676
00:51:36,756 --> 00:51:38,196
Are we just going to take over all that?

677
00:51:38,196 --> 00:51:39,996
Which callouts do we want to talk about?

678
00:51:40,156 --> 00:51:41,356
I'll talk about whatever call you want.

679
00:51:41,356 --> 00:51:43,436
Let me jump in. Let me jump in for a sec.

680
00:51:43,556 --> 00:51:44,716
You guys are making my job easy.

681
00:51:44,716 --> 00:51:45,956
We've been going for 15 minutes.

682
00:51:45,956 --> 00:51:47,556
Let's pivot slightly.

683
00:51:48,756 --> 00:51:51,036
Custody is a big topic through this.

684
00:51:51,036 --> 00:51:56,396
I think I agree with Paul's argument that many people think they're using
self-custodial

685
00:51:56,396 --> 00:51:59,236
Lightning and they're really using ruggable, potentially Lightning.

686
00:51:59,276 --> 00:52:03,036
That's true currently based on how much custodial Bitcoin is out there with
Lightning.

687
00:52:03,036 --> 00:52:06,636
And I'm not super technical, but people talk about the hub and spoke model of
Lightning a

688
00:52:06,636 --> 00:52:08,556
lot and which brings in LSPs.

689
00:52:08,836 --> 00:52:15,876
So thinking forward to how we solve scaling Bitcoin through Lightning, how do we
think

690
00:52:15,876 --> 00:52:19,036
about LSPs? Because they're currently mostly centralized entities.

691
00:52:19,316 --> 00:52:25,276
Is that a dangerous point of contention that we're giving so much power to a
voltage?

692
00:52:25,276 --> 00:52:27,196
Can these things be decentralized over time?

693
00:52:27,236 --> 00:52:28,876
How do you guys see that point?

694
00:52:29,476 --> 00:52:36,196
Well, I'm glad you asked about that, because at first, back in 2015, 2016, I was all
in

695
00:52:36,196 --> 00:52:37,396
favor of hub and spoke.

696
00:52:37,676 --> 00:52:41,996
And I thought it doesn't matter because you have hub and spoke, but there will be,
you

697
00:52:41,996 --> 00:52:43,956
know, there'll be like a thousand hubs or something.

698
00:52:44,156 --> 00:52:46,876
And most importantly, anyone will be able to create a hub.

699
00:52:47,996 --> 00:52:51,716
And I thought we'd all be protected because I didn't understand the Lightning
technology

700
00:52:51,716 --> 00:52:53,476
back then as well as I understand it now.

701
00:52:54,156 --> 00:52:57,796
I thought all of us are going to be protected by like HTLC, is going to be protected
by

702
00:52:57,796 --> 00:52:58,796
our own cryptography.

703
00:52:58,996 --> 00:53:00,836
So we're always going to be able to get our money back.

704
00:53:01,396 --> 00:53:04,276
And so I thought it doesn't matter at all hub and spoke.

705
00:53:04,276 --> 00:53:06,836
And I thought, let's make it hub and spoke all the way.

706
00:53:06,836 --> 00:53:11,636
You know, let's dial the efficiency, the economic efficiency, the technical
efficiency,

707
00:53:11,836 --> 00:53:15,836
the physics. Let's dial it all the way up, make whatever kind of crazy hub.

708
00:53:15,836 --> 00:53:21,116
We'll make like a ring, like a galaxy of hubs, and then we'll all have spokes.

709
00:53:21,636 --> 00:53:22,996
And I was all for that.

710
00:53:24,116 --> 00:53:28,916
Now, I think it is a slightly different situation where what has happened is people
have

711
00:53:28,916 --> 00:53:31,596
kind of realized that the self custody is too difficult.

712
00:53:32,596 --> 00:53:34,436
The HTLCs are not worth it.

713
00:53:34,516 --> 00:53:40,676
You know, it's just better to just what gives you more product market fit is just

714
00:53:40,676 --> 00:53:44,836
custodial. So it's almost like a red herring at this point.

715
00:53:44,876 --> 00:53:46,236
It's like there is no hub and spoke.

716
00:53:46,236 --> 00:53:50,156
Everyone just has an account, you know, whatever, a blue wallet or something.

717
00:53:50,156 --> 00:53:52,716
I hate to, you know, I don't want to call anyone out or something, but I'm just
saying

718
00:53:52,716 --> 00:53:54,996
that it's like it doesn't work.

719
00:53:54,996 --> 00:53:56,676
The bigger issue is just that it doesn't work.

720
00:53:56,676 --> 00:54:00,356
So the hub and spoke doesn't make any difference.

721
00:54:00,396 --> 00:54:03,236
It's just the whole thing is an illusion to me.

722
00:54:03,236 --> 00:54:04,676
So it doesn't make any difference.

723
00:54:06,596 --> 00:54:10,836
Yeah, I am worried about the hub and spoke thing, there are pros to it, right,
because

724
00:54:10,836 --> 00:54:15,276
frankly, the hubs are always really well maintained, well capitalized nodes.

725
00:54:15,436 --> 00:54:18,116
And so there's a lot of upside to routing through them.

726
00:54:18,156 --> 00:54:21,756
I always call it the super high way of lightning, right, to route through them.

727
00:54:21,756 --> 00:54:23,316
Of course, there are downsides with that.

728
00:54:23,596 --> 00:54:27,156
Yeah, it's not the greatest thing in the world, but also at the same time, the

729
00:54:27,156 --> 00:54:29,596
services that a lot of these like nodes provide are super dope.

730
00:54:29,676 --> 00:54:33,756
Like, honestly, like C equals, I'm not sure if they're still around, but their

731
00:54:33,756 --> 00:54:35,796
services that they had were pretty awesome.

732
00:54:35,796 --> 00:54:37,396
And we could connect like all sorts of cool stuff with them.

733
00:54:37,676 --> 00:54:40,916
And plus a green wallet with Blockstream, their LSP is pretty dope, you know,
because

734
00:54:40,916 --> 00:54:44,436
I can basically have like a super lightweight, like lightning client, connect to

735
00:54:44,436 --> 00:54:46,156
them. And I always thought that was super neat.

736
00:54:47,556 --> 00:54:50,916
Yeah, I'm not like, it's just like a different pro and con set up, in my opinion.

737
00:54:51,116 --> 00:54:55,356
You know, I like so on the custodial side, here's here's something that like, I
don't

738
00:54:55,356 --> 00:54:57,876
think people quite have like figured out just yet.

739
00:54:58,116 --> 00:55:01,076
I'm happy to like spill the beans to any other custodians out there who want to beat

740
00:55:01,076 --> 00:55:06,636
me to it. But like things like Spark and Arc and other like, you know, a setup
similar

741
00:55:06,636 --> 00:55:12,036
to this are actually really, really cool because you can have like this custodial

742
00:55:12,036 --> 00:55:16,956
setup where there's no setup like necessary for the user, like keys are just on
their

743
00:55:16,956 --> 00:55:18,716
phone and it doesn't even really matter.

744
00:55:18,716 --> 00:55:22,956
Things are driven by a centralized entity, call it whatever you want, a Spark
organizer

745
00:55:22,956 --> 00:55:27,596
or whatever they call it. But like, you know, each person has all the information on

746
00:55:27,596 --> 00:55:30,996
their own device and they can unilaterally exit via lightning whenever they'd like.

747
00:55:31,396 --> 00:55:34,796
I think that's a bee's knees, you know, like, yes, it's going through centralized
like,

748
00:55:34,796 --> 00:55:37,556
you know, hops, if you will, for incoming and outgoing.

749
00:55:37,796 --> 00:55:43,196
But it's certainly more centralized or more better, more decentralized than than a

750
00:55:43,196 --> 00:55:45,556
Postgres database. You know, I think that's pretty neat.

751
00:55:45,916 --> 00:55:49,396
I think that's a, you can respond, Paul, but I think this will be the last question

752
00:55:49,396 --> 00:55:50,836
and then we can go to closing thoughts.

753
00:55:50,836 --> 00:55:52,676
I think it's important.

754
00:55:52,676 --> 00:55:54,316
How can we get more self-custody?

755
00:55:54,516 --> 00:55:58,076
And I do, I think it's a chicken and egg problem, as I've said.

756
00:55:58,116 --> 00:56:02,716
So I do think, obviously, we want to ramp certain things up.

757
00:56:02,716 --> 00:56:07,236
And when when that first person texts you and says, oh, you're into Bitcoin, the

758
00:56:07,236 --> 00:56:09,796
Bitcoin price is going up, I keep hearing more about Bitcoin every day.

759
00:56:10,116 --> 00:56:14,196
You want to be able to just like, whatever, send them, you know, a message, send
them

760
00:56:14,556 --> 00:56:19,836
whatever, send them five dollars worth of Bitcoin and they're not going to sink a

761
00:56:19,836 --> 00:56:23,676
700 gigabyte node, you know, on day one.

762
00:56:24,116 --> 00:56:25,796
That's incredibly stupid.

763
00:56:25,876 --> 00:56:26,916
I'm not in favor of that.

764
00:56:27,716 --> 00:56:33,476
So we do need custodial ramp up, independent of whether or not Lightning survives or

765
00:56:33,476 --> 00:56:34,996
takes over is the number one thing.

766
00:56:34,996 --> 00:56:36,396
It makes no difference. Lightning dies.

767
00:56:36,716 --> 00:56:38,316
We need some kind of.

768
00:56:39,476 --> 00:56:44,036
Ramping up of the commitment that people have and, you know, people are not going to

769
00:56:44,316 --> 00:56:49,636
generate their own wallet by like rolling dice or shuffling cards, you know, on day

770
00:56:49,636 --> 00:56:54,396
one. Although, again, we want that we want that option for the right, that easy
option

771
00:56:54,396 --> 00:57:00,236
for the whoever it is, you know, the big the big important Lightning user or Bitcoin

772
00:57:00,236 --> 00:57:04,116
user or whoever someone is fleeing, you know, mainland China with all their money or

773
00:57:04,116 --> 00:57:05,116
something or North Korea.

774
00:57:05,116 --> 00:57:08,076
And we need them. They want you know, they don't know who they can trust.

775
00:57:08,076 --> 00:57:09,476
So they want they want to build.

776
00:57:09,476 --> 00:57:10,956
So we want so we want that.

777
00:57:11,596 --> 00:57:16,956
However, I do think it the way the chicken and egg problem works, like an example I

778
00:57:16,956 --> 00:57:18,676
bring up pretty often is that.

779
00:57:20,276 --> 00:57:24,396
People have learned how to drive a car, you know, for a while and probably in the

780
00:57:24,396 --> 00:57:28,316
future, people won't have to learn how to drive a car, you know, thanks to
self-driving

781
00:57:28,316 --> 00:57:30,156
technology, Waymo's, et cetera.

782
00:57:30,196 --> 00:57:31,076
Right. Exactly.

783
00:57:31,076 --> 00:57:32,796
Uber or whatever. So just like.

784
00:57:33,876 --> 00:57:37,476
The elevators operate themselves in the past, you had to have the elevator operator

785
00:57:37,476 --> 00:57:40,836
because people would, you know, get like, you know, cut in half or mangled by the

786
00:57:40,836 --> 00:57:42,356
crazy. They wouldn't trust the elevator.

787
00:57:42,396 --> 00:57:45,676
So you had a full time guy. Now, what I'm getting at, though, is driving a car is

788
00:57:45,676 --> 00:57:46,756
actually really difficult.

789
00:57:46,756 --> 00:57:47,636
And but.

790
00:57:48,916 --> 00:57:53,836
The benefit was worth it, so and we built all this, these systems, the driver's

791
00:57:53,836 --> 00:57:59,036
licenses and driver's ed, driver's education, you know, the learner's permit, we

792
00:57:59,036 --> 00:58:03,556
built this huge thing because we're an ambitious society who wanted people to have

793
00:58:04,076 --> 00:58:05,396
the autonomy of the car.

794
00:58:05,396 --> 00:58:07,276
And, you know, it wasn't easy.

795
00:58:08,676 --> 00:58:12,076
But it's not like the end of the world where there's a will, there's a way.

796
00:58:12,076 --> 00:58:17,716
So I think this whole custody thing, we could make the software so that it is a

797
00:58:17,716 --> 00:58:22,756
little bit easier for people to self-custody and we could make the expectation
higher

798
00:58:22,756 --> 00:58:28,556
and say, this is why you want to own your own Bitcoin, because you can't get rugged,

799
00:58:28,876 --> 00:58:31,556
whereas it's only it's inevitable that people get.

800
00:58:31,796 --> 00:58:38,236
So I don't see the world as like we show up on June 20, we wake up and there's a

801
00:58:38,236 --> 00:58:41,076
certain level of demand for self-custody.

802
00:58:41,636 --> 00:58:44,556
I don't see that as the situation that is the situation.

803
00:58:44,556 --> 00:58:49,076
But I'm saying it's a function of what we do in the Bitcoin community.

804
00:58:49,316 --> 00:58:53,916
Our job is to make it really easy for people to run their own node and roll their

805
00:58:53,916 --> 00:58:56,716
own keys and have total control of their own money.

806
00:58:57,396 --> 00:58:59,756
And our job is to make it as easy as possible.

807
00:59:00,596 --> 00:59:02,516
And then that's what we should be hyping up.

808
00:59:02,556 --> 00:59:09,316
We should be hyping, hey, with Bitcoin, you can do two or three multisig and what

809
00:59:09,316 --> 00:59:10,556
can you do at your local bank?

810
00:59:10,676 --> 00:59:13,796
The most you can do is put someone else like on the account and have like a one

811
00:59:13,796 --> 00:59:16,516
of two between like you and your spouse or something.

812
00:59:18,036 --> 00:59:19,756
That's pretty lame, but we have just two or three.

813
00:59:19,756 --> 00:59:23,716
If you want to do a two or three escrow, you got to use like escrow.com or you got

814
00:59:23,716 --> 00:59:28,676
to like hire lawyers or you got to like make an LLC or something, you know, but

815
00:59:28,676 --> 00:59:30,316
Bitcoin, we can just do all that.

816
00:59:30,476 --> 00:59:32,316
We can do five of seven multisig.

817
00:59:32,356 --> 00:59:35,316
We could do three of nine or stuff like that.

818
00:59:35,316 --> 00:59:36,316
So we got to hype up.

819
00:59:37,596 --> 00:59:41,276
We got to make the technology easier to use, and that's what we have to hype up is

820
00:59:41,276 --> 00:59:42,516
what makes Bitcoin different.

821
00:59:42,796 --> 00:59:44,076
We say, well, listen, you know what?

822
00:59:44,076 --> 00:59:49,876
On whatever it is, on Backpage or on Craigslist or whatever, or on various

823
00:59:49,876 --> 00:59:56,676
messaging apps, you can't send you can't text someone money because of this cabal

824
00:59:56,676 --> 00:59:57,876
that you mentioned before.

825
00:59:58,076 --> 01:00:01,996
It's monopolist guilds and they're they're protectionist junk,

826
01:00:02,156 --> 01:00:04,476
anti-competitive moat that they built.

827
01:00:04,916 --> 01:00:08,396
But with Bitcoin, anyone you can just send an email or you can just send a text or

828
01:00:08,396 --> 01:00:09,836
you can just send a QR code or whatever.

829
01:00:09,836 --> 01:00:10,876
Anyone could send money.

830
01:00:11,556 --> 01:00:12,796
There is no onboarding.

831
01:00:13,196 --> 01:00:14,676
There is there is complete privacy.

832
01:00:14,836 --> 01:00:16,876
So we want to show that type of thing.

833
01:00:16,956 --> 01:00:17,996
That's what we want to do.

834
01:00:17,996 --> 01:00:21,396
And that's what we should do is I'm trying to say.

835
01:00:21,436 --> 01:00:26,436
So I don't think it's like not enough people out there want self custody.

836
01:00:26,436 --> 01:00:28,516
It's like we are not making it easy for them.

837
01:00:28,556 --> 01:00:29,116
We should.

838
01:00:29,156 --> 01:00:32,516
But, you know, this is just one of the many mistakes we've been

839
01:00:32,516 --> 01:00:34,036
making over the last 10 years.

840
01:00:35,356 --> 01:00:41,236
You said, how do we how do we make like self custody better?

841
01:00:41,236 --> 01:00:42,836
How do we get people excited about self custody?

842
01:00:42,836 --> 01:00:44,036
How do we like bring it to the masses?

843
01:00:44,036 --> 01:00:45,636
I'll tell you exactly how we do it.

844
01:00:45,716 --> 01:00:46,036
Right.

845
01:00:46,916 --> 01:00:52,956
As someone who's worked on getting Bitcoin in people's hands since 2015 and is like

846
01:00:52,956 --> 01:00:56,796
deep in the swamp right now, there's basically two problems.

847
01:00:57,236 --> 01:01:01,996
The first problem is moving the Bitcoin from the seller's hands, the custodian's

848
01:01:01,996 --> 01:01:04,756
hands into the hands of the person who wants to get it.

849
01:01:05,076 --> 01:01:10,916
This is largely solved one way or another by if not Lightning or ARK or a million

850
01:01:10,916 --> 01:01:12,876
other non Bitcoin protocols, right?

851
01:01:12,956 --> 01:01:15,516
With someone out there, it's relatively soft, right?

852
01:01:15,756 --> 01:01:17,276
That's not the problem we should really be worried about.

853
01:01:17,356 --> 01:01:21,036
The problem that we should really be worried about is, OK, we can

854
01:01:21,036 --> 01:01:24,836
instantaneously, almost for free, move the funds from point A to point B.

855
01:01:24,876 --> 01:01:25,356
Fine.

856
01:01:25,836 --> 01:01:31,116
But the issue is the fiat system does not allow for instantaneous transactions.

857
01:01:31,516 --> 01:01:37,276
OK, what this means is if you're in the middle, if you are giving someone Bitcoin

858
01:01:37,396 --> 01:01:42,236
and getting fiat money, you have the opportunity to get rugged yourself

859
01:01:42,436 --> 01:01:44,236
because the other person issued a chargeback.

860
01:01:44,276 --> 01:01:50,396
This specific issue is why it's so difficult to get Bitcoin in the hands of

861
01:01:50,396 --> 01:01:51,276
people, right?

862
01:01:51,276 --> 01:01:54,996
People genuinely, most folks have no idea how big of an issue this is.

863
01:01:55,036 --> 01:01:58,636
But those scammers and those like, you know, folks are always calling you.

864
01:01:59,036 --> 01:02:01,396
They're they're destroying this industry.

865
01:02:01,556 --> 01:02:05,836
And it's because of that specific part that makes like a complete instantaneous

866
01:02:05,836 --> 01:02:10,796
Apple pay option really difficult to provide folks, even if you have all the

867
01:02:10,796 --> 01:02:15,516
licenses. So the first like so the idea here in order for us to get self custody

868
01:02:15,516 --> 01:02:19,396
in the hands of everyone is Bitcoin and stable coins or whatever end up being

869
01:02:19,476 --> 01:02:24,876
such a good solution that it actually ends up pressuring fiat banking rail folks to

870
01:02:24,876 --> 01:02:29,436
implement a completely instantaneous depositing option.

871
01:02:29,436 --> 01:02:31,716
We have wires we have fed now.

872
01:02:31,916 --> 01:02:33,116
They cost a lot.

873
01:02:33,156 --> 01:02:35,636
Sixteen dollars and eighteen dollars respectively.

874
01:02:35,876 --> 01:02:36,836
It's really expensive.

875
01:02:37,116 --> 01:02:39,356
OK, and but there are no chargebacks with those options.

876
01:02:40,236 --> 01:02:45,716
If we can push the fiat banking rails to get to a point where they have a sub five

877
01:02:45,716 --> 01:02:50,836
dollar option, right, that is instantaneous, then we can get into a point where we
can

878
01:02:50,836 --> 01:02:55,556
actually start offering like completely self custody solutions with Apple pay that

879
01:02:55,556 --> 01:02:59,436
are maybe a little bit subsidized by five dollars, but entirely reasonable for
people

880
01:02:59,436 --> 01:03:01,196
to get into that.

881
01:03:01,196 --> 01:03:02,796
That world is what we want.

882
01:03:02,796 --> 01:03:05,316
We want Bitcoin to like pressure, you know, rail banking.

883
01:03:05,436 --> 01:03:09,276
So that fiat rail banking ends up like, you know, pushing that we need more people

884
01:03:09,276 --> 01:03:11,196
get Bitcoin and their self custody solutions.

885
01:03:11,196 --> 01:03:14,116
And it's easy. It doesn't matter to me if it's Bitcoin or lightning.

886
01:03:14,116 --> 01:03:17,116
Honestly, I don't I don't give a shit or arc, you know, I don't care.

887
01:03:17,716 --> 01:03:18,916
I want that end goal.

888
01:03:18,956 --> 01:03:23,436
So do you think like a stable coins partly, I think were invented to fill that type
of

889
01:03:23,436 --> 01:03:25,996
a thing of like a fast fiat?

890
01:03:28,316 --> 01:03:32,876
We'll see, I've got my own personal thoughts on stable coins, right, but I can't
deny

891
01:03:32,876 --> 01:03:36,596
the fact that they that they are like valuable for a lot of reasons that we can like

892
01:03:36,596 --> 01:03:37,516
kind of rely on them for this.

893
01:03:37,516 --> 01:03:41,836
Maybe the stable coins will become that like intermediary rail, right, in which case

894
01:03:41,836 --> 01:03:44,756
phenomenal. But listen, I can't pay my rent in stable coins just yet.

895
01:03:44,876 --> 01:03:46,796
You know, I certainly can't buy groceries with stable coins.

896
01:03:46,796 --> 01:03:47,876
So we are not there yet.

897
01:03:48,116 --> 01:03:51,476
You know, right now we're in this weird phase of banks issuing all their individual

898
01:03:51,476 --> 01:03:56,036
stable coins, which reminds me of like the Confederacy or like the Articles of

899
01:03:56,036 --> 01:03:58,676
Confederation, where every bank had their own notes.

900
01:03:58,876 --> 01:04:01,636
And I'm not excited to see how this turns out personally.

901
01:04:04,076 --> 01:04:10,516
OK, let's close, let's close on this question because we covered a shit ton and

902
01:04:11,956 --> 01:04:16,996
there's a bunch of topics around CTV upgrades, you mentioned ARK and Spark, which

903
01:04:16,996 --> 01:04:18,316
kind of speak Lightning.

904
01:04:20,556 --> 01:04:25,196
In 2025, with all that's going on, all that we just covered, is Lightning worth

905
01:04:25,196 --> 01:04:27,916
investing in or not?

906
01:04:27,956 --> 01:04:29,236
Let's start with you, Harsha.

907
01:04:30,796 --> 01:04:35,116
And as an investor, I think Lightning is at a pretty good time.

908
01:04:35,956 --> 01:04:40,076
Yeah, like as a as a group trying to push Bitcoin forward.

909
01:04:40,596 --> 01:04:45,276
Yes. So like we support Lightning at Magnolia, honestly, it wasn't difficult to if

910
01:04:45,276 --> 01:04:47,476
I'm being completely real, you know, maybe it's because I've been working with it

911
01:04:47,476 --> 01:04:51,196
for so long, but it was just spinning up a node and just like, you know, like having

912
01:04:51,196 --> 01:04:53,716
a couple of protocols and procedures set up in our compliance docs.

913
01:04:53,916 --> 01:04:54,916
It's not a difficult thing.

914
01:04:55,156 --> 01:04:58,796
You know, if I really cared, I would like partner with Voltage.

915
01:04:58,796 --> 01:05:01,396
There's so much infrastructure for Lightning now that supporting it and investing

916
01:05:01,396 --> 01:05:02,476
time into it isn't difficult.

917
01:05:02,556 --> 01:05:04,316
So it's just low cost at this point.

918
01:05:04,356 --> 01:05:08,356
It's somehow it's it's genuinely easier than Bitcoin, which is very funny to me.

919
01:05:08,356 --> 01:05:10,836
Which is very funny to me for a lot of reasons.

920
01:05:10,876 --> 01:05:12,116
But yeah, I'd say, yeah, sure.

921
01:05:12,116 --> 01:05:14,756
Invest in Lightning as a business, you know, hang out, have fun.

922
01:05:14,836 --> 01:05:17,516
It's not going to solve any of your real problems you're going to run into as a

923
01:05:17,516 --> 01:05:18,436
business in the Bitcoin world.

924
01:05:18,436 --> 01:05:19,236
But, you know, have fun with it.

925
01:05:21,036 --> 01:05:21,636
What about you, Paul?

926
01:05:23,036 --> 01:05:24,236
Well, I don't think so.

927
01:05:24,236 --> 01:05:27,476
I mean, I really I am I'm more of a pluralist, though, but I do think we should

928
01:05:27,476 --> 01:05:32,436
try everything. So but actually, Lightning just gets so much more so much

929
01:05:32,436 --> 01:05:37,116
disproportionate attention that it really shouldn't get.

930
01:05:37,276 --> 01:05:41,516
And the only way to accurately reflect that state of affairs is to try to

931
01:05:41,516 --> 01:05:43,076
emphasize people that they should.

932
01:05:44,196 --> 01:05:47,836
Pace less attention to it, and so that's my point of view.

933
01:05:49,116 --> 01:05:52,756
OK, so it's almost more like a ratio thing, from my view, there's definitely

934
01:05:52,956 --> 01:05:57,196
Lightning is weird because it's it's been going for so long, it works kind of

935
01:05:57,196 --> 01:06:00,916
depending on the use case, but people are like in two big camps.

936
01:06:00,916 --> 01:06:04,276
There's like it's going to slowly die and it's going to be we're going to be on

937
01:06:04,276 --> 01:06:09,036
roll ups or some L2 thing and you're going to use a bridge or it's the future.

938
01:06:09,036 --> 01:06:10,476
That's like the two poles.

939
01:06:10,476 --> 01:06:13,956
And they both fully believe that, which is wild.

940
01:06:17,276 --> 01:06:20,516
Yeah, I mean, and a lot of the people who have studied Lightning, like Barack or

941
01:06:20,516 --> 01:06:23,876
whatever, the guy who invented ARK, he crashed the Lightning network twice.

942
01:06:25,116 --> 01:06:27,716
These are the people who say it will be something else.

943
01:06:27,956 --> 01:06:31,796
And then the people who think Lightning is the future as an anonymous Twitter

944
01:06:31,796 --> 01:06:36,476
account with no face and a fake name that joined in 2022.

945
01:06:38,636 --> 01:06:42,036
So I got it. OK, cool.

946
01:06:42,036 --> 01:06:43,476
Well, gentlemen, this has been this has been great.

947
01:06:43,476 --> 01:06:45,156
Let's do quick closing thoughts.

948
01:06:45,156 --> 01:06:49,636
Anything you want to leave with like a minute or two harsher, feel free.

949
01:06:51,076 --> 01:06:54,396
Closing thoughts, dude, I think Lightning's like still pretty cool to work on.

950
01:06:54,396 --> 01:06:56,116
I think people are doing some really cool stuff with it.

951
01:06:56,116 --> 01:06:59,276
I think we're at a point right now where it's not really tech based.

952
01:06:59,276 --> 01:07:03,276
Right. I think a lot of the issues with Lightning are really just like bubbling

953
01:07:03,276 --> 01:07:05,756
down support for it, for the folks who actually really need it.

954
01:07:05,836 --> 01:07:06,676
That's what we're trying to do.

955
01:07:06,676 --> 01:07:09,916
We're trying to like bring this like Lightning banking integration,

956
01:07:09,916 --> 01:07:12,756
which, by the way, no one does, not even Lightspark.

957
01:07:12,756 --> 01:07:16,916
OK, like two other folks that they can actually onboard folks

958
01:07:16,916 --> 01:07:18,716
with Lightning into Bitcoin.

959
01:07:18,716 --> 01:07:21,636
That's that's to me like the missing ingredient here, you know,

960
01:07:21,956 --> 01:07:22,836
and we're going to try and solve it.

961
01:07:22,836 --> 01:07:24,796
We also support native Bitcoin, too.

962
01:07:24,796 --> 01:07:27,316
And we've we've already had a significant amount of interest

963
01:07:27,316 --> 01:07:29,716
in our Lightning offering, even though we're pre-operational.

964
01:07:29,716 --> 01:07:31,756
So I'm pretty bullish.

965
01:07:32,756 --> 01:07:34,076
All right, Paul.

966
01:07:34,636 --> 01:07:38,196
I just think that, you know, Lightning, there's way too many moving pieces

967
01:07:38,196 --> 01:07:43,916
constantly need new genius developers to come up with a new solution to this that.

968
01:07:45,276 --> 01:07:48,596
You know, transaction pinning and et cetera, et cetera.

969
01:07:48,596 --> 01:07:50,876
It's just basically not worth it at this point.

970
01:07:50,876 --> 01:07:53,676
There are, you know, better ideas out there,

971
01:07:54,476 --> 01:07:58,476
including but not limited to my own Drivechain idea.

972
01:07:59,276 --> 01:08:02,836
But really, regardless of what happens with that, I think overall,

973
01:08:02,836 --> 01:08:06,516
this was something that was a response to the large block.

974
01:08:07,516 --> 01:08:12,956
Argument in the block size war, and it became a kind of political slogan

975
01:08:13,596 --> 01:08:17,036
and that and it became irrational, and it has built up a giant cult

976
01:08:17,036 --> 01:08:20,836
of people who are willing to defend it, who don't really understand what it is.

977
01:08:21,316 --> 01:08:25,036
And meanwhile, the march of science has been proceeding in the background

978
01:08:25,036 --> 01:08:29,236
and people should pay less attention to Lightning and more

979
01:08:29,596 --> 01:08:33,956
more open minded about other things, which there are very many.

980
01:08:35,076 --> 01:08:37,756
I think that that is what people should do.

981
01:08:37,756 --> 01:08:40,156
So. That's my point of view.

982
01:08:41,356 --> 01:08:45,036
All right, I think we can we can close it there, people in the comments,

983
01:08:45,036 --> 01:08:48,156
if you're part of the cult, comment, if you're not comment,

984
01:08:48,156 --> 01:08:51,676
we won't be able to stop them, you know, the cult in droves.

985
01:08:52,516 --> 01:08:54,116
Yeah, hopefully this was helpful for people.

986
01:08:54,116 --> 01:08:56,556
I definitely thought we stayed on track pretty well.

987
01:08:56,556 --> 01:08:57,596
And this is super interesting.

988
01:08:57,596 --> 01:09:01,876
So thank you, gentlemen, for coming on and debating Lightning.

989
01:09:02,156 --> 01:09:04,236
Yeah, this is fun. I had fun.

990
01:09:04,516 --> 01:09:08,036
So thanks for having us. Yeah, this is a good time. All right.