The topic is Lightning Network, the good, the bad, and the ugly.

And does that mean that each of the people on the panel represent one of those things?

I'll let you guys be the judge.

Grant is going to host it.

And he had the easiest name to remember, but it's not written on here, the last name.

What was it? Cook, Grant Cook.

He's from Litecoin Underground.

He's the host of a weekly Litecoin Twitter or X spaces and the first Litecoin podcast.

He is a longtime Litecoin holder and user with a goal of fostering a fun, positive community for Litecoin.

And Vlad Costea, they're going to introduce themselves.

And Paul Sztorc and Joel Valenzuela are going to all introduce themselves as Grant Cook interviews them all.

So please give them a warm Litecoin welcome.

Keep clapping all the way until they get seated or else it's really awkward on the video.

Keep clapping until they get seated.

Yes.

All right, that is the RAND.

If you guys aren't familiar with me, my name is Grant Cook.

I host Litecoin Underground.

Space is every Wednesday.

And RAND is one of our followers.

So I recognize a lot of people who have come in here.

I just want to thank the Foundation for having us.

We're doing an interesting topic today.

But I'm just going to have these guys go down the line, introduce themselves and kind of what they do.

So Vlad, if you want to start.

Yeah. So this panel, is this working?

I think it should be more here.

Bring it up.

OK, so this panel is called the good, the bad, the ugly about the Lightning Network.

Well, who are you?

I'm the one who's supposed to defend the Lightning Network.

So I guess I'm the good.

Who's the ugly one?

What do you do?

You have a podcast, right?

Yes, I host the Bitcoin Takeover podcast.

I have been doing this for five and a half years.

Paul is actually sponsoring me, but today I'm supposed to fight him.

Yeah, that's true.

I don't know.

It's like a conflict of interest there.

Yeah.

And Vlad just recently created a Litecoin version of his magazine.

If you can, go out there and check it out.

It's beautiful.

Only 50 of them were printed and 13 of them were signed by Charlie.

And you can get them for one Litecoin.

So you better FOMO.

Yeah, yeah.

Very cool.

Very well done.

And Joel Valenzuela, your claim to fame is living on crypto, right?

Yeah.

Among other things.

Yeah.

Hey, everyone.

So my name is Joel Valenzuela, and I've been in crypto around 12 years now.

But for the past eight years, I've been living unbanked off crypto.

Currently, I do biz dev and marketing for Dash.

And I also have my own podcast, as if we needed more in this space,

called Digital Cash Network.

And I'm proud to be an occasional guest of the Litecoin Underground as well,

which is kind of my claim to fame here.

Yeah.

And Paul?

Yes.

I am Paul Sztorc, founder and CEO of LayerTwo Labs and creator of

Is this not working?

Is this going to be good?

Moving on?

Let's see.

You guys hear everybody?

Lift it a bit.

Lift it?

We'll just hold it?

We're good.

Does that have something to do with my hands?

Paul Sztorc, founder and CEO of LayerTwo Labs,

and creator of Drivechain, which is BIP300-301.

And that's a pretty important project that I'm going to be talking about,

I think, at three later today, if we're still on schedule,

if the schedule didn't change.

And I also am a big – now I'm a big critic of the Lightning Network.

I wrote this article, Lightning Network Fundamental Limitations,

like two and a half years ago.

And ever since writing that article,

people have been copying the points and even the format and even the title.

They have panels that are like lightning limitations and stuff.

That's a very common thing.

And so they invited me to come speak on this panel topic.

Yeah, well, so the reason, I mean, and I think it's kind of worth saying,

right, this is the Litecoin Summit, and people would say,

well, the Litecoin Lightning Network isn't really doing anything

because it's not needed yet.

So why do you want to talk about Bitcoin lightning at a Litecoin summit?

And, you know, my thinking about bringing this topic up was that

we get a little preview into the future, that if we get to see

how is lightning performing on Bitcoin today,

does that tell us something about how it will perform on Litecoin in the future?

What are the limitations?

What are some things we should be maybe aware of?

Should we have as much focus on it as Bitcoin has had?

Or should we stray from it, right?

I think this is kind of a weird thing.

I mean, Lightning Network, I think the whole reason that one of the good things,

it's good for Litecoin that the Lightning Network is such a failure

because if Lightning Network was so great,

then we wouldn't have this great BitPay stat that so many people are actually using.

They can't use BTC, so they just turn to something that works, which is Litecoin.

And if the Lightning Network worked, that would almost be terrible, I think, for,

I mean, I'd like to throw that idea out there, perhaps.

Well, let's do the good, the bad, and the ugly,

because I think it's a nice way to present this.

And Vlad, you know, you are what I would say the most entrenched,

at least you used to be more in the Bitcoin maximalist culture

where lightning was the primary scaling solution

and it was the greatest thing in the world.

It was going to make everybody have free self-custody forever.

That didn't come to fruition, I would say.

But what are some of the things you think that has been successful on the Lightning Network to date?

Well, if you join the Nostr echo chamber,

you're going to see that people send each other tips pretty much every day,

very small amounts.

It's custodial.

I think custodial Lightning has some use cases, and it's interesting.

It's against the reasons why I got into Bitcoin in the first place.

There seems to be a subset of users who are just fine with having a custodian

because they believe if it's a Bitcoiner who's custodying the funds as opposed to a business,

they're going to be more honest.

But honestly, there are some reasons to not believe in this.

Also, I remember back in early 2018 when Lightning finally made it to a main chain.

It was actually on Litecoin.

And I ran a node back in the day, and I did some testing.

It was with eCurrencyHudler.

I'm not sure if he's here, but he was one of, if not the greatest educator in the history of Litecoin.

And he helped me set that up, and then I burned my SSD because of that.

So I actually do have some proof of work behind trying Lightning so early on.

And all of that expertise that was generated,

all the feedback loop from having Lightning on Litecoin was taken to Bitcoin.

Because Charlie, if he's here, he's probably outside, but he is an investor in Lightning Labs.

So Lightning Labs, when they had their LND software, they tested that on Litecoin first.

So the first main net transaction for the Lightning network actually happened on Litecoin,

which to me is interesting.

And on the long term, I think if we're going to see the Lightning network growing,

and I think it will, even if we get Drivechains,

maybe those are going to be a good way to onboard people to Lightning.

Who knows?

Lightning is very chain agnostic, so you can have cross-chain situations where you swap.

They're called atomic swaps.

And on top of this L2, you can have these decentralized exchanges that take no fees,

and you can build markets with that.

So Litecoin can actually take the best implementation of Lightning from Bitcoin and perfect it.

Right, right.

Also, Joel, these are the good points.

You're the bad, I guess.

No offense, Paul.

You can see where this is going.

Joel, what do you think?

I could be the ugly if people want.

Because the utopia that was sold was, yeah, these millions of transactions, fee lists,

everyone keeps control of their coins, you get enhanced privacy,

like all the things you love about Bitcoin, but even better.

That's what was kind of sold for seven years.

What has prevented that from coming to fruition?

Yeah, to answer that really quickly, I would say it's structural.

It's never going to happen like that and never could happen like that because of the structure.

But I'm not going to come here as a Lightning critic.

I'm more of like a realist who thinks it has applications in its place.

So also for context, I've heard about Lightning since a long time ago,

and then when it actually kind of started to roll out in the 2021 type era in kind of a usable way,

I decided, you know, I've heard all the arguments,

it's going to work, it's going to do everything,

and then you got the Bitcoin cash mostly side of things saying,

oh, it's a big scam, centralize this and that,

and I'm like, well, I don't actually know, so I'm going to use it.

So I ran on my own Lightning node, right,

and experimented with that and ran that for a few months,

asked for help all over the community,

bought liquidity channels from BitRefill and things like that

and just kind of took a deep dive into it as an actual user

and also used a lot of the more popular, what they call non-custodial Lightning wallets,

like Phoenix, for example, is always my go-to breeze as well.

And I think that the Lightning network largely works under two models,

which it seems like it's been packaged and sold for neither of these two.

The one model is that I think was closer to what was originally envisioned,

might have been, is the more peer-to-peer model

where everyone will run their own node of some kind,

everyone will open and close channels all the time,

that kind of model that would require a lot of on-chain scaling to work.

And that model, in my opinion, would only work if, first of all,

you had just significantly more on-chain capacity.

It would reduce the amount of on-chain transactions by a certain amount,

but not dramatically.

Instead of for every five, six, seven Lightning payments,

you'd have to make an on-chain transaction.

So it'd cut those down, but you'd still be using a ton of on-chain transactions

to open a channel.

Let's say I want to send to Vlad,

or we're transacting back and forth, we have a channel,

but then I need to rebalance it every once in a while,

I'd open a new transaction, or then with Grant or whatever.

That model can work, but again,

it doesn't work with the on-chain scaling limitations of Bitcoin.

The difficult part, too, with the payment channel concept is that

how often do you really have two-way payments going on with somebody you know?

It's either I'm paying my rent,

it's all going in one direction every single month.

It's not like my landlord is sending me rebates for some reason.

So having these kind of cooperative payment channels

doesn't really make a whole lot of sense.

Yeah, it can in some things.

Obviously, like the bar tab type situation.

Let's just say I've been paying Vlad back and forth for whatever,

and then I decide, oh, I'm going to open a tab at the bar,

and every time I get a new drink, I pay for it instantly with Lightning.

And then I don't actually settle on-chain until the end of the night,

and then Vlad's like, oh, I'm going to buy one, too,

but then he just piggybacks off of our channel to do it.

Small cases like that can, again, reduce the amount of on-chain transactions,

but not substitute for them.

That's the big thing, is it's sort of been pitched as a substitute.

If you can substitute them, that's when the other model comes in,

which is what they call the hub-and-spoke type model,

which we've started to see happen a lot.

A lot of Lightning adoption has happened through institutions,

like, for example, Coinbase, Kraken, all these big things.

One of the more popular wallets, the Async, the Phoenix wallet,

connects to this one mega-node that routes everyone's transactions through.

And unfortunately, I can't really use Lightning anymore

because after I shut down my node, I was only using the Phoenix wallet,

and then they don't service U.S. customers anymore

because of money transmission issues.

And so now it kind of got shut out of that.

But the point is, those big kind of hub-and-spoke models

where everyone has a Lightning service provider,

like a bank account, kind of, but with semi-self-custody, right,

where you have funds in a channel that you can sort of force close

and you can at least steal it.

Today you do, but we don't know if that lasts.

Yeah, so that's the other model that, again, I think can work.

I think it requires a bunch of trust tradeoffs.

I don't like that world.

But that's another model that Lightning could be optimized to use for

because then the only on-chain transactions are just people,

like Coinbase and Kraken, rebalancing their channel

if they have some issues with, like, liquidity on one side.

I don't think it will work for either of those,

and I think that it's like the puzzle really, though.

By the way, before we launch into this,

I'm not saying it's the most ideal situation for this.

The puzzle is, given how broken it really is,

why does everyone still talk about it?

And I just think that the actual answer to that is just

that people have invested so much of their ego

or even VC money, et cetera,

so much of the brand of so many different companies.

A lot of people have, like, some people have,

not to name names or whatever, but certain companies,

they have, like, a whole Bitcoin section

and they have, like, a whole Litecoin thing on the top of their web page.

So people, it really is like a bizarre kind of psychosis

where even people have started to use the word lightning

to describe things that are completely

and totally unlike what, you know,

the inventors had in mind.

There's something that doesn't use HTLCs,

a custodial lightning.

Custodial lightning being the perfect example

of something that is,

that doesn't even use Bitcoin at all,

is just an account on a website.

It's just a number.

It's like Bitcoin in name only.

There's no, yeah, there's no HTLCs,

there's no Bitcoin,

there's no promise of getting your money back at all,

but people will call that custodial lightning

with a straight face.

And so then it just broadens the category

of what is considered the lightning network further

and then you have all these weird other problems,

like Wallet or Satoshi or whatever getting pulled

because it's not actually crypto,

it's not actually Bitcoin at all.

They just pull the, they just, people complain

and they say this person is running an unlicensed bank

or whatever, which they are,

and then they pull.

So you're going to be,

obviously I'm going to let Paul be the ugly solution.

Yeah.

My question to you,

so there's trade-offs, there's compromises,

I think if we're looking at the original intent

of Bitcoin and Litecoin to be this self-custody money,

you're obviously sacrificing a lot of those things

to even interact with lightning at all,

at any scale.

Is it salvageable?

Is there anything that Litecoin,

using this as a reference and saying,

well, maybe it's doable if,

the opportunity for Litecoin is,

do not fall into the Bitcoin cult and start,

because the Bitcoin cult is very,

very harmful to Bitcoin in many ways.

So the opportunity would be to say,

this is Litecoin,

we are not going to drink the Kool-Aid.

Right.

I'm going to say,

I'm going to mix up lightning and Litecoin,

probably a couple of times if I just say this

without thinking about it very carefully,

but you want to not drink the lightning Kool-Aid

and say, we will not make that mistake.

I think it has been a huge distraction for BTC

and it has also, as they say,

taken the air,

sucked the air out of the room

where people are focusing on that.

The culture rewards moving in that direction.

Everyone is,

you can only climb the totem pole

by working on lightning

or you say that you have a lightning project

and you get funding.

This has altered the whole trajectory

of everyone's focus

and I think it ultimately will just not pay off.

I actually think almost all the L2s

that people are working on

will eventually have a problem

where the fees that they collect

are not passed.

Everyone has basically the same model,

which is that the fees,

you collect fees from usage

and then that rewards the people

to not rug pull the system.

Even Bitcoin kind of works that way

because the transaction fees

are collected each block

and then rugging the system

would be rewriting the blocks

and rewriting the blocks

takes a bit of work

and the cost of writing the blocks

is exactly what the transaction fees is

in the future

when there is no block subsidy.

So everyone has that model in mind

but some of the L2s,

most of them,

including the lightning network,

they do not pass the fees

down to the L1 miners

and the reason why that is significant

is because the L1 miners

can destroy any L2 they want at any point

so if they have a choice

between the L1 miners

collecting all these transaction fee revenues

from merge mining

or something like that

or sitting by and earning nothing

and watching someone else,

the lightning LSP,

lightning service provider

or the arc super node or whatever,

watching those people

earn hundreds of billions of dollars a year

in transaction fees

as there is some kind of like hyper

like coinization or hyper or whatever,

the L2 takes over,

the arc super node takes over the world

and does everyone's payment

they will just say,

well, we will just block that,

we will block people

from sending into or out of that

or using that

or doing the,

even the BitVM challenge thing,

the miners could censor that,

anything based on ZK proofs,

the miner could censor the ZK proof.

So...

And that is the important thing

that I kind of wanted to drive at

is that lightning is here to stay, right?

Unless for some reason

SegWit goes away,

if Coinbase wants to launch

litecoin lightning,

a lot of these businesses

may add litecoin lightning capabilities

but more than anything,

where do we,

is this a place

where our energy should be directed?

And again, I'm not a developer

and so I think about

if I am somebody

who wants to develop on litecoin,

what should be the things

that are being focused on

that could bring some scalability

and I know Paul's got an answer

to a whole presentation

about it later today

but that maybe,

those are the things to think about,

don't spend your energy

on something that

maybe we're seeing

is not able to work

in the way that we initially

were told it was going to work.

Well, just give it 18 months.

Yeah, it's everything in 18 months.

Everything's two weeks, right?

Yeah, see that's the joke

is that lightning,

they always said

it's 18 months away or whatever.

They said that over and over again.

They said it was proof of stake.

Also, Ethereum said that.

But,

Ethereum actually,

to their credit,

they finally got the,

they did proof of stake

and you know,

people say,

you know,

lightning exists now,

lightning works

but lightning has,

it has only ever had

whatever,

4,000 something bitcoin

on the whole thing

which is,

I'm not sure exactly,

I should probably run the numbers

to make absolutely certain

but like,

look at all the money raised

by lightning companies,

it's probably less than that.

So,

this is just like,

4,000,

if there's 19.5 million coins,

this is like

a hundredth of a percent.

I've got stats somewhere,

something like 5,000 bitcoin

around the world.

So,

I don't know.

I don't know.

I'm not sure.

Something like 5,000 bitcoin

are on the lightning network

but you can't know

how many transactions.

I think the most evident thing

to me

is somebody like BitPay

offers lightning

and nobody uses it.

Exactly.

BitRefill offers lightning

and nobody uses it

which is interesting.

I use it.

Well,

but it's interesting to me

why that isn't, right?

Like,

is it the convenience factor?

Is it just because

it's just more hassle

than it's worth?

Yeah.

Because you would think

that people would

want free transactions

but they don't,

they don't seem to want.

Yeah.

So,

I bought a ticket

with lightning

and the fee

that I paid to Phoenix

was 2.5 dollars

and the on-chain fee

right now

for bitcoin

is 50 cents,

so.

That doesn't make any sense.

That doesn't make any sense.

So,

you should use

bitcoin.

Yeah,

and I don't want to say

that it can't work

or that it

will never be good

for one or two other things

and in fact,

I came up with something

that I called

a version of fraud proofs

that requires,

it basically requires

like the lightning network

in order to work.

I don't know if anyone

will ever care about that

but,

so,

I'm not saying

that lightning network

is like a completely

like evil thing

or whatever

but what I am saying

is there's this giant

like illusion field

over it

where there's,

everyone is hyping it

because they think

lightning equals bitcoin

equals number go up

and they,

and so,

very few of these people,

even software engineers

working at lightning companies,

many of these people

have come up to me,

the lightning critic guy,

the ugly or whatever,

they come up to me

as a person

and they say,

not until I read your article

that I realized

that I didn't know

how the lightning network worked

or they say stuff like that

and I have another post,

the LN Black Pill

where I have collected quotes

from people,

the people who are working

on the lightning network

including the inventor,

Dash Draja,

Rene Picard,

the author of

Mastering Lightning,

the book.

Well,

I think,

you know,

we got to wrap up

here quickly

but I think,

you know,

what's nice about being the host

is I get to go last

and no one can rebut

my opinions here

so,

no,

I think it,

you know,

just whenever you find

in crypto in general,

if someone tries to act

like they're going to get

everything that they,

that the main chain offers

and you're going to just get

the exact same experience

through some other method,

I think it's just,

you should,

your ears should perk up

like that doesn't make any sense.

How did Satoshi take

years to come up

with this solution

and someone's going to

just abstract it away

in a nice corporate package

you know,

that doesn't make

a whole lot of sense.

So,

self-custody,

use lightning at your,

with caution

and,

yeah,

I don't know if you guys

want to add any last things,

I think we're out of time

but,

you have one last thing

you want to add?

Yeah,

I would add that,

you know,

global payments system,

as a global payment system,

I would not recommend

the lightning network really.

What it does do

is because

it's super localized

and it's like

the transaction

between you

and whoever you're

doing it with,

the rest of the network

doesn't know about,

it doesn't really hit

these scaling limitations

that global networks do

or the same constraints.

So,

if you have anything

where you have

an insane amount

of volume

that only a few people

need to know about

and be involved in,

it could work for that

and so,

everyone involved

with the lightning network,

I would say just

abandon the whole

like,

I'm going to buy my coffee

everywhere in the world

with part,

I would recommend

focus on like maybe

an internal social network.

Again,

like that's why

something like Nostr

is where

you see a lot of this.

Focus on stuff

where you need

a ton of transactions

that the whole world

does not need to know about.

Do we have time

for questions?

Can I do questions?

Does anybody have one

or are we good?

Also,

I wrote an article

in my magazine

which you'll find outside

about lightning

and litecoin,

so you can read that

if you want.

It's a good intro.

It explains lightning

as islands

that need to build bridges

between each other.

If you want to send

cars to another island,

you need to build a bridge.

But the other island

cannot use the same bridge

to send cars to you.

So,

that's how lightning works.

That's good,

that's good.

Okay,

so no questions?

Oh,

it says zero up here,

so I thought we were done.

Okay.

All right,

there's no questions then?

We're good?

I think we're good.

You can come up here,

Marty.

Yeah,

go ahead.

It's more an observation.

I feel like the discussions

around lightning

perhaps it's better

to frame them around

are we developing

and providing

lightning network

for business

to business solutions?

Are we developing

and providing

lightning network

for business

to consumer choices

for consumer to consumer?

And it may be better

for people developing

on lightning

to have a clearly defined

mission statement

in terms of

which of those areas,

because it's clear

to me listening to this

that perhaps

it's not a great solution.

It could be a

not necessarily

a great business

to consumer solution

but a thing

that the world

needs.

Yeah.

Yeah,

the gentleman's question was like

can it be like

business to business

instead of like

involving the end user?

And this is part of

a big trend

of people

correctly realizing

that the lightning network

is not this cure-all

that everyone thought it would be

and so now everyone's

walking everything back

and trying to find some box

where they can fit this.

That's what I'm saying

that the gentleman

was saying.

But I think definitely

it's not the

consumer experience

you know for payments

like it cannot

the payment cannot fail.

Like if you use

if you had Visa

and MasterCard

and one of them failed

like one out of every hundred times

and the other one

worked every time

that would be

the kiss of death

for whichever one

failed because it's just

too humiliating to be

in the restaurant

or waiting in line

and it doesn't fail

and you're like

okay try it again

and the lightning network

is not gonna hit

that kind of reliability

anytime soon

and Vlad's metaphor

of islands

where you have to build the bridge

and you can't ship

anything back and forth

is very good

because the onboarding problem

is very severe.

In order to use

the lightning network

you need to first

use an L1 transaction

between the two parties.

So every single person

who wants to join

the lightning network

has to do something

on L1.

So you're building

an awful lot of bridges

for something

where the better solution

would be to just sail around

on the water

and not use lumber

or whatever

to build these bridges.

Or use a plane.

Or use a plane.

Yeah.

Yeah.

Right.

All right.

Well I appreciate it.

Marty's coming up.

Thank you guys.

All right.

Good job guys.

Good job.

I'd like to officially say

that I thought I was catching on

until you guys got up here

and now I've lost everything.

I don't understand

any of it anymore.

Short it.

Short it?

Is that what you said?

Yeah.

Good job.

Good job.

Also just a quick word

to the tech guys

who do understand all this.

You don't have to hold

the little microphone.

You can just attach it

to your shirt there

and it'll be fine.

You don't have to hold

the little microphone

to attach it to your shirt there

and then the audio people

who are professionals

had set you up with that.

That's how audio physics works.

It works for like four inches.

It's not on the lightning network

apparently.

I don't even know

what just happened.

I don't know what happened there.

I don't even understand.

The Litecoin and Bitcoin

is on another network

that was hyped for a while online.

Is that what was happening?

And one person hates it

and the other person

hates it.

I don't understand

what's going on.

I don't understand

what's going on.

I don't understand

what's going on.

I don't understand

what's going on.

I don't understand

what's going on.

And one person hates it

and other people

were not really

defending it.

I felt like that

was very uncomfortable.

No one else thought

that was uncomfortable?

No, I feel like

that was the purpose though.

I feel like he wrote the blog

to be uncomfortable

about the lightning network.

At least that was the message

I was getting.

And so bravo.

That was perfect.

And I forgot that

I'm not stalling anymore.

I came up here stalling

but we had found

our next target.

And so bravo.

That was perfect.

And I forgot that

I'm not stalling anymore.

I came up here stalling