Lightningin the 4th Epoch with Elizabeth Stark

[00:00:00] Colin Harper: Welcometo the next bit of the halving live stream. I'm Colin Harper, a formerjournalist of Bitcoin magazine, turned freelance journalist, and I'm delightedto be joined with the one and only Elizabeth Stark of lightning labs. How areyou doing,

Elizabeth?

Elizabeth Stark: I'mgood. I mean, it's, it's been quite a day already, you know, super short blockas the last one before the halving, that was fun.

Colin Harper: Yeah,that was nuts. I was like looking at how many blocks we had left as we werejumping on Hangouts to do this, and. I would like refresh the page afterwardsand saw that had already happened. It was nuts.

Elizabeth Stark: Yeahwe had our Lightning labs team, group video chat, and we were tracking it. andin fact we were talking about the probability of super short blocks.

Connor on our team, our head of cryptographic engineering,sent out some research on it. Of course.

Colin Harper: Yeah,obviously. Absolutely of course. I mean, you expect nothing less. Right?

What

was the final block? Do you know how quick it was?

Elizabeth Stark: Itwas short. It was like tens of seconds, I believe, but...

Colin Harper: that'scrazy.

well, [00:01:00] yeah, welcome to the fourth epoch,everybody, "epoch" I should say. and part of what we're going to betalking about today, we want to touch on more than just lightning, a littlebitcoin, cause  you know, halving justhappened, we're feeling good about it.

but one thing that I want to talk about with you today,Elizabeth is in this fourth epoch, what is it going to take for something likelightning to get to that mainstream adoption where we start seeing morecircular economies? I know that's a huge question. but I guess my openingquestion for you is, what do you believe are some of the primary challenges forlightning today that are standing in front of that

goal?

Elizabeth Stark: Yeah.well one thing that's really cool is, in reflecting on, you know, the pasthalving, the 210,000 blocks, that was really when, like, the first lightningdevelopment started. It was around the last halving like the early development,you know, before alpha, certainly before beta, before mainnet and all of that.

And, you know, so much has changed since then. I mean, it'sbeen wild to see things evolve, [00:02:00] since the last, halving. protocoldevelopment does just take time and there aren't, you know, so many protocoldevs, also with the Bitcoin protocol. But I actually see, I think this halvingis really interestingly timed.

You know, we all knew the halving, what happened, we didn'tknow exactly when, but we didn't know about a pandemic and kind of globaleconomic chaos and all of that. And to me, this opens up a massive opportunity.Right? you know, a lot of people are saying right now that, you know, we'reseeing a decade worth of change in a month or something, and then I'm thinking,well, actually, if it's possible in a month, that's actually a month's worth ofchange.

I think right now we're well poised for a moment, for bothbitcoin and lightning, but you know, at the end of the day, challenges arethere, because Bitcoin itself -- like right now, we're hearing of a lot ofpeople getting interested in Bitcoin, for example, like the boomer population.

Like there's a whole Bitcoin boomer, movement that I thinkis emerging, which is [00:03:00] really interesting. And I'm excited. There'salso a lightning boomer side of things as well. and I actually see usability --I mean, this is something I've talked about a lot in the past, -- but you know

making the technology easier to use, enabling people to holdtheir own coins, you know, not your keys, not your coins. but also building outmore resilient infrastructure. Even in terms of the centralized institutions,you know, things are going down as we saw. you know, it's still somewhatdifficult to use.

We want things to be more resilient. So, I think in terms oflightning, you know, we knew for beta, it was command line only right? And thatwas intentional, by the way. Then we saw the evolution of , well, "it's anend user applications and UIs and use cases," and I'm really excited abouta lot of those that have emerged, but to me, I think the next four years willbe about making this technology easier to use.

And you know, there are design, related elements of that,other technical elements, but then liquidity, and for folks that have heard mespeak in the past [00:04:00] around lightning, they know that liquidity issomething I'm really passionate about. with lightning, you've got amazingspeed, Amazing scalability,

very low fees, but you do have this liquidity aspect to lightning.You need inbound capacity in order to receive funds, and of course you needfunds outbound in channel in order to send. so to me, I see one of thechallenges as ensuring that we have the proper liquidity. As one of our devs,Joost at lightning labs likes to say, the goal is to get the basic payment oryou know, basic transaction perfectly executed, right?

So the end user shouldn't have to think about it. So forexample, today in the credit card system, you swipe your card and it works. Butthere are like 20 or more intermediaries that are involved that are behind thescenes and, and actually, one of our investors sent this graph, which is reallyinteresting because I didn't even know all the different parties that wereinvolved in that singular credit card transaction.

So we want to remove a wide variety of these intermediariesand make it work. But you know, it, it's going to take time to get there. Soback in, October at the lightning conference in Berlin, a lot of people wereactually talking about those [00:05:00] challenges. One thing that I love aboutour community, is they've been very honest.

They're not going to say like, everything will just workmagically tomorrow. I like to think of it as honest optimism and so. A lot ofpeople were talking about the challenges, but also the solutions. So to me, Ithink getting to basic payment perfectly executed is where we want to be say inthe next four years.

And in many ways, you can think of even like something likeGoogle, right? Where, okay, you type in a term, you know, it's centralized andyou have a search result. But actually, all that goes into it, it's supercomplex and I think the whole idea is to abstract away kind of everythingthat's under the hood and just make it work.

So that's where I want to get to.

Colin Harper: Yeah,absolutely. And I want to go back to this problem of liquidity,outbound/inbound liquidity, some of the largest problems for routing,obviously. going back to this idea of intermediaries, how big of a role do youthink companies like lightning service providers are going to play a role inthis,

you know, in this, whatever we want to call it, web 3.0, newepoch of online commerce. [00:06:00] cause we've seen that thrown around a lot,I remember in the lightning conference, that was also a big topic ofconversation is, you know, custodial versus non-custodial, what kind ofservices are going to be available for what kind of level of users?

So what role do you see lightning service providers playingin the future?

Elizabeth Stark: Idon't know what web 3.0 means.

I don't know. So, yeah, I know that there -- shout outactually to Ryan Gentry who wrote a cool blog post around new emerging usecases around lightning such as chat and, certain types of like, sending dataover lightning, and people love to discuss and debate that. And I know thereare other communities that talk about that term, but like, honestly, I don'tknow what that means.

So, in terms of a lightning service provider, myunderstanding is the kind of name for that is a company, that is kind ofmanaging a degree of liquidity and running services, but I actually see that... so, Breez, the wallet company, noncustodial wallet, shout out to them, Ithink have used that term pretty extensively.

but I actually also see, there's kind of a broader set of[00:07:00] things, which is, the lightning kind of capital provider. that's nota term of art, I just made that up. so today, you know, we have interest ratesthat are zero and in many places, negative or going negative, right? actually Ijust saw an article around Maker Dao and how there's a discussion in thatcommunity of say, having to go to negative interest rates, or at least like,you know, very, very low or zero

Colin Harper: Noshit,

really?

Elizabeth Stark: Yeah.Yeah, I just saw that. And, so I think the whole idea is, well, you can providecapital to the network, you can deploy that capital and ideally earn a return.So Alex Bosworth, one of our devs,[inaudible] a bunch of fees, like a lot,recently, I think it was in, the month of, I think it was April. March orApril.

And, of course there's going to be this interplay between onchain and off chain fees. And, you know, lightning fees should be kept, ideallyquite low, but lighting fees or percentage based, whereas on chain fees, as I'msure folks know, are based on space. So there's also an interesting arbitragesituation there. So I actually think what we'll see is new [00:08:00]opportunities for both LSPs,

along the lines of folks that are kind of managing liquidityand opening channels, and then capital providers to earn a return on theirfunds, on the network. And the goal is, by the way, "Wumbo 2020." forthose that are not familiar, that is our, campaign slogan. And, so Wumbo is alarge  channel size on lightning.

some of the implementations have enabled that in part on ourLND implementation for lighting labs -- we have not yet, coming soon, fingerscrossed -- but that is enabling folks to open larger channels. And the goal is,you know, to have stability, security, backups, all of that, that enables youto do that, but it's often, so you're not going to unintentionally open thischannel.

You need to know what you're doing, and it opens the doorfor larger transactions, exchanges, we saw Bitfinex, back in December as thefirst major exchange, a bunch of other exchanges, including  BitMex, are running lightning nodes publicly.I know Kraken has Pierre Rochard over there. I was just speaking in VRyesterday

with them, and they're very excited about this. [00:09:00]so to me, wumbo here is going to be significant because you'll see moretransactions and the ability to send larger amounts. by the way, do you knowwhere Wumbo comes from?

Colin Harper: Well,from SpongeBob.

I like

Elizabeth Stark: missedthe SpongeBob boat. I don't know, but

 I Wumbo, you Wumbo, I'mlearning SpongeBob as we go.

so to me, I think that's going to be really key here. And,so another cool thing is, MPP, multipath payments, that actually, recentlyshipped in the latest L ND release 0.10.

we put a blog post out about that last week and you caneffectively chop up payments. So getting to the point around liquidity, that'sa really exciting development because, okay, now if you want to send a thousanddollars, you don't need capacity of a thousand dollars in one singular channel.You can chop that up into smaller parts.

to me, at the end of the day, the way that I view lightningis it's this new, kind of capital market structure that's emerging. it's goingto be used for payments for [00:10:00] transactions, but I also, we're seeingan emerging kind of class of new types of lightning assets or financialinstruments.

For example, there's been quite a bit of discussion on the lightningdev mailing list around discreet log contracts. originally created by Tadgeover at MIT, one of the paper, co-authors. people are looking at, newconstructions around that. So to me, I think we're really setting the stage andbuilding a new financial, Layer 2 infrastructure and, you know, LSPs will be apart of that.

I think people building out these new, kind of financialproducts are going to play a big role as well.

S o, people are now debating what you call lightningfinance. It's Definitely not DeFi, is it LiFi?

I,

yeah, so somebody yesterday came up with that and then someother people hated it because it's Bitcoin and you know, some people,

Colin Harper: FlashFi?I don't know.

Elizabeth Stark: Ilike LiFi. But you know let the viewers decide and maybe give feedback.

Colin Harper: Imean, Bitcoin's a very, I don't know, creative community. [00:11:00] We'll havea meme for it here in a week, probably already as we get off this live stream.

Elizabeth Stark: Solet's come up with a name and create the meme. But at the end of the day, Ithink the goal here is, you know, this is all backed by, you know, the Bitcoinbase layer, the security of the Bitcoin chain, like on the day of, you know,the halving, and that's significant and you're not going to get that securityand you're not going to get those guarantees elsewhere.

And I think that's part of what's so key,

Colin Harper: noteven on DeFi platforms?

Absolutely not. well, kind of building on top of that, is itan exaggeration to say that the early days of something like the lightningnetwork reminds people of the early days of Bitcoin? Cause that was thesentiment flying around at Lightning Con.

Elizabeth Stark: Yeah.So in Berlin, we expected 400 people back in October, back when we used to gettogether, see people, you know, have fun, spend funds on lightning and kind ofget beers with the automated beer machine, the cocktail bot, the lightning[00:12:00] coffee, which was craft coffee, by the way.

but no, so, one thing that's been really cool is there are awhole host of people that actually got interested in Bitcoin through lightning.And I actually didn't realize that until I started talking to folks. And a lotof them were kind of interested in kind of web development or usability or appdevelopment and things that lightning made possible.

So I love the fact that we're actually bringing in kind of anew crop of, Bitcoin folks, via lightning. So, you know, the more, thebetter.  I'm really excited about ourcommunity. I think, you know, there's so much creativity within what peoplehave built. you know, shout out to, Desiree [Dickerson]  and the Mint Gox folks there are now, gamingtournaments that are going on with lightning.

The lightning gaming community is growing substantially.Sphinx.Chat for those that don't know. and there are a variety of theselightning based chat apps where  you'renot really going to spam people cause you have to send sats or if you're goingto spam them, you'll have to pay.

Colin Harper: Losingmoney.

But speaking of those gaming and messaging applications.what are some other [00:13:00] potential, because, you know, going back to, youknow, the facetious web 3.0 thing, you start seeing people throw like lightningaround for auxiliary use cases, right? gaming, is one of them for payouts ingaming, you know, another one that kind of gets thrown around is potentiallyfor, I mean, this is a payments solution, but still are kind of like micropayments for content curation on the web.

what are some like use cases that you see for lightning?Maybe some of the obvious ones, that other people maybe don't point out andsome of the non-obvious ones? I don't know. What are you excited to see this beapplied to in the next decade?

Elizabeth Stark: Soone of the cool things about working on this tech is like sometimes you justwake up and you're like, "Whoa, I never thought that would happen."

And you're like, "now you can feed chickens withlightning," you know, although credit to Elaine Ou, who was the OG birdfeeder with lightning. Cause she created a cool app around, on testnetoriginally. And you know, there've been all these, like Satoshi's place,Lightning koala [00:14:00] made that. And so I actually think, I consider andtry to predict these things, but like, we honestly just don't know.

And that's what's so interesting. You're like, Oh wait,somebody made a novel where you can like, pay a satoshi per page, or like payper word or... so three of the areas that I'm interested in right now, thefirst is the, as mentioned the gaming world. There are a lot of really coolcompanies out there, doing, games with lightning, ZBD, Donner lab, Satoshi'sgames and a bunch of others.

And there's the MintGox crowd. so, and they, you know, whilefolks are stuck at home, like perfect time to go online and, and play videogames with lightning, I think the lightning chat and like data on lightningaspect is really interesting. Now, people, there are debates in the community,you know, can this scale, does this make sense?

But we're opening up this new use case and, yeah, check outthat post by Ryan Gentry, to learn more about what's going on in that world. Soto me this is an emerging use case. and you know, some people think, okay, chatis spam. Some [00:15:00] people think it's not scalable, which is funny,because of lightning.

But, I like the idea of attaching payment to messaging, ithink that's really interesting. And, you know, at the end of the day, if youthink about, you know, hash cash, right? Like, if you're trying to prevent spamon email, it's cool how like things come full circle with something.

Colin Harper: That'strue.

Elizabeth Stark: Andthen, you know, lighting finance, LiFi, whatever you want to call it, I'mreally interested in.

So there are all these fiat to lightning, services,river.com, zap, breez, Escher, a variety of other folks that have done that. Sothat's kind of on the more centralized side because they're using, you know,actual Fiat. Folks like LNmarkets. they're doing a BitMex competitor usinglightning.

So it's more transient, you kind of send in your funds andyou can get them back quickly. and then you have these new possible emerginguse cases around, other assets on lightning. So I think that's been reallyinteresting to me to see how that emerges. Also, things move really [00:16:00]quickly. It's like, I don't know, in one week there's like a new service orapplication that somebody's built, which is always

been fun.

Colin Harper: Yeah,absolutely. And you're right to say that things move quickly. I remember one ofthe first articles I wrote for bitcoin magazine was kind of like  when lapps were like a big thing, like whenyou had Y'alls coming out and all these other new things when lightning,network, just finally it graduated out of beta or into beta and people werefinally starting to use it.

Elizabeth Stark: Ohyeah and one quick point. I know you wrote a great piece, Colin, on the releaseof LSATs. For those that don't know.

Colin Harper: I'mglad you brought this up. I wanted to hit on this

Elizabeth Stark: LightningService Authentication Tokens, not to be confused with an ICO token different,like a web token. and it enables you to pay and authenticate without having ausername and password, which I think is really cool, right?

Because especially in this day and age with like theconstant data breaches and privacy breaches, if you want to pay for somethingdigitally, you know, everything from an API call to say a digital [00:17:00]good to streaming audio and video, you could pay for articles. you can do sowith LSAT and you can authenticate.

say, you know, with AWS, a service like that you have tosign up, username, password, credit card, now you can actually just pay per usage.So I know the community was really excited about that. And we recentlyreleased, a draft version of the protocol and some tools around that. So I knowpeople are building and like see who knows what they'll build.

So, let's see. I'm excited.

Colin Harper: I'mexcited too, because any sort of solution that allows us to authenticate ouridentity online without having to go through Google, Facebook or Amazon is bigwin for everyone involved,

Elizabeth Stark: Andnot only that, like every single time... so, okay. Right now, being at home,you know, a lot of folks are doing online shopping.

Granted, okay, if, if you're going to deliver an item, youstill need to, you know, provide that information. But if it's streaming orsomething, and now it's like you need to provide, your [00:18:00] email, likeall sorts of personal info. Okay. You can use a throwaway or something, but thenumber of entities that you have to provide your information to is insane.

And I hate it, especially being a paranoid, you know, Bitcoiner,

Colin Harper: Yeah,exactly like leaking information left and right.

Well, Elizabeth, I think we're budding up against our time.I think we've got maybe five minutes left, maybe a little bit less. what elsewould you like to touch on? what is something that no one's talking about thatyou think they should be or not?

Elizabeth Stark: Well,I'm really excited right now about the prospects for Bitcoin. I mean, I knowpeople are talking about that. But I really, I do think the halving came at anopportune time, but to me at the end of the day, if, if this isn't what Bitcoinwas made for, then what was it made for? Right? So we have, you know, like themassive money printing, so one thing I think fewer people are talking about, soa lot of folks are talking about, you know, the U.S. Money printer go brrrrrr.

Of course, that meme has gone mainstream, but I'm [00:19:00]really excited about the international use cases that are going to come out ofthis as well. I think right now we're in a macroeconomic environment that'sgoing to make it much harder for smaller cap, Fiat currencies. and even beforethe crisis, for example, I was in Argentina, a couple of months back, I misstraveling great community over there, and they had, seen inflation 15% in one week.

Right. so just a little bit over a week ago, I was on avideo chat with a group from Venezuela. and they had folks from all over LatinAmerica in their Bitcoin community. Right. And by the way, I love talking tothe Latin American communities. We were also in Brazil for Lightning Labs. Itwas really great to meet folks from the Bitcoin community and Venezuelan, etcetera.

But to me, I think what folks aren't thinking about as much,people were saying, okay, money printer, go brr, you have these major hedgefund investors like. Paul Tudor Jones, et cetera, who by the way, like I didn'tknow who he was until like a month ago or less. So, so [00:20:00] that's a bigdeal. You have this kind of Bitcoin boomer generation coming in.

But to me what I'm really interested in is what are theopportunities that we can unlock and what are the use cases that we can unlockfor a lot of places around the world that are really going to need this now,especially in light of the global macro economic climate. And you know, whatrole can lightning play in that.

Peter McCormack I think it was back in December afterLabitconf was in El Salvador and there was a community there of folks who, Uselike Bitcoin, they were kind of given and paid with Bitcoin, and there werestreet vendors who accepted lightning and you know, they were using lightningbecause of the instant transactions.  ButI think fewer people are thinking about right now, you know, it's moneyprinter, go brrrr. You have kind of the finance world getting into this, whichby the way, like, welcome to them because look, Bitcoin is equal opportunity.Like if they want to come in and buy Bitcoin and be a part, like, sure.

Sounds good. You know, we want to maintain things likeprivacy, fungibility, all of that. But I think it's really interesting[00:21:00] that people are seeing, you know, why Bitcoin on a macro scalematters, right? The, the 21 million cap, if you read that letter by the PTJ. Ithink it was quite eloquent and it

Colin Harper: Henailed it. It Sounds like he'd been like reading Bitcoin talk and Twitter postsand like the Bitcoin standard for years, you know,

Elizabeth Stark: Iknow.

And you're like, okay, cool. This is finally like permeatingthe mainstream. But, I do think we will see Bitcoin's impact internationally,in a way, in the next couple of years. you know, that we previously had notseen, I believe. And part of that is really. proving usability, but who knowswhat's going to happen with fiat currencies with dollars, will it be inflationand deflation, you know, at the same time.

will there be asset inflation? We see like the stock marketmooning, while, you know, 20 plus percent of the U S is probably unemployedright now. So to me, what I want to think more about, and actually credits orFred Ehrsam. He had a really good [00:22:00] tweet that I think encapsulatedthis quite well, where he said, you know, everyone's talking about moneyprinter Go brr, but people aren't thinking as much about the, the smallercurrencies and what's happening on the global macro level.

So to me, that's what I want to learn more about and thinkmore about. So yeah, Bitcoin's global, our community's global and anybody canbuild on this stuff.

Colin Harper: Hellyeah, I think that's probably a pretty good place to cap it.  Elizabeth, thanks so much for taking thetime.

Elizabeth Stark: we'vecome a long way. there's so much more in store. Bitcoin's never going to beboring, or at least not for a while to come. And that's part of why we're here.

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