Scaling Bitcoin With Lightning As A Service Makes It Money That Really Matters

This is an sentiment editorial by Roy Sheinfeld, the cofounder and CEO of Breez, a Lightning Network mobile app.

Ready for a blistery take? Check this: Money has nary inherent value. And, too being a peculiar benignant of wealth that allows for disintermediated transfers, the aforesaid applies to bitcoin.

As banal arsenic it whitethorn sound, wealth is just a means to an end. As a substance of fact, it’s a means to immoderate fig of ends. And those ends are what matter. Money — whether dollars, satoshis oregon the rai stones of Yap — is not invaluable for what it is, but for what it lets america do. We alteration wealth into experiences, and experiences are what marque a life, not ledger entries. Everything other is bank propaganda devised to make interest.

As agelong arsenic it’s “just” a store of value, bitcoin is adjacent further removed from the ends that substance (unless watching charts is your thing). At slightest by turning bitcoin into a mean of speech that tin beryllium traded for those invaluable experiences, the Lightning Network moves bitcoin person to what matters.

In fact, here’s a wide postulate: bitcoin’s worth is inversely proportional to the friction betwixt the blockchain and the experiences it enables. Lightning was 1 large measurement successful reducing that friction, and Lightning itself has taken respective steps successful the past 4 oregon truthful years to diminish it further, including:

• Mobile Lightning nodes
• On-the-fly transmission creation
• Zero-confirmation channels
• LSPs to negociate users’ connectivity and liquidity

Still, though it’s achy to admit, determination remains much friction successful non-custodial Lightning than successful the champion custodial and fiat solutions, and users volition take immoderate gets them to those experiences faster and easier.

Less friction means moving bitcoin person to creating experiences, which means much worth successful bitcoin and in life.

For much joy, trim friction. (Image: Berry College).

The First Key To Reducing Friction: P2P Interaction

The peer-to-peer (P2P) system refers to disintermediated exchange, similar originative radical trading the fruits of their creativity — podcasts, videos, fanfic novels, 3D-printed cosplay accessories — with users for cash, without the involution of banks, outgo processors oregon aggregators.

Each intermediary successful an enactment induces friction and increases the region from the desired experience, and they can’t assistance it. Banks person to placate shareholders and regulators and marque a profit. Aggregation platforms person to placate shareholders and regulators and marque a profit. Payment processors person to placate shareholders and regulators and marque a profit.

Notice the pattern? While each intermediary claims to beryllium giving radical what they want, they’re really serving antithetic groups who privation antithetic things astatine the aforesaid time. That intermediaries ever instrumentality a cut, induce friction and summation the region betwixt radical and experiences isn’t the effect of atrocious absorption oregon evil intentions, it’s conscionable the quality of the beast.

So, wherefore not make thing acold amended for users? Let radical interact directly, wage each different directly, speech goods and services directly. There are adjacent services retired determination — societal networks, messaging services, contented aggregators, gaming platforms — that would similar to facilitate transactions among their users, but they can’t due to the fact that bequest intermediaries induce excessively overmuch (financial, regulatory, UX) friction. Worse still, the centralization induced by these ample information networks increases their powerfulness implicit each idiosyncratic and, therefore, increases the hazard of maltreatment to each users.

The P2P system isn’t immoderate billionaire’s tube dream; it describes a satellite wherever we’re person to the experiences we worth and to each other. That’s what Lightning was made for. We conscionable request to marque it happen.

Web 2.0 enactment is you paying a conglomerate with wealth controlled by idiosyncratic else; the P2P system is conscionable 2 radical trading ideas, goods oregon a laughter for immoderate P2P cash. (Image: Brooke Cagle).

The Second Key To Reducing Friction: Fitting The Right Application To The Experience

A acquisition we’ve drawn from processing Breez is that antithetic kinds of experiences (ends) request antithetic outgo interfaces (means). For example, the point-of-sale (PoS) terminal and podcast subordinate that are included successful our app are meant to consciousness similar their ain small self-contained interfaces, tailor-made for their respective purposes (or arsenic adjacent arsenic we could get with the technological limitations of moving a node connected a phone).

But you tin lone cram truthful galore activities and experiences into a non-custodial Lightning outgo app. And, nevertheless clever, charming and bully looking a squad down the outgo app whitethorn be, they’re not needfully champion placed to devise caller ways of applying P2P payments to caller types of experience. We cognize however to marque Lightning mobile and however to amended its UX, but erstwhile it comes to commerce, music, video streaming oregon immoderate different vertical solution, experts successful those fields cognize amended however to trade the champion experience.

Indeed, the PoS mode and the podcast subordinate are conscionable scratching the aboveground of what’s possible. We implemented them according to the KISS principle. Though they person scaled and attracted caller users, they’re fundamentally demo versions implemented to showcase however radical interface with the P2P economy.

Could others with fine-grained expertise of those and different kinds of acquisition travel up with amended ways to use P2P wealth to P2P interaction? Of people they could. And would those amended applications execute standard that our neophyte, outsider attempts ne'er could? Absolutely.

And that’s the point. The amended we use the tech, the person radical get to the experiences they want, the much they volition usage the tech, the faster Lightning volition scale. The standard we’re aiming for is not X orders of magnitude; we’re shooting for a satellite wherever kids rotation their eyes whenever an big says “Back successful the fiat days…”

Achieving standard is simply a substance of reducing friction, and multiple, tailor-made apps that use Lightning exertion optimally to life’s galore worthwhile pursuits is the champion mode of minimizing friction and expanding the P2P economy. It’s not astir making the champion wallet that tin bash everything; it’s astir adapting Lightning — the means — to immoderate extremity users privation and immoderate kinds of acquisition they privation successful exchange.

LaaS Liberates Lightning

Those who recognize the method requirements of moving a non-custodial Lightning app volition person realized already that adapting Lightning payments to immoderate fig of existing and yet-unimagined applications is incompatible with moving a node successful a azygous app. Lightning is acold excessively technically demanding to standard the P2P system arsenic we person described it. Running the benignant of always-on node required is an acquisition that fewer users, developers, creators oregon vendors retired determination volition relish.

We’re envisioning Lightning arsenic a Service (LaaS). LaaS is astir utilizing Lightning to region friction from life, from the experiences we crave. The constituent isn’t to amended the idiosyncratic acquisition in the app, but to amended the users’ acquisition of Lightning arsenic a whole that gives them much worth successful their lives.

And LaaS is doable. Our imaginativeness for LaaS has 3 large components:

1. A Lightning Software Development Kit (SDK)

As it stands, anyone seeking to integrate Lightning payments to their existing concern faces a steep learning curve. Accepting payments implicit Lightning requires them to tally a node, unafraid liquidity with a Lightning work supplier (LSP), negociate fiat exchanges, execute swaps connected and disconnected the Bitcoin blockchain, negociate a wallet, and truthful on. A non-custodial SDK would springiness P2P entrepreneurs and existing web utilities entree to those functions without having to commencement from scratch.

With a well-designed SDK, developers could prime the Lightning functions they request from a paper and integrate them rapidly and easy into their ain applications. Instead of having to larn the Lightning tech stack, a Lightning SDK volition fto developers simply plug it into their ain tech stacks.

2. Hybrid Architecture

Lightning needs to beryllium instantly disposable wherever and whenever radical privation to marque payments. Locking a user’s functionality into a azygous app oregon connected a azygous instrumentality would necessitate the idiosyncratic to accommodate to the technology, which is backwards. That’s friction.

At the aforesaid time, though, KYC friction and global, cross-market enlargement requires a P2P, non-custodial solution. As soon arsenic LSPs commencement acting similar banks, regulators volition commencement treating them similar banks. That’s friction too.

The solution is simply a hybrid architecture based connected sovereign distant nodes, but that locates those nodes successful the unreality alternatively than connected users’ section devices. Any work could entree these nodes from immoderate device, but arsenic agelong arsenic the users’ keys are locally stored, users would support custody of their ain funds, minimizing the operators’ regulatory profile.

P2P positive minimal friction equals scale.

3. Decentralizing Liquidity

There is nary recognition connected Lightning. The liquidity to settee immoderate transaction needs to beryllium preloaded onto the network. While this imposes a important liquidity load connected those seeking to process users’ payments, it besides presents the affluent accidental of a snowball effect: the much liquidity the web contains, the much transactions it tin process, the much transaction fees the operators tin collect, the much liquidity they person to put successful the network, and truthful on.

As Lyn Alden precocious enactment it:

“Once determination are tens of thousands, hundreds of thousands, oregon millions of participants, and with larger mean transmission balances, past routing a outgo from immoderate arbitrary constituent to immoderate different arbitrary constituent connected the web becomes exponentially easier and much reliable.”

Ironically, snowballs are lone imaginable erstwhile h2o is frozen, i.e., not liquid. (Image: Pauline Bernfeld).

In bid to get the snowball rolling, we indispensable administer the load of preloading the web with liquidity by onboarding caller LSPs. By attracting LSP collaborators, we volition rise the liquidity level of the web overall, turning the snowball into an unstoppable avalanche of liquidity.

A Postscript On Shortcuts And Friction

A dear, aged teacher of excavation ever utilized to say, “Doing it the close mode is the shortcut.” Like truthful overmuch contented gained from experience, this was infuriating to perceive arsenic a young person, which makes it nary little wise.

The thoughts supra astir however to standard Lightning and catalyze the exponential maturation of the P2P system ne'er adjacent flirt with the thought of third-party custodians. And yet I would beryllium the archetypal to admit that connecting users via third-party custodians would marque everything so overmuch easier. Throw unneurotic a jazzy interface for an app successful a fewer weeks oregon so, person your developers instrumentality a database successful the backend to negociate users’ transactions, chopped everything down to a azygous node and a fistful of large outgo channels, and you’re off. Less hassle for Lightning operators, a tighter web and a shallower learning curve for Lightning users.

We could propulsion this adjacent further. For each its revolutionary potential, bitcoin tin beryllium a symptom successful the neck. Private keys tin get irretrievably mislaid oregon stolen. The web needs a definite magnitude of vigor to run. A satoshi tin lone beryllium successful 1 spot astatine immoderate fixed time, limiting fiscal innovation. Why not conscionable archer everyone that we’re moving their bitcoin around, erstwhile successful information they person nary bitcoin … and neither bash we? Same database, aforesaid interface, infinitesimal hassle, free Lambos for everybody.

I'm joking, of course. It’s been tried. Repeatedly. FTX. BlockFi. Genesis. Solana. It’s already a cliché that “the communicative of cryptocurrency is successful ample portion a communicative astir rediscovering accepted finance.” And not lone volition operators suffer users’ wealth (or magic beans, arsenic the lawsuit whitethorn be) sooner oregon later, but the web would dwell of a constricted fig of choke points, begging to beryllium regulated, throttled and censored.

At which constituent we’d person to larn from our mistakes, commencement implicit from scratch, and bash it again the close way. Fortunately, it’s inactive aboriginal days, and we tin inactive do it close the archetypal time. An omniscient being capable to presumption each imaginable timelines would guarantee america that the sometimes tedious way of sovereignty and self-custody is, successful fact, the shortest way to our P2P future. Though LaaS envisions a somewhat antithetic web than we person present to recognize the aboriginal of Lightning, the principles and technological integrity that marque Bitcoin worthwhile indispensable stay inviolate.

This is simply a impermanent station by Roy Sheinfeld. Opinions expressed are wholly their ain and bash not needfully bespeak those of BTC Inc oregon Bitcoin Magazine.