TFTC: A Bitcoin Podcast - #134: Jack Mallers

Episode Date: February 11, 2020

Join Marty and Matt as they sit down with Jack Mallers to discuss: - LN Strike - Lessons learned while building Zap + Olympus - Lightning Privacy - Lightning for exchanges - much more Shoutout to this week's sponsors. Cash App. Start #stackingsats today. Use the promo code: "stackingsats" to receive $10 and contribute $10 to OWLS Lacrosse you download the app.

Well, hi there, freaks. It's your boy, Marty Ben, here to introduce this week's episode of Tales from the Crypt. I've got somebody who's running up the stat board here at TFTC, sat down with Jack Mallers, joined by Matt O'Dell, to talk about the Strike app that he just launched, an app that allows individuals to pay lightning network invoices directly from their bank account using the Strike app. It's a very promising development in the space that I love to see coming to the market. um this is a great episode because we talk about uh pretty candidly uh the limitations of lightning network and maybe some mistakes uh that jack and uh has made with zap and uh olympus along the way finding out uh how to use lightning network the lightning network correctly when you're taking

everything into consideration like volatility privacy um ease of use and stuff like that It's a very candid conversation. Jack is somebody who, as you freaks know, I love, huge fan of him and all the work that he's been doing over the years to make Bitcoin more usable. And yeah, again, this is a very honest conversation talking about some hard truths that exist with limitations of these networks. And as we say in the podcast, we're figuring out how these networks work and how we can best use them and leverage them.

So I think you guys are really going to enjoy this. episode. As a side note, some of you may notice if you follow me on Twitter and see what I post there. Yesterday, I announced the Bitcoin channel on Dig. Some of you may know I've been curating that channel for a few months now, but we're actually going to turn it up a notch. We're going to try and create a Medium and Reddit combination-like environment where people can post links pertaining to Bitcoin that they can then talk about. And then on top of that, we're moving to make it

so people can post original content with a bit of curation to help highlight and surface very good content in the Bitcoin space to help educate Digg's audience, which, believe it or not, is still pretty big. So if you guys have not signed up for that Bitcoin namespace, go over to digg.com slash Bitcoin,

join the namespace, join the conversation. I think it's going to be fun this episode of Tales from the Crypt is brought to you by the Cash App you freaks already know all about them and if you don't let me tell you about them they're an app that you download you use the code StackingSats when you download it

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ten dollars to our good friends at owls lacrosse i'm gonna hit you with the bird call early owls lacrosse all right and then once you download the app you're gonna get a bunch of functionality all right you're gonna be able to buy and sell bitcoin you'll be able to stack sats you'll be able to send sats off the app to a personal wallet from a personal wallet to the app you're gonna get their boost program which allows you to go to partner merchants and get discounts there if you have the boost card the boost card is dope if you don't have one already and you have the cash app order it yeah you're gonna save some money and you get some cool personalization you get to put your signature or bitcoin symbol or lightning bolt whatever you whatever you so feel and then

on top of that they just released cash app investing all right they're letting you stack slivers of stonks if you so please all right if you have a favorite company out there that you want to invest in you haven't been able to in the past because you've had to buy a whole share and it's too expensive for you to buy all at once cash app is now letting you again buy slivers of a stonk you can buy as little as one dollar of your favorite stonk okay cash app investing is a subsidiary of Square, a member of SIPC. And because Cash App is directly connected to your bank account, you're going to be able to invest right away.

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ripping pods in the last 24 hours uh in the studio with somebody who's been here you're you're putting up getting up uh the stat list here bro we got jack myler's in the studio welcome back yo what's good fellas you also got matt odell here sup freaks uh your second podcast in three or 24 hours let's fucking go uh big announcement when was it last week this time last week it was last thursday right before recorded rabbit hole recap last week ln strike pretty dope uh you're the man who created it so i'm gonna let you explain it uh i'm not gonna try to describe your product in front of you yeah uh man i'm gonna give it my best shot i think uh the coolest part about it in my opinion is the evolution of like how it came to be in the process

we went through um i think it was really like unique user research around lightning that hasn't really been done before but uh it essentially allows your u.s dollar payment methods to be interoperable with bitcoin and lightning um and in my opinion it's the lowest friction and barrier of entry to participate in what is becoming like a budding economy on the internet and so i think it's really important um and i think it's the depth of the idea i haven't had a chance to really convey in full i think my first blog post was cool but i got a ton of stuff and uh i'm just really excited i'm really proud about about it too how i came to it is is just a crazy story yeah how long this came out of nowhere in my opinion in my opinion too it wasn't on my radar

and then you dropped that blog post i was like whoa and so to me this seems like a great product because it allows people who don't own Bitcoin to interact with merchants that want to accept Bitcoin, which I think is huge. Yeah, well, I think it also works in the reverse way where a mainstream fiat-only business can accept Bitcoiners paying them because we do the auto-conversion in the reverse

for merchants as well. So it's a dual-sided service. I think it has a ton of potential. But what I'm most proud of, again, is the process I went through to understand why Lightning is important and break down a lot of assumptions and come to a product that has, like, some standing ground.

It's standing on something that, like, there was work put in and assumptions clarified and proven wrong or right, you know? And that's what I think is the most foundational about it is it's not a guess. All right, let's dive into these assumptions. Like, what was the approach for determining these assumptions and then proving them right or wrong? Yeah, so we got to go back to my Olympus post

or even to when i started zap you know so zap was this is this open source wallet and like set of tools now i think we have like 20 repositories in our github and uh it was just to make using bitcoin easier and lightning was going to have this new relationship with the end user we have all these new tools and a few years down the road it was like okay well how do we graduate to the next level because we were just starting to see a lot of the same you know there are like a million zap wallets they just weren't called zap right and it's like well what's the big problem and it was onboarding it was like everyone had the same amount of users we all have you know breezes users or zaps users or blue wallets users they're all on twitter right and so it's like how do we expand

that and make an impact that's wider than you know the people that are just incentivized because they hold the asset that we're trying to impact and to me it was onboarding and taking them from fiat to using lightning is that was the hardest part is getting someone from zero to the experience that should give them that aha moment and uh all of my assumptions were just like flat out wrong every single one embarrassingly wrong um about how this would work so it was originally that you would link it to your zap wallet like open source wallets would be able to have users buy bitcoin to them and that that would induce normal mainstream consumers to participate with lightning and it was just i walked through in the blog post like volatility taxes and just having to

have a wallet and the responsibility that that is and the burden that that is to a normal person those are the highlights but it even goes deeper than that of just how wrong that was on so many levels um and so yeah i guess i can walk through it i don't know how to best break this down it's a crazy story though because strike was entirely an accident based on all this stuff i've got three hours we got plenty of time here yeah so the first one was volatility um so you know we were testing and uh users were buying with because of fees and such what users were doing which i didn't expect at the time is they're buying in bulk so they would buy like five hundred dollars of bitcoin at a time without the intention of spending that right away but figuring if i just am going to pay

fees to acquire and get myself set up then i should do a batch at once you know it's like a big top off yep and then say i have this five hundred dollar balance and i'm going to be spending this whenever i bump into qr codes and volatility just nicked this in the butt entirely like bitcoin would go up and people would be like yo i'm not spending this thing which is a beautiful thing like they were learning on the fly like how hard the money was um and they were preferring to like they're like i don't get it like i can use my debit card on fold but like my dollars aren't going to go up like bitcoin is so they just move the money off or if bitcoin would go down be like I'm not spending at a loss like that's whack you know what do I look like spending when it's at

5k and next week my buddy's spending at 7k like I'm no loser and we were like fuck like that's fucked like I can't there's nothing I could do about that like all of these things were so defeating at the time it was just like well fuck me um and then for merchants it was equally as bad you know or even worse arguably because they priced their operation their business in dollars And so volatility, a bad day of Bitcoin, can just wipe out a month's worth of business. And so there was no incentive. Because at the end of the day, too, this is a chicken and egg problem. I can have people ready to scan QR codes, but they have to have QR codes to scan.

And I can have all these businesses presenting QR codes, but there have to be people that have the ability to pay them. And so volatility was horrible. The next one was taxes. What I did accidentally is I was linking everyone's personal identity to their nodes public key you fucking idiot jack so stupid so here i am delivering this bitcoin to them in a channel where the only way for them to then use it and spend it is to go back through me right so you buy bitcoin from me it's coming to you through a channel that i established with you

and this is a common practice in like all of these lightning on-ramp services right and so they know your public key they know your kyc info and they know exactly when you spend it and so bitcoin is taxed as property and so every time that that bitcoin moves from your lightning wallet that is a taxable event and if there are like real gains like i mean the irs is getting extremely aggressive on everyone's 2020 tax report or form there's going to be uh did you spend or use cryptocurrency period so they're getting aggressive and so here i am this central point for them to come after like we know that you know these people we know that you gave them the bitcoin and their identities associated with their public key and we know that you know exactly when they spend

so users are coming to me like so when i scan a qr code to click pay can you tell me like before i hit send like what the tax implications are are you gonna provide me with the 1099 yeah and i'm just like for every lightning payment like thousands of y'all's articles i've bought in my lifetime right like satoshi's place art uh fold gift cards bit refill all taxable events and users learn about this and they're like homie i'm off it like i'm just not on that that sucks like i would do it i have like 10 cents all the time and i would pay for an article but i'm not trying to deal with like the volatility and like submitting all this to the irs and then us as like a company like what the fuck do i look like building we're sitting all day building like

tax tools makes no sense at all well this doesn't seem like a zap problem it seems like a government regulation problem yeah so we're fighting for like diminished exemptions like all these things and we're fighting the good fight but it's just a huge deal and like i like operating on my time not on the man's time and so it was a big big problem people were just opting out like either buying bitcoin and then just moving it to cold storage which i mean i'm converting people to like hodlers of last resort and they're getting on board to bitcoin but i'm not helping lightning at all um and then with this tax thing and then the last one is probably intuitive to most is that creating a wallet having a backup it didn't make any like these people just had no interest

in doing this it was like the i have a dollar in my pocket if i can use that to scan a qr code i will but if i have to download have something sync there's something in my google drive account volatility i'm reporting all this to the irs like i'm just i'm good dude i'm good and so yeah that kind of summarizes it i've been ranting for a second now but that was like super heartbreaking to me because you know then you start to question like is this possible and like fuck um is this a hobbyist tool and you know something that may grow post hyper bitcoinization but in 2020 am i like wasting my time like those type of things so i'm like depressed about like you know yeah a lot of time and effort blood sweat and tears into these products and

the long dick of the law just fucking uh fucking things up yeah but even like volatility dude like it's a good point that these users were making accidentally is like if you own bitcoin at any point why would you ever spend it unless you had to unless there's a justifiable reason like you're using it because there's no other tool that could accomplish what you're trying to accomplish like censorship resistance or privacy or whatever that is but these are people that are buying bitcoin from a regulated entity um that has their kyc linked to their wallet they're not using bitcoin for any of that they're not using bitcoin to speculate and they're not using bitcoin for privacy or censorship resistance so why would you ever ever like once you come across bitcoin just

hold it like and that was a great point they were making to me and i would look in the mirror like who have i become to where i'm on the receiving end of such a point you know what i'm saying is fucking my head up um so yeah i mean taxes are tough like dealing with regulators is going to be a long haul battle but even things like volatility and you know what it takes to run a lightning note on your phone as good as things like phoenix and breeze are like you put that in front of you know the lady at the front desk she's gonna shit her pants actually had her buying bitcoin on cash app last week cash app is not the same beast i know i think she can figure out breeze i think so i have faith in her i did too well so then speaking of the topic first of all disclaimer

i love breeze i love phoenix i love all i love everyone that's real rap i do i this community is so dope but i started to question like all of these trade-offs that we're making as wallets you know because zap was in a position where people wanted us to offer like the breeze type functionality and then the other side was you know you have to maintain this level of privacy like zap is one of the only privacy like oriented wallets where you create your own channels because you know phoenix and breeze are reporting to coindesk like yeah we process like our users made 10 000 payments in a month and it's like yo that is not chill that you know that you know what i'm saying i have no fucking clue who's using zap how they're using zap and how many times

they're using zap and i will never be able to and so then i started to question like hold on a second if these more like wallets that are designed for newbies are compromising on censorship resistance and privacy because Apple and Google know who's downloading this and then these services know exactly when they're spending. And so if the United States wanted to go to them and say, we're imposing taxes every time you forward an HTLC,

like holler at the kid, tell us their Apple account and we're gonna tell the IRS, like that is possible right now and so you're like if they're making these privacy and censorship resistant type of compromises then who is the target user like have we been thinking about this entirely wrong like these are the things that are just fucking my head up like anyways i was going through it man i mean you know i'm fine but i was i was going through it somebody's got to think of this stuff right and and as somebody uh who uses app every day i'm happy that you can't see everything i'm doing well i mean in their in their defense uh like

have you read phoenix's faq it's like fucking fantastic they list all those trade-offs very very clearly yeah no um so the disclaimer is i have nothing against them in fact i think they're doing an amazing job and i don't think anyone's being like dismissive right i'm just curious like who is that target user similar to to coin joins and we say this a lot in this podcast like the more people coin join the more it's hard to like sort of taint or consider coins tainted like do you think there's a a mass market threat not even a mass market america market threshold that it hits where people are just using this stuff and it's like hard to be like all right we're gonna enforce all these draconian tax laws and aml kyc it's that do you think this is a

just do something ask for forgiveness later type situation or yeah like don't get me wrong i mean people should take all my opinions with a grain of salt like i could be totally off the ball no i think you're making some very good points i mean i 100 agree with you i mean i have the similar concerns with like treasurer and ledger servers like no one ever talks about that um they have like insane amount of data yeah so i so i mean the story goes i'll do like a quick tldr and then i'd love to tell the actual story but i was in paris at the time i had a pit stop i met keto minor in person uh i was on my way yeah absolutely great guy and i was on my way to the lightning conference and i was in my hotel like spent no time outside my hotel and i'm like

whiteboarding on this giant sketchbook where i do all my designing like shit like why is bitcoin important like why do people use it and i have on on this piece of paper like speculation like the number one use case that has far exceeded privacy and censorship resistance which is just like factual basis not to weigh which one's more important but the one that's attracted more users is speculation and wealth creation specifically, is that people are making a fuck ton of money by owning this thing, and their returns are out returning any other asset. So one, speculation and generating wealth. The second is censorship, resistance, and privacy. This is this inherent property that no other asset has been able to achieve, and that's kind

of like, you know, the genius of the white paper and, you know, the puzzle that Satoshi crafted. now all of a sudden we have a third never had a third even like cash app and coinbase the most consumer facing friendly businesses in the entire industry are shoving these charts in your face and their app is entirely buy and sell there's no functional utility to the asset at all on their platforms they look great they're easy for the you know the front door lady to use but they're not do you know what i'm saying is is they're totally built to entice speculation and to allow you to participate in speculation and so who is this new third that the lightning network is introducing because you've got people who are using lightning not to speculate and not

for censorship resistance right because breeze has users phoenix they have users so these people clearly aren't valuing privacy they clearly aren't using the asset in a censorship resistant manner because in theory like any regulator can come to these you know hubs providing liquidity and enforce some serious rules and tax consequences so then all of a sudden we have a new we have a third and understanding that third and how to give people access to that and why people are valuing that like people are using lightning not to not to speculate and not for censorship resistance and privacy and that was like my mission at the time is understand this one because i don't think we have and it was blown i'm like blowing my own mind here and i start to question like are the

trade-offs that these wallets are making smart because now for zap it's really obvious for me we will never provide inbound liquidity for you as luxurious as it may seem. I compromise all of these properties that make, you know, this censorship resistance, privacy, like these type of things really valuable. So anyway, then that eventually birth strike where if you are not speculating, if you don't care about privacy and censorship resistance, which we call like a mainstream user, whoever these people are, then in theory, all you need is a debit card, right? In my Olympus demo, I bought Bitcoin, and then the Bitcoin was in my Zap wallet for 0.5 seconds, and then it went to Bitrefill.

Why did it need to be in my Zap wallet? I wasn't using Zap for censorship resistance. My public key was linked to my fucking full name. Who cared? Why didn't the Bitcoin just go straight to Bitrefill, and all I need is a debit card? Now, all of a sudden, we're really hoisting and supporting this third, all of a sudden, new user that is being attracted to lightning more and more aggressively and giving them great access so that if you bump into a lightning qr code in your everyday life you don't need any of these

things outside of like a bank account and that is kind of like how my brain went there yeah and so using strike to uh pay these lightning invoices it's basically like you're there's no there's that 0.5 seconds where it's in zap doesn't exist there's no basically time at which you can have like a capital gain exactly so um yeah so i was buying bitcoin to my zap wallet and then immediately spending it so one or people were buying in bulk like i was saying before and then incurring volatility and just being like yo fuck this shit this shit's whack so no volatility no taxes so spending that olympus demo that is a taxable event that i you know i'm on the internet on my fucking YouTube under my full name. So I'm reporting that to the IRS. That's fucked.

And so the strike story is pretty nuts. So I'm in Paris and I'm just down in the dumps, dude. I'm like, fuck. Because the last thing that would make sense is lightning is for post-hyper Bitcoinization, which means that, you know, volatility is no longer an issue. Taxes are probably like a long gone deal. And we're in a world that supports Bitcoin natively. But today we're not. And it's very unclear you can speculate but are we even close it's hard to tell so i'm in paris and i'm like fuck me like this is fucked and i'm thinking about this tax thing and i have my parents connect to my zap nodes and they get to use them because they're just not very technical and they want to use you know the products that their kid makes and but they just can't set that shit up themselves

and i'm thinking like about reporting my taxes and i'm like wait a second i'm not gonna report like the transactions that brooke is making from my zap node she doesn't report those i report those so i'm like hold on like she's using lightning though do you know what i'm saying yeah i'm like she's using lightning all the time but she's not exposed to taxes why is that it's because she never touches the asset if those bitcoins from my lightning now get stolen they're my bitcoins i have ownership of them and it's my problem she's using lightning though on like a free line of credit for like being a dope parent do you know what i mean yeah so then i start to blow my own mind i'm like hold on a second and so i call my i call rockstar dev uncle that's fam what a boss

i call them up and i'm like dude let's put together a few api endpoints one i need the ability to add balance to a line of credit and two i need the ability to pay any lightning invoice and you can use my like web of well-connected notes and so we toss it together and i start calling my buddies and I'm like yo cash at me money like a dub dub Chicago slang like 20 bucks I'm like yo cash at me a dub and I would put that dub into the database and then I would give them access to my node and when they would spend I would go into the database and I would make it lower credit it and when they ran out they would cash at me again and i don't know if i'm gonna go to jail if this is like money laundering or whatever but this is what i was doing and i was still using zap and i was

using this hack together database and this endpoints and i'm telling rockstar dev i'm like don't tell anyone this not because i think it's like a secret genius idea but because no one's gonna like the depth that i would have to take to explain what the fuck is going on in my brain just trust me man please god and he's like yeah of course of course so that's what that's what happened and then i realized like now these users like my friends that are cash apping me they have a balance in dollars and bitcoin can go up 100 or down 50 and they don't give a fuck because they have a dub right none of these transactions are being reported as taxes and I'm like holy fuck like I'm the one dealing with all the taxes which is chill

like I can do that I'll wear all this to the face if everyone else can get a great experience and they don't have to ever set up a wallet they downloaded zap they scan the QR code to connect and they make any payment their heart ever desires and receive and I was like going through my check box like i solved it i started freaking out i'm like in paris like you know i went i remember we were on the river some river uh in berlin actually so i'd gotten to the lightning conference and i run up to the zap team and i try and explain it to them and they think i'm nuts and i'm like giddy as fuck i'm like yo i fucking fixed user experience like i think i'm onto something no one's believing me and then at that point it was about finding the necessary partners and

making that real. So instead of cash apping me, it was linking a bank account or linking a debit card. And how can I have a banking partner that would allow people to hold the cash balance on the app like cash app does where I can yank from a payment method if I need to. But if they're sending and receiving, we don't want to have to have those delays of actually touching the bank account. If this is like a running balance of send receive, like it can live on the app, like cash app, like Venmo. And it was just about making it real. And we made it real. And then that's like the story of strike pretty dope story what goes on in your mind your mind seems uh to be racing at all times man yeah dude it's fucked up it's like a disease but sometimes it does cool stuff

so the way strikes strike in its current form today are you still taking that tax burden on i take everything on like the hardest part is the volatility risk like the balance sheet risk i take on we can get into all that detail but that is the inherent property of the service right it's like if you want censorship resistance privacy and to have this experience on your own today you pay a premium for that right you do this my node or you buy specific hardware you have to go through the process of setting up zap asking people like matt what to do on twitter and that's the premium you pay for something like strike it's so easy because i'm wearing all of that for everyone and that's but that is like the inherent value it's a tenable long term though yeah oh i'm

chilling i'm a warrior for sure i gotta figure it out um you know scaling it is a different beast but scaling anything is a beast like scaling bitcoin was and currently is a beast so you know there's a lot to figure out but um um you know the reason i announced it is because i was confident that i had solved you know the bare minimum necessary to get this idea out into the world and even strike itself the app wasn't the plan either i had talked to i can't name them i don't think but like multiple public companies where there's a serious value in using lightning as like a settlement payment rail that have existing distribution with the u.s dollar and i was like we can plug this in from under but there's so many compliance and just general assumptions

balance sheet risk so that we ended up launching strike first as like a proof of concept to the world like look at what's possible this is going to change things or not but it will tell us a ton about why lightning is important because if strike doesn't work then censorship resistance on lightning is like the only value prop and when fees spike like moving your your activity to lightning and there is no other value and like a lot of these things like phoenix and breeze should in theory die with strike because we're all like making these similar trade-offs right some are more aggressive than others but you know i'm trying to say yeah no definitely it's uh i can't i just in my mind i just keep coming back to like this just seems like unnecessary bullshit to have

to put up with like is it more worthwhile trying to change the laws um because they do seem again very arduous and we talk about this a lot on rabbit hole recap kyc amls aml laws specifically uh do more harm than good at the end of the day like you shouldn't have to take on people's social security numbers and all that shit i mean the biggest hurdle that bitcoin ux in general has is regulatory um and it's just like getting around those trade-offs are why a lot of things kind of seem taped together um so so you're saying uh balance sheet risk uh so that's basically because you have to hold large amounts of bitcoin on lightning network right yeah so let's walk through a user story of i have x amount of bitcoin in my infrastructure and the users has x amount of

dollars they make a one thousand dollar payment out of the infrastructure what's actually happening is i'm getting their u.s dollars and they're using my bitcoin all right like i'm sending it on their behalf that leaves me in trading what we call inherently short bitcoin all that means is for me to recoup the necessary amount to like restock my infrastructure i'm assuming that the price doesn't go up because if it goes up the dollars that i received won't allow me to buy the same amount of bitcoin i spent right so if i spent a hundred dollars with the bitcoin and i receive a hundred dollars i have to trust that it's gonna you know that hundred dollars with the usd is gonna get me the same amount of bitcoin i just spent and so that leaves me inherently short

And obviously at scale, if we wanted public companies to use this infrastructure, there's 30 million people making payments all the time. It's pretty advanced, real-time, automated risk management and trading to where every time an order comes into the infrastructure, we have algorithms that are just running and balancing ourselves in real time. So if we need to make a trade to balance out our exposure, like open a derivative position, hedge with a spot partner, a counterparty, we do that so that our balance sheet remains flat and that we don't have a bias on whether Bitcoin goes up or not. We can just provide the service because if you do have a bias and you do care, you're going to get wiped out. So that part's hard, right? is just ensuring because we do send and receive so you have the user story of you know the user that's buying a blunt in colorado and they are using their bank account to scan a btc pay server qr code but then you also have the reverse where you have like a twitch streamer who's put up like

a strike donation page and people all over the world are sending bitcoin and he's getting dollars in his bank account right it's like magic in both ways and so we are both inherently short and inherently long all the time and sometimes these flows cross each other out but sometimes just by happens chance people are spending more than they're right and vice versa then we build a bias to the market and so being able to hedge that in real time establishing enough partners so that we're trading while you guys are using the app and that's like one of the harder parts i can imagine trying to actively trade to to create stability and equilibrium in in your holdings and then is this a profitable service like with the tax burden all that in the long run

yeah yeah definitely so right now i don't charge a thing uh just trying to learn best i can like you know you can't be at that goal bowl to know that you got everything wrong the first time and that you got everything right the second so i'm just learning um very much down to lose bitcoin that's in my infrastructure like something gets hacked or i i'm knowingly wearing that risk to i think that this is would really push bitcoin forward and eventually at scale we're going to have to charge like some edge in our trading spread or so you know we're going to have to find some way to cover ourself at scale but um and i'm very transparent about that i have nothing to hide or lie about but at right now is the the rate i get my hedge off at is the rate you guys

get to use um there's no every fee from like a debit card processor is passed directly to the user i don't buffer shit um and it's just about learning because if we can get this right man um it'll be a big deal no it seems huge and then um doesn't add a layer of privacy to like a like so you're you're when you're using strike and scanning a qr code that pays uh the lightning invoice that's just a on your bank account that shows up as strike right yep so you you know your u.s dollar payment method has a direct relationship with us it's very similar to how i've heard matt describe his relationship with fold exactly that's what i was thinking same thing and so that but you got to be careful you know like i can talk a big game about how that enhances privacy

but you know we obviously it's not privacy with your relationship with us right yeah as it is with fold um so there are trade-offs there um which i think that one is a particularly good one one that i'd like to point out though is in the original model of olympus where we were delivering bitcoin to your wallet and we knew your public key whether we recorded it in a database or because we were paying these invoices which matt has talked about on the last few rhrs is what he's concerned about is, you know, people doxing themselves by posting invoices with their public key. So with strike, it's, it's a little bit different, subtly different, but very important is something like spark swap or what Olympus was. They're delivering to your same public key every

time. And they know that you are that public key with strike. You're sending to any fucking thing you want. How am I supposed to know which one's your public key? Do you know what I'm saying yeah is it it's a it's a a little bit clever in that way and we don't have direct channels so i set our you know minimum channel like in the config of lnd to 22 million bitcoins it's like a clever way to say no one's allowed to open channels with me because i don't want direct relationships with you guys it's gonna fuck you i want to be connected with you know the inner liquidity that's routing and so that payments are hopped and that there is that clever layer of privacy that you won't find in some of the other lightning so there's not to say that

they're bad you know i gotta catch myself like i'm talking shit it's just different it's just different trade-offs that's that's one thing about lightning and bitcoin overall right we're learning this is again alien technology that we're learning how to interact with and build on and it seems like we're in a very big trial and error period but you still know the you know the pub key that's being paid of course yeah we are the payer of the invoice um so we know the destination right so it's gonna there's a big hurdle here compliance wise right oh yeah like that's gonna make or break everything oh yeah so yeah that's what we're talking let's jump into this compliance bullshit yeah dude i know um you know the twitter reaction was great so many people support me and

i'm very open about how thankful i am for that and so many people shit on me which has been new like having you know direct access to shit on me in my pocket like my phone goes i read it's like you're fucking idiot i'm like oh shit fuck i was having a good day you gotta turn off twitter notifications yeah bro for real but uh i didn't mean to advertise the service as if it was like kyc list i saw a lot of like you know jack had routed around kyc like that's full of shit man if people want to throw me in jail and do what they want with me they can like i i'm on their soil i have to play their game please don't do that yeah dude i'm too sexy and you have the bank account information right yeah so um one thing topic i think is interesting to discuss is there's

a huge difference between something like spark swap or what olympus was going to do and i'm using spark swap because i think they're great i'm not trying to overuse the name but um they're delivering to a user's wallet and so from a compliance standpoint with regulators it's a much easier service to pitch because i can say yeah they're buying bitcoin yeah lightning is potentially more private than uh the base layer but we know the destination in theory this user is cosigning and saying that they're sending it to their own custody and if they're actually sending it to a terrorist and they get caught then that's more on them than us because we have this dialogue with the user that they're buying bitcoin to their own custody right whereas with strike is not that we're pretty

open about like scan any fucking qr code you want it could be to your own wallet but it could be to anyone and we don't care and we don't want to care and so that dialogue with regulators has been interesting but it's like a fight that i gotta fight i'm willing to fight it for bitcoin because i think it's important like i think lightning has this again this like third user base that isn't speculation it isn't censorship resistance it's instant transactions it's global payment rail that's cheaper and faster than anything else in the world and we should fight those things and allow those use cases but it is different in that sense hopefully that makes sense that's the compliance side is the is the invoice that's being paid is where the compliant yeah it's

that the regulators don't know who that is with like a spark swap or you know breeze hooks in with an external like uh whatever payment app they know that it's going to the breeze wallet it's going to whoever spark swap has registered for us we don't really know where it's going you're allowed to scan what you want and a regulator can go on the dark web and say oh you know this dark web person is accepting lightning let me ask for a bag of coke cocaine or heroin decode the public key from it and then run to strike and say has anyone paid this public key and if they are and if they try to don't let them because this public key is selling fucking heroin blacklist right and that is like the dialogue that they're having with me because

they're having a tough time letting me do this service because it is different than like just onboarding a user which by the way like back to my other point we shouldn't be onboarding users over lightning to speculate like there are better ways more secure ways like get them a cold storage get them a cold card so i think lightning's predominant use case will grow to be what strike is. And so it's important for me to educate rate regulators, talk them through this, tell them why it's important, tell them why it's a lost cause. Like you can't win this fight. And so there's no point in trying. And anyways, that's kind of like the dialogue that we have, but obviously like, you know, I play by the rules. I have no intention of breaking the rules. I've been

a good citizen and, uh, yeah, it's, it's a relationship. It's like a marriage, man. Like It's never over, something you work on. Yeah, but it's, I mean, again, like, when are these agencies just going to do good police work, good detective work, and why? It sucks because you're an entrepreneur trying to create a very useful company, in my opinion, in a lot of Bitcoiners' opinion.

You're just being handcuffed by draconian laws, right? So we talked about AML D5 a little bit before. Apparently, AML D6 is coming out. What the fuck? I just found this out. Um, and then on top of that, like, and to go back to highlighting the utility that like this strike in particular, like a lot of people talk about just like pushing lightning to the background and having it. So people don't even realize they're using Bitcoin. And this seems

like a good first step in that direction. Yeah. Like you can imagine a user story. I'm really bullish. These lightning video games, super pumped about them. I'm waiting to play. Yes. Yeah. I'm super stoked. And you can imagine a scenario where a user has strike to interact with them and all of a sudden these game developers in another country have all of these users that can interact where i have 20 bucks i scan a qr code for five dollars to play this game and then i withdraw back like ten dollars because i won and now my balance is just 25 i never touched bitcoin i'm just dealing in dollars if i want to download zap if i want to download breeze that's my choice but if that's not my swag which is like a lot of people they can still interact with this economy

like we're inherently long us as a community like qr codes is what i like to put it like we're bullish qr codes i think that we're going to bump into more and more of them i'm very bullish qr codes it's blowing my mind that like it's not a bit uh a more common user experience here in the states i mean in asia it's huge yeah and in the reverse user story where like i can go to starbucks and say listen there are people in the world that have appreciated wealth in bitcoin that want to transact privately with bitcoin and you can now accept their business without touching bitcoin like i'll give you a point of sale where you display a qr code they scan it with their breeze their phoenix their zap node connected to their their zeus whatever the fuck their flavor of tea

is and as soon as i get the pre-image i give you money in your bank account like you never touch bitcoin there are no taxes you're just dealing in dollars in fact i'm a cheaper processor for you but now you're allowing business with this world of people and it's borderless it's the entire globe and that in the reverse for merchants is equally as appealing to like you know i i purposely marketed the consumer because you know just keep it singular trying not to dunk too hard but uh that yeah dude like i think it's i think it's fucking huge i think it's huge the gaming was one of my first thoughts too uh because it's so easy too for the game producer or the content creator like a twitch streamer or something to be like just download the strike app

like they don't explain to them what bitcoin is or anything like that yeah exactly and so back to regulation um i've become like a fucking lawyer so i came into bitcoin with my my dad's basically my dad's background in finance and markets and trading and i was teaching myself to code but now i've got like product under my belt now i'm a fucking lawyer and so uh there are certain laws that i mean there are rules like literal laws i can follow i have the right to follow where there are uh like layered um levels like for example there's kyc aml and then there's the cip and And within CIP, $1,000 accounts and lower can be treated as prepaid accounts but aren't treated as a prepaid program. So these type of accounts where if you are using Strike and you never exceed $1,000, which none of our users have so far, then it's just like name, email, address, and you're chill.

And when you say exceed $1,000, you mean in one payment? Yeah. And you're chilling. But, like, if you want to deposit, like, 10 grand, like, if you wanted to have the capability to send, like, a Wumbo 10G lightning payment, like, then the regulators are going to, you know, kick me. And that's a tough thing for me as a product guy. Like, I'm not trying to shotgun KYC anyone. How do I be transparent? How do I give a good user experience with these layered levels?

But then after my blog post and i'm talking about dealing with the marijuana industry now, they're like fuck you kid. You're arrogant Like we don't like your swag. You're embarrassing us. And so it's just like an ongoing battle. So, you know I hope Community trusts in me that i'm doing my best But you know, I think i'm really going to get away with get away with jesus christ. I think i'm really going to uh, comply within the laws that exist to have these accounts that if you're just a typical lightning user and you're sending micro payments you're sending 10 20 bucks that there is no aggressive kyc and that's an industry practice across the board even binance at one point had where if

you're trading under 2 btc there was no kyc they still technically do but they just shotgun kyc people sure so i i'm you know i would never do that but uh that's kind of as transparent as i can be when it comes to compliance is i'm fighting the best i can 5 8 150 i'm swinging so a couple things here so it seems like uh institute thresholds at which people can't go over to make sure that they don't need to get kyc thrown on them and then two i can't stop but keep going back to the fact that we need to change the laws like fucking the war on drugs marijuana particularly is fucking dumb like why is it why is it that these people can't get money in the amlky again going back to like amlkyc like again draconian do more harm than good like do we need to fight and

start fighting back against these draconian laws um as as users like i know you're on the front lines as a product guy uh basically representing bitcoiners like do you do you want to hear more people speak up and more people join you on the front line um yeah but i'm just not confident it's gonna move the needle like i just don't know what is dude i'm being just dead honest i mean what kind of world is that though it's not a good one it's one where you know threats and guns are like that defines the rules right on a brighter note it does seem like american regulators get it more than european regulators yeah i can say that the regulators i've dealt with and the council i think council should be praised council being lawyers should

be praised more than they are because they are the proxy between this relationship and they have a decision to make of like who to side with and my counsel i've worked with the best counsel in the united states with all these relationships i've built sidley austin catten fenwick these guys get it and they want to learn they'll call me all the time like what's an htlc and they're fighting the good fight and regulators aren't trying to fuck anyone um they're just trying to do their job not defending them but you know it's such a pyramid where as you get to the top it's where you can cast a lot of the blame supposedly you know but the guys that i interface with guys and girls um they they mean no harm they have no problem with strike a lot of

them are fans some of them are users actually some of them tested but yeah no it's um sticky situation we find ourselves in gentlemen uh so what you're still i mean strikes absolutely going to be there so what what can we expect for strike moving forward um yeah so getting it in the hands of people more people using it yeah like walking through like the balance sheet risk i'm taking on like the infrastructure i have is hot wallet yeah like how to deploy successful lightning network hot wallet infrastructure like these are all things that i'm doing and one of the first to do and so you know i know a lot of people are pissed that like they haven't gotten an invite but you know every the reception to the announcement was so well like went so well

we have thousands that sign up like you know you can refresh the page and the number's going to go up every time and so that defeats the purpose of like a beta you know what i'm saying like the whole point is like at the time of olympus was like if you have the balls because this is like risky like at the time i was accidentally linking your personal identity to your fucking wallet like shit was fucked so if you have the balls and the courage to do this like please reach out but at this point everyone is just thousands of people so for us it's and me personally it's about you know where am i comfortable you know in my hedging in my infrastructure letting people gain access and so so far we've just been adding people by the week like yeah like new week add 25 new week

at and and just grow it and you know my internal goal is before this quarter is over so like end of march uh just take the doors off you know pray to the man above and uh yeah that but that's as honest as i can be who knows may take longer may be out next week and then where will we be available like any app store yeah so we have ios android browser extensions and desktop hell yeah it's pretty oh and like there'll be a web interface too like i think the uh web interface would be killer like the adult film industry is similar to the marijuana industry where a lot of these people get de-platformed and to be able to have like a tip and dot me page but it's just you're dealing in dollars like people all over the world can scan a qr code and you just get

money in your bank account no taxes no volatility no anything um these like porn stars and of the sort have been super interested in that so we'll have like all sorts of tools i think it's a really powerful infrastructure we have and just gonna learn and when i learn shit like damn that would be sick i'm just gonna build it well keep fighting the good fight man thank you for building it and again standing up for for bitcoiners everywhere it doesn't seem like it's uh uh an easygoing battle it seems pretty stressful are you stressed out uh yeah but like life's hard dude you can't blame that all on bitcoin life's just i don't know yeah like i'm stressed but it's a good problem to have you know like uh my my parents always tell me at any point you could just stop and come sell

weed with us in colorado and uh i don't want that i enjoy i enjoy it mamba mentality oh i mean thank god you're here dude again i use zap every day um shifting away from strike particularly right now like how are you uh what are your thoughts on the development of lightning uh just generally as uh the advancements in the protocol the different uh implementations allowed your building to be easier uh yeah i've had dialogue with pretty much everyone like i remember i feel like i get an og card because matt corallo hit me up when rust lightning was just like a hobbyist project to check it out and so now i'm very excited to see what the ldk offers we still use on d um i think async has been kicking ass dude i mean eclair um is a beast uh they've got

multipath payments already they've had one bow for a while um and so yeah i think couldn't be more bullish lightning uh i mean definitely tame expectations because you know those expectations land on the devs and and sometimes it's not fair to them but uh as far as capital influx the support that the project has gotten and uh the success rate so far i mean had to have exceeded expectations there's only eight million locked in lightning doge here's a billion locked in defy dude you know i can speak to that i don't know if we want or what our time is but plenty of time plenty of time we got uh i have some lightning like trading stuff coming out that's going to be huge that ties into strike and we're opening fat capital f or ph fat channels that are private

so like yeah you can lick that eight million liquidity publicly like you're just wrong let's dive into that though so like that's that's a topic that we've been talking a lot about too like uh bitmex researchers did that piece where they found out or they they surmised they're guessing uh educated guesses that public versus private channels are 72 to 28 percent and then the liquidity locked is 88 versus 12 percent um you're saying the estimates i mean i'm not saying bitmex's estimates particularly but overall estimates of money locked in lightning may be underestimated well you can just take it as like a best guess dude like i mean especially like once we get shit like schnor it's just gonna get more and more difficult and to use data points like

that is just so straw man it's like opposite of factual like you can never put your life on the line with any of these data points so like they don't mean anything to me um and yeah i think trading is trading may be the killer app of lightning which i'm happy to get into but these people are going to be operating strictly in private channels for a variety of reasons and so you know all these eth heads are going to get rocked with a with the right hook when that happens dive into it what is uh trading is going to be one of the killer use cases so well in my opinion lightning's killer app one of them our killer feature is instant transactions like period in trading there's something called latency arbitrage which should speak for itself the

ability to execute a trade before someone else so like a typical user story goes some ico raised a fuck ton of money never had a million dollars in their life before god knows what they're doing with it they go to exchange like bitstamp and they market sell 2000 bitcoin now exists in an arbitrage opportunity where bitstamp is trading 10 below other spot markets so if i can buy on bitstamp and i can sell on anything else i'm going to make a 10 clip every unit that's cash money like this is just trading 101 and so now you have to think like well how can i get bitcoin to these exchanges i can post a bunch of bitcoin everywhere with the assumption that these opportunities are going to come up but i'm taking risk that doesn't get hacked and also like

that my capital isn't being used efficiently like who has a billion dollars to spread out all over bitcoin exchanges like i have to predict the right ones i have to predict which books are going to be full and then people that are like really powerful and rich started negotiating credit with exchanges so people are trading with capital that they don't actually have and the exchange is just like pay me back later and that's fucking weak that's just cheating and that's whack and so or you can just deposit to an exchange in real time and you're waiting like six comps and you hope the arbitrage is there in an hour but as efficient as this market's becoming it's not going to be oh wait a second there's a second layer on top of bitcoin that settles in less than

a second like yo blockstream liquid like i get it like that's fucking dank that's still a minute so if i'm settling in a second you're selling in 60 i'm 60 times faster than you i'm gonna win every trade right so the killer app for traders you gotta follow the money that's what my dad always tells me like follow the money the money wants to get their trade off first and so the money's coming to me you know i'm a trader i clearly speak speak the language and they're like you can get me to execute in front of everyone else i get to execute trades first that's tens of millions of dollars in revenue a day sometimes i'll write you an empty check if you can set up some private channels because we don't want public channels where like some fucking breeze wallet

noob is using my liquidity like i'm trying to execute an arbitrage i'm trying to make some fucking money so private channels also private channels with counterparties we're familiar with right like i think loop is great i don't know if loop makes sense in a scenario like this because it's not necessarily like peers that don't know each other like i'm trading with cmt cmt is five minutes from my crib if something happens like we have a database mesh or like a force close i'm gonna call cmt and be like yo our shit got fucked up here's what we're gonna do to reset that shit back up because we're both trying to make money so like it's more of a trusted relationship but we're using lightning to win and lightning has this uh capability to accomplish a

vertical stack where i can hedge strikes consumers over lightning and then also execute arbitrage over lightning and also execute ostc over lightning and so we're accomplishing you know something like liquid has a closed economy and lightning is able to go from the peak of the liquidity trough to a user buying a y'all's article and it can do it like that like it can move do you know what i mean that's insane so we're working on that sorry we're working on that infrastructure with traders because a proprietary trading firm has the risk appetite like exchanges right now don't want to do it because of compliance and because they don't want to get hacked and lose customer funds like it's still unclear how to operate these things

at scale for a proprietary trading firm they're trading their own money these guys all are worth hundreds of millions of dollars like what's the risk jack i can try and make tens of millions of dollars on latency arbitrage with this technology or like my lightning channel may go down i'm gonna lose like 50 g's i don't give a fuck like that they have the risk appetite to be first so anyways like i think it's really interesting uh we're coming out with something in february regarding that because it directly impacts strike right like i'm trading in real time i would love for those trades to be over lightning and so yeah now a couple things here number one incredible a few things uh it makes sense the number two the fact that private

channels just seem like a better use case and uh like a better experience is uh incredible too because you're just incentivizing more privacy and your whale bot problem yeah the whale bot solving the whale bot problem and then uh number three it seems like the exchange is already moving on this we've got bitfenix and bitstamp already set up correct yeah so well a lot of them are running nodes bitfenix is the one that allows you to deposit and execute and so uh won't say who we're working with like people can take their best guess and i'll announce it in february this month but uh there's a lot of things to think through as far as like um you know are you allowing me to if I say I want that spot in the order book like I want to execute this trade which requires me to

deposit and then execute when you give me access to do that are you holding that spot in the book so that while I'm depositing there's a chance for a race condition and if you're handling that race condition then like the latency and the execution and like the matching engine like all of that is going to get slower and take a huge performance hit so we don't want that but we certainly as traders like want that experience so it's about like how can we pull that off and what tools with lightning can we use and you know like using things like turbo channels like if cmt is a familiar counterparty to me turbo channels and non-risk i don't care like they're homies you know if ten thousand dollars goes missing i'm gonna call them and be like yo what the fuck

and we're gonna fix it and so you know it's just it's different trust model different trade-offs and then it seems like eventually you can get to a point where you're just connecting api calls and this is automated almost yeah so like what Bitfinex has right now is a user facing node where users are at a depositing withdrawing what you're proposing is basically like a Bitfinex joined whatever your group is you know supported uh your initiative they would probably be launching a separate node that would be like a dedicated node that just had private channels with with your network potentially yeah so like one of the obvious features is like the wumbo bit which i don't even think is a feature bit at this point and so we would want that enabled and and there's

a few protocol features that would be advantageous to this scenario and so maybe they want to spin up a separate node i would personally suggest uh so yeah i think you're just to separate risk right because they're hot wallets and i'm pretty spot on just from like i'm a big visualization guy and just visually visualizing this setup would just basically create tubes to margin to books right yeah and so what's also great is uh books yeah silvergate has got the sen network silvergate exchange network to where you can instantly settle dollars the same way you can instantly settle bitcoin over lightning and so we all bank at silvergate and so that if i need if i'm like the buy side and i am delivering usd i can do that instantly and now if i'm the sell side

i can now do that instantly too and so there's an argument to be made that lightning's killer app is instant transactions like even side chains 60 second transactions at best right like that's a 60x difference in the trading world like you might as well not even play you know what i'm trying to say yeah i mean i come from the trading world in a prior life and that's i mean that's people literally build their server farms as close to the exchange as possible to cut that latency down as much as possible yeah and it'll be like a more free like democratic uh like market because the credit negotiations and shit like shit's kind of fucked and does this add any like uh privacy to the order book too can you like yeah like if they're private channels

and stuff like that you sort of the books get deeper and you may not even notice it certainly i mean like of course if i deposit 50 g's of bitcoin to an exchange over a private channel where that relationship is direct or there's someone in the middle managing liquidity and it's like one hop or so like i mean there's no whale calls for that yeah so yeah absolutely i mean i think we forever will have on-chain activity of people reorganizing wallets and stuff and exchanges will always it'd be always kind of tough to hide like what their cold storage address is whether they want to or not but i think in that particular scenario you're spot on for sure yeah not from a trading perspective like with the lightning specifically you can see the visible

order book and then not even know yeah even in like public channels it'd be in theory pretty difficult to have like a lightning network whales calls i can't even imagine like this guy just like forwarded this htlc um well if they if it was like big channels between exchanges and stuff they'd watch it more easier to tell um on that note i i kind of i like this idea a lot better than liquid one of my concerns with liquid is that it creates almost a it creates a real trusted relationship between all the partners so you're kind of co-mingling risk among like the most high risk entities in the space basically which are exchanges um but with this even though it is a bit of a trusted relationship it's not it's really right there's there's less um because

either party you can always close your channel yeah you can close your channel and you can watch the other person to make sure they don't steal funds um so it just seems like a step up improvement in that regard as well yeah where with liquid you're you have to ask them to sign that to send your friends and it's a federation right that they're all a part of um yes so there's more like commingle risk in that situation damn i'm getting all excited over here this is huge yeah i'm pumped man uh there's a lot of smart people and a lot of money that um has been pushing me to work on this type of stuff so i'm excited would like to say like i think liquid's dope like i'm always careful on like trying to shit on people because that's what i'm not doing i'm just

saying you can't beat instant transactions it's a meritocracy whatever yeah it's like whatever it is what it is and also um i what i love about this lightning relationship is you get to choose your own trust level like it's not necessarily defined if i wanted this relationship with someone on the other side of the world i didn't know in theory i could do that and lightning provides me the security model to do that but i can probably take on more risk if i know don don's a family friend don's one of the best traders that's ever existed and i'd be like yo let's open up you know a bunch of private channels that equate to two million dollars with the capacity both ways and let's ride like we could do that and i got his phone number and

give him a call if you know what i mean and and that relationship because we have more trust and we're kind of pulling lightning strings a little bit like who gives a fuck none of your business like well then like if this practice becomes more commonplace of people creating private channels with people they trust i think it it leads to what i was describing earlier where it's like even harder to to enforce these these compliance laws these regulations right and that at that point it's like hey there's literally nothing you can do about yeah i mean even like with counsel with my lawyers one of the topics was you know is forwarding an htlc is does that even have regulatory clarity in the u.s and the answer is no but they're not like

you know going after kids for it obviously but the answer is that still to this day so like regulation's a little messed up but i'm really excited that there's a market participant because i think we all had this pie in the sky dream like once exchanges get onboarded then it's over and i think that the exchanges probably won't be first like exchanges will probably come after these prop firms and these uh hedge funds whoever is providing the liquidity and has the incentive they'll take the risk because they can afford to and it makes sense and yeah it goes back to the chicken and the egg problem they'll react to the demand of the people want to trade yeah like who knows maybe bitfinex is stealing everyone's business and then maybe your lightning plan

was 2021 but you better expedite that shit because i'm not executing any at any of your books so yeah it'll be fun and and who knows like it's it's certainly not a silver bullet and uh we'll see like you know we're not gonna go big numbers yet we're starting small gonna grow it and gradually then suddenly yeah how do you prioritize all this shit i don't know man i feel like i answer this on this pod like this i just wake up i go get it yeah well again thank you for doing it man it's uh no and it's like we we find ourselves it feels like we're ramping into another bull market and that's the uh the big question is like will the infrastructure be ready that was the huge problem in 2017 you literally couldn't get fun these

exchanges couldn't handle the volume of on-chain transactions and it won't be what spoiler it will not be ready no i know that it'll be better than 2017 i imagine we might have more people entering though so like i feel like every bull run will like smash into the wall for like the next couple of cycles yeah but the wall will be higher right oh absolutely or further back how would that analogy work or that visualization yeah well i also like we're not going to hit the choke points that we did at the levels of volume that we did in 2017 hopefully yeah for sure there's i think that's an undeniable fact but i also think it's an interesting point um a lot of the things that like define that it's ready and able to support is because Bitcoin and layers like lightning are

built with, you know, trustlessness in mind and that you're dealing with peers that don't trust each other. Um, so things like watchtowers, like we haven't talked about those in a while, but like that was a hot topic at some point. Like how do we ensure that like, not only is it scalable and ready, but also like doesn't require any trust. And that's from an engineering standpoint, typically the hardest part is like ensuring you know it has decentralized capabilities no one has to trust anyone else and that's what takes a lot of the time like things like loop is like you know it's just rebalancing channels like you could do a circular rebalance but circular rebalance there's some trust involved in that and loop is an elegant trustless solution it really is but it took time

for lightning labs to build that and it's really complex to where i think a lot of these trading scenarios like we're gonna be ready no matter what because there's gonna be money to be made and if i have to duct tape that shit to make a million bucks i'm gonna duct tape that shit like i don't give a fuck you know what i mean and and so i i wouldn't underestimate it like is it going to be like a perfectly trustless system that's ready probably not to matt's point i think he's really right but you know like is there going to be some capital on lightning looking and and if that means a hot wallet with some hot wallet risk people are going to wear that wrist to the face and not care yeah but directionally it just seems like we're going in the right direction progress

absolutely yeah it's uh exciting for instance so many people like to shit on lightning man it's it blows my mind it's like again i talked about this many times like i've set up my node set up my channels have been set it and forget it for almost a year at this point just mainly receiving transactions but i check my zap zap app every day and just sat streaming to our node it's beautiful like it works and i've never had anybody complain about not being able to pay invoices that we populate on our site and uh on our merch store like it just works a lot of it works yeah so anything else we should touch on here i don't know i wasn't wearing boxers in that video what were you wearing i'm thinking of all

the twitter videos are the best were those were those uh so pumped muay thai fighting shorts no they're chicago bear shorts they are like super above the knee but that's chill it was like 10 p.m and i was just like chilling at my desk so i don't think i needed to get punished for that but i'm i'm just trying to roll through like the twitter comments in my brain uh that was one of them they weren't boxers but at this point for my next video i am gonna wear maybe i should wear like a speedo maybe wear a speedo you can you can buy a dime bag you can use the dime bag as an example yeah i will i will mental note well how uh how was chicago i miss chicago it's good dude it's cold but uh nothing new yeah i love chicago hawks seem to be doing pretty good right now

i'm not a hockey guy damn are you uh not really i did like i did like the uh when i lived in chicago black hawks were one of my favorite teams uh to root for in chicago because because they won they were winning the whole time yeah there you go it was just like the city was so much more fun when they were winning yeah the cubs are in trouble the socks are i like what the white socks are doing but uh we're certainly not a world series contender yet the bulls stink the bears stink so yeah bring on this bull market and get the sun out yeah are we are we ready for the next bull market are the shit coins gonna pump i'm ready the the shit coins are already like kind of pumping yeah that's why like i'm getting everybody's like too bullish right now i'm

almost like apprehensive like i'm always ready for a bull market i said yesterday that i wasn't ready and that i was tired but fuck that shit of course i'm ready is this when you start growing your hair out i've decided yeah of course only in the bull market you got to be clean cut in the bear market so people take you seriously still um i i've decided that this this cycle i'm going to try and argue with shit corners less and just tweet stamp all their shit i like that like we should just make sure we have like a full record of the whole cycle this time here's actually a question a specific question i have like do you think all this stuff gets easier as we get closer to a closed loop like and are we getting closer to a closed loop like bitcoin

economy um in theory yeah right like the tools are there in theory so if there's value to a economy then it should be gaining more traction than like a where it was a year ago but in practice i can't really speak too much to it i still think we're like super early um that's one thing you freaks out there to remember we're still so fucking early yeah like yeah like the whole follow the money incentives are king like i take that shit very very seriously so i don't you know people still price their shit in dollars you know pricing things in bitcoin and trying to pull off that hyper bitcoinization story is doing the community a favor more than it probably is doing you a favor so yeah i think we're extremely early yeah and then like outside of the funds that

you're directly connected with are you like reaching out to like other popular crypto funds quote-unquote who were actively trading bitcoin too yeah it's more like a word of mouth it's like yo do you know that you can deposit and execute at the same time within a second and everyone's like get the fuck out of town and so it's more of those conversations of just like but you start from like scratch literally like traders don't care about lightning and they shouldn't have until now and so it's like how does it work what are the risks and like um but yeah just kind of word of mouth i got strike i got that and i got those derivatives just wake up and get it yeah how are the derivatives coming along what do you think of uh jeremy rubin's pow swap like on chain i think

it's super cool i posted a video a little while back i'm not totally sure it solves much personally like i think the really hard thing is pricing difficulty like someone has to like put a cost to it like a dollar amount or a denominated bitcoin amount and be like yo this is how much it costs to like long difficulty and there's no smart contract like you know what i think jeremy rubin did is we were allowed to settle trustlessly and use bitcoin script to settle but i never thought settlement was the problem like whether these big traders are settling with like dollars or trusting each other like no one's stealing like derivative like swap money but the problem was like who's going to be the difficulty market maker it's not you just have

an idea in my head i don't know if this is a good idea or it's a thought like for the difficulty pricing how you would be long difficult you'd have to get to the cost of the hardware right at the end of the day right because that would yeah like so in theory dictate like you buy that a u.s dollar price and you plug it in that's what would affect difficulty yeah but the mining market is so like not efficient like black box to bottom to like where we make markets and we are just like taking on risk knowingly but knowing that the most efficient way to find good pricing is to just try and then like see how the market swings and we have our own little algorithms and whatnot and that's kind of what we're doing like some of these i i was just recently asked to sign an nda i wish

i could name drop it would make me sound tight but some like super big names were paper trading so like not even real money like that that's how like cautious they're being but then there's like lower tier mining firms that you know need the service like now i also think like on-chain fee derivative for fees like on-chain fees uh i think that's going to be necessary like the next before the next having not this upcoming but so by 2024 no because that that makes like that's another thing jeremy was saying too like that fee futures market to helping create like an equilibrium in the fee prices uh again this is just these products would make everything more efficient right yeah exactly like you can argue that segway 2x a lot of that was because uh you had these

businesses that were inherently short blockchain fees which meant you know as fees went up their business made less and less sense and then miners are inherently long fees where you know the block subsidy is going to go to close to zero and trend down and they're expecting fees to go up and so you have a natural two-sided market where those two should be able to lay their risk off like cash app for example is eating all the fees for you to withdraw right um and so if fees spike to like a hundred dollars per transaction like that's going to get expensive for them they should be able to hedge that so yeah i think like the swaps and derivative products for bitcoin will get super creative but i think that they're not necessarily here yet because the need to hedge

isn't necessarily here yet like again follow the money like when the incentives are there it'll happen for sure incentives this whole system is driven by incentives um it seems like people are becoming more incentivized to to use bitcoin hopefully the regulatory burden isn't too much but i'm confident that uh sanity will prevail in the long run um are you confident yeah all right um any final notes you want to leave these freaks no man i love you guys thank you both for having me it's my fourth one i'm abusing i'm abusing your time at this point whenever whenever i get that to you i'm like yes i love it i love a a sneak up visit to new york city from jack it is my fucking pleasure yeah fucking love this shit hell yeah hell yeah uh thank you for doing

what you do i truly do believe you are you are making bitcoin better and uh bitcoiners overall over uh better overall uh better off overall i can't even speak um this was your fourth episode i think we got the most comfy outfits uh that we've had i'm in sweats matt's dressed up though i cleaned myself up for the bull market um that's all we got this week freaks peace and love