The Wolf Of All Streets - Unlocking the Potential of Bitcoin: Building Lightspark with Christian Catalini

Episode Date: July 9, 2023

Join Christian Catalini, co-founder of Facebook's Diem (formerly Libra) and MIT Crypto Economics Lab, as he introduces Lightspark, his groundbreaking project, to revolutionize the payments industry using the Lightning network on Bitcoin’s blockchain.  ►►OKX Sign up for an OKX Trading Account then deposit & trade to unlock mystery box rewards of up to $60,000!  👉 https://www.okx.com/join/SCOTTMELKER  ►►THE DAILY CLOSE BRAND NEW NEWSLETTER! INSTITUTIONAL GRADE INDICATORS AND DATA DELIVERED DIRECTLY TO YOUR INBOX, EVERY DAY AT THE DAILY CLOSE. TRADE LIKE THE BIG BOYS. 👉 https://www.thedailyclose.io/   ►►NORD VPN  GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets   ►►COINROUTES TRADE SPOT & DERIVATIVES ACROSS CEFI AND DEFI USING YOUR OWN ACCOUNTS WITH THIS ADVANCED ALGORITHMIC PLATFORM. SAVE TONS OF MONEY ON TRADING FEES LIKE THE PROS! 👉 http://bit.ly/3ZXeYKd  ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/   Follow Scott Melker: Twitter: https://twitter.com/scottmelker   Web: https://www.thewolfofallstreets.io   Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #Trading The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

Yeah, so many of us started, you know, their interest in crypto from Bitcoin. If you trust Bitcoin, you're very likely to trust Lightning. You want to be the payment layer on top of it, right? To some extent, as you know, some of these projects started almost as a joke or control different communities. There's been a major trend in the crypto space of people building other blockchains or building on other blockchains, but then returning to Bitcoin to build exactly what they want on the most secure network in the world. Christian Catalini was one of the great

minds behind Libra and Diem, which we saw basically die because of congressional and regulatory pushback. Well, now he's building at LightSpark on the Lightning Network to make fast, secure, cheap payments a reality for everyone, be it retail or institution, all over the world. It's all coming back to Bitcoin, guys. Christian Catalini will tell you why. Obviously, you were fundamental in the development of Libra and Diem, and we kind of saw major pushback from the government when that happened, and then they seemed to have somewhat disappeared. So what was the conclusion of the whole Libra-Diem story?

I mean, at least for me personally, it was a very constructive journey. And I think the team and many of the people involved learned a lot through that. I would say that, you know, one of the conclusion was definitely that despite us trying for, you know, three to four years to get the project off the ground. If you look at the landscape today, we still don't have an open protocol for money. And so we were trying to do it in a certain format with a certain set of participants. But I think that need is still unfulfilled. And so, you know, when we left, for many of us, there was a sense of unfinished business. And looking back, I mean, the answer probably was kind of in front of us all this time,

which was, you know, we do have an open protocol for money on the internet. We just need to develop it to its full potential. It's Bitcoin. Yeah, it's interesting to obviously have the journey started Bitcoin, go down all of these avenues to try to solve this problem. And you've come back to Bitcoin with LightSpark, right? And specifically on the Lightning Network, maybe just give some context as to what you guys are building there and why that now works.

And we don't need all those other things you were trying to build. Yeah, so many of us started, you know, their interest in crypto from Bitcoin. And to some extent, what we were trying to do in the Libra DM period, it was, you know, more performant layer one, something that could scale to billions of users and millions of transactions every day. So that's why we try to develop new technology to achieve that goal. But the other way to approach the same problem is, okay, we already have a network that's really decentralized. It's available as global liquidity. People have been building on it and using it for years. People trust it, and it's secure.

How do we make that network scale? It turns out that it's a much more complex technical and economic problem to get Bitcoin to really perform to that level. But that doesn't mean that it isn't the right problem to solve. There's a number of reasons why, you know, when you look at the history of technology, networks that are truly open, that are truly available to everyone in the same form or shape from email to the protocols that power the internet in many different flavors, the web, were born as fully open protocols. And that's what made them really powerful to this day. Bitcoin has all those features.

And of course, Bitcoin has a lot of potential that's really untapped. We have millions of wallets all around the globe that hold Bitcoin. You have exchanges excited about crypto, from remittances, cross-border payments, to really enabling merchants and others to accept payments in a new form, more seamless, with lower fees, that hasn't happened yet. And part of that is a technological problem, but part of that is really removing frictions for people that want to build on top of Bitcoin so that the network becomes truly available and easy to use for as many developers, startups, enterprise participants as possible. It seems that Lightning has been around and talked about for quite a while, and there's

been some challenges, as you mentioned, scaling that, obviously, bigger challenge in scaling Bitcoin itself. So what does LightSpark add to that process? How does it help this to scale? Because you're talking about this becoming a real base layer of money, millions of transactions, as you said, a day, if not more billion people using it one day. That's some serious scale. Yes, Lightning has been around for some time. In fact, Taj, one of the co-inventors, has been working on our team since the early days of LightSpark. But at the same time, I think Lightning had not seen the level of investment and interest that we had seen in other

areas of crypto. Part of this is because, again, there's no additional token with Lightning. It's Bitcoin. So there's no ICO. There's no launch of a new ecosystem. So you have to do kind of the hard work. You have to solve those last frictions. You have to get users on board. You have to do kind of the hard work. You have to solve those last frictions. You have to get users on board. You have to get wallets and kind of endpoints alive before it can be really useful. When we started looking at Lightning, we identified a set of both technical and also kind of market design challenges. On the one hand is this wonderful technology, right? You don't need any additional security or safety assumptions.

If you trust Bitcoin, you're very likely to trust Lightning. But on the other end, we know Bitcoin programmability is very limited. What you can build on top of Lightning is very constrained. It's almost like building for space, right? When you're trying to launch a vehicle into space, you have all these additional safety and security requirements that really limit what you can build, how you can shape a new product. With Lightning, it's kind of the same. Everybody that tries to build on Bitcoin is facing a set of really technical constraint challenges. On top of that, because you're locking liquidity, you're locking precious Bitcoin into pairwise channels when you're trying to move value through Lightning, there's an economic challenge.

Capital locked and idle is expensive. And of course, parking Bitcoin into Lightning channels may be profitable at the beginning if you're trying to bootstrap an ecosystem, but quickly becomes unsustainable. And so for Lightning to truly scale, for Lightning to be a true alternative to traditional payment network

and everything else we use every day, we need to drive the velocity of those Bitcoin up. We need to keep those Bitcoin moving. We need to make capital efficiency really one of the key targets in scaling Lightning. So how does that happen? I mean, how do you then compete with the centralized payment networks that exist now? Because a lot of people make the argument that there's a reason these centralized protocols exist because they're extremely fast, right? I mean, the Visa network, the MasterCard network, obviously, things like that. All of these centralized solutions, again, have a role in place and to some extent could also evolve to be complements to what you can

do on Lightning. Where Lightning really changes the game is by opening up different participants, whether it's wallets, banks, other financial institutions, digital platforms that want to move payments, say, between creators and their fans, marketplaces, ride sharing, you name it. For all of these use cases, openness and interoperability is really important. Today, you still can move value between users of different digital wallets in most scenarios. Forget sending value between different wallets across borders. So you do really need this new type of network that is open and interoperable and allows people to send and receive no matter where they are. So that's where Lightning, I think, does have a major advantage. Of course, there's the technical challenges of working with Bitcoin. And so, you know, in traveling through an asset that is volatile.

But as you start integrating Lightning with more traditional fiat on and off ramps, I think people will start even forgetting that Bitcoin is involved in the background. So you'll be able, for example, to send money across border from your local currency, say in the US, it's going to be the dollar, traveling through Lightning and maybe arriving to the recipient in Mexican peso within seconds, full final settlement without any of the complexity involved in current payment rails. How does that work and how cheap would that be? The good news is that over the last 10 years, we've built massive Bitcoin liquidity across the globe.

So often to go from Bitcoin to local fiat is one of the cheapest transformations relative to most other FX transactions. We also have a number of crypto exchanges, digital wallets that have emerged that do speak crypto. And so once you start connecting them all through the same network, you can really have a transfer where some of the fees are only the fees involved with Lightning and with the conversions from Bitcoin to fiat.

If you look at major currencies, within three to five to 10 basis points, you can really convert back and forth between Bitcoin and those currencies. And so this makes it very competitive relative to remittances solutions or others where sending money across border, we're talking hundreds of basis points for each one of those transactions. Is there a size of transaction where this becomes prohibitive? I think this obviously works for small transactions, but one of the criticisms I think historically of Lightning is it can't send millions of dollars necessarily across the network in this manner, right?

The good news is that it all depends from network structure. So I already mentioned that in Lightning, we're sort of locking channel in pairwise channels. One way to think about this is almost like you have connections between correspondent banks. Of course, it doesn't need to be only banks. It can be any sort of endpoints that is active on the Lightning network. But as you place and optimize liquidity, you can support both very small, tiny, you know, nanotransactions or micropayments or very large ones. Of course, those large ones need to happen between larger participants. So imagine two crypto exchanges that may move value between each other daily on a regular basis or two banks or financial

institutions. All of that becomes possible. It really depends on how you set up the network to support what you're trying to do. And a big part of what we do is actually ensuring that when a new participant comes onto the Lightning Network, the connections that are established, the roads, so to speak, for value to move are in place. The roads are optimized and maintained for the kind of traffic that you're expecting so that suddenly you're not sending a bunch of payments on a dirt road, if it needs to be more like a highway. Those are all the kind of technical problems that we're solving in the background to ensure that when people experience lightning,

it looks and feels like modern payment routes. Right. I think that's been one of the major challenges. But I think that also there's an expectation in crypto and in Bitcoin that things take time. Yes. I mean, the good news in crypto and in Bitcoin that things take time. Yes. I mean, the good news is that they don't need to take time. And if we can scale a scaling solution like Lightning to where they can go, I think people will forget that Bitcoin was slow to begin with. Yeah, I just mean even from a UX UI standpoint, you know, getting just the interface to the point where it's as familiar as a Venmo or a PayPal or a credit card system for your average person who, to your point, is not going to care or understand that this is being sent on the Bitcoin network. Yeah, my co-founder, Jeff Tian, he's been focusing on design for many decades.

And I remember in the early days when he started looking at crypto, he keeps telling us that the UI UX is so broken. We've made things so hard for consumers and for businesses to participate in this wonderful new digital economy. And so a big part of our job has been simplifying those concepts. Lightning is extremely complex. In fact, we created a first version of our product with some of our private beta early customers, and it was way too complex. You still had the concept of channels, of rebalancing, and then we started asking ourselves, what is the job to be done? What does this product need to do for our enterprise

customers? And quickly, we realized that a lot of that complexity could be hidden. It's still hard technical set of challenges that we need to solve, but the user of our system does not need to know about that, right? The same way when you plug in a Wi-Fi router at home, maybe you set up some security settings, but you're off to the races. You don't need to worry about what's happening to those packets that are flying through the air in your house at all times. Well, I think we know that there's tremendous demand for something like this. Obviously, we can see even just with the popularity of stablecoins, right, that people are looking for alternatives to the traditional payment rails. What I found

fascinating when I started digging into stablecoins is the market share that's done on Tron, right? And Tron is not this particularly popular blockchain at this point, I would say, but I think it's something like 60% or 70% of USDT is sent on that network simply because people care about cheap and fast, right? So how do we get them to care about cheap, fast, and secure if they're already using something that's cheap and fast? I think as you expand the set of participants, right? So when you look at stablecoins today, they're still mostly used within DeFi, within trading. They haven't crossed into the mainstream. So if you're trying to bring on board more traditional financial institutions, digital wallets, all sort of players that try to serve a much more broader market, those questions are inevitable.

So they'll worry about security. They'll worry about custody of the assets. They'll worry about when a user is experiencing this, what's the recovery flow if they lose their keys? So all of these problems in usability, I think will need to be addressed. And so to some extent, Lightning is actually quite intuitive to people that have experienced traditional payments. It brings the same kind of commercial privacy that you need when you're trying to accept payments. As a merchant, I don't want my volumes to be visible on a public blockchain right it's it's confidential information um and and in general what we've seen is also that from a compliance perspective some of the tooling that people have

come to expect for Bitcoin one a big Bitcoin layer one transactions can also be adapted and you're used on lightning which is really important for expanding the set of participants that can really use Lightning. Can you give an example of that? Which things can be taken from that Bitcoin version one onto Lightning and then onto LightSpark? Yeah. So some of our public early customers, Xapo was the first bank in the world to add Lightning and Rain, which is the largest digital asset exchange in the Middle East. They're regulated institutions, right?

So whenever they introduce a new product or feature, they have to talk to regulators and they have to make sure that from a compliance perspective, they can meet all of those gold standards when it comes to risk management. So what we've done together with them, together with other partners like Chainalysis, TRM Labs and Nota Bene, is really develop a product where to a risk and compliance officer, a transactional lightning looks like just a general Bitcoin transaction. That was kind of a gap and is a really important one if you want to bring in millions of users onto the system. That's really interesting.

You kind of obviously bumped heads, as I hinted to, during the DM days and Libra days with regulators and legislators. Is that what caused it sort of for you to pivot? Did you think that because it was built on Bitcoin, you wouldn't have those problems anymore? Or was this simply because Bitcoin seemed to be the superior solution for you? I mean, this is a very different project. We're a startup. We're completely, you know, different set of participants and team members. I would say that actually, you know, we learned a lot through the regulatory set of interactions across the globe. And we know kind of what is expected from the systems to scale. But when we took a step back, we felt that, you know, as launchers and supporters of a new network,

you have this impossible job of convincing others that they should come build on your system. With Bitcoin, that problem doesn't exist. It's already an open protocol. It's been running for many years. It has gone through a number of governance and technical challenges that have nothing to do with our team. And that, of course, we can contribute in the future

to advance. But to some extent, Bitcoin is running with or without LightSpark. We think that's extremely important. Also, when we talk to potential customers and new partners, because if we were to ever change our features, change our pricing, change something that our customer doesn't like, they have the freedom to take their services and move to a different provider. They can do this in-house or not.

That doesn't exist with any one of these other kind of more closed networks. And it's extremely important when trying to set up a new ecosystem in payments. So you don't want to be a layer one. Correct. Bitcoin is the layer one. Right. So there's massive, I never really thought about it that way, but there's massive disadvantage to being that later layer one, which we've seen with others, obviously. If you have downtime or going offline,

you don't want to be the one responsible for that. You want to be the payment layer on top of it, right? We want to help organizations and enterprises, right? Connect to Lightning, use Lightning to its best. Of course, we're also contributing to the open source development of Lightning and Bitcoin security in general. Those are really important public goods. But in general, by developing better Lightning software, what we can make it is make it really

easy for anyone that wants to move value over Lightning to do so. So our job is really lowering friction for others to come and participate in the Lightning economy. So to lower friction for others, what exactly are you building? Obviously there's the payment rails, but how will merchants be able to use this? How will institutions be able to use this? How will governments be able to use this? I mean, all in due time.

And I think, you know, different types of organization will approach the network in different phases of its evolution. Right now, we're focused on traditional crypto players that are already moving Bitcoin and that, of course, can move Bitcoin much faster and more efficiently with lower fees for their customers. So you think about crypto exchanges, crypto wallets, all of these are already familiar with Bitcoin. And for them, it's kind of a no-brainer of switching from, you know, slow transactional layer one to instantaneous settlement on layer two.

Simple things like when you're loading your wallet on Lightning, it's instantaneous. If you're trying, say, to buy an ordinal, that transaction can be accelerated by moving it over on Lightning. If you're trying to zap someone on Noster, well, you again have to use Lightning. Next to that is working closely with partners that can also convert from Bitcoin to fiat. Once you start converting from Bitcoin to fiat, now for people that don't want to worry about the complexity or volatility of crypto, they can start experiencing a payment flow where maybe they're starting with a local currency, so they're sending money abroad, it gets converted over Bitcoin, it flies quickly through the Lightning network and on the other

end, it's converted back into fiat. So that's a new way to move value across borders with no frictions and final settlement, which is really important, right? Most payment systems today are rarely final settlement. And so if I'm a merchant, I may get paid by the user, but that money doesn't drop in my bank account until later. Yeah. Can this eventually replace SWIFT and ACH and all of these sort of incumbent systems

that require a third party intermediary, a tax collector, if you will, and can take three, five, seven days. I mean, could we see this adopted by the banks themselves and I think really the industry that you're looking to disrupt? We definitely see financial institutions adopting this. And in fact, you know, our choice of Bitcoin was reinforced by the fact that if you look at neobanks, banks and other financial institutions, not just in the US, but across the globe, the first asset that they typically bring under custody and expose their customers to is Bitcoin. Of course, they're comfortable because there's stronger regulatory clarity, but it's also the one where there's more demand for kind of early adopters in this space.

So, yeah, you could imagine, you know, banks and other digital wallets and fintechs using Lightning as a new type of rail for moving value, not just domestically, but also cross border. You mentioned before how Lightning is used for zaps on Nostr. One of the big news stories right now is that Apple is removing Nostr from the app store for that very reason. What do you make of that? I think we've seen different waves of attempts at opening up more of the wallet garden around the different app stores. And when it comes to payments,

I think, to be honest, it's overdue. We should be able to pay when we're buying digital content, when we're buying an app, through different means. Now, platforms like Apple and Google, I think have made tremendous efforts in improving the developer experience,

doing a lot of really important things for those ecosystems. But when it comes to payments, I think we're literally overdue for a change. And so my hope is that these ecosystems will be opened up and people will be able to pay in different ways for content. Also, because if you take a step back, if you look at who the current system is hurting, it's really the creators and other participants that are trying to monetize their work, whether it's digital content, a news article, media, a podcast. All of these forms, I think, will thrive a lot better in a world where app stores are not just gatekeepers of payments, but are just more of a fluid interface for people

to receive payments and send payments. Yeah. I mean, you also mentioned Ordinals being sent on the Lightning Network. Ordinals, BRC20, this has kind of been the story in the Bitcoin community for the last, I would say, three to four months now. Where do you stand on the Ordinals debate? Look, I think experimentation in Bitcoin is always positive. And to some extent, as you know, some of these projects were started almost as a joke or to troll different communities. And then they took a life of their own.

I think that's the beauty of crypto because it's such an open protocol. People come up with ideas, some ideas stick, some others kind of die down. But what is great is that I think people are realizing that after 10 years spent by many participants launching yet another token, yet another layer one, we're going back to basics. We're looking at those one or two networks that really can add a lot of value. And what can we build on them,

even within the constraints? Of course, ordinals and BRC20s are putting a lot of pressure on Bitcoin's mempool and transaction size. But what's also interesting is they're also an accelerant for Lightning. So one of the things that we've noticed is that, you know, because of what's happening with already known as NBRC20, a lot of key players in the crypto ecosystem are coming to us and saying, OK, now we really need to offer lower fees to our customers. We need to move on to Lightning. And it seems like you're not the only people who have sort of experimented outside of Bitcoin and come back, right?

It seems like now DeFi, NFTs, metaverses, gaming, everything we're talking about now being built on Bitcoin. Do you view then the other chains as competitors? It almost seems like they're becoming test nets for things that will eventually come back and be built on Bitcoin because it's more secure. The way I like to think about this is that different chains have made different technical market design and economic choices. So that makes them better for different things. So when it comes to payments and the movement of value, it's very clear that the safety and security of Bitcoin is paramount.

So anything that moves value, whether it's payments or financial services, I think it's going to have an advantage on Bitcoin for the foreseeable future. If you're talking about compute, I mean, Ethereum is a vibrant ecosystem of developers. And I think there's always going to be a place for that, where you have more flexibility in what you build. But again, it's not clear to me that the two need to be competing with each other. In fact, you'll see probably Ethereum applications that will use payments powered by Lightning. And that experimentation, I think,

is going to be very productive for the ecosystem. That said, did we probably exceed the number of layer ones that the world can use? Probably. It's actually historically not unlike what happened in other industries, right? So if you look at the automobile industry, the first few years, massive entry of new manufacturers, and then there's always like a shakeout. Same with every major general purpose technology that we've seen historically. It's natural, right? So people get

excited, people start building different things, but then there's the emergence of a dominant design, right? So some sort of choices that somehow make sense and that people coalesce around. So I think that is what's happening around Bitcoin right now. Yeah, I always laugh when people compare the crypto bubble, specifically the last crypto bubble, to the internet bubble in the late 90s and early 2000s.

And apparently that's a bad thing, but exactly what you just described, even outside of the innovation side, when entrepreneurs rush into a new area, most of them are going to fail, but they'll hopefully advance the ball for the ones who succeed, right? So I don't even think it's a bad thing

if 90% of these layer ones or layer twos or projects fail, given there are some outright scams and problems in this marketplace. But for the ones that are really innovating, most of them should fail, correct? It's the nature of the innovation process, right? So no matter, even if you look at the portfolio of a VC, right, typically it is all about details. Same with entire industries.

So it's always hard, right? Because we have selection bias. So we look at the few success cases and then we say, well, of course, this all worked. And we forget all the attempts that were part of that pack. I think that's exactly what happened in crypto. It is also true that the incentives were not the right ones. In a world where everything could be measured, I think there was a lot of attention at metrics that were sort

of disingenuous. So you would look at the price of a token at the market cap and feel like, oh, this is an ecosystem worth millions, if not billions of dollars. But then in terms of use cases, we made no progress, right? So I've been excited about cross-border money movement, remittances for a very long time. But if you look at how much of these networks is being used for actual utility that helps someone move money from A to B, it's still very small. And that's why I'm excited about Lightning because we do have the install base. People are already familiar. There's millions of wallets supporting Bitcoin and soon supporting Lightning. And once you have that, I think things will happen at a much faster pace. Wasn't Aptos a layer one that sort of arose from Libra and Diem?

Our open source code base, I think, was used in many different forms. There's multiple projects using it. We actually looked at it and decided to not use it, although we could have. We went back to Bitcoin because, again, by solving harder technical problems, I think we can make a lot more progress because we're building on a truly open protocol. El Salvador obviously was the first country to adopt this. And so sort of the leading narrative, we all look to El Salvador and say, are they using

it? Is this happening? Are you guys focused on El Salvador or any other specific countries that are already sort of adopting Bitcoin and where we know that remittances are a huge part of GDP. I mean, those are the places where this is really, really needed, at least in the first iteration. We're very responsive to what we see kind of demand, right? Like any startup.

And I would say in conversations with our clients, Latin America is a very vibrant ecosystem for crypto. It's always like this, right? So regions that are leapfrogging technological stacks are the first ones to come up. Same with Africa and pockets of Asia. I think when we have a very skewed US perspective, we forget that in many countries, crypto has already been solving problems, whether it's B2B money transfers that nobody in the US would do probably using crypto rails, they're happening across borders in other parts of the globe. So yeah, we pay a lot of attention to these regions that are already kind of crypto native,

that already have usage that is beyond investment. And we see, I think, a lot of potential because you have a younger group of institutions and startups in those ecosystems that are really ready for this and excited to build new experiences for their consumers. Yeah, I mean, there's quite a few countries in the world where the population effectively skipped internet access on a computer when they got a phone. They just missed that entire gap of innovation. And then they got a phone and all of a sudden the world opened up to them. You can make the same corollary in this situation to people who never had access to banks. There are no banks in their countries or it's very limited. And now they have a phone

and their phone becomes their bank. I mean, that was always sort of the initial promise, but it just didn't work as well as it needed to. But it seems like we are really getting there. As you said, I mean, in a lot of these places, even if it is clunky, people are finding a way because they need to, right? So I would imagine that necessity here is driving a lot of the demand. Absolutely.

And to some extent, I mean, your example of mobile money is a really good one, right? Mobile money extremely successful in a few countries like Kenya, right? Where you have like essentially massive penetration and adoption of mobile money. Many other parts of the world, it hasn't happened, right? And of course, there's a lot of friction. Regulation plays a component in how you can serve these markets, of course. But the technology is there. And I think there's no more reason for why we can't do it today. Again, I think we need the right type of network. We need

the right type of participants to enable the functionality. And we also need to target an experience that's intuitive. Because for someone to switch from sending remittances maybe through a traditional channel, through sending them over a digital wallet, they need to feel the safety, security, intuitive ability to just do that, security, intuitive, you know, ability to just do that with any family members, right? No matter how tech savvy or not they might be. In your opinion, what are the lightning wallets right now that are the closest to having that UX UI that's familiar enough for the average person to use? I think I'll reserve my right to answer that in a few weeks or months. Oh, that means we have to have you back because there's something coming.

I think you'll see a lot of really interesting experiments that are coming up. It's also that to date, right, there wasn't a way to integrate Lightning that was extremely easy. So our wallet SDK, you know, makes it as easy as possible. Literally in a few days, you can have a Lightning wallet that's fully functional and interoperable with the rest of the network. That's going to unleash, I think, a lot of creativity, both by established players that want to move into Lightning and new ones that are going to come up. So I would pause.

Of course, you have great wallets like the Cash App that already support Lightning with millions of users, but I think you'll see a lot more in the near future. I would imagine so. There's been a lot of talk of stablecoins coming to Bitcoin. There are a few small examples, but we haven't really seen anything gain traction unless I'm missing it. Do you think that we will eventually see as vibrant a stablecoin ecosystem on Bitcoin

as we see elsewhere? I believe right now stablecoins are $125 billion market cap collectively. That's pretty significant. And very little of that is being captured on Bitcoin. I would say there's two steps, right? So the first step is going to be for projects like Taproot Assets by Lightning Labs to enable that functionality natively on Lightning. And of course, we've been also looking closely at what they're building. It's really exciting. Technology is not there yet. I mean, it's up and coming.

And so hopefully that will become more available. The second part, though, relates to stablecoins, right? So with the exception of Europe with MICA, where I think now there's a framework that people can build if they want to issue a stablecoin. And so we'll see, I think, a lot more entry or Hong Kong, where I think the regulators have signaled that they're supportive of initiatives around stablecoins and crypto in general. I think in the US and in other countries, there's still a lot of uncertainty. What is a proper stablecoin design? How do you design a reserve that can withstand stress market conditions? How do you ensure that consumers

have a claim? We've seen this recently with the Silicon Valley bank events, so that consumers can always redeem for value. How do you ensure that those transactions are compliant so that if there's AML and CFT requirements for those payments, that they're satisfied? All of those are kind of open question marks on stablecoins. And so I think both we need lightning technology to develop, and I think that's going to happen in the near future. But second, we'll need issuers to kind of catch up with regulations so that we have stablecoins that can be used for the mass market.

Now, the good news is that even if we don't have stablecoins, all those use cases I was describing before, we can build them today, right? So we shouldn't wait for stablecoins. As long as you have a partner that is a good on and off ramp, and you can build really cheap conversion between Bitcoin and fiat, you already have all the ingredients. And so to some extent, the word with Bitcoin and Lightning as the rails and efficient conversion through multiple partners is one that is a lot more resilient than one where, you know,

you're relying on one single issuer to kind of maintain this kind of global bank. So in theory, you don't need stable coins at all, as long as it's cheap and fast to convert directly into fiat, which then begs the question of, will we be able to convert cheaply into fiat if this operation choke point 2.0 or choke point 2.0, which everybody's talking about. Clearly, there's, whether it's an attack or an issue with the banking rails for crypto, specifically in the United States. So could that at all affect what you're building? How closely do you keep an eye on this sort of regulation and what's happening with the banks? Of course, access to banking rails for any crypto participant is extremely important.

I would say that the description of events is very still US centric, right? So lightning is used in many regions of the globe. And so even if things get more difficult for crypto in the short term, although I'm very hopeful for the medium to long term in the United States, there's a lot of regions where this can already be useful. When it comes to some of what happened, I think on the banking side, some of the networks that all crypto participants relied on were fairly centralized. Like you had one or two banks that essentially were clearing and settling all of these movements of value. If you had built all of that on top of Lightning, maybe with an integration so that you can convert again from

deposits to Lightning and back, I think the system would have been a lot more resilient. And so if there's a lesson, I think what happened is that we do need to actually apply crypto, which is we need to build decentralized system. We need to build decentralized system that are safe and secure. It's always harder. But to some extent, when you're building on a robust foundation, then the product that comes out on the other end is a lot more long lasting. What's the timeline for building something like that on Bitcoin? Are we talking about years, decades, months? People here want weeks, obviously, but I think we know that's not the case. You can build that today. So in regions of the globe where banks or neobanks or other financial intermediaries are allowed to touch crypto, there's no reason why they couldn't do

that today. And so you could have a neobank, say in Latin America, move value rather than using traditional networks over Lightning all the way to Europe, all the way to Asia in split seconds with very low fees. None of the complexity that we see today. Again, it's mostly about connecting to Lightning, ensuring that there's liquidity and then using it for what it was intended to be.

Really, really interesting. So how do we get that increased liquidity on Lightning? Does that just naturally happen with the level of adoption increasing or is it a chicken and egg problem? What's interesting is that there's a massive amount of global Bitcoin liquidity that's underutilized, right? So most of it is parked, whether it's in cold storage or not so cold storage. And so to some extent, the Bitcoin liquidity is not the problem. And in fact, I mean, if Lightning scales, the value of Bitcoin will increase. And so you'll need less Bitcoin for the same amount of payment volume. It's also important to remember, and often people get this wrong.

So they look at Lightning, they look at how many Bitcoins are locked in channels, and they say, oh, Lightning is still very small. What they forget is that the Bitcoin locked can move back and forth many, many times in the same day. So the velocity and the payment volume is often much larger than what you see on the network. And so we can use not so much Bitcoin to support a very meaningful payment volume in real time across the globe. So again, the economics of Lightning are pretty positive in that sense. What's the 10-year vision? In a perfect world where you build everything that you want to and you reach the level of

adoption that you think is possible, what does this look like? I hope we can build a future together with other ecosystem participants that makes it frictionless for people to move value anywhere on the globe in different use cases from tiny nano payments to very large payments. All of that should be instantaneous like we're used to with the Internet. And again, businesses, merchants, creators, platforms, they shouldn't be paying a lot of their revenues to the fees of the traditional rails. By bringing down those costs, I think we'll unleash a lot of economic potential. And I think people will be very creative with what they can build. Often people always think about, oh, is this going to compete with traditional networks or not? What's more

interesting to ask is like, what can you do with Lightning that you couldn't do with traditional payment rails? I'm pretty sure that, you know, between AI, some of the work happening within these creator platforms and so on and so forth, you'd see a lot of new use cases for payments that don't exist today because, you know, you can't support them. You can't stream money in real time from a creator to, from a fan to a creator as they're viewing a video, for example, as we show on our website or your salary, if you're doing remote work, your salary cannot be remotely streamed. Why shouldn't you be paid your salary in real time? Maybe that would be a feature that a lot of people would really enjoy. You hinted earlier at interoperability between Bitcoin and other

networks. I think that's sort of a holy grail, the idea that that could happen. How far do you think we are from that and what progress is being made towards seeing that happen? I think, look, the solutions we've seen to date bring in centralization, bring in some attack vectors that, again, don't speak to the safety and security

that we should aspire to. I'm pretty sure that over time, if there's a use case for making major networks interoperable with each other, it will happen. In fact, you know, Taj, as I mentioned, co-invented Lightning. He often says, look, I built Lightning for Bitcoin, but there's no reason why you couldn't run Lightning on a different chain like Ethereum.

And once you do that, you could have a hybrid system with channels that can move, you know, Ether against Bitcoin and the other way around in real time. So my sense is that the technology is not a problem. It's more like when there's a clear use case and when Lightning is scaling in that direction, people will build it. Or could that clear use case be the existing stable coins that are so popular, even if we don't see them built onto Bitcoin? I think stable coins will come to Bitcoin.

Again, is there a need for stable coins to move between different chains? For sure. But to some extent, I mean, the more interesting question is, what can we do with Bitcoin itself? And then can we combine Bitcoin with more legacy infrastructure so that it feels and looks like a traditional payment system? If you're a developer, right, you want

a simple API, you want to be able to send, receive, create invoices. Can we abstract away all that complexity? It's a bit like when people were getting their enterprise routers from Cisco or someone else. Yeah, they didn't have to worry about all the complexity of the internet. So our job is to make it as easy for someone to plug into the internet of money as it possibly can. You hinted at the crossroads of AI and crypto or blockchain. Are there any cool things you're seeing built or any ideas that you have

that you think we might see down the road? It's one of my favorite topics because both spaces are iterating and growing exponentially and so incredibly fast that it feels like there has to be a natural intersection. There absolutely is. I mean, at Lightspear, our whole core product, right, Lightspear Predict, is designed to make lightning capital efficient.

And that is an AI-driven product because, again, if you can predict where liquidity needs to be, you can apply AI tools to that solution. But if you zoom out, I think there's a stronger complementarity between AI and crypto. Just think about when people build these models, they'll need to pay for usage in tokens, right? As we've seen in the OpenAI concept in a very granular way.

They'll need to be able to build between different models and reward the creators, either of the original content, as we've seen in some of the controversies around images being absorbed by some of these models or answers in popular websites being absorbed by these models and then repurposed as original answers. How do we create almost like the equivalent of the creator economy rails for AI?

I think Lightning will play a role in that. And then in general, because AI presents a whole number of challenges when it comes to authenticity, identity, I think we'll use more and more crypto. Ironically, Lightning Wallet is a way to authenticate yourself. It's a pretty powerful one. It goes cross website. It goes through different applications. It could sign that you are who you are. And we're doing this podcast together right now.

Right. So all of that, I think, will come into play. applications, it could sign that you are who you are and we're doing this podcast together right now. So all of that, I think, will come into play. Again, there's a lot of excitement about AI. I'm actually glad that some of the excitement around crypto has kind of faded down after some of the events of the last years. It's the time to build and to downplay the hype and actually execute on the vision. Yeah, I think the digital ID side is going to be massive, especially on the privacy side, which we didn't even talk about. But the fact that you could do exactly what you just described, you could give the confirmation

without giving all of our other information to do it. Yes, I think people have been talking about this concept of verifying credentials in different shapes and forms on the internet without data leakage, without replicating your personal information across all of these different websites. I'm actually quite bullish on using Lightning for authentication because I think it's almost like an open version of some of the authentication schemes that we use every day, which is log in with, you know, a large company X or Y. I think as those things develop, I think we'll see better identity solutions, which can also help us, I think, bring lightning to new use cases from remittances to other

payments applications. I had Pascal Gauthier on the show from Ledger, and we were talking about AI because inevitably all of my conversations seem to come back to AI. And he said he had stolen this from someone. I'm stealing it from him. He said AI is digital abundance and crypto is digital scarcity. And so when you mix the two, it solves a ton of problems. I thought that was a really eloquent way of putting basically what you just described. Correct. Just really interesting. Are there other things? We talk

about, I guess, the idea that Bitcoin fixes this, right? And we see all these things being built. We talk about the bubble and how a lot of the things will fail. Are there things being built on Bitcoin right now that you think just shouldn't be? Maybe should be left to these other chains or just bad ideas? Or do you think that everything at least is helping? I think I've learned not to judge any project in crypto because you can never tell what looks like a fun project with cats on a chain ends up being the next big thing. So

again, it's important to have experimentation. The pressure it's putting on some of the constraints on the technical side are good. People sometimes don't like them because they say, well, why is the mem space being cluttered with these attempts at arch projects or whatever they are? But it's all good. I think it's all good. It all pushes us to build better systems. So you're building all of this, obviously, on Bitcoin and on Lightning, and most of it is to be able to have fast payments in fiat. Where is the role still to you for Bitcoin? Should people be transacting directly in the Bitcoin or is it really use Bitcoin as the store of value and then for your smaller transactions do exactly what we're talking about here? What's the role of Bitcoin in your mind after going through this process so many times? There's one we're already seeing, which is this concept of almost like magic internet money.

And I think the clearest example is really Nostr. Small amount of Bitcoin sats, right, which is a different term for it. And so it's already a little bit more detached from your store of value. Okay, Bitcoin is my serious saving, but that is something that I can spend, reward, tip, do pro-social things with it. It's always been an important part of the history of money, gift giving, and how people interact with each other socially. Money is a social construct. And so I think what you're seeing on these platforms,

it's super early days. And I think it's unfortunate that Apple is blocking these apps from these types of experiments. Because again, the sums that are exchanged are nothing that would change Apple's balance sheet anytime soon. But when you're able to read an article, right? And maybe it's a better experience than a paywall where you get stopped. You can't even read the content.

And you feel like, oh, whoever wrote this must have spent a lot of time. And I want to reward them buying them a coffee. Those are the kind of things that I think we'll see with magic internet money. And why not? Why not keep a balance of Bitcoin, even if you're not convinced that Bitcoin is a good store of value? Having this magic internet money that is global, doesn't speak any particular language and can cross across creators and fans that can be scattered across the globe and speak different

currencies, different economic contexts. It's super important. So I'm really excited about seeing where people take that. Do you think we should change the vernacular completely from Bitcoin to Sats? That's been a huge argument, but I think there's still a lot of people out there who say, I'm interested in Bitcoin, but I can't afford one. And they don't understand the divisibility and that you can basically make these micro payments and transactions. You can just hold sats. Do you think that we need to change that language?

Look, I think there's good experiments in both directions. We have to do more education, right? In general, whenever you're exposing new users and new participants to crypto, there's so much complexity. You're right that sometimes people feel like, okay, I cannot access Bitcoin because one single unit is so expensive. Sats have a disadvantage that are a new thing.

And so it might be that for some use cases, calling them sats is a lot more compelling. At the end, it won't matter, right? So I think if the use cases are there, people will gravitate toward the right naming. I know we're about at the end, but I actually want to hear at least the brief story of how you got into Bitcoin and crypto in the first place, because I didn't ask. And I know, obviously, you're at MIT in the Crypto Economics Lab.

So obviously, you've been passionate about this for quite a long time. Yeah. So my first attempt at getting into crypto was actually when I was doing my PhD at Toronto. And I remember we were studying actually the early crowdfunding platforms. So it was really fascinating to see artists funding their albums online. And so I stumbled onto Bitcoin. I tried to mine it back in the time. And then it was way too complex in the day. It was like 2010. For you? I feel like you would have been able to figure that out.

We're like, we should study this. This is interesting. And he's like, no, don't do it. First get a job. So I get my first job at MIT in 2013 and that's kind of what I did. So I stumbled on our Bitcoin club and two students, Jeremy and Dan, came to me one day, they had raised half a million dollars in Bitcoin from alumni. And their idea was like just to distribute it

on campus. And as you can imagine, the administration was like, no way. But I thought it was really interesting. And I was really excited about the new technology, what we could do, especially with a community of hackers on campus, building things, tinkering with Bitcoin. And so after some thinking, I'm like, you know what, if we design it as a research study, we go through the proper IRB process, we learn, you know, we will publish research based on what happens, then they won't be able to say no. So that's what we did. And that's when I went down, you know, very deep into the rabbit hole.

We did the airdrop in 2014. Don't ask what that's worth today. I think some students still regret. I was going to say, how much money did you guys give away? I think some students still regret having the most expensive sushi lunch of their life. And I think it's only going to get more expensive. A lot of Bitcoin pizzas, right? Everybody knows the Laszlo story, 10,000 Bitcoin for Papa John's pizza or whatever it was.

But think about how much you contributed to adoption, though. Think about how much you contributed to adoption. At MIT, it was sushi, not pizza, because there was one location that accepted Bitcoin in Central Square. But to your adoption point, as we published in the science study, the majority of Bitcoin early adopters hold on to their Bitcoin. So MIT students, the vast majority, were still holding by the end of the study. So yeah, they made the right choice. I mean, do you have a focus group where you can circle back and see how many of them are holding it now? You'd be surprised. Sometimes I receive an email of an entrepreneur now. It's like, oh, I founded this company. I'm in crypto because we did the experiment. I was

exposed and I got excited. So yeah, I think those are the stories. Because you're handing me $7 million and I'm able to fund my idea. Right. Absolutely astounding. And do you think that you will remain in this space for the bulk of at least the coming years in your career? I mean, do you think that it has staying power

and this is what truly is your calling? Yeah, it's 10 years in. I mean, also the LibraDM journey was more reinforcing the belief that we need this, right? We do need an open protocol for money. If we want to democratize access to all these services, we have to build the infrastructure. So yeah, I'm in for the long haul. No matter what happens to the space, we'll keep fighting and building.

I'm confident that only good things will come of it, even with these very temporary roadblocks and obstacles that we're seeing. Where can people check out LightSpark and follow you and see what you guys are building? LightSpark.com, it's LightSpark on Twitter, and I'm ccatalini on Twitter. I'm really looking forward to seeing what comes out of it.

And I'm glad that people are coming back to Bitcoin to build all of these things. I mean, I love all of it, but I think it's really inspiring to see sort of this movement back into Bitcoin. Because for quite a while there, it seemed like nobody was going to build anything. Thank you so much, Christian. Thank you. That's dope.