Unchained - Unconfirmed: Why It Doesn’t Make Sense to Compare Lightning to DeFi - Ep.279

Starting point is 00:00:00 Hi, all, before we begin, some quick announcements. First, if you haven't yet filled out the Unchained Survey, this is the last week you can fill it out and enter to win a BTC candle, which is scented with Satoshi Wood, Musk, Musk, Tula Fulves, and Finite Minerals. Head to SurveyMonkey.com slash R slash Unchanged 2021 to fill out the survey by end of day on Friday, October 8, which is the day this episode comes out. We will announce the winners in next Tuesday show. Again, the survey is at SurveyMonkey.com slash R slash Unchanged 2021.

Starting point is 00:00:30 You can also find the link in the show notes. Second, my book The Cryptopians, Idealism, Greed, lies in the making of the first big cryptocurrency craze is available for pre-order on Amazon, Barnes & Noble, Bookshop.org, or any of your other favorite bookstores. Go to Bitley-C-T-T-O-L-Y-S-C-R-Y-T-O-P-I-A-N-N-S and pre-O-RDER today. Hi, everyone. Welcome to Unconfirmed.

Starting point is 00:00:59 The show that reveals how the marketing names and crypto are reacting to the week's top headlines and can see insights keep on what they see in the horizon. I'm your host, Laura Shin, a journalist with over two decades of experience. I started covering crypto six years ago and as a senior editor at Forbes was the first mainstream media reporter to cover cryptocurrency full-time. This is the October 8th episode of Unconfirmed. Looking for NFTs that are useful and fun? Try So Rare, the largest NFT-based fantasy game.

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Starting point is 00:02:00 The link is in the description. Today's guest is Ryan Gentry, Director of Business Development at Lightning Labs. Welcome, Ryan. Hi, Laura. Thanks for having me. Lightning is having quite a moment with mainstream services like Twitter and Substack adopting it. And Paxville, the Bitcoin Peer to Peer Service, has also brought on Lightning. Give us an overview of the ways in which Lightning is bringing Bitcoin to the masses. Yeah, absolutely. So what Elizabeth Stark, our founder, has been saying,

Starting point is 00:02:30 for years is that the Lightning Labs mission is to bring RICO into billions. And that the way that we're doing that is by building developer tools and infrastructure to let companies like Twitter, whose lightning integration is powered by Strike from Jack Muller's, Substack, whose lightning integration is powered by OpenNode, who are both of those companies are Lightning OGs and the Pax Foods come online. They are the ones bringing the end users to the protocol. right and we're building infrastructure and so this is just you know a result of many many years of hard work of building up this protocol of you know sharpening these developer tools documentation

Starting point is 00:03:15 etc etc getting it to the point where the protocol was mature enough that these early adopter companies are coming on board and adopting it and I think it's you know we're going to talk about it here in a little bit but I loved this one chart arcane research posted the State of the Lightning Report, the State of the Lightning Network report, this week. And they had this one chart that was showing, you know, the public network capacity. And it's two spikes with the first spike being kind of the innovators.

Starting point is 00:03:42 And the second spike being the early adopters. And we are firmly in the early adopter stage of this new technology. And it's just like incredible that our early adopters include Twitter and the country of El Salvador. Yeah. So speaking of El Salvador. El Salvador, I would say that that probably is the biggest development for Lightning recently. El Salvador adopted Bitcoin as legal tender, and they've also onboarded people to the Chiva wallet there. So what is the significance of this milestone?

Starting point is 00:04:16 I mean, it's just, it's an amazing vote of confidence in the stability of the protocol and of the network. And I think it's really important, just briefly, you know, there's, depending on your estimate and like how you measure the numbers. There's somewhere between 15,000 and 25,000 public routing nodes on the on the lighting network. And like this is like a real truly decentralized network, right? Like lightning labs does write the dominant implementation in L&D, but like lightning labs proper at the company only runs like five nodes, right? Like all of the vast, vast majority of the network are run by, you know, hobbyists, businesses, entrepreneurs, developers,

Starting point is 00:04:59 et cetera, et cetera, who have all, you know, independently figured out how to get these things running, how to manage your channels,

Starting point is 00:05:07 how to manage liquidity, how to provide, like a good experience on the network. And so I think, you know, again, years of all this hard work culminating in a nation state,

Starting point is 00:05:19 adopting it. And like, I got to tell you, uh, from the Bitcoin 2021 announcement until September 7th, our team was just, you know, we had big plans for what we wanted to do.

Starting point is 00:05:28 do this summer. And instead, it was like, oh, man, we got to be ready for six million people to, you know, adopt this, like, right away. Like, we got to focus on, you know, a bunch of the backend, you know, scaling the database and, you know, making sure that the nodes were secure and, you know, all this, all this kind of back end engineering work that goes underappreciated. But, and we were nervous to be frank with you. This is a big deal, right? It's a big deal, not just for lightning, but for Bitcoin in general. Like, this had to work. And, you know, It hasn't been a perfect launch by any stretch. No launch really is, but by all accounts, like it mostly works.

Starting point is 00:06:06 You know, people are able to, they're able to buy food at McDonald's. We've heard through the grapevine that, you know, the most popular restaurant accepting Bitcoin in San Salvador is Pizza Hut, which go figure. I guess Bitcoiners just love pizza. That seems to be a thing. You know, and it's just, it's incredible that, you know, this, this country, has decided to go on a Bitcoin standard and that we were ready for them. I think it's a, it's a testament again to, you know, of course, my colleagues at Lightning Labs who are doing

Starting point is 00:06:39 like a lot of the heavy lifting. But again, you know, Open Node, EBEX Mercado out of Guatemala, the Goloa team who built the Bitcoin Beach wallet. Like there's just, there's so many players in our ecosystem who all went hands on, you know, the refill, who've gone hands on deck to make sure that this worked. And this is the power of, you know, a decentralized ecosystem really working. And it's, it's, you know, the other thing that I think is incredible is, you know, obviously I do business development. So I talk to companies all the time about onboarding to the Lightning Network and integrating and, you know, giving their users the experience of global payments. And now I have this great line that I can use where it's like, look, like, you may think that

Starting point is 00:07:23 this is hard or some difficult thing. Like the country of El Salvador figured it out, right? Like you can get on, your engineers can make this happen, right? We can get this to work. So it's just a great testament to all the underlying work that has gone in over years and that we were ready to rise to the occasion. And so you kind of referenced this earlier, but as we've seen, the capacity on the network has grown by more than five times in dollar terms and by about three times in Bitcoin terms year to date. And so is that due to what you were talking about, just all these different businesses, you know, trying to get ready for what they knew was going to be a new influx? Yeah, it's a really good question.

Starting point is 00:08:04 It's a difficult one because there isn't like one specific reason why. But in general, what we've noticed is there is this trend that happens where developers build new applications and like, you know, achieve a wallet would be kind of an instance of this. Twitter onboarding would be an instance, et cetera. Strike, you know, developers build new applications. They bring new users. users produce more volume on the network. More volume on the network means more routing fees for the nodes on the network.

Starting point is 00:08:33 And as they start earning more funds, they allocate more capital. And that as they allocate more capital, of course, as we all know, like the thing that makes the most news in the crypto space is a chart that's going vertically up into the right. And that gets more developer interest, more developers build new applications, and this flywheel just spins. We're, again, heavily in the early adopter stage. now of the Lightning Network as a technology, and this flywheel is spinning. We are now in the steps where the capacity is going up.

Starting point is 00:09:04 And I can tell you, like, we're getting new developers, new people interested, new, you know, this next wave of application developers are here in earnest. And I'm really excited to see what they produce because, you know, now volume is now, like, very consistent. And more nodes coming online needs kind of margins. for these routing node operators start to depress a little bit, and they need to find new sources of volume and new users to keep their visits going. And so I recognize that you don't work for OpenNode or Strike,

Starting point is 00:09:43 but you do work for Lightning Labs, which has helped Paxville bring on Lightning. So just in general, I was curious for these more mainstream services that are bringing Lightning on, How has that happened? Has it just been general interest in Bitcoin or is this lightning companies reaching out? Or how is that adoption happening? That's a great question. I don't know if I could say this definitively. I would bet, though, that in the spring of this year, a lot of that was outbound BD. It was like, hey, it's time. We're ready. There are all these benefits to you as a company by turning this on. But I can tell you from this starting this summer post-Bitcoin 2021, like the amount of inbound interest has been like huge.

Starting point is 00:10:32 It's been it's been really exciting to see that switch kind of flip a little bit. And now people, you know, and this is again like what happens with open networks and network technology in general is in the early stages, like the benefits to joining a network are not great. they're not huge because there's nobody else on the network. But as the network goes, like at some point, you reach a tipping point where the benefits to joining the network are enormous, right? Like if you can plug in a node, open up a couple channels and pay to thousands of merchants all across the globe, people in El Salvador, tip people on Twitter, you can do all these sort of things like the benefits to joining this network are very large.

Starting point is 00:11:12 And I think that's what we're starting to see now is like the switches kind of flipped. You know, and I write our monthly newsletter and our last newsletter was, like, you know, titled, Are We Reaching Tipping Point? Like, are we there? Is it as critical mass been achieved? I don't know if I can say for sure that we're there yet, but like we're certainly significantly closer than we were in the spring. So a lot of outbound BD, you know, now there's, you know, significant inbound interests. And, you know, the other important thing is like, yes, there are experts. companies like Lightning Labs and other members of the community that will help onboard these

Starting point is 00:11:51 companies. But this is all open source software, right? Like, you can, you can do it on your own, if you'd like. And there are, you know, tons and tons of people on our performers that I talk to every day that are reaching out and like, hey, by the way, you know, we got our nodes up and running and we just wanted to reach out to like, hear if there's anything we should, we should know before we announce to the world that this is what we're doing. And that's like, a pretty cool thing to have happened. All right. So in a moment, we'll discuss more about adoption and the future of lightning. But first, a quick word from the sponsors who make this show possible.

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Starting point is 00:14:21 So the total value locked in Bitcoin in Lightning is $165 million. And that gives it a ranking of 35 on D5 Pulse. And for comparison, the biggest Ethereum-based D-5 protocols have billions locked in them, like in the teens, like AVE at $16 billion. Sure. Why do you think total value locked in Lightning is still far less than in some of these Ethereum-based defy protocols. Yeah. You know, so it's very much an apples to oranges comparison because for one, in Bitcoin and in Lightning in particular, this is a full reserve system. Like,

Starting point is 00:14:58 there is no notion of debt. It is all Bitcoin. There's no money multiple. There's no additional tokens that are locked in. It is, it is all 100% for reserve. Whereas, you know, some of these other defy, like the whole point if defy is over collateralized lending. Right. So you are able to kind of multiply your money and like increase the total value of that. I think one thing that's been really interesting for me, because I pay attention to the broader crypto space is it seems like, you know, Defi has like clearly found product market fit. I don't think there's any denying that. But all the things that the defy people are interested in doing are very orthogonal to what we're interested in doing. Right. Lightning has always been very focused.

Starting point is 00:15:44 on transfer in Bitcoin from peer to peer. It's fulfilling the vision of Bitcoin as peer-to-peer electronic cash. And so there is no, you know, like trading is not like a really big use case on the Lightning Network. You know, lending is not a big, there is no notion of debts. So we're not doing lending. We're doing payments, right? And value transfer and remittances and micropayments and tips, et cetera, et cetera. So they are just different, I think.

Starting point is 00:16:18 And I think it's fine. It's not, we're not, in the lightning ecosystem, we're not necessarily trying to say, oh, you know, we're DFI too, right? Like we're, it's payments. It's always been about payments. And I think the very last thing that I would say is the whole point of lightning is capital efficiency. Like you, you have Bitcoin that you want to earn or return on.

Starting point is 00:16:42 You're putting it in the Lightning Network because it's able to, to make you, you think, more money than putting it in, you know, blockfire or whatever the decentralized protocol is to earn a yield on your Bitcoin, right? And so it is all about how many times can I turn over my capital, very efficient. It's been very interesting to me watching the defy conversation happen, especially like I know Hayden Adams, a Unuswap talks about this a lot, where he's like, we're focused on volume as a metric, not total value locked, right? Like the total value lock being small and the volume being high, is actually the goal.

Starting point is 00:17:16 And I think that's been an interesting thing to watch because that's kind of always what we've said about lightning. It's like, well, it's really like we shouldn't have just like a bunch of Bitcoin sitting in hot wallets and Lightning Network. It should be used. It should be earning a return. And so, you know, the goal is to have volume number be high.

Starting point is 00:17:33 But of course, the problem is we can't publish a volume chart because it's all recorded locally and it's private. So that's just something we don't have, although I think the Arcane Research Report did a nice job, like one of the first ones, I think, to kind of aggregate some volume numbers from different players and try and show at least, you know, a picture of what the volume looked like. And what did that show that there was a high volume compared to the amount locked in Lightning? I don't think they made that exact comparison. Like what they, I remember what was specifically

Starting point is 00:18:07 in the report was that the volume numbers they'd seen like had doubled from July to August and then doubled again from August to September. And that I think, like, there was another report from an analyst Kevin Rook from, like, midsummer or something where he did, like, you know, like a kind of top down estimation and bottom up estimation and arrived at, you know, maybe for this year, the total volume and the lighting network would be like between $100,000 and $500 million transacted, which is, you know, I don't like I think it seems about right. I don't really know.

Starting point is 00:18:45 But what's interesting is like in 2020, Visa and MasterCard combined did $16 trillion with the payments. So like we got a lot of zeros to add before we're in the conversation in a big way. So speaking of arcane research, their report also showed that payments for online services like trading and gambling have tended to dominate payments. at volume and lightning, but that in September, personal transfers and payments for more everyday transactions like merchant payments through at double the rate of those other services. What do you think is behind that shift?

Starting point is 00:19:24 El Salvador, right? I think El Salvador for sure. But also, and like one thing, so I was at, earlier this week, I was at the Oslo Freedom Forum and put on by the Human Rights Foundation. And, you know, we talked to Mike Peterson, who was at Bitcoin Beach, specifically about he was presenting on like what he's seen in El Salvador, especially, you know, in the years coming, but especially this past month. And again, it's kind of like what I was talking about earlier. It's like this technology has been ready and has been battle tested. And it was just kind of waiting for its moment. And so people that pick up lightning wallets today, maybe they tried and. early 2018 and were like severely disappointed because it was, you know, too early. They pick

Starting point is 00:20:10 them up today and they're like, oh, man, this actually works like really great. Like, this is a nice experience and especially for people that aren't in Western countries or in China where there are like very good payment systems. Like the lighting network now is significantly better than the payment rails in Nigeria, right? Like, it is already a better user experience than payment rails for a large majority of the world. And so I think we were just waiting on a moment, right? We're waiting on a spark to get a bunch of people to download wallets and start using it. But that moment is like firmly here. And I think, you know, so a lot of that volume is probably happening in El Salvador itself. But I think it's also inspired a bunch of people all around the world to be like,

Starting point is 00:20:53 well, if they can do it, so can we. What are we waiting for? Right. This is all open source software. It just requires spinning up a node and getting some liquidity. So where do you think lightning is going next? There has been talk about streaming money. Can you explain what that means and how likely it is that you think it'll become a common thing soon? So I would, I don't know, is it bad form to recommend other podcasts on your show? Because there was a great answer to this from BTC sessions on, I guess, a podcast that should not be named. There's a great answer to these sessions.

Starting point is 00:21:33 You can name another podcast. It's fine. He was on Preston Pish's show. I heard it this morning. And so BTC Sessions is a YouTuber who produces like tutorials and different videos for using Bitcoin products. And he was talking about how, you know, on YouTube, you know, he barely makes, you know, enough money to get by. Right. Every, every, they nickel and dime him out of ad money on everything. But there is already this like pretty vibrant ecosystem in the light. space that will while you're listening to a podcast, you will stream money to the podcaster. And he was like, you know, and it's generally the way it's set up is you just send them,

Starting point is 00:22:14 you know, something on the order of 100 sats, like under a dollar or, you know, like on the order of pennies per minute while you're listening. And so he was like, you know, if I have 10,000 people watch my YouTube video, like, you know, I can't buy a piece of bread with that. But if I have 10,000 people listening to my podcast and each of them, maybe pays me a dollar in Bitcoin for the duration of the entire podcast, that's $10,000 for an episode, right? And so it is happening already. And podcasting is like kind of the first medium through which, like, it's really taking off. And what I think is amazing about this is this

Starting point is 00:22:52 podcasting 2.0 movement is not only are the podcasters really interested in the money that they're earning, of course, right? And they're pushing their listeners. They're like marketing the Lightning Network to their listeners saying like, hey, don't, don't listen to me through Spotify or whatever. Listen to me through one of these independent podcast developer apps because then you can pay me while you're listening. And it's working. I don't like I don't think it's quite had its moment like El Salvador had yet. It hasn't really like exploded. But there's, you know, hundreds if not thousands of podcasts now that are enabled with these kind of lightning tips. And so we're starting to see, and this is so, sorry, the second thing that's really interesting about podcasting is, you know, as a podcaster, I'm sure you know, it's really hard to get data on what your listeners are doing while they're like, like when they drop off of the episode, et cetera, et cetera, unless they're on one of these walled garden platforms like Spotify.

Starting point is 00:23:50 But if they're paying you every minute, you know, like through the data, through the payments that you get at what point in the episode they drop off. You know at one point in the episode did they really like something and they can send you a boost, which is like sending you, you know, a full dollar in one payment if they really agree you with something that was said. Right. So there's all this like side industry that's popping up now of, you know, on top of just users paying podcasters for listening. Additionally, like the data that the podcasters are getting in the analytics they're getting

Starting point is 00:24:19 about the listeners. So it is happening. I think we just need more wallets, more integrations, need to make the user. experience much nicer. But the cool thing about this is that it's the content creators who are incentivized to market this technology to their consumers, right? Which is just, you know, something that I certainly didn't see coming a year ago, but he's like really amazed.

Starting point is 00:24:45 And, you know, it's first up podcasting, next step, YouTube. There's a couple, there's a, a Brazilian, like, YouTube group, Bitcoin Hiiros, which is Heroes, who they just released a new website, which I'm blanking on the name right now. But it's in order to make a comment on their live stream, you just have to pay 100 sat invoice in order to get included as like a spam filter so people don't make nasty comments. And so I think we'll see. And it's like a very user-friendly. Like, you know, you just have to bring your own mobile wallet to make the tip.

Starting point is 00:25:20 I think we're going to see a lot more stuff like that pop up. And it's just, you know, in the way that this always goes. is we just have iteration, development, you know, attempts, attempts, and then somebody hits it big, and then all of a sudden it goes mainstream. And so I think we're going to see that again here and just a matter of time. Yeah, just from what you were talking about, I was like, oh, I need to look into this. We can get to set up. We can get to set up, Laura.

Starting point is 00:25:46 I know all the people. Okay, great. We'll talk after the show. All right. Well, it has been so much fun having you on Unconfirmed. Thank you so much. Thank you so much for having me. This was a lot of fun. Don't forget, next up is the weekly news recap. Stick around for this week in crypto after this short break.

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Starting point is 00:26:50 As of publishing time Thursday afternoon, the price of won Bitcoin was up roughly 25% for the week, increasing from $43,450. to slightly above $54,000. One explanation for the rising price is rumors swirling around the approval of a Bitcoin Futures ETF. Nate Garaci, president of the ETF store, said he thinks the first Bitcoin Futures ETF could be approved

Starting point is 00:27:12 in less than two weeks. Eric Maltunis, Bloomberg's senior ETF analyst, agreed, tweeting that he gives such an approval a 75% chance. Pointe's reports that CMEBTC-based futures contracts were trading at a 12.8% premium to the spot price on Wednesday, the largest premium since mid-April.

Starting point is 00:27:34 Many analysts consider CME Bitcoin futures a proxy for institutional sentiment on crypto. CME is currently the only crypto derivatives exchange for institutional and traditional investors with federal oversight. Mike Bichella, a general partner at Block Tower, believes the premium suggests that institutions could be front-running the news of a futures-based Bitcoin ETF being approved. notably, as you see chair, Gary Gensler, recently lent his support to a Bitcoin futures ETF, twice mentioning that he would, quote, look forward to staff's review of such filings. In addition to speculation surrounding the approval of a Bitcoin ETF, here are a few other reasons

Starting point is 00:28:13 for BTC's bullish price action. Based on analysis from Ki-Yung-Jew, the CEO Cryptoquant, it appears that a whale purchased $1.6 billion worth of spot Bitcoin in just under five minutes on Wednesday, coinciding with Bitcoin's push up to $55,000. Both SEC Chair Gary Gensler and Fed Chair Jerome Powell explicitly stated their respective regulatory bodies do not plan to ban crypto. U.S. Bank, the fifth largest retail bank in the U.S., announced that crypto custody for BTC, Bitcoin Cash, and Lycoin is now available to fund managers, thanks to a partnership with NIDIG.

Starting point is 00:28:48 The CEO of the $27 billion family office of George Soros confirmed that the fund invest in Bitcoin, The CEO, Don Fitzpatrick, told Bloomberg, quote, From our perspective, we own some coins. The compound bug's compounding bug. Last Thursday, a bug was found in a recently implemented upgrade to a smart contract powering compound, the fifth largest defy protocol by total value locked, which put roughly 280,000 of the protocol's native token, comp, at risk of being erroneously claimed. On Sunday, compounds bug intensified after an Ethereum user called the protocol's drip

Starting point is 00:29:24 function, adding 202,000 comp or $66 million to the rewards contract, almost doubling the number of outsized awards available to be scooped up. This brings the total combat risk to approximately 490k, of which 136K is still in the controller, said Robert Leshner, CEO of Compound Labs on Twitter at the time. Leshner explained that the compound team had hoped to keep the drip function quiet until the next governance protocol could be implemented to fix the bug. quote, nobody had called the function in weeks, and community developers were hopeful that proposal 63 or 64 could go into effect before it was called, he said, on Twitter. Due to the way compounds governance and private key structure is set up, it takes seven days

Starting point is 00:30:07 to correct coding errors. According to Bantag, a core developer at year in finance, the drip function had been known for days and was, quote, the best kept secret in defy. As a publishing time, the bug is on its way to being patched with governance proposal was 64 titled Fix Comp Accrual Bug, passing 1,037,107 votes to zero. The protocol made it through the week with 129,000 comp left in the controller contract, a far cry from a worse case scenario. 6,000 Coinbase user accounts drained via multi-factor authentication error. In a letter file to California State Attorney General offices, Coinbase admitted that over 6,000 customer accounts had funds removed due to an error in the exchange of security system.

Starting point is 00:30:53 According to the document, attackers took advantage of a flaw in Coinbase's SMS account recovery process. For users who used SMS text for multi-factor authentication, hackers were able to receive the SMS text messages necessary to gain access to user accounts. From there, funds were transferred to third-party wallets. Coinbase believes that many of its customers fell victim to third-party phishing hacks. The exchange says that hackers had to have already obtained a user's email address password, and phone number associated with their Coinbase accounts to be able to utilize the SMS recovery flaw. Coinbase will be compensating users for any funds lost, depositing the, quote, value of the

Starting point is 00:31:33 currency improperly removed from user accounts at the time of the incident. The exchange did not release information on how much crypto was stolen. The DOJ is building out a cryptocurrency enforcement team. The U.S. Department of Justice announced that it is creating a national cryptocurrency enforcement team on Wednesday. The team will be focused on analyzing crimes committed by exchanges and mixing and tumbling services, along with helping to trace and recover assets lost to malicious actors. Deputy Attorney General Lisa Monaco explained the new team's purpose as dismantling, quote, the financial entities that enable crypto actors to flourish, and quite frankly, to profit,

Starting point is 00:32:11 from abusing cryptocurrency platforms. As technology advances, so too must the department evolve with it so that we're poised to root out abuse on these platforms and ensure confidence in these systems. Circle comes under fire from the SEC. CoinDisk reports that Circle Finance, a key backer of the USDC stablecoin, has been under investigation by the U.S. Securities and Exchange Commission since July. The company revealed in its most recent S4 that it, quote, received an investigative subpoena from the SEC enforcement division, requesting documents and information regarding certain of our holdings, customer programs, and operations. According to the filing, Circle is, quote, cooperating fully with their investigation. In related news, MoneyGram, a cross-border payments

Starting point is 00:32:57 company worth $700 million, announced a partnership with the stellar blockchain network, which will allow for nearly instant money transfers using Circle's USDC for its 150 million customers. The program will pilot in Q4. MoneyGram previously worked with Ripple on a similar product. regulators appear to want staple coins regulated like traditional products. The federal deposit insurance corporation or FDIC is looking into whether stable coins may be eligible for its coverage, reports Coin Desk. While the discussions are still in infancy, this could be very positive news for stable coins. Such coverage would insure token holders up to $250,000 in the case of a bank failure. However, getting such insurance will most likely depend on the backing of the stable coin.

Starting point is 00:33:41 an unnamed insider told CoinDesk. Quote, this is all part of a process by which they are trying to bring stable coins into the banking system in a responsible manner. It depends on what's backing the stable coins. If it's backed by reserves at the Federal Reserve for cash, then I think you just make the argument that it's a deposit. If it's backed by treasuries, I think you'll have a harder time treating it as a deposit. As of publishing, neither of the two largest stable coins, UST and USCC, are fully backed by cash. Last Friday, the Wall Street Journal reported that the Biden administration is, quote, considering ways to impose bank-like regulation on the cryptocurrency companies that issue stablecoins. The journal says that Biden's administration intends to recommend a Congress draft legislation regarding a special purpose charter specifically tailored to stable coin issuers.

Starting point is 00:34:30 If Congress doesn't act, the Biden administration is prepared to go to the Federal Stability Oversight Council, or FSOC, which has the ability to designate StableCoyc, as systemically important, a process that could lead to a stringent risk management standards imposed by the Fed. The news comes ahead of an anticipated Treasury report on stablecoins. Speaking of stable coins, a Bloomberg report found that Tether, the issuer of USDT, loaned $1 billion to Celsius Network, a crypto lender. Bloomberg's investigation also found that Tether reserves held billions in loans to Chinese firms. The CryptoSafe Harbor proposal gains steam in the House financials.

Starting point is 00:35:09 Committee. On October 5th, the ranking member of the House Financial Services Committee, Representative Patrick McHenry, proposed a new bill, dubbed the Clarity for Digital Tocons Act of 2021, which seeks to turn SEC Commissioner Hester Persis idea of a safe harbor for crypto assets into actual law. Under their proposed legislation, which would adapt securities laws developed in 1933, crypto companies would be allowed to launch a token without worrying about running afoul of U.S. securities law. The bill would allow crypto startups a three-year window to fully decentralized and transform their tokens into something that does not resemble a security. To get the benefit of the safe harbor, startups would be required to disclose information like source code,

Starting point is 00:35:52 transaction history, and tokenomics to prospective investors. Time for fun bits. Is Elon Musk's cute puppy a buy signal? Maybe it's correlated, maybe it's not, but Elon Musk appears to have made a new meme coin a top 20 asset, and all it took was a cute picture of his dog. On Sunday, Elon Musk tweeted out a picture of, Locky Frunk puppy, his cute puppy, that just so happens to be a Shiba Inu. Since then, the price of Shiba Inu jumped approximately 177%, vaulting the meme coin into the top 20 coins by market cap asset publishing time. Thanks for tuning in. To learn more about Ryan and Lightning, be sure to check you the links in the show notes. Unconfirmed is produced by me, Laura Shin, withel from Anthony You know, Mark Murdoch, and Daniel Les. Thanks for listening.

Unchained - Unconfirmed: Why It Doesn’t Make Sense to Compare Lightning to DeFi - Ep.279

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