We Study Billionaires - The Investor’s Podcast Network - BTC133: Creating a New Libor on Bitcoin w/ Jesse Shrader (Bitcoin Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey everyone, welcome to this Wednesday's release of the Bitcoin Fundamentals podcast. On today's show, I have Bitcoin Layer 2 Lightning Expert Jesse Schrader on the show to talk about all the fascinating stuff they have going on with their Amboss website. Amboss is a website that analyzes all the Bitcoin full nodes in immediately settling channels that are open between the nodes on the network. Jesse has some exciting metrics and an announcement relating to his company providing an open market for liquidity. providers that can now receive income for providing such liquidity services. This is a really fascinating chat that really makes a person think about the implications for risk-free rates and finance at large. So with that said, here's my chat with Mr. Jesse Schrader.

Starting point is 00:00:49 You're listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Preston Pish. Thank you. Hey, everyone. Welcome to the podcast. I'm here with Jesse Schrader and Jesse. Super pumped to have this conversation. We've bumped into each other here and there at various conferences. I've been a user of AmBoss for a few years now and love the site. And it's fitting that we finally have this conversation to talk about what you're working on. So welcome to the show. Thanks so much, Preston. And super happy to be here.

Starting point is 00:01:34 And sure we've been working on your podcast is legendary. and also the reason of so much traffic to Ambus was, you know, because you spun up a node way back in the day. Man, I was just learning. A dream to be able to talk to you. I was just learning. And you guys had such a sleek interface, you know, like the other things that are out there to, like, connect with other nodes. I mean, it felt a little bit like I was programming in terminal, which I clearly can't do. I'm pretty clueless. I just, I run a, oh, what's the, I run an umbril. So it's, I need the turn. key node solution and you guys had like this just amazing site to connect nodes. So Bravo to you guys. Here's where I want to, Jesse, this is where I want to start. Take us back

Starting point is 00:02:19 to Lightning when it was just being stood up. Like you came in the Bitcoin, what was it, 2016 timeframe somewhere in that range? Yeah, I got into Bitcoin in 2017, really. 2017. Yeah, I got pretty excited about the number going up. And then of course, the, the numbers started going down. And that's when I really dove in to figure out what it is that I actually bought. And part of my excitement was buying gifts and like with Bitcoin. And I paid just crazy high fees. After experiencing that, that really pushed me into, okay, how do I pay less in fees?

Starting point is 00:02:59 Because really I was paying like $60 for a single transaction. And that was just a crazy time for Bitcoin transactions. And that pushed me into lighting. Before you were a Bitcoiner, you have this interesting background in legal services. And specifically with class action lawsuits for overdraft fees, predatory loans, identity theft. What did that experience kind of prepare you for? And how has some of that experience kind of leaked over into what you're doing right now with designing this whole new financial system, global financial system?

Starting point is 00:03:37 From the legal services background, most of that was in class action lawsuits. Really, I was there as a temp worker, you know, answering phones, reading from a script, and just reading to the people who called, you know, what was the class action lawsuit that the callers were involved in? And, you know, the first case they put me on was about overdraft fees where banks and like one particular bank, but really all the banks did this, they would. reorganized debit card transactions in highest to lowest dollar order. And the consequence of that was that the bank could charge more overdraft fees to a customer because they had more overdraft fees when their bank account balance was zero if they

Starting point is 00:04:24 switched around the order of it. Like there were tons of cases that went through that building. You know, there's a whole whole section dedicated to Wells Fargo as well as, you know, other identity, like security breaches, the target issue happened through there where every target customer that had a debit card transaction between several years, their information was leaked. So that was kind of laying the groundwork of letting me know that there's some real problems with our payments infrastructure, even if you're talking about just debit cards before you get into credit. Of course, like in the building, there was also like mortgage lending,

Starting point is 00:05:06 discrimination, et cetera. But really, it was a huge learning moment for me about payments. Back to your start in Bitcoin, you met Tony Potdevin, is the name, and he was working for Thunder Hub, and people just have to realize, like, back at this time, 2017, when you two met and Lightning in general, like, this was more of a, like, people didn't even know if, like, this was going to work. Like, anybody who was dealing in Lightning back in 2017, they weren't dealing with anything like what we've got right now, which are these turnkey solutions with running a node on Umbrol or whatever one that you're using.

Starting point is 00:05:50 I know for me personally, back in 2017, it was just like a talking point. Like, yeah, you know, and maybe a few years, this will be something that people are actually using or doing. But for now, like you got layer one and maybe there's a, maybe there's a scaling solution. So tell it to us from your point of view when you met Tony and like what it was that you guys thought you were going to do with Ambos. Yeah. So early days of lightning was just a couple of telegram groups where some folks that were wanting to experience lightning were getting together and say, I'll open a channel to you. maybe you can open a channel to me.

Starting point is 00:06:31 And like this was like the reckless days. That hashtag reckless was all over the place because lightning was very experimental at that stage. Now, as we're experimenting with these things and L&D is improving, which is like one of the main implementations of lightning, as that was improving, it became more and more comfortable. So then there was a size limit for lightning channels that was part of the initial setup just to protect users from funds. But really, I got connected with some of the early tool builders. And one of those was Tony Pottenen. And he was building Thunder Hub, which he had built in a hackathon. And when he built that, that was like an actual user interface that I could understand.

Starting point is 00:07:25 understand. You know, I'm not a wizard when it comes to working in commands line. And, you know, I know a couple of commands just enough to be dangerous, but putting together a user interface for Lightning was so important. I got connected with Tony, sent him a few suggestions, and he saw me helping early Lightning users out in the chat, just, you know, how to get Thunderhub set up, how to navigate the interface, like what opening a channel was, what's sending a payment it's receiving a payment, these types of basic pieces as well as like setting up channel backups. So those early tools, like us getting together was was pretty important. You know, me on the more social side.

Starting point is 00:08:10 And then Tony, who's like just a ruthless tool builder that iterates really quickly. It's crazy to me to think that, you know, like I use, I use Thunderhub whenever I was, every channel I've ever opened. I've opened it through Thunderhub. And for me, as a non-programmer, like, it was an intimidating interface. But if when I take a step back and I think about, well, what would it be if I didn't have that interface to use to even open channels? And I don't even know, I don't even know how that would be possible without an interface like Thunderhub. So he's the guy that literally designed Thunderhub and made it possible so that I can go to another node, just for people that haven't run their own full know. Let me just describe it to you real easily. So I run a full node. I go and I can go to

Starting point is 00:08:58 emboss, a website that literally indexes all the people that are running full nodes. And I can find basically their IP address or it'd be like your mailing address if you were going to mail a letter to somebody. I can find this mailing address for other nodes that I want to connect to. And whenever I connect to them, I'm opening a channel with Satoshi's Bitcoin, then can be routed back and forth to each other. And there's a whole bunch of people that are doing this between the nodes. And the only way you can find other people is you've got to have some type of global index that people can reference. And that's what AmBoss is. And then Thunder Hub is where you would go to actually open these channels and say, this is the address. This is how much I want to open and do it in the next block. This is the fee that I'm

Starting point is 00:09:44 willing to pay and whatnot. So that's what we're talking about if people are wondering that maybe aren't as intimately familiar with layer two. But okay, so you met him in 2019. And so how did you guys, how did you come up with the idea for Amboss? Like, what was it that was driving you to know that there was something here to build? For early days, there's a big question of, like, who do I connect to? What are smart decisions in this new economy that we're creating? I mean, the whole, like, Lightning Network in general, I mean, you're taking your savings and you're deciding I'm going to put it in a new format that creates a pathway to another node. And by in so doing, that creates a payment network that operates without credit and without debt,

Starting point is 00:10:32 you have to make decisions that are costly. I'm going to make a Bitcoin transaction that's going to create a new pathway. In order to make that decision, especially if the decision is costly, I'm going to need some information. And so that was the main driver behind Ambas. Like, how do I package all the data together about this network and kind of create a map of it and be able to guide people on how to make a better payment network without credit, without debt? It works really fast at where you could pay next to zero fees. We started indexing the Lightning Network.

Starting point is 00:11:15 And there were a couple of tools out there. that did something similar. You know, one was like 1ML and then Fiat Jaff behind Noster. He actually created one of these explorers as well. But the early product was a Lightning Network Explorer, which basically just means all the nodes on the network we're going to give you a profile page. You can have your name, the color of your node on there.

Starting point is 00:11:43 You can have all your different channels listed. and we'll just make a whole bunch of data visualizations to help you understand the data about your node. So that was the main driver and then figuring out like, oh, okay, we need to start organizing node operators using markets. I would think that this would just be so overwhelming at the beginning. Was there a point early on where you guys were like, okay, like, what in the world are we doing here? Or did it just kind of immediately start clicking and like all the data out there like you were just a pig in mud? Like walk us through, walk us through those early days of what this was like.

Starting point is 00:12:26 Figuring out like, okay, how much did I just pay to open a channel? Like, where did the money go? And we know like it's reckless at this point. Like we're always double checking the node. Like how do we know that the money is still there? Yeah. Because I'm watching my balance. and it's changing around.

Starting point is 00:12:46 Why is it changing? And like there's no one that is able to really answer that question for you because there's like developers that are working on the protocol. Like how are we supposed to like make safe guardrails for people to help understand like what just happened with their money? I'm laughing, Jesse, because this is the exact feeling I had when I created, when I opened my first channel and I had all these tools at my design.

Starting point is 00:13:14 disposal. And this is how I felt. So I couldn't imagine how everyone felt in the early days without having some type of graphical way to view that the channel's been opened with this other party, right? Like, I could see, I could literally see it on your platform, on Ambos and with Thunderhub, and I could see that these things were happening, which you would think would put a person at ease. But the way you were just describing it is, I was just like, did I do it right? Did I just literally, like, shoot 10 million sats into the ether and they're gone forever. Like I just didn't have any type of and there's nobody sitting next to me like while I'm doing this and it was a little intimidating. But keep going. I want to hear more. Keep going. Like what Bitcoin does really well is accounting.

Starting point is 00:14:00 Like you're just keeping track of things. And you know, my background is environmental engineering. So like there's going to be flows from one point to another point. And it all at the end of the day has to all add up. These are the calculations that I'm doing. And in order to return a profit, you have to have an idea of what kind of funds are you spending. And so I'm having to do that calculation and like checking against my node, making sure that everything lines up just to give myself comfort. And now with Ambos, like, we're just trying to streamline all of that activity to help people, you know, make better decisions when it comes to using the life. any network so that we can actually create an alternative to traditional payment networks. Is there any other evolution that you guys have noticed? So you start with basically this data

Starting point is 00:14:54 analytics, basically coming up with a footprint of the entire layer two Bitcoin network. As you're trying to operationalize Ambos, like was there an evolution, were there any evolutions that happened or like moments where you're like, hey, maybe we should also be doing these other things or did it, have you guys just continued to try to make the original idea just better and better each day? One piece that we noticed is that people were coming into the Lightning Network and it was happening faster and faster. So when people joined, they would usually come into the groups and ask, why can't I receive a payment?

Starting point is 00:15:33 Like, I want to like send Lightning to my node. And we would just have to tell them, oh, it like you can't do that because like you need someone else to open a channel to you like how are the SaaS going to reach your point B if there's no road that's going there so really like liquidity and lightning is is directional because there's no credit and no debt like someone has to allocate their savings to you so that you can receive a payment and we realize that this is a huge user experience problem that huge problem of acquiring inbound liquidity means that there's a market there. And so what we put together was what we called magma,

Starting point is 00:16:21 where we just created a marketplace where you can log on and look at the different nodes that are willing to open channels to you. And they all have prices there. So you could just with a simple lightning payment, be able to buy a channel to your node. and your lightning payment only goes through if they actually open the channel to you. So that's how we set up this marketplace because in the early days I was actually trying to sell channels, say like, oh, okay, you need liquidity.

Starting point is 00:16:54 Well, it costs me money. So how much are you going to pay me to open a high quality channel to your node so that you can receive payments? So this is something that I was doing via telegram, just the same. simple messaging app. But with Ambos, we put a company together, like, let's create a marketplace for this that actually matches up people that have been saving Bitcoin with the people that need to receive payments because we know this is going to be huge in the future when we've got people selling goods on lightning and they want to be able to receive payments and receive those

Starting point is 00:17:30 reliably. You know, for people that are listening to the conversation, most are not running their own node, most are not tech savvy or really kind of doing the things that the hardcore Bitcoiners are technically doing with their coins and testing and trying these things out. So this is a question that I was going to ask you much further along in the show, but I think it's pertinent to do it right now just because people that are listening have heard us talk about, you need an inbound liquidity, you need this technical thing to happen in order for all this to really kind of work. And they're probably thinking to themselves like, there's just no way that this is going to catch on. But for folks that don't have a layer two wallet, like you can go and download wallet of Satoshi, you can go on

Starting point is 00:18:17 the cash app and you can seamlessly use layer one, layer two bitcoins. You don't even realize which one you're using. It's already seamless to the end user. The U.X is completely seamless. For that person, help them kind of understand, I guess, how you see this evolving five to ten years from now, what is the typical user of Bitcoin? They don't have to know any of this stuff. Is that a problem? That they don't have to understand all this as far as like the centralizing forces? Or do you think that the fact that they have the optionality to do these things if they really want to is enough to make sure that Bitcoin doesn't have any type of attack factor, I think is where I'm really going with the question? When people, when like the end user uses lightning, generally

Starting point is 00:19:07 right now, they're using custodial wallets. That means that your Bitcoin that you claim is yours is actually being held by someone else. Now, thankfully, like, we're in early days of Bitcoin where, you know, a lot of these developers and wallet creators are our friends. You know, there's not a lot of enemies to Bitcoin and to Lightning right now. But that may not always be the case. Now, to actually take another step and say, I'm not going to trust another company or person,

Starting point is 00:19:44 like, I'm going to have to set up my own infrastructure. And that infrastructure is essentially a small server. Now, we've kind of operationalized this a lot. Um, broil and voltage have done, you know, phenomenal jobs at like making, running your own server a much easier process. But that is a way to do it and minimize the amount of trust that is going on in payments. What this actually does in effect is like almost sets up a city on a map and there's going to be highways going between all of these different cities on the map. Let's take a quick break and hear from today's sponsors. All right.

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Starting point is 00:24:32 All right. Back to the show. No, no, no. That's perfect. So, well, back to this question. So do you think that the fact that people have the optionality to basically set up their own infrastructure and run it is the main thing that we need to ensure continues to exist, which it is with Bitcoin that makes it so much different than the legacy financial system,

Starting point is 00:24:58 which you don't even have anything remotely close to that optionality to run on your own. Does that prevent the attack vector of centralizing forces? Is that enough? Yes. I mean, people are going to be able to run their own infrastructure and just reduce the trust that they have had in other systems. Let me share this story with you that we were processing payroll for Ambos. and we were thoughtful that something may be happening in the banking sector.

Starting point is 00:25:32 Now, we're processing payroll and using a payroll provider, but what we didn't know was our payroll provider was banking at Silicon Valley Bank. And half a month's payroll had already left our account. And we find out soon after that Silicon Valley Bank has gone bankrupt. Wow. and it has no funds. Now, what situation are we in right now? Do we just lose half a month's payroll?

Starting point is 00:26:02 And not because of any fault of ours, but simply because we were using a vendor that was banking at this bank that until then, I had never even heard of. There is trust in our payment system. And this was like happening automatically. And I had no worries about it before. but now I'm concerned about it.

Starting point is 00:26:25 Now I'm wondering, is the FDIC going to step in and bail out my deposits, my payroll? Am I going to get that money back at all? Or are they going to devalue the money and bail out the banks like they did in 2008? This is the problem that we're trying to solve by creating a complete alternative to any trust-based financial settlement. And we can do that using our own infrastructure and by using Bitcoin, which can't be devalued in that same way as the U.S. dollar or any other fiat currency. Talk to us a little bit more about the existing centralized payment system because I know you are pretty well versed on all the issues that it currently has, but for people that aren't intimately familiar with the nuances of these issues. And then what we'll do is we'll also talk about the potential issues of a decentralized payment system like Bitcoin and layer two. So let's go ahead and hit the existing legacy system and do a little bit of a compare and contrast.

Starting point is 00:27:29 So I've been reading this book called The Anatomy of the Swipe. And it goes into detail about what happens when you're actually swiping your payment card at a payment terminal. And you'll swipe your card. And then soon after you're going to see a nice checkmark. whatnot. It says, oh, yeah, transaction approved. And then, at least in the U.S., you're going to add some funds to it right after that as like a tip. And like the actual debit from your account is the original amount, but then you're stacking on this tip on top of it. And the actual settlement from that payment doesn't happen until like 45 to 60 days later. Now, during that time,

Starting point is 00:28:16 like no money actually moves until much, much after that, that swipe period, you know, days, weeks, sometimes months. And during that period,

Starting point is 00:28:27 while you're waiting for the actual settlement to happen, there's still a risk that the merchant, whoever sold you, you know, your meal, your goods, but have you, that they may not actually receive those funds because you're

Starting point is 00:28:41 going to pull what's called a charge back. And so you can just reverse, that payment. All of our, the Fiat payment system that we've become accustomed to is a debit system. So if your information on your debit card gets leaked, then someone else is actually going to be able to pull money from your account. Now, like, that's the opposite way that Bitcoin operates, where every single payment is a push payment. So, so you're individually approving every time any funds leave your account or your wallet. Any other issues that you'd like to highlight?

Starting point is 00:29:23 I know that you've talked publicly about barriers to entry for competitors against like Visa and MasterCard and things like that. You already mentioned the counterparty risk there with the Silicon Valley Bank and, oh, Lordy. But yeah, how about the barriers to entry? Yeah. When we look at payment processors of the world, really there's three. Visa, MasterCard, American Express. And just Visa, you know, settles $5 trillion worth of payments

Starting point is 00:29:53 every single year. So this is a massive industry, but Visa used to be a nonprofit, and it is now a private company. It is using the same technology that was set up back in the 1970s. So there really hasn't been a whole lot of innovation that's happened in terms of payments. So when you go to swipe your card, the merchant is actually going to pay about 3% of the transaction just to make that settlement happen. Now, on the consumer side of things, we've been enticed by the idea that we're going to get, you know, one to two percent cash back. So that's going to be money back in the account. But what we're not taking a new account is the actual increase in prices just because of the inefficiency of the settlement system.

Starting point is 00:30:46 So the prices that we're paying are being marked up by 3% or more just because of the fact that the merchant is actually going to have to pay those settlement fees and take on the risk that there could be chargebacks. So, Jesse, I want to get into some of the really interesting things that you guys are now doing at Ambos, which is providing a marketplace, this Magma marketplace for people to open channels, for individuals, for companies, for whoever it might be that's wanting inbound capacity, liquidity. Walk us through how you guys created this open marketplace, what it looks like, the number

Starting point is 00:31:28 of people that are actually using it. Just tell us everything you got. We launched Magma a little over a year ago. and we allow people to just say how much they'll charge to take their Bitcoin savings and allocate them towards payment rail. And so that's what's being created with the Lightning Channel, is a new payment rail going to a new destination. So anybody that wants to start up a business and accept Lightning payments with their own node

Starting point is 00:32:02 and their own infrastructure just goes on to Anaboss. thought space slash magma and goes and clicks buy on one of those nodes. And they can also like review and determine whether that's a valuable node to buy a channel from. And depending on like the price that they're willing to pay, we'll get information about what's the value of liquidity that the, that the market is finding. So you could price your channels very inexpensively. And then, like, we'll have a better sense of, you know, what's the cost of settlement from like continuously operating this new payment network?

Starting point is 00:32:45 Yeah, this gives us a each of these channels that are sold for like a month, three months, or six months at a time. They'll agree to keep it open. And they'll also promise to keep their routing fees very low. So they won't pay, consumers won't be paying a transaction fee each time. So a merchant can go through and just buy one of those channels and set up a new payment rail to their business. Teach people why this is so different than the existing financial system, credit-based financial system with respect to risk-free rates and what this might potentially offer in the future. When you're using a credit card, for example, that issuer is essentially loaning you the funds

Starting point is 00:33:34 and they're going to charge a high interest rate if you fail to pay. Instead of doing that, what we've created with lighting is a way to simply take your Bitcoin and make it be used for payments. And when you're doing that, you're actually not giving up custody of your Bitcoin, even if you're the channel creator. So you don't have to worry about someone else taking your Bitcoin, even though you've just increased the utility of this new monetary asset. Now I can use this awesome store of value as a medium of exchange.

Starting point is 00:34:12 And I've just set up that network. Now, I don't have to trust the other person and I'm getting a yield off of it. So this is the first time that this has ever existed. is you can earn yield from your Bitcoin without having to trust any other party. Really, you just have to trust your own infrastructure that you've set up. I'm going to put up a chart, Jesse, here so people can see what this looks like today. Describe this for people that are only listening to the audio so that they kind of know what we're looking at. But, I mean, it's a yield curve.

Starting point is 00:34:49 It's a, would we call it yield as far as, oh, you know, the financial definitions get tricky here because you're not giving up custody of the coins. It's almost like you're renting the liquidity. I don't know what the proper terminology would be. But anyway, over to you. There's really no words for it. But instead of LIBOR, where you have an idea of like a reference rate for interest, what you have up is called what we're calling the liner, which is the lighting network rate. And this is a dual index.

Starting point is 00:35:28 There's two pieces to it. So there's the liner cost, which is, what does it cost a merchant to get set up with liquidity? And we can see that when we first started the marketplace, there wasn't a ton of volume. So it was up closer to 5%, but we watched it drop down to about 2%. that folks were paying for that initial bootstrap of liquidity. If they're paying 2%, that means that they're saving an entire percent of their transactions versus a payment processor. Now, on the other side of things, there's the people that are using their savings to create

Starting point is 00:36:11 a new payment network. And that's what we're calling the liner yield. So that's the green line, which is below the liner cost. And that actually shows that people can earn yield without giving up custody of their funds at any point. So people can earn up to what we're seeing is above 2% yield for providing liquidity to the lighting network. This is really where it comes together. because on the one side, if you're a holder of Bitcoin, why aren't you using your Bitcoin to create a new payment network? And on the side of the business operator, why are you using a less efficient settlement method that uses credit and debt when you can use the lighting network and you could have instant settlement and no chargeback risk?

Starting point is 00:37:09 Jesse, I want to talk to you a little bit about the inscription stuff that's been happening. on layer one. This has made the fees really blow out and get much higher. How has that impacted lightning and channel management? Because anytime somebody wants to close a channel or open a channel, they got to do that on layer one, which has these high fees now. Just walk us through some of your thoughts on that. By putting other things in the blockchain, everyone is essentially bidding to get into the Bitcoin blockchain and get be part of this immutable record. When that happens in order to like create a channel, you're going to have to bid a higher price to be part of the Bitcoin blockchain.

Starting point is 00:37:54 And it's costing a lot to actually create this new infrastructure. Now like despite the higher fees that are being paid, there's still an opportunity to earn yield by setting up this infrastructure. When folks are adding inscriptions, they're adding images and whatnot, they're essentially stamping the blockchain. They're also doing that with new assets under this BRC 20 standard. And consequently, there's been a lot more concern about am I opening the channel, a lightning channel to the right person or to the point where it's just saying, okay, this is a crazy

Starting point is 00:38:35 fee spike, I'm not going to pay it a transaction fee that's quite that high. And I'll just wait until this hype, this mania is over and then set up my infrastructure at a time at some point in the future when I think the prices for a Bitcoin transaction will be more reasonable. Have there been any metrics? You guys are doing the analytics and the data on everything, lightning, is there any metric or chart that you like in particular or that you think is really representative of a certain idea? If you pull up the order details chart on Ambus, you can actually see this really significant gap in when we've seen magma orders happen.

Starting point is 00:39:24 And that was quite recently with this like BRC 20. Oh yeah. Yeah, excitement. Is that right in here, Jesse? Yeah. The start of May then. It's just this huge gap where there was essentially zero volume through our marketplace for lightning channels because the network was just like, well, forget about it.

Starting point is 00:39:49 I'm not paying that much. Like, can't I just wait to set up the infrastructure at a time when fees are much more reasonable? I love it. Recently, there was this announcement down at the Bitcoin Miami about ARC. And this was an attempt. Well, I don't know if attempt is the correct word, but it's a protocol that's trying to remove this burden for inbound liquidity that we talked about a little bit earlier.

Starting point is 00:40:19 It also has some privacy benefits. I'm curious what your thoughts are on ARC and whether you think that it's going to be something that actually catches on or if it just kind of physically. out and kind of goes away. What are you thinking? I would put this in context because, you know, lightning was a white paper in 2016 and it's still early days and it's seven years later. Arc has received a lot of excitement recently and I hope the ideas accelerate.

Starting point is 00:40:51 But I think that's really the stage that we're at right now is like the initial idea phase. It's being talked about quite a bit, this discussion about is this the direction that we want to take a second layer on Bitcoin? And what does it mean for the lighting network? It sounds like ARC may be able to work with lightning in a way and using a shared UTXO model. It's still like early days to even understand what this thing is, although it's, it's exciting to actually have potentially private payments and not have this inbound liquidity problem. One thing I'm curious about is the network effect, because with lighting network, we've got now businesses that are set up on it and developers that have like different camps

Starting point is 00:41:48 and are working on different aspects of it. It's a whole like flourishing ecosystem of development that's happening. And that might be hard to replace just because of the network of execs that has. Like, this is when you go down to El Salvador, like, people are using lightning. Like, that is like the method of payment that people have become familiar with. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up and customers now expect proof of security just to do business. That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform. So whether you're prepping for a stock two or running an enterprise GRC program, VANTA keeps you secure and keeps your deals moving.

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Starting point is 00:45:36 I mean, you're effectively at the white paper phase. Like, nobody's actually implementing anything on this program. The one thing that I found a little bit interesting or maybe a barrier to use is just the refresh. I guess there's a refresh that's required every 30 days for people that are using it. It almost seems like it might be a tool for larger companies or entities that are operating on Lightning in the future. Maybe it's for them and not as much the end user, which is a little ironic because it almost seems like it's for end users to have immediate inbound liquidity. It might not even be used

Starting point is 00:46:19 by the retail or individuals in practical use, if at all. I'm just curious to hear some of your thoughts on that. How about for a guy that's so close to lightning, what is something that you think a lot of people are missing about the Lightning Network right now that you're excited about or you think is really important moving forward. What I'm really excited about is enterprise adoption of the Lightning Network. And that comes in two forms, one, in just the formation of markets around Lightning. The fact that folks with Bitcoin holdings can start earning yield at very low risk without making the same mistakes that people made by allocating their Bitcoin into

Starting point is 00:47:05 C-Fi yield platforms. This whole system doesn't need to blow up and we can have cheaper payments. So that would be a win. And the second piece is after attending the micro strategy conference and having KPMG on one side of me and fidelity on the other side, all done up in suits and getting palpably excited about the lighting network. Michael Saylor can essentially tip his employees for meeting their workout goals at work or showing up to meetings on time. And everybody in the room that I would never expect to be excited about Bitcoin and Lightning are really excited about it. They're freaking out if they're going to be over a minute late to their next meeting because they would miss out on the stats that they would get.

Starting point is 00:47:57 The other aspect is just new use cases. Noster is incredible. As a new social network and a social network protocol, like we can have just internet native payments that are just flying around. You know, I'm posting a meme a day on Noster and people are sending me sats. Just like throughout the day, I check my phone. I've got a new notification from Wallet of Satoshi. saying, you know, you just receive 21 sats or 101 sats, just sending me like a little

Starting point is 00:48:34 LOL message with Satoshis that I can save as, you know, real money and use my node to convert to Bitcoin and I can move into cold storage, what have you. The whole thing is exciting. It just really lowers the friction involved in payments. Yeah, I completely agree with you. This past 12 months, everything just started to become very real. I know whenever I was just opening the channels earlier when I started using AmBoss initially, like I was using Lightning. I was setting up these channels, but there wasn't really like any type of operational use case like out there. You know, you'd do like test transactions where you'd send a friend 100sats or whatever, but there was nothing that was like real to it. But once you started using it on Noster, seeing like,

Starting point is 00:49:23 what Michael's doing at Micro Strategy and just people are really finally starting to harness this idea that if there's no fees for even the smallest two-cent transaction and I can immediately settle those two things, it's kind of phenomenal what type of use cases are starting to pop out of that that were never possible before, streaming stats to listen to podcasts or whatever it might be. And I think we're just kind of just starting to hit the tip of the iceberg of where some of this is going to start going. So I'm with you and I totally share that sentiment. Jesse, if people want to learn more about you, is there anything else that you want to hand people off to to teach them more about lightning or Bitcoin or Amboss? Fire away. Let them know.

Starting point is 00:50:12 Certainly read as much as you can. If you understand Bitcoin and you want to dive deeper and start to understand. And not only Bitcoin as a store of value, but Bitcoin as a settlement network and Bitcoin for payments for global settlement, yeah, I'd push them to, yeah, pick up mastering lightning and, yeah, start building, run a node, install Thunder Hub, and start exploring on Ambas. I love it. Jesse, this was a real pleasure. And thanks for making time to come on the show. It's my pleasure, Preston. Thanks so much. If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application

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We Study Billionaires - The Investor’s Podcast Network - BTC133: Creating a New Libor on Bitcoin w/ Jesse Shrader (Bitcoin Podcast)

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