Posted on

Lightning Speed: Taro Is Here! Lightning Labs Releases The Code’s Alpha Version

The controversial Taro protocol is ready for testing. The initial version of the code is available on GitHub, and it enables “developers to mint, send, and receive assets on the bitcoin blockchain.” Notice that the company isn’t talking about the Lightning Network yet. In a blog post announcing the Taro launch, Lightning Labs promised, “once the on-chain functionality is complete, we’ll work towards integrating the Taro protocol into lnd, bringing Taro assets to the Lightning Network.”

This is the first step of many and it’s mainly aimed at developers. According to Lightning Labs, “this initial release is only designed for testnet usage as a way for developers to start using the code.” That means, no real value is flowing through Taro at the moment. But… what is Taro anyway? The blog post defines it as a “Taproot-powered protocol for issuing assets that can be transferred over bitcoin and in the future, the Lightning Network for instant, high volume, low fee transactions.”

Taro Will Enable Stablecoins To Travel Through Lightning

This is a multifaceted protocol that allows many things, but the feature everyone is excited about is the fusion of stablecoins with the Lightning Network. It’s controversial because you have to trust the issuer of stablecoins, which means they come with counterparty risk. Bitcoin doesn’t have that problem. In any case, in the subsection titled “The First Step Towards Bitcoinizing the Dollar,” Lightning Labs tries to convince us that stablecoins over Lightning are a good idea:

“With Taro and the incredible developer community, we can build a world where users have USD-denominated balances and BTC-denominated balances (or other assets) in the same wallet, trivially sending value across the Lightning Network just as they do today. This leap forward will accelerate the path to bringing bitcoin to billions.”

If that sounds too much like Galoy’s stablesats, it’s because both implementations are trying to solve the same problem. They use vastly different methods, though. And place the counterparty risk in different places.

BTC price chart for 09/29/2022 on Fx | Source: BTC/USD on TradingView.com
How Does Taro Work And What Else Does It Do?

Don’t worry, these brand-new protocols are hard to master, or even understand. Luckily for us, Lightning Labs gave us a technical-but-easy-to-follow explanation as a refresher:

“Taro assets are embedded within existing bitcoin outputs, or UTXOs. Think of these assets as “UTXOs within a UTXO.” A developer mints a new Taro asset by making an on-chain transaction that commits to special metadata in a Tapoot output. When minting a new asset, the Taro daemon will generate the relevant witness data, assign the asset to a private key held by the minter, and broadcast the newly created bitcoin UTXO to the bitcoin network. This new outpoint becomes the genesis point of the newly minted asset, acting as its unique identifier.” 

When Lightning Speed first tackled the Taro subject, we explained what a Taro asset can be:

“What is a “Taro asset”? Whatever you want, your BTC can be “converted into different assets such as USD to EUR or USD to BTC.” Or, as Bitrefil’s Sergej Kotliar puts it, “Pay in currency of sender’s choice, receive in currency of recipient’s choice. This means that every wallet can now have native Strike-type “USD balance” functionality for example. With no need to trust the wallet, the only trust lies in the issuer of the token.”

How To Get Started With The Novel Protocol

As previously stated, this Alpha release is mainly for developers. If you’re one or know of one, here are the protocol’s coordinates: 

“To get started exploring Taro, download the daemon, check out the API documentation, and read the getting started guide. And for a more extensive explanation on how Taro works, take a deep dive into the Taro BIPs and our documentation.”

Have a blast, developers. And please report back to us with your findings.

Featured Image by Jennyrang from Pixabay | Charts by TradingView

Posted on

Lightning Speed: Taro Wants To Abolish Cross-Border Payments, Disrupt The Market

Have you heard about Taro? It’s an improvement proposal for the Lightning Network that Lightning Labs introduced in April. “Taro makes Bitcoin and Lightning multi-asset networks,” the company claims in the latest edition of their newsletter. They also explain in simple words what the protocol does, how it does it, and the implications of its implementation.

“In a world of omnipresent communications connectivity, nobody says “cross-border messaging” anymore. Taro promises to do the same thing to “cross-border payments” by decentralizing the entire global FX market into a protocol that can run on a Raspberry Pi by anyone, anywhere.”

Is the Lightning Labs exaggerating? Or is Taro the protocol that will bring the next billion people to the Lightning Network? “The opportunity provided by Taro bringing assets like stablecoins to the Lightning Network is clearly enormous,” the company claims. Can Lightning Labs back that case and argue it convincingly? Let’s find out.

What Taro Does And How It Does It  

The first thing Lightning Labs makes clear is the psychology behind the improvement proposal. It almost seems like bitcoin’s Lightning Network will be serving Taro and not the other way around.

“Instead of starting from scratch and bootstrapping a new ecosystem of nodes and liquidity, Taro will leverage the existing network effects of both the infrastructure that’s been built out over the last several years plus the 4000+ BTC allocated to the network today as a global routing currency.”

How does it work, though? The “edge nodes” are the key. By “integrating with Taro,” normal Lightning nodes can now “process an instantaneous conversion from L-USD into BTC or vice versa, for a small fee.” That means that “every Taro transaction on the Lightning Network will be converted into BTC by the first hop, routed across the network as BTC, and then converted back into a Taro asset by the last hop before the destination”

What is a “Taro asset”? Whatever you want, your BTC can be “converted into different assets such as USD to EUR or USD to BTC.” Or, as Bitrefil’s Sergej Kotliar puts it, “Pay in currency of sender’s choice, receive in currency of recipient’s choice. This means that every wallet can now have native Strike-type “USD balance” functionality for example. With no need to trust the wallet, the only trust lies in the issuer of the token.”

The trust model is the main difference from Galoy’s Stablesats, another novel concept that looks for a similar result.

BTC price chart for 08/13/2022 on Bitstamp | Source: BTC/USD on TradingView.com
What Does Taro Mean For The Lightning Network?

In a recent interview published by NewsBTC, AXX’s head of research and strategy Ben Caselin explained the protocol further

“In Taro, smart contracts and asset transfers are not executed by the blockchain, and they are also not enforced by the blockchain. Instead, transfers are executed by the sender of an asset (who has to make a corresponding bitcoin transaction), and enforced by the recipient, same as the Lightning Network.”

And in the previous Lightning Speed, we theorized about how big could this development be for the Lightning Network.

“According to The Bitcoin Layer, “a global capital market operating on top of bitcoin-denominated financial rails is inching closer with each new onramp.” And the Taro protocol and all of the assets it would bring to The Lightning Network is the mother of all onramps.”

Back to Lightning Lab’s newsletter, the company toyed with even bigger expectations. For example:

“A community bank could issue a local stablecoin on Taro and it would only need a handful of nodes or liquidity providers to make a market between the local currency and the BTC core of the Lightning Network to be connected to a global community of buyers and sellers. No permissioning required!”

They’ll Never See It Coming

According to Lightning Labs, bitcoin “renders cross-border payments obsolete.” Stablecoins are a huge business and so are cross-border payments. In the intersection between them, Taro stands tall. “Visa’s 65% operating margin is one of the highest of all the companies in the S&P 500 index, and this margin is Lightning and Taro’s opportunity. They’ll never see it coming.”

The company expects that the benefit for everyone working on the Lightining Network will be tremendous. “We expect that bringing Taro to market and making Lightning a multi-asset network will dramatically expand the Total Addressable Market for those building Lightning applications.” And you know what more users mean, more of those sweet-sweet fees.}

Featured Image by Joseph Mucira from Pixabay | Charts by TradingView

Posted on

The Bear Market Correction Could Be Over, According To ARK. Reasoning Inside

Rejoice! The bear market might be over. That’s the main thesis behind July’s “The Bitcoin Monthly” report. “Because bitcoin’s price did not rise parabolically during the 2021 bull market, its bear market correction could be over,” ARK reasons. And it makes sense, the numbers seem to suggest it, and it feels like it. However, are we fooling ourselves? Is ARK’s reasoning wishful thinking? Let’s examine the data and see what it tells us.

First of all, “bitcoin closed the month of July up 16.6%, rising from $19,965 to $23,325, its most significant gain since October 2021.” So far, so good. Can we declare that the bear market correction is over, though? Well, “the likelihood of touching its delta cost basis has diminished, bitcoin’s downside risk in a bear market technically stands at its delta cost basis, currently $13,890.” This number seems far away. Maybe bitcoin is slowly getting out of its slum. 

“Bitcoin has corrected 72% relative to its alltime high. Although this drawdown is consistent with intracyclical corrections, like the COVID collapse in 2020, bitcoin usually finds global cyclical bottoms with a correction greater than 80%.”

That doesn’t sound as promising. Maybe there’s more pain ahead, however… “Given the positive correlation between bitcoin and US equities since COVID, the US being the leading price mover of bitcoin suggests an emerging risk-on market environment,” ARK claims. Apparently, the US has been leading the bulls lately. Perfect. Bitcoin needs all the help it can get in these trying times.

Are We Leaving The Bear Market? Let’s Look At The Signs

  • “Contagion in the crypto markets appears to be contained, as Celsius and Three Arrows Capital officially file for bankruptcy.”

Announcing the Celsius news, NewsBTC said “After weeks of conjecture and hearsay, Celsius’s legal counsels have formally informed regulators that the cryptocurrency lender has filed for Chapter 11 bankruptcy protection.” Announcing the 3AC one, we said, “Crypto hedge fund 3 Arrows Capital is slated to be another pillar piece of 2022’s bear market headlines, joining the likes of brutal bear market moments that include Terra Luna’s downfall and CeFi’s drama.”

  • “Leverage appears to be unwinding across the crypto ecosystem, paving a path to recovery”

That’s phenomenal. May this continue to happen.

  • “After trading below its investor cost basis for the first time since March 2020, bitcoin has reclaimed major support levels and is trading above its market cost basis.”

Great news. Is this real, then? Are we getting out of the bear market this fast?

BTC price chart for 08/09/2022 on Kraken | Source: BTC/USD on TradingView.com
Other Factors, Miners And Lightning

  • “Despite continued miner pressure, bitcoin’s economics are at equilibrium.”

Ok, some miners sold and others turned down their machines. However, the pressure seems to be subsiding and the sun seems to be shining. 

  • “Bitcoin’s scaling solutions appear to be gaining momentum, as capacity on the Lightning Network reaches an all-time high.”

The Lightning Network went head to head with the bear market and didn’t even flinch. People are building and the L2 solution is bigger and better than ever. “LN capacity growth seems to accelerate during bear markets, marking a shift in sentiment from exuberance and speculation to testing and building longterm solutions for bitcoin.”

  • “Given continued declines in economic activity, including employment, the Federal Reserve could pivot during the second half of the year.”

Is the US in the middle of a recession? Opinions vary, but the results are the same. People all over the world are struggling. “The drop was attributable largely to a decrease in inventories, residential and non-residential investments, and government spending. Strong recession signals could compel the Fed to change its hawkish stance,” ARK states. 

  • “The 10-year Treasury bond yield has been unable to sustain a move above 3% and is now falling, posing less competition to cryptoassets.”

Government bonds were the safest investment for years and years. Nowadays, they’re not the new kid on the block anymore. Bitcoin is the new kid on the block. This bear market might not have been more than “brief deviation.” We might be back in business after all.

Featured Image by Alexa from Pixabay | Charts by TradingView

Posted on

Lightning Speed: How To Take BTC From Reserve Asset To World Reserve Currency

Is the Lightning Network bitcoin’s killer app? It might be, but it still has a long road ahead. One of the stops on that road is the possible inclusion of stablecoins. Does bitcoin need them? Aren’t there inherent counterparty risks with those? The debate over those questions rages on. And in their latest post, The Bitcoin Layer makes the case for this development to be crucial in The Lightning Networks trajectory. 

According to The Bitcoin Layer, “a global capital market operating on top of bitcoin-denominated financial rails is inching closer with each new onramp.” And the Taro protocol and all of the assets it would bring to The Lightning Network is the mother of all onramps. However, the risks it brings forth are as big as the opportunities it presents.

Let’s explore what The Bitcoin Layer has to say before jumping to conclusions. They might surprise us.

Making Lightning Interoperable With Everything

The first part of the article is about Magma, “a Lightning liquidity marketplace that allows nodes to buy and sell liquidity by leasing other network participant’s channels for a minimum specified period of time.” According to the article, Magma’s existence proves “a structural demand for secondary markets of liquidity”. In those markets, “participants can buy and sell collateral as needed—eventually blossoming into a deep and liquid capital market.” 

Not only that, The Bitcoin Layer also theorizes about:

“Through time, Lightning Banks will emerge. As market participants lack the technical wherewithal to efficiently operate Lightning channels, most Lightning Network channel management will be subsumed by these entities who specialize in it.”

And this is where the Taro protocol comes in. When it was announced, our sister site Bitcoinist posed the following questions:

“So, the main idea is to create and transact stablecoins over the Lightning Network, but the technology allows users to create any asset including NFTs. And the bitcoin network underpins the whole thing. However, is this a positive development for bitcoin? How will this benefit the Lightning Network? Does a hyperbitcoinized world require tokens?”

And The Bitcoin Layer provides convincing enough answers to those questions. But first…

“Taro makes bitcoin and Lightning interoperable with everything. For the Lightning Network, this means more network volume, more network liquidity, and more routing fees for node operators, driving more innovation and capital into the space. Any increase in demand for transactional capacity that will come from these new assets (think stablecoins) will correspond with increased liquidity on the bitcoin network to facilitate these transactions.” 

BTC price chart for 08/09/2022 on Kraken | Source: BTC/USD on TradingView.com
A Bitcoin-Denominated Global Capital Market

“Using sats as the transmittal rails for transactions across every currency opens the door for a bitcoin-denominated global capital market”. No one would contest that. Nor that “the Taro protocol opens the floodgates for this traditional finance liquidity to be subsumed by a faster, counterparty-free settlement network”. The network is counterparty-free, but, what about the assets’ inherent counterparty risk?

Conceptual Future Bitcoin-Lightning Risk Curve | Source: The Bitcoin Layer

According to The Bitcoin Layer, it’s all about risk and the barrier to entry:

“Higher tiers on the risk curve require less maintenance but incur more risk, whereas the lower levels on the risk curve incur less risk but have a higher barrier to entry for the average person who lacks the technical wherewithal for maintenance and security best practices.” 

And they make the case that the introduction of Taro is a crucial step in the process of bitcoin fulfilling its destiny of becoming the world reserve currency.

“For bitcoin to become a world reserve currency, a deeply liquid capital market is an intrinsic requirement—and the Taro protocol is a promising step in making that happen. While bitcoin and LN are trillions of dollars away from becoming a legitimate alternative to other capital markets, they arguably maintain the lowest collective risk profile of any capital market in existence, as they are underwritten by an asset that when custodied incurs zero counterparty risk.”

Zero counterparty risk.

Does The Lightning Network Need Stablecoins, Though?

The answer to that question is still up in the air. The Bitcoin Layer acknowledges the inherent counterparty risk those present. It even puts them almost at the top of the risk curve. However, they consider them crucial and even welcome every other asset in the world to The Lightning Network. According to their theory, that’s how “a bitcoin-denominated capital market” emerges.

Of course, this is all speculation. The Taro protocol has not been approved. Bitcoin’s liquidity is far away from what it needs to be to become the global reserve currency. And, even though stablecoins on The Lightning Network might be closer than we think, the whole scenario takes place in a distant future.

Featured Image by WikimediaImages from Pixabay | Charts by TradingView and The Bitcoin Layer

Posted on

Lightning Speed: Branding Opportunities On The Lightning Network, A How-To Guide

Leveraging the Lightning Network for branding? Is that even possible? Voltage, a bitcoin infrastructure provider, makes a great case for it. Granted, their “Identity and brand on the Lightning Network” article is in itself a branding effort by the company. That doesn’t mean the information it contains is invalid, though. In fact, they probably hit the nail on the head with this one.

Related Reading | Lightning Speed: What’s The Lightning Development Initiative?

The company’s CEO, Graham Krizek, is the piece’s author. “One of the interesting things about the Lightning Network is that you as a node operator have a “billboard” (an alias) with which to advertise your node. The alias is a human-readable, and changeable value that people interacting with your node can see,” he says going straight to the point. The other factor here is time. Companies that start their branding efforts now will reap the most benefits in the future.

Let’s let Voltage explain what their thesis is about:

“The Lightning Network is still in the Innovator to Early Adopter phase of the Adoption S-Curve.  Despite rapid growth, participants continue to have a unique opportunity to use minimal effort to capture a large potential upside in value. The creation of a node in under 2 minutes allows companies and individuals to have a stake in the Lightning Network and leverage this to build differentiating brands.”

The keywords here are “minimal effort” and “under 2 minutes,” but don’t let Voltage fool you. Spinning up a node might be an easy and low-cost branding endeavor. Your company will have to keep it up forever to earn the trust it’s looking for, though. 

Branding Over Time And Space

The fact of the matter is this: if bitcoin becomes what it’s supposed to be, the companies that supported the network from the beginning will get a big branding boost. 

“As a decentralized network with public accountability, the simple act of broadcasting your alias allows for a compounding effect of time on the value of trust. A strong brand relies on consistent and honest performance over time. Running a node permits you to build that brand and immediately illustrate dedication to customer security, customer privacy, Bitcoin, and a long time preference.” 

All of this is nice and makes sense, but there’s something missing. The biggest alpha in the whole Voltage article is only slightly related to branding. It’s a sneaky piece of information that makes all the sense in the world.

“This brand display on the Lightning Network is a passive and effective means of showing support for Bitcoin. As the cryptocurrency space continues to grow more muddled and diverse, having a public statement in support of any one coin can become divisive. Running a node on the Lightning Network does not require any words to be spoken or any announcement to be made.”

Some companies can’t afford to be bitcoin-only, and that’s ok. However, if you want to avoid divisiveness, actions speak louder than words. Spin up that node and make a silent statement. The people in the know will hear your message loud and clear. That’s branding for you.

BTC price chart for 06/22/2022 on Eightcap | Source: BTC/USD on TradingView.com
Early Adopters Building Trust

As we told you, the other factor here is time. “Strong brands require the humbling reality that time in the public eye building trust is the key to success. Early adopters compound this value of time to dominate a market,” Voltage says. Spinning up a node is the easy part, to earn the trust to open channels with other nodes takes time and effort. As all branding does. 

“Time-building trust within this network compounds through the availability of capital allocation. The Lightning Network rewards time and the building of trust by increasing the amount of traffic through the establishment of more channels. Rewards that leverage the network effect weigh the value of time heavily.”

In any case, one thing’s for sure, the time to act is now. For most companies, the Lightning Network is uncharted territory. It could become the primary way to send value over the bitcoin network, though. “The tremendous upside potential of building a strong brand in this uncongested space comes at the low expense of creating a node and capitalizing on time,” Voltage says. 

Related Reading | Lightning Speed: Open-Source Bitcoin Banks’ Fee Structures For Inbound Liquidity

It might make sense for your brand to claim your terrain in the Lightning Network, in case it catches on.

Featured Image by Keila Hötzel on Unsplash | Charts by TradingView

Posted on

Strike Brings The Lightning Network To Every US Merchant. The Market Yawns

The Strike announcement was an atomic bomb, but the market is not impressed. Since Jack Mallers wasn’t there to reveal an Apple deal as rumored, the general public was somewhat disappointed. However, the Strike CEO announced something much bigger. The company partnered with Blackhawk and NCR to bring Lightning Network transactions to Point Of Sale terminals all over the United States. Plus, with Shopify for the e-commerce equivalent. 

The man was playing third-dimensional chess with us. Mallers titled the presentation “The King’s Gambit,” an alternative to the “pawn to e4” chess opening he usually mentions. Here’s the video:

Inside Strike ‘s Announcement

The presentation started with a brief history of payment networks, starting in 1949 with the invention of the Diner’s Club card. The first revelation comes next: payment networks have not evolved or innovated in 50 years. The legacy financial system is still using this ancient technology like there’s no tomorrow. 

These merchants are adopting Bitcoin for payment this year. (Jack Ballers – Strike). pic.twitter.com/FF57vYF7BH

— Big Sky HODL ⚡ CO Beef Initiative (@BigSky_HODL) April 7, 2022

As usual, Strike’s Jack Mallers proposes to the world that it should join an “open payment standard.” That it should use a “superior payment network.“ And with these partnerships, he finally accomplishes it. Strike will use the bitcoin network as payment rails to enable Lightning Network transactions in a high percentage of merchants in the US. According to Mallers, bitcoin will finally be “embedded into our lives.”

Another interesting part of the story is Senator Cynthia Lummis’ support. According to a letter she sent to Mallers, she says “I am working to bring smart legislation to the digital assets space, so that innovations like this can be integrated into America’s financial services industry.“ That’s reassuring. Because chances are legacy players will fight this. 

thank you @jackmallers. you're an incredible inspiration.

— jack⚡ (@jack) April 7, 2022

The senator will speak tomorrow, on Bitcoin 2022’s final day of conference. 

BTC price chart for 04/08/2022 on Oanda | Source: BTC/USD on TradingView.com
How Did The News Affect The Market?

The general public was expecting Strike to announce an Apple partnership that would’ve made bitcoin’s price pump to infinity. It didn’t get it. So, bitcoin traded around the $43K range the whole day and acted unaffected in front of Jack Mallers’ news. It seems like the market didn’t even flinch. 

What @jackmallers just announced is going to kick off the #Bitcoin circular economy in a massive way.

I think few understand that the inability to easily use BTC is what makes it difficult to accept as a daily driver.

Medium of exchange is here. Next stop, Unit of Account.

— Guy Swann ⚡ (@TheGuySwann) April 7, 2022

More nuanced than an Apple partnership, it will take months, maybe years to see the new’s impact. On the one hand, people aren’t incentivized to spend their bitcoin. As long as its price is increasing, people will want to hold the asset. On the other, this provides a non-KYC way to spend your bitcoin. A non-KYC way of paying. The Strike announcement makes bitcoin a competing Medium of Exchange and puts it into every store in the US.

Is that fact priced in? 

What Does The Twitterati Think About Strike ‘s News? 

The Guy Swann sums up the announcement by declaring it’ll “kick off the Bitcoin circular economy in a massive way. I think few understand that the inability to easily use BTC is what makes it difficult to accept as a daily driver.” For his part, podcaster Anthony Pompliano said, “Hundreds of millions of people can now spend bitcoin or dollars across the Lightning Network instantaneously, completely for free at every major US retailer.”

Strike CEO @jackmallers and Strike just announced partnerships with Shopify and other leading payment providers.

Hundreds of millions of people can now spend bitcoin or dollars across the Lightning Network instantaneously, completely for free at every major US retailer.

— Pomp 🌪 (@APompliano) April 7, 2022

In a phenomenal thread, Economist Lyn Alden explains the implications. “The more places that accepted BTC at point of sale (on-chain or Lightning or otherwise), the more permissionless the whole network is. This is because, if all you can do with BTC is convert it back into fiat on a major exchange, then it’s easy to isolate it, effectively blacklist addresses, etc.”

This is because, if all you can do with BTC is convert it back into fiat on a major exchange, then it's easy to isolate it, effectively blacklist addresses, etc.

But if you can directly spend it on goods and services across companies and jurisdictions, it's harder to isolate.

— Lyn Alden (@LynAldenContact) April 7, 2022

On the other hand, notorious YouTuber Bitboy Crypto misses the point completely and says. “Michael Saylor: Never Sell your Bitcoin (crowd goes WILD) Jack Mallers: Here’s a great way to spend your Bitcoin (Crowd goes WILD) Like does no one see the disconnect here?” 

Michael Saylor: Never Sell your Bitcoin (crowd goes WILD)

Jack Mallers: Here’s a great way to spend your Bitcoin (Crowd goes WILD)

Like does no one see the disconnect here?

— Ben Armstrong (@Bitboy_Crypto) April 7, 2022

Matt Ahlborg, head of research at Bitrefil, gives Bitboy the 411. “What Jack Mallers is really saying is that you will be soon be able to offload your Bitcoins in the real world without KYC’ing through an exchange first.” While Jack Dorsey keeps it short and sweet by saying, “thank you Jack Mallers. you’re an incredible inspiration.”

What Jack Mallers is really saying is that you will be soon be able to offload your Bitcoins in the real world without KYC'ing through an exchange first.

If this is true, it is actually an extremely substantive and important development for Bitcoin.

— Matt Ahlborg (@MattAhlborg) April 7, 2022

The whole world changed after that Strike announcement. It might feel similar, but we’re living in bitcoin world now. Make of that what you will. 

Featured Image: Jack Mallers at Bitcoin 2022 taken from this tweet | Charts by TradingView

Bitcoinist @ Bitcoin 2022 Miami

Bitcoinist will be at Bitcoin 2022 Miami in Miami Beach, FL from April 6th through 10th reporting live from the show floor and related events. Check out exclusive coverage from the world’s largest BTC conference here.

Posted on

Light Speed: Kraken, Another Giant Exchange Integrates The Lightning Network

This is huge! Kraken now supports Lightning Network deposits and withdrawals. The suddenly popular second Layer protocol keeps growing and gaining importance. “Finally, traders have an instant and inexpensive way to move bitcoin on and off the platform,” Kraken said in their official announcement. The Lightning Network is much more than that, though. 

What will happen once Kraken’s extensive clientele tries out Lightning transactions? Will the phenomenal experience change the way they see bitcoin? The second layer solution can perform millions of operations per second and all transactions cost pennies and offer final settlement. In using it, there are also privacy gains. The huge innovation, though, is the cash-like experience. 

The Kraken integration comes with a Lightning node of their own. To implement it, the company used LND by Lightning Labs. The reason is that “they have the largest user base and we have a lot of people on the network that have lots of experience with LND. So it has proven to be easy to use and very reliable as well.” That’s according to Kraken’s bitcoin product manager, Pierre Rochard, who also said to Bitcoin Magazine: 

“Adoption is going to come from people who have fiat in their bank account, and they need to get it into Bitcoin. Kraken is providing an excellent venue for them to do that, and then they can top up their mobile Lightning wallet and use it as a medium of exchange. That’s clearly the next step in terms of Bitcoin’s evolution.”

Designed with this and the cash-like experience in mind, Kraken limits Lightning deposits and withdrawals to 0.1 BTC.

BTC price chart for 04/02/2022 on Binance | Source: BTC/USD on TradingView.com
Kraken Announced Lightning Network Integration In 2020

Even though this looks like it magically happened, the integration had been in the works for a while. In 2020, Kraken stated its intentions:

“In 2021, we are committed to hiring a team to focus specifically on the Lightning Network, as part of our continuing effort to deliver the best possible experience for traders and investors.

We expect to allow clients to withdraw and deposit Bitcoin on Lightning in the first half of 2021, which will allow clients to move their Bitcoin instantly and with the lowest fees.” 

It took a while, but it’s finally here. Market-wise, will this move the needle in favor of bitcoin? Will the world even notice? According to this list, Kraken became the 23rd exchange to support the Lightning Network. Among the giant ones already on board are Bitfinex, OKEx, OKcoin, BitMex, and Bitstamp. Among the up-and-coming ones, BullBitcoin, Buda, CoinCorner, Kollider, and Boltz.

This also means, that you're able to instantly move the lightning payment you received to @krakenfx to exchange it for fiat, basically reducing the currency exchange risk to zero.This completely changes the dynamic for fiat brick and mortar stores.https://t.co/bpNzKC7ZDL

— zero fee routing ⚡ (@zerofeerouting) March 31, 2022

And, since we’re on lists, in their announcement Kraken provided Lightning wallet recommendations: 

“For example, BTCPay Server enables Lightning payments for merchants, greatly improving the bitcoin checkout flow. For consumers, Breez, Phoenix and Muun bring Lightning to mobile with a modern user experience.”

As to the importance of the move for markets and business, a pseudonymous Lightning node operator that goes by “zero fee routing” puts everything in perspective. “This also means, that you’re able to instantly move the lightning payment you received to Kraken to exchange it for fiat, basically reducing the currency exchange risk to zero. This completely changes the dynamic for fiat brick and mortar stores.”

Attacking The ESG FUD Head On

The increase in Lightning Network adoption also brings a great opportunity with it. The community could clean up the disgusting ESG-based narrative enemies of bitcoin have been planting in mainstream media. Regarding this, in the already quoted interview Kraken’s Pierre Rochard said: 

“With Lightning, you can send a payment off-chain that is much more energy efficient, not only because you’re not adding the miner fees, and thus the amount of electricity consumption by miners, but also because that payment only has to be stored and shared by the two parties in that channel.”

Do Greenpeace and Ripple not know that most bitcoin transactions are going to be off-chain in a few years? Do they not know that the Lightning Network alone will take bitcoin out of the conversation its enemies have been carefully manufacturing? Kraken certainly knows. And took action. 

Speaking about Kraken, its CEO Jess Powell has been present on the news lately. He recommended buying bitcoin below $40K. During the Canadian crisis, he hinted that bitcoiners should take their funds out of centralized exchanges. And he refused to voluntarily ban Russian users, providing a convincing rationale to justify Kraken’s actions.

And now, his company integrated the Lightning Network.

Featured Image by Ferhat Deniz Fors on Unsplash | Charts by TradingView

Posted on

Lightning Speed 004: What’s The Lightning Development Initiative?

There’s no denying that 2021 was the Lightning Network’s year. What does the future hold, though? If the objective is to onboard the next billion people, the network needs work and fine-tuning. To grab the bull by the horns, The Human Rights Foundation and Strike set up three 1 BTC bounties. 

The bounties will go to the first person or team to develop an anonymous Lightning tip jar, a tokenless way to peg BTC to dollars, or a privacy-focused wallet that supports some kind of Chaumian e-cash feature. In a Twitter Spaces conversation about the program, they named it The Lightning Development Initiative. 

A catchy name that we’ll use from now on to refer to all of this. This fourth edition of Lightning Speed is all about the future. Let’s explore the three ideas and the new information that we have about each of them.

The Lightning Development Initiative In Twitter Spaces

Among the speakers were Strike’s Jack Mallers, The Human Rights Foundation’s Alex Gladstein, Bitcoin Magazine’s Christian Keroles AKA CK Snarks, and Tales From The Crypt’s Matt Odell. It took place on December 29th and Bitcoin Magazine hosted it. A Twitter user named Gigi summarized it for us.

🚨 A thread summarizing the Lightning Développement Initiative Space ⬇

3 amazingly interesting topic related to the bounties were discussed.

I'm so bullish on Lightning⚡ it hurts. Very grateful to have these people on our side ❤👑

let's look at my notes 🧵 pic.twitter.com/PRs9cohPaN

— Gigi ⚡🇨🇵 (@GuerillaV2) December 29, 2021

Bounty #1: An Anonymous Tip Jar

In our sister site Bitcoinist’s report, they described the challenge as follows:

“Can you create a Lightning tip jar that doesn’t reveal any information about the parties involved? That’s the first task. How to receive completely anonymous donations. According to Bitcoin Mag, the “goal is to enable anyone to use free and open-source software (FOSS) to print a QR code that can be used for receiving Lightning payments privately. Importantly, “The QR code should not reveal the public key or IP address of the user.” 

In the Lightning Development Initiative’s report, we learned that this has to do with the two competing protocols, Bolt12 and lnurl. Jack Mallers “pointed out the absolute need for interoperability on the Lightning Network and that even though lnurl might not be “optimal” right now, the market will eventually decide what open standard they prefer to use. He thinks that currently UX is a major focus for the Lightning community and we should make peace with the fact that there will be competition between solutions.”

Rockstar pointed out that this debate around lnurl vs bolt12 will have huge implications for the future but that he's glad that there's now an active discussion on the matter.

Jack added that contrary to the Bitcoin main chain, we can somewhat afford to fuck up on LN..

— Gigi ⚡🇨🇵 (@GuerillaV2) December 29, 2021

Mallers put forth another interesting idea, “contrary to the Bitcoin main chain, we can somewhat afford to f**k up on the Lightning Network. As long as the Bitcoin monetary policy is not threatened then we can freely fiddle on top of the protocol via Lightning.”

BTC price chart for 01/14/2022 on Bitfinex | Source: BTC/USD on TradingView.com
Bounty #2: Stablecoin On Lightning Without A Token

Bitcoinist described this one as:

“The second challenge seems to be even more difficult, at least on a conceptual level. The HRF and Strike want a wallet that enables “anyone to “peg” an amount of bitcoin to U.S. dollars without needing an exchange or another token.” That’s right, without a centralized entity. And relying only on sats and bitcoin.”

Gigi summarizes why the world needs this:

“The goal is to allow people to access dollars without a single point of failure. Further down the line, as Bitcoin becomes less volatile, these people can use btc, but until then there’s massive demand for holding value in dollars. The tether market cap is proof of this.”

It serve an important humanitarian use case. We need to create the foundation for this new financial system.@Chris_Stewart_5 >> maybe it can be done with DLC's? Not using a token but rather something representing price exposure (think Eurodollar system). (oracles?)

The END.

— Gigi ⚡🇨🇵 (@GuerillaV2) December 29, 2021

Bounty #3: A Chaumian E-Cash Feature

First of all, Investopedia defines Chaumian e-cash as:

“eCash was a digital-based system that facilitated the transfer of funds anonymously. A pioneer in cryptocurrency, its goal was to secure the privacy of individuals that use the Internet for micropayments. eCash was created by Dr. David Chaum under his company, DigiCash, in 1990.“

So, once again, anonymity is the priority. As Alex Gladstein put it when announcing the bounties, they’re “for the first open-source, non-custodial, non-KYC Lightning wallets to ship features requested by dissidents worldwide.” Also, take into consideration the words of security expert Brian Trollz, “Bitcoin without privacy is nothing but a surveillance system.”

Bitcoin without privacy is nothing but a surveillance system.

— Shino (@brian_trollz) January 13, 2022

What does Gigi have for us on this topic? “We need a sort of Chaumian e-cash, extremely easy to use for the Plebs and accessible. Maybe the solution is a federated  one, making it harder to regulate.” He then quotes Jack Mallers again, “There’s going to be a singular standard for the internet of money (Bitcoin). Many will compete on top of BTC so we need “interoperability to the standard.”

Matt: We need to make it very easy to use because experience shows us that if it's somewhat challenging (coinjoins etcc) people won't bother to protect their privacy (goddam idiot normies 🤡)

— Gigi ⚡🇨🇵 (@GuerillaV2) December 29, 2021

Conclusion: The Future Is Bright

Developers, teams, companies, anyone can earn the Lighting Development Initiative’s bounties. The non-profit OpenSats will serve as the judge. They are all open for the whole year. If by the end of 2022 no one has claimed them, the money will go to the Human Rights Foundation’s Bitcoin Development Fund on January 1st. Which is fair. Especially considering they just gave 425 million Sats to these worthy organizations and individuals.

For more information and details read Bitcoinist’s original report.

Featured Image by Micah Tindell on Unsplash | Charts by TradingView

Posted on

Lightning Speed: Taproot And The Lightning Network, A Match Made In Heaven

A little more than two months ago, Taproot went live. What does the biggest update to the Bitcoin network in years bring to the table? How can it help the increasingly popular Lightning Network? That’s exactly what the article we’re about to summarize is about. It starts by informing us that “Bitcoin even has a scripting language,” and that it’s called Script.

But before we get into that, what is Taproot?

“Taproot is a combination of three Bitcoin Improvement Proposals (BIPs) that enhance this scripting infrastructure: BIP340 – Schnorr, BIP341- Taproot and BIP342 – Tapscript. The key of Taproot that unlocks all the others is the introduction of Schnorr Signatures, which allow for key and signature aggregation. This means that multiple parties are able combine their keys to a single public key, thereby allowing them to sign a single message.”

It’s important to know that Taproot won’t allow “fully expressive” or “Turing complete” contracts like in Ethereum and all its related chains. Nor are those kinds of contracts a priority for the Bitcoin network, as our sister site Bitcoinist points out. Also, to curb our expectations, let’s read what Tales From The Crypt podcast’s host Marty Bent warned us about in his newsletter:

“It is important to understand that these benefits aren’t going to be immediate. They are going to come to market slowly over time as the software gets implemented into wallets and other services. Many are expecting Taproot to get activated over the weekend and all its potential benefits to be realized immediately. This is simply not the case and it is important that this fact is understood.”

Ok, let’s get into the meat and potatoes.

How Does Taproot Help The Lightning Network?

First of all, every Lightning channel consists of “2 of 2 multisigs”. So, a first benefit of being “able combine their keys to a single public key” is that “we have lighter transactions and therefore cheaper channel openings”. Not only that but “signature aggregation also offers enhanced privacy since its contents are indistinguishable from a single-signature transaction.”

To clear up how does this benefit privacy, let’s quote the Binance Academy:

“Spending Bitcoin using Taproot could make a transaction in a Lightning Network channel, a peer-to-peer transaction, or a sophisticated smart contract become indistinguishable. Anyone monitoring one of these transactions would see nothing but a peer-to-peer transaction. It’s worth noting, though, that this doesn’t change the fact that the wallets of the initial sender and final recipient will be exposed.”

However, this is not quite true… yet. The Voltage article clarifies, “Does this mean that lightning channels are now unidentifiable on the blockchain? Well, the answer is ‘yes’ for private channels and ‘not quite yet’ for public channels.”

BTC price chart for 01/04/2021 on Gemini | Source: BTC/USD on TradingView.com
Private And Public Lightning Network Channels

What’s the problem? Well, the network doesn’t announce the creation of private channels. The public ones, on the other hand:

“Unfortunately, even if we do hide the channel openings on the blockchain, the current specification of the lightning protocol requires nodes to broadcast the details of the funding transactions when announcing their channels.

This might seem counterintuitive at first, but it’s also an elegant way to prevent nodes spamming the network with fake channels.”

Also, let’s take into account that surveillance firm Chainalysis already announced a Lightning Network-related service. We should assume there are “sybil nodes surveilling the network”. And that “With enough hostile nodes” a bad actor could paint “a fairly detailed picture of the flow of funds”. Well, Taproot has an elegant solution for that:

“Taproot’s introduction of Schnorr signatures paves the way for a type of smart contract called Point Time Locked Contracts (PTLCs). PTLCs operate in the same manner as HTLCs by allowing payments to be identified by nodes, but PTLCs come with a handy feature of being able to randomize its identifier with each hop thereby making it impossible for nodes to correlate the traffic of sending and receiving nodes.”

Understand that “Taproot is a door that opens many other doors”. It’s a new toolkit with which developers all over the world will create new features and improvements. The info this article contains is just the beginning, the low-hanging fruit that we can see from our advantage point. Remember what Marty Bent said, “these benefits aren’t going to be immediate.” The Taproot-enabled stage of Bitcoin is just starting.

Featured Image by Cooper Baumgartner on Unsplash | Charts by TradingView

Posted on

Lightning Speed: Podcasting 2.0 And Its Relationship With The Lightning Network

Will podcasting 2.0 be the next use case for the Lightning Network? The statement might induce skepticism, but Kevin Rooke presents a surprisingly good case. Prepare to receive the gas you needed to start your own podcast. The technology is just getting started, and the people are just getting comfortable with it. However, the logic behind Rooke’s argument stands. 

Related Reading | Spiral BTC Releases Lightning Development Kit. Jack Dorsey’s Puppet Promotes It

He starts with a statement that will surprise no one. “The Lightning Network’s architecture allows creators to earn directly from their biggest fans, in new ways that aren’t even possible on a fiat payment system.” That much we can admit. We know that closed platforms provide convenience and a sizable audience. However, “Apple takes a 30% fee on in-app payments, YouTube takes a 45% fee on ad revenues, and Facebook keeps all their ad revenue without paying their creators a penny.”

On the other hand, “Email, websites, podcasts, and Bitcoin are all examples of open platforms.” They don’t offer an already captive audience, but, “anyone to plug into fully-formed networks of content and users with full interoperability between competing products.” This helps a lot. However, creators using these open platforms, “still rely on closed monetization platforms like PayPal, Amazon Affiliates, Patreon, or Google Adsense to earn income.”

The Lightning Network Comes To Save The Day

You already know this, the Lightning Network allows for micropayments that are almost free. Anyone can use it, and it’s approaching mass adoption by the minute. “Not only can creators now plug into an open monetization platform with hundreds of millions of users, they can even access a new type of monetization that was never before possible.” Those new types are, “real-time payment streaming, micro-tipping, and other monetization strategies that simply aren’t possible on fiat payment rails.”

So far, so good. “Real-time payment streaming” via the Lightning Network is what Podcasting 2.0 is all about. However, it’s easy to miss why that is important. Crucial, even. 

“Advertising is directly at odds with other monetization strategies like paid subscriptions. If only a small fraction of your listeners are willing to pay subscriptions for your content, any gains made from subscription revenues will cannibalize your ad revenue, as your total listeners fall by 95% or more.”

That’s the problem with Patreon or similar services. You can monetize your biggest fans’ support, sure, but advertisers won’t pay for that small audience. Podcasting 2.0 provides the best of both worlds.

BTC price chart for 12/11/2021 on Bitstamp | Source: BTC/USD on TradingView.com
We’re Still Early. The Dawn Of Podcasting 2.0

Let’s check the stats out. That’s always fun.

“There are 4,434,920 RSS podcast feeds on the internet today, but only 2,947 of them are on Lightning today. Put another way, only 0.07% of all podcasts on the internet can earn Lightning tips right now.”

And, of course, only early adopters and people in El Salvador are using The Lightning Network. And from that group, only a few people will tip or pay in real-time for the content. However, “there is zero downside to enabling Lightning tips, and the upside can be a meaningful contribution to total revenue. It’s only a matter of time before the other 99.93% of podcasters figure this out.”

And that’s not all, the Lightning Network enables a type of interaction that was not possible for the podcasting medium. Creators can know the exact moment that their listeners decided to tip them.  

“Podcasting 2.0 apps also let listeners send messages and tips to creators while listening to a show, providing direct feedback with timestamps attached to every comment. This innovation represents a shift to a more social podcasting experience.”

And ok, that feedback was already possible in YouTube livestreams. However, besides the blatant censorship, YouTube is a closed platform. The feedback stays with them and isn’t available for people consuming the podcast through other apps. That’s not the case with Podcasting 2.0.

“Since RSS and the Lightning Network are both open platforms, comments are also interoperable across Podcasting 2.0 apps, so any creator can receive feedback from any listener using any app.”

Conclusions About Podcasting 2.0

Another advantage that this new standard provides podcasters is that they can truly be platform agnostic. 

“Since RSS and Bitcoin are complementary open standards, podcasters don’t have to risk alienating their existing listeners or worry about migrating their content to a new platform.

All podcasters need to do is flip the switch and their Lightning tips and messages will seamlessly integrate with their existing RSS feed.”

Kevin Rooke closes his masterclass with this:

“As Podcasting 2.0 apps continue to build easy interfaces for listeners to tip their favorite podcasters, Lightning tips could even become a primary revenue source, without cannibalizing or interfering with a creator’s existing ad revenue.”

Related Reading | Lightning Speed: Eight Mind-blowing Facts About The Lightning Network

Do you see it now? Or is he exaggerating? In any case, the Lightning Network doesn’t have to provide a “primary revenue source.” If Podcasting 2.0 provides a secondary one that wasn’t possible before, plus audience interaction, that’s more than enough.

Featured Image by CoWomen on Unsplash | Charts by TradingView

Posted on

Lightning Speed: Eight Mind-blowing Facts About The Lightning Network

Welcome to “Lightning Speed,” a new section in which NewsBTC will explore the possibilities that Bitcoin’s Lightning Network opens. In this first edition, we will focus on Peter St Onge’s “The Lightning Network is About to Change the World” article. According to his bio, the academic “holds a Ph.D. in Economics from George Mason University, and a B.A. in Economics and Political Science from McGill University.” Make of that what you will. 

St Onge was at the Free State Project’s Porcfest in New Hampshire when he had an epiphany. “The Lightning Network is now moving Bitcoin exponentially closer to becoming a true universal medium of exchange that is controlled by the people, not by governments.” That’s right. Bitcoin already won the store of value race, but, with the Lightning Network, it becomes the apex medium of exchange. What does this mean for the world?

Lightning At The Porcfest

Before we blow minds, let’s explore the Free State Project’s Porcfest real quick. St Onge sets the stage:

“As we enjoyed the mild New Hampshire summer, people wandered over to buy $2 sodas with Bitcoin, paying instantly and with zero transaction fee. I watched patient bitcoiners onboard Lightning newbies, taking them from zero to a Lightning wallet full of fresh hot sats in literally 5 minutes. It was the iconic “buy a coffee with Bitcoin” on steroids.”

Yes, #LightningNetwork is being used at #PorcFest2021. Ana sold a water to @jfcarpio as @Joe_Saz watches pic.twitter.com/sUou8otfP4

— Patrick Motorist (@BitcoinMotorist) June 27, 2021

This was before everybody and their grandmothers went to Bitcoin Beach to test the Lightning Network first hand. Watching the transaction’s speed and comfort, St Onge knew. This was “Confirmation that the Bitcoin developer ecosystem has now built the holy grail: Bitcoin as a true medium of exchange. One where transfers are instant, essentially free, and as easy to use as the simplest app on your phone.”

St Onge’s Four Insights About The LN As A Medium Of Exchange

  • The fees are really that cheap. St Onge recalls, “our sats party replicated what’s now going on across the world. Just last week at El Salvador’s now-famous Bitcoin Beach, 20,000 near-instant transactions went around with aggregate fees of $4.98. One-fortieth of a penny per transaction.” 
  • Traditional banking can’t compete. “For perspective, that’s about 500 times cheaper than the credit card fee on a $5 cappucino, and it’s at least 4,000 times cheaper than the average credit card transaction fee.”
  • It gets better. The fees are not correlated to the transaction’s total amount. “Note, 1/40 of a penny would cover essentially any amount — you could buy a house with Lightning for 1/40 penny.” 
  • The Lightning Network doesn’t sleep. “It transfers instantly, 24/7 including holidays, and is able to leap national borders and regulatory gatekeepers with zero effort.”

BTC price chart for 12/04/2021 on Tradestation | Source: BTC/USD on TradingView.com
St Onge’s Four Insights About The Lightning Network’s Growth & Potential

  • The network is growing exponentially. “Lightning Network statistics have exploded since May, with network capacity now expanding by an annualized 635%. As these new Lightning apps onboard millions of people, they then pass along and train newbies by word-of-mouth, creating exponential growth that can very quickly go from irrelevant to dominant.” 
  • The project has been years in the making. “The original Lightning Network White Paper came out in 2015, and after heady growth through 2019, the Network was essentially moribund these past 2 years.”
  • Most altcoins are no longer needed. “First, it knocks the legs out of competing “medium of exchange” (MOE) coins like Dogecoin, Bcash, Ripple, Litecoin, or their many knock-offs.” 
  • This is just the beginning. “Just as the internet needed user-friendly interfaces (web browsers) before it could really change the world, Bitcoin needed user-friendly interfaces to grow beyond money and towards being the base layer — the “rails” — for decentralized services built on Bitcoin alone.”

The Lightning Network is changing the world already. Because of that fact, NewsBTC created “Lightning Speed,” a feature about the possibilities that Bitcoin’s Lightning Network opens.

Featured Image: jplenio on Pixabay | Charts by TradingView

Posted on

Charlie Lee Sums Up Litecoin’s 10 Years History. Part Four: SegWit Activation

Today is the day, Litecoin’s 10th anniversary. Congratulations to Charlie Lee and everyone involved in the project over the years. We are exploring Litecoin’s history through the eyes of its creator. We covered its fair launch, the long-hard road to exchanges adopting LTC, and we introduced the SegWit story. It’s time to finish it. 

The last time, we introduced Bitmain’s co-founder Jihan Wu. Reportedly, he was singlehandedly stopping SegWit adoption in the Bitcoin blockchain. Lee’s plan was to use Litecoin as a Testnet of sorts for SegWit. “I realized that here’s a chance for Litecoin to do something to help Bitcoin. If we can get SegWit on Litecoin, it can clear out all the FUD and prove that SegWit is safe and a good upgrade for Bitcoin.” To accomplish that, he had to convince miners to side with him and not with the manufacturer of the most efficient ASICs.

Related Reading | New To Bitcoin? Learn To Trade Crypto With The NewsBTC Trading Course

According to Coindesk, there was another important incentive for Litecoin to adopt SegWit:

“Since SegWit could potentially pave the way for technologies that expand the value proposition of cryptocurrencies, the move toward accepting the upgrade has reignited excitement around the normally less-popular cryptocurrency. Litecoin’s price has nearly tripled since the end of March as a result.”

And this is where today’s story starts.

LTC price chart for 10/13/2021 on FX | Source: LTC/USD on TradingView.com
Charlie Lee Talks To Litecoin‘s Miners

During the end of 2016 and the beginning of 2012, Lee talked to everyone. One of his first victories was to get “Innosilicon, another LTC ASIC maker,” to his side. In this part of the story, we can see how hard Jihan Wu was playing. A “huge LTC Miner” was ready to signal for SegWit in principle, but, since his machines were in a farm controlled by Jihan Wu, he was afraid that he might lose access to cheap electricity.

Innosilicon was immediately on board with SegWit. They agreed with me that it's the best path forward. And they were able to convince some of their customers to support SegWit.

One of their customers was a huge LTC miner. He owned about 5% of the hashrate. Having him was huge.

— Charlie Lee (@SatoshiLite) October 8, 2021

The objective was to get “75% of blocks signal for SegWit within a 2-week timeframe.” Easier said than done. LitecoinPool was the first great pool to side with SegWit. Another big mining pool, F2pool, also promised to do it, but they didn’t right away. This turned out to be great for the cause because they provided a clear signal that the market supported the SegWit transition. Lee narrates, “over the next month, F2pool actually flipped flopped. They would signal and then stop signaling. The market reacted accordingly. When F2pool started signaling, the price will go up, and vice versa.” 

To complicate things, “Jihan wanted me to personally visit him and the miners in China to convince them about SegWit.” Lee didn’t like the power-play, but that was nothing. As more and more miners signaled for SegWit, Jihan turned to the ace up his sleeve. There was a rumor that “Bitmain was building a ton of LTC miners and was going to turn them all on themselves to block the upgrade.”

Over the next week, more and more miners started signaling for SegWit and it started to look inevitable. And then this happened. Bitmain was building a ton of LTC miners and was going to turn them all on themselves to block the upgrade. 😡https://t.co/Zvs9srExJJ

— Charlie Lee (@SatoshiLite) October 8, 2021

It was time for Charlie Lee to call in the big guns.

The User Activated Soft Fork

Since both the miners and the market were clearly signaling in support of SegWit, Charlie Lee felt he had the right “to pull the UASF trump card out.” One of the wonders of decentralized organizations is that the users can also activate a soft fork. “If the majority of users and exchanges run the UASF code, SegWit will activate.” If that happened, miners had to comply and adopt SegWit as well.

UASF stands for User Activated Soft Fork. What it means is that instead of having the soft fork (SegWit) being miner activated, the user decides to activate the soft fork in a future date. If the majority of users and exchanges run the UASF code, SegWit will activate.

— Charlie Lee (@SatoshiLite) October 8, 2021

The threat of a UASF was too much to bear, so the miners agreed to meet with Charlie Lee online and work things out. 

Yes we will do roundtable online with @SatoshiLite ASAP, not need to wait for June. https://t.co/rVWQjLu5kJ

— Jiang Zhuoer BTC.TOP (@JiangZhuoer) April 20, 2017

And the rest is history, “On April 21, I met with Jihan, Innosilicon, and miners for over 8 hours IIRC. It was exhausting.“ They reached an agreement, this is the blog post announcing it. Among other things, it says:

“We agree that protocol upgrade should be made under community consensus, and should not be unilateral action of developers nor miners. We advocate that Litecoin protocol upgrade decision should be made based on the needs of the users, through the roundtable meeting voting process, and activated by miner voting.”

Charlie Lee reflects, “Although this seems so bad for a decentralized cryptocurrency to have a closed door meeting to make decisions that affect the future of Litecoin, I felt like it was a compromise I’m willing to take. It’s better than an all out war between the miners and I.”

On May 10th, 2017, SegWit was activated on Litecoin.

SegWit has activated on Litecoin! 💥😁 pic.twitter.com/lpeklpQpZe

— Charlie Lee (@SatoshiLite) May 10, 2017

After that, a few historic transactions took place

  • On THE SAME DAY, a notorious Bitcoin developer completed the first Lightning Network transaction.
  • A few days later, Lee posted an anonymous “$1m bounty on a SegWit address:” The text says:

“A lot of people have been saying that segwit is unsafe because segwit coins are “anyone-can-spend” and can be stolen. So lets put this to the test. I put up $1MM of LTC into a segwit address. You can see it’s a segwit address because I sent and spent 1 LTC first to reveal the redeemscript.”

  • A few months later, Bitcoin activated SegWit through a UASF. “It’s hard to know exactly how much Litecoin helped with this. I feel like it definitely has helped.”
  • Days later, Charlie Lee and Strike’s Jack Mallers starred in the first Lightning Network request/ payment transaction on Litecoin. That man Jack Mallers has a way to get involved in historic transactions, like this one, and this one.
  • That same month, Lee did his first Atomic Swap transaction. “This shows how one can move coins between different chains in a decentralized way. It was a great proof of concept and paved the way for decentralized exchanges.”
  • And later, he did another Atomic Swap but this time with Bitcoin.
  • And the next month, Lee did “the first ever cross-chain swap between BTC and LTC via Lightning.” This time it was with the now world-famous Lightning Labs.

Related Reading | Binance Burns Record $600 Million BNB In Its 15th Quarter

Wasn’t that an amazing, amazing story? We learned so much. And, even though we said this was the last chapter in the Litecoin 10-year history, Charlie Lee has another story to tell. Join us tomorrow for the infamous story of Charlie selling all of his Litecoin. Another legendary moment in crypto land.

Featured Image: Charlie Lee’s picture from this tweet | Charts by TradingView

Posted on

The 411 On “Adopting Bitcoin,” A Lightning Network Conference in El Salvador

Perfect timing and place for a Lightning Network Conference. In less than a week, Bitcoin will be legal tender in El Salvador. The Lightning Network was instrumental for this to happen. The real-life case study for the Lightning Network is El Zonte AKA Bitcoin Beach. And in Mid-November, all of those factors will collide in an event aptly titled “Adopting Bitcoin.”

Related Reading | How Big Is Bitcoin’s Lightning Network? The Answer Will Surprise You

This Lightning Network conference comes with a call-to-action as its unofficial slogan, “Unite, focus, collab!” And, by the looks of Adopting Bitcoin’s official Twitter, the tribe responded to the call and will attend en masse. 

Unite, focus, collab! ⚡⚡⚡

"Adopting Bitcoin – A Lightning Summit 2021" #adopt21 brings together the Bitcoin and Lightning communities in El Salvador this November

The focus: transitioning 6+ million people onto the Lightning Network!

More info: https://t.co/WWULQ3STIu

— Adopting Bitcoin (@AdoptingBTC) August 29, 2021

What Characteristics Does This Lightning Network Conference Have?

According to “Adopting Bitcoin‘s” website, their purpose:

“… is bringing together the Bitcoin and Lightning community in San Salvador and El Zonte to create connections and foster the future of money and payments in the Central American republic.”

The Lightning Network Conference has the following characteristics:

  • The team behind the Bitcoin Beach Wallet, Galoy, produced the conference. 
  • “Adopting Bitcoin” is a not-for-profit event.
  • The organizers will donate 100% to support Lightning Network development.
  • The Lightning Network conference will be both in English and in Spanish. 
  • “Adopting Bitcoin” will be live-streamed.
  • They’ll dedicate Tuesday and Wednesday to hard-core conferencing.
  • Thursday they’ll finish the peregrination by visiting the place that started it all, El Zonte. “We will have an organized Bitcoin Bazaar 10a-4p…. with kiosks, stands and food stalls anchored at / near Hope House,” said Galoy’s Co-Founder.

Tuesday and Wednesday are full conference days in San Salvador.

Thursday is more casual in El Zonte. We will have an organized Bitcoin Bazaar 10a-4p…. with kiosks, stands and food stalls anchored at / near Hope House.

R/T bus transport SS <> EZ will be provided.

— Hunter 🌋⚡️🇸🇻 (@btcnyc) August 30, 2021

  • The Lightning Network conference is for “early adopters only.” Tickets can only be purchased with bitcoin over the Lightning Network.
  • “Adopting Bitcoin” is for “developers, businesses and general enthusiasts to network and form in-person connections.” 

Adopting Bitcoin: Lightning Summit in El Salvador. Dates: 16 – 18 November 2021. Tickets can only be paid on the #Bitcoin #LightningNetwork. All proceeds of the conference will be donated to the development of the Lightning Network. https://t.co/vZzQb6MOy9 pic.twitter.com/ivizhyD960

— Bitcoin LightningNetwork+ News ⚡️ (@BTC_LN) August 30, 2021

“Adopting Bitcoin’s” Line Up

Tuesday and Wednesday, the party is in San Salvador’s Sheraton Presidente. Both days contain “Lightning 101” workshops. Among the star lecturers are: 

Alex Gladstein, Chief Strategy Officer at the Human Rights Foundation; podcaster extraordinaire Stephan Livera; Bitnob’s Bernard Parah, from Nigeria, one of the protagonists of this historic transaction; “Bitcoin En Español’s” host Camila Campton; Mónica Taher, Tech & Economic International Affairs for El Salvador; Bitcoin Beach’s Mike Peterson, and Paxful’s Ray Youssef.

Full line-up in the Lightning Network Conference ‘s website.

On Thursday 18, the party moves to El Zonte and ends with a literal Taproot Activation Party in El Tunco. For a video tour of both towns, check this mini-documentary out.

BTC price chart for 08/31/2021 on Cexio | Source: BTC/USD on TradingView.com
About Galoy, Organizers Of The Lightning Network Conference

According to their official website, “Galoy offers easy to use Bitcoin ‘Banking-as-a-Service’ (BaaS) products.” They are responsible for the self-referential official wallet for the Bitcoin Beach project. “In October 2020, we launched our branded “Bitcoin Beach” Lightning Wallet in El Zonte.” Galoy describes itself as:

“… a B2B company, serving organizations that embrace Bitcoin as money. We build on the Bitcoin Protocol and the Layer 2 Lightning Network, utilizing the tools created by the team at Lightning Labs.”

Related Reading | Are The Lightning Network’s Almost-Free Transactions The Killer App BTC Needed?

And now, they’re contributing to the Bitcoin ecosystem with this not-for-profit Lightning Network Conference in El Salvador. One that requires that you actually use the novel network to purchase the coveted ticket. And donates all proceeds to Lightning development. 

Nice.

Featured Image: Adopting Bitcoin’s logo | Charts by TradingView

Posted on

Are The Lightning Network ’s Almost-Free Transactions The Killer App BTC Needed?

Bitcoin is already a success story like no other. Will the Lightning Network ’s cheap transactions take the party to the next level? As our exploration of this new technology proceeds, we turn our heads to the ideas of Peter St Onge. Through his newsletter CryptoEconomy, he tells us about the Porcfest in New Hampshire. There, attendees transacted using the Lightning Network all through the festivities.

Related Reading | How Big Is Bitcoin’s Lightning Network? The Answer Will Surprise You

“It was on-the-ground confirmation of what the statistics are already saying: the Lightning Network has arrived. Confirmation that the Bitcoin developer ecosystem has now built the holy grail: Bitcoin as a true medium of exchange. One where transfers are instant, essentially free, and as easy to use as the simplest app on your phone, whether Uber, Venmo, or Twitter.”

An accurate description of where the Lightning Network is right now. However, we’re here to explore another idea of his. In “How Cheap Lightning Changes the World,” St Onge tells us:

“Millennia of inventions show they don’t begin to change the world until they get cheap. Implying Bitcoin’s disruption of the real world hasn’t even begun, and Lightning Network can take it there, from the narrow “digital gold” of today to something revolutionary on the order of agriculture, the printing press, or the internet itself.”

Are the Lightning Network ‘s almost-free transactions what’s going to take Bitcoin to the “something revolutionary” level? That’s the case we’re here to make.

The Lightning Network Solves Problems On The Cheap

To complete the “something revolutionary” idea, the author gives us this tenet:

“It’s not invention that matters, it’s diffusion. For example, steam engines were invented in the 1st century AD by Heron of Alexandria, then forgotten for roughly 1,500 years until independently rediscovered, launching the single biggest transformation since the invention of agriculture.”

To change the world, an invention has to solve problems and be cheap enough for the effort to make sense. “The benefits of the solution have to exceed the costs of the solution.” Cheap technology solves exponentially more problems than an expensive one. So, Peter St Onge is tankful for the Lightning Network ‘s “magical, world-changing, revolutionary cheapness.”

BTC price chart on Bitbay | Source: BTC/USD on TradingView.com
Potential Applications For Microtransactions

According to the author, the Lightning Network could be useful for:

  • “Trading things that are valuable in aggregate, but too cheap on their own.“
  • Trading “things that are very valuable individually but that are currently either too expensive to trade or that face regulatory barriers.”
  • Plus, “Lightning could build uncensorable speech platforms, even uncensorable commerce of physical things.”

Related Reading | Bitcoin Lightning Network Sees Storm Of Activity And Adoption

Also, “there are millions of failed or obsolete business plans through the ages that are viable with sufficiently low transaction costs,” according to Peter St Onge. The author closes his prediction with a rather large time window for it:

“And, to be fair, we’re not talking an overnight revolution; Lightning is growing fast, but probably still has years to reach scale. So I have no idea if we’re talking 2 years or 20 years. But neither should be surprising.

Still, in aggregate, I think microtransactions have the ability to finally unlock Bitcoin’s potential far beyond money.”

His point remains, the Lightning Network ‘s usage is cheap enough and user-friendly enough to potentially onboard the next billion Bitcoin users. And the party is just starting.

Let’s finish this with a phenomenal video in two parts that shows how the Lightning Network ’s been under attack, but persisted and conquered:

(PART 2) pic.twitter.com/gTwsqSLaUb

— ₿ Isaiah⚡️ (@BitcoinIsaiah) August 24, 2021

Featured Image by TheDigitalWay from Pixabay – Charts by TradingView

Posted on

Michael Saylor Brings The Thunder To Venezuelan Bitcoin-Only Podcast

If someone is doing his part, that’s Michael Saylor. The MicroStrategy CEO proved that he’s a stand-up guy by sharing the knowledge on a medium-sized podcast that’s usually in Spanish. Saylor went in on the topics du jour and revealed never-before-heard secrets. What does he think about El Salvador? What’s up with the infamous Mining Council? Is MicroStrategy in a vulnerable position? Keep reading for those answers and more.

Related Reading | Michael Saylor Clarifies His Company’s Bitcoin Strategy On US’s National TV

One of Michael Saylor’s first lines is, “I think that the next decade it’s going to be all about digital transformation of propertry.” After that, it’s gem after gem.

What Does Michael Saylor Know About The Venezuela Situation?

The podcast is called “Satoshi En Venezuela.” The episode is titled “Bitcoin is Hope for Venezuela.” Since that name derives from a Michael Saylor quote, it figures that the first question was a why disguised as a how.

How is Bitcoin hope for Venezuela?

“Now you can put your property into a Bitcoin and put the Bitcoin on your mobile device. And I think the reason that that represents hope to the world is, eight billion people are going to be able to afford a mobile device. And 8 billion people can have property on the mobile device. Bitcoin is like a bank in cyberspace run by incorruptible software.” 

That sounds amazing, but, why is Bitcoin good for Venezuela specifically speaking?

“Well, every economy works better if it has an incorruptible bank that allows everyone to store their monetary energy. It helps return rationality and long-term perspective. Hope is about believing that in a decade your life will be better than it is now.”

Beautiful. Michael Saylor also believes that, for this to work, “We have to give people property rights. And we’ve got to give them the ability to store their economic energy in something that they have control of.” By that, he means Bitcoin and only Bitcoin.

BTCUSD price chart - TradingView

BTC price chart on Coinbase | Source: BTC/USD on TradingView.com

Does Bitcoin’s Volatility Affect MicroStrategy? How Does Their Playbook Look Like?

His company, MicroStrategy, famously was the first to put Bitcoin on their balance sheet. And then, they kept buying and buying. “We’re basically converting our working capital from the weakest asset to the strongest asset,” Michale Saylor clarifies. Then, he gives you his strategy’s play by play: 

The way that we manage the volatility is, we make sure that we have enough Dollars to pay all of our bills for the next 12 months, based upon whatever volatility. So, we wouldn’t really ever need to liquidate any Bitcoin unless we had like a one in a hundred event. Then, we might sell a little bit in order to pay our bills, but that hasn’t happened before.”

He expects reasonable scenarios. Other currencies will print and print. There will only be 21 million bitcoin. Lots of businesses and people will integrate with the Bitcoin protocol. So, it’s not that risky. In a long time frame, it’s a “responsible business strategy.” It would be risky with a short time frame and a short-dated debt strategy.  

In short, MicroStrategy’s financial strategy protects them from volatility. If in 10 years Bitcoin is down and not up, then and only then they’ll be in trouble.

A Mining Council In An Open Network

The host, Bitcoin philosopher Criptobastardo, questions Michael Saylor with the basic objections that the Bitcoin community has with the Mining Council. Saylor answers:

“The council exists to gather information, to run surveys, and to educate. It’s not a government body. I agree that a governing council probably wouldn’t be the right thing. It’s really just a voluntary and open asociation of Bitcoin miners to gather information, share best practices and educate.”

According to him, someone has to respond to attacks. The Bitcoin community has to take control of the narrative, produce data, give info to decision-makers. “The people that need to know are Wallstreet investors, mainstream media journalists, and politicians.” These are powerful allies, and, “when they tell us that they’re under pressure from their constituency to get an answer, we should do our best to give them the answer.”

Related Reading | Can Bears Force Michael Saylor To Sell His Bitcoin? Analyst Shared Bullish Theory

Is Michael Saylor Going To El Salvador?

According to the MicroStrategy CEO, one would need 21st-century infrastructure to solve a current problem. That’s what the Salvadoran government is trying to do with The Bitcoin Law. What will they get out of all of this? Well, according to Michael Saylor:

“I think there are two benefits you get when you adop the bitcoin standard if you’re a country. One benefit is the macroeconomic benefit. You end up with a treasury asset that is appreciating in value instead of depreciating in value. You put your entire economy on stronger bases.” 

The El Salvador experiment is crucial to mankind. If everything goes as planned in there, the economic growth they’ll have over the next few years will be unmatched. Michael Saylor continues and closes:

“The second benefit is a technology benefit. It’s possible to use the Bitcoin protocol, or in this case Lightning. The combination of Lightning and Bitcoin transactions in order to provide digital currency to every citizen of the country. So, two thirds of El Salvador dont have a bank. If I want to create a bank, I want to give them a mobile phone and a digital wallet. And a digital currency, which is the Dollar. On top of a digital asset, which is Bitcoin.”

That sounds like a tank to us. 

 Featured Image by FelixMittermeier from Pixabay - Charts by TradingView
Posted on

Five Gems From Van Valkenburgh’s Testimony At The Congressional Hearing

The congressional hearing hilariously titled “America on ‘FIRE:’ Will the Crypto Frenzy Lead to Financial Independence and Early Retirement or Financial Ruin?” is the gift that keeps on giving. NewsBTC already analyzed some aspects of it, but Peter Van Valkenburgh’s testimony merits an article on its own. The Director of Research at Coin Center got several important ideas on the record, and we’d better register and remember them.

The previous article’s introduction still stands:

The U.S. Congress Oversight and Investigations Subcommittee held a hybrid hearing on Bitcoin and cryptocurrencies. The institution summoned Alexis Goldstein, Director of Financial Policy for the Open Market Institute, Sarah Hammer, Managing Director at the Stevens Center for Innovation in Finance, Peter Van Valkenburgh, Director of Research at Coin Center, and others.

Related Reading | New 2021 FATF Crypto Guidelines Labelled as Mass Warrantless Surveillance

Since we at NewsBTC already did the job and covered the ridiculous statements of Representative Brad Sherman, it’s time to give the mic to someone more qualified and informed. Let the record reflect that a full video of the whole hearing is not available at the time of writing. We’ll base our report on everything we could find on the open Internet.

What We Know About Peter Van Valkenburgh’s testimony

Luckily for us, Documenting Bitcoin preserved the best bit of Van Valkenburgh’s presentation. The Director of Research at Coin Center sets everything up by explaining why and how the Bitcoin network is censorship-resistant.

“… we have the advantage of knowing everything that the peer-to-peer ledger tells us. It’s shared and open, it’s not a proprietary standard from a corporation. And the peer-to-peer ledger shows us how much work these miners are performing to make sure that transactions get in blocks and they’re not censored by some third party or some government that wants to coerce certain transactions or block certain transactions. It’s this vibrant competition between miners that guarantees that the miner cannot form a cartel, and choose to systematically exclude certain persons from this financial system.”

To complete this idea, let’s quote Van Valkenburgh’s own “Understanding Bitcoin’s energy use” paper.

This competition is healthy because it means that the effort spent securing the network scales automatically with the value of the transaction data on the blockchain—not the number of transactions. So the more value there is riding on the Bitcoin network (because individuals value it more as reflected in the price), the more resources will be devoted to its security. 

This leads us to…

What About Bitcoin’s Energy Usage And The Lightning Network?

This man is a House of Representatives veteran. He knew what he was doing. Van Valkenburgh set everything up, and then he goes to the meat and potatoes of the testimony. He goes for the throat and flips the establishment’s argument about Bitcoin’s energy consumption on its head. He shifted the narrative and put a spotlight on the traditional financial sector’s known inefficiencies. 

“As far as energy usage, it’s worth noting that the traditional financial sector uses an estimated five times more energy than Bitcoin. Granted, the traditional financial sector moves more money. But it’s worth noting that Bitcoin’s energy usage doesn’t scale per transaction. So, most of the costs are the fixed cost of setting up an open peer-to-peer system that’s robust. And we have thechnologies like the Lightning Network that can bundle millions of transactions into that existing system without a meaningful increase in energy. So, it’s possible that we can have an open financial system that’s censorship resistant using one fifth of the energy of the current financial system.”

So yeah, the Lightning Network and its wonders are registered in the U.S. House of Representatives’ record. And, even though Bitcoin’s aim is not to outright substitute the ”current financial system,” the record reflects that Bitcoin is more energy-efficient, plus censorship-resistant as a bonus. Lastly, it’s worth noting that “five times more energy than Bitcoin” is an extremely generous estimate in favor of the traditional sector. 

BTCUSD price chart for 07/01/2021 - TradingView

BTC price chart on FTX | Source: BTC/USD on TradingView.com

What Does Van Valkenburgh Think About Regulation?

The fine people at Coindesk got hold of Van Valkenburgh’s prepared testimony. In a recent episode of their “The Breakdown” podcast, they cover an altogether different area of it:

There are a couple of key shifts in perception he tries to make, first, around the idea that crypto isn’t regulated, that’s wrong. It’s regulated all over the place at the state and federal level. It’s just fragmented. Second, crypto is for crime: wrong again, in 2020, only 0.34% of all cryptocurrency transaction volume involved a criminal sender or recipient and remember, those numbers came from Chainalysis, an organization that a huge number of government agencies spend multiple millions of dollars with every year. 

Related Reading | Bitcoin Lightning Network Sees Storm Of Activity And Adoption

This ties up nicely with the above discussed, and with this direct Van Valkenburgh’s quote:

“For every transaction we want blocked, there’s a transaction that we should celebrate for being unstoppable. Yes, there are criminals making payments on the Bitcoin network because banks won’t bank them. There are also pro-democracy activists and Belarus and anti-police violence protesters in Nigeria, taking donations on the Bitcoin network because local banks won’t bank them. For every decentralized app that’s trying to scam investors. There’s another that’s testing out ways to disperse universal basic income, will remove the corporate control over social networking, or eliminate the hacking risk inherent in centralized identity solutions.”

Suffice to say, this man went into the belly of the beast and spoke the truth. The Bitcoin movement will be forever grateful.

Featured Images by Krystal Ng on Unsplash - Charts by TradingView