Building Business Solutions Using The Lightning Network

The founder of Lightning company LNPay.co discusses how his API service helps businesses integrate Lightning

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[0:00:07.7] P: Tim, I appreciate you jumping in on such short notice. You are the creator of LNPay.co, which is, in my view, a herald of the future, where we will have more and more, the surprises. No one, of course, that I'm saying this, but we're going to have more and more businesses and infrastructure built out on top of the Lightning Network. For the audience, of course, we've got Bitcoin, which is layer one technology, sound money, it's extremely decentralized, very censorship-resistant. Then on top of that, we've got layer two technologies, like the Lightning Network, which allows us to transact in Bitcoin very quickly, is to say, almost instantaneously for very, very low fees.

In the same way that TCP/IP is a communications protocol that underpins the entire Internet, the Lightning Network stands to take a similar place, not only in terms of financial systems, but also in terms of communication protocols. I think, that the systems that you are building, accelerate that future in a really exciting way. Can you give us a brief description of what LNPay.co is and what service it provides?

[0:01:12.1] TK: Yeah. I think, it was a good description of where we're at with the Lightning Network, or where in the bigger picture, where it fits in. LNPay, a brief history will help clarify where the angle that LNPay is coming from. I got involved in Lightning Network in early 2019. I was just general frustrated with paywalls. I was trying to find a micropayment solution, which led me to the Lightning Network.

I started by trying to build a small paywall solution, which was called paywall.link, which turned out, it took the form of a Bitly type link, where you clicked on it, and it would take you to an invoice that you would pay and then would forward you to the destination, like an article or something. As I was building that out, it was so early that there weren't a lot of tools to build what we'll call LAPPs, Lightning apps. Paywall.link was a LAPP. I started building out other little LAPPs. One was Faucets, if you remember those, they're still around for micro-engagement, all micro-payments focused.

After building both of those, I realized that I just rebuilt the same tools again. I started iterating into what is now LNPay, which is a set of tools, a toolkit that empowers developers to build, manage, maintain, operate LAPPs for any application, really. I'm really trying to focus on micro-payments, because I think that's the big ocean there that's new, and nobody knows how those models will evolve, and where the value chains will flow. Yeah, that's so that's where I'm focusing on; micro-payments and developers and trying to help them build more in the ecosystem.

[0:02:57.9] P: More specifically, I run a routing node. Again, just for the audience, you can interact with the Lightning Network immediately today, by just going and downloading a Lightning wallet, like Breez, or Muun wallet, or BlueWallet, or any number of other extremely effective UX Lightning wallets. That just means that you can send Bitcoin, essentially, instantly, and for very, very low fees. You can do that today.

What we're talking about here is people who want to be building on top of the Lightning Network, people who are interested in building businesses, people who are interested in in creating services, LSPs, Lightning Service Providers on top of that. What LNPay.co does is it abstracts away some of the lower level complexity and provides API endpoints that any software engineer, or business can connect to.

More than that, it allows you to go in – I was messing around with LNbits. I was trying to give a demo for somebody of creating a Faucet that had certain parameters set and was resistant to spamming and stuff like that. That's actually how I came across LNPay.co. I was like, “Oh, my gosh.” I think, it's the first of its type, right? Where basically, you're providing this service that empowers developers and businesses to implement this technology very, very easily.

[0:04:18.1] TK: Yep. A lot of the times, it's invisible to the end user with the BlueWallet, or Wallet of Satoshi, or those. It's the other end of that. It's the service that you're interacting with that you're sending or receiving SATs to. A good example is stacking SATs back, Leon, he's here. He uses LNPay to power rewards. When you claim your reward, your SATs back, LNPay is underneath helping the service manage balances and keeping the accounting right, and some of that other mundane stuff that businesses still have to do. Bridging the gap between the Lightning Network and the business world.

[0:05:01.3] P: Sorry, who was that? I'd love to pull them up.

[0:05:03.0] TK: Leon with the lightning BOLT right there.

[0:05:05.6] S: It’s okay. You can call me Shinobi, just so you don't get in trouble.

[0:05:10.0] P: I mean, in trouble with who? Shinobi, welcome to the stage. You are currently going by the name of Lightning in the blunt smoke. Tell us, what inspired you, as a human to take the name Lightning in the blunt smoke?

[0:05:24.0] S: Well, you see, somebody has to be a beacon of brain cells that still function in the cloud of blunt smoke.

[0:05:30.9] P: That's fair enough. Fair enough. As usual, your microphone does sound like you are communicating with us from the distant past. I'll ask you to try to over-enunciate your words. Somehow, your audio was always the worst of anyone I know.

[0:05:42.7] S: Well, I'm outside and there's cars driving by. Tim, this is pretty much like the logic here. It sounds like, what you're working on is pretty much having a system set up that you can just bridge with an existing business. Let's say, a web shop doesn't have to completely redo their backend. That's pretty much the gist of it, right?

[0:06:03.7] TK: Yes and no. I mean, that's one use case. That's the most basic use case. There's going to be different ways that layering micro-payment, like payments and micro-payments are fundamentally going to be treated differently, or at least, that's my thesis. It's starting to happen with things like streaming payments, and stuff like that, with podcasting 2.0 stuff. There's different features and tools that are needed to accommodate that style of usage. There's a market slowly coming up to handle those cases. Yeah, the basic payment stuff covers that. I'm not as interested in normal web shop payments. It's more micro payment focus.

[0:06:48.0] P: Got it. Got it. Shinobi, please feel free to jump in and offer comments as we go. You have a depth of knowledge around Lightning that is, I always appreciate. Are there any privacy concerns that are worth mentioning in using a service like LNPay.co?

[0:07:03.2] TK: For who?

[0:07:04.7] P: Any of the actors involved. Mostly, I'm thinking for businesses. Are there, if someone, is someone who cares about privacy, cares about maintaining the anonymity of their users, is there anything there that's interesting, and we're talking about?

[0:07:16.3] TK: Yeah. That is definitely some concerns there when you have a centralized system like this. We can go into more detail and cut up how the “custodianship” and stuff works. Yeah. I mean, when you have a central repo of data, there's definitely some risk there. Inherently, the Lightning Network abstracts a lot of that away with pub key and stuff like that.

I mean, if you tried, it's still pretty hard to drill down on that stuff. A lot of that burden falls on the developers in how they wish to use the service. They can store a lot of metadata if they want, or they can keep that on their own. It's definitely a topic and it's one to balance with the building a business and maintaining a good level of hygiene, privacy hygiene.

[0:08:13.6] S: That comes down to any privacy risks of the business itself, though. Not derived just from using LNPay, right?

[0:08:21.7] TK: Yeah. It's just in general. Yeah.

[0:08:24.9] P: Yeah. I think that is a very important distinction. I wouldn't want to accidentally give the impression that there was a privacy risk there, because it's definitely with the business and as we all know. The number of notices that I've gotten over the years that my social security number, or personal information has been essentially liquidated and put on the dark web is more than I care to admit.

[0:08:43.7] TK: Yeah. I think there's an interesting problem there for businesses to solve, which is keeping track of users and certain, just for accounting, if you're trying to make sure balances are right and things. You build a trail of user history. You don't have to necessarily tie that to any PII. It's still important for you to run a functioning business to have those things straight. That's where you have to think about those concerns. How every business handles them is different. Some of the more privacy-focused ones handle it in one way. Especially, being in this – as I go down further and further in the Bitcoin and Lightning rabbit hole personally, it's – you have to put it top of mind. A lot of people just put it to the side. If that's a priority of yours, you can make it pretty good for your users and yourself when using third parties.

[0:09:39.4] P: Yellow, I see you have your hand raised. What question do you have? Please keep it focused to the Lightning Network and building businesses on the Lightning Network.

[0:09:46.7] Y: Sure. Yeah, man. I have a question for Tim, because I heard that he's focused in micropayments. I was wondering if there is any development in a so-called Lightning Network app that is around micro-loaning, small amounts of loans, maybe using some collateral, or something like that. Is there something like that? We know, is that possible?

[0:10:11.3] TK: Yeah, that's a good question. Micro-loans in general, I have somewhat heard about in Africa is popping off. In terms of a Lightning app to do that, I have not heard of anyone pushing that for, but I think that's a good idea.

[0:10:29.3] Y: What if in our wallets, the Lightning Network wallets, if that's possible, right? I don't know if it's possible. I'm just brainstorming here. You're going to have a wallet, like Lightning Network wallet, any wallet. It has a function that when somebody sends you a collateral, like that 10% of a loan that you're going to take, then only the other person can send the loan, basically. Then you can stream the interest in that loan, if that's agreed upon. Is that possible?

[0:11:00.3] TK: Yeah. You could use what's called HODL invoices for that, to unlock the funds when first part is paid. You would take the 10% when and exchanged a loan at the same time. Yeah.

[0:11:15.1] Y: Yeah. Because I knew that function, I know so many people that are going to use that, even here in Greece, the so-called first country. Imagine guys in El Salvador, we can basically give them incentive to take loans in the best money there is. I don't know if that's a dream, I guess.

[0:11:34.9] TK: You should do that bro. That's a good idea.

[0:11:37.4] Y: I in a programming and can meet me about it. Start it.

[0:11:42.2] S: Do you really want people not making a lot of money to take out a loan denominated in Bitcoin right before the price moons?

[0:11:50.4] Y: Yeah, that's another story.

[0:11:56.2] P: Yellow, I was expecting you to come up and ask a question about banana bread. I'm both disappointed and also elated. It's a good point. I think –

[0:12:03.7] S: Teasing on the conspiracy to be serious and natural.

[0:12:10.0] P: I hear you. This is exciting stuff. It's a serious topic.

[0:12:13.6] S: I mean, it wouldn't be useful for quick payday loans, instead of long-term things. Just imagine, you need money to eat, that you know for a fact you can get tomorrow and pay back and you just don't want to wait till tomorrow to eat.

[0:12:27.6] TK: I didn't think about that, but the micro-loan doesn't have to be over a long period of time. A micro-loan, micro-time, too.

[0:12:35.9] P: Yeah, absolutely. I mean, payday loan style thing, where it's a loan over two weeks. I mean, that thing is incredibly valuable for a lot of places in the world. I'm currently in the US, I think a lot of prevalent Bitcoiners are based in the US, and it makes it easy to forget that there are very, very different and important problems that Bitcoin solves, that is not as prevalent and as obvious for those of us that are lucky enough to live here in the short-term.

[0:13:03.6] Y: Yeah. The point is that if you're going to be saying, let's bank the unbanked, or got to build stuff more than just payments, right?

[0:13:13.7] P: Yeah, absolutely. I mean, one of the things that for me, was so exciting about – LNPay.co, is that I was playing around with basically, setting up Faucets, setting up withdrawal links. Again, basically, you have BOLT 11, which is the current standard for Lightning payments. Basically, if Shinobi and Tim and I go for pizza, and then I put the cost of the pizza on my credit card, and then I want to split it three ways, in BOLT 11, which is the current standard, I have to basically, generate what's called a Lightning invoice, which can be represented as a QR code.

Then I show that to them, they would scan it with their Lightning wallets. It would say like, “Okay, you owe P this amount of SATs,” and they could sent it to me. LNURL, how would you describe it, Tim? What's the term for it? It's not an improvement upon?

[0:14:03.6] TK: I would say, it's a user experience protocol. Fiat Jack came up with it and I agree with that.

[0:14:10.2] P: Yeah. Fiat Jeff is amazing. He, basically, came up with, again, LNURL. You can check it out if you Google Awesome LNURL, you can see all the functionality that's available there. Essentially, it adds all this additional functionality, like the ability to log in, or authenticate as a user via Lightning, associated with your specific Lightning Node, the ability to do what's called an LNURL withdrawal, which is where you basically, have a QR code and everybody that scans it gets sent a certain amount of SATs.

Instead of having an invoice where you have to say, “Pay me this amount,” they have to scan it and then approve it. You can basically, have QR codes where people can either send you money, SATs directly, without you having to generate an invoice, or you can do the inverse and basically, you can provide Faucets where they can scan the QR code and then be sent SATs from you. I was playing around with that with LNbits, and then came across LNPay.co, which provides that functionality as well in a more developer-friendly format. How many businesses are built on top of LNPay as of right now?

[0:15:14.4] TK: Before I answer that, I want to go back to your LNURL, and go from there. LNURL started, LNURL withdrawal was the first biggest aspect of LNURL that started, because there's a fundamental UX problem with the way BOLT 11 and the Lightning Network works with the invoices. If you need to receive something on the web, you have to basically, paste an invoice to get paid. That hurdle, that's some serious friction if you have to go to your wallet, and then people have wallets on their phones. Is it impossible in 2019, to do that easily?

LNURL surfaced as a solution to that, where it basically, instead of having to paste in an invoice that you generated, there's a QR code that you can scan and the wallet and the server talk behind the scenes and handle that invoice exchange, so you don't have to paste it in there. That was one of the first things that LNPay implemented way back, that was really necessitated the need for a server/service to process those. Leon if you're here, it'd be a good time. Leon was one of the first to use LNURL in stacking, as a easy way for customers to get their SATs back.

[0:16:44.4] Y: Yeah, exactly that. LNURL withdrawal and within LNPay.co was most perfect for us. Perfect UI to hand out the Satoshi, so the SATs that our users are in on our platform, so they only have to scan a QR code and they had their SATs directly in their wallet. What we do is we let people earn SATs by shopping online. What you know in the US, a platform like Lolli, to say what we do here in Europe, what our thing was that we don't want to hold the funds for the user and pay out every SAT that is available for us directly to their wallet. Now, with LNPay and LNURL withdrawal, that was the perfect solution for us.

[0:17:29.2] L: What Yello said before about short-term lending, that sounds a lot like the current repo market. They could be something in the future that goes in that direction. Say, if you had –

[0:17:39.2] S: I think, Yellow more meant like, payday loan type stuff.

[0:17:43.7] L: Well, I'm just thinking if you had a lot of capital, and in the future, there's more regulation around Bitcoin and you didn't want to hold it on your books. It sounds a lot repo, doing that short-term lending. Look, it's not relevant now, but I just think that could be something in the future that becomes relevant.

[0:18:00.3] P: Got it. Alex, I know you're sitting there in the audience. You've refused to come up, but I just want to acknowledge, you have a blue checkmark now. Congratulations. That is quite an accomplishment.

[0:18:09.2] CK: We got to get blue checks for all the Bitcoin mag people.

[0:18:12.8] S: If you ever get a blue checkmark, I will disown you, P.

[0:18:16.4] Y: Thanks, P.

[0:18:18.5] CK: We need to infiltrate the blue checkmarks with Bitcoiners. I think, it's actually a great attack vector.

[0:18:23.9] S: Yeah. I’m on undercover check mark, fake journalist.

[0:18:26.8] CK: Shinobi, writing up articles and he might get a blue check soon one day.

[0:18:30.3] S: I will refuse it. You’re never putting a blue mark on me, man.

[0:18:34.3] CK: Mark of the devil. P, where are we taken this convo? I was enjoying the talk about LNURL and all the applications. I didn't know that was being used on stacking either.

[0:18:44.1] Y: A long time.

[0:18:45.0] PARTICIPANT: Yeah. For us, started using LNPay and LNURL withdraw from the start was the idea that we want to use us to take custody and responsibility over their Bitcoin themselves as fast as possible. When someone has earned Satoshis, we want them to have it in their own wallet and take responsibility for the Bitcoin directly, that they start thinking about it, what are this? What this entail you? Start learning about it. Because we onboard a lot of no-coiners, I think.

We bring them to Lightning and to Lightning wallets, and then they start thinking about it. Then they earn Bitcoin, they own Bitcoin, and they start educating themselves. That was the first, when we started the project was one of the main topics we want to focus on.

[0:19:35.8] L: Tim, do you believe that the work currently being done on contracts and DeFi and the other derivatives in the alt coin market, this is from a coding perspective. Do you believe the work done on that and the code that developers have been making in that in the future can be implemented into Lightning through contracts here? Or do you believe, it will need to be recreated for Litecoin specific code?

[0:20:02.3] TK: I think, all the things you see happening in every altcoin universe can be built on Lightning, one way or another. It might be really far out. We might haven't figured it all the way out yet, but I'm a pretty firm believer that it'll all be able to be done on Lightning.

[0:20:22.8] P: I agree, 100%. I think, that the shitcoins are basically affinity scams, right? It's how closely can you associate with Bitcoin, in order to leverage its legitimacy in order to promote your own scheme to basically, take Bitcoin from people into buckets? There are some specific projects that are actually trying to do interesting technological things, but the vast majority of them are just trying to do that.

Take Bitcoin out of people's pockets, put it into theirs. I agree with you a 100%, Tim. I think the vast majority of it can be done on Lightning, or will be possible in the future, but the things that are not will be implemented on Bitcoin over time.

[0:21:02.7] TK: Yeah. I think, from just the technical perspective, too, I'm not sure how. The more and more I learn from some of the guys pushing stuff forward in the space, like Lightning Labs, and like Springshot Paul, I believe in even more that between Bitcoin and Lightning, or another layer on top, the things will be able to be done. We just might not know it all the way, but it will all be possible.

[0:21:28.3] S: I mean, look at DLCs. Most of the stuff going on in smart contract land, they’d still requires an Oracle. They just tried to obscure that. BOLTing a DLC into a Lightning channel, anything dependent on an Oracle, you can construct that.

[0:21:46.9] P: Dustin, welcome to the stage.

[0:21:48.5] D: Hey, what's up guys?

[0:21:49.7] P: We're talking about Lightning. LNPay.co. It’s legit.

[0:21:53.5] D: Lightning’s one of my favorite things.

[0:21:55.5] S: Autism.co, not PlebNet, right?

[0:21:58.3] P: Sorry, did you say autism not PlebNet? Yes, that's correct. One thing that I –

[0:22:03.1] S: Autism net.

[0:22:04.4] P: No, that’s not a thing. That's the thing you're trying to create. It's not actually a thing, Shinobi. We'll talk about this later at home. One thing that I want to make sure that people understand and the audiences, Tim, can you walk people through the use case for LNPay.co, versus running your own routing note? What specific value does LNPay.co provide to people who are interested in building on top of the Lightning Network? What's the value prop there?

[0:22:33.0] TK: Well, there's two things to unpack. Routing nodes and routing is not really something that this should be used for. I don't really help with routing and the purpose –If anything, LNPay is routing, and the fees are negligible, or not really paid attention to. We optimize for delivery. That sometimes means paying ridiculous fees, just to make the experience better. Yeah, routing is a separate thing.

The value prop for developers is that some of that stuff is abstracted away for you, and you're given the tools to work through that. Right now, LNPay operates in two forms. There's a full custodial form, and then there's “custodial.” There's a semi-custodial form, where you plug in your own node, and just use the application layer of LNPay on top. The value there is you bring your own node, and you can still get the application layer of an easy to use API and general tools to help with micro-payments and managing user wallets and stuff, which includes setting fees, and at a high-level, or adjusting those, and for certain users, setting limits and stuff like that. You can even do that on a per user basis, when you get into the more mundane things of managing a service with lots of users. Got off on a tangent there, but it's where it goes.

In general, it's just helping people get started. I mean, that's the toughest part is just getting started and being able to build on the Lightning Network easily and learn what's going on. That is, I would say, that chief value prop now. It's just getting started with normal, web-friendly things, like web hooks, and standard API rest formats. You don't have to interface directly with your node, which is low key, a huge pain in the ass. Don't have to deal with GRPC.

[0:24:38.0] P: How dare you?

[0:24:40.2] TK: Don't have to do all these things, if you're trying to just test out a tiny, little service to see if there's anything there. That's why it started as custodial. Now over time, that was used to help bootstrap it over time as the tools and things. People have nodes now, so you can – it’s easier to spin up nodes on voltage or Umbrels and things, and they’ll slowly move away from custodianship as you get more advanced. It's easier to abstract away the complexities of running a node, which has always been the core problem.

[0:25:12.0] P: Absolutely. I think, looking at your website, you offer direct integration with Zapier. That's a very powerful feature, right? There's so many apps that are connected via Zapier, as they like to say. To be able to integrate Lightning into one's business app workflows via Zapier, it's pretty fucking huge.

[0:25:31.8] TK: Yeah. Just general integrations that people are used to, from a normal – when you go build your normal SaaS business, everyone plugs into all these things. It's pretty much by default, right? That ecosystem is not really – just is not built yet in Lightning. That's how you know it's early. It's like, all these things will exist, these integrations, all this stuff will be there. It's just not there yet.

[0:25:57.1] P: On the website, you've got SAT mailer, and create Lightning Network into your emails, reward your readers with loyalty SATs via LNURL, or include Lightning invoices directly in your emails for purchasing. Is that a specific integration that you provide? Or is that something that somebody can do via something like Zapier?

[0:26:13.8] TK: I don't know if Joe Rogers is here.

[0:26:16.6] P: Probably not.

[0:26:18.0] TK: Yeah, probably not. He was the first one to actually use – First, was obsessed with putting Lightning in emails, because you can put an invoice and an email and you could, as a static QR, and you could just pay it and something could happen. Then with LNURL, you could actually give people money in an email.

[0:26:39.6] P: That thing, it's pretty amazing.

[0:26:41.6] TK: Yeah. I got obsessed with that. Joe and I worked together on creating the probably, the first loyalty newsletter, like SATs newsletter, when he was running his Bitcoin words, where every user would – when he would send out his journal, there'll be some SATs there that you could pull. You could pull the SATs. If you pulled the SATs, you got another email, because Zapier would trigger to send another email to you, that you pulled the SATs. This is another way, too, where you could buy something. You could pay, or tip, and then it would send you an email with like, “Oh, thanks for tipping.”

[0:27:19.1] P: That kind of functionality is so important in terms of adoption, right? Because all of us are really – At least, I don't want to speak for everyone, but I – something that I spend a lot of time thinking about is how could we make Bitcoin and the Lightning Network more approachable for the vast majority of people? I think, that's a super important thing. I think, integrating with Zapier is one of those things, where it's like, everybody just goes to Zapier; programmers, non-programmers alike go to Zapier, and they're like, “Okay, what can I integrate with?” To have that functionality available is pretty powerful.

[0:27:50.2] TK: Yeah. Another thing with emails in general, email is a very – I come from the traditional, say, traditional startup world, where email marketing is done and stuff like that. There's a lot of metrics, open rates, click-through rates, impressions, all that stuff, people use to engage with their audience. If you can add another layer in there, which is money, you can start getting cost per things, like a real cost, like cost per open. Or if you pay, you pay people, you can see if your readership goes up, because you paid people. Maybe you can ditch ads. It actually is a win-win for everyone.

Those metrics are cool to see if it's going to work, like we think it's going to work, with micropayments, micro-engagement, if that stuff actually plays out. It's unclear, but it's cool to think about and test out.

[0:28:47.3] L: I think, we're seeing a little bit of that here in Spaces. I looked this morning, there was some paid spaces in here. They run on this same system, Tim, on the Lightning system?

[0:28:57.3] TK: Yeah. I haven't actually played around with much of the functionality in Twitter with tipping and stuff. Yeah, exactly.

[0:29:04.9] P: I'd be surprised if paid Spaces were already in native Lightning. That would be amazing if they were. I want to open the floor to the people that are on stage first. Are there any comments, thoughts, questions you have about the future of the Lightning Network, the work that is being done that we've discussed so far, or any ideas that you have? Then following that, I want to open the floor and bring some people up to ask specific questions, voice ideas, and then we'll tear them apart, unless they're good ones. Dustin, Shinobi, Alex, everyone else. Leon.

[0:29:38.9] A: Last time, I see something interesting, and that's the connection between digital payments. In this case, LNURL pay and physical actions, physical events, so that you can pay a Lightning invoice and that triggers a physical event. Been experimenting with that myself, but I think, we will see what use cases come up in the next months and years, because I think there's a lot of possibilities there.

I experimented myself with just doing a Lightning payment, and that's triggered some sprinkler in the garden. You could also think about air-conditioning in hotels in other events in the physical world that can be triggered by digital payments. We’re very early with that. Yeah. I think, a lot of ideas will come up in the next year.

[0:30:24.7] P: I'm not going to tell you that that will definitely be at Bitcoin 2022. I'm going to strongly imply it. There may or may not be Lightning, Tesla coils that can only be activated by direct payments to Lightning addresses that donate to charities. These are things that are possibilities, but it's going to be exciting for sure.

[0:30:42.8] A: Yeah. Very cool. We have to stay experimenting with that.

[0:30:46.4] P: Yeah, absolutely. I think, one thing I'll just say as an aside is, I continually have the experience of having to explain to people why it is so significant that the Lightning Network allows you to send value to another person instantaneously for essentially low fees, with no intermediaries. It is continually surprising to me that I have to articulate to people, do you understand what happens when you send money through Venmo? Do you understand the number of actors that are in that chain that have insight into your information, your data, and can block that transaction from happening, if they choose to?

People just don't get it. I think in a lot of other countries, to something we're talking about earlier, that's very, very front of mind. In the US, at least, which is where I'm currently based, people are just completely oblivious to it. When you talk about that functionality, or the Lightning Network of Bitcoin, people are like, “Yeah, but why do I really need that?” It's like, “Oh, you will. You will need that.”

[0:31:50.4] D: It's inevitable that eventually, everything will be a Bitcoin Lightning payment. I appreciate Tim, so that you're working on the last mile effort to really get Bitcoin to more places. I think, that's a really important piece of the whole picture.

[0:32:02.7] S: I'd actually like to hear Tim and Leon’s thoughts about any friction, or timetables, as far as BOLT 12, replacing BOLT 11 will go, given how many services have integrated LNURL, which is pretty much built out specifically, because there wasn't something like BOLT 12 already. Do you guys see that taking a lot of time, just because of how much has already built up around that LNURL? Any frictions or pain points in that transition?

[0:32:34.2] TK: I think, it's still a little wild west, man. I think, it'll be a while before we see a real dominator. Yeah, LNURL’s got did the move, first mover advantage and has a lot of traction. BOLT 12 solves the same thing. Also, you got this extra layer of LND and c-lightning politics. You also need the nodes to implement BOLT 12, which is an extra hurdle. LNURL’s outside of all that, on the application layer?

[0:33:09.5] P: How much overlap is there between LNURL and BOLT 12?

[0:33:14.5] TK: Zero, right?

[0:33:15.7] L: When you look at our solution, we send a payout to the user, but we cannot pay out a user fee at BOLT 12 at the exact same time, because at the time that we sent the LNURL withdraw, we don't know if the user is online, if it's not connected to the Internet. I think for us, the LNURL withdrawal is always the preferable way for now.

[0:33:39.3] S: You guys see a lot of wait and see. Even if the politics between implementations is sorted out, it's probably not going to – we're not going to see services jumping over really quickly.

[0:33:53.9] TK: It's like, what is jumping over me. I think, if anything, it'll just be dual support, or it'll be, “Oh, BOLT 12, oh, LNURL support.” I have a hard time. It's tough to see where it's going to go, but I can see – it's been a hot topic lately at some of the conferences and things, where that's all going to fall. Because you can even make the argument that both LNURL and BOLT 12 are unnecessary by just using key send app, and some special custom parameters that define what you need to do. You don't need –

[0:34:27.6] P: The Bosworth hypothesis.

[0:34:29.6] TK: Yeah. Then, it stays all contained on the Lightning Network, too, which LNURL takes advantage of HTTP. Then you have issues with DNS. It's actually very complex.

[0:34:43.4] L: Yeah. I think, the hardest thing, the hardest nut to crack now is, how do I send Bitcoin via Lightning in a non-custodial way to a user that is not online? There's no solution for that yet.

[0:34:54.9] D: There was one I heard talked about fairly recently. I suspect it's coming.

[0:34:59.0] P: Can you elaborate, Dustin?

[0:35:00.9] D: I forget. I was just by speculating on this in Austin a couple weeks ago. With Greenlight, with a c-lightning, as far as I can tell, it should be totally possible to receive stuff and not send it while your key is offline. Greenlight is the thing that separates your key from your actual – all the rest of the Lightning Node. I can't tell you how they – the theory this person had, just turned to second hand. I believe, it's theoretically possible. If that's true, expect it will be in a little while, you'll see it come out.

[0:35:30.6] TK: I think, how that works is you have a central node. I think, Breez did this for a little bit. I don't know if they still do it. Basically, you have someone like Breez, you’ve got a spoke-hub situation. Then all the lease are connected the hub and the hub will hold the payment until the node comes online, and then send it. That's how Greenlight also works. I don't know if they do it the same technically, but that's the general idea.

Greenlight is a pretty hot topic lately, too, because of the separation. The key there is the separating of the signer, which is a pretty interesting concept. Basically, you can pull your keys. You just need your keys to receive and send, but you don't necessarily need the node software in the same spot. You could have a node in the cloud and have a USB drive plugged into your computer somewhere, and you could assign and receive payments when that USB drive is plugged in, but when you unplug it.

[0:36:37.2] D: There's no theoretical reason you couldn't receive while the signer’s offline, right? There's no SATs at risk for the other side. It's just on your own, since there's no risk to that.

[0:36:46.4] TK: Yeah. Sure. Just sending.

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[0:38:49.6] D: There are some weird cases that prop up that you might need a watch tower. You might need a little more than other cases. I have more through all the details. Anyway, I just think it's theoretically possible.

[0:38:58.0] P: Theoretically possible for someone to receive SATs, while their node is offline, while their Lightning Node is offline.

[0:39:03.9] D: Yes.

[0:39:04.5] P: Okay. Got it.

[0:39:05.1] D: Yeah, some variant of offline. The keys are offline.

[0:39:08.4] P: Yep, totally. Again, I know I say this constantly. I feel it's the most common thing I say. For the audience, what we're talking about here is with a Bitcoin Core node, which is layer one Bitcoin, sound money, decentralized, censorship-resistant, all that stuff, you do not have to be online in order to receive payments.

If Dustin wants to send me money for a pizza that I baked him, or for putting his boat out when he set it on fire, because he's doing emergent mining, whatever it is, he can send that payment. It gets set in the blockchain, and then basically, I can move my node back up after six months, catch everything up, and then be good to go. In the Lightning Network, your Lightning Node by default, or in general, has to be online all the time, because the Lightning Network is extremely dynamic. There are services that are fully custodial.

As to say, they hold your keys for you and run all the systems in place to basically, maintain your liquidity and your availability, like BlueWallet. Or you can use systems, like Breez, where you're actually running a full node that is a neutrino node. It's not a full note. It is a pruned node on your phone in real time, that basically, will give you alerts, if you don't open the app frequently enough. It'll say, you got to open your app, because your node needs to be online, in order to make sure that you're not missing anything.

What Dustin is talking about is on the Lightning Network, how can you have full custody of your private keys, and then also be able to receive payments without problems if you are not available?

[0:40:49.6] S: If you tweak what full custody means, you could have the other side of your channel, just keep signing updates that update the balance, and then waiting till you come back online to have you sign and then exchange the revocation keys. You would be in a weird Limbo, where none of that was enforceable, until you did that. Obviously, would have to trust your channel comes –

[0:41:16.9] D: It's exactly that, but you wouldn't trust anybody though. As long as you're receiving, the other side has no risk. You can't steal any funds. The trust all works out. Well, that's exactly correct. You would have them sign their half of the updated state, and then relay it to the online portion of the Greenlight service. Then when you come back online, then you would sign the new states and stuff and you wouldn't be able to send to that channel again, until you caught up the signatures.

[0:41:42.9] S: You wouldn't be able to enforce that until you exchange the penalty keys for the most current state. You know what I mean? Any of those –

[0:41:52.5] P: Wait, wait. I think, we're getting too in the weeds here. We got to define our terms. When we talk about penalty keys just as transactions, things like that, you got to provide context for the audience.

[0:42:02.1] S: The only way you can enforce the current channel balance is having the penalty key to effectively steal the other party's entire channel funds, if they try and do that.

[0:42:12.0] P: Exactly. Again –

[0:42:13.0] S: This offline receiving system, you could have that go through, but all the recent payments that happened while you were offline, your channel counterparty could still use the channel state to close the channel before those payments, until you come online and sign everything and everybody exchanges penalty keys. Because, unless you’re online to get that, you can't really enforce those things.

[0:42:40.6] P: To be clear, what we're talking about here is the Lightning Network is basically, it's like a spiderweb. You run a node, or you can run a node if you choose to. Basically, just because I do not have a direct connection to Shinobi, I can still send in payments. If I have a channel to Dustin and Dustin has a channel to Shinobi, I can basically route payments through Dustin to Shinobi. Then, all the people that I have channels open with, which are two of two multisig contracts. Whenever anybody says like, “Oh, you can't do smart contracts on Bitcoin. They're totally full of shit.” It's absolute garbage. You want 100% can.

Bitcoin was the first blockchain to implement them. Though people get weird around Turing completeness, which is not a feature. It is a bug. There is a risk if you go offline as a Lightning Node. If your Lightning Node is unavailable, because essentially what a channel is, is it's basically, it's like a bar tab that is updated in real time between two people. If Shinobi and I have a channel that we've opened between our two nodes, which by the way, Shinobi, I'm furious that we do not yet have a channel open.

[0:43:48.4] S: Or do we?

[0:43:49.1] P: Oh, shit, dog. Okay. Well, that's a possibility. The point is, if I take Shinobi out for beers, and I buy him a beer, and then I say, “Okay, you owe me $5, or whatever.” Then, he basically, updates our channel state, and then we go back and forth, that's fine. Then, if my node goes offline, and I'm down for the count, Shinobi can, in theory, publish a false channel state, which says something like, “P owes me all the money that was opened in this channel, and he can go fuck himself.”

There are systems that mitigate that type of behavior. They create incentives, because that's what Bitcoin and the Lightning Network is all about, right? It's all about these incentives that basically, drive optimistic, or I would say, correct behavior. One thing is there's watch towers, which are basically, systems that you can set up that allow you to send your channel state to third parties, so that if something goes wrong, they can publish what is called the justice transaction, which is my favorite term in Bitcoin to full stop and no scrubs.

The justice transaction allows someone who has been cheated in terms of channel state, to not only reclaim the funds that were rightfully theirs, but also, to reclaim the funds that the other person had that were previously on their side of the channel. You want to be very careful about trying to, or not even you want to be. No one tries to screw each other, or very few people do, because the threat of the justice transaction is so great, that it's just not worth it economically. That's what we're talking about here. Would you add anything to that, Shinobi or Dustin?

[0:45:26.0] S: Yeah. I just want to clarify that until you come online, in this example of receiving a payment while you're offline, and sign things and exchange those penalty keys, you can't consider those payments finalized or enforceable. Nobody can go back and steal all your channel funds. They could theoretically do that with the little amounts that you've received in payment.

[0:45:51.4] D: You're getting there half of the insurance keys. This would require restructuring the protocol and having a special justice transaction. As I understand it, there should be no reason you wouldn't be able to get those funds, just their half of the signature keys, even though you haven't updated your side.

[0:46:08.2] S: Well, like think about this. They can't give you their penalty key, until you give them theirs. Otherwise, they're screwing in the –

[0:46:16.8] D: It would require a protocol update, where they did give you the penalty key, without getting yours yet.

[0:46:21.1] S: Yeah.

[0:46:22.1] A: I had one thing to say before I'm going to step down and let some other speak. It was a question for you guys who are very tech savvy around Lightning. Excuse my ignorance here, if it's a stupid question, but I'm going to ask it anyway. With the standard Internet protocols and things that go on around censorship and things, with people running Bitcoin full nodes, and running Lightning Nodes and Lightning channels, are we going to see a future where there's a decentralized Internet, too, where if I'm currently in a jurisdiction that blocks me, like China, from communicating over the web, that I could possibly send SAT and attach to the SATs was information, and they would be able to interact again, with the web, even though I'm censored?

[0:47:01.6] TK: It sounds like, you're describing the Tor network.

[0:47:04.8] A: What I'm trying to say here is if I'm running a Bitcoin on a Lightning Node and a Lightning Node, and my country's censoring me from most HTTP, or stuff, Google and stuff like in China, can I send information and data through the Lightning Network and reroute around those centers?

[0:47:22.6] S: Yeah, you definitely could.

[0:47:23.5] D: I would probably send it through the Tor network. That's what I would do. Lightning can be run over the Tor network, and a big portion of it is actually. Tor Network was really the solution for that.

[0:47:33.2] L: Yeah. I got I got a real-life example on this, because we got a we got a user in our community, or in the Netherlands. He lives in China and he sends the nations do a podcast of realizing on a weekly basis. He runs his own Tor Bitcoin Lightning nodes, and he just sends it all from China.

[0:47:53.0] D: Yeah. You could totally send a network, a message over Lightning that's also over Tor, which is fine that works today. Tor is useful for people getting around there. There is the great firewall of China today, and used actively for such purposes. It's old tech. It's already been solved, but still very cool.

[0:48:12.8] P: I just want to welcome Rindel.

[0:48:14.3] TK: You can put arbitrary data in Lightning memos or something. You don't actually want to do that. Years ago, the thing to do to impress your friends was to tunnel HTTP over DNS. You go to a hotel, and the hotel has a captive portal where they want you to pay for the Internet. If you say, “Fuck you. I'm not going to do that.” Instead, I'm going to have a DNS server that acts as an HTTP proxy and tunnels all of my HTTP responses over DNS.

Yeah, you can do that, but it's not very scalable. It's going to be even worse on Lightning. Lightning bandwidth is very constrained. If you want to do interesting network protocols with Lightning, the thing to do is use Lightning transactions for coordination, or signaling. Then you use normal other Internet protocols for the actual payloads.

[0:49:10.2] P: You’re talking about something, like impervious?

[0:49:11.5] TK: Yeah, like impervious. Or if you wanted to do some video calling application, you would use, or audio calling for that matter, you would use Lightning to trade a bunch of SIP parameters, and then you just do normal voiceover IP. If you're worried about censorship, use Tor, or ITP, or any of the other systems for doing the Internet, or the web over censorship-resistant networks. Please don't try to serialize arbitrary web responses into Lightning messages. You're going to have a bad time and you're going to cause problems for the network.

[0:49:47.8] PARTICIPANT 1: Is Tor allowed in China? Is that not banned?

[0:49:50.9] D: It's unstoppable. You can't stop it. That's the point.

[0:49:54.4] P: Well, it's unstoppable as long as the US government supports it, right? My understanding is that Tor is dependent on the US government, in order to function reliably.

[0:50:05.7] PARTICIPANT 2: What they say is the vast majority of the relay Tor nodes are operated by the CIA or something, right? Something like that?

[0:50:12.7] Yeah, but you shouldn't be using those anyway. You should use native –

[0:50:15.5] P: 100%.

[0:50:17.9] S: I mean, the whole core node, you are implicitly trusting a bunch of hackers, mostly in Berlin and Europe who run the directory servers, or their servers, which actually filter out all the relay nodes that you build circuits from. Tor and of itself is inherently centralized around those group of people.

[0:50:39.7] TK: In fact, the other main Tor team is almost all women.

[0:50:42.5] P: No shit.

[0:50:43.3] S: I would say, half spooks.

[0:50:45.7] P: That has nothing to do with their gender, or their biological sex. Sorry, I’m eating a loaf of bread right now.

[0:50:52.3] KP: To the earlier question, though, you have the ability to attach and message to a payment, like in a key send. Those are short messages. You won't be able to download a page, or something like that. You can see a message to –

[0:51:04.2] PARTICIPANT 2: Yes. AB characters, I think.

[0:51:06.9] TK: Yeah. The idea would be that you use the key send to coordinate something to Clearnet, wherever you can.

[0:51:13.4] PARTICIPANT 1: You can send to a pub key, small amount and a message. You should be able to coordinate at least messaging part of it.

[0:51:21.4] PARTICIPANT 2: Thunder hub has this built in. It's a little bit wonky, but it works.

[0:51:24.6] P: Yeah. I mean, just to go all the way back to something we were talking about, probably 30 minutes earlier. There's the question of what should be built with the app layer, versus built at the protocol level. There was a great conversation with John Carvalho and Lisa and Vivek and Alex Bosworth from Blockstream, that was basically going back and forth about this topic.

[0:51:44.1] S: Whoa. Alex is not Blockstream.

[0:51:46.1] P: No, no, no. Sorry. Alex Bosworth is Lightning Labs. Alex Bosworth of Lightning Labs, Lisa, and Vivek of Blockstream here, and then John Carvalho of the stealth startup that he's been promoting for forever. That is an interesting topic. It's basically, what should be built at the app level, which is Alex Bosworth has built this incredible tool called Balance of Satoshis, which most of use, who are running routing nodes. It uses key send, in order to facilitate a bunch of pretty amazing functionality, very relatively seamlessly that is not available currently on the Lightning Network at the protocol level. That's Lightning Lab’s position.

Then the block stream position is that, “Oh, no, no, no. That should all be built at the protocol level.” That should be something that we all agree on, so that we can all be on the same page. It's an ongoing debate, but it's an interesting one, for sure.

[0:52:33.1] N: Did Alex, or anyone bring up the LSAT idea, authentication token? Because I've been looking at that lately. I feel like, people aren't doing anything with that. Even though it has a lot of really cool concepts that you could do with it.

[0:52:47.4] KP: Can you elaborate, Nate? What is it?

[0:52:49.4] N: Yeah. March of last year, Lalu from Lightning Labs talked about the Lightning Service Authentication Token, the LSAT. The LSAT is used a little bit in their pool, but it's also an open library of functions and stuff. You can essentially have a Satoshi different from all the other Satoshis on the Lightning Network. You could sell tickets. It would solve a problem of the Bitcoin conference. All you need is an email. Nothing's really stopping you from selling your ticket five times.

[0:53:26.6] S: LSAT was based on macaroons for authentication.

[0:53:30.1] N: Yeah. The way that it's pay for an API token, right? It's like, you hit an API, and it sends back, God, what is it? It's like a HTTP, what is it? 402 or something.

[0:53:42.4] TK: 402. Yup.

[0:53:43.4] N: Payment required, which it's hilarious that we have an HTTP error code for years, which is payment required, like nobody's done anything with it. The idea is you have the server send back this payment required and attached to it is a Lightning invoice. The client pays the Lightning invoice. I think, the way that LSATs work also is the Lightning invoice also comes with an auth token. You pay the invoice, and then that auth token is good for whatever metered, or prepaid amount of API access that you pay for.

There's a piece of open source software called altwall, which you can see, it's written in NodeJS. If you have a JavaScript application, like an express application or something, you can put volt wall in front of it, and basically, have a paywall for your API. If you want to do normal paywall stuff, you can do that, but you can also do paywalls for software. You then, I don't know, weather data, and you want people to pay for programmatic access to the weather data. The idea is that LSATs are a mechanism to have software agents pay for data access, which is really effing cool.

[0:54:53.0] TK: I think the easiest way to describe that LSAT that I've heard is it's a macaroon with an invoice attached to it. That's pretty much it. The macaroon can have complex permissions embedded in there.

[0:55:04.3] N: Are there any projects that are using this? Or is this a problem of foundational development?

[0:55:10.7] P: I like to imagine that that was you making that noise, not your child.

[0:55:14.1] N: Hey, P. I've known you since she was born, dude.

[0:55:16.8] P: No shit. How old is she?

[0:55:18.2] N: Seven months.

[0:55:19.2] P: Wow. Congratulations, man.

[0:55:22.3] N: Yeah, she's a goofball. I was talking to somebody earlier today about it and we were like, yeah, it's a problem – You're thinking it was a problem with foundational development. People that want to use LSAT can do it easier.

[0:55:32.8] TK: Yeah. I think that there's a couple different chicken and egg things going on. It'll get resolved one day, either by LSATs, or by something else. One of the things that would be awesome to see with LSATs is really good integration into open API/swagger. For people who don't know, there's a set of libraries called swagger, or now they're called Open API, where the idea is like, you define a web API with interface definition file. You say, these are the API calls that I allow, these are the parameters, these are the responses, these are the errors. Then it generates a stub server for you and it'll generate clients in whatever language you want.

The idea is, I build my Weather Service API, I put out a swagger definition for it. If somebody wants to use Python, or Java, or JavaScript, or GoLang, they just hit a button, and they get a client for and they can call it. If you integrate LSATs with that code generation, then what you can do is you can say, okay, I'm going to build an API that uses LSATs, and a dozen different languages can all call it and they know how to pay for their access. That's a lot better than saying like, “Oh, in order to use this, you have to write a bunch of clients that all know how to negotiate LSAT.” There's libraries for all LSATs, but the code generation part of it just isn't there yet.

Another thing that they're probably going to have to just figure out to get more adoption is better integrations with middleware application servers. It’s like, what you really want to be able to do is go to some API gateway and just check a box that says, “Monetize my API,” and it uses LSATs. That just doesn't really exist yet. There's that thing. There's also just services, like voltage or LNPay are probably going to be important with this, because if all you're trying to do is monetize your API, you might not want to deal with the care and feeding of a Lightning Node and dealing with inbound liquidity and all that stuff.

Instead, you just check a box that says, “Monetize my API,” and you want to be able to get payments for it and not have to deal with a Lightning Node. There's a bunch of steps that I think we need to get through before we really see LSATs take off, but they're going to be really, really cool. I mean, if you think about the world that the SaaS ecosystem is in right now, the way that all this stuff works is you build software as a service company, and then you build a metering system, where people sign up for an account, they register a payment instrument, they use the service for a month, and at the end of the month, you add up all of their usage,

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