March 14, 2024


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Citadel Dispatch

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BLOCK: 834670
PRICE: 1392 sats per dollar
TOPICS: medium of exchange vs store of value, lightning, stablecoins, different custody models, ecash, bolt12, human readable names, marathon slipstream, non standard transactions, bitkey hardware wallet, spiral wizards

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(00:00:02) Intro Clip: The risk of governments affecting bitcoin's growth

(00:01:58) Bitcoin as a currency vs. store of value

(00:41:50) Taproot channels and reducing fees

(00:51:40) Time Out Trees and scaling Lightning

(01:08:07) Stablecoins on Bitcoin and Lightning

(01:21:11) The impact of non-standard transactions on the Bitcoin network

(01:22:30) The need for transparent and verifiable transaction accelerator services

(01:26:21) The importance of preventing centralization in Bitcoin mining


00:02 - Intro Clip: The risk of governments affecting bitcoin's growth

01:58 - Bitcoin as a currency vs. store of value

41:50 - Taproot channels and reducing fees

51:40 - Time Out Trees and scaling Lightning

01:08:07 - Stablecoins on Bitcoin and Lightning

01:21:11 - The impact of non-standard transactions on the Bitcoin network

01:22:30 - The need for transparent and verifiable transaction accelerator services

01:26:21 - The importance of preventing centralization in Bitcoin mining

Andrew Sorkin:

That there's any risk at this point. Has has Bitcoin reached such escape velocity

that there's any risk that


the US government, Chinese government, other governments

somehow do something to Bitcoin that that that puts its growth in jeopardy?

Michael Saylor:

You know, it's it's another great question, Andrew. A lot of times the skeptics, they say Bitcoin looks too good to be true. It's so good to be true. Someone's gonna take it away from you. And that's based on a fundamental misunderstanding

about Bitcoin.

People people refer to it as currency or digital currency, and that's unfortunate,

historical artifact.

It's not digital currency. It's digital property.

And once you make that big leap and understand it's property, you see, the compelling use case is capital preservation

for everyone in the world.

There's no there's no

associated with owning property. You can own a $1,000,000,000 building in New York City. You can own a every place in the world where they allow you to own property,

which means China,

Europe, the US,

they're going to embrace Bitcoin as digital property.

All the controversial

issues around around cryptos have to do with their use as a medium of exchange.

But what I'm here to say really is medium exchange is only worth a $1,000,000,000,000.

Store and value is worth a $100,000,000,000,000.


I give your company, I give your family, I give your institution a $1,000,000,000, I drop you in Africa, and I say, you gotta save the capital for a 100 years. What are you gonna buy?

And the answer is nothing.

There is nothing on the entire continent you can buy that's better than Bitcoin.

So Bitcoin's going to be embraced as property.

It's going to be it's going to be controversial if people think of it as a currency. So I would encourage people to think of it as as digital property,

a $1,000,000,000 building in cyberspace

Andrew Sorkin:

And does it ever for a 100 years. Does it ever have to be a currency, or do you think it ever becomes a, quote, unquote, currency?

Michael Saylor:

It doesn't have to be a currency.

You know, nobody's trying to buy a cup of coffee with a fraction of their building on Fifth Avenue.

Right? But there's a but every rich person I know owns property in London or New York City or somewhere, and none of them complain about not being able to spend their building to to as a medium of exchange. So the the killer application is capital preservation for everybody.

The store of value is the killer use case. Medium of exchange is a distraction.

Governments are always gonna issue currency. They're always gonna make it legal tender,

and that's just fine.

Bitcoin's competing with gold. It's gonna eat it, and then it's competing with risk assets as as a long term hold, and it's competing with you buying a an Airbnb

as a retirement income source if you're a middle class person.


Good morning, freaks. It's your host, Odell, here for another Civil Dispatch

interactive live show focused on actual Bitcoin and Freedom

Tech discussion.

I am

grateful to be here on a fine Austin morning at PlebLab,

Steve Lee:

with Steve Lee of Spiral. How's it going, Steve? Going great. Thanks so much for having me. Just flew in last night, as you know.

Thanks for everyone being patient for, doing


this this Thursday morning session. Yeah. We had I told the freaks ahead of time that we were recording last night, and then we ragged them and and did a morning rip. But,

didn't seem people were too disappointed. They're they're a lot of people a lot of freaks like the morning reps. They enjoy the morning reps more than I do, to be honest. K.

So, Steve,

what'd you think? We we started off,

dispatch with the CNBC clip of of Michael Saylor talking about how Bitcoin's not money.

What is your do you have any thoughts on that?

Steve Lee:

Yeah. I do have thoughts. I actually don't

yeah. It seems to maybe be creating

controversy. I don't I don't really think it

I don't see the controversy in the sense that I actually mostly

agree with what he said.

And I say this is someone

working on Bitcoin

for payments in Bitcoin as a currency. And a lot of what Spiral does in spirals mission, right, is about Bitcoin as payments and Bitcoin as a currency, not digital gold. So that seems a little odd that I would agree with what he said. But

I think,


product market fit of Bitcoin, the use case of Bitcoin today is

story value, digital gold. And

for, like, he I think he's speaking to people coming into Bitcoin. And that's a good entry point as to

under wrapping your head around Bitcoin.

I also think he's probably not wanting to scare off

governments and regulators,

and challenge you know, being gold like is less threatening than, like, challenging


challenging the US dollar or currencies? I mean, he mentioned building specifically.

So Like, you're not trying to buy a cup of coffee with

Steve Lee:

a fraction of the Empire State Building. So I actually have no issue with what he said. Had but having said that,

well, also, I think Bitcoin is a Bitcoin's store of value is just, like, a done deal. I mean, it Is Bitcoin a currency?

It I think it can become 1, and I'm working hard with many other people to do that. Right? But I think Bitcoin is a store of value. It's a slam dunk. It's already there. We have people in the live chat sending me fractions of a building right now to support the show.

Yeah. So I mean, there's you know, it's

obviously used,

we're seeing niche uses of it today. Right.

Again, I like, I am

I don't wanna come across as, like, bearish on Right. Bitcoin's currency. It's just we're super early days. And also, it's it's less it's not a slam dunk that it's gonna work. I mean, one thing we're gonna talk about is, like, you know, the challenges of lightning and challenges with all the different technologies to to make it scale.

So we'll we'll we'll go we'll get into that in more depth. Really? There's a lot of technical

there's engineering challenges.

There's design challenges. And then there's other challenges too to to

and and it's just a longer road for adoption, the the for the network effects for that to take take. Yeah. First first, I just wanna pull it back for a second.


I got really excited,

that we're having this conversation, so I didn't do a proper introduction.

Steve is,

lead at Spiral, which is essentially

blocks open source initiatives,


or operation over there. You kind of focus on like the freedom tech aspects.

Steve Lee:

Yeah. I mean It's really cool what you guys are doing over there. Yeah. People can think of the the spiral spiral's an initiative within blocks. So we Right. We are block employees, but we're we're team Bitcoin. Everything we do,

and, we're not directed


the company to work on


their stuff. They Jack, they're directed call you up and tell you exactly what to do. Yeah.

Steve Lee:

The the only direction is do what's do what you think is right for Bitcoin. So it's a sweet gig. We've been doing I mean, it's four and a half years in. So I mean, let's just real quick. Let's pull back to Sailor.


I mean, a lot of talk is that he is just being


or cautious in terms of regulatory environment. Like, he's got a big target on his back.

And so he by framing it that way, he's trying to make it less controversial and make him less controversial.

I think there's probably some merit to that. I wonder, like,

if you asked him behind closed doors, like, if he thought Bitcoin was money or Bitcoin is a currency, what he would say.

I think he might say the same exact thing. Well, what,

Steve Lee:

what's been publicly said about



product plans around Bitcoin? You know? Well, so he so this was I wasn't gonna

bore the freaks with a 12 minute interview, but

there's a longer clip of this.

And he recently


MicroStrategy as a Bitcoin development business.

And I just immediately laughed at the news

because they've done no Bitcoin development whatsoever.


let's see you ship some stuff before you say it. And I was like, okay, it's just like a framing thing for investors because investors are thinking, do I buy the ETF or do I buy MicroStrategy now? Now he has some competition in terms of, you know, people with Charles Schwab accounts. Yeah.

But in this interview, he almost framed it like a real estate developer.

So I think when he says like Bitcoin development company, he just means like just gonna buy more Bitcoin constantly.

And he just calls it a development company.

But I'm not sure. Like, that's Yeah.

Steve Lee:

Yeah. That's not I I I

think you might be surprised. Let's just put it that way. See okay. Interesting. We got a tease from Steve.


I mean, look. It'd be it'd be great to see them ship Bitcoin tools.

It'd be even better to see them ship open source Bitcoin tools, but I'm not going

to hold my breath on that until I see,

yeah, to see it actually in the wild.

But I I mean, I think

I can say as a fact that Bitcoin is money right now. I think Bitcoin is money right now. I use it as money.

People use it as money. I I I was just in Costa Rica.

Like, people are, like, you know, going to the farmer's market and paying in Bitcoin. They're going to restaurants and paying in Bitcoin. They save in it. They spend in it without permission.

And, like, you need both. Like, you can't

A good money,

I see how in the adoption curve, I 100% agree that it starts at store value

and then it becomes a unit of account and a medium of exchange. And there's, like, a flow to it. Right? 1st, you have to save in it. You have to actually have the value accrue.

Steve Lee:

A desire to hold it.

A desire to accept it. Exactly.


To want it.

But the thing doesn't work unless you can spend it without permission because otherwise, it's not actually censorship resistant. And then actually, there's not really much value there. Like, if someone can tell you

what to do with your Bitcoin,

Steve Lee:

then it's not really a savings either. 100% agree on that. If we if we lose

yeah. I mean, obviously, if if all the Bitcoin winds up in ETFs

Yeah. The experiment is over.

There's no question about that. Yeah. I I just the only thing I I've

for, like, 7 years now

that I've been in the space, I see people get all riled up Is it the store value? Is it me to exchange when they're fighting? Yeah. It's like, it it can be both. It is both. It has to be both. Now as far as, like, everything is you you said that it is money now, and you gave a bunch of examples. Those are facts. So I mean Yeah. There's no debate there. Yeah. Like, people are sending fractions of a building to to the show right now to support us. It's just so,

I think the only

why one would say it's not money yet or a currency yet

is is just scale.


meaning, there's not, like, millions of businesses that accept Bitcoin. Yeah. But there's no It's not it's not it's not ubiquitous. But, like, there's also, like, not that many holders.


Like, Sailor always says, like, the 100,000,000 number.

Like, do you think there's actually a 100,000,000 Bitcoin holders?

Steve Lee:

Depends in the definite you know, if you include Like, hold your own people. With, like,


$5 in a finance account. No. No. I'm not including them. That that you have to include that type of Well, I'm self custody. How many Bitcoin holders have bigger self custody?

Steve Lee:


a single digit million for sure. Exactly. And

probably closer to 1 than 10.


I don't know. But Think like 5 ish or something. Yeah. Something like that. Yeah. So it's incredibly early even on the store value side is what I would say. Yeah. Yeah.

I mean, Noster for me has been crazy. Like, to me, Noster is like this

and I've seen you,

you play around with Nastr.

It's this global digital Bitcoin circular economy that's kind of app like, I would say good morning to people. They say good morning, and I send them Freedom Money.

Like, that's crazy.

And I wonder how much that becomes

kind of like a bootstrapping mechanism because it's it's definitely a bigger hurdle.

If your first experience is buying Bitcoin on Charles Schwab or Binance

or Coinbase,

it's a different perspective than if your first experience with Bitcoin is making a shitpost

and receiving SaaS.


If that's your first experience, your first touch point with Bitcoin, you actually come in in the circular economy side. And there are no KYC sats. Right? You're actually just

and we're gonna get into lightning and stuff, and there's issues with it.

A lot of people are using custodial wallets, but

there's something there.

Anyway, we have a long list, Steve. Steve came Steve came prepared. We're we're gonna talk about a lot of things today, Freaks. Thank you for joining us in the live chat to all of you. I know it's an early morning. I know it was late notice,

and, it's impressive it's impressive how how active it is there. I hope, you all have a nice cup of coffee. It looks like we have about 500 people in the live stream right now. Amazing.

So Steve,

Steve Lee:

Is lightning a shitcoin?

Is lightning a shitcoin?

I didn't know that was a controversy.


I like to be provoked. I don't think it's trickling.

Steve Lee:

Although, I I I will say one of the UX


with lightning is when, you know,

it's a common UI pattern in a wallet tab, a tab UI, and you'd like, if you're gonna choose a deposit, like, if you wanna receive money Right.

You you choose

Bitcoin or, like or, like, the tabs might say Bitcoin or Lightning. I feel like that's on chain or Lightning. That's pretty

standard. And and then, like, some,

like, Cash App and others have evolved, like, with a unified QR code Right. Which helps

dramatically at UX. But when I've seen Not only when I've seen a new for custodial loans, I feel like. Right?



Because if you do the unified QR code and the user isn't really educated on what the differences

are, that may get really confused about, like, why is my fee higher or, like, why is this slower or

On the

this well, so, like, why are some transactions different than others? Right? Yeah. But on the

Steve Lee:

as the receiver, you don't


really care. I mean, I guess you'd only care you don't care about the fees. You're not paying. Okay. So let me use an example of a self custody wallet that uses unified QR code, Zeus, by Evan. Right? I hate

it because

but maybe I'm,

like, I'm definitely a unique user.

Right? But if I give someone an invoice

to my lightning node,

like, I don't want them to pay me on chain. I want them to pay me lightning. So then I tab over and do the Lightning only.

Or if I want them to pay me on chain, then I send them an on chain address. Like, I have control over

what, you know, what like, what if it's like a a $40 transaction, let's say.

Right? Or, I mean, I'm now talking in fiat terms. But let's say it's like

80,000 sat transaction.

Like, I don't wanna receive that on chain,

so I pick lightning.

And if you start to hide that from a user in a self custody way and fees go up, like, part of the reason why there's so much debate right now about Lightning sucking

from a self custody point of view, I think, is because fees are finally increasing. Right? There's actually some fee pressure. When it's 1 separate bite, you can do all sorts of tricks like Phoenix Wallet.

You know, you receive an on chain transaction. It just automatically opens a channel. You receive a lightning transaction that's higher than the the higher

more than liquidity, then they they splice in and add liquidity. That's another on chain transaction. And all those can kinda be hidden from the user

in a low fee environment.

Or like on the reverse with Moon Wallet,

where everything at rest stays on chain,

and they're just doing swaps to receive on Lightning or send on Lightning, like, you can kinda hide that from the user, and the UX looks really clean

because on chain fees are low. But once on chain fees start going up,

it becomes really hard to

explain the trade offs and the education of the user and and have good UX at the same time. It gets really, really, really confusing.

Steve Lee:



I I still think you generally are going to prefer lightning,

except if the payment amount is so high

that it crosses over that threshold where it's actually cheaper on chain.


Exactly. So why Unify Keyurco? Why not just use the lightning invoice?

Steve Lee:

Well, the I mean, I would expect, like,

the 95 or 99%

case to be

lower than some super high value. We don't know what that threshold value is gonna be, so it's sort of unknown.

But if it's And it depends on your wallet. Right? It depends on what the case is. The vast majority of payments.

The every

all everyone involved wants it to go over lightning,

then it'll just go over lightning, and it's what people want.

And if it's the 1% case where I, as a sender,

if if well, I mean, the the reason why the unified QR code

the reason why it's great is that it's simple as a user because you don't have to decide. You don't have to choose between these different mechanisms. That's the huge win. Right.

As the sender

And then it's backwards compatible, which is cool. Like, it's an old Bitcoin wallet that doesn't know lightning. It still works. And then as the sender, if I don't have a Lightning wallet, well, then I the only way even if you want Lightning, the only way I can pay you is on the chain. Right. And well, I mean, there might be case some cases where you're just like, I don't wanna get paid then. But it most of the time, it's like, okay. I'll accept this backup plan. Right?

Anyway but the reason I brought this up,

is not really used to be, you know, like, your code. But what I've observed with people looking at a wall that has those 2 tabs is

back to your question of is lightning a shit coin. Yeah. They ask me,

is lightning another coin? Right.

Because they don't know what it is. Yeah. And that was that's always been a motivating factor for me,

that I think lightning should be its its technologies that should be hidden

from users.

And it should just be in the background. They're just batch Bitcoin transactions.

And so but but I mean, to it is it is not a token or a shitcoin.

But is it but I've I've but I've been reading on on Twitter at Noster that it's it's dead.

And I so we should talk about that.


Yeah. I mean,

I do like, what is the better before we get to that, like, what is the better terminology? Because I do hate that it says, like,

Bitcoin or Lightning or On Chain or Lightning. It's that's kinda confusing, and

I don't know. I mean, maybe it's just unified QR code. Like, maybe it's just

Steve Lee:

I think well,

if we

if we assume if we assume a world where Lightning does scale for payments, and that, of course, is being called into question, and we'll talk about that. But if whether it's lightning or some other technology. Let's just say some technology actually scales payments to 8,000,000,000 people, handles as many payments you want. That's where most the vast majority of payments are gonna be. So it's just default the experiences to that. And then on chain

will be this, you know,


mode or it's like this rare it's where you keep your bill. Rare. Yeah. Where you keep your buildings.

Like the sailor button or whatever. So,


that'll it that that's how I would expect the UI. Okay. So, Steve, is lightning dead?

Steve Lee:

Lightning is not dead.

A lot of the,

criticisms that are being

levied against it are valid, though. So it's not like people are creating conspiracies around it. You know?

And these are and a lot of the criticisms are coming from builders, right, who are who are who spent a lot of time and energy And they're frustrated. And they're frustrated. Yeah. And their and their complaints

are are valid. So we can walk through those complaints. But

is it that I've heard,

you know, I've heard some pundits say, like, literally declare it dead and we should just move on. It's like a failed experiment. We've got 7 years of data, and I think that's, like, completely


It depends a lot on expectation. Like, what are your expectations?

So for those


have been led to believe

lightning is going to offer

near zero

fee payments Right. Scales to everyone on the planet AI machine, the machine straight magic, like, you know,

streaming, etcetera.

That's, that's a false narrative.

And I think It's quite popular narrative. A lot of people are Yeah. Starting. And I you know,

core engineers on Lightning

knew that that wasn't

the case.

Or there there's, like, unsolved problems to to Right. Achieve that.

But I I certainly think, you know, people


marketing, lighting, whether it's their business or they're just excited about the technology took took it too far. So if you believe in that narrative, that's when you're getting, like, you're hitting a brick wall right now.

Also, something we should talk about is, like, fees. Like, what are what are the what are people's expectations for what fees should be or can be or what's acceptable? I think that's a good conversation to have.

But one thing that there's no question in my mind where lightning is

finding success and will almost undoubtedly be successful

is like interoperable

glue between a bunch of other systems.

It does

there it does scale Bitcoin by orders of magnitude.


And you name another type of technology or system, and it it already connects it. Like like It's really good as like, it's it's found massive product market fit as a interoperable

payment protocol between custodians, basically.

Steve Lee:

And then the question is And other and other to and, like, you know, you take ARC

or state chains,

or the e cash systems, Cashew, Fedimint. All of those


either on paper or in reality Right. With with lightning.

You take custodial stuff like Cash App, Kraken, OKEx,

etcetera. All these,

products that support lightning.

You you can you can be on any of those one of those systems. I can be on a different one, and we can pay each other. And and I don't need to know you're on,

you know,

that you're using state chains, and you don't need to know that I'm using Fedimint. We can pay each other, and our language is


so that's super, super powerful. In fact,

I played around with,

stable coins last week. I mean, I'm I'm trying to dabble more in in in other stuff just to see Yeah. Where things are at. You like trying to go now? Or I wanted to play with Tron,

stablecoin. You know, stable but what I found is they're stable like,


so I I was playing with Coinbase Wallet last Friday

and, like, searched for USDC and there's, like, dozens

of options

because, you know, there's USDC and Ethereum. It's on every It's USDC on base, which is Coinbase's, like, scalability solution, and then Polygon, and I


and and and then and then there's. So, I mean, there's a bunch of options on Ethereum

Right. That are in they're they're all incompatible with each other. And and, like, Coinbase Wallet has some swap

feature, but it only works, like, on base, or you can only swap certain assets. So it's like a total total mess.


And it just made me appreciate lightning so much more because you there's all these different,

layer twos or scaling solutions or whatever you wanna call them. But just different product and services that you can be on with Bitcoin,

and lightning is this glue to make it all work together. Yeah. Super powerful. I mean, I think


I think most

people in the space that are relatively educated, like, agree that lightning is, like, great as an interoperable payment protocol between custodians. Yeah.

So it's it so it's fighting success there. Yeah. Like, the the question is the question is, like,

is the dream



self custody lightning

for billions of people, is that dead? Is that possible?

Steve Lee:

I think we definitely I don't think it's dead. I think we need to, like,

keep question you know, questioning things. Spirals worked on,

on that problem. You know, we we put a lot of effort into LDK.


LDK works for

many use cases. So so

it's found strong adoption.

And if you look at who's adopted it, it's many different types of applications.

Like, for example, you know, Cash App was one of the first adopters.

So that's

technically one of the easiest

problems, though. You know, they're running it on a server.

It's custodial.

Yep. So

but it's been running for, like, I think, 3 years now. So that that was one of the first that that's one use. But then, LightSpark is Right. A big LDK user. Oh, they use LDK. They they use both LND and LDK. Okay. And they use LDK,

for a lot of the reasons we we built LDK.

They're doing a lot of customization, and LDK is really good for customization. It gives you

it's like it has, like, a 1,000 method

API that gives you a lot of knobs to turn.

They also needed a scaling. So LightSpark wants to for their clients, they wanna support non custodial. They want their clients to hold the keys. Right.

And so they wanna run kind of, it's it's kind of a green light like architecture where they're running, you know, Blockchain. Green light. Yeah. Yeah. It from an architecture standpoint, it's similar to Blockchain green light,

where they're,

each of their clients,

they're running an LDK instance, an LDK node on LightSpark servers. Right. Every you know, so they The nodes on the server If they grow and have a lot of users, they could have thousands of

of lightning nodes running their servers and they they need the efficiency there and all the case keeping them. But the keys are on the low the the customer's device. Yeah. And then the servers


the the notes are on the servers. Yep. And then,

presumably, the whole idea is that you

you don't have to trust the server as much. Correct.

It is There's still probably an element of trust there.

Steve Lee:

It depends on exactly how it's Yeah.

Deployed. But the the point there though is that that's another

instance. And then, like, the the Fedimint

and and Fedi guys are are, I know, early stages tinkering with LDK

to to be, like, the LSP or lightning gateway between The the muni guys are using LDK. And then They're also doing fast. And then, you know, Bitkit and Mutiny are two examples of mobile wallets. So there's there's mobile. There's server. Oh, and another really interesting application is, there's a startup called Lexe, l e x e. And,

just a couple of developers.

E x e? Yeah. Okay. It's a couple of really sharp developers,

kind of mutiny like, and just 22

strong engineers that are like, oh, moving super fast.

What they're doing, it's interesting, is they're running,


in an enterprise


and they're running an instance per user. So so it's non custodial.

Or it's a I mean, it's in a a little bit gray area. Right? Meaning, they're running an LDP instance

per so it's green light and light spark like model, except the keys aren't on a client's device. They're in an enterprise HSM. Okay. And there's a you know, that creates enough distance from Lexi

that they're they're going, you know, they're gonna argue. That from a regulatory standpoint, they are they don't have control.

Now security, you can get it's Where's the agent now? Is somewhere in between, like, they're on my device Right. Versus, like, they're sitting on this company's server.

It's better than sitting on a server. It's not as strong a security if it's on my as my device. But it's super interesting because they can be,

you know, one of the challenges of lightning is that if your keys are on your phone, then it's hard to, like, receive offline payments and other The keys need to be online. Right here with Lexi, they're always online because the keys are are,

you know, I have a have a persistent Internet connection. So the point being, LDK is being used across lots of different types of applications,

But we've

certainly, as a team,


have our eyes on making

it a great experience on a mobile phone for an individual user. Right.

And, you know, as

and mutiny

has probably done the best of anyone to try to make that

a reality, at least on LDK. I mean, Phoenix Phoenix is the best experience right now on a mobile phone Yeah. For a lightning wallet. And I and I They have their own lightning implementation that they use for it. Yep.

I I would I think it's the best, and I think Beauty is probably the 2nd best. And I think those are the 2 two best,

mobile lightning experiences.

But yeah, I mean, even if you use those, they, you know, we can go through some of the problems, like and

onboarding new users

and channel fees and and fees. Situation is super complicated to explain to new users. Yep.

So, actually, one I mean, a question for you, and I guess just

people in in

the community. I'm curious what everyone's expectations are. What should what what what are acceptable



like, unstoppable

censorship resistant

money? Because I think we all Right. Hope and wish for, like, 0

or or one sat or, like, near 0 because we've been we've been experiencing that

with not with custodial lightning wallets. Right? That's what Right. And and and, like, and when we you know, for people who use,

credit cards and debit I mean, you're just used to 0 as a consumer. They hide the fees. They hide the fees. But as a your mental model as a consumer is, at least, I mean, and for Americans, it's 0.

So I think if people are anchored on that so if if, like, Phoenix charges, I think, 40 basis points Right.

I'm sure there's a segment of people who sort of throw up on that. Like, I don't wanna give up my 40 base you know, 0.4% on every payment. Now but what if it's 1%, 3%, 5%? I think people just more and more people would throw up on that.

But, arguably,

if this is, like, unstoppable censorship

money, 5%,

you you could make an argument that that should be acceptable, or I don't know.

So there's some threshold there where you keep or there's another threshold, but you you keep reducing

the market size,

the higher those fees. But so, like,


I I think what the disconnect has been,

I mean, to wrap all these things together,

is this narrative around how Lightning was sold,

ignored the fact

that the way Lightning is designed,

intentionally designed,


to maintain censorship resistance

while having an interoperable protocol for badging Bitcoin payments,

and that means being able to settle on chain.

And as a result, that means that there'll always be 2 on chain transactions,

1 for open and 1 for close.


so no matter what,

there is a

base fee expectation when using Lightning

that you have to make at least 2 on chain transactions.

And so then the question really becomes,

will one sapper byte always clear?

Right? Is will will mempools never clear again? And I think for a lot of for for a long period of time, people got complacent and just assumed

that one separate bite would always be a thing.

Like I've had conversations

with very smart people

at the top of Lightning Businesses

over the last 2, 3 years and they were operating under the assumption

that on chain fees would always be low.

And I just I don't think that's the case.

I think we're starting to see it play out.

I'm curious. Like, what do you do you think

what's your base case on on chain fees? Like, do you think because that's Yeah. I I laugh because or, I mean, I I

Steve Lee:

agree with you. A lot of people have that

mental model, but it I mean, it this has been no this should have been known

all along Right. That fees

will rise. Now could we have predicted that, like,

they'd rise now because of the reasons they did? BRT 20 BRT 20 and such. We we couldn't have predicted that.

I mean, but

if we fast forward to some long term future, 20, 30 years in the future,



if there's demand for Bitcoin in the world. And when I say Bitcoin, I mean, like, non custodial

on chain Bitcoin. Absolutely.

Not not ETFs. Tell you. But actually

using the Bitcoin network

and doing real Bitcoin transactions.

Obviously, if there's not demand, then, like, will Bitcoins failed or, you know, it's not what we all hope it to be. If there is demand, obviously,


these are going to rise because it's limited space.

Steve Lee:

But so so, obviously, it'll rise. But then secondly, with the subsidy going away, from a security standpoint, if they don't rise,

Bitcoin will fail. Right. So I think yeah. It it's a pipe dream that's So fees are gonna rise? Fees are gonna rise. Okay. So we're in agreement. So that's my base that's my you know?

Like like, keep what some modeling I did, like, 4 or 5 years ago, just

napkin math, like, modeling.

I made

an assumption

that we need


of sec annual security. Meaning,

minor revenue is $50,000,000,000

per year. Okay. Now that's highly debatable. I have no idea what the right number is. And you pulled that out of your ass. Right?

Kind of. There's, like, some thought behind it, but it's pretty much pulled out of my ass. Okay.

And the reality is none of us know what that number needs to be. Right. And you don't know until it's too late. And I, you know, I thought enough about this. I I I think it's, like, nearly impossible to model. I think we're just gonna find out If it's enough for now. If it's enough for now. Yeah. So but if we make that assumption, and and then we make an assumption that Bitcoin is a $1,000,000

in, like, the year 2038

I thought you were gonna say in a year. No. Well, it might. I don't know. But, like, in the fall just called a $1,000,000 Bitcoin in a year. I don't make I don't make a sign in. You get year 2038. I'm a You're bearish. Bitcoin The number will go up. I I'm I'm saying I'm happy I'm happy with that prediction. This cycle, no price predictions.

But if you so and I think that assumption is easy to make because it in 20 the year 2038


If Bitcoin's not a $1,000,000, I I I also think it's probably 14 years. Yeah. Or, like, the it would be it could be it could still be some niche

privacy ish

coin, but very very niche. Like, for this to be broadly like, helping lots of human beings, I think it it necessarily has to be $1,000,000 a coin just through basic adoption

and math. So if you make those assumptions,

then with a fixed block size, you have

it it it

you have, $200

average transaction fee.

That just is calculated from that's the only assumptions you need to make,

and you get that calculation.



minor revenue,

$1,000,000 a coin, 2038.

Steve Lee:

Because you get dollars charge. Because the subsidy goes down a lot. But it's still at a $1,000,000 a coin, it's still,

you know, it's still, like, meaningful.

But it's

I mean, I can pull up the numbers. What's the number of sats?


Because all my UTXs are in sats, not dollars.

Steve Lee:

Yeah. I'll try to pull I don't know what it is in sats off the top of my head. I don't I don't find it. 200 divided by a1000000. Right? Isn't that it?

Does that make sense? You mean divided by a 100,000,000?


No. By, $200

divided by a1000000


like, as we're in dollars.

I think that makes sense.



Steve Lee:

average transaction fee. Sounds about right. And then well, and then that divided by a 100 and so that'd be a 142

stats per vByte

for sort of a typical transaction. Yeah.

So it's not horrible.

I'd wanna go double check those numbers. But


I'd be cool with, like, all the other stats provided. I I think that's probably on the low end.

Steve Lee:


Right. Well, again, we don't know what security budget needs to be. And also oh, also, e even if we somehow magically knew that's all that's needed to to secure Bitcoin,

it still doesn't mean the fee might be way higher. Because the fee is a function of demand, not it's not

like once we reach some magical security budget, then

people don't keep paying fees. It's it's solely based on demand.

So, yeah, I think

fees are going to be higher. So,


So let's go back to our So then discussion point. It's like, there do you agree that


fees are correlated


because, like, like, the lightning fee market is super interesting because lightning nodes can dynamically change their fee rates at any given time.

Like, you literally just open

you know,

spin up your lightning node, and you can just

choose which channels, what fees you wanna do at will, on demand, whenever you want.

And it's a little bit

it's not a mature market in terms of setting fees and stuff. People don't really know what they're doing. I mean, I've been running

many Lightning nodes for 5 years. I've just been losing money.

I don't really know what the right fee is to charge at any given time. But in general, like in a mature Lightning ecosystem,

those fees should probably be correlated

to on chain fees, right?


So the question really becomes,

like, those fees will go up with on chain fees. I think they have to.

Steve Lee:



would expect them to, yeah. And then right now, Lightning wallets, a lot of Lightning wallets are

sacrificing that fee revenue and artificially keeping them low to increase adoption.

Steve Lee:

It's like, the classic grow first, monetize later model. Right? That's probably Get users on the door. Probably the case. Yeah. But, I mean, we can just talk about the theoretical numbers to see the problem. I mean, if,

like, you know, when

fees were really high a few months ago,

I needed to

I needed to top up my mutiny wallet.

And, like,

if you went to

and check the fees, like for an average transaction, it was estimated to be

was it


sets per b value, or it was really high. And it was, like, $20.20

or whatever. But then but I was gonna be charged even more

for, like, a just in time,

you know, you know, 0 comp lightning channel, something like $30.

Right. And one thing that'll improve that or there there's several things that can that are known that can improve that. 1 is to add splicing.

Right. Which

Phoenix is done. Because they control the implementation. We're adding it. We're actively adding it to LDK, but it's not available yet in LDK.


Another is Taproot. So just for those that are not aware, splicing

allows you

to increase,

or decrease the channel size

without closing the channel and reopening a new channel. Up until before splicing existed, the only way to make your Lightning channel bigger was to literally close it and open a new one.

And so this removes

one on chain transaction from that flow. Yeah.

Steve Lee:

So that and cap root is also an efficiency win.

And that the, the transaction will just be less bites.


Right. Would you be excited as well?

Steve Lee:

They're in the middle. I think they're in the middle of development.


I think they shipped it.

Like, very recently? Yeah. Like, my my Phoenix Wallet has separate addresses.

Steve Lee:

And they no longer be using But I don't know they were reusing engine addresses for I mean, I'm not. I hope they've already delivered that, but I I don't know if they're using Taproot channels yet. But anyway I didn't know. I don't think they're using Taproot channels. And and so and then that'll that'll also reduce fees.

And then another way you can reduce fees is if you're patient on confirming the new channel. Meaning, like, if you

when you broadcast the transaction Right. The for the funding of the channel, if you use low low fury, it might take Right. You know, half a day, a day, a week. And if your if your use case allows you to be patient like

that, you can, you know, you can save anywhere from, like, 50% or more. But most people's use cases don't.


I know that very few people when they use money are like, although I'm gonna prepare to receive money in 10 days.

Steve Lee:

This is where

yeah. But already like, to deliver a good user experience, there's 0

channels. So, like, if I'm

if I'm a new user or you're paying me more than my I currently have in my capacity,

a new channel can be created or a new splice or whatever.

And as long as

I and the counterparty are comfortable

with 0 comp, then I can instantly receive it and use it

with a window of time in which there's some trust Yeah. With with the the the counterparty.



that transaction

to create that channel can also use a low fee rate, and it might take

days to confirm.

Everyone saves money, but it just create creates a larger window of time of trust. Right. 1st, my own opinion on that as, like, a I think it's a very reasonable trade off for a user to to have, like, a a day

of, you know, to reduce fees.

And I don't think it's, like, unreasonable

to trust

the LSP for for a day. Right.

But it, you know, it

it raises regulatory risk, though,

or the LSP.

So that sort of needs to It's like custodial ish during that period. It's just the gray area. Right? Yeah. I mean, because, like, the if you take the extreme,

like, what was it? Hosted channels? I think that's what they call it. Those are just straight to studio.

But well, it's because they're based I mean, you can just, like, you can you can open a channel and then never broadcast it. Right.

And then and so you take that time from, like, instead of, like, the next block to a day to infinity

forever. And then obviously, it's much cheaper.

Yeah. But then it's it's forever custodial

as opposed to trusted in a short period of time. But there's

the the point is there's a number of known mechanisms that will reduce that fee

in a material way, but not

not a game changing way. It's not like it changes this fee to where

everyone can use lightning and it's


0 fees. So so that's on chain transaction. It's always like you said, like, what is a like, is 0.4%,

you know, 40 bips,

like, a fair fee on lightning for Phoenix to charge?

It to to most users, that's nothing compared to

what the lightning channel opens are to them. Right? Like the

when I onboard a new user to Phoenix,

you know, at some point, starting this fee market, they were getting hit with, you know, a $30 fee upfront.

Like, if it's a $100

Yeah. That's 30%.

Yeah. Like, that 0.4%

is not the issue for them.

Steve Lee:


yeah. I think I think the reality is if we if we are in a fee market where it's something like $20

per on chain transaction.

It's only


for like a $500 to $1,000

type wallet.


And then you can get sub 5

percent, probably sub 2 percent

fee to calculate, like, over over a 100 payments, what's my average fee?

Right. Of course, you're gonna get have


big payments. But what's my what's my average fee after whatever? A 100 payments or

or a 1000 zaps or whatever? And if

if that's 40 basis points, I think that's pretty phenomenal.

If it's 1 or 2%,

that seems,

not bad. And at 5%, seems like the threshold where it starts being like, is this really a good direction or not? But but again, so, you know, are people using this for

truly for censorship resistant money where otherwise,

like, if you're in a situation where you literally can't make the payment, otherwise, the only way you can make the payment is this way.

I think you're gonna be hap you'd be happy to pay, or you're you're not gonna you'll pay 5%.

I shouldn't say you're gonna be happy. Right. But if you can't make the payment any other way, you'll pay the 5%.

Whereas if you're also, I'd say, like, if you're just doing zaps,

which are such tiny amounts and you do so many of them,

like, I I personally would have no issue with, like,

totaling all the zaps I do over a year if I percent of that budget

went to, like, the Lightning Network

and Bitcoin Network and miners and stuff just to facilitate it, like, I wouldn't mind. I think a lot of users wouldn't mind because it would be it's kind of a hidden cost in some ways.

So maybe one also in Part of the UX challenge of, like, how do you hide the cost?


I mean, when people hear, like, oh, a payment that I wouldn't be able to make otherwise, usually,

you know, the thought is is something, you know, more censorship resistant or,

you know, payments that are not allowed or not possible.

But, I mean, Zaps, I think, would be a good example of that because that's something that you can't mimic on Fiat rails. Right? So,

will people pay a premium for that? But I think

I mean, that's when you start to get into the

the other part. I mean, if you wanna bring up Zaps is that's really big is is

is not just the fee

fee concern or or the fee realities of using self custody lightning,

but also to receive

being able to receive and not be online. Yep. Because

if, like, I need to have my phone open

to receive Zaps, like, I'm never gonna get any Zaps. Like, why that doesn't make any like, that that model doesn't work in in that kind of on demand all the time. I mean,

Ciel Dispatch has no ads.

We have podcasting 2.0. Right? So when people listen on, like, Fountain or Breeze or other podcasting 2.0 apps, they can stream you sats. Right?

So literally, like, every hour of every and our viral recap has it too.

So, like, almost every hour of every day, I'm getting all these payments, a small bounce, you know, 2 sats, 5 sats, 10 sats, 1 sats,

just constantly.

And so I have to run my own node to to to to receive that because I need it to be always online.

But what's the reality of the situation? The reality of the situation is 99%

of podcasting 2.0 hosts, including Marty, who's


you know, proficient at Bitcoin

compared to the match the majority of people, are just using custodial wallets for it.

Right? Like, Fountain has a bundled custodial wallet with with ZBD,

and most of the podcast hosts are using that.

So that's the reality on the ground. The reality on the ground is self custody lightning

has friction, has elements of friction because it's censorship resistant and it's freedom focused. And so as a result, the users are going to custodial options. Right. So I'm a little less concerned about this problem in the sense that,

Steve Lee:

a couple developers on spiral are working on the async payments protocol

right now.

So I expect by hopefully, this summer, we have

demos that we can show everyone.

And I I don't know how well that'll work for, like, a podcasting

business and streaming.

Yeah. But certainly for for just an individual user

receiving payments,

you know, a a few per day or few few So how does that look for the user? So,

let's say you're using a non custodial mobile wallet. Yep.

And I send you I send you Bitcoin.

Basically, it's like a message.

So Like a my LSP

will contact your LSP and say, hey.

There's a payment for Matt. Let me know when you wake up. Basically, when you open the app. And, of course, there can be a push notification, so you'll know to open the app. That pops up. But it like it can be, like, an hour later. It can be a day later. It's, like, whenever you get around to opening the wallet.

Then your LSP will say, hey. Now he's online. Now send the payment.

So it's like a deferred

Does the sender need to be online at that point, or the LSP is handling it their whole No. The sender does not. So I can also be at Naktoder Mobile Wallet. So I don't need to be once I initiate, I can just go offline and be and and be confident it'll be paid. My LSP will be try. And it's using trampoline

to keep it trustless and private.

Okay. So that my so that my LSP can can can retry that payment.

So I think I mean, every all the engineers who that have looked at this protocol,

I think it's sound. So I don't think there's a whole lot of risk that it won't work, but, like, we'll see. We'll code it up. We'll code it up. Make sure it works. Yes. We'll find out.

And and that I mean, it's it's not it's not perfect, but it goes a long ways towards solving offline receive for individuals.

So that's why I'm that's why I'm saying I'm I mean,

clearly, it's an enormous UX problem today.

I just say I'm not concerned because, like, let's let's build this,

see if it fixes it, then great. The fee stuff, that's more of just fundamental. Like, there's no, like, spiral can't like, the LDC project can't work on a

a change to pixel. Although, let let's talk about it. Like okay. So

there's no question


another because another problem with fees too is, like, on yeah. Like on Nostra, if you're a brand new user, if, like, I onboard you and you receive your first zap, I zapped you 21 tabs. Okay. Yeah. Well, so is someone gonna open a channel to you? No. Right. Received 21 zaps? No. I mean, they

because you're you're gonna tie up, like,

whatever, a 100,000 Sats or more of or 500,000 Sats of liquidity and paid on JVs for someone who's likely to churn or you just don't you know nothing about this new user.

So that's a massive problem.

And lightning to as defined today,

like, there's no solution for that. So how do we solve stuff like that? Well,

if you look at what, like, mutiny is doing,

they're they have lightning, and they're also adding Fed in it. So they're having e cash, and they're gonna have a certain threshold. So, like, from 0 to some to to n, some n amount of money,

you know, they're gonna use Ready to start, you need cash. And then when you hit a certain amount, you move to A chance. Self custody lightning. So I'm, like, I think that's a great experiment. I've done their building that out.

And I expect that to work well,

UX wise. The biggest concern there is who's gonna be running the mints? Right. What's the regulatory picture for that? And it's certainly my hope that there's

thousands of mints, tens of thousands of mints, hundreds of thousands of mints around the world, and and you're able to trust. Like, there's basically local local mints.

Right. Whatever local means to you. But, like,

not Sam Bankman Fried on some island, but, like, someone you actually know or a group of people that you know or have a reason to trust.


Right. So there's 2 main projects

in the ecash realm,

or 2 main protocols. 1 is Cashew,

and one is Fedimint.

Cashew has a single signer mint,

And then

is a federated, like, almost like a multi sig model.

And I'm gonna have Cali on, next week on Monday,

to talk about Cashew.

But what was really interesting that he just released,

for Cashew is this idea of

using multipart

lightning payments

Across multiple minutes. Across multiple minutes. So you can keep funds in, you know, 5 or 6 minutes, and they can altogether pay the same lightning invoice,

even though each mint has different,

Steve Lee:

signers. Yeah. Which has really interesting privacy properties too. I mean, e cash already has really interesting privacy privacy properties, and this takes it to the next level. So I think that's


It compartmentalizes

that rug risk. Right? Because it's like

the the the main issue with with any kind of e cash model is that not only can the,

signer steal funds,

just like a, you know, straight up rug, but they can also silently inflate funds.

And and so as a result,

you know, not having all your eggs in one basket can be a way to try and mitigate that. I mean, on, like, a big scale, like, that's what MicroStrategy does when they,

you know, they keep a portion of their funds at different custodians.

Steve Lee:

Yeah. I so Spiral's long been a supporter of Fedimint. We I I think we're the largest funder of Fedimint protocol development outside of FEDI itself, but we we funded 4 different developers working on FEDIMENT for a couple of years now.


I've learned to appreciate

Cashew as well. And, like because the fir when when Kelly first announced it, I'm like, dude, why don't you just help out with Betterment?

But but I I I've learned more about

it is a key difference. It's much simpler in the sense that it's so much simpler. It's just what you know, there's only one custodian. So it's much simpler, and they're they're, like,

anyone who's worked on lightning

can appreciate the value of simplicity. Right. Because lightning is not simple.

Impediment is also pretty complicated, but they're doing great. But I I think,

I think both projects are important for the ecosystem,

and also


doing different types of experiments.

Right. I think with Fedimint protocol and, like, Feddy, the company, and probably what Mimi is doing, their their intention around the UX is that the wallets and the user experience will still be


denominated in Bitcoin,

and, like, all payments are over lightning.


Whereas, like, Cali and Cashew are taking a very different approach where you actually you're holding this e token.

Right. And you can It's a bear asset. It's a bear asset and you can It's a bear I o u. And you can pay anyone else in that mint, you know, with that token. And then there's and then there's inter mint multi. Yeah. You you can technically, you can do it with FedMed. But I think that my understanding of, like, the

philosophy and approach

is that


well, in Fedimint's a protocol

too. I mean, like, someone could come along and use the Fedimint protocol and and adopt


the the practices of what Cali's doing as well. So anyway, I think both are super interesting technologies. But the idea is if you pay within a mint, all these fee things that that we've been talking about

go out the window because

it's it's just it's just e cash payments between each other. And when you pay between Mints, then you're gonna use Lightning. Lightning, but then you're but it's because it's a you get the benefits of sharing channels, though. Just like

Steve Lee:

Cash App and any custodial lightning wallet, you can have millions

tens of millions of users,

but just a few lightning channels and manage just a few lightning channels. And and


an an an can do the same thing. Right. You can have, like, a you have a professional lightning node operator. Yeah. That is the gateways,

Steve Lee:

managing liquidity and trying to keep the fees low. Yeah. So, you know, how do we move forward? How do we create good user experiences? This is definitely one path worth investing in, and people are investing in it. Yeah. Awesome.


yeah, my biggest,

I've always been,

bullish on that and excited about it. I'm just little worried about regulatory and then also just worried about who who who's gonna who's gonna run the mitts. Right. Who's gonna build the roads?

And so that's that's an unanswered question. We'll see.


you know, time out trees is a I don't know if you've looked at that. I have no idea what that is. So John Law,

posted on the dev mailing list a proposal,

for time out trees, which is another way to scale lightning. So I'll try to summarize it here. I think it's well, let me step back. One thing that Spiral started doing at the beginning of this year,

we started a weekly study club just within our team. Cool. The wizard study club, because we hired a couple

Bitcoin wizard last year. Awesome. Insta Gibbs, who a lot of people write. Oh, he's great. Craig Sanders, Yeah. Long time open source contributor.

And Yuval,

not like us. So 2, like, extremely sharp people.

Neither of them are working on that. We we wanna hire people

to not work on LDK, basically. Right. We you know, because it because Spiral is

obviously invested a lot in LDK, and we

think it's really important. But we we invest in, like, a dozen projects through our grand program, and we wanna help Bitcoin overall.


we started this weekly study club, and each week, we are looking at some technical proposal. And so we've been looking at different covenant proposals.

We also looked

at time out time out trees just to see what, you know, what's on you know, just keep keep up up to date and and fresh. And I, like, I I feel like,

we have

folks like Matt Carollo and Yuval and Greg who are, you know, generally respected in the space, and I think can contribute to


Bitcoin technical roadmap


And like,

are we ever going to do another consensus change? How does that process go about and like, you know, there's no blueprint on how to do a consensus change, but you need

credible it's I think it starts with credible developers having So the time discussions require a fork. Is that what you're saying?


they do. A soft fork. Like a like CTV or, Yeah. Some type of component. Oh, so, yeah, let me describe. So we we do this weekly study club. We looked at,

at time out trees.

I'll start with, like, the

what's what's great about them. They so first of all, they they work I mean, they they are they scale lightning more. Okay?


you can create you meaning, like, an LSP, like, entity. You can create a time out tree with 1 on chain transaction. Okay. And you can have as many users in this tree as you want. A 1,000. You could have

so it's

it it it borrows or it seems to me like it borrows some arc like concepts. So you can have, like, a 1,000

virtual channels and users in this tree or a million

for the cost of 1 on chain transaction.

So you're sharing

that 1 on chain fee across a lot of users.

So you could onboard,


those channels or no?

Steve Lee:

Is that like They're they're un they're virtual,



channels. Okay. They're in They're in the time out tree. Yes. And there's there is a unilateral

Steve Lee:

exit option, which I'll get to. For each individual? Yes.


But that's another on chain transaction.

Steve Lee:

It's many on chain transactions.

That's when I get to the the the bad. Let's

start with the good list. Or, like, what why is this interesting?

Okay. It's interesting because you can onboard

you have, like, incredible scaling for onboarding a lot of people basically instantly. Right.


you know, it's called time out tree because it has a fixed amount of time,

say, 3 months

for that tree to live? And what does it mean when it dies? What are the end of 3 months?

That is when the timeout

occurs and the funder of that, like, the LSP

can take all the money. So Done. After 3 months,

anyone in that tree

needs to get their money out to be secure. Otherwise, they're trusting the LSP not to steal it. So how do they give their money out? Well, one of the there's a unilateral exit. We'll get to that. But the if this were to work well,

the 99%

plus case needs to be you just move your funds to a new time out tree. Right. And you do that through lightning.

Yeah. And and you do that through lightning. You do that all off chain.

So the happy path here, the beautiful case, you can onboard

millions of people very, very, very cheaply. Right. And they just every 3 months, they're moving their funds to the next time out. And the LSP is Which only requires 1 on chain. The l s the LSP is handling that. Right? E either way. So they're they John Law did add a in addition to the

protocol where the LSP can do it automatically for the users, but the users can do it at any point in time. Because, like, we're not They don't have to you don't have to wait till 30. You can do it any any time you want.

And you just keep doing that indefinitely.

And then you and then you're just doing lightning phase. Right. So it divides

always by a 1,000 or something. Yeah. So, like, that's that sounds amazing. Right? Soles all the problems. So so what are the downsides?

If you do need to to unilaterally exit, it's the number of on chain transactions is log or order logged in. So if you have, you know, if you have, like,

a thousand people in a tree Yeah. It's, what what is that?

I mean, it's, like, 10 10 plus on chain transactions. I got it. So if we were just talking about

how expensive lightning is with 1, Like, oh my god. I have to pay $20. Well, imagine having to pay $20 $200. So Right. Basically, whatever

you any Who pays that? Under that under that 2 so everything you're like, the $200 of your wallet is not noncustodial. Is it like, anything above $200 is noncustodial.

Right. Because otherwise, you can't you can't go on chain.


And so your your but who did that last Who pays that? The the person who if you're one one of the 1,000 users does it, he pays all 10 transactions? Yeah.

And then So that's not griefing at least. At least, like, you can't have just, like, a person in there that just keeps doing it to fuck with people. And and then,

Steve Lee:

if so the the cost goes down too as you unwind this tree. Like, if all thousand exit,

the last person, I think it's, like, only 1 or 2 transactions.

But still, the total, if all thousand had to exit, it's more than a1000. That I mean, it's, like, several 1,000

transactions. So what are the what are the scenarios where you need because, again, the happy path is no one ever unilaterally exits because you don't have to. What when do you have to? Well, one is if the LSP is a thief and trying to steal the money and just, like, goes offline.

Because if they go offline, then you can't make lightning payments. You can't get out without except for this. And the other 3 month ticking time bomb or whatever. Yeah. And so then there's, you know, a, you know, everyone has to get out.

And then the other scenario is, like, it it it's not a thief, but their just their computer went down or, like, their server went down or they're just having operational

difficulties. Right. And then people would need to get out. So those are the 2 scenarios. So, you know, what

is this,

revolutionary, amazing, or not?

It really depends on what are the ratios of it. If the happy path is like, you know, the 99.99%

case Yeah.

Then Which you're probably it's probably pretty attractive.

Now, another open question that that I have I mean, some people might have this figured out, but I'm I'm asking

I'm asking around to get better answers is how to can you share cost?

Like, if so, again, the first user exiting

pays a lot more than the last user. So is there a way to share cost? And also, z man has proposed in the past things like insurance, like fee insurance.

So I really wanna explore that model more. Because if you could


fee insurers


and participate in that This is basically what I'm doing. Reduce

Steve Lee:

the the maximum exposure I have to exit by myself,


it might all of a sudden solve that problem. This is where the freaks don't realize. I keep betting Marty that mempools will never clear again. It's it's basically fee insurance.

Because if mempools don't clear again, then he owes me a 1,000,000 sats, and I can put that towards fees in the future. Yep. Yeah. And if they do clear, then my fee becomes way lower.

We're we're we're RHR is the first. RHR Bets is, like, the first fee insurance in the market.

Steve Lee:

It's very small scale. So I I think there might be legs there. So I'm I'm excited to explore that more, learn more about that.

Fee insurance, man. If we if we can figure out, like, fee insurance


and sharing Because that's the problem. Right? Too. It's like fees are free from you. I think Time Out Trees,

Steve Lee:

is attractive. Now, Matt Corallo is,

more skeptical in Time Out Trees. Really?



I won't have you speak for him. Yeah. I,

I mean, the real issue is it requires a fork. Like, the thing that excites me so much about Ecash is we don't need a protocol change. So we can we can just ship today. Yeah. And, like, hopefully, we have, you know, positive

protocol changes in the future. Yeah. But just in case we don't and I'm also, like,

if you're gonna play the game of, like, waiting for a protocol change or, like, building with the expectation of a protocol change, you're gonna have a really bad time in Bitcoin. Yeah.

Yep. And that's where you get into a bad place. Agreed. Which is why, I mean, there's a lot of excitement around,

Steve Lee:

BitVM as well. It doesn't require consensus change.

That one I I'm I'm interested in seeing like, I know people are building building out prototypes, building it out. Like, I wanna see what is the performance

like, both computational and data. Data primarily. But how much on chain footprint is there when you have disputes?

Because I'm Which is yet to be seen. I worry it's really high, which would make it impractical. But But if it's but if it's not bad, then


that's an exciting Do you know of any cool projects that are being built on BitVM? I feel like it's mostly shitcoin stuff right now.

Steve Lee:

I don't I don't really know the details of what's being built out on. Yeah. I haven't really But but we are Yeah. So I'm just excited to be back to

looking at We're looking at state chains and ARC and other stuff as well. I will say that, like,


early in this explanation ARC requires protocol change too. Right?

For it to be, I think, reasonably effective. And, like, state change are live now, but would it be better with protocol change?

Steve Lee:

Yeah. But Mercury's

done a nice job. I mean, what's great yeah. It's nice that Mercury actually productionized Like, shift it. State chains and shift it.

I think they Call it Mercury layer. Right? Yeah. I think they do expect their initial usage will be,

like, ordinals and inscriptions

in demand, but it'll still prove out that model.

It's a good experiment to have. It requires,

I mean, it requires a lot of I mean, one thing looking all these other solutions, lightning still

is the most trustless


scaling solution. And that's why it's not p list. Right? Like that's why it Yeah. Costs money. There's So that's so I I I think part of this, like,

Steve Lee:

frustration with lightning is just this realization that,


it's not a zero fee. So let's pull back for a second. Right? We, like, barely touched on stablecoins.


I don't think stablecoins on Lightning make any sense.

Steve Lee:

How would you like, do you think I tend to agree. I I I I'm I remain I mean, I'm open minded to all this stuff. I remain open minded to, like, see the light. Like, maybe I'm just not seeing what others are seeing. But,

I guess,

I think stable points there's already trust around


You're trusting cash or the issuer.

Steve Lee:

Yeah. And, of course, like, the US government. Right.

So why do we need

or want the cost of something as like, Bitcoin Exactly. And lightning.

Like, I I I don't I don't That's why people just use Tron because you're not trusting Tron. And also and then Tether. I mean and also, like, Tether, you know, has gone from, like, Bitcoin, that's underlying platform, to Ethereum, to whatever is cheapest.


Whatever is centralized is the cheapest, and they just go to whatever is cheapest. Don't care.

Users actually they, like, prefer the cheaper one. Like They prefer the cheaper. Like, there was like, McCormick did this

film in Argentina,

and they were doing a,

he was trying to get he was trying to get dollars,

and and the money dealer wanted Tether.

And Peter came with Ethereum Tether,

and the money guy was, like, super disappointed in him because he wanted to run Tether because it was way cheaper. Yep. Like, they do they want low fees.

That that's that's the desire because they know at the end of the day, they're not trusting Tron. They're trusting Tether. If Tron goes down, Tether can just be like, we moved the ledger over to Solana or whatever centralized chain they want to use. Yeah. So I I'm definitely not sold on

Steve Lee:

stable coins on Bitcoin or Lightning.

I I'm not but I'm not sure. But but I'm very hyped.


But but I I'm actually not sure what the end game is. I'm gonna I'm gonna like, I'm curious You can do it yourself. Well, no. I just wanna ask no. Meaning, like so I described my experience trying to use stable coins last week on Right. Coinbase wallet.

And it's just a total total shit show. Like, there's so many different platforms, and they're not interoperable.

So the that's a horrible user experience. Yeah. So it seems like the end game needs to be, like, you know, I have

US dollar stable point, and so do you. And we can send it back and forth. And who? We shouldn't care about the underlying networks and technology and platform. The only way I see that being resolved though is that, like, one emerges as the winner, like, a winner take all, which is probably what's going to happen.


Yeah. I mean, you don't have that issue if you just use TronTether because, like, the other person uses TronTether and you have If it's a winner take all, then It's like a winner take most.

Steve Lee:

Yeah. Yeah. And and so I'm not sure if, like,

you know, like, other people have

explored, like, contract for difference on DLCs and then, like, taproot assets and these different ways to do it on Bitcoin and lightning.

Are they gonna, like, I don't really see their advantage versus


prod. Yeah. I mean, it'll cost more money, first of all, I believe,

because there's gotta be a cost there.

And then this and then this the second thing is, like, I don't know if users actually

I I think there might be a misplaced

belief in where the demand is. What is the demand? I don't know. I, like, I think a lot of people that are building in Bitcoin


that these Tether users, what they want is they they want a stable dollar balance shown in their app.

I think what they want is they want interoperable dollars that they can send between. Yep. And so, like, all these, like, utility pools and stuff like that doesn't really solve that.

Steve Lee:

Right? Yep. I agree. You end up in, like, a stripe font. What do you do as a builder, though? Right? I mean, I I don't know what I would choose right now. I mean, you're you're maybe you're hinting at Tron, and maybe that is the right choice. But even then, you're still not interoperable with tons of other stable points. Look, I've never used Tether. I don't trust Tether.


I've you know,

I'm not a Tether truther.

There's this massive regulatory risk there. I always call it cruise missile risk.

Like, this is what Bitcoin is supposed to fix. Right, is is trusted third parties or security holes.

But there's clear demand for it.

And right now, the reality is is that the, like, the the number one most popular quote, unquote self custody wallet of the world is Trust Wallet,

which is maintained by Binance,

and it has horrible Bitcoin support.

I think it reuses addresses by default. It doesn't support lightning.

They had an entropy issue where, like, they were generating poor wallets and stuff,

but they support Tether on Tron. And there's, like, a disconnect where, like, the best people building

in Bitcoin,

that are building the best wallets, that are highly performant,

that are very secure,

they don't support Tether on Tron. So I think there's, like, there's a place in the market for, like, a really good Bitcoin wallet

that has, like,

native Tether transport.

And it's, like, very controversial on Twitter.

Unfortunately, I'm not using that bird app anymore.

Steve Lee:

But, I I agree there's an opening there. What? Huge opening. I mean So so there's one product that isn't exactly that, but is is blending,

Bitcoin and stable coins. That's lava.

I don't know if you've heard of lava, but they're so they They're still being liquid?

No. They have it's a it's a Bitcoin wallet.

And they are using DLC technology

to do loans.

Okay. So it's pretty advanced

technical use case of DLCs. Okay. So then you can use your Bitcoin as collateral for a loan and receive USDC stable coin. And then, yeah, and then have that as spending money. So it's a pretty slick experience.

You know, they're gonna have to develop

that 2 sided market for, like, with lenders


For it to be Yeah. But I'm not even living that far. Right? But but that but it's it I mean, I'm raising it as an example of, like, someone who actually built a

good Bitcoin wallet and,


a stable coin? Because because that's Well, I would say, like, on the loan product side, especially if, like, you're trying to do, you know, no KYC p to p loans.

Like, I mean, Huddl Huddl, for instance, all like, they don't have they don't use DLCs, but they use multisig.


they they support all the stable coins because, like, they can't support Citibank or Wells Fargo. You know? Yeah.

But I would like, I'm even going, like, a level below that. Right? Like, the

a level below that. Just being able to, like, send and receive. Right? Like, Trust Wallet is probably,

you know, a 100 x, maybe even a 1000x more downloads than

like Bitcoin, Twitter's favorite Bitcoin wallet, than like a Phoenix. Yeah. Right? Like Phoenix is yeah.

Trust Wallet is probably 100x, 1000x the number of users of Phoenix Wallet,

which is insane.

Right? And so, like, it's like, are we just gonna ignore

what these users are doing? And the argument is, you know, a compelling argument that you don't want to expose your users to the risk that is Tether and the risks that are Tron.

But by not supporting it, they're using Trust Wallet and being exposed to much more risk

than if they had a solid Bitcoin wallet that supported it. So

it might be a controversial opinion, but that's what I think about it. And I don't think stable coins on lightning are the answer.

This has been a great conversation, Steve. We have

Steve Lee:

you wanna keep we have a lot more to go if you have if you have the Yeah. Let's run let's run through the list.


So you wanna talk about bolt 12?

Steve Lee:


Where do let's how about we let's call it

marathon slipstream

first. I think that'll be fairly quick,

and I think it's interesting.


Mind. Yeah. Let's talk about marathon slipstream. So what is I mean, I know, but explain to the Yeah. Explain to the And I think the the reason why this is

Steve Lee:

interesting to the whole community is it's around,

this debate on, like, standard Bitcoin transactions and nonstandard and some of the ordinals and inscription stuff Yeah. Is using nonstandard



Why does this why does this matter? Why should this matter to every every Bitcoiner? Right. So Marathon Slipstream is like you go to the website, site, and you could just submit a Bitcoin transaction directly to Marathon, the miner, and they'll they'll line it for a fee.

Steve Lee:

Yeah. And you can and in particular, you can submit a nonstandard Bitcoin transaction. So when we say nonstandard Yeah. Mean nonrelayable.


Like, nodes don't, by default, relay it Yes. Within vertical rules. Yeah. Let me describe. So there's, you know, consensus

Steve Lee:

valid transactions where people are familiar with. You know, there's set of rules and you gotta be you know, then your consensus valid.

But on top of that,

the Bitcoin Core Project


this notion of standard transactions

and nonstandard. And there's a set

of transactions that are consensus valid,

but are nonstandard and don't get, as you said, don't get relayed on the network.

So is this some kind of conspiracy? Are the core dev is trying to, like, censor things? Right. They have these set of rules.

Or I'm saying I'm saying no because they have these set of rules. The the reason they've,

added these is to protect security and denial surface Right. Attacks. And I'll and I'll give one one of the key tenets of rules. So this and and we should all

separate that discussion from, like, Luke and Ocean,

like, the the whole filter campaign. Right. Like, like, the people who don't like ordinals or certain use cases of Bitcoin and, like, filter those out, that's a very separate discussion

from this discussion, which is,

Dawson security concerns. So

one example is,


you can create Bitcoin transaction. Like, let's say you're a malicious actor. You could fill an entire Bitcoin block with transactions

that intentionally

are really, really slow to validate.


a typical block

can be validated in, like, I don't know, a second or less or, like, really fast. Right? Like, a normal block is validated super, super fast. By nodes. By nodes. I'm talking about nodes here. Yeah. This could be like any any user's node, a mining node. I mean, a a laptop like Raspberry Pis can validate blocks very, very quickly. However, a malicious actor can create a block that's constructed that can take, like, 30 minutes to validate.

If it's constructed in this malicious way.

So that would be very bad for Bitcoin,

because it would it it could lead to, like, forks.

Obviously, like, if your your wallet's gonna, like, loot if there's successive

blocks like this, you're not gonna be on the

the tip of the of the blockchain.

Right? Because blocks might be

being produced every 10 minutes, and if it takes you 30 minutes to validate each block, you're gonna fall behind. It would be very chaotic. And it's also it's it leads to centralization too. Because, like,

if I mine a block

and I already have validated it, I can start mining the next block, and all my competitors

are spending 10 plus minutes validating

my the block right of mine. So it's it's very bad for Money Central Intelligence. Yes.


yeah, so bad, bad, bad. So it would be so when marathon introduced this new product slipstream, and I think them pulled up space also has a similar product, but more and more, I mean,

excel transaction accelerators have been around for, like, over a decade. Right. But now the new use case is,

NFTs and stuff like that Non standard. And

and non standard.

So it's no surprise that companies are offering a product to make money off of that. So

when I saw Marathon announce that, reached out to to Marathon to chat with them. Because I just I worry I worry that some miners

just aren't aware of, like,

like, they might have the mindset of, like,

you know, screw Luke and these people who wanna, like, censor stuff. Like, we we it's a free market. It's a free market. It's a good opportunity. It's a valid choice. Aware of the DOS or security issues. So reach out to Marathon and and, like,

Greg and Matt joined.

It actually was a really good conversation.

They actually are aware of these issues,

and they're being very thoughtful about it. So I was quite encouraged

by that,

that healthy conversation. And and, hopefully, they'll be publishing what changes they're making

and which nonstandard transactions they are allowing

just so just so others can learn from that if other miners do it. Because we don't want like, it would be it would be bad if miners allowed

any consensus valid transaction

because then someone would,


I would expect someone to attack the network then.


But how how can you stop that? I mean, you can't really stop that. Yeah. I mean, you have you you can only stop that if miners

Steve Lee:

don't allow those types of transactions.


But, I mean, I guess the thought is is, like, it's one thing if you're just broadcasting and notes are relaying it,

and it's a little bit less bad if it actually has to pay a mining fee and get into a block, and there's still, like, limitations to how many

how many of those transactions can be there. Right? Like, it's more of a it's more of a DDoS issue for nodes

if you don't have those standard news rules. Right? Like, if it actually gets into a block, it's not as bad.

Steve Lee:

When you say it gets into

Like, these like these hard to validate transactions. These these large hard to validate transactions. Yeah. Well, I mean, you know, if there's only one that's mine that takes 30 minutes to validate, it would probably cause some disruptions. But if there is many and there are many in a row, it could be chaotic. Right.



and I just wanted, like, on the mempool side, like, what mem so transaction accelerator services and, like, out of band,

transaction submissions, stuff like that has happened, like you said, for, like, a decade now, if not longer.

But usually, it's directly to the mining pool just like Marathon.

I'm not very transparent.

Hard to verify what's going on. Right? So what

is trying to do is, like, make the most



model of that that is shared between multiple mining pools instead of just

one mining pool. And that's also really important on the miner side because on the miner side, when you're accepting these

these out of band fees,

like, the individual miners don't know if if their pool operator is skimming off the top and paying them more. Well, that's why so the the so what dawned

Steve Lee:

upon me last year is that that might be the strongest selling point for Stratum v 2.


Meaning, to sell to minor to the selling point to minors, hey, you need to upgrade the stratum b 2 and do your own transaction selection.

Is it, like, you don't know how much the mining pool is skimming off the top. So if you if you produce your own template and choose your own transactions, you know exactly what's going into that.

So I think Stratum b 2 can help with that. But but I yeah. I I brought this up mainly just to make sure people are aware of this, what nonstandard transactions are.


some of them

some of them could have disastrous effect, others, not so much. And just understanding the difference is important.

I'd also say, though, that these

products that are

accepting transactions,

that's something I think we should all be monitoring to in terms of centralization

forces, whether it be mempooled space, or

marathon, and there's gonna be more that crop up, I'm sure.


you know, we we don't want mining to become permission. Right? And and in the worst case scenario,

if there's just 1 or 2 companies that

become, like, a a

large fraction of transactions that get mined, if they go through 1 or 2 companies. That's a very bad scenario.

Because then if you're a new miner,

now you have to go strike a partnership with those companies sign an agreement, legal agreement, blah, blah, blah. That's not how we want mining to work.



if you're familiar with the developer, 0x1b0c,

yeah, he's, Timo, he's great. Anyway, he's created amazing network monitoring tools. And,

you know, he's created tools that detect whether

pools are are censoring or factory that started funding them through open sets. Yep. Yeah. You stole you stole them from the spiral. They're not a competition.

I'm just joking. But yeah. I mean, Brink's funded it, and we did it, and now you guys are. He he's great. And, like, his recent analysis, he looked at

nonstandard transactions on

on Bitcoin, and he looked at, like, the last 270,000,000

transactions mined or something,

like a year's worth or whatever.

And only, you know, it's it's far less than it is, like, 0.02%

of transactions are nonstandard.


that's good. Right. It's not that many. Right. Like 20,000

transactions, I think it was.

So but we we need to monitor that. Like, Like, if that becomes 1% or 5%, it

gets scary. And and then should corner it, though. Yeah. So we should be monitoring that. Unfortunately, he's built tools to monitor that.

That's all I had to say about that. Okay.


What do we have next?

What do you wanna talk about next, Steve? Human readable names. Are you are you on top of this? I'm on top of this. I'm on top of this.

Not top of the changes.

I I I mean, lightning addresses are great because they're human readable. Yep.

Is is this supposed to be a better version of that?

Steve Lee:


it has


differences and advantages.

1, it's not specific

to lightning.

So, like, silent payment.

Like, any Bitcoin payment protocol could use this. Yeah. That's pretty cool.

So, On chain or lightning? On chain or lightning or really in in it's generic in that way. I think it's best suited though for silent payments

and all 12. Okay.


Still on chain of lightning. Yep. And and because

Steve Lee:

because it it's using DNS.

So if you do like, with silent payments, you can have a static identifier and keep repaying, reusing it, and you That's like a big one. Privacy. But if you're using a just standard on chain address,

you would have to, like, update the DNS record, like, every time you wanna

receive a new payment, which is

probably a bit unwieldy

Yeah. You to use DNS that way. But with silent payments of a bolt 12, you just add one entry, one time, like a bolt 12 offer.

And then you never have to update your DNS records again.

And so if you're an individual user, you can do that. But if you're a if you're a a wallet or a or a a provider,

you also like, with Bolt 12, you can support millions of users with just one DNS entry.

So it's all you can you can both you can put one entry per user,

and DNS can scale to to 1,000,000.

But, to simplify things, you can just have one entry and actually support.

It's just an indirection to all your users.

Now why did why does this matter? Like, how is this an improvement over,

and when you're all based lightning address,

it doesn't you don't have to have a web server. So it improves 3 properties,

censorship resistance,



security. Because right now with lightning address and l n URL,

any of your payments can be censored. Because you can do just basic like, if someone in Iran is using Noster and wants to zap you,

if you're

if you're using a lightning address at, like, a US provider Yeah. They'll just block it. They'll have to block it. Yeah. They can you know, and if they don't, they're gonna get fined. Right. Bitpay got fined. Because they're, like, gonna get hit with an Iranian IP address to pull the invoice. Yeah. So it helps sensors repressants. It helps with privacy.

Because right now with lightning address and l n URL, every payment you make,

it the the server

gets and can record the the sender, the receiver, the account. They get all that payment data. It's all collected.

But with this approach,

it's not because you you,

you're requesting

DNS once to get an offer, and every payment you ever make with that offer is done is not contacting any server. Because you already have the You have the offer. The shared secret essentially.

Yep. So it's a huge win for privacy and it's also a win for security. Another problem in lightning address in l n URL is that you're trusting the server not to swap out invoices. Right.

And With the l n URL, you're literally like you're hitting this web server and just giving you a lightning invoice every time. Yep. And it can, you know, it can use a different invoice. It can pay itself, and it can do so 1% of the time, and harder to detect. And especially with Zaps. Right? I mean, like, how

no one actually knows, like, who how many Zaps I received and, like, some of them might have been skimmed. And you could skim forever and not get caught.

But with this approach, there's no third party server issuing the the invoice. So it it dramatically improves those 3. It's compatible with lightning like the user experience. Right. You can still have a lightning address. So I'm excited about this. It requires


it requires adoption. People have to adopt it. But Well, first, I mean people need to adopt Bolt 12. Right?

Steve Lee:

Yeah. It actually so I I think this helps with bolt 12 adoption as well.

So where is bolt 12? I mean, we have,

3 implementations now that support bolt 12. CLN, declare, and LDK all support full 12. There's also


the but LND is the elephant in the room that Right. Doesn't 80% of nodes. 90% nodes, whatever.

Steve Lee:


on the network, but what matters is the endpoints for 12. The users. Yeah. And that's where you do see more adoption from. Right. Look at Phoenix, for instance. Phoenix and mutiny and green wallet is using Right. Freeze SDK. You know, so popular or lightning.




it's not as bad a picture as 80 or 90% is l and d. But still,

like, the Kraken's of the world and OKX and if if if you have money on, like, an exchange and you wanna send it to your own wallet or someone else does Right. We want those LND users to be able to send. Right. So there's a project called LNDK,


you can run if you're an LND user, you can run the LNDK software,

you know, side by side with your LND process. It understands onion messages and bulk of all messages.

So it can

enable your LND node. It's like a translator plugin. Yes. So you can use this the custom messages interface with the LND to actually send,

all 12 offers, which is exciting. So there's there's at least a

stop gap solution there until l and d actually supports it. That's cool. So we're sort of ready for wallets to start adopting. So,

you know, challenge

so I my hope is that, like, mutiny, green,

Phoenix are early adopters because they're all like, the the developers and companies behind those are opponents of bolt 12 and understand the challenges of

of of mobile and stuff and wanna move in that direction. So hopefully

What about Cash App? I think Cash App wants us to order too. So I think I think it's realistic this year, those 4


Just Cash App still doesn't support landing addresses.

Steve Lee:

Correct. But so I definitely chat with, I chat with I chat with all all 4 of 4 of those products, in the developer bind it. I,

my hope is that those 4 will support it this year.


But I raised this,


the DNS and lightning address stuff. That actually might be a an easier adoption path for Bolt 12. If you're because if you add it to your wallet now,

the challenge in the UX is when I wanna receive money,


You got Duante lightning. Do I Yes.

Steve Lee:

You have 3 buttons now.

And you can't I mean, I you can't just show both 12 because there's not enough adoption yet. The person can't see it. This transition group.


but with the

but with human readable names,

you can support bolt 12 immediately

because you can support bolt 12 and lnurl simultaneously,

and that's hidden from the user.


So I I actually think that Because it's the same human readable name. Is that the point? Yep.

Steve Lee:

Got it. So you're, like So, like, the lightning address also Let's say you use 12, basically. Yeah. Let's say you use whatever. You know? Exactly.

Whoever you're using for your lightning address,

they can add

this new,

Bolt 12 based DNS

approach. Keep supporting what they already sort with the LNERL. Support them side by side. And then anyone trying to pay you that is up up to date Well, I like that. They can do it. But and then it falls back to Did they support LNERL? They can just pay with the on your own stuff. Yep. So it's a way better user experience than having to do it within the wall itself. Like, yeah. That's a really graceful way of doing it.


That's my that's my new that's how I think bolt 12 will get adoption. That's a cool pitch. I like that pitch. I didn't realize that. Okay. That's that's awesome. Bullish.

Steve Lee:

Anyway, at some point, we should talk about,

Bitkey's design as well. Yeah. What do you I don't know if you wanna do that. You wanna chat about Bitkey?


A different episode or now? No. I think we should I mean, I think we should definitely talk about Bitkey.

Steve Lee:

And we I mean, at some point, you should have, like Because you started shipping. Right? Yeah. So and just so the audience knows,

yeah, I work on Spiral. I don't work on the Viki team. Yeah. But I so what I'm what I'm shilling here is more the

what I'm most excited about this product is the recovery


design and what Block's new hardware wallet

that that's trying to make it

very easy and approachable,

for new Bitcoiners coming in to to self custody their Bitcoin rather than use an ETF.

I feel like this is, like, the the first product that is,

that that I feel comfortable, you know,

giving to my my dad for Christmas and being like, you can secure your Bitcoin this way, and I don't have to, like, completely hold your hand and Yeah. Exactly. Freak the fuck out. Someone with Bitcoin on exchange,

Steve Lee:

or ETF or whatever, and they like, they're

think products like Trezor, Ledger Right. Gold Guard, like, just freak them out or intimidate them, or they just More power throw up their their hands. Yeah.

This is a product to get them started with self custody, and they're they're they're not gonna shoot themselves in the foot. So

what Yeah. So,

yeah. I'm excited about where they've innovated on recovery Yeah. Design and UX.

And I I hope I hope that this product proves it out, and then I hope it gets adopted by many other products in the space. Because we can get into the debate about, you know, this big key doesn't have a display. Right? Right. So we can get into that debate. And it's an interesting debate. Yeah.

But okay. Great. Even if, like, for people who absolutely wanna display, that's totally fine.

I hope to see a product by someone that has a display but also adopts this recovery model. Because the the beauty of this recovery model

is that it's a seed it's a it's a by default multisig wallet. Yep. And it's by default,

seedless. You don't write down 12 words. Right. Which I think is the largest

UX hurdle in self custody today.

Because, I mean,

So we we can debate about this. And a lot of lot of big concerns will be like agree. I mean, so a lot of big concerns will be like, it's so simple. Just write down 12 words, but I think it opens up Pandora's

box, because what do you do with those 12 words?

And it's like, okay, well, I can go get steep crypto steel or something like that. And then okay, well, where do I put that? And if I put it in a safe,

if I only put it in the safe in my home, then like, what if someone steals the safe? What if my house burned down, whatever? And if I put it in a bank safe safety deposit box You got it buried in public park. So so the so then, like, anyone takes a take if you take yeah. If you right. If you take a picture of that, your money's stolen.

So it just opens up this can of worms, and, like, a lot of us have gone down that path. And and I've, you know, I've spent 100 of hours thinking about

do it yourself self custody solutions. Figure out this. Normal people aren't gonna spend 100 of hours. So


beauty of this design is you don't write down 12 words.

It's a collaborative custody model.

It is, but also with self sovereignty. That's what it's a killer design. So,

you the onboarding experience, you can onboard in, like, 30 seconds. In super slick. Most of that time yeah. You get the most of that time is, like, you doing the calibrating the fingerprint sensor.

So it's super slick onboarding. And then if you lose your phone, you can recover. If you lose your hardware device, you can recover. If you lose both your phone and hardware device, you're gonna recover, which is kinda mind blowing. Yeah. Because you have a key on the phone, a key in the hardware device, a key unblocks servers. That's the 3 keys. So how can you recover if you lose 2 of the 3? Because the key on the phone is also backed up in your Icloud or Google Drive account Right. Encrypted.

And so if you lose both, there's a way to So both like a trusted contacts method. Right? Yep. Which is necessary.

They they don't have a they don't have they have a key, but not a key to your wallet. Right.

So if you lose to the cloud. If you lose

yes. So the encrypted copy in the cloud needs to be decrypted.

And your

family You don't want you don't want Blok to have all that key Right. Because then Blok would have access to 2 keys. If you hold that key, you can lose it. Yep. So your trusted contacts have that key. Right. So, like, I'd be the trusted contact for my dad or whatever. Yep. And then if he


loses both his phone and his hardware, then

I guess the app

has me go through the flow to help him recover it. Yep.

And then you just mail him a new piece of hardware. Right? It was, like, delay notify or something it's called. Yeah.

Steve Lee:

And then another

question or or pushback is, like, well, what if,

like, block goes the company goes rogue or the government, like, forces them to, like, just, like,

remove the app from the app store or from your phone or something?

Even in that scenario, you're protected.


that that was the software that was just developed by the team. It's an emergency access kit. Great glass move. It's a yeah. So I think they're officially calling it emergency access kit, but it's but it's great glass mode. Yeah. So you can and and so

even if your app is taken away from you,

you can still you can download from GitHub a copy of the app, side load it onto, like, an Android phone. Right.


you are given a PDF sheet,

which has an encrypted copy of


mobile phone


key. When do you get the PDF sheet?

Steve Lee:

Up upfront. And so you can Most people have store the PDF sheet now? Yeah. You can put it, like, in email. So but that that's just optional. You need to be you need to be somewhat security conscious with it, But if any if a bad actor gets privacy risk, not


as key risk. Not a privacy

Steve Lee:

risk, I don't think. And it's not a security like, if an attacker gets that by itself, they have nothing. You you have to have they would also have to have physically have your hardware device.

So if you have your you need your hardware device, you need that PDF

for this emergency mode to recover.


And how do you get the PDF?

Steve Lee:

I don't I think it's,


just provided to you, like, upfront in the product experience. I'm actually not sure. So is the idea you, like, store it in iCloud or something and printing out the PDF or You could print it out. Is it encrypted? Or is You could store it in your email. You could sort like, in the Is it the mobile key? It's not the mobile key unencrypted. That doesn't make any sense. That's not what it is. It's the mobile key encrypted.

Steve Lee:

Encrypted with the hardware device. Is that the idea? Yeah. And then so you still need to keep it. You still have your hardware device, and it can decrypt it. But it it itself So I think it's fair. Like, if, like, your failure mode is that


block is ditching you, like, you gotta still keep your hardware device.

Steve Lee:

Yeah. Yeah. K. Like, it's magic out of I think it's, like, an incredible


recovery design. So I have a question for you, Steve. Like,

when I was originally sold to Bitkey or the concept of Bitkey,

there's, like, a lot of claims that it was, like, a

it's gonna be, like, a wallet for the developing world. Right?

Steve Lee:

It's a 100 and $90.


And it's beautiful hardware. It feels really good in hand, right?

To me,

it's the Charles Schwab wallet.

I don't know, like like, I I maybe there'll be future Bitkeys, like, maybe there'll be, you know, cheaper versions or different

trade off models or whatever. But to me, like, this is for

the, like,


Charles Schwab ETF buyer

to to buy and hold Bitcoin instead.

Steve Lee:

I I think that's fair.

I think that's fair. Great for that person. I think that's fair, and that's true.

I know that the team

cares about

the customer segment you mentioned, which I agree.

I mean, you you need a certain threshold of money for a big because it's on chain too. You know, and that you could argue whether, you know It's on chain only. Do you need a $1,000 worth of Bitcoin or more, but something like that to


to justify Right. Because that's 50%.

Yeah. If it's

Steve Lee:

$1,000. Although we all know the numbers may go up. Oh, yeah. But yeah. So

there there is a desire to support

other segments.

There's a desire to support maybe, like,

an initial, like, software only solution. Right. So

the the road map

is to be determined, but I there there's gonna be a road map. So, I mean, it's not like this product shipped and then the team's disbanding and that's it. There'll be a there'll be a road map.


Even, like, the ads now, like, the videos are super slick ads,

and it's, like, it's, you know, it's my dad. It's my mom. It's Charles Schwab

users. Yeah.

Steve Lee:

But I think But at the same time, it's launched in, like, 95 countries or something. Yeah. Including India. So it it it's gonna be interesting to see where the sales come from. That's another thing too. I mean, we'll we'll learn where where the sales are going from.

Yeah. So I I do my main point here, I love the recovery model. I hope,


learn it

learn about it and give feedback on it.

And hopefully, other product builders will adopt that type of recovery model. I love the


like, it is

like, the setup flow is so smooth.

It's just,

it's a really it's a really clean straightforward

experience. And I love the idea of, like, the concept of the,

you set a threshold.

The idea is, like, you don't you're not, like, constantly traveling

with your hardware. Your hardware, you keep somewhere safe.

And then do you set a threshold like, okay, I can make $100 worth of payments per day and then you only are tapping this device against the back of your phone Yeah.

If you wanna make a payment larger than that, which I feel like is a very clever

because no hardware wallet solution has really gone that route. And and if you look at the history of hardware wallets and Bitcoin, they're almost all

you always have to have your hardware device with you if you're gonna sign because the keys are on the device.

Steve Lee:

So I'm I'd love to hear your opinion, Matt.

You know, we could list, like, dozens of ideas for how to improve this product or product line.

I wanna screen. I'll give you a few you want a screen? I so I'm gonna I'll give you, like, 4, and I I'd ask you to prioritize them. So add a screen as 1.

Introduce a new lower

price point product is another, adding inheritance


to make inheritance

much much easier,

or adding lightning. So out of those 4, how would you stack rank those 4?


I think,

screen inheritance,

cheaper Lightning.

Okay. Yeah. And I think I think you could do you could still have the screen list, but you can kinda solve multiple problems there because you could have, like,

the Bitkey

Plus that has a screen,

and then the screen list version gets cheaper.

And then then you kinda solve 2 problems with 1 there. But the inheritance, like, is just it's so perfectly set up for inheritance with the trust contact

situation. Because I think in a lot of times, the trusted contact will also be the heir. Yeah.

And inheritance

self custody inheritance is such an unsolved problem. Totally. Because your heirs are actually

like, if you're thinking about it right, your errors are also in your threat model. Because not even if the errors are


like, the errors can be pressured. Yep. And you don't wanna you don't wanna put your errors at risk.


doing that right is,

I think there's massive demand there. And I think a lot of people, especially, like, high net worth Charles Schwab MO,

Which they choose custodians. They choose ETFs and stuff because they know Charles Schwab will handle the inheritance for them, and they don't wanna think about it. Yep. I agree.

Steve Lee:

And I think your prioritization makes sense. I I think it's real there's, like, 20 ideas at least that could be done in, like,


know, it's gonna take years to do all of them. But any of them is gonna make make the product better. I think for now, like But that's also real quick. But that's also why I hope that,

you know, they open source their code

and their hardware specs and stuff. I just hope others build too. Because I there's no way one team can build all of these ideas quickly. Right. So I hope others Well, I don't know. It goes goes off of this. Announced with these, like, 22 devices, which is clever and interesting.


Aliko's is still Aliko's. Yeah. Yeah. Aliko's is still Aliko's. Absolutely. He's awesome.

Steve Lee:

Yeah. He's great. I mean, I've heard them a lot on BDK. I mean, he's cofounder of BDK. Well, I think what a lot of these guys are missing


and he realizes that he's just a tiny team. It's literally a 2 person team,

under, like, a shoestring budget.


you need to have

the full experience.

Like, it's awesome for, like, power users.

I love that I can just use Sparrow Wallet

with my hardware. I can do crazy multisig quorums. I can use different hardware devices, I can do anything I want.

It's like the most powerful sovereign tool ever.

But for a large portion of people,

you will never get the UX right if you don't have

a in house app

that is built for it. You know? And I think that's one of the reasons why the bid key is so clean is because the team also built the corresponding app that goes through the setup flow with you, like little graphics and stuff. You know? Like, do this next. Do that next. Yeah.

You can't have that.

The experience will just never be clean,

as clean.

Steve Lee:

Yep. I agree. Back

to, Aliko's product. Yeah. I think it's super interesting and innovative as well. It's mobile focused, uses NFC, and NFC is a great interface. Has a screen. It has a screen. It has a really cool form factor. Right? I mean, it looks like a it looks like a key.

But that ring, I mean, it what's

like, a difference between it and Bitkey, Bitkey has, a rechargeable battery inside.

So every, I don't know, every few months order, you gotta plug it in and charge. USB c. Yeah. And whereas


or that's the company. And Portal. Portal. Portal's the name of the product. It, there no battery, and it just, yes, charged off of the devices connected to the powers it. Yeah. So I hope that works I hope that works well and is reliable because that's super super cool, and it has the display.


Yeah. But you needed, like, the design to do like, it's hard because the MSC is in the back of the phone, but you want them to be able to see the screen. So it needs to be long enough to At least on the demo videos, it looks like he he nailed that. So pretty cool.

Yeah. But, yeah, I think we'll see some really cool different hardware developments, but I really do appreciate the boutique being out there.

I mean, we and, like, the honestly, like, that demo, like, needs it more than ever right now with ETFs.


Well, my hope with the ETFs is the SCC

Steve Lee:

changes the rules so that you can do in kind transfers.

Because right right now Mhmm. I I'm worried about the tax trap. So Yeah. This is what's gonna happen. Yeah. So you bought, you know, you buy BlackRock right now Yep. And a number goes up. You you make a boatload of money. And, like, so and then, like, over time,

both because the the value of what you bought went up and you just learned more about Bitcoin, all of a sudden, you went from, like, why would I ever sell custody to, like, I want to sell custody.

Yep. You go through that journey.

But 3 or 4 years later, if you have massive capital gains, you're in a tax trap. Yeah. You have to pay 20%. You can sell,


rebuy, and then self custody. So people are gonna do that. So if the SEC approves in kind transfers, you can actually get your Bitcoin directly out of the way. That's not you gotta just follow the incentives, and that's not gonna change. Doesn't want that. Yeah. And because people don't realize, like, I think the original thinking that a lot of people had was that fees would compress over time on the ETFs. Because also, like,

we were talking about fees earlier with, like, Bitcoin transaction fees and stuff.

Like, the ETFs are the first time that, like, you're passively getting charged fees for holding.

Right? Like, you're just getting constantly hit with fees no longer and longer you hold. And I think the fees actually start to go up. Like, if we a 100 x from here

and all those people are tax trapped,

then all of a sudden, BlackRock can pump their fees.

Steve Lee:

You know, all these different ETF providers can start increasing their fees. Yeah. I mean, if you're in a retirement account that's not taxable, then, of course, you can just

sell To a different ETF. To a different ETF.

And then if you're in a taxable account, consult your tax adviser whether

it's a wash sale or not if you switch from one to another. I'm not sure.


I I think I think I think you get hit on the tax on the situation, but I'm also not an agent. So I'm,

Steve Lee:

so that that that is, that is that is worrisome,

and I'm not sure if the SEC will change that anytime soon.


Yeah. I just don't think that there's an incentive to do it. Yeah.

Steve Lee:

Well, we'll see how it plays out.


Steve, this has been fucking awesome. Thanks for having me on for you so long. No. This was great. I did a nice 2 hour rip to start our morning.

Is there anything else you wanna chat about while you're here?

Steve Lee:

No. That's good. What do you think about Pub Lab? First time in Pub Lab. Love it. I just showed up and, it's great. It's a really cool spot. So I would recommend any any Bitcoin builder.

Certainly, if you're in Austin, you should probably be working at a Club Lab. And, if you're visiting,


I do do they welcome They love they love big builders? Yeah. They love big corners here. So But particularly builders. It's, like, very dead focused here.

Steve Lee:

Yeah. I mean, I visited you in Nashville a little over a year ago and that's, that was, you know, Bitcoin Park's an incredible

experience. So,


I'm finally making my way to Austin now. And then we're gonna bring you to Bitcoin Commons. This is gonna be your first time in the comments too. Yep.

Exciting. Well, Steve, this has been wonderful. I look forward to our next chat.

Steve Lee:

Thank you for joining me. Thank you. But one last thing. Go. So Spy Spiral is hiring developers. So if you're a developer wanting to do open source for clients Let's go.

Just a quick plug. You can,

apply at spiral dot

spiral dot org. There's sorry. Spiral dotxyz.


You want me to check for you, or are you sure? I'm I'm pretty sure. I'm trying.

is correct? Yes.

Steve Lee:

What is


What kind of do you have just, like, specifics on developers or some Japanese site?

Do you have any is there like

a specific call out for what kind of developer Yeah.

Steve Lee:

One is, I mentioned the wizards

earlier. So looking for, you know, pretty hardcore developers looking to do really innovative stuff. So

any kind of, like,

big type of tech proposal or change for privacy or scaling or security,

like, we're interested in in in talking to you.


And also hiring on LDK still. Meta. Yeah. Awesome. Spiral dot x y z freaks. If you're interested, make sure you apply.

Steve, thanks again. Thanks, Pat. Freaks,

thanks for joining us, whether it's in the live chat, whether you're listening on your favorite podcast app.

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Stay on both StackSats, Freaks. Appreciate you all. Peace.