I spent the most of last week in Nashville, Tennessee for the Lightning Summit at Bitcoin Park. It was an incredible event filled with people from around the world who are working to bring the lightning network to billions of people.
I spent the most of last week in Nashville, Tennessee for the Lightning Summit at Bitcoin Park. It was an incredible event filled with people from around the world who are working to bring bitcoin to billions of people via the lightning network. There are a lot of people out there who think the second layer scaling solution has been a failure as it hasn't gone mainstream five years after its launch in March 2018, but being a daily user of the lightning network I've always found this proclamation as lazy and uneducated. That feeling has only grown stronger after my trip to Nashville. Here are some of the themes that stuck with me and are things that you should keep in eye on in the coming years.
The use case that seems to have found the best product-market fit since the lightning network launched is B2B enterprise payment flows. The ability to settle meaningful flows instantly with relatively low fees has been a massive value add for exchanges and other large transactors who frequently need to move money between each other. This makes sense when you take into consideration the amount of technical prowess that is needed to spin up, maintain and operate high functioning routing nodes on the network in its current state. The next big domino to fall within this theme is multi-national corporations incorporating the lightning network into their businesses to reduce the settlement times, final settlement risk, and overall costs. Luckily, there are companies like River, IBEX, Strike, and others building out APIs to make it very easy to get on-boarded to the network.
AI, so hot right now. It is becoming clear that there are many synergies between AI companies and the lightning network that could improve the ability of upstart AI companies to feed data into their LLMs, allow end users to interact with AI with better privacy, eliminate chargeback risks, and provide better pricing for users.
The lightning network is uniquely suited to payout a distributed global workforce of individuals feeding data into LLMs. People in emerging markets with access to smartphones can get jobs via companies like Stakwork which leverages human work to complement its AI engine that completes microtasks at scale for companies looking for a cheaper solution. Humans provide the input the AI can't quite figure out on its own, get paid out in sats via the lightning network for completing the task, and make Stakwork's AI engine even better by providing accurate data that can be leveraged in the future.
A big problem for companies trying to leverage AI to improve their products and processes is that they are forced to doxx themselves to the AI companies processing their requests. This could lead to scenarios where an AI company is able to leverage the fact that they know what a particular company is querying as insider information that can be used to beat that company to market. When the practice of gaining access to the API gateway of an AI company via a payment over the lightning network becomes commonplace this problem should be greatly reduced. End customers will have significantly more privacy while at the same time getting them better pricing as they pay for exactly what they consume in terms of compute.
Last, but certainly not least, gated access to AI APIs via lightning paywalls will eliminate chargeback risk for AI companies over night. Due to the capital intensity of the compute necessary to make AI work, chargebacks are a massive attack vector for AI businesses. Being able to offer gated access via a monetary network with instant final settlement is a massive benefit as it eliminates this risk.
Lightning Service Providers (LSPs) have become an integral part of the lightning network to date as it isn't trivial for an individual or company to spin up and maintain a lightning node and the liquidity management necessary to ensure it is reliable at routing payments. The rise of LSPs like Voltage and Amboss has brought with it a lot of well founded skepticism from network participants. Is lightning even worth it if it is wholly dependent on a small universe of companies running the infrastructure? Tools like Blockstream's Greenlight and Validating Lightning Signer are moving things in the right direction as they aim to separate the private keys used to sign transactions from the node, which allows users to hold their own keys while allocating the management of their node to LSPs who will manage it in the cloud (their servers).
It has become clear that LSPs have played a vital role in the success of the lightning network so far. The ability to spin up managed nodes is a massive value add for individuals and companies looking to tap into the power of the network.
While it was very clear that lightning so far has been dominated by enterprise users who are regulated by the state, the rise of wallets and services that make it easy for individuals to operate on the lightning network in a sovereign fashion was extremely encouraging. Companies like Mutiny and Zeus have been building with sovereign users in mind and have shipped products that make it easier than ever for individuals to gain access to lightning without having to become masters of node and channel management.
It has never been easier to build on the lightning network. Five years of protocol and infrastructure build out has resulted in a wide range of tools that make it very easy to build products that implement lightning. LDK and Breez's SDK have made it possible for developers to build customized wallets to suit their needs and the needs of their users.
Right before the summit started the team from Phoneix announced that they had implemented splicing in their wallet. Making Eclair the first lightning implementation to offer the functionality. In short, splicing allows users and service providers the ability to open a single-dynamic channel that can be rebalanced on the go without the need to close and open more channels. This will enable dramatic cost savings for people using sovereign wallets and the companies that manage them. This has been a long awaited feature that should make it easy for lightning companies to manage liquidity while significantly reducing ongoing costs and UX problems for users who don't understand the nuances of liquidity management.
Eclair is the first to market, but other lightning implementations should be adding the ability to splice over the next year. Once splicing is widespread, we should see much more capital efficiency across the network which should dramatically improve economics and the user experience for everyone on the network.
All in all, it was an incredible week of programing that helped me level up my knowledge of the lighting network, how far it has come, where it stands today, and how it may progress in the future. If anything, the summit reinforced the reality scaling bitcoin is hard. Very hard. Luckily for us, there are extremely smart people focused on the problem and shipping solutions that are bringing the network to more and more people every day. The question that remains is just how sovereign the network will be when all is said and done. Things are pretty centralized right now, but it is getting easier to be a sovereign lightning user over time. The hope is that we can get the UX around sovereign usage to the point of parity with every day fintech apps before the fee market prices sovereign users out.
Queen beds aren't big enough for a family of four.