#625 Overview of the Lightning Network with Kevin Rooke

Kevin Rooke is a technology investor. He recently wrote a great analysis of the Lightning Network, which is what we discuss today. You can read it here: https://www.kevinrooke.blog/the-lightning-network-is-bigger-than-you-think/ ======================= Gemini is a leading regulated cryptocurrency exchange, wallet, and custodian that makes it simple and secure to buy, sell, store, and earn bitcoin, ether, and over 40 other cryptocurrencies. Offering industry-leading security, insurance and uptime, Gemini is the go-to trusted platform for beginner and sophisticated investors alike. Open a free account in under 3 minutes at gemini.com/pomp and get $20 of bitcoin after you trade $100 or more within 30 days. ======================= Do you have a business idea you’ve been dreaming about, but don’t know how to actually start building it? Use Bubble’s drag-and-drop tool to develop custom, interactive, multi-user web apps in hours. Go to Bubble.io to build, launch, and scale real ideas and products without engineers or code! Bubble is the go-to no-code platform for over 1 million builders, and has recently closed a $100M funding round to continue supporting startups like yours, from MVP to IPO. Go to Bubble.io/pomp and the first 500 listeners will get their first month free on any of Bubble’s paid plans. ======================= Polymarket is the world’s leading information markets platform where you can trade on the most pressing global questions and see unbiased, real-time data on what the market thinks will happen – all on the blockchain. For a limited time, sign up with referral code “Pomp” to get your first trade reimbursed up to $100. Click on the link to get started: polymarket.co/pomppod

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Kevin Ruck is a technology investor. He recently wrote a great analysis of the Lightning Network, which is what we discussed today. You can read it by clicking on the link in the description. I really enjoyed this conversation with Kevin, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is Gemini. Gemini is a leading regulated cryptocurrency exchange, a wallet, and a custodian that makes it simple and secure to buy, sell, store, and earn Bitcoin, Ether, and over 40 other cryptocurrencies. They offer industry-leading security, insurance, and uptime. Gemini is

• 0:46Anthony Pompliano?

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• 1:29Anthony Pompliano?

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• 2:14Anthony Pompliano?

  It's polymarket.co/pompod polymarket.co/pompod. Go check them out. You'll get that first trade reimbursed if you use that code POMP. And let me know what you think about it. Last but not least are my friends over at Bubble. Do you have a business idea you've been dreaming about, but don't know how to actually start building it? Use Bubble's drag and drop tool to develop custom, interactive, multi-user web apps in hours. Go to bubble.io to build, launch, and scale real ideas and products without engineers or code. Bubble is the go-to no-code platform for over 1 million builders. And they recently closed $100 million funding round to continue supporting startups like yours.

• 2:54Anthony Pompliano?

  From MVP to IPO, go to bubble.io/pomp and the first 500 listeners will get their first month free on any of Bubble's paid plans. That's right. If you go right now, the first 500 listeners that go there will get the first month free on any of the paid plans for Bubble. They are the go-to no-code platform for over a million builders, and I think you'll like it. So head on over to bubble.io/pomp. First 500 people, free month. Thank me later. All right, let's get into this episode with Kevin. I hope that you enjoy it.

• 3:24Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 3:47Anthony Pompliano?

  All right, let's get Kevin on here and let's talk Lightning Network. Kevin, what's going on?

• 3:51Speaker 02

  Hey.

• 3:52Anthony Pompliano?

  How are you?

• 3:53Speaker 02

  Good. Good to be on the show. Thanks for having me.

• 3:56Anthony Pompliano?

  Absolutely.

• 3:56Speaker 02

  Looking forward to chatting Lightning.

• 3:58Anthony Pompliano?

  Let's, uh, let's start with just give everyone kind of a quick overview of your background. Then what you do kind of day to day right now, just so people understand your perspective.

• 4:07Speaker 02

  Yeah, so I've been in crypto for three or four years, have kind of watched the growth of Lightning from the early days, not really paying too much attention to it early on, but around earlier this year, I really got into it and started doing a lot of research on it. And that's a lot of what I do today is research and investing in crypto. And I started to notice in April and May, when this El Salvador news came out, and all of a sudden, the Lightning Network is going to have this real use case. I started to notice the growth of the network, and I started to follow along with it and really dove down that rabbit hole.

• 4:48Speaker 02

  And yeah, started studying it, got myself set up on a Lightning node, started routing payments, and started realizing that not only is this like a much better user experience for moving money around on the Bitcoin network, it is, it's really misunderstood. And so that was kind of the piece I wrote earlier this week was about why, why we are not really thinking of Lightning in the correct lens, we're looking at it through the wrong lens. And because of that, we think it's a, it's a smaller protocol than it actually is. There's a lot more activity happening on it than people realize.

• 5:28Speaker 02

  And this is really just what gets me going. I think I'm, I'm really excited about how big this network is today and how big it can be tomorrow.

• 5:37Anthony Pompliano?

  Yeah, I, I think I share the excitement and kind of passion for this as you do. Let's start with just a high level, like what is the Lightning Network? People probably heard about it. They know it has something to do with Bitcoin, but they may not actually understand just at a high level, like what is the Lightning Network supposed to be?

• 5:52Speaker 02

  Yeah, so super high level protocol for making instant and nearly free payments on Bitcoin, right? And so there are, right now, well over 10,000 active nodes running on this like Layer 2, that's Lightning, we call it Layer 2 technology.

• 6:10Speaker 02

  And what is, what's really happening is people are on the Bitcoin network, entering into an agreement between two.

• 6:19Speaker 02

  Two nodes. So let's say you and I decide that we want to set up a channel on the Lightning Network. We can enter into an agreement on the Bitcoin network. We can open up a channel on this layer two, and all of a sudden you and I can send funds back and forth between each other or between other nodes on the network without making an on-chain transaction. So the idea is that anyone can pay anyone for basically no cost and, you know, permissionless and it has all the same properties as the base Bitcoin blockchain does. Just it's optimized for payments.

• 6:56Anthony Pompliano?

  Got it. And so you wrote this piece recently, and what you basically did was you broke down how folks evaluate the Lightning Network, and then where you felt like that evaluation was fair and accurate, and then where you thought that it could be a little misleading. And so if we start just maybe with this idea of value locked in the network, that's a term or a concept that became very popular in the decentralized finance space, usually on the smart contract platforms. But walk us through kind of where we are from a value locked in the Lightning Network, and then why you think that that might not be an accurate kind of way to measure this specific network?

• 7:31Speaker 02

  Yeah, so right now, the way it's often framed is that the Lightning Network has this, has, people look at like the network capacity, which is the amount of Bitcoin that every kind of node has on the network. They look at that and they say, well, this is total value locked, and they compare it instinctively to a lot of the DeFi protocols. So Maker, Compound, Aave, Uniswap, they all kind of use the same TVL, total value locked, metric to measure their growth against each other. But it's, TVL is, it helps DeFi protocols kind of like overestimate

• 8:14Speaker 02

  their size. There's a lot of incentive, like DeFi protocols have inflation built into their, often built into their tokens. There's yield farming that goes on that incentivizes capital to move on to those platforms. And that kind of overestimates their actual demand for TVL. People are just kind of going there for yield farming or for earning interest rates on something.

• 8:44Speaker 02

  But Lightning underestimates it. Lightning has a few different

• 8:50Speaker 02

  a few different reasons why TVL is not actually value locked in the Lightning protocol. The first is that some of the channels on Lightning are private. So that's not visible on the network graph. There's no way of seeing what capacity all these channels have. So there's always going to be a

• 9:16Speaker 02

  the metric that people use as TVL is always going to be underestimating the actual size of the complete Lightning network. We just don't know entirely how big the, how much bigger it is. But it is going to be always bigger because there's private channels that aren't advertising their capacity.

• 9:34Speaker 02

  And furthermore, it's TVL itself is a metric about like locking value and putting it like amassing capital and Lightning isn't really about that. Lightning is about making payments, right? So this is not an AMM. This is not a boring protocol. This is not like, we're not trying to collect a bunch of funds on this protocol. We're trying to, we're trying to move funds between people.

• 9:59Speaker 02

  And payment volume is one of those metrics that can't be tracked. It, it's, you know, Lightning is private by design. So that is actually probably one of the more important metrics. But it gets, it gets overshadowed. It gets, you know, there's no way to actually measure it. So people go with the next best thing, which is they look at network capacity and they call that TVL, which is kind of misleading, but that's it's the most available metric. So that's what people tend to gravitate to.

• 10:28Anthony Pompliano?

  So it seems like what people are basically doing is they're trying to use a couple of different frameworks to evaluate where is Lightning Network today? What is the total kind of opportunity set at the given moment? And then try to use that as a way to establish where it's going. The first is they're using metrics or frameworks that have been used in other parts of the industry and then applying it here. But the difference being this is a payment system versus those other systems where Actually locking value for liquidity or market making is important. Here it is not because it's a true kind of payment system. So that sounds like one piece of this. The second piece is that with the data that you can query around nodes, et cetera. There's public and private components to it. And so people can only cite the public.

• 11:14Anthony Pompliano?

  They can't get the private data and so they just run with the public data. But it's actually a bigger number when you had public and private. We don't know what that private number is. Is that a fair characterization of where we are?

• 11:24Speaker 02

  Yeah, I think so. And then the payment volume itself is just something that no one has any real insight into. Like you and I can send funds back and forth on the Lightning Network. We could send 100 transactions a minute back and forth. And that that doesn't appear anywhere. There's no Lightning Explorer that is going to show the actual value of funds being moved across the Lightning Network. So one example would be, you know, Strike using Lightning as the kind of the back end of their app. It's it's like they they aren't showing any of their payment volume to Lightning Explorers. That's that's not visible. So we actually don't know how much bigger it is than their total capacity. But chances are they're moving those funds over quite frequently.

• 12:08Anthony Pompliano?

  In the piece that you wrote, you used a a couple of examples, specifically Lightning Network Markets or L N Network, or I'm sorry, L N Markets or Biterru. And L N Markets is a derivatives platform that's built on top of the Lightning Network. Biterru is an Australian Bitcoin exchange that offers customers the ability to deposit and withdraw with the Lightning Network. And what you highlighted was, given that this information is private, we had to wait for these organizations to basically publish the information. And so L N Markets said that they've done $200 million of volume on the platform since March 2020. And then you showed that Biterru did $54 million of payment volume through the Lightning Network in the last nine months or so.

• 12:50Anthony Pompliano?

  And so your point here was basically that if $50 to $200 million is being done with platforms that are not, you know, the most popular in the industry or kind of well known. Your estimation is that the payment volume is somewhere in the billions to tens of billions of dollars on an annual basis?

• 13:09Speaker 02

  Yeah, I think, I mean, if you see Bitteru and L N Markets doing fifty to two hundred million dollars in annual volume. Bitteru is the like eight hundredth largest node on the network. There are a lot of apps and other nodes that are doing far more volume.

• 13:29Speaker 02

  You, you know, Bitfinex has two nodes and a total combined capacity of three hundred Bitcoin on their two, on their two nodes. And so you start to think like Bitfinex is one of the, you know, largest crypto exchanges out there. It's got three hundred Bitcoin that they decided to put on Lightning. They're not doing that for fun. You know, they're doing that to move funds back and forth and they have enabled withdrawals and deposits through Lightning. And so, you know, the, the network is far larger when you take a look at payment volume versus node capacity. Because you can move payments back and forth so quickly and it's so cheap.

• 14:09Speaker 02

  There's, there's no cost really to making these payments. They're, they're far, I mean, they're like a fraction of a penny. Sometimes if you have to, if you have to route a payment, if you make a direct payment, it's free. And so when you lower the barriers to making these payments, all of a sudden, payment velocity can go up. So I think, I think the actual payment figure is higher than a lot of people realize or think it is. But, you know, as you said, we, we don't have a complete picture of how big payment volume is because not all this information is being published. So we kind of have to rely on clues from, from companies that choose to publish it themselves.

• 14:48Anthony Pompliano?

  And then Alex Bosworth is a Lightning Infrastructure engineer at Lightning Labs. He leads that, that part of their work. And in your piece, you highlighted some of his recent comments around how much money he's making from actually routing transactions. So before we talk about maybe the, the math around what he's doing, just help people understand, right? People always ask like, how do I participate in the Lightning Network? Is there a way that I could mine or route transactions or buy things like, like what's the financial opportunity? And I think that routing transactions ends up being where many people settle. So like, how does that work? And then how do people get paid for doing it?

• 15:25Speaker 02

  Yeah, so the easiest way, and this is in the last month or so, I set up a node using something called Umbrel. And I think it's getumbrel.org or dot com. And that's probably the easiest solution out there for a lot of people. It's a hundred or 200 bucks. You get six or seven computer parts, you get a little Raspberry Pi. And there's instructions on how to, you know, connect all the parts and sync to the, you run a Bitcoin node and a Lightning node. And Umbrel has their software and that kind of interfaces with your, with your computer that you just built. So for a hundred or 200 bucks, you can get a Lightning node. Then you have a wallet and all of a sudden you can move funds from the Bitcoin base chain to Lightning.

• 16:10Speaker 02

  And you can start routing payments right away. So one of the things that I saw once I started to move funds onto Lightning. So I woke up one morning and there was just, and funds had moved across, I had put a certain amount of funds in one channel. And I had a, I had an amount of inbound liquidity and outbound liquidity. That proportion changed as funds moved across the network. And so it happens right away if you're a routing node.

• 16:38Speaker 02

  You can, you can set fees on how much, how much you want to earn for passing a payment through.

• 16:45Speaker 02

  And so that, this is kind of getting to Alex Bosworth's node. He's a routing node and he's earning when a payment, a payment comes in through one of his channels and goes out to another one of his channels. And it's, we don't know which party is sending the payment and which party is receiving the payment. All we know is that it's using his channels and liquidity in those channels to get the payment across the network. So he's, he's earning a fee for that. His fee is about 25 basis points, which is probably on the higher end, but he's a very well-connected node. It's got a lot of capital in there. I think roughly 25, 30 Bitcoin of capital in his channels on his two different nodes.

• 17:31Speaker 02

  And so he's earning quite a bit of money from routing those payments because. He's well-connected, so if I'm trying to send a transaction to someone I've never met before, I may not be connected to that person. I may be using Alex's node, because he has a connection to someone else who has a connection to someone else who has a connection to that person. And, uh, yeah, that's, that's kind of the, the basics of routing. And you can genuinely make money, uh, but it is a, it's a competitive market in the same way that Bitcoin mining is a competitive market. It's permissionless, anyone can do it, anyone can join. And so naturally that means like everyone's trying to undercut each other. Everyone with Bitcoin money, everyone's trying to find cheaper energy. Um, on Lightning, everyone's trying to find better, uh, channels to open and better nodes

• 18:16Speaker 02

  to connect to and better paths to route through. So it's, it's always going to be this really competitive market. Uh, I imagine margins are going to be pretty slim, but, uh, you, you absolutely can earn money, uh, routing on Lightning.

• 18:30Anthony Pompliano?

  Yeah, it, it's absolutely fascinating. I think that, um, you know, when you take all of this into, uh, consideration, it's very obvious that this is headed in the right direction. One of the reasons why I've been so bullish in the Lightning Network, uh, both it just in terms of, uh, conceptually what they're trying to accomplish, but also, uh, with investments in Strike and, and other types of businesses like that, is it feels like Lightning is taking the organic growth path. It doesn't have, uh, some sort of airdrop mechanism or yield farming or something that can kind of short circuit the growth. And so what it does is it will have much more steady growth, kind of in the beginning, uh, and, and kind of slower growth, but those people end up being really, really sticky, high retention users of the product, right? They, they stay on the network, they don't leave, they don't jump to the next network

• 19:15Anthony Pompliano?

  that shows up just with, you know, better, uh, returns on some sort of airdrop or, or yield farming or whatever. And so when you start to look at growth in general, what initially kind of pulled me to the piece that you wrote was, uh, the growth has been kind of what I'd consider slow and steady. So, so a positive, uh, organic growth, exactly what you would want to see, but it's starting to pick up now. And so you highlighted, uh, a, a couple of different numbers in April, May, June and into July that just shows like, we may be hitting a little bit of an inflection point here. Kind of walk us through, you know, what those statistics are and how you think about this growth and, and, and kind of what it means for Lightning in general.

• 19:53Speaker 02

  Yeah, absolutely. So that's, that's one of the things that also drew me in in the last few months has been watching these numbers grow. Not only, not only grow, not only grow from in an absolute way, like the network capacity is month to month, the number of Bitcoin being added in network capacity grows, but also in a percentage. So from a higher base, all every month, the percentage of Bitcoin added to total uh lightning um network capacity is growing. So as an example, I put in the piece during April, uh in the beginning of April, there was 1169 Bitcoin of public network capacity on Lightning.

• 20:37Speaker 02

  At the end of the month, there was uh 1231. And so there was, that was 5% growth in the month of April. The month of May went from 1231 to about 1400. That was a 14% growth uh from a higher base. Then the month of June went from 1400 to 1650 Bitcoin. Uh, and that again is, it's a bigger growth. There was 18% growth from another higher base. And then July was 1650 up to 2100 Bitcoin. Uh, and now we're pushing 2200 Bitcoin locked on the network. And uh, you know, that is 27% in, in that last month.

• 21:14Speaker 02

  Um, and so, you know, it's not only growing, it's not only growing from an absolute basis, but it's growing as a percentage, which is really, really rare. And um, it doesn't take much imagination to see how quickly this can continue to grow. If, if, you know, if the next month grows by 30%, 40%, 50%, uh, it's not long before you've got 10,000 Bitcoin, 15,000 Bitcoin, 20,000 Bitcoin unleashed on the Lightning Network.

• 21:40Anthony Pompliano?

  You mentioned El Salvador, Twitter, Square, et cetera. I think that definitely in the Bitcoin community, uh, you know, I've been saying for a while, Twitter, Square should merge, embrace Bitcoin, game over. You know, one of the most powerful companies in the world, one of the most important valuable companies in the world. I don't think we're there yet, but uh, what is the relationship between companies like a Twitter or a Square or a country like El Salvador and the Lightning Network?

• 22:07Speaker 02

  Well, when I look at that, I just think it's the, it's, there are two or three catalysts that have the potential to onboard millions, or tens of millions, or hundreds of millions of users, right? And that would be, so El Salvador is probably the short-term catalyst, where I think it's September 7th, their Bitcoin bill goes into effect, and every citizen is going to be airdropped thirty dollars of Bitcoin on Lightning, every merchant will be required to accept it as payment. All of a sudden, you have, everyone with, everyone in El Salvador has a Lightning wallet. Everyone in El Salvador has Bitcoin. Their relatives who are sending money through remittance channels, twenty-four percent of El Salvador's GDP is remittances,

• 22:52Speaker 02

  they can now send money through Lightning, and now all of a sudden, they're onboarded too. So you know, you can quickly see how the six million people in El Salvador can branch out into this like larger network that is sending and receiving funds, and you know, six million can turn into ten, twelve million when you, when you take into account the relatives of people in El Salvador, then all of a sudden, a neighboring country decides to do the same. There's like really, really compelling network effects that are being built right now. And I think that's the short-term catalyst to watch out for, is how quickly is El Salvador going to kind of adopt this, and how important is Lightning going to be in their day-to-day lives? We've seen some good examples already with Bitcoin

• 23:37Speaker 02

  Beach, but it'll be really interesting to see in September what happens across the country once everyone is on Lightning. And I think the same, you know, Twitter, Twitter actually, I think is a really, I don't know if you remember this, but there was a, there was a product called Tippin on Twitter, I guess a couple of years ago, it had a, it had a moment, and It basically enabled anyone to send uh lightning payments to a Twitter account. And I thought that was like a great integration. It was someone, it was someone unrelated to Twitter that built it. But it enabled anyone to move money to a, directly to a Twitter account.

• 24:17Speaker 02

  And I, I remember getting a few stats from, from some people online and I was just like, that's really cool. But I don't know what to do with it. And so that was kind of like a first aha moment. I had a little bit of an aha moment. I was like, I can, I can receive money through my Twitter account. It's just like, I just think this is like the most obvious next step for Twitter to make this a native integration. Um, make it possible to like withdraw funds and move them uh to different wallets. And I, I think that's like another, you know, Twitter's got 206 million daily active users, I think. Uh, that is an enormous uh pool of people that you can pull from. If you enable some tip jar feature with lightning or a super follow.

• 25:01Speaker 02

  Instead of paying $5 a month through PayPal and getting charged, you know, 40 cents for a transaction. Um, all of a sudden you can, you can tip someone, you can tip someone 40 cents, you can tip someone 4 cents. You know, you, there's no limit to how small these payments can be. And I think that really opens up a lot of possibilities. And yeah, I hope, I hope Twitter and Square both kind of uh release some uh lightning integrations in the near future.

• 25:28Anthony Pompliano?

  What are you most excited about? Is it individual users? Is it companies, nation states, the, the totality of everyone using it? Like when you think of lightning, what, what gets you the most excited?

• 25:39Speaker 02

  I think, I don't think it's any of those things. I think the thing that gets me the most excited is that this is a, it's a, like a radical decrease in the cost of making a transaction. It's like, we don't have any platform in the world where you can make a permissionless uh transfer to or from anyone for basically free and instantly. You know, we have, we have some silos. We have, you know, Cash App, if you're a US user, maybe you can make a free transaction. But you're trusting Square, you're, you're trusting some of the banking system. Um, you can't use it internationally. Uh, like I can't use it in Canada. There's, you know, PayPal's going to charge you a fee or maybe a, a time delay.

• 26:19Speaker 02

  There's, lightning is the first implementation of this idea that you can move value to or from anyone. Instantly and for free. Um, and it can scale to the world, which is, I, I think is really incredible. And I start to think about, you know, past innovations, past like networks and even just radical cost declines in certain technologies. Um, I think back to like the early, uh, nineteen hundreds in America, when, when homes all across the country were being, um, outfitted with, with a few different networks. So one was electricity, um, sewage, water, all these like, all these systems that radically

• 27:01Speaker 02

  decrease the cost of, um, getting fresh water, uh, you know, turning on a light makes it, it makes it instant, right? As soon as you have, uh, Thomas Edison set up his Pearl Street Station, uh, people all of a sudden have free and instant access to light. As soon as you have an air conditioner come on, you have free and instant access to manipulate temperature. These things have really, really wide ranging impacts. I was actually studying the kind of history of the air conditioner and, um, some of the like wide ranging impacts are like it, it, people live longer when they have air conditioning. It caused a mass migration in the U S towards the, the south, uh, half of the country and the, uh, latter half of the twentieth century.

• 27:46Speaker 02

  And, um, Hollywood's golden age coincided with the time that air conditioners started to be put into movie theaters. There's like really dramatic wide ranging effects for what you otherwise would think is just like, you know, oh, I can make the room cooler. It, it changes refrigeration. You can now move food across the country, across the world. You can access foods that you never could before. It changes so many things when you can, when you can decrease the cost and make it instant. You can instantly access a colder temperature if you want. Um, it enlightening is the same way, like you can instantly send money in any denomination you want. Um, and so I think there's a lot of these low value kind of transactions that have never been able to be spent.

• 28:31Speaker 02

  Um, things like play to earn games, like there's, there's a thunder games is a app that, uh, or it's a studio that they built a couple of, uh, Bitcoin games. You can earn sats for playing a video game every day. They give out sats to thousands of people. In small, small denominations, that wouldn't be possible on chain. Streaming podcasts, you can tip creators for, you know, every minute of a podcast that you listen to. People come in, tune into the show and watch five minutes of it. They can tip you for the exact amount of time that they're watching. Messaging platforms, you can all of a sudden build groups where people have to pay to send a message.

• 29:12Speaker 02

  All of a sudden, you reduce a lot of spam, you, you open up some new possibilities for what these platforms could be. And so I think there's a lot to, uh, yeah, there's, there's a lot of possibilities. We don't know what the second order effects are going to be of lightning. But I, I know that when, in the past, when we have seen innovations that radically decrease the cost and make, make something instant, um, you know, faster, cheaper, um, anything like that has, has often come with, uh, really wide ranging effects. And so I think that's going to be the same for lightning.

• 29:45Anthony Pompliano?

  John, what questions do you have?

• 29:46Speaker 03

  Yeah, Kevin, thank you for doing this. I really appreciate you sharing your knowledge with everyone. Um, I kind of have a two-part question. So first, like, what are the disadvantages, if any, to the Lightning Network? Like, why would someone not want to use it? And then also, like, what's going to drive further adoption of the Lightning Network for people to use it? Um, and so on.

• 30:04Speaker 02

  So I think the, the disadvantage right now is, it is not easy to use. It is, you know, even, even setting up a node on Umbrel, which I think was a relatively easy experience. You have to buy hardware. You have to, you know, I get a shipment from Amazon, I have to build this little computer, uh, set up a node, takes a few days to sync. Um, there's a, there's a bit of a learning curve and, uh, I'm not, I'm not fully up to speed on like all the technology risks and security risks. Um, but I think it's initially like that, that's what kept me from the Lightning Network for the last couple of years. And it was only about a month ago that I, that I set up my own node. Was that it just seemed like it was a very, um, difficult, uh, network to be a part of. I didn't really know why I should be a part of it.

• 30:50Speaker 02

  As you start to see more apps though pop up, so like you have users, you have capital, you have, um, now countries that are kind of using lightning to settle payments. All of a sudden, this opens the doors for developers to come in and say, I'm going to build an incredible app on Lightning because there's 10 million people in El Salvador and their relatives, and there's people on Twitter that are using this, and now there's an addressable market. And so I think that's kind of going to be a catalyst for growth. It's a flywheel, right? Like, you have users and capital that start to accumulate on the network, attracts developers, these developers attract more users and more capital. So it's organic. And, you know, this is something we chatted about earlier, is this is like an organic demand

• 31:34Speaker 02

  driving. And it's, yeah, I think that flywheel is really starting to churn. And I've started to see a lot more Lightning startups being built, and the ecosystem's flourishing, I think.

• 31:47Anthony Pompliano?

  Definitely. What is your favorite application right now, or kind of software interface to Lightning? Or is there anything that you use on a daily or weekly basis?

• 31:58Speaker 02

  I started using L and Markets a lot. That's Bitcoin Derivatives platform. I truly think it is the fastest trading platform in the entire crypto industry. There's no KYC, no verification, you can send funds directly from your node, they arrive instantly, you can open a position in a single click, you can close a position in a single click, you can withdraw funds in a single, in a second. It's just like an incredibly fast experience, and it just makes me cringe to think about how much time I had wasted in previous years, you know, going through KYC process verification, waiting a few days, figuring out how to send

• 32:38Speaker 02

  funds from a bank to, you know, buy some Bitcoin. They make it really seamless. You got to get on Lightning to use it, but once you're on there, it's really, it's magical kind of experience.

• 32:50Anthony Pompliano?

  Where can we send people to learn more about Lightning? Is there, I know you've written a couple of pieces on your blog. Should we send people there? Are there other resources that you usually suggest to folks?

• 33:01Speaker 02

  Yeah, so one, this one's a little more technical, but the first few chapters are pretty good for anyone trying to learn more about it. There's a book called Mastering the Lightning Network, and it's available on GitHub right now. I don't think the hardcover kind of final polished book has been released yet, but you can read a lot of it on GitHub for free. And that is written by Andreas Antonopoulos. I think someone at Lightning Labs is also a co-author, and can't remember. There's three authors. But those are like the OGs of Lightning. They really truly understand the protocol, and there's a lot

• 33:43Speaker 02

  of foundational knowledge to learn there. If you want to learn more about the ecosystem and all the apps being built on it, Jameson Lott has some really good resources on his site. I think it's Lott.net forward slash Lightning Information. Great stuff. There's like 40 or 50 apps I had never heard of that are already in action, and you can use them to either earn sats or send sats. So that's a really good resource to start with.

• 34:12Anthony Pompliano?

  Love it. And then where can people follow you on Twitter?

• 34:17Speaker 02

  Yeah, I'm at K E Rook on Twitter, and I write a lot of long-form research on KevinRook.blog.

• 34:26Anthony Pompliano?

  I think you're doing a fantastic job, and I always enjoy finding kind of the corners of the internet where it's like, oh, wait a minute. It is like, oh, I could read about this all day long. This is pretty high quality. So I appreciate you jumping on here and kind of explaining to everyone. As I was saying to folks in the comments, I think Lightning is probably one of the most misunderstood and mispriced opportunities right now. And so obviously, in things like Strike, there will be opportunities to invest in companies, but also just the usage of it, the adoption, and kind of what it'll do for Bitcoin and the network on a global basis is pretty powerful, as you've outlined. So I appreciate you taking the time to do it.

• 35:04Speaker 02

  Yeah, of course. And I think one other thing is, I think there's an additional, a couple more additional like effects because Lightning is built on Bitcoin. This is the only way to access it directly is to buy Bitcoin. I think that's another kind of advantage it has over some of the, you know, when you think about like how it's positioned compared to like DeFi protocols and stuff like that where if you're investing in that in the DeFi space, you don't know should you buy a compound Aave, should you buy Ether, should you buy, there's like a bunch of different tokens you can purchase. Lightning to kind of, if you're investing in that, if you're kind of betting on the network's success, the only way to do it is through Bitcoin directly.

• 35:50Speaker 02

  And so I think that's another kind of compelling advantage it has. It's very focused on, you know, this this resilient network that has already proven itself. And yeah, there's no, there's no distractions associated with it.

• 36:04Anthony Pompliano?

  Yeah, I tend to think that you are more right than wrong and you're on to something. So keep banging the drum. That is, that is what we need. So appreciate you taking the time to jump on and we'll definitely do it together in the future.

• 36:15Speaker 02

  Sounds good. Thanks for having me on.

• 36:16Anthony Pompliano?

  Thanks, Kevin.

• 36:17Speaker 01

  Thanks.