Streaming Value Over the Internet
It's time to unlock Lightning's true potential and remonetize the Internet! I wrote about my thoughts and experiences from Baltic Honeybadger and why I'm excited for more innovation in the space.
I remember writing about the streaming wars on the internet in 2015. It was a research paper for a Venture Capital client of mine, and the job was to determine if consumers wanted to use streaming services such as Spotify, Netflix, and YouTube or if it was just a passing trend.
As someone who was already using most of the streaming services for a long time, I thought he must be joking?! Why shouldn’t these services stick around? Why on earth should anyone pick an analog, slow system over this?!
The big advantage over how we used to listen to music or rent movies is that we can always carry our libraries with us. Even if you don’t like streaming, we can get cheap storage these days, so you could even have your entire library with you on a hard drive or portable player. Looking back, I was early enough in the streaming world and understood the advantages of the older system. I had to wait for others to catch up.
I’m bringing up this point because just this past weekend, while attending the Baltic Honeybadger conference in Riga, I spoke to some prominent figures in the Lightning industry, and the same ideas or topics, just like in 2015, came up. This time, my talking partners and I agreed on almost everything, apart from some technical details. Those were because of personal preferences and not the overall topic at hand.
We both know that Lightning will be the game changer for streaming value across the internet. Right now, Lightning’s most prominent use case is the ability to execute fast and cheap payments and open channels to other peers. However, there is so much to this technology, and this article aims to give you some insight into what’s possible.
Businesses and the Lightning Network Need Each Other
Many people in the industry look at Lightning and think it’s a joke. Either it’s too complicated, too many players involved, or we sacrifice many of our freedoms on the main layer, mainly with custodians or things like Lightning Service Providers (LSPs).
Sadly, most people miss the bigger picture. Yes, there are trade-offs with using custodians or trusting an LSP over your node. But guess what? The same applies to most normal users on the main layer as well! How many people out there still leave their coins on exchanges or trust custodians like Fidelity to manage their Bitcoin for them?
The beauty behind Bitcoin is that you can choose. It’s either an opt-in or an opt-out. I highly recommend it to anyone interested enough to self-custody and to be in total control over their own Bitcoin. If you have the ability to do so, do it! It’s fun, and you can customize or utilize that part of your Bitcoin stack how you want.
However, I also acknowledge that a huge group of people out there don’t want to (yet). They’re looking for simple solutions, or they are legally bound to use a custodian. Think of a business or publicly traded company. These institutions have to engage with a trusted third party. Yes, I know it’s not perfect; otherwise, they’ll get shut down.
And if there is one thing Bitcoin and particularly the Lighting industry needs, it’s more institutional adoption or more business solutions that get regular companies on board. After all, they are the ones who will bring Bitcoin to the masses.
The plebs can use this as a trojan horse and educate newcomers about the importance of owning your keys and always being in possession of your Bitcoin. I like to tell newbies that the self-custody route is their savings account and that the Sats in their Phoenix wallet, which is at least semi-self-custodial, is the cash they carry on them and occasionally spend on food or drinks.
For many businesses, the most significant pain points are high fees or the ability to lower them and increase their margins. This is literally the best-case scenario for Lightning, and we should do better in educating businesses about it. At the same time, the programmability and effectiveness of Lighting are some of the easiest arguments to make for this kind of business and individuals who might look at it and start figuring out what it is.
Programmable Money Is Going to Change the World Once and for All
I’m not talking about a great wallet or yet another LSP, but the ability to implement monetary streams via API calls. You might think of the most obvious example with a donation via click online, but another interesting model could be the redemption of mined Bitcoin. Imagine the Coinbase transaction immediately being sent to open a Lightning channel, allowing Miners to stream Sats the minute they need them.
Instead of relying on manual processes in the beginning and transferring Bitcoin back and forth on-chain to either pay for the infrastructure or sell them, such an integration with the Lightning Network would allow them to be more agile.
Who knows, they might even be able to stream their employees’ salaries on-site through these Lightning channels and encourage them to use Bitcoin as well. This might be the simplest of examples for streaming, but if it’s effective and gets more people on board, this is the way to go.
Now, this isn’t easy to do, and there are many things to consider, but there are already prototypes in the works. The integration of Lightning and Miners could also drive local Bitcoin adoption.
It’s sort of similar to what you see in cities like Lugano. While a Bitcoin standard is still far away, you see more and more businesses adopting it and using the network to save costs, find new clients, or outcompete their neighbors.
Another exciting avenue this could go down is the integration of Lightning as an IT infrastructure. Because the network can settle instantly and with things like RGB even transmit other currencies, it might be the perfect fraud detection tool.
Many services, such as Airbnb or Netflix, have issues with fake credit cards or hacks in users’ accounts, where fraudsters use stolen data to create subscriptions. If the fraud is detected, it takes a lot of weeks and manual work to redeem the victims.
This is all down to the ineffectiveness of Visa or MasterCard. It can take up to two weeks for them to settle the transaction, and once that is done, the insurance policies kick in. They’ll then have to take a look at everything as well and delay the whole process even further.
With Lightning, these companies could run a dedicated fraud prevention channel between them and the insurance, settle the transactions instantly in the clients’ accounts, and shorten the process to a few days instead of weeks.
The user doesn’t even know about this because, on their end, it looks like they’ve gotten their money back, as the systems internally could transfer the amount in Fiat via RGB or Lightning. The IT department would use Lightning as a money transfer engine and a shared security pool with the insurance. Both of these things are possible to settle on the network.
People already do this if they use Cash App in the U.S. Where you send money back and forth with Lightning, now imagine the same for all subscription tools as a fraud prevention tool or as the main backend for their subscriptions.
I’m sure there are other examples, but I don’t want to waste more of your time. Instead, I encourage you to think about more of these concepts. Yes, having a fast payment option for our coffee is fantastic, but that shouldn’t be the main argument for using Lightning. Suppose it already has the capability to do so many different things and be the essential backbone of the Internet. Why should we build more products and solutions to fulfill that potential?!
Bitcoin and Lightning particularly enable us to remonetize the corners of the Internet that advertising and Big Tech stole from us. It’s up to us if we’re willing enough to make that first step and get out there.
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