Lightning is becoming a service layer an application layer of sorts for Capital markets on top of Bitcoin. So what does it mean exactly that we're providing services to the network? What might that market begin to look like? That's what we're reading. Day with another one from Breeze technology written by their CEO Roy Seinfeld who we've had on the show. I will have all those links in the show notes, but for now, let's jump into introducing lightning service providers. The lightning economy is coming and it will combine two fundamental components technological innovation and actual people. The technology is lightning itself peer-to-peer trustless fast and economical Bitcoin transactions. Sure. There are some user experience wrinkles to be ironed out but there is no doubt that Bitcoin is going to replace Fiat and lightning is how The other half of the equation though is adoption actual people have to start using the technology and accept it as their default means of exchange as Lightning replaces Fiat. The network will have to own board new users by the million and then by the billion, how can we manage own boarding at that scale? simple with lightning service providers What is an LSP when thinking about the challenge of onboarding it's important to remember that many incoming users aren't coming from Bitcoin. They'll be onboarding directly from Fiat and they'll need someone to guide them onto the network. Even experienced technically sophisticated users could use some help to avoid non obvious obstacles. For example, even a user willing and able to open her own channels manually will have to spend money first. IE move local balances outward to create inbound capacity before she can receive money, which is the opposite of what most users would prefer. In choosing a hub for her initial connection, how can she tell which ones are stable and well connected even if she uses autopilot to help find active hubs opening Channels with the hub's it recommends is still a bet on the Hub stability. She's betting her setup fees that she won't have to repeat the process. Should one of these hubs decide to close the channel unilaterally. Those are the kinds of problems LSPs solve they provide users with a stable connection to the lightning Network simplified Channel management and liquidity while ISP is a well-known term. You probably never heard about LSP before the similarities between the lightning Network and the internet in many respects are striking. It's no accident that the term lightning service provider resembles internet service. Provider they're similar in that they both connect users to a wider network, but different networks require different functions from their service providers. So let's talk about those functions. What does in LSP actually do? Lightning is a network of nodes connected by payment channels those payment channels comes with a number of features that both make the network secure and trustless as well as potentially cumbersome for new users. These features would include capacity limits inbound and outbound liquidity routing through payment channels from sender to receiver the need to sync with the Bitcoin maenette Etc. LSPs basically constitute counterparties on users payment channels that perform Channel management functions automatically in order to ensure that they work consistently and effortlessly from a user's perspective. For example, one opening channels and LSPs. First function is to open a Channel with a new users node and confirm its active status. Since the channel is initiated in created by the LSP. The user doesn't need to fund the channel herself from an existing long chain wallet, which greatly simplifies the onboarding process LSP scan on board Fiat users directly leapfrogging on chain technology and flattening the learning curve. two incoming capacity when a user manually opens a channel, she cannot receive any payments until she spins some of the funds used to open the channel in an LSP model where the LSP funds the channel from the outset users benefit from immediate inbound capacity while users will still have to deposit funds into the channel before they can spend anything the LSPs inbound capacity will let them receive funds immediately via Once the channel is active. 3 routing LSPs act as hubs providing users with a secure stable connection to a node that itself is well connected with payment channels to further hubs and ensuring that users can always route payments where they please LSPs connectivity is their capital. For rebalancing hubs need open Channels with each other to Route payments. They also have local and remote balances and if those balances fall out of balance, then they will no longer be able to forward users payments a busy Hub whose channels are all skewed toward. The remote balances won't be able to forward payments and a hub receiving High volumes of incoming transfers. Run out of Channel capacity to accept anymore. Another vital LSP function then is rebalancing the distribution of funds in the local and remote balances among themselves to ensure the liquidity of their payment channels and the mobility of users funds. five reliability in order to avoid downtime users can either open a range of different channels with different nodes in different locations and on different terms, or they can connect to just one or a few hubs who must provide reliable service to survive the first strategy requires lots of management and lots of funds to be committed in different places. Whereas the latter relies on the Network's built-in incentive structure to solve the problem. Beyond up time there is also the more fundamental need to have open channels available at all. When push comes to shove either node on a payment channel can force close it with little or no Warning by providing users with rock-solid SLA s or service level agreements LSPs can reassure users that they will be able to pay and get paid when they want without having to manage multiple channels. It's and commit funds all over the network and the SLA is reassure users that channel closures will only happen in predictable well-defined circumstances. LSPs without centralization At first glance there's a tension between Bitcoins decentralized peer-to-peer trustless nature and a network with hubs is in there. If users connect to the network over a single Hub and payments or simply routed from one Hub to another it might sound like centralization. That's not exactly true because it's so easy to mitigate. Why should anyone connect to a single LSP? Why shouldn't users have the option to Of several LSPs available in their apps and be able to choose whichever offers the lowest transaction fees if we keep the barriers to entry low and there's a lively Market of LSPs users can hop between them to suit their own purposes. They need not rely on any single LSP and the network will remain decentralized. Although LSPs don't require trust ideally users will run their own full nodes and essentially be their own LSP for the less Advanced users public LSPs provide them with the choice. They need to remain Sovereign and autonomous. LSPs help to onboard users and Breeze helps to own board LSPs despite the fact that it's a great business model open to virtually everyone. There are not many lsb's currently out there Breeze is one very good example, when users install the breeze app, we provide them with 1 million satoshi's of incoming capacity in channels. The breeze Hub opens for them. Automatically. Our Hub is well connected to it actively rebalances funds on its payment channels to ensure. liquidity with over 70 other hubs at the moment Breeze users automatically opt into the breeze LSP in the near future though will be giving our users the option to select a different LSP within the app. They'll still be able to use the breeze app with all of its advantages but they'll be able to select the LSP or LSPs of their choice including their own nodes choice is good for users competition is good. For the market decentralization is good for the network and users are good for Breeze everybody wins, but we're not the only LSB currently operating. There are a few others on the market providing users with funded channels and with more or less Channel and balance management lightning to me Ln big.com and bit refills Thor for example, they're all doing their part. Part two on board users in to expand the lightning economy. We are actively proving the viability of the LSP model and we welcome you to join us. If you operate your own LSP or are interested in getting one started but need users contact us. We'd love to include you as an option in our Android and iPhone apps. Let's onboard the world to the lightning economy. And that wraps up our excellent little article on Lightning service providers by Roy Seinfeld and I really want to talk about this one because it's going to lead into our guides take episode for tomorrow. So I'll let me go get something to drink real quick. We'll hit our sponsor and I'll be back. We'll sit down and get into this one. For anyone who has a podcast anchor cannot be beaten particularly for trying to get off the ground their entire platform is free. This includes unlimited hosting both in audio that you upload and how much your listeners download. I have uploaded an incredible library of audio now and I've never paid anchor a dime. In fact, they connect me with other sponsors and have run an ad consistently on my show. So they've paid For exposure to my audience that's really hard to beat even if we ignore that I can record directly in the app or my browser. I don't need any other software. If I don't want it I can edit at sound effects clips and they automatically publish to all of the top podcasting platforms. I never had to do a thing. So if you were thinking of starting a show or already have a podcast, there's no better platform out there check out anchor by downloading the app or go to Anchor dot f FM today All right, so I want to actually start this off with a little bit of pushback and I want to do it with just kind of a little dose of reality here and there was a quote towards the beginning which I don't really take a lot of challenge to I don't take a lot of issue with but I do I take little bit of issue with the finality of the statement and that is quote. There is no doubt that Bitcoin is going to replace Fiat and lightning. How now this is essentially what I believe but I want to say that I don't think there is any doubt that a decentralized money a decentralized sound money will replace Fiat and that lightning and Bitcoin are the two most powerful candidates for that in terms of a cryptocurrency. Nothing touches Bitcoin in any sense of what I think of as the value and the purpose of a decentralized what we get out of that system and the validation that we are able to maintain I don't think anything comes close to bitcoin and if Bitcoin survives against a incredibly well funded and malicious State actor if the coin as a system makes it through that or if it survives a long enough to deal with the potential quantum computer problem, you know, whatever it is like cryptography does. Break, and even though there is massive incentive to ensure the system remains. I think that a a fundamental change in on the on the time span of a couple of decades. I don't think it's out of the question that we have to completely change the signature or the cryptographic scheme of Bitcoin. I think it would probably still be called Bitcoin, but I just want to I want to put a little dose. Of like okay that potential remains regardless of how unlikely that is I think it's still there. And then I also want to add that lightning isn't the only second layer solution. I think it is. It has absolutely the most potential for what is it out there and I have been using it and I don't intend to stop using it even with the handful of payment failures that I had that I have had. In fact, I've actually had Couple more recently. I wrote like a really long thread on Twitter about all this stuff that I've done with lightning and it has been incredibly reliable, even though some of the payments did take a while. They would like sit there and spin for a bit. One of them looked like it had failed like it just went back to the screen and then I had to check all my casa node, and it had actually gone through but I didn't know for like 20 minutes or something. So like the experience wasn't perfect like it was not Lately seamless and it wasn't like super fast and there were a couple of payments failed somewhere in that mix but I've been able to do a pretty substantial amount of transactions and exchanges on the lightning Network that just did not rely on chain payments and that has been pretty amazing to see it get to that point because I was trying to use it for a while and not having any luck and now it's a little different. I'm Actually using it using it like I'm actually moving funds around I'm using it not just to Tinker with but just because I can actually use it for some stuff. I can buy some gift cards. I can use fold. I can go out and get stuff in the world and I can use lightning and that's pretty awesome. And that's come a pretty long way in a pretty short amount of time again, however, it isn't the only option and we could come up with something completely better maybe side chains end up being a quicker and easier model that mean there's no telling there's no telling there's a ton of work happening on the lightning Network and I think it's got an unbelievable Head Start, but it's simply not the only thing out there and you know, there are plenty of competing protocols in the peer-to-peer Market in the early days of the internet and all sorts of stuff and you don't really know where it's going to And so we have a best guess and I think that statement is pretty much correct if you take out no doubt that Bitcoin is going to replace Fiat and lightning as hell. I think that's pretty much correct, but I just wanted to and you know, don't at me. Okay. I know I'm ridiculous and speaking absolutes pretty often and I've talked about how lightning is going to change everything and how Bitcoin was gonna bring down the state. I'm aware of that. This is just my moment to take a step back and And give a little dose of rational push back on this now if you want to go back and get really bullish. Listen to the Tales from the Crypt episode with Jack Mallards. Does I just listened to it so I know I'm like way over excited right now. That's why I'm trying to I'm trying to come back trying to come back down a little bit and talk about this this new LSP thing in a reasonable tone. So I'll tell you Breeze is really reason I've had so much luck with lightning lately. I have been relying on them as my LSP and I have made their wallet aside from kind of piggybacking off of my casa as my main like refunding and or refilling and withdrawing wallet. So I use it for I use Casa for payments. Much less often than I use Breeze, but it's mostly because of Breeze acting as an LSP that I have been able to use lightning all the time. And because it's a neutrino based node, so I don't sinking takes like hardly any time at all and I'm just starting to now that Olympus has just been announced from Z, Jack Mallards. Again, if you haven't listened to the Tales from the Crypt episode you got to this. This is going to be I'm so excited about this and so I'm trying to get back into these app while it because I haven't used it in a while. I'm going to use the crap out of the Olympus wallet or the the debit card straight to lightning service and I am excited to see how that plays out. So let's dig into the lightning service providers concept because I love this concept and it aligns everything so Flee to create an open market for this sort of service and I just think it's going to be I think the stage is being set for such a fascinating Market development like route that I find it hard. Like I still I think right now the path of least resistance to all of this is this sort of thing is an LSP essentially a services. Is platform a service layer? Well, yeah, then application application and service layer for the Bitcoin protocol stack. That's really what we're this what we're talking about here. And I think this is just going to be massive. So that's the biggest problem in lightning that that's the that's the one like always the point of failure is how do you find stable? Well connected nodes. I remember when there was an explosion of Channels and nodes early on in the network. Everybody's just opening Channels with anybody that like will open like this this available open Channels with I did it a lot too and in no time because people were just playing around with a network and seeing what it was like half of my channels would be offline and I'd be like crap. I didn't even get to do anything with any of these channels and now I'm having to check all these channels that are offline and you know half of my liquidity is like locked up and I can't do anything with it like very early on. Um when everybody was in the testing, let me just Boot something up and play around with it and shut it down phase. It was really kind of a headache and that's like the worst thing for your position in the lightning network. If you're not connected to Reliable nodes you you're not and you're not well connected to the network at all. You know, it's like that. It's like it doesn't matter how fast the internet itself is if you've got a dial-up connection If you've got a dial up internet connection being shared with six of your neighbors over, you know, ham radio signals. Well, then, you know, your internet experience is going to be crap doesn't matter if the whole rest of the network is fiber and that's really what we're talking about. When we're talking about finding that first group of nodes to connect to is what's your connection into the network? And that is the that's the prime target. For initial services in the lightning network is you liquidity is the service of the lightning Network liquidity for payments to make secure payments and that's to think that we're taking something that I mean, that's what visa provides a platform and liquidity for payments and they'd provide the infrastructure. Like this is all we're talking about this being built into the back end of a decentralized open source protocol. Is really an astounding breakthrough on this is not something to be scoffed at even if it doesn't even in this stage where it's not working reliably and I'm really I'm so excited about where Breeze has taken this and the fact that Roy the thank you by the way to Roy and even said anything about it for Roy writing this article because I was going to passing through in my head like it's just kind of imagining like, okay. What is it? Exactly is the service of the LSB and I like that laid out the you know, five main Services than LSP is actually providing but I would actually add a sixth one for aggregating and we'll get to that in just a minute because I think there's going to be I think there's going to be another layer to what lightning service providers offer that they're in a prime spot to offer. They could not they're basically getting the real estate that I think would put them in the top position for exactly this sort of service now, we'll get to that in just a second. But first I just want to get into the overall job of the LSP and I'm just going to hit all of them really fast. We've got opening channels, which if you've ever downloaded the breeze wallet breezes a great example to just have so you can kind of see how how this plays out. So if you haven't downloaded this bre easy, if you haven't downloaded it yet just go check it out. They open a channel to you automatically and you'll just wait for confirmation essentially and that happens immediately when you set up the wallet, so it really does only take a you know, handful of minutes like 10 20 minutes before you can actually use it as a lightning wallet, but that's the first thing the nila's P does is it will open a channel to you? And the second job is to give incoming capacity so that you can actually receive payments which you know for somebody actually getting into lightning for the first time may actually be wanting to do that. They may there's the onboarding is not really in the Bitcoin Community. The onboarding is in the noob Community the people who don't have Bitcoin in the been trying to figure out how to get it how to use it and what to do with it. So it's really important that these Services actually do provide incoming capacity. They have liquidity for exactly that service so somebody can receive $10 $50 in Bitcoin immediately. And that's the other thing about Olympus Jack Mallory hours news app service or whatever where you can just pay with a debit or credit card. I think maybe it's just a debit card. I don't remember. I'm still digging into all the details. I'm so excited about that, but I haven't had the time yet to go. Into it, but where you can buy Bitcoin with debit card and then have it immediately Fund in your zap wallet and that is incredibly incredibly exciting. I talk about getting through the user interface issue and the user experience with having to get them. I mean think about the comparison for where we've come like there are a number of apps now where the first iteration the first experience of anything. Thing with Bitcoin will come from a lightning transaction like so the normal setup now if you're even if you're like a Bitcoin Noob, it's like, okay. Well first sign up on this exchange and give them all your information and take a photo ID with your selfie or let's take a selfie with your photo ID, you know, give them all this crap sign up kyc AML blah blah blah connect your bank account transfer money into it by some Bitcoin now you got It up your own wallet, you know, you should probably get a hardware wallet. Here's the 24 word seed blah blah blah get up of Bitcoin account. This is your this is your address Now open up a lightning wallet. Now, this is the same Bitcoin address blah blah blah. I mean the list goes on and on. I mean the the track that I did from Bitcoin to a lightning wallet and then set up a channel don't use autopilot because autopilot is not very good. Here's directions on channel management. I mean the headache is in Shane like the complaint from be cashiers and big blockers or whatever that lightning is confusing and complicated is absolutely true in this stage of development and using it the way that I've had to use it. No nor me was ever going to do that. And I knew that that was that was absolutely clear. It was just so stupid in my opinion to assume that that wasn't going to change that. They were just know there's no way around this. It's like their issue with it was just a complete and utter lack of imagination. nation and the inability to actually or really the it's not even the inability. It was the purposeful ignorance on even trying to figure out if there was an easy and obvious solution to these problems that things could actually get sorted out. It was that they desperately just wanted it not to work. So why spend two minutes thinking up a solution and now obviously we have these things these things are landing LSPs are being developed and I love this concept. I think this is going to be a major part of lightning and I think this How we build this out in markets of professional liquidity providers that are available anywhere in the world and we'll get to why this is not a centralization problem. In fact, I think it's the exact opposite. I think it's a beautifully Global open decentralized market and I'm really excited about that. But before we get there so routing that's the next thing that the LSP does they act as hubs and they are the ones that Make sure routes are available liquidity is available. And that's also part of Channel balancing. The next thing is rebalancing that Capital that is available in like breeze talks about having 70 different channels available to other hubs and other nodes and other businesses and stuff on the lightning Network. So they have a plethora of routing options to reach each destination and Course the Simplicity of getting to any other Breeze user is just as obviously mean you're only going through one hop and and they keep because they've already offered up liquidity on your side. It's really easy to to bridge that Gap, you know, like everybody can already receive payments mean we did it at the Raleigh Bitcoin meet up. We had a noob come in and listen to the show and participate a little bit and she was kind of like I'm interested in Bitcoin, but I haven't really gone there yet. We got her to download the breeze wallet after a little bit while we were explaining kind of what was happening with the confirmation in this sinking which the sink doesn't take very long if anybody's listen to the previous episodes about neutrino. It's a very lightweight sinking. So even when I haven't opened up my Breeze wallet for a week and only it really only takes like 20 seconds to get caught up. Because the neutrino uses block filters as opposed to obviously downloading the full Block Chain on your phone and the black filters are literally I think it's like 20 Meg's or something in total right now and I can't remember off the top of my head, but it's something like that and so the LSPs are providing all of these available routes and I just have the one connection to Breeze. Well, unless of course, I'm I set up my custom to my own note. Something like that, but that's actually we talked about in the bit refill episode about trampoline payments where if your device is having a hard time keeping the entire index of the lightning Network that you can actually reach out and requests for your LSP. This gives up privacy, by the way. So this would this would be the LSP wouldn't let you or you be letting the LSP know who you were sending the payment to whereas in the other instance where you're just in a normal payment really Breeze has no idea of even if I'm paying another Breeze user on if I'm just doing it through a basic lightning Channel. I'm Excuse me a basic lightning invoice. I'm not using trampoline payments or anything out of the ordinary Breeze really doesn't know that I'm paying them. The only way they would know that if it is if that person had no other channel, but at the same time they could also have a private channel so they don't really know they can just kind of guess that's another beautiful thing. Lightning is it's everything is private. Even your LSP doesn't really know what's going on. But the trampoline payments what that's about is to all flowed to your LSP or to some other computer that may have a lot more computational power and obviously with what they talked about in this article that you can pick your own node. Well, I can use my computer at home which might be a beast as opposed to my cell phone to Route payments for me so I can can just joking just offload the difficult computational work and the need for a lots of ram once in my home desktop computer. And that's another that's another amazing thing about this technology is that you can just it's just open like I can connect and do I have free rein and free control over my keys over who I connect to and the and there is this this Market need for liquidity routes. No payments for Reliable connections into the lightning Network and there is just this perfect slot for LS piece to fit right in and that's the last part of the last piece of the puzzle is reliability at the end of this you need a reliable connection into the lightning Network and you know Hardware on some some random person's desktop computer is often not reliable. It's not always on. Sometimes they have to shut down the computer. I just had to I've had to break up this audio into three different days. We roll two different days worth of recording with a gap in between because I've completely had to redo my operating system. I'm going to from where I started this episode. I'm actually on a completely different operating system completely different partition on my computer so I know exactly what it's like to have unreliable computers or unreliable hardware and that's an incredibly important part of the Bitcoin Network or excuse me. The lightning network is you need to Have they need to be online? So again a perfect case for a service and even more so a service whose node is always by default charging a fee for the route and right now obviously it's small the default is like one Satoshi if I'm not mistaken, but there are a number of nodes out there. Y'all's dot-org lightning power users then actually charge. Real fees because they want to be able to bring in a little bit of capital from their reliable channels that allow them to rebalance and create more liquidity and splice in and splice out and Loop in transactions and all this stuff without losing money on the fees. They want to get back the fees and it's just as important to establish fees on the lightning Network as it is to establish fees on the Bitcoin Network. It can't be free liquidity isn't free Capital Access is not free. There has to be a fee for it. And the more actual the more actual cost not necessarily a big cost. But real cost in the sense that maybe it'd cost a tenth of a cent or a hundredth of a cent even really enough that it makes a difference when you do it a million times. That's how you protect the market from spam. That's how you protect a no. Open network from flooding the network from screwing up liquidity as an attack Vector. Like if somebody can rebalance and incite me think about it a a competing business or a competing LSP could connect to their competition connect connect to a different LSP that they wanted to screw up. And essentially if they weren't charging if that second LSP was not charging rates or fees. To the liquidity that's available where you know, maybe if you're routing 20 cent, you don't charge a fee at all because that's not really important. But if you're routing $100 through who you need to, you know, you need to pay me ten Cent for this transaction because that's going to fill out some sort of a channel. And I'm going to have to rebalance or you know do a circular transaction to get my liquidity back even but this this malicious LSP that we're talking about in this instance could specifically go through and try to unbalance all of the other LSPs funds and if they that other LSP didn't charge a proper fee to fix and rebalance. Well, then they got they let themselves get screwed. They open themselves to an attack vector. But anyway, that's just a couple of reasons why I think it's important and we start establishing fees in the lightning Network albeit small, but at least enough to kind of protect against a DDOS attack or something like that, but let's get to the centralization quote-unquote issue because this is a and I talked about this in my answering the lightning thud article. I don't know is a while ago. But in fact, I think it was like episode 50 or something like that. So it was over a year ago. Now if I'm not mistaken and I did talk about this but actually wanted to hit it again and he brings it up. It's like, okay. Well, you know now we're just connecting two hubs and hubs are connecting to each other isn't this centralized isn't this a problem can't they censor or try to track your payments and stuff like that aren't all the problems with using an ASP and in fact just like that using the ISP example is that we would consider I think most people would consider isps heavily centralized and at the same time as being centralized or because they are centralized their single point of failure on spying what you're doing on the internet controlling what you're doing on the internet like they the Whole Net Neutrality thing was over throttling. Traffic to Netflix specifically mean what if they you know, what if the LSP charges a very specific, you know charges much higher fee to routes and Netflix, you know, like when you've got some some situation if we're talking about an analogous situation, I don't think I think that's ridiculous. But let's go with the analogy here first and then so they're going to spy they can censor or control exactly what your traffic is to certain areas. And and of course in the Context of sintering they can just shut down your ability to transact in technically an LSP. If you're connected to them could do the very last one. They could shut down your ability to transact but they literally couldn't do anything else. None of the other stuff is possible. And the only thing they can do with the last one takes one Bitcoin transaction to as a solution like the solution is very quick and any LSP that did this would be absolutely complete. Committing suicide as a service provider in this network. Why because isps get away with it because you don't have any other options. So in my complete complete honesty and really trying to see if lightning has some sort of a centralization issue is this there's just no meaningful concern here whatsoever. And I think the best way to express that or to explain that is by comparing it to what if isps worked like the In network would it be an improvement or would it be basically the same thing and the biggest and most obvious the biggest and most obvious reason why it's not centralized is that there is no Geographic limitation whatsoever. It is a truly Global open frictionless Financial Marketplace. There is no limit like when I'm if I have a problem with Time Warner or Spectrum or whoever it is. Is in my area. I've got them and like AT&T. That's it. Those are my only two options as an ISP my quote unquote only options for an LSP is any LSP in the entire world? So why if a more reliable doesn't sensor LSP is in South Korea would I use one that is geographically near me that was censoring which again is stupid. It doesn't make any sense because they would have to know where the final destination of every payment is. They have to change their own implementation of the protocol. It really doesn't make any sense. But even though I think it's ridiculous, let's assume that this is true that it makes any sense whatsoever for an LSP to attempt to censor transactions. Why would I use that LSP? Why would I ever and choose one that specifically when what was my what was my limitation? Why would I be forced to use one? Is there a reason I Can't download a different piece of software. Is there reason I can't open a Channel with anyone else imagine right now, if instead of being stuck with your two or three ISP options, you could sign up for literally any internet service on the planet you could you could use some, you know, Mobile Cellular 300 megabit Connection in Hong Kong some broadband connection in Estonia the Google satellite internet service fiber line in Kapoor and you could do this. You could just have any of these internet options available to you without going anywhere and no matter who you connected to or where they were your connection is entirely encrypted and private. There's no there's no like I don't need a VPN here. No one can spy on what's happening outside of our direct channels and it is onion routed by default. It is as soon as you send a payment that isn't directly To the LSP or analogously is soon as you go to a website that isn't it isn't the actual iasb's website like as soon as I'm not going straight to my ISP Spectrum or whoever it is and I'm going somewhere else on the Internet. It's it's invisible to them. You don't need a VPN or some exit node that you have to worry about when the entire internet is tour. That is what lightning is the entire. I work is onion routed. It's a giant Financial Tor Network and there's not even a clear net alternative to it. That's the other big thing is there's no there's no like I'm trying to get privacy but I got to do something fancy. There's no clear net lightning Network. It's just all tort or is the only internet out there again, if you even if you're using your local geographically limited is p not really a big concern if everything you're doing is overt or do you don't really have that much to worry about and yes, they can see that. Okay, you went to the next server because they bounce as how the onion routing works. It only lets them see the very next location and then the next layers the layers further out from there. They can't see and even if the next one is the destination that next server they don't know that they cannot know that for sure. They don't know if there are other private connections. They don't know just in LA. They don't know if there are other private channels they have and it looks the same whether there is nine more hops in the channel or if there's nothing at all if that's the Final Destination and then back to the ISP example. Imagine. There's no restriction whatsoever in who that internet provider is again anywhere in the world and no one can trap you in a contract. That's the thing. He talks about these service level agreements with LSPs. It's a Brilliant way to create consumer confidence in signing up for this node that we promised 99 point, you know nine percent uptime for the month. So your payments will always get routed and for any payment under $100 or something like that. There will always be a route available anything over that, you know, we have options like it's great to actually have a service level agreement so that you can rely on these nodes. I mean if again If I'm just a random note on the network and you just want to connect to me, I could completely change my setup if like I don't have to come to you like I'm just connecting randomly into the network. There's no reason for me to have to like email you and be like by the way. My server is going to go down for a minute. Like I'm just going to change my computer. So we don't have an agreement between us and I think it makes sense that there would be for something you're relying on for routing payments for moving payments through its great, but understand that agreement cannot Trap you in a contract. It can't trap you into using that LSP. It's just for confidence in saying you can trust me you can you can rely on me for your connection into the lightning Network. That's all that agreement is. They have zero way to keep to prevent you from closing your Channel at any time that you want. So it's like having an Internet contract that literally just this minute I could just be like I'm so sick of this internet company and I just hit. Exit I just hit closed Channel and it's done. I'd no longer have their internet service. And again, I can connect to any internet service in the world after that. The user always retains the ability to just peace out with their money did if there was any reason to distrust or be concerned with the LSP. That was chosen. I'm out and in that in the market itself. Every Market barrier every Market barriers. Your competition is basically gone. There's no there. No National borders. There's no regulatory barriers. There's no pricing barriers. There's no language barrier. It's all just part of the protocol. There's no Geographic barriers none. They're just gone. Imagine if you could just have that with isps. And best of all because the user never loses the ability to loses their final say it perfectly aligns the incentives the LSP has no substantial. No relevant control whatsoever other than delaying the user. That is the most bad that they can essentially do. So a bad LSP that does not serve the user is discarded in no time at all. The Barrier to destroying or the barrier to bad economic behavior being punished is so low that it makes no sense for a bad actor to ever arise for any length of time in that it's literally like an internet where there are no contracts and the time it takes to end a relationship with an ISP is about a 10-minute confirmation. So if that's the new world of isps of Internet service provision of providing that service with this be a negative or a positive development for the decentralization of the internet because that's essentially the those are the ins and outs of a quote-unquote lightning service provider in the context of is it centralized know? No, and I think any assumption that it is or would be for any reason is really kind of dumb but mostly due to a complete and utter lack of imagination, which I said before is probably on purpose. It's that willful ignorance where it's just I don't want to think about it and I don't want to imagine it as being better because it's really comfortable for me to hate it and think it's stupid and never going to work and what's funny is we can actually take this like once Further like there's a new curveball in the Brilliance of the LSP that they actually talk about. Is that even if one LSP can cause these problems well, guess what? You can connect to five LSPs at once and you can choose whichever one you want to use at any particular time. So if one fails to route a payment, we'll just use a different one and you don't even have to that's a situation where you can close the contract and just not even think about it because you already connected to Multiple, so it's like having the you know, five companies that can give you a customer support and you just hang up on the one that's being shitty or not answering your question. So it's and you just have you know, four people on the phone at all times trying to help you sort out your issue and so not only is it not centralized in just the general sense but there's not even any reason why you would only have to pick one you could have as many as you want you could have just like breeze how they have 70 channels. Open with all these different areas and stuff. You could just as easily have 70 yourself. So it doesn't matter. There's there is no centralization in any meaningful sense whatsoever and regardless of if there is centralization in like a number of lightning service providers that do a really good job. It will be specifically and only because they do a really good job and like that's like saying that the market is not decentralized because one company is really successful. That is not what that means at all a market can still have open competition and one person may or one company may still succeed above and beyond all the others and take a lot of the market dominance centralization is about the structure of the market. Now if there's like billions of dollars worth of regulatory overhead to start a company in order to compete with them. Okay? Yeah, that's incredibly centralized because how many people you can you know count on your hand. Many people who have billions of dollars to just throw around like that and also have an interest in that sort of company or something. So that's centralization in Market choice not centralization in Market architecture. It is no less a decentralized network or system just because one company or one node or when server something, you know, whatever is particularly successful in comparison to others. But that's what leads to what I think would be number six on this list is aggregating and I also think because we've got a situation where with LSPs and we're going to get you know, service level agreements possibly and we're going to develop an entire liquidity and routing like Channel management Market because it's very possible that we can see that sort of development. I think it will make a lot of sense to have a decentralized reputation system. And I think that's actually a prime target for an additional lightning service because and that's that's one of the coolest things about that is because lightning is becoming its own Market is becoming its own ecosystem with pricing and liquidity and capital availability all this stuff because of that. It's all of the individual lightning Services all the needs for lightning. Like needing routing and channel management are the best first case for services own lightning. So if there's not a basic very quick and easy protocol level solution or like protocol autopilot, like client solution for the routing problem or for the liquidity problem. Well, make it a service make it a market. That's great. Now we're going to compete for who can do it the best and who can do it. It the most reliably and I think another part of another piece of that puzzle with node reliability and stuff that may not be served on the protocol level. Why not make an application why not make it a decentralized database of reputation systems of a of a reputation system use the public key as the identifier and arguably that's maybe this is what we kind of have coming with Casa and Microsoft's partnership. I'm heard anything else about that, but I think that's going to be a very big important part of this is being able to see a node history. And actually I got a good friend in the crypto economy crew chat. I don't think I want to it's not public yet. I don't believe so, but he's making a website or making a project very around that sort of concept and it looks kind of neat and fun. So this is going to be another prime target for a market with within lightning that will help to build out the infrastructure and the robustness of the network. It makes sense to make sure that your node has been reliable in the past has liquidity available etcetera Etc to connect to and it will flush out all of the crappy nodes. It will get rid of all the routes that are constantly online and offline it will it develop it will develop a heart to the network that incredibly circular well-connected and robust for everyone to tap into and that's just really exciting to see this, you know, intricate spider web being built with all of the and like the opportunity for all of these additional markets to basically round all the corners cross all the t's dot all the eyes to fill in all the little gaps where the lightning protocol works, but it needs Some sort of explicit direction to be reliable to have liquidity available to have channels managed properly to get fees figured out to get a reputation system up and running to get a proper encrypted messaging service up and running to get ways to aggregate the opening and closing of channels as again why I think LSPs will be prime targets for that. If you've got a lot of people connecting to them sending opening and closing channels. Things need to get rebalanced or looping in and looping out for anybody who doesn't know the loop thing that I've mentioned a couple of times already is when you send a non chain transaction to a sort of insured controlled swap with just a random. No doubt on the network that's locked to your key. So essentially you can't have there's there's no risk. You don't have to trust anybody so it doesn't really matter who you use it either works or it doesn't you never have to really worried about losing money, but it's called an atomic swap or a submarine Swap. And so the loop in and loop out is when you send a known chain transaction in order to get balance only lightning Channel or the reverse you Loop out by sending lightning forward and then getting a known chain transaction back. So those sorts of things will be happening a lot when we're talking about routing and channel management and LSPs are the perfect place to for a Fee aggregate a lot of transactions to save money especially for those initial, you know, maybe refilling your channel balance or something but aggregating them from all sort all of their users all at once if you got a million users every 10 minutes might see, you know, 200 channels get looped in or looped out at once. So what why not for the money that you've already got in channels connected to them charge a 10 cent fee per And then take a huge cost and or a data savings by aggregating all of these at once and then dropping out, you know, all of the return to refilled balances through their lightning Network again another simple service that I think there are a prime target to actually fulfill a the market need for since we're going to talk about lightning tomorrow. Probably. I don't know now that I'm on a completely different set. And I'm gonna have to figure out how to get a new editing situation going on here. I am back on I was an audio my main software but there are still a couple of pieces of the puzzle that on my new setup here. I have not sorted out yet. So I still don't even have internet on this computer. So I'm having to I'm gonna have to transfer stuff over and probably upload this with my iPad, but we'll go ahead and just close this episode here. Hopefully, hopefully we'll have a guys. Episode tomorrow that was the original plan, but I'm already two days behind on figuring out all this stuff because of this, you know computer taking a dump on me here. So I thank you too Roy Seinfeld for letting me read this article and for writing the article and always to for the breeze wallet. I've been relying on them a lot and no I'm not getting paid for this. I'm not No, I talked about them have talked about them a lot on the show. This is not an advertisement. I just really love the wallet. So I talked about it. But I do encourage you to download that and check out the article and he just actually dropped another one that I have not gotten to but it is an extension and talking about the markets of LSPs, which is so exciting because that's really what I've been brainstorming about four weeks now and been stuck on I'm thinking about so we might be jumping into that one soon to I don't know. I haven't read it yet. But definitely check that out. I'll try to have that link in the show notes as well as the original article that I read today link to Roy's at Twitter page and all that stuff so you can follow drop some Applause on medium and all that wonderful stuff. This is the crypto economy and this will conclude conclude this will Claude out our quick read and commentary of introducing lightning service providers. Thank you guys so much for listening. We are back in Action. Sorry for the little break there and we I will catch you guys tomorrow. If you would like to become a patron to the show check out patreon.com slash the crypto economy. I got some really fun announcements coming in the next day or two. I think it's I think so. Something is finally done and I want to double check and go back through it, but I'll have something to announce. So don't forget to follow me on Twitter at the crypto economy fun stuff on the way. Thank you guys so much for listening. I'm so happy to get to explore and build and play in this absolutely fascinating new world with all of you. And I love that you are taking this ride with me. So thank you again. I am guys suam this is the Economy. I will catch you all tomorrow with another episode and until then take it easy guys.
With another great piece from the Breez-Tech CEO we read and explore the fascinating concept of the Lightning Service Providers. What is their role? How will the market develop? Doesn't this mean Lightning is centralized? All this and so much more in a great piece from Roy Sheinfeld. Don't forget to drop applause on the original article, catch our interview with the author, & check out the awesome Breez Lightning Wallet at the links below: • Introducing Lightning Service Providers (medium article) https://medium.com/breez-technology/introducing-lightning-service-providers-fe9fb1665d5f • CryptoChat with Roy Sheinfeld https://anchor.fm/thecryptoconomy/episodes/CryptoChat_016---Lightning-is-a-Breez-with-Roy-Sheinfeld-e4j7i3 • Breez Lightning Service https://breez.technology • Other Articles by Roy on the show https://anchor.fm/thecryptoconomy/episodes/CryptoQuikRead_259---Lightning-at-the-End-of-the-Tunnel-Roy-Sheinfeld-e4a35k • To explore the other amazing tech coming to Lightning https://anchor.fm/thecryptoconomy/episodes/CryptoQuikRead_248---Bitrefills-Hottest-Lightning-Tech-of-2019-e426ph  And because it was that good. 