Audible for the best Bitcoin content out there. This is a crypto Connie quick read. What is up guys? Welcome back to the crypto economy with guys Swan. We have got a quick read for you to start off the week and we're just going to go ahead and jump right into this one because a I've got a whole lot of other work to do but be this one kind of speaks for itself. It's another one by Nick Bhatia and it is titled the lightning Network why I quit The bond market for Bitcoin and we'll chat a little bit about it at the end. But let's go ahead and jump in. I'm a markets Junkie A markets. Junkie is somebody who is physically dependent on watching asset prices tick up and down constantly trying to analyze the cause and effect of every movement across the globe. Naturally when I first understood the true nature of the Bitcoin protocol I became obsessed with its price as well rabbit holes. I began my dive down the Bitcoin Rabbit Hole in 2016. I was trading Us treasuries and other interest rate products for an Institutional asset manager my first big trading gig I had unprecedented access to some of the most Brilliant Minds on Wall Street for the first time in my life. So it's safe to say I began my dive down the banking Rabbit Hole in 2016 as well the craziest thing about going down the Bitcoin and and banking rabbit holes at the same time is the difference in scale. It's unimaginable at the time Bitcoin had less than 20 billion dollars in total value is a relatively small player in the bond market was turning over 20 billion dollars in treasuries in just a few months one seemed way too small and the other way too large. I knew I had to learn to start thinking in trillions if I was to understand the scale. all of the Global Financial system The numbers game I will never forget the moment. I conquered the concept of trillions my fellow Trader and close friend played a daily numbers game with us on the trading desk this time. The question was quote how much money settled by the federal reserve's wire system last year. I thought for a minute did some mental math and guest 3/4 of a quadrillion the answer sure enough was 767 Trillion dollars. I was off by a gargantuan 17 trillion, but somehow that amount was both less than 3% margin of error and a thousand times. The size of Bitcoin Bitcoin was simply too small at less than 20 billion dollars in the dollar system had enough zeros to make one's head spin the two would reconcile over the coming decade or two I had decided and should be spending my time on the Bitcoin side. I started thinking about life after the trading desk knowing it would probably involve Bitcoin Bitcoin is digital gold. I watched treasuries equities gold oil currencies and tried to understand how they all work together. I saw Bitcoin, assuming the role of gold as sound money roll in a digital future the supply schedule and difficulty adjustment Game Theory hooked me in I started digging and immediately found the conversation focusing on an update called segue it which would allow for something called the lightning Network. The first time I used Bitcoin, I tracked the transaction status on a block Explorer right away. I became intimately aware of the settlement process of Bitcoin. It was thrilling. Of course the first block took over half an hour and my heart was quite unnecessarily panicking basically the finality of settlement after a couple blocks felt incredibly secure, but the hour that it took was completely impractical for any sort of daily routine transaction. It was clear to me that Bitcoin was digital gold and instead of taking weeks on ships across oceans to settle it takes about an hour incredibly powerful empowering and in fact revolutionary, but not a global quote currency. Lightning Network makes Bitcoin a Global Currency. Lightning Network changed Bitcoin forever with instant settlement in the lightning Network settlement is free from the time burden of block confirmations Lightnings architecture consists of instantly settling Financial agreements secured by a call option or a Justice transaction lightning Network massively expands the velocity of Bitcoin increases Bitcoins capacity for transactions by orders of magnitude and most importantly the game. a new wave of Bitcoin innovation the very concept of streaming money has software developers buzzing with energy and I'm Blown Away by some of the use cases. They're coming up with Bitcoins Supply schedule initially hooked me but lightning was the force that was pulling me in I decided to dedicate my intellectual capacity to Bitcoins lightning Network because a store of value Asset exhibiting medium of exchange currency speed and scale is unprecedented in human history. three and worth Pursuit I took to jump now. I'm along for the ride. after years of trading bonds and leading a dual life of rate straighter and Bitcoin fanatic it was time to make the transition full-time to bitcoin the community graciously welcomed me and my idea of the lightning Network reference rate in 2018, but it wasn't until earlier this year that I met the team from open node in downtown Los Angeles only a few blocks away from where I traded treasuries, the chemistry was instant because the vision was precisely aligned Full conviction in lightning Network and its role in bringing Bitcoin to the world. My message to them was clear. I wanted to help on board the world to the proverbial LNP /b P or lightning Network protocol Bitcoin protocol stack Allah the ubiquitous TCP / IP transmission control protocol Internet Protocol stack upon which the world's internet infrastructure is built to my delight. They wanted me along for the ride. Lightning is just beginning. The pace of lightning Innovation since its debut early last year has been staggering. I laugh when I hear Skeptics say that lightning network capacity and growth has stalled because of arbitrary public Channel metrics lightning network is not a public Ledger like Bitcoin. It's actually quite the private Ledger making so-called chain analysis irrelevant within lightning any attempts to analyze the growth of lightning network from the outside are futile. Additionally the narrative I hear in the financial media about Bitcoin as merely digital gold is frankly a little tired these people either haven't technically understood the lightning Network or aren't aware of its existence Bitcoin now works at light speed something that a precious and very heavy metal could never do open node is carrying the torch at open note. We don't have to guess whether Bitcoin is a store of value or a medium of exchange. We know it's both and we know that both functions are essential to Bitcoins build the vast majority of transactions. We process is via the lightning network, but the vast majority of the value we process is on chain. We also don't have to guess whether people want to use a hosted solution. When I asked our CEO and co-founder afternoon from on his biggest surprise since starting open note. He said quote. I'm surprised by how quickly we've gained trust from the community even amongst some of the hardcore bitcoiners Who Shall Not Be Named in quote note that our blog is up and running we're excited about our next Endeavor open node. Research our first report. To be released in quarter one of 2020 will tackle the world of Bitcoin as a transactional currency Global e-commerce will surpass four trillion dollars by next year and our mission is to determine exactly how much of that week in power at open node. The task at hand is challenging to say the least but the challenge motivates us to debunk one of Bitcoins greatest misconceptions that it is only a store of value and Not a medium of exchange. It's both and we're excited to show you why. All right quick break. Let's hit our sponsor and we'll come back in and talk a little bit about this piece by Nick Bhatia. 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 published 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 again, this is by Nick Bhatia. We have read a ton of great stuff by Nick on the show and I love his series that he mentions actually and there's a link to it in this episode. But I'll I'll drop all the links in the show notes obviously to a bunch of the other great pieces. We've covered by him about his about the lightning Network reference rate the time value of Bitcoin. I think Bitcoin second layer is the title of one of them. I found them all but he's we've got so many pieces by him that are just wonderful to read on the show and I highly highly recommend it. But one thing that this thing illustrates that and most people like really forget or I think maybe dismiss is just how small Bitcoin is in the scale of things and how unbelievable its potential remains in solving the problems of an industry of a Repeating industry essentially that is literally hundreds of trillions of dollars in size and that that system has fundamental had systemic issues that Bitcoin is a solution to and is one of the most fascinating and profound solutions to those sorts of problems as we've ever seen. It's the first time that we've been been able to take any sort of quantifiable measurement as to the degree of something Security in the Text of a financial or a trusted relationship trust is not is inherently non-quantifiable. So the fact that we have that in the form of irreversibility of a transaction in the Bitcoin Network and we have a dynamic to actually reach out and attempt to measure that via the proof of work that it would take to undo any of those transactions is unbelievably powerful and in a groundbreaking at the most understated in the most understated way and and lightning network is an entire new ecosystem on top of this and I think he gets to it in this piece, but I think it's I genuinely think of it as a will be as diverse and complex as a new web. We typically associate lightning network with just scaling payments and scaling Bitcoin over. All just in transactions and I don't really think that's the best way I think that's a bit of an elementary way to frame it because this is a and that's one thing that Nick body is so great at with the piece that we recently read the triumvirate of liquidity and then his original series and the lightning Network reference right talking about how it's actually a non-custodial a counterpart a non counterparty risk financial asset. Obviously it does have Risks, but it is your own management and holding risk of an asset that can actually pay a return to pay a set interest rate is essentially not a like I loaned it out interest rate, but a rate of return based on the the need and use of liquidity within the lightning network is that you can provide Capital up to a network with you know bridges in channels between major. Like let's say those say there's ever a situation where there are few channels between you know specific like, you know, there's a bit of a bifurcation. There's a split in the lightning Network where there's kind of a bottleneck for any reason whatsoever. Well suddenly, I have the capacity to insert myself and add new channels to bridge the gap and make the lightning Network infrastructure hold Again by offering up liquidity as a bridge between these two locations in the lightning Network And that's a very powerful idea that I am doing that without counterparty risk. I don't have to really be concerned about what anybody else is doing. Anybody else does as long as I keep proper backups, keep a hold of keep proper Security on my hardware and my keys. Well, then my ownership of those coins are under nobody else's control that it is it is wholly my responsibility as to whether or not I'm safe. And that and that I can actually make a return that I'm offering up that liquidity somebody else without actually giving it to them is such a fascinating idea. It is unique in human history as a financial asset. I mean imagine if you could even if it was only point one or point zero one percent it's a non counterparty risk percentage return to somewhat you you're not giving over custodial control. You're not losing the fact that you are still the sole owner of a the mount need specifically agreed and signed upon amount of coins and that's just it's just truly truly unique and that's one of those things that he gets into and he talks about it in this piece really is just that it is it is something entirely novel in and of itself and its it really is if when you like kind of wrap your head around it and really begin to see the possibilities of the lightning Network, even if this early stage where it may even only be like a 10x or 20x as far as like normal payments go but the possibilities are literally endless. I think we will see lightning Network settling vast sums of money as well as incredibly tiny amounts of money. It will settle, you know, a certain contractual agreements. I think we'll have tokens based on Lightning Network that are pegged to bitcoin like gift Bitcoin Bitcoin denominated gift cards and stocks and stuff like that. I think there's an entire infrastructure here to just build an entire array of new tools without a lot of using a a hardcore like a a hardened set of Bitcoin scripts. We're using social good way to put it to to establish a new network that does not have those restrictions where you're still you're still flocking it to secure Bitcoin, but you also have the kind of Freedom with the HT Elsie's to lock it to all sorts of exterior arrangements with just a private and public key combination. So you don't have to be internal to the lightning Network script does not have to be executable on the Bitcoin change. So you don't have any of those limitations with what kind of a contract you can write you can just like just like we talked about With jacquimo Zuko's setup is you can make quote-unquote colored coins. You can make tokens and external things on the lightning Network itself without having to need that functionality on bitcoin and because of that I think this is there are no limits with what we can do with lightning. It's just a matter of time and it's a matter of development and as a matter of incremental improvements both to the payments scaling situation as well as the being and reliability of the lightning Network infrastructure, which I think is a really key part right now at our current stage is specialization and management within the lightning Network where we see nodes establishing what their role is and we see the growing difference between how service level nodes and infrastructure level nodes behave. And then user nodes and same with you know, service level and network infrastructure level channels as well as user channels. And and I think we'll continue to see this specialized and diverge into a number of different roles on the network and growing use of network specific services that help to Route Around some of the early limitations and essentially keep the the infrastructure of the lightning Network this virtual infrastructure of channels and nodes available and consistent across time. So it's genuinely fascinating to watch all of this stuff play out. I'm particularly when you you want it when it does follow or seem to happen and develop in ways that you would expect it to and then even even more so when it contradicts you and kind of pulls a Black Swan Does something that you never quite saw coming or the it just kind of surprised you out of left field? Those are even more exciting and there is so much to come. There's so much happening the lightning Network right now. I'm in the process of trying to gather as many resources as I can on some of this stuff because it's just such a fascinating tool and protocol in and of itself that Bitcoin makes possible. So yeah that Was just a really cool piece by Nick Bhatia and congratulations on him joining the open note team. By the way, I love open node have used them on and off with with my website and a number of different things whenever I need to easy way to throw something up. I'm typically jumping on open node, and probably my favorite services to that or just BTC pay server open node, and then pay wall dot link that I've used and I go back and Worth between all three of those and I love them. So I highly recommend checking out open note as well. If you have not they they provide lightning if you like have like an online store or WordPress website anything like that and you want to accept payments with Bitcoin and lightning they will basically manage all the liquidity and everything for you and accept payments enlightening and Bitcoin of course, but uh, but yeah, it's definitely currently one to check out as well as Nick Bhatia have I lived links to all of this stuff in the show notes so you can check it out. So don't forget to go there and I'll also have it posted on the crypto Kana me.com. I've been a little bit lacks about getting these things posted on the website, but I think I have finally found a trick to make this much much easier for myself and I am excited to simplify that process because it has been really tedious up to now but with that That'll do it. We will close this episode out here. Don't forget to follow. Well both open node and Nick Bhatia Nick Bhatia. The altar of this piece on Twitter. I will have both of their tags in the in the post on Twitter. And of course follow me at the crypto Kana me and subscribe to the Crypt economy with guy Swan the guy who has read more about Bitcoin than anybody else, you know, so that you don't miss all the amazing. Tent coming out incessantly in the Bitcoin space. There is just a flood of awesome stuff articles just like this on everything that you could possibly imagine. We've got another couple of really cool research papers that I've got going on in the background and I'm working on finishing up a another full audio book. This would have been a little bit kind of rushing through some of these episodes recently and because I've got a big huge piece to drop very soon. And we are going to have knut Swan homes sovereignty through mathematics available on auto audible very very soon. So keep a track keep an ear out for all of that stuff the little bit coin book audio book read by yours truly is available on Audible right now. And of course, it's a wonderful wonderful book to give out as a gift as an introduction to bitcoin and its implications or its impact on society. That's the little bit coin book and Lastly if you are planning on coming to the Bitcoin maximalist conference that is bit block. Boom this coming year in August. I am going to be speaking there. I'm going to have my time on stage and I have got a lot of great ideas about what I'm going to talk about. So if you would like to join me, come hang out, let's drink. Let's hang out with a bunch of bitcoiners for a weekend and have an awesome time. You can do that or 30. Percent off with the discount code CC and that is bit block boom.com get your tickets and we'll hang out our guys. Thank you guys so much for joining me. I love you all. I hope you stick with me on this insane ride. We are taking into the future and I'll catch you next time on the crypto economy. All right guys, take it easy.
Another of the many great pieces from Nik Bhatia getting into the impact and scope of the system that the Lightning Network could become. Bitcoin is neither just a store of value, nor just a medium of exchange, it's both. The LNP/BP protocol stack is taking us into the future, hear all about it in today's read from Nik Bhatia, now part the OpenNode team, titled "The Lightning Network: Why I Quit the Bond Market for Bitcoin." Link to Nik's Twitter and the original article on his Medium page: https://twitter.com/timevalueofbtc https://medium.com/@timevalueofbtc/the-lightning-network-why-i-quit-the-bond-market-for-bitcoin-12693120039f  The other great pieces by Nik we have covered on the show: The Triumvirate of Liquidity https://anchor.fm/thecryptoconomy/episodes/CryptoQuikRead_317---The-Triumvirate-of-Liquidity-Nik-Bhatia-e8t41e Bitcoin is a Human Right https://anchor.fm/thecryptoconomy/episodes/CryptoQuikRead_269---Bitcoin-is-a-Human-Right-Nik-Bhatia-e4jtga The Business of Bitcoin Cold Storage https://anchor.fm/thecryptoconomy/episodes/CryptoQuikRead_182---The-Business-of-Bitcoin-Cold-Storage-Nik-Bhatia-e2ndoj Our 3rd ever Interview with Nik Bhatia all about the future of Capital Markets https://anchor.fm/thecryptoconomy/episodes/CryptoChat_003---Nik-Bhatia-on-The-Future-of-Bitcoin-Financial-Markets-e2ndqv The Bitcoin Second Layer https://cryptoconomy.podbean.com/e/cryptoquikread_132-the-bitcoin-second-layer/LNRR The Time Value of Bitcoin  https://anchor.fm/thecryptoconomy/episodes/CryptoQuikRead_143---The-Time-Value-of-Bitcoin-e2ndq2 The Bitcoin Risk Spectrum https://cryptoconomy.podbean.com/e/cryptoquikread_109-the-bitcoin-risk-spectrum/  Grab your copy of the Little Bitcoin Book or listen to the audiobook read by me! Get tickets for BitBlockBoom2020 at the link below - offer code CC for 30% off! BitBlockBoom.com  ---   This episode is sponsored by  · Anchor: The easiest way to make a podcast. 