 we explained what the Lightning Network is, the micropayment commerce it makes possible, and how wallets are bringing down the costs for people to use the network. 

 set the stage, the Network's progress gives line of sight on a future in which Average Joe may choose to buy his cup of coffee with Sats instead of Benjamins.

Sats-Benjamins Analysis: Buying a cup of coffee

As exciting as bitcoin-purchased coffee is, it's a drop in Lightning's ocean of potential.

What could possibly be better than coffee? 

There's only one thing: The Internet. And I'm not talking about our current 

watch a cat video and be bombarded with cat food ads

 internet. I'm talking about the internet we were promised: John Perry Barlow's Internet.

"Governments of the Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather."

A Declaration of the Independence of Cyberspace

A Toolkit for Heretical Web3 Developers (for dummies)

The concept of a new Lightning-based internet can get pretty heavy so I'm going to lean on people way smarter than me to guide you through it. Specifically, 

Lightning 2020: A Toolkit for Heretical Web3 Developers

I'm sure there's other great Lightning-as-the-new-internet content out there but Ryan's piece has been my map of this exciting new world. I can’t improve it. The best I can do is make it understandable to a broader audience.

Ryan identifies that along with easy microtransactions, the Lightning Network adds two new levels of programmability.

Persistent, self-sovereign identity and authentication, which are made possible by macaroons, Lightning Service Authentication Tokens (LSATs), and generic digital bearer asset tokens

Arbitrary data payloads, which are made possible by Type-Length-Values (TLVs), Keysend, and HORNET

We're going to break these down in the simplest terms and best memes possible.

Lightning payments are sent from the sender's node to the recipient's node, through a network of routing nodes. 

Think of a node as a computer running Lightning software. These computers can connect to form channels that Lightning payments flow through.

 visual of nodes A through Q, the channels between the nodes, and how a payment could flow from node A to node Q.

Like Bitcoin wallets, Lightning nodes are identified by encrypted keys which look like a random sequence of numbers. Unlike Bitcoin wallets, nodes run software that stays online and are meant to send and receive all of a user’s Lightning transactions. Nodes used by user friendly Lightning wallets are an exception that we'll get into.

These characteristics make it possible for node data to be collected and displayed while the node's owner remains anonymous (we call that 

 list Lightning nodes along with their activity (how old they are, their channels, etc.). It's kind of like a social network of Lightning nodes where each node has a profile page that shows the node's influence in the Lightning Network. 

The point is nodes can act as digital identities, kinda like website usernames, except better in a couple ways.

: This dead horse is worth beating. Personal information is not tied to nodes. This means if you login to a website with your node instead of an email address, the site can't target you with creepy personalized ads or lose your personal info to hackers.

: Remember, nodes are designed to send, receive, and route payments so a node used as a login can easily transact bitcoin with a website. And since Lightning is designed for programmable micropayments, this ability goes beyond anything we've seen in traditional commerce. Imagine paying for the exact amount of time you spend watching a cat video instead of commiting to a monthly cat video subscription. This also opens the door to the entirely new possibility of websites being able to send money directly to a user’s ID👀

If you're like me, you're probably wondering what using a node as a digital identity looks like. 

, gives us a glimpse of this future potential reality.

Y'alls is a message board that runs on Lightning. Users pay sats (Bitcoin's smallest unit) to publish an article and they have the option to charge readers sats for article access. The setup isn't seamless in the current state but with recent 

 developments, users will soon be able to receive these payments directly to their node by submitting their Lightning node public key with their article.

Pseudonymous logins that can send and receive payments are cool but we're still in the shallow end of the Lightning Web3 pool. Put on your water wings because we're going to dive into the other digital things that can be sent among Lightning nodes.

Authentication made possible by macaroons, Lightning Service Authentication Tokens (LSATs), and generic digital bearer asset tokens

What in the hell is this supposed to mean?

Think of it as different types of digital receipts that prove you paid for a website's service with the click of a button. It's kinda like the "Sign in with Google" button that lets you magically enter a website.

Except digital Lightning receipts (aka LSATs) magically let you enter websites you've previously sent a Lightning payment to (even if it's just a few sats). And unlike big bro Google, LSATs don't track you around the internet trying to guess the next useless thing you can be manipulated into buying.

LSATs can be sent to other nodes just like payments, meaning you can transfer your right to access a website to a friend or an unknown internet stranger that pays you for the privilege. It's like sharing your Netflix password except LEGIT.

LSAT potential isn't limited to a proof of payment. 

 shakes the imagination with his exploration of how LSATs could be used as a form of 

. A COVID testing center could issue test results in LSAT form which could prove to retailers, TSA, etc. that the patient tested negative for COVID at a certain time and date without the need of unsettling surveillance.

So we've figured out that digital receipts can be transferred between Lightning nodes, along with payments. At this point, a woke observer would realize that we're just sending data between nodes. A bespoke observer would realize that theoretically, any type of data can be sent between nodes. 

Arbitrary data payloads, made possible by Type-Length-Values (TLVs), Keysend, and HORNET

Lightning transactions are designed to attach data to payments. Even with a standard Lightning wallet, a memo can be attached to payment. Here's me being tough with myself through a 1 sat memo-attached invoice from my 

See what I did there? I just sent a private message from one app to another for 3 sats (1 sat payment + 2 sats in fees). At current prices, I could send 30 more for the cost of a penny! And when I say "private", I don't mean in the way Zuck says his chat apps are private. 

By design, Lightning network messages are routed through nodes that don't have visibility into the sender or recipient nodes and there is no backdoor to any powers that be. I think it's fair to assume that many people would be happy to spare a few sats for that type of peace of mind.

So, how do we make most use of Lightning's private memo sending capabilities?

 gives users the benefit of Lightning's private messages and payments within the comforts of a design that feels like it has nothing to do with Bitcoin.

Lightning chat apps like Juggernaught are really ambitious. Attracting a large number of users away from entrenched centralized chat apps is a David vs. Goliath effort. But if they pull it off, huge improvements in digital communication privacy can be made for generations to come.

And there's no reason why data on Lightning has to stop with text communication. As 

Potentially you could have a streaming movie that compensates everyone that participates in the streaming movie.

, a Lightning chat app with video conferencing. Unlike your regular not-so-private-maybe-Chinese-spyware Zoom calls, Sphinx video is built for privacy. Viewers can even tip the broadcaster sats in appreciation for their viewing pleasure. Check Sphinx's not so subtle flex in this 

 expands the conceptual limits of data on Lightning even further. He explains that a network of Lightning nodes could create a better alternative to 

, the popular encrypted anonynouminity network that allows users to access the internet and software without exposing their identity. 

Like the Lightning Network, Tor also routes data among a network of nodes. But the Lightning Network is better designed in a few ways:

: It's harder for unfriendly outsiders to surviel the routes data takes through Lightning nodes

: Lightning nodes get paid to route data which means there's a reason for people to run private-data-routing-nodes other than the goodness of their cypherpunk heart. More incentivized nodes mean a lower percentage of nodes being run by unfriendly outsiders wishing to tamper with the network.

And there you have it. The potential for a network of Lightning nodes that act as pseudonymous digital identities and send private payments and data among each other. 

I think John Perry Barlow would be pleased.

How do we get from today's early stage of Lightning adoption to an independent Internet? 

Lightning protocol and app developers need to keep the upgrade and product engines pumping to onboard more users onto the Lightning train. There's one specific piece of infrastructure that all of the internet freedom goodness covered in this post depends on: users running Lightning nodes.

User friendly Lightning wallets have made it possible for non-node runners to use Lightning. This is great for Lightning adoption but these users cannot use nodes as a digital identification nor participate in any of the cool functionality that comes with it. There are several approaches in the works to lower the hurdle to become a node-running Lightning user.

: New hardware/software setups are consistently making it easier for people to run their own Lightning node. 

 is one such product that makes node-running easy enough for newbs like us.

: There's no reason why a Lightning node can't run on your mobile device, except practicality of course. The 

 is an early attempt to allow users to run their own Bitcoin node. While it 

. is working on a solution for its non-node running users to get full node benefits. 

 is a node that intermediates payments between Carol and Bob so that Carol and Bob don't have to keep their mobile wallet nodes online.

 is a new company developing a service that makes it easy to create a remote, always-on Lightning node without sacrificing control. They will allow individuals and business to create their own Lightning node in minutes. If it delivers, it could change the Lightning game.

 gives users the option to sign up for Lightning node access when they onboard onto the app. Chat apps have struggled to make money since the dawn of Web2. Sphinx may have just solved this ***without sacrificing user privacy***

If and when these services make it dead simple for Average Joe to access Lightning node capabilities, expect a new category of Lightning apps that expand the capabilities to follow. 

This virtuous cycle will not only create new ways to spend and earn money on the internet but also has potential to offer an internet that puts the privacy and preferences of users first.

And Scarce City isn't just going to sit back, post memes, and watch this future unfold. We've got wild ideas to become a Lightning-based marketplace.

Bitcoin as Money: The Internet We Were Promised

Bitcoin haters have never been hard to find. Here's what some of the best and brightest had to say about the big ฿ over the past few months:

The first wave of cryptoassets, of which Bitcoin is the best known, have so far failed to provide a reliable and attractive means of payment or store of value.

Cryptocurrencies basically have no value. They don't produce anything...It doesn't reproduce, it doesn't deliver, it can't mail you a check, and can't do anything.

I can trade bananas easier as a commodity than I can trade bitcoin. And I can still eat that banana before it goes bad, and get all my potassium for my workouts!

Haters gonna hate but they're not wrong. For everyday purchases, using Bitcoin is more trouble than it's worth. Why go through the pain of buying a coffee with bitcoin when Benjamins are so damn good for buying coffee?

They're missing something though. Bitcoin has unique properties that create new ways to use money. In a small number of cases, for a small number of people, those new ways of using money are worth the pain of using Bitcoin.

Small # of Cases for a Small # of People: Sats > Benjamins

The point is those small number of cases for those small number of people are growing. Here are the number of active Bitcoin addresses over time from 

. The increase shows that either more people are using Bitcoin, using it in more ways, or both.

Bitcoin is open-source software. That's geek-speak meaning anyone can help build it and it's made to be built into other software. What happens as more work goes into Bitcoin and Bitcoin related software? It gets easier to use and there are more ways to use it.

The world is also changing. Let's be real. It's getting weird out there. As it gets weirder, Bitcoin's unique properties could become more useful to more people.

Play these two trends out and eventually even the biggest haters will have to give the big ฿ their respect. Even if we're still using Benjamins to buy coffee!

To make this case, in this post I'll first give a rundown of what Bitcoin is, the unique properties that make it useful, and the costs of using it. If you've already been around the Bitcoin block, feel free to skim or 

In the following posts, I'll dive into the different ways Bitcoin is used and how it could be used in the future, starting with traditional commerce:

: The history of Bitcoin commerce epic fails and false hopes.

Coffee? Where we're going we don't need...coffee

 The new commerce possibilities enabled by Lightning Network micropayments.

): Lightning's potential to create the private and secure internet we were promised.

We'll then work our way into other ways Bitcoin is used as money.

Thousands have tried to answer the question but mostly in a way that doesn't make sense to normal people. Here's a straightforward approach from 

"At its core Bitcoin is a transparent ledger without a central authority."

Also, have you noticed that sometimes ฿ is capitalized other times lowercase? It's not because Bitcoiners are sloppy. 

 refers to the transparent ledger (or network/software) while 

 refers to the unit of money that is accounted for in the transparent ledger. In other words, the coins.

If these statements make your head spin, take no shame in checking out this real talk from Nik Custodio: 

For our purpose of understanding what makes Bitcoin useful, we'll focus on the properties that emerge from 

. The grouping and labeling of these properties are another topic of hot debate in the Bitcoin world (spoiler alert: Bitcoin is one big hot debate). I've adopted my list from 

in the internet. The imaginary lines that humans draw on maps and the rules that people have to follow on different sides of those lines don't matter to Bitcoin. It costs the same and takes the same amount of time to send bitcoin across the room as it does halfway around the world.

: Only 21 million bitcoins will ever exist. The amount of bitcoin created with each block decreases every 4 years in an event called "the halving". Today, 12.5 bitcoins are created with each block. After the next halving in mid-May 2020, that number will half to 6.25 bitcoins.

 and a visual of the creation of those 21 million bitcoins (we've moved a bit further along it since) from Phillip Nunn.

: Bitcoin's smallest unit of transactable value is called a Satoshi or a 

. A single Bitcoin is equal to 100 million sats. As I'm writing this, there are 142 sats in 1 US penny. The point is Bitcoin can be transacted in tiny amounts of money.

: The Bitcoin blockchain is maintained by independent computers (

), known as miners and nodes that add and verify new batches of transactions, called blocks. Once a transaction is added to a block, it can only be reversed if a large percentage of those computers agree to remove the transaction's block and every block that has been mined since. This means it is really expensive to reverse transactions (Jameson Lopp gets into the nuance here if you're interested: 

Bitcoin: The Trust Anchor in a Sea of Blockchains

). For the real world, this means you can't call your Bitcoin exchange to ask them to reverse a transaction like you would call your bank to reverse a credit card payment.

: Unlike the traditional banking system, you don't need an account to interact with Bitcoin. Anyone can run Bitcoin's software and transact bitcoin without anyone's permission. This also means that no one can stop you from using Bitcoin. In other words, Bitcoin is censorship resistant.

: Once you have bitcoin in a wallet, you just need your private key to spend it. There are a bunch of hardware and software solutions to securely store and spend bitcoin. But a Bitcoin wallet can also be accessed by simply memorizing 12 words in a certain order. Once stored on your phone, computer, USB stick, or in your head, you can take your bitcoin and access it anywhere.

: Because Bitcoin is digital, it can be programmed into software. Similar to how Uber sends a car to pick you up with the press of a button, software developers can program bitcoin transactions into their apps in any way they dream up.

: Bitcoins are stored in wallets that are associated with a seemingly random sequence of characters called an address. Anyone can create a wallet and receive bitcoin to their wallet address without giving up their identity. The simplest way to understand this is to generate a 

: All Bitcoin transaction and address activity is publicly displayed on the blockchain. Anyone can search and view blockchain activity in a 

. This transparency makes it easy to track and audit the movement of bitcoins among addresses.

As we'll see in our examples, Bitcoin is most useful when more of these unique properties are used.

The cost of using Bitcoin is all of the extra effort, cost, and risk that come with using it instead of Benjamins.

No need to be a Bitcoin OG to call those out. In a nutshell, if you want to use Bitcoin in any meaningful way you have to:

Find an exchange or person to buy bitcoin from

Send them fiat currency and receive bitcoin from them without getting ripped off or giving up sensitive personal information

Store your bitcoin without losing it or having it stolen from you while being exposed to extreme price fluctuations

Find someone who will accept it as a form of payment for some special something that you want to buy

Send them bitcoin in exchange for that special something at the risk of getting ripped off (again) and triggering a capital gains event

Pay a wildly fluctuating fee to complete the transaction

Wait 10 minutes to 2 hours, constantly refreshing screens, hoping you didn't input the wrong address

Potentially live with purchase regret if bitcoin's price increases 10x after you spend it.

These costs can be summed up in the following categories:

: The risk of losing your money from getting hacked, losing your private keys, sending bitcoin to the wrong address, bitcoin's price tanking, transaction fees, and capital gains tax.

: The time and frustration involved with researching the right hardware and software solutions to use, dealing with terrible user experiences, and waiting for transactions to complete.

: The challenge of finding people and companies to buy bitcoin from and sell bitcoin to.

: The risk of missing out on sick gains if bitcoin's price increases after you spend it.

Given the collosal hassle, it's a miracle that anyone uses Bitcoin at all. They must really love those special somethings. We'll explore the special somethings that are worth the hassle (as well as those that are not) in the following posts.

Bitcoin as Money: A Sats-Benjamins Analysis

, we claimed that Bitcoin is chosen as money when the benefits of using it outweigh the costs. In other words, when it's better to use Sats over Benjamins.

, we identified Bitcoin's unique properties that benefit traditional commerce, like buying a cup of coffee.

And we noted that plug and play merchant services lowered the cost of buying coffee, and other everyday type things, with bitcoin.

But we discovered that most people still only want to buy everyday type things with bitcoin when the price is high and they're ready to cash in on sick gains anyway. During other times, most people prefer to spend Benjamins over Sats.

So, what's it going to take to flip the Sats-Benjamin scale?

Now's the fun part when we look past the bore of the present and into the excitement of the future of the everchanging Bitcoin Universe.

itcoin is a network of computers that follow a set of rules to maintain a transparent ledger. But the Bitcoin Universe is much bigger. It includes all of the software and hardware that runs on top of Bitcoin. 

 visualizes a snapshot of the Bitcoin Universe in his piece, 

A Look at Innovation in Bitcoin’s Technology Stack

. As jaw dropping as it is, Lucas calls out that it wasn't complete at the time of writing and like any universe, it's never exactly the same at two different points in time.

There are some enchanting celestial bodies in this Universe. We hope to explore many over time. But for now, we're going to focus on the galaxy that means the most for Bitcoin commerce: The Lightning Network.

 on how it works but in simple terms, it's a network of person to person payment channels. Bitcoin can be sent within channels 

. Lightning only touches the Bitcoin blockchain when participants open and close these channels.

Lightning's unique properties are a clutch complement to Bitcoin, generally and 

property. A single bitcoin could always technically be divided into 100 million sats but the fees associated with sat-sized transactions were cost prohibitive.

The Lightning Sats-Benjamins Analysis Today

How do the benefits of using Bitcoin for traditional commerce stack up with the addition of Lightning?

Well, most people aren't worried about their 

 payments are a welcomed addition compared to waiting 10 minutes and paying an unpredictable, potentially meaningful fee for a regular Bitcoin transaction.

And how does the addition of Lightning impact the costs of using Bitcoin for traditional commerce? 

Remember that sweet plug and play software that made it easy for merchants to accept bitcoin with minimal 

 progress we made by a bunch of consumers owning bitcoin?

Well, if you want to take advantage of Lightning's 

 payments, you have to moonwalk that progress back. Bitcoin merchant and wallet software does not automatically work with Lightning.

Without Lightning software in the hands of merchants and customers, the costs of using Bitcoin + Lightning actually increase.

What would Bitcoin commerce look like if consumers and merchants were suddenly Lightning-ready?

, a heroic effort to integrate Lightning into local economies of El Salvador, gives us a glimpse. It all started when Michael Peterson received a gracious Bitcoin donation to give the power of the big ₿ to the town of El Zonte.

With 10 plus years of local community experience under his belt, Michael immediately saw the potential. Gang extortion and a lack of banking services in the country make fiat bad for business and increase the value of Bitcoin’s 

 property. Also, by rewarding community work with bitcoin, the program helps focus youth attention on stacking sats rather than a life of crime.

 costs of using Bitcoin the hard way -- by putting a Lightning wallet the hands of individuals and teaching them how to use it. As a result, they've managed to create a circular economy for food, household items, and even haircuts, all on the Lightning Network.

Michael tells me that over 500 people in El Zonte, Punta Mango, and El Espino have Lightning wallets. About 3 bitcoins are distributed throughout the community each month and an estimated 3 to 6 bitcoins are circulating the local economies at any given time.

With Bitcoin Beach running point, Lightning has a chance of becoming the go-to payment method in these towns and beyond.

To learn more about how Bitcoin Beach accomplished this feat and their future ambitions, check out 

On The Coast Of El Salvador, Bitcoin Is Becoming The Standard

What about the rest of us who don't have a Michael Peterson in our town? Fortunately, some companies are working to bring Lightning's traditional commerce benefits to the masses.

 make it easy to buy gift cards with bitcoin which is cool for a couple reasons. 

: Gift cards are not tied to customer personal info and no personal info is needed to spend bitcoin (remember, 

: Bitrefill, Fold, and their merchant partners avoid credit card fees and chargebacks with bitcoin purchased gift cards (

, yo!). Being the good stewards they are, they throw some of those savings back to customers.

It turns out, these companies save even more when customers buy gift cards with Lightning. So, what do the savvy Bitrefill and Fold peeps do to reward Lightning payments? They throw even more savings back to customers.

Lightning transactions are simply less expensive for Bitrefill and for our customers that use Bitcoin frequently.

First, people have to want to use it. Fortunately, there's a primordial soup of mega-smart people grinding to discover new Lightning-enabled opportunities.

Whereas Bitcoin development is criticized for moving slowly in the interest of security, the relatively low consequences of breaking things on Lightning gives developers the freedom to be a bit, dare I say...

. This means we should expect wild experimentation on Lightning. Given the network's unique properties, it's likely only a matter of time before the primordial soup gives birth to life.

Micropayments have been well incubated as a concept and may be ready for life on Lightning. Micropayment possibilities have permeated the dreams of hungry minds for years and Lightning's 

transactions make them practical for the first time. Once it's basically free to transact in tiny amounts of money, entirely new types of things can be bought and sold.

Way back in May 2018 when Lightning was starting to get real, 

 launched to the enthusiastic arms of the community. The concept is simple -- pay sats to draw on a shared canvas -- but it showed the potential of creating social experience with Lightning microtransactions. And who isn't nostalgic for writing "for a good time call (201) 374-0642" on the bathroom stall?

 is going after this opportunity with their marketplace for selling 

 through Lightning. What's being sold for tiny amounts of money on Paid.co?

They tell me Lightning's low friction attracts some creators to sell small physical items, like stickers, that wouldn't be worth the cost of business on traditional ecommerce marketplaces.

The concept gets really interesting when considering the new types of commerce that are enabled by Lightning micropayments. According to Paid.co, the selling of digital files like printable templates and art works are most popular but also varies to less expected services, like unlocking of PDF and ZIP files. 

 leans into the marketplace for services idea. Stack sats for anything from downloading an app to opening a channel with someone's node. The services center around the Lightning community for now but you can imagine the possibilities if and when Lightning is adopted by a broader audience.

 is a playground of Lightning consumer applications. Several share the previously impractical theme of paying for engagement, such as social likes, survey responses, and answers to questions. In the spirit of due diligence, I'm testing their services to boost the Tweet ♡  for this blog post. 

What? You thought 50+ people really liked this post? Nah.

You can also pay or get paid for one-off access to wifi hotspots and paywalled digital content. And of course, what would a Lightning playground be without playing games for sats? Lightning video gaming is a category with enough activity to warrant its own post. Stay tuned for that one, folks. 

 users pay sats to display pixels of digital artwork. It's a new way for artists to make money from their art and turn otherwise static work into a group effort that evolves over time. By throwing down a few hundred sats, I unlock pixels for the community, pay the artist directly for their work, and feel a sense of artistic contribution.

: How many Sparkshot sats do I have to spend to add "artist" to my Tinder profile? 

For example, now that I've been hustling on this 

 piece for the past couple weeks, I'm incentivized to shill you on it so I can see what other Bitcoin memes lay below that dark surface.

These are just a few of the apps out there attracting users to Lightning through microtransactions. In many ways they look like toys but according to a16z's Chris Dixon, that's often 

While many eyes are on microtransactions, we haven't even begun to consider the less obvious Lightning-enabled consumer apps. And many major dudes will tell you, the biggest breakthroughs often come where you least expect them.

Once people want to use Lightning, they need software to store and transact their sats. Strong efforts are in motion to create the gold-standard of Lightning wallets.

Lightning's technical setup poses new challenges to wallet builders. Some wallets require users to 

which are sadly, complete deal-breakers for average Joe. Others offer easier experiences at the sacrifice of taking control of users' bitcoin (shout out to 

After testing a few wallets, I can only vouch for one hitting the sweet spot of these tradeoffs.

Bitcoin as Money: Coffee? Where we're going we don't need...coffee.

And that Bitcoin's benefits depend on the unique properties that are used. Bitcoin is most useful when more of its unique properties are used.