Scarce City

Bitcoin as Money: The Internet We Were Promised

by Chris Tramount

In the previous post 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.

Two years after Satoshis.Place 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

Damn right it's provocative.

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, Ryan Gentry and his post: 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.

  1. Persistent, self-sovereign identity and authentication, which are made possible by macaroons, Lightning Service Authentication Tokens (LSATs), and generic digital bearer asset tokens
  2. 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.

Persistent, self-sovereign identity

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

What the hell is a node?

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

Here's a Wikipedia 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 pseudonymous). Public directories like 1ML 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.

Cue the robot selfies.

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

  • Pseudonymous: 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.
  • Easy Payments: 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. Y'alls, a pet project of Lightning developer, Alex Bosworth, 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 Key Send and LNURL 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. Buck Perley shakes the imagination with his exploration of how LSATs could be used as a form of Non-Orwellian Contact Tracing. 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 Breez wallet and to my BlueWallet.

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?

It turns out, there's an app for that. Juggernaut 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 Alex Bosworth noted on TFTC:

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

Which brings us to Sphinx, 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 video.

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

  • More private: It's harder for unfriendly outsiders to surviel the routes data takes through Lightning nodes
  • More decentralized: 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.

The Path to the Promised Land

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.

  • Easy Node Setups: New hardware/software setups are consistently making it easier for people to run their own Lightning node. myNode is one such product that makes node-running easy enough for newbs like us.
  • Mobile Nodes: There's no reason why a Lightning node can't run on your mobile device, except practicality of course. The HTC Exodus1 is an early attempt to allow users to run their own Bitcoin node. While it seems to leave a lot to be desired, it gives hope for future iterations.
  • Lightning Rod: Our favorite Lightning wallet, Breez. is working on a solution for its non-node running users to get full node benefits. Lightning rod 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.
  • Nodes as a Service: Voltage 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.
  • The Node Bundle: Sphinx 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.

Signup for our newsletter and
 follow us on Twitter to watch us get reckless.

Join our mailing list to receive new product drop and blog updates

Thank you and welcome to our mailing list!

Follow Us

Scarce City © 2020