Good Morning Everyone,
One of the common concerns that you hear from people that do not understand bitcoin and the lightning network - or even know about lightning typically, is that it’s too slow, and that it cannot process enough transactions and that’s why the newer shinier xyz shitcoin is more pretty and exciting, and thus going to change the world.
When in actual fact, what you tend to find, is that those individuals are just crippled by the effects of the fiat mind virus, and are a product of the fiat system. They are in most cases suffering from a severe case of CDHTPD - Catastrophic and debilitating high time-preference disease.
Obviously I just made that name up, and while it is not real in the sense that it’s not a medically recognized disease, the difference between a high time preference and a low time preference is a societal-altering difference. They are polar opposites, and the point of arrival depending on your time preference is a key determent on the way you behave throughout your life as well as how and what you choose to focus on when allocating your time. It determines how you perceive the meaning of value, and how you express value fundamentally and the way in which you orient yourself in the world.
For clarity, someone with a high time preference is someone that is extremely sensitive (read: fragile) to time (time = volatility), and is very short sighted and focussed primarily on the shorter-term time horizon. High time Preference is concave.
A low time preference would be the opposite. Someone that is focussed on the long term, and prioritizes the future over the present. Low time-preference is convex. Anti-Fragile - meaning one gains from the volatility of time.
The classic marsh-mellow test is one well known example that demonstrates the psychology of time preference in children.
It is true that bitcoin alone as the base layer, broadcasts transactions roughly every 10 minutes as transactions are confirmed and a block is mined, the block height increases, and the number of transactions per block is limited to the size of the block, which since 2017 was changed to be measured by ‘weight units’.
The current average number of transactions per block vary, but for simplicity sake we can say is likely to be somewhere between 5-10 p/second. If you would like a little more detail on this, this link will be clarifying.
What is obviously missing from this is Lightning, which is a second layer network built on top of bitcoin. Lightning radically changes the throughput capability of the network. Theoretically, the lightning network can process millions to billions of transactions per second and at almost no cost.
The concept and term ‘Lightning Service Provider’, or LSP, was originally coined in an article in 2019 by Roy Sheinfeld. Roy is also co-founder and CEO of Breez - which is an awesome lightning wallet and podcasting 2.0 application, which is well worth checking out if you haven’t already. The idea of an LSP is similar to that of an ISP for the internet.
Wikipedia describes an ISP as follows:
“An Internet service provider (ISP) is an organization that provides services for accessing, using, or participating in the Internet. Internet service providers can be organized in various forms, such as commercial, community-owned, non-profit, or otherwise privately owned.
Internet services typically provided by ISPs can include Internet access, Internet transit, domain name registration, web hosting, Usenet service, and colocation.”
Everyone connected to the internet these days, is connected via an ISP. ISP’s were one of the key mechanisms in enabling the internet to scale to the extent it has around the world and allow more users to join the network.
In a similar way, bitcoin has established itself as the trust or value protocol layer of the internet, and lightning service providers are going to play a pivotal in supporting the growth and onboarding of users to the bitcoin and lightning network.
The lightning network as it is today, is still beyond many ‘mainstream’ users, although for anyone with a tiny bit of interest and curiosity it’s easy enough to get a node running and open up some payment channels, but as i found out recently, if you have any issues it can get pretty technical pretty quick.
One of the larger constraints regarding opening and maintaining lightning channels is liquidity. I think this is likely the larger barrier that really drives the need for LSPs over time, as many people that interact with this network won’t have several btc available to be locked-up for use as liquidity by the lightning network.
As explained in a great twitter thread, the key functions of an LSP will be:
* Provide liquidity to the network
* Support nodes with new channels
* Routes data and payments
* Rebalances channels among users
* Drives reliability and redundancy
It’s likely that large holders, exchanges, platforms and service providers built on top of these networks operate as major LSPs with thousands of smaller ones operating and maintaining channels with smaller liquidity pools and contributing to decentralize and further strengthen the network.
This in my opinion is where the early majority phase of network adoption happens, and it likely happens in a way where people do not need to worry about any of technical aspects and simply enjoy the benefits of near-free and instant lightning payments anywhere in the world 24/7 x 365, while LSPs take care of the logistics in the background.
Lightning has been in development for years, and is just now starting to really come into its own, with almost 35,000 nodes currently online. While those with a high time preference are being distracted by jpegs (NFTs) of rocks and apes, i believe most are underestimating the potential of the lightning network, and specifically the role for LSPs to play to on-board users.
Simply put. If Bitcoin is equivalent to TCP/IP, then Lighting is akin to HTTP.
We are witnessing the adoption of an entirely new global monetary protocol layer for the very first time, and most people are missing it, because they cannot see further than their nose.
Maintaining a low time preference is a super-power in a world conditioned for instant gratification.
Hope you all have a great finish to your week. Bring the powerful Friday energy 💪
Really appreciate you sharing these letters with as many people as possible to support my work. (I think $50 for an entire year is a pretty tiny cost?)
The value and trust layer of the internet is being built and anyone is free to join.
LFG
I’ll talk to you all on Monday.
AK
