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Jesse, welcome to the podcast.

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Thanks so much, Jake.

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My pleasure.

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Super simple question to start with.

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What are you most excited about working on today?

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Today, I'm really excited about bringing stable coins to the Lightning Network.

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I think basically putting together all of the information necessary to get people excited

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about bringing other assets onto Bitcoin and having in-flight currency exchange.

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Wow.

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There's a lot to dive into there.

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Yeah, absolutely.

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And that wasn't the answer I was expecting, which is particularly cool.

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Let's start here.

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So stablecoins, what are they?

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And why would it be useful to have them on the Lightning Network?

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Yeah.

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So stable coins are tokens that basically enable any merchant to be able to receive payments over the internet, just like they would receive Bitcoin, but they don't have to worry about volatility.

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Now, when you have stable coins, there are some trust considerations.

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but overall it means that you know you're trusting an issuer of a currency just like

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you're trusting the u.s dollar but now you have the technology upgrade that we've all been enjoying

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with bitcoin and lightning cool and my i i personally don't use stable coins all that much

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just thinking about my personal use case which is always helpful with this kind of thing right

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And that's because I'm not too pissed off with the Australian dollar, which is where I now live, having grown up in the UK.

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And so I'm happy to use the fiat banking rails for general day-to-day life purposes.

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But there was incredible traction with stablecoins all around the world in different countries.

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And that classic phrase of like, check your financial privilege.

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People don't have access to bank accounts.

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People don't have access to US dollars.

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People don't have access to all of these different financial services.

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and a stable coin comes along and they're like,

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hang on, I don't have short-term volatility risk here.

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Boom.

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And talk to me then about the kind of person

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that loves this product as they are today.

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Yeah, the type of people that love it

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are really businesses,

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especially people and businesses

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that have expenses denominated in fiat.

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If you've got fiat expenses,

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like rent, well, then you can't stomach any of the volatility that a lot of the Bitcoin

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investors really love because, you know, that volatility means that their savings are

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generally going up. But if you have a drawdown and, you know, Bitcoin is known for this,

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where it, you know, occasionally crashes by 30, sometimes 80 percent, you know,

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a business isn't equipped to stomach that type of volatility.

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They still have their expenses.

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They still have to make payroll.

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So that's really the fit for stable coins.

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Interesting. Okay.

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And I mean, I have so many questions for you, Jesse.

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Let's try to do a bit of a journey, shall we say.

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So like, how did you come across this problem?

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And why is it the most exciting thing you're working on today?

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uh i came across this problem because we've been working on bitcoin um and improving the payment

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experience when using bitcoin and trying to answer this question of why are we having so

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much difficulty getting merchant adoption of bitcoin payments and by asking the questions

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of really what's holding you back from doing this.

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The payment processing is so good with Bitcoin,

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with lightning added to it,

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but why aren't we seeing everybody accept payments?

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And it kept on coming up that merchants are afraid of volatility.

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They want to be able to receive payments at a low cost,

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be able to pay their employees, their team members, their vendors, without having to think

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about the payment system so much. I think where we're at right now today is that merchants are

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paying payment processors quite a lot, over 3% often. And they also have to bear this risk of

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chargebacks. And here I come in telling them about, you know, all of the magic that Bitcoin

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payments can offer. And then they simply asked me the question of, well, can I, like, how do I sell

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it? I'm like, why would you want to sell it? And I have to put my morals aside, but, and really

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get down to the heart of it. And the reality is that they have a whole bunch of expenses that are

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denominated in dollars that they need to pay and they need to pay simply so that they can just

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continue to operate their business and not be caught up in all the magic and the excitement

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of the technology. But it's really just brass tacks. I need to pay my people and I need to do

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so reliably. It's very interesting and not to draw it away from the business use case you mentioned,

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But I'm currently in the middle of having purchased a house, working on a renovation.

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And I'm looking at potential quotes and different capex coming up in the relatively near term, like three to six months.

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And my wife's like, well, where's Bitcoin going to be?

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And I'm like, anyone's guess.

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She's like, make a prediction.

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I'm like, well, it'll be wrong.

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And in a very small way, that's similar to what you're talking about.

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because it's like the short-term volatility is such that you don't know.

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And in my instance, I think the most comfortable position

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is just to simply DCA out when you need the cash.

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But you do run the risk of a drawdown.

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And what does that mean?

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And maybe you're better off to take 50% off the table now

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and use that and set it aside.

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And then if you get some upside,

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then that 50% is not as expensive as you thought it was.

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With a business that every single month has CapEx,

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that would be even more acute as a problem when it comes to funding.

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So yeah, really interesting to think that through.

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And so another angle to this that strikes me as cool as well is

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I've studied before and I really resonate with this.

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Like the wider crypto market is generally speaking,

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highly speculative software projects and very different to Bitcoin.

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And any Bitcoin maxi will bang on about what is money and blah, blah, blah.

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And I love all that.

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But I also like this idea that actually the crypto market is a testing ground for everything that might one day end up on top of Bitcoin.

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And what you're describing is exactly that, because stable coins, like them or not, have found product market fit because they are flying in terms of capacity adoption and different ones coming to market.

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So is that just this process playing out, do you think?

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i really like that uh kind of framing of this that we have watched stable coins proliferate

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on crypto generally but it's not happening on bitcoin and seeing the numbers coming from tether

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that you know 20 trillion dollars was transacted in stable coins last year um and 10 of those were

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on Tether. But then you look deeper and you see that the biggest blockchain that these stablecoins

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operate on is Tron, which is basically as centralized as you could get. And I also looked

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at the transaction fees and I see that the transaction fees on Tron are rising exponentially,

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where it's $3 to $6 per transaction. And that's more than you would pay on Bitcoin.

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that's certainly more than you would pay on the lighting network so it was really kind of asking

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this question of like why isn't this happening on bitcoin like what's what's being preferred about

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these more centralized uh less robust less reliable blockchains that all of these stable

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coin all the stable coin activities happening on those other blockchains and basically you know

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So me being kind of a Bitcoin maxi, I'm thinking, why do we need a second blockchain?

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What purpose does it actually serve?

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So recognizing that Bitcoin is capable and would actually be very good at serving these stablecoin use cases because of some of the innovations done by Lightning Labs through Taproot assets.

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so you can actually create these other tokens and really remove the blockchain out of the

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conversation it's not there's no tech advancement it's just a separate token

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and you do have a trusted issuer so bitcoin is now capable of doing stable coins and stable coins

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at scale using lightning and so are there any examples of that available in the market today

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no there's not so not a single one so that's what makes me most excited about it because

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i'm going around and communicating this opportunity come on jesse let's go yeah like

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here's here's a golden opportunity for you to move 20 trillion dollars worth of activity per year

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onto Bitcoin and have it be extremely reliable.

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And you don't have to worry about Justin Sun behind Tron doing something weird

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or the government shutting it down.

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Now you've just got a token that's moving on Bitcoin,

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which is extremely reliable.

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It's globally available.

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It's easy to access.

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You're benefiting from the scalability of the Lightning Network.

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We're kind of at the center of everything.

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Um, and it makes me very excited to communicate the first mover advantage that is available

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to anybody that wants to kick this into high gear.

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Cool.

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And so one of the big parts of the last like five years plus for me has been going down

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the Austrian economics rabbit hole and having done a business management degree, you know,

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never asked the question, what is money?

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And suddenly it's like, oh, sound money is actually a really useful tool.

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and low time preference thinking is really useful and actually it's about human action and

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praxeology i had um hubertus the austrian on the podcast gosh i can't remember what episode number

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now but he had some excellent points around how free banking works in an austrian environment

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and having been extremely like radicalized by the concept of a fixed monetary supply

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I spoke with Hubertus and actually he completely opened my eyes to what's possible in terms of some of the bottlenecks of a truly fixed money supply.

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And so anyone listening, go and check out Hubertus's content.

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There's a couple of YouTube videos, very, very good.

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And equally the episode I did.

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But why is it bad if someone has access to a fixed money supply?

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They can say, OK, I'm going to give you exposure to a bunch of things I print with this in the background.

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and you can go and use it as you wish.

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And in one sense, it could be just one business to another saying,

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okay, you're supposed to be supplying me some raw materials,

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some logs, some iron ore, some whatever.

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I don't have the money for it right now.

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Here's an IOU.

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Once I've created the product and sold it, you'll get paid.

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And that debt contract is, in a sense, a form of money.

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And you can build them on top of the limited fixed supply at the very base.

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and it's this idea of moving away from what currently exists which is a totally debt-based

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credit circulating economy where basically someone just prints it calls it debt sticks it on an asset

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balance sheet and you know you're off to the races it's like well hang on that isn't anything when you

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really get down to the base of it and hence we've got this crazy scenario of having to print more

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money just to pay the interest and it's fine except for the fact that anyone trying to save

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in that currency is getting absolutely screwed.

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And so the idea of stable coins on top of Bitcoin actually to me

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is something I'm completely open to because, yes,

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the short-term volatility problem is completely real,

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as we've discussed, but actually it still fits

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within that Austrian lens of base case or base money is fixed.

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And so if you go and give away too many extra tokens

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on top of that to someone else who then fails

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and you don't get them returned and you're exposed

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to the base layer, you're swimming naked, essentially. And so your due diligence on who

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you might loan to or who you might give your stablecoin to goes up because you want to get

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them back. Otherwise, you don't get your Bitcoin. And so there's a really interesting play here where

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that kind of all comes together. Anything resonate there, Jesse? And have you looked at that kind of

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stuff from Hubertus? Absolutely. I love talking at Hubertus. So we've been... What a legend.

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Yeah, we got connected through the Riga Baltic Honey Badger Conference.

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But he makes a great point.

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Because right now, the system that we're operating in is completely addicted to debt.

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There's far more dollar-denominated debt than there are dollars in existence, which doesn't really make sense.

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that means that the dollar could die not in inflation but could die in deflation

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if you know we basically don't have enough dollars to pay back all that debt so okay we

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need a different system that actually has that's more honest and so this is where we would introduce

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a Bitcoin standard. But on top of that solid foundation of Bitcoin, of trustlessness,

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well, we can build a debt-based system and a credit system on top of it.

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But at the base of it, it still remains truth. So if you're going to do loans, for example,

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well, you're going to want to do loans and things that are not Bitcoin. Because one,

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Well, you really can't afford to lose your Bitcoin if someone doesn't pay you back.

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I don't think any of us Bitcoiners are willing to put up with that risk.

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But also, we don't want our debt denominated in Bitcoin either because I may never be able to repay that.

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So what we're left with is, you know, I actually want dollar denominated or some other currency denominated debt when talking about a credit system.

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And that's actually consistent with, I believe it's called Gresham's Law, which is saying the best money is actually kept in stores, kept in your vault.

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But the worst money is actually circulating much more rapidly.

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And we're seeing that is very consistent with the stablecoin adoption that we're seeing today.

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It is worse money than Bitcoin, but we're seeing it circulate much more. And so when we're looking at Bitcoin as a medium of exchange, we want Bitcoin to be that store of value, be a medium of exchange, and be open to the idea that anybody will receive whatever currency they want and be able to cater to that massive market.

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um i don't want bitcoin to miss out on the opportunity of being the medium of exchange

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for the world um and in order to serve that we're going to have to bring in other tokens

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and it immediately gets me thinking jesse so you know there was a reason that you had gold coins silver coins bronze coins you know that tiered feature set essentially where like you know on the gold end

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really good at store of value, but not so great at moving across space. Whereas actually,

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you could use different commodity monies to perform the smaller transactions at a lower

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cost per payment, essentially. And maybe that's what we're seeing here, being built out as like

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a blended set of tools on top of Bitcoin that's replaced gold.

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And so, yeah, it strikes me then,

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do you think if Bitcoin's the base case blockchain

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and then you've got Lightning on top of that as a layer two,

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which is using Bitcoin as collateral

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and we can run through what the Lightning Network does,

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but then there's going to be another set of tokens on top of that,

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do you think that if those tokens,

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let's say that's the equivalent of bronze,

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are they still as a medium of exchange it's still bitcoin performing medium of exchange as a as a

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feature of money do you think or is that more of like a suite of products how best do we think about

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it do you think yeah um some of this is is not intuitive actually most of this is not intuitive

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but but basically very few people get what bitcoin is right it's not intuitive initially it's it's

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it's hard, but once you see it, you can't unsee it.

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Yeah. Bitcoin is trustless, and that's the main piece.

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So when you're talking about creating infrastructure,

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which is the Lightning Network,

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instead of just making a single Bitcoin transaction,

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I'm going to create a Lightning channel,

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which allows me to actually move value

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across this trustless channel.

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And once I have that set up,

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then when we introduce new tokens into this,

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What Taproot Assets enables us to do over the Lightning Network is in-flight currency exchange.

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So the payment may begin as one currency, move over trustless rails through Bitcoin, and then exchange at the end that last hop into another currency of whatever someone wants to receive.

226
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and it allows us to have a completely trustless payment system and then still be compatible with

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all of the currencies that we want at the edges interesting and so

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to be very clear trustless is essentially the ability to transact whether you are

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receiving sending or saving and no one getting in the way that's that's right uh you're keeping

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self-custody you know basically nobody can stop you from doing this uh there aren't people taking

231
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exorbitant fees um you can participate however you would like to do and not have to worry about

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you know someone taking the value that you've saved brilliant and there are a whole number of

233
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reasons why that's important it's not a direction i want to go in right now necessarily but um where

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I am keen to learn more. And this is where I thought the thrust of today's conversation would

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be, would be around like the economics of a lightning node. And it's to frame where I'm at,

236
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which is the very, very start of this process. Investment background, managing my own capital

237
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over a multi, well, over 10 years of trying different things essentially landed at Bitcoin

238
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is the thing for long term, multi generational store of value. And it's then a case of trying

239
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to ignore absolutely everything that you see come up because the shiny different objects that appear

240
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and you're like oh that might beat bitcoin the hurdle rate or this might be a good bet and

241
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before you know it you've put some money into something that's called a treasury company and

242
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it's trading terribly versus what bitcoin actually did and you're like well that was that was a mistake

243
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but a good lesson so in terms of the lightning network and running a node i have recently become

244
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I'm an Albi Hub subscriber.

245
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And so I'm using Albi and I have a couple of nodes and channels.

246
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I have a node with a couple of channels open.

247
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And I'm really interested in the Lightning Network

248
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from a perspective of capital allocation.

249
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So, okay, I don't have Bitcoin the hurdle rate as an exposure

250
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when I'm earning in sats.

251
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That's a brilliant start.

252
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You know, when you're buying an equity at a fiat-denominated number,

253
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you're making a bet that that fiat number is going to be higher

254
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at some point in the future when you can actually get liquidity for it. Whereas earning in sats is

255
00:21:14,685 --> 00:21:19,405
like magic. Great. I don't have that problem any longer. But then it's like, what custody risk am

256
00:21:19,405 --> 00:21:23,405
I taking? Am I having to give the Bitcoin to someone else that's apparently going to give it

257
00:21:23,405 --> 00:21:27,585
back to me? Like some of these loan products, for example, you're having to give them a whole Bitcoin

258
00:21:27,585 --> 00:21:33,385
to only get 50% loan to value in fiat. It's like, well, hang on, what happens if the Bitcoin price

259
00:21:33,385 --> 00:21:38,405
rockets and I just never get the Bitcoin pie? But that's a difficult trade to make in some senses.

260
00:21:38,405 --> 00:21:45,425
So yeah, just run me through the Lightning Network itself and how it's developed over time and what the economics of it are.

261
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Because when you're like stable coins coming to Lightning, I'm like, wow, massive volume, capital required, can be done in self-custody and potentially a yield in sats, which is maybe where this is all going.

262
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But yeah, fascinating.

263
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Yeah.

264
00:22:01,665 --> 00:22:07,605
So when you're thinking about Bitcoin, I think everybody knows that there's a limit.

265
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seven transactions per second is really what Bitcoin is capable of doing.

266
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But when you actually go to pay, it's going to take at least 10 minutes on average just to get

267
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one confirmation to actually make a payment happen. So we need Bitcoin to be more scalable

268
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and we need it to be faster. So that was really the genesis of the Lightning Network.

269
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How can we make Bitcoin more scalable, faster to transact, cheaper to transact,

270
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And also not disrupt the decentralization that Bitcoin has, not introduce trust into the system.

271
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So that's really where Lightning Network fits.

272
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And what actually happens is that you're taking your Bitcoin and you're connecting it to someone else and creating a joint account is how I like to think about it.

273
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So I'm putting Bitcoin into a channel.

274
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I share it with someone else, and we're both signing the payout with every transaction that happens over this channel, this side ledger to Bitcoin's blockchain.

275
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So if both of us sign, well, we can each leave without the other's permission and take it to the Bitcoin blockchain and leave this relationship and get our Bitcoin back.

276
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I don't need to talk to you in order to exit this channel.

277
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which is really nice.

278
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So I have unilateral exit power with lightning.

279
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But when I'm creating this lightning channel,

280
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it actually provides a benefit to you

281
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because it allows you as well as me

282
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to actually transact in a very seamless way

283
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and faster and cheaper.

284
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And so there's situations where you might actually pay me

285
00:24:05,485 --> 00:24:11,865
to open a lightning channel to you just because it creates useful infrastructure. Just like

286
00:24:11,865 --> 00:24:18,165
if you're running a store, well, you might pay someone to build a road to your store

287
00:24:18,165 --> 00:24:29,145
so that customers can access it. So that's a situation. So there's economics where with every

288
00:24:29,145 --> 00:24:36,625
payment that goes through this lightning channel, I can earn a fee. And I can also earn a fee if

289
00:24:36,625 --> 00:24:42,965
someone is paying me to open a lightning channel to them. So that's two ways that you can earn

290
00:24:42,965 --> 00:24:48,025
sats by using your Bitcoin as infrastructure for payments.

291
00:24:49,205 --> 00:24:55,085
It's a really cool picture to start painting because there's that whole anarcho-capitalist

292
00:24:55,085 --> 00:25:01,405
well it's like you know the pushback is who will build the roads you know and it's like well we will

293
00:25:01,405 --> 00:25:10,025
and this is the example um yeah and it immediately makes me think you know the the the piece of real

294
00:25:10,025 --> 00:25:16,745
estate that is not connected to the road network versus the piece of real estate that is connected

295
00:25:16,745 --> 00:25:22,385
to the road network they're different capital propositions and it's very clear that the second

296
00:25:22,385 --> 00:25:30,445
of those two is more valuable because of the trade that can then be done. So how many Lightning nodes

297
00:25:30,445 --> 00:25:37,805
exist? How many Lightning channels exist? And how is that market growing? Because if there's $20

298
00:25:37,805 --> 00:25:42,725
trillion worth of stablecoin that could end up being transacted using this infrastructure,

299
00:25:43,225 --> 00:25:49,905
like where are we? There's not even a stablecoin on Lightning yet, right? So this is the very start.

300
00:25:49,905 --> 00:25:52,745
I'm debating pulling up the actual figures

301
00:25:52,745 --> 00:25:55,065
but I know some of them off the top of my head

302
00:25:55,065 --> 00:25:56,845
well, do take a second if you want

303
00:25:56,845 --> 00:25:57,245
no problem

304
00:25:57,245 --> 00:26:10,445
okay, right now

305
00:26:10,445 --> 00:26:12,645
on Amboss.space

306
00:26:12,645 --> 00:26:14,985
I can see that there are

307
00:26:14,985 --> 00:26:17,205
15,139

308
00:26:17,205 --> 00:26:18,285
nodes active

309
00:26:18,285 --> 00:26:21,445
And those are just public nodes.

310
00:26:21,785 --> 00:26:23,525
You can have a private node as well.

311
00:26:25,425 --> 00:26:28,525
Now, you asked about channels.

312
00:26:28,785 --> 00:26:32,445
There's 46,000 channels that are active.

313
00:26:32,545 --> 00:26:35,505
So these are the individual connections, and that's what's public.

314
00:26:36,025 --> 00:26:37,785
But you can also have private channels.

315
00:26:39,205 --> 00:26:46,405
And then what we don't know completely is how much payment activity is happening.

316
00:26:46,405 --> 00:26:57,225
But we've been running Lightning nodes with our Rails product for other people, for customers that don't give up custody.

317
00:26:57,505 --> 00:27:03,685
They keep self-custody, but we get to see the actual transaction volume that is going through that.

318
00:27:04,165 --> 00:27:12,125
And we're seeing out of the 29 Bitcoin that we've deployed, to date, we've routed 62 Bitcoin.

319
00:27:12,125 --> 00:27:19,885
so really there's not that much bitcoin that is actually required to move an incredible amount of

320
00:27:19,885 --> 00:27:26,265
value you know since we launched it in july wow and just just talk me through what that actually

321
00:27:26,265 --> 00:27:35,785
means then so the capital position i that's uh that was a metric of okay here's the pool of capital

322
00:27:35,785 --> 00:27:41,265
and then here's the amount of payment value that was supplied by that pool of capital

323
00:27:41,265 --> 00:27:48,725
which is almost 3x the deployed capital yeah you you could think of it in terms of velocity

324
00:27:48,725 --> 00:27:58,105
so the the forwards volume that we've done in this cluster of nodes is twice the value

325
00:27:58,105 --> 00:28:04,445
of the capital that is in there wow and that's in about six months time so that tells me the

326
00:28:04,445 --> 00:28:11,805
velocity is about four and and it's just these are the kind of things just blow your mind don't

327
00:28:11,805 --> 00:28:18,665
they we are living through history being written you know what i mean like this is a new money and

328
00:28:18,665 --> 00:28:23,945
it's being built in ways that no one envisaged even five years ago and it's like this is what

329
00:28:23,945 --> 00:28:29,185
happens if you give people an aligned incentive a base network through which everyone shares and

330
00:28:29,185 --> 00:28:30,925
the value accrued to that network.

331
00:28:31,645 --> 00:28:32,565
Let's build it.

332
00:28:32,665 --> 00:28:35,305
And it takes time and things don't work,

333
00:28:35,465 --> 00:28:38,985
but that's okay because what comes out of it is more robust.

334
00:28:40,585 --> 00:28:43,665
Like how many Bitcoin did you say that you guys have helped deploy?

335
00:28:43,885 --> 00:28:44,305
15?

336
00:28:45,865 --> 00:28:48,885
30 Bitcoin is about what we've deployed.

337
00:28:49,405 --> 00:28:52,365
30 deployed and 60 something moved.

338
00:28:52,985 --> 00:28:53,085
Yeah.

339
00:28:53,165 --> 00:28:53,305
Okay.

340
00:28:53,365 --> 00:28:53,585
Wow.

341
00:28:53,905 --> 00:28:54,065
Yes.

342
00:28:54,105 --> 00:28:56,385
30 Bitcoin doesn't sound like all that much,

343
00:28:56,425 --> 00:28:57,985
but when you think about the fiat number,

344
00:28:57,985 --> 00:28:58,885
it's quite big.

345
00:28:59,185 --> 00:29:03,465
And I'm then wondering about the total market size.

346
00:29:03,605 --> 00:29:06,965
How many other people are actually actively doing this at this point?

347
00:29:09,045 --> 00:29:16,245
Well, given that there's 15,000 nodes, there's not that many that are actually participating.

348
00:29:16,765 --> 00:29:20,905
It's relatively small, but it still is highly decentralized.

349
00:29:22,285 --> 00:29:27,645
And what we've done is made it very easy for people to start to participate.

350
00:29:27,645 --> 00:29:35,885
but we also have to balance how much demand is there for payment volume on the Lightning network.

351
00:29:36,245 --> 00:29:42,485
I don't want to deploy a ton of capital because then the rewards would dwindle.

352
00:29:42,885 --> 00:29:48,685
So I really have to balance the supply of Bitcoin versus the demand for payments on Bitcoin.

353
00:29:49,645 --> 00:29:55,045
And I guess this is where the point about building stable coins on Lightning is cool

354
00:29:55,045 --> 00:29:58,545
because it's like, okay, if we did have all this extra demand,

355
00:29:58,845 --> 00:30:01,245
then this is how it would function on the back end.

356
00:30:01,445 --> 00:30:04,545
And this is how that piece of economics actually fits into it.

357
00:30:05,125 --> 00:30:07,105
Okay. And I love this.

358
00:30:07,145 --> 00:30:08,885
It's taken kind of half an hour to get to this point.

359
00:30:09,005 --> 00:30:13,085
So what would it look like to actually build a stable coin?

360
00:30:13,505 --> 00:30:17,685
And why would I use your stable coin built on Bitcoin and Lightning

361
00:30:17,685 --> 00:30:23,025
instead of a Tether token USDT with Tron in the background?

362
00:30:23,025 --> 00:30:32,045
yeah well the nice thing about it is it's completely permissionless so you can create

363
00:30:32,045 --> 00:30:39,245
your own token i can create my own token we can all have our own stable coin but

364
00:30:39,245 --> 00:30:47,085
i think with recent legislation uh the genius act specifically it's really opened the floodgates

365
00:30:47,085 --> 00:30:53,805
So all of these regulated institutions, basically every fintech is issuing their own stablecoin.

366
00:30:54,505 --> 00:30:56,505
We're seeing it happen live.

367
00:30:57,805 --> 00:31:04,325
You know, Stripe just released their Tempo blockchain that's going to be focused on stablecoins.

368
00:31:04,985 --> 00:31:06,805
You know, we've got Tether in the mix.

369
00:31:06,885 --> 00:31:08,025
We've got USDC.

370
00:31:08,865 --> 00:31:10,845
Revolut just announced a stablecoin.

371
00:31:11,885 --> 00:31:11,985
Wow.

372
00:31:12,165 --> 00:31:15,585
It seems like this is all happening at once.

373
00:31:15,585 --> 00:31:23,625
but it's all happening because we've witnessed what is happening with tether where tether buys

374
00:31:23,625 --> 00:31:31,625
u.s treasuries to fix our debt problem in the u.s and they're getting the rest of the world

375
00:31:31,625 --> 00:31:40,605
to buy u.s treasuries via these usct tokens so the rest of the world gets dollar stability

376
00:31:40,605 --> 00:31:45,845
and the U.S. gets more people to buy its debt

377
00:31:45,845 --> 00:31:48,965
and Tether and stable coins are the vehicle

378
00:31:48,965 --> 00:31:50,725
to distribute it to the world.

379
00:31:51,825 --> 00:31:54,965
But with all of these different stable coins

380
00:31:54,965 --> 00:31:56,325
coming to market,

381
00:31:56,785 --> 00:31:59,865
we're introducing an interoperability problem

382
00:31:59,865 --> 00:32:03,005
because the blockchains that are being introduced

383
00:32:03,005 --> 00:32:04,805
don't talk well to each other,

384
00:32:05,005 --> 00:32:07,205
which is necessary to...

385
00:32:08,205 --> 00:32:09,905
How do we link them all together?

386
00:32:10,605 --> 00:32:15,665
And how do we form a network of value that can transact seamlessly?

387
00:32:16,985 --> 00:32:19,565
So that is really what's being done.

388
00:32:19,565 --> 00:32:27,185
I think which stablecoin are you going to choose is really about the reputability of the issuer.

389
00:32:28,445 --> 00:32:33,285
Have they built a brand of trust and reputability?

390
00:32:33,805 --> 00:32:35,945
Have they built the transparency tools?

391
00:32:35,945 --> 00:32:41,225
and a lot of the custodians within the space actually have built that.

392
00:32:41,725 --> 00:32:43,005
They have that trust.

393
00:32:43,225 --> 00:32:44,445
They have the transparency.

394
00:32:45,145 --> 00:32:48,625
They've survived audits.

395
00:32:49,645 --> 00:32:58,625
So I can see a lot of people navigate and gravitate towards those custodian-issued stablecoins.

396
00:33:00,685 --> 00:33:04,945
We'll see if governments start issuing and CBDCs.

397
00:33:04,945 --> 00:33:08,385
Do we trust a government more than we trust a custodian?

398
00:33:08,965 --> 00:33:10,365
That's an open question.

399
00:33:11,245 --> 00:33:29,910
But what I do know for sure is that there so many stable coins out there that there going to be a need to interoperate between these If you want your stablecoin to actually be used well plug it into the Lightning Network so that I can have in currency exchange

400
00:33:29,910 --> 00:33:32,550
and you can get paid in whatever token you prefer.

401
00:33:34,090 --> 00:33:37,570
And so is the product, Jesse, actually more of a B2B play

402
00:33:37,570 --> 00:33:40,390
rather than B2C and build infrastructure

403
00:33:40,390 --> 00:33:42,630
for the likes of Revolut and Stripe

404
00:33:42,630 --> 00:33:44,870
to have their own blockchains with their own stablecoin,

405
00:33:45,350 --> 00:33:47,150
but then this is how they're going to talk to each other?

406
00:33:47,730 --> 00:34:09,050
Yeah, this is very much B2B focus. But, you know, my goal is to really bring the Lightning Network to everybody. So that everybody is just using the Bitcoin system. We're building on a Bitcoin standard. We've got this neutral currency that is interfacing between all these currencies at the edges.

407
00:34:09,050 --> 00:34:13,690
and that Bitcoin is at the center of all of this activity

408
00:34:13,690 --> 00:34:16,410
and that all of that is going through the Lightning Network

409
00:34:16,410 --> 00:34:20,630
and it's rewarding savers to create payments infrastructure

410
00:34:20,630 --> 00:34:24,770
in a decentralized way that's different from Visa, MasterCard, PayPal.

411
00:34:25,390 --> 00:34:25,990
Yeah, hell yeah.

412
00:34:26,130 --> 00:34:29,350
And that's exactly what I would like to see built as well.

413
00:34:29,350 --> 00:34:32,670
Just from a shared vision perspective,

414
00:34:32,970 --> 00:34:35,570
I would use a product that was built like that.

415
00:34:36,510 --> 00:34:38,190
And the likes of Stripe, for example,

416
00:34:38,190 --> 00:34:44,350
obviously an absolute mammoth business that is the back end of a huge payments layer on the

417
00:34:44,350 --> 00:34:50,110
traditional internet the likes of shopify like for sure they'll bring something out right shop pay

418
00:34:50,110 --> 00:34:55,630
alibaba they'll all get involved but what will they do well their incentive will be to

419
00:34:55,630 --> 00:35:01,870
to actually be the complete opposite like it'll be a centralized blockchain it'll be a way to

420
00:35:01,870 --> 00:35:08,570
monitor exactly who does what when and to it'll probably be as i think about it packaged up as

421
00:35:08,570 --> 00:35:13,690
some kind of safety thing it's like oh you should use our blockchain because we can ensure that you

422
00:35:13,690 --> 00:35:17,550
don't have any scammers or do you know what i mean and it'll actually be a surveillance tool

423
00:35:17,550 --> 00:35:23,490
and that's not what the world needs is more financial surveillance it's the complete opposite

424
00:35:23,490 --> 00:35:28,790
so in some ways i could see a situation actually where bitcoin is the ultimate

425
00:35:28,790 --> 00:35:37,110
example of a bottom-up, viral, organic adoption in terms of a technology. And it's how many people

426
00:35:37,110 --> 00:35:41,670
even 10 years ago described, like, if there was a new type of money, this is probably how it would

427
00:35:41,670 --> 00:35:48,230
look. And it's happening. I wouldn't be surprised if a stablecoin went through a similar process.

428
00:35:50,050 --> 00:35:55,670
Do you think that's kind of a likely outcome? And it might take 10 years to have the most

429
00:35:55,670 --> 00:36:00,590
successful stable coin but the point is is from the very very start like because tether for example

430
00:36:00,590 --> 00:36:06,810
you're still trusting tether i've never seen tether's open book balance sheet to say how many

431
00:36:06,810 --> 00:36:11,690
u.s treasuries they've got no one's ever seen that it's a private company apparently they made

432
00:36:11,690 --> 00:36:15,950
20 fucking trillion or whatever i don't even know what the number is what i must want to look that

433
00:36:15,950 --> 00:36:22,710
up they're the most profitable business per person in the world according to them um and i don't know

434
00:36:22,710 --> 00:36:26,430
a lot about the business but it's still that process isn't it it's like if you started now

435
00:36:26,430 --> 00:36:31,770
and built something truly transparent from the start with bitcoin and lightning underneath it

436
00:36:31,770 --> 00:36:39,470
that's a much better fit yeah i think there's a lot of news actually happening around tether the

437
00:36:39,470 --> 00:36:44,150
company and looking at their balance sheet how many u.s treasuries do they actually have whereas

438
00:36:44,150 --> 00:36:50,890
the genius act requires one to one so for every token you've got the u.s treasuries to back it up

439
00:36:50,890 --> 00:36:59,630
so that's happening um but of course there's open questions about you know should they only

440
00:36:59,630 --> 00:37:05,510
hold u.s treasuries because tether the company actually holds bitcoin and gold um in significant

441
00:37:05,510 --> 00:37:12,810
quantities uh they really keep u.s treasuries necessary to meet their obligations um because

442
00:37:12,810 --> 00:37:18,050
they're hedging their bets on interest rates declining which would have a direct impact

443
00:37:18,050 --> 00:37:27,430
on Tether's revenues. For the evolution of things, we've watched Tether issue on many

444
00:37:27,430 --> 00:37:34,950
different blockchains and having to invest a lot of resources in how those blockchains interoperate

445
00:37:34,950 --> 00:37:41,690
and how you can have Tether zero on how these tokens can move from one blockchain to another,

446
00:37:41,690 --> 00:37:44,930
because that's been a major sticking point for them.

447
00:37:45,930 --> 00:37:50,010
And we've watched Tether hop from blockchain to blockchain

448
00:37:50,010 --> 00:37:52,250
looking for cheaper and cheaper transactions.

449
00:37:53,250 --> 00:37:56,810
And the reality is that even Solana,

450
00:37:57,610 --> 00:38:00,530
which touts its scalability,

451
00:38:00,530 --> 00:38:03,610
is only doing 17,000 transactions per second.

452
00:38:04,890 --> 00:38:08,670
And if we want to serve the economy of the future,

453
00:38:08,890 --> 00:38:11,530
which is a machine economy and using AI,

454
00:38:11,690 --> 00:38:15,170
where you're having one payment per AI query,

455
00:38:15,670 --> 00:38:18,970
we have to think about the scalability that that will require.

456
00:38:20,030 --> 00:38:23,790
And what we saw from Stripe and their Tempo blockchain

457
00:38:23,790 --> 00:38:27,510
is they're promising 100,000 transactions per second.

458
00:38:27,510 --> 00:38:31,250
And if we compare that, just to benchmark it a bit,

459
00:38:31,690 --> 00:38:34,170
to Google search queries,

460
00:38:34,890 --> 00:38:37,230
how many Google searches are done per second?

461
00:38:37,490 --> 00:38:39,390
It's 189,000.

462
00:38:40,250 --> 00:38:40,330
Wow.

463
00:38:40,330 --> 00:38:44,390
So Tempo needs to scale double that.

464
00:38:45,270 --> 00:38:46,810
Solana cannot do it.

465
00:38:47,430 --> 00:38:52,250
No blockchain can actually serve one payment per Google search,

466
00:38:52,570 --> 00:38:53,550
but the Lightning Network can

467
00:38:53,550 --> 00:38:57,870
because it can do 40 million transactions per second.

468
00:38:58,590 --> 00:38:58,890
Can it?

469
00:38:59,150 --> 00:39:00,210
That's my next question.

470
00:39:00,330 --> 00:39:02,570
So what kind of volume can the Lightning Network do?

471
00:39:03,570 --> 00:39:06,910
So, yeah, this is easily 10,000 times

472
00:39:06,910 --> 00:39:10,330
what the next best blockchain can do.

473
00:39:10,330 --> 00:39:12,230
I've never heard this metric before.

474
00:39:13,170 --> 00:39:16,450
It's not like 100x faster, 10,000 times faster.

475
00:39:16,970 --> 00:39:17,630
That's right.

476
00:39:17,990 --> 00:39:20,790
Fuck, that's a game changer.

477
00:39:21,750 --> 00:39:24,730
And so why have I not heard that information before?

478
00:39:25,730 --> 00:39:26,230
I don't know.

479
00:39:26,390 --> 00:39:31,310
Anyway, please teach me why the Lightning Network

480
00:39:31,310 --> 00:39:34,230
is able to do that volume of payments per second.

481
00:39:34,230 --> 00:39:42,870
well there's a couple of different reasons one is there's no central database that holds all of

482
00:39:42,870 --> 00:39:48,890
the globe's transactions so why is bitcoin slow it's because it takes 10 minutes for

483
00:39:48,890 --> 00:39:57,650
the entire globe to arrive at a like a source of truth and have a shared history like that's why

484
00:39:57,650 --> 00:40:05,370
there's a block time delay. But the Lightning Network doesn't have a shared ledger of all the

485
00:40:05,370 --> 00:40:11,110
transactions. It's side ledgers. It's a network of side ledgers called payment channels. It's a

486
00:40:11,110 --> 00:40:17,450
payment channel network. And that technology allows it to scale horizontally, instead of

487
00:40:17,450 --> 00:40:25,810
doing a bigger and bigger and more centralized blockchain. Now you've got, what was it, 46,000

488
00:40:25,810 --> 00:40:34,430
micro ledgers that are all happening at once. So this payment channel network behind the Lightning

489
00:40:34,430 --> 00:40:40,130
Network is actually what makes it capable of reaching this massive scale and not having to

490
00:40:40,130 --> 00:40:48,390
rely on proof of work in order to get the entire globe aligned. Really cool. And it makes me think

491
00:40:48,390 --> 00:40:59,130
about the traditional banking system and how historically this became about the the growth of

492
00:40:59,130 --> 00:41:04,110
the telecommunications infrastructure was such that you could suddenly make a phone call and if

493
00:41:04,110 --> 00:41:07,890
you could make a phone call to someone on the other side of the world that you trusted and you

494
00:41:07,890 --> 00:41:11,850
said listen mate you keep this money for this person and i'll keep this money for this person

495
00:41:11,850 --> 00:41:16,990
and let's not actually physically send gold to each other because that's way too expensive and

496
00:41:16,990 --> 00:41:21,750
And it threw petrol on the fire of, you know, why should we have a paper currency on top of gold?

497
00:41:21,890 --> 00:41:23,490
Well, that's precisely why.

498
00:41:24,630 --> 00:41:25,810
What does that result in?

499
00:41:25,870 --> 00:41:34,810
Well, we've got these big commercial banks, also the payments companies, and they are collecting together lots of IOUs every single day.

500
00:41:35,330 --> 00:41:38,290
And at the end of the day, they do an interbank transfer.

501
00:41:38,730 --> 00:41:42,010
And that's essentially what Lightning is doing on top of Bitcoin.

502
00:41:42,010 --> 00:41:44,390
as and when people close their channels,

503
00:41:44,510 --> 00:41:47,270
they say, okay, look, I'm ready to get out of here.

504
00:41:47,350 --> 00:41:48,350
And as you've already described,

505
00:41:48,350 --> 00:41:49,870
you can do so by your own choice.

506
00:41:49,890 --> 00:41:52,390
You don't have to go to your channel providing partner

507
00:41:52,390 --> 00:41:54,770
and go, oh, by the way, I'm finished with this.

508
00:41:54,770 --> 00:41:56,150
Can we agree to like, you know,

509
00:41:56,210 --> 00:41:57,510
annul the contract or whatever?

510
00:41:57,630 --> 00:41:58,410
You can just leave.

511
00:41:59,390 --> 00:42:01,410
Would that be a fair analogy, do you think,

512
00:42:01,450 --> 00:42:02,410
in terms of that kind of,

513
00:42:03,430 --> 00:42:06,210
the payment layer that we currently use

514
00:42:06,210 --> 00:42:08,170
and is considered like the status quo

515
00:42:08,170 --> 00:42:11,870
is already abstracted away from the real value.

516
00:42:12,010 --> 00:42:14,690
And so that's really what Lightning is doing on top of Bitcoin.

517
00:42:16,090 --> 00:42:23,850
Yeah, the current system is relying on all of the assessments that...

518
00:42:23,850 --> 00:42:24,530
All the trust.

519
00:42:24,530 --> 00:42:27,630
Do I trust you as a consumer?

520
00:42:28,090 --> 00:42:30,770
Will you pay me back at the end of the month?

521
00:42:32,850 --> 00:42:38,850
And also it's relying on trust in the banks that are transferring this money.

522
00:42:38,850 --> 00:42:54,270
You know, I've authorized this transaction and now I'm going to debit your account at another bank and I'll pay a fee for this and have to rely on that other bank to actually maintain solvency.

523
00:42:54,950 --> 00:43:01,950
Which is a massive question because, of course, the bank has a tiny reserve ratio and they've loaned out all of their money.

524
00:43:01,950 --> 00:43:23,030
You know, we're at a point in the system where the global liquidity is extremely low. And so many banks are at risk for bank runs, where you could withdraw all your funds and the bank may not have the cash on hand to actually meet its obligations, because most of it is loaned out.

525
00:43:23,030 --> 00:43:42,170
And so this kind of sets up an entirely trusted system. And it's more important than ever that we move away from that, especially because we've got additional geopolitical upset that could really just throw the whole thing into chaos.

526
00:43:42,170 --> 00:43:49,470
and you know bitcoin its heart beats every 10 minutes and will continue to do so reliably it's

527
00:43:49,470 --> 00:43:57,430
more reliable than aws at this point so we need that firm infrastructure on which to build our

528
00:43:57,430 --> 00:44:03,490
future society and prepare us for the future it's so cool jesse you're filling me with optimism and

529
00:44:03,490 --> 00:44:10,970
also ideas it as i was listening to you i thought back to my last comment about abstracting the

530
00:44:10,970 --> 00:44:16,430
payment layer away from the real value. And actually, that's not true. That's not what

531
00:44:16,430 --> 00:44:22,350
Lightning is doing. Bitcoin is the real value. And Lightning is a representation of Bitcoin built in

532
00:44:22,350 --> 00:44:27,710
such a way that there isn't any requirement for trust. So it's not an abstraction of Bitcoin.

533
00:44:28,270 --> 00:44:36,670
It's actually just another form of Bitcoin. It is Bitcoin. Lightning does not introduce a new

534
00:44:36,670 --> 00:44:45,070
token itself. Yes, you can move other tokens over Lightning, as it described. But Lightning itself

535
00:44:45,070 --> 00:44:53,210
is a contract between two people about how their Bitcoin, their shared Bitcoin in this contract

536
00:44:53,210 --> 00:45:00,270
should actually be managed. Really, that's all it is. And it also provides a protocol of how those

537
00:45:00,270 --> 00:45:07,230
contracts can interact. And so one payment can hop from party to party to party in a way that

538
00:45:07,230 --> 00:45:15,210
nobody has complete knowledge of all of the payments. This is our escape out of the panopticon.

539
00:45:16,290 --> 00:45:22,470
And it's also a bet on the future of efficiency and decentralized power,

540
00:45:22,470 --> 00:45:25,390
because this is a network and networks are powerful.

541
00:45:25,390 --> 00:45:32,710
they're so powerful um oh okay jesse a few questions i'd love to get to now where

542
00:45:32,710 --> 00:45:38,310
i you've been building a business for a number of years now what's that process been like for you

543
00:45:38,310 --> 00:45:47,110
it's it's been such a journey i never thought that i would be capable of you know running a business

544
00:45:47,110 --> 00:45:54,390
and uh it was it was a humbling experience because you know i went into this knowing

545
00:45:54,390 --> 00:46:00,310
nothing really. And, you know, my future co-founder, you know, asking me, have you ever

546
00:46:00,310 --> 00:46:06,810
thought of starting a business? And it hadn't even crossed my mind. But like, you know, working in

547
00:46:06,810 --> 00:46:12,450
the fiat system, you know, people would, you know, trust me, give me more responsibility. And, you

548
00:46:12,450 --> 00:46:20,610
know, so of course, you know, you're kind of working your way up. But when you're starting a

549
00:46:20,610 --> 00:46:26,650
company, you're the top. There's no one really that you can delegate it to at the beginning.

550
00:46:27,490 --> 00:46:34,950
So you have to do everything. And being a generalist, I may not have had the best grades

551
00:46:34,950 --> 00:46:44,170
all through school, but what I've learned is that I'm actually a good operator. That generalist

552
00:46:44,170 --> 00:46:49,770
skill set that we've done from doing little things here and there can actually all be applied

553
00:46:49,770 --> 00:46:59,050
and you can run a solid organization, you know, without having to be really rich or be super smart.

554
00:46:59,570 --> 00:47:12,270
But really, you can kind of put together your skill set to be empathetic and be able to understand other people's pain and suffering and be able to design a product that addresses it.

555
00:47:12,270 --> 00:47:20,170
So really starting a business was the start of it, putting together a presentation.

556
00:47:20,490 --> 00:47:25,890
I never realized how valuable a presentation could be on being able to communicate your ideas.

557
00:47:26,090 --> 00:47:32,250
But we went to El Salvador shortly after the legal tender law.

558
00:47:33,570 --> 00:47:36,970
And so this was our first AMBOSS presentation.

559
00:47:36,970 --> 00:48:00,270
And that's when the venture capitalists approached us, be like, what is this AMBOS thing? And I think we had a lot of excitement and we've carried that momentum. And now into a state where we're ready to scale. And we're looking for the next investor partners to take us that next leg of the journey.

560
00:48:00,270 --> 00:48:22,230
But thankfully, we had phenomenal backers in our early stages with Stillmark to help us make sense of all the data of payment channel networks, be able to apply it, bring AI into the picture, to have fully automated operations doing very complex tasks in order to make this payment system work.

561
00:48:22,730 --> 00:48:30,210
Wow. Yeah. Early stage capital in some ways is a runway to product market fit.

562
00:48:30,270 --> 00:48:36,130
but the more efficient you can be with that early stage money which is an idea it's people it's like

563
00:48:36,130 --> 00:48:42,790
cool idea this is exactly what i invest in go but then how long can you make that money last

564
00:48:42,790 --> 00:48:49,870
what do you find along the way it's a bet basically so so can you share any just any

565
00:48:49,870 --> 00:48:59,410
moments where you're like oh this is really hard um i think for early stage um

566
00:48:59,410 --> 00:49:05,910
just meeting with folks and figuring out what in the heck is the venture capital process

567
00:49:05,910 --> 00:49:12,330
how do i actually raise an investment round um what do i put in my pitch deck and who do i talk to

568
00:49:12,330 --> 00:49:21,290
um and there's really no good information to say how to do it um you know i spent you know

569
00:49:21,290 --> 00:49:27,970
countless hours watching youtube videos and reading uh venture deals in order to get some

570
00:49:27,970 --> 00:49:34,010
sense of how this process goes, but it wasn't really until I did it that became to understand

571
00:49:34,010 --> 00:49:41,890
that it is relationship building and the early stage venture, the most valuable ones really

572
00:49:41,890 --> 00:49:43,050
become part of your team.

573
00:49:44,630 --> 00:49:51,410
It's if you can use them right, if you get the right strategic investor, it's giving

574
00:49:51,410 --> 00:49:53,690
you a leg up because it's not just a check.

575
00:49:53,810 --> 00:49:56,690
It is them being involved and being supportive.

576
00:49:56,690 --> 00:50:10,915
And I think I was really afraid to have my first board meeting I think I can share that I thought that this is where investors come to grill you

577
00:50:10,915 --> 00:50:13,315
on all of the mistakes that you've made

578
00:50:13,315 --> 00:50:16,035
as you're learning this process.

579
00:50:16,175 --> 00:50:16,615
Sweating.

580
00:50:18,295 --> 00:50:20,795
And what even goes into a board deck?

581
00:50:20,795 --> 00:50:25,775
But what I know now is a board meeting

582
00:50:25,775 --> 00:50:28,535
is where you get the smartest minds together

583
00:50:28,535 --> 00:50:31,495
to work on the hardest problem.

584
00:50:32,395 --> 00:50:36,955
And your job as a founder is surface the information,

585
00:50:37,535 --> 00:50:41,235
the information that you are seeing in your day-to-day

586
00:50:41,235 --> 00:50:44,695
that makes this the hardest problem

587
00:50:44,695 --> 00:50:49,175
and equips your board with enough information

588
00:50:49,175 --> 00:50:54,695
to be informed and be strategic to you

589
00:50:54,695 --> 00:50:57,695
to help you devise a plan and devise a strategy.

590
00:50:58,535 --> 00:51:11,435
And so it's been an incredible journey on that, just to get to that stage, to realize all these people are here to support me, not here to tear me down.

591
00:51:11,855 --> 00:51:15,535
Because we're all part of a team here.

592
00:51:15,675 --> 00:51:19,555
We've all got money and time invested in this, and we want it to be successful.

593
00:51:20,315 --> 00:51:21,095
Really cool.

594
00:51:21,095 --> 00:51:25,455
because people don't often talk about those like smaller moments where it's actually quite a big

595
00:51:25,455 --> 00:51:29,855
deal to you but oh my god i've got to do a board meeting like what even happens

596
00:51:29,855 --> 00:51:39,475
you're the ceo mate what's going on here yeah uh but you know i think we've we've attracted

597
00:51:39,475 --> 00:51:46,015
investors that are uh that like the fact that you know we're we're humble founders um we do

598
00:51:46,015 --> 00:51:53,815
have to figure things out but we're here to learn open to feedback um and yeah we're here to fix the

599
00:51:53,815 --> 00:52:00,755
world financial system um and what an exciting project to work on so absolutely that's the reward

600
00:52:00,755 --> 00:52:08,375
and so jesse to to are you actively doing a financing round now or soon to be in the future

601
00:52:08,375 --> 00:52:15,435
uh let's see i'll i'll probably answer that after the call but but overall that's okay

602
00:52:15,435 --> 00:52:16,855
No pressure, no pressure.

603
00:52:17,175 --> 00:52:18,935
Because it can be kind of sensitive as well.

604
00:52:19,015 --> 00:52:20,255
And that's what I'm conscious of.

605
00:52:21,315 --> 00:52:22,835
I'll keep it very, very simple.

606
00:52:23,495 --> 00:52:25,075
How does Amboss make money?

607
00:52:26,635 --> 00:52:29,355
Yeah, Amboss is a liquidity coordinator.

608
00:52:30,055 --> 00:52:33,875
So we've got all of these, this decentralized network,

609
00:52:34,335 --> 00:52:37,255
all of these different nodes, and they each have Bitcoin.

610
00:52:37,635 --> 00:52:39,415
But who do they connect to?

611
00:52:40,335 --> 00:52:44,635
And solving that problem, we solved it using a marketplace.

612
00:52:44,635 --> 00:52:46,935
and that marketplace is called Magma.

613
00:52:47,115 --> 00:52:48,235
It's a liquidity marketplace.

614
00:52:48,235 --> 00:52:51,515
It was really the first one that was out there

615
00:52:51,515 --> 00:52:53,235
that anybody could access.

616
00:52:54,235 --> 00:52:57,555
And it's been active for about five years now.

617
00:52:58,035 --> 00:53:02,035
And through Magma, that liquidity marketplace,

618
00:53:02,535 --> 00:53:03,415
Amboss earns a fee,

619
00:53:04,175 --> 00:53:08,355
which is 0.05% of the infrastructure

620
00:53:08,355 --> 00:53:09,515
that is being created.

621
00:53:09,775 --> 00:53:13,275
But at scale, that becomes a massive, massive number.

622
00:53:13,275 --> 00:53:23,295
if we're looking at replacing the foreign exchange market through this decentralized coordination,

623
00:53:24,175 --> 00:53:29,855
that's really where we're focused. So Ambos makes money from coordinating liquidity.

624
00:53:30,675 --> 00:53:33,755
And we also have other business lines, but that is the key.

625
00:53:35,015 --> 00:53:41,035
Awesome. So it's the Magma liquidity marketplace for the Lightning Network. So if you're running

626
00:53:41,035 --> 00:53:44,975
a lightning node and you want to add some liquidity and open a channel then magma is one

627
00:53:44,975 --> 00:53:49,735
of the places you can do that yep if you want to get connected you basically go to the marketplace

628
00:53:49,735 --> 00:53:55,835
you could buy it from you know any other participant on the network and pay the they're

629
00:53:55,835 --> 00:54:01,075
asking prices yeah this is where i've been playing around with lb hub lately and looking at opening

630
00:54:01,075 --> 00:54:05,095
channels and i saw emboss pop up and i'm like oh my god look all these different names and

631
00:54:05,095 --> 00:54:09,915
I just had no idea like this even existed essentially.

632
00:54:10,095 --> 00:54:11,735
So I'm at the very start of this journey,

633
00:54:11,735 --> 00:54:13,735
but it's really catching my attention.

634
00:54:13,915 --> 00:54:16,755
And something you just said then as a venture investor

635
00:54:16,755 --> 00:54:18,675
is like big idea.

636
00:54:19,115 --> 00:54:21,835
So how do you disrupt the foreign currency markets?

637
00:54:24,035 --> 00:54:28,875
Well, one piece is actually bringing other assets

638
00:54:28,875 --> 00:54:30,695
into the Lightning Network.

639
00:54:30,695 --> 00:54:39,175
and that's why I'm excited about pitching people on bringing their stablecoin onto Bitcoin and

640
00:54:39,175 --> 00:54:44,155
accelerating it using the Lightning Network because what it enables is in-flight currency

641
00:54:44,155 --> 00:54:51,595
exchange. Why do I need to be managing all of these foreign currencies if I can just choose

642
00:54:51,595 --> 00:54:56,275
which currency I want to receive and the exchange happens automatically with every payment?

643
00:54:56,275 --> 00:55:04,675
that's that's what this tech enables and i'm so excited to be able to deliver that

644
00:55:04,675 --> 00:55:12,215
as soon as there are multiple currencies in this um the floodgates are open yeah and in that sense

645
00:55:12,215 --> 00:55:16,455
that's why networks are interesting isn't it because you know each phone that is added to

646
00:55:16,455 --> 00:55:21,215
the network the network as a whole grows in value more so than necessarily that one user

647
00:55:21,215 --> 00:55:27,575
and the same would apply with the more currencies that are going through this technology the better

648
00:55:27,575 --> 00:55:35,135
and it makes me think about my brother-in-law Shada he works for a business that does a lot of

649
00:55:35,135 --> 00:55:41,655
it's a travel business a stocklisted Australian travel business that is a flight aggregating

650
00:55:41,655 --> 00:55:46,875
platform and they have another line of business which was hotels in Europe and they basically

651
00:55:46,875 --> 00:55:51,295
they have a huge Aussie dollar exposure to different geographic locations.

652
00:55:51,295 --> 00:56:01,055
And he's got relationships from his finance department as a finance director with Citigroup, a big bank, and they're doing FX stuff all day long.

653
00:56:01,615 --> 00:56:05,175
It's like, well, I'll have to share this episode with him and see what he thinks.

654
00:56:05,175 --> 00:56:09,255
Like, how would this actually work in that real use case scenario?

655
00:56:09,815 --> 00:56:16,175
And I know that he owns some Bitcoin, but it's not necessarily something that the business has taken seriously yet.

656
00:56:16,175 --> 00:56:19,155
and such is the nature of where we're at in the adoption curve.

657
00:56:19,295 --> 00:56:21,615
It's like the leaders of the company are obviously looking

658
00:56:21,615 --> 00:56:22,575
at short-term volatility.

659
00:56:22,935 --> 00:56:24,555
That's a no, like we touched on already.

660
00:56:24,995 --> 00:56:27,335
And equally, we're functioning as a company,

661
00:56:27,415 --> 00:56:28,215
so what's the problem?

662
00:56:29,795 --> 00:56:32,315
How would you catch someone's attention that's working

663
00:56:32,315 --> 00:56:35,815
in that more traditional world with FX exposure,

664
00:56:36,035 --> 00:56:38,815
like real FX exposure that they need to get rid of?

665
00:56:39,595 --> 00:56:42,135
And they're using swaps and options and all sorts

666
00:56:42,135 --> 00:56:43,255
of different stuff to do that.

667
00:56:43,255 --> 00:56:53,535
I think it might be a bit awkward to say that that pain is going to go away.

668
00:56:54,535 --> 00:57:00,695
That full-time management of all of these different currencies may go away.

669
00:57:01,855 --> 00:57:07,315
What we have right now is $9.5 trillion that is transacted every single day.

670
00:57:08,555 --> 00:57:12,435
That's daily volume that is happening in foreign exchange markets.

671
00:57:12,435 --> 00:57:17,555
and that we actually have a shot at meaningfully disrupting that

672
00:57:17,555 --> 00:57:22,155
because we've got better technology that is faster, is more reliable,

673
00:57:22,155 --> 00:57:26,215
that doesn't have two-day rolling settlement around the world

674
00:57:26,215 --> 00:57:29,395
where you're at risk of holding all of these different currencies

675
00:57:29,395 --> 00:57:31,715
for too long than you want to

676
00:57:31,715 --> 00:57:35,055
just because a bank is not going to be open on the weekends

677
00:57:35,055 --> 00:57:37,935
and that weekend is going to roll around the world.

678
00:57:37,935 --> 00:57:58,335
Yeah, and the duration between Friday 5pm and Monday 9am, there could have been some macroeconomic issue or geopolitical instability that means that your Aussie dollar euro rate has drastically shifted since you received payment 48 hours before at no fault of your own.

679
00:57:58,335 --> 00:58:04,635
and that problem for example that exposure would go wow and it's also that thing isn't it where

680
00:58:04,635 --> 00:58:12,935
we live in a world where the status quo is fiat central banks and each country kind of has its

681
00:58:12,935 --> 00:58:19,715
own and they issue their own currency and as a result like i follow fx rates you know i'm

682
00:58:19,715 --> 00:58:24,095
originally from the uk but i'm looking at us dollars i'm looking at euros i'm looking at pounds

683
00:58:24,095 --> 00:58:29,935
aussie dollar and just i'm always following right i now actually started pricing my assets in gold

684
00:58:29,935 --> 00:58:34,275
and in bitcoin just as metrics so that i've started it's really interesting you know you

685
00:58:34,275 --> 00:58:39,435
move away from just the one fiat denominator and start looking on different metrics um

686
00:58:39,435 --> 00:58:45,095
but that whole fx market is as a result of all these different countries having different forms

687
00:58:45,095 --> 00:58:49,615
of money it's like well if everyone was just using bitcoin you don't have an fx market

688
00:58:49,615 --> 00:58:59,055
no like you're telling me that the 9.5 trillion dollars per day that is being transacted on fx

689
00:58:59,055 --> 00:59:05,555
can't operate during the weekends in the age of the internet yeah i mean that's that's asking for

690
00:59:05,555 --> 00:59:10,335
disruption wow um when i can actually have in-flight currency exchange that happens with

691
00:59:10,335 --> 00:59:17,215
instant payments where i don't need to trust any of the intermediate hops like like that's that's

692
00:59:17,215 --> 00:59:21,535
the future where I can do micropayments and I can pay AI systems.

693
00:59:22,515 --> 00:59:26,795
Like what's, what's holding us back from that?

694
00:59:26,935 --> 00:59:28,315
We have the technology.

695
00:59:28,815 --> 00:59:32,515
Now let's go serve that market because it sorely needs it.

696
00:59:33,115 --> 00:59:39,675
If you're holding a currency for too long during these geopolitical upsets, well, it's

697
00:59:39,675 --> 00:59:44,315
going to cause massive disruption and, you know, businesses shouldn't be in trouble because

698
00:59:44,315 --> 00:59:47,135
of something that's happening in another part of the world.

699
00:59:47,215 --> 00:59:49,915
just because they're stuck holding a currency that they don't want to hold.

700
00:59:52,075 --> 00:59:54,615
And so, Jesse, I'm conscious of time.

701
00:59:54,735 --> 00:59:55,715
Another 10 minutes, okay?

702
00:59:56,735 --> 00:59:57,115
Sure.

703
00:59:57,595 --> 00:59:58,415
Yeah, cool. Thank you.

704
00:59:59,215 --> 01:00:05,675
Just to come back to the economics of running a node and managing channels,

705
01:00:06,215 --> 01:00:10,715
what we're talking through here is, okay, well, that's potentially an error for disruption.

706
01:00:10,875 --> 01:00:12,155
That's potentially an error for disruption.

707
01:00:12,155 --> 01:00:18,395
all of it should it go the way that you're you're you're envisaging equals more volume on lightning

708
01:00:18,395 --> 01:00:26,095
so to me very clear green light like learn more that would be the first step right how does this

709
01:00:26,095 --> 01:00:32,975
stuff work um but you know the headline grabbing yield number that was thrown around earlier on

710
01:00:32,975 --> 01:00:38,655
this year about like 10 percent yield is possible for a lightning year a lightning node what are

711
01:00:38,655 --> 01:00:43,055
those numbers like in reality? And you already mentioned the fact that if you put too much

712
01:00:43,055 --> 01:00:49,515
capital into the system, you don't need that much right now. So it's obviously a balancing act

713
01:00:49,515 --> 01:00:54,455
between actual demand and capital deployment. So just, yeah, if we could go back to that,

714
01:00:54,475 --> 01:00:59,375
I'd love to understand what kind of yields could you expect and what might compress those over

715
01:00:59,375 --> 01:01:06,715
time and how big might it become? Yeah. The big number that got thrown around was 9.7%

716
01:01:06,715 --> 01:01:13,015
coming from cash app you know miles suitor at you know bitcoin vegas he announced that number

717
01:01:13,015 --> 01:01:22,155
and it's a bit misleading because overall cash app itself does you know five five hundred million

718
01:01:22,155 --> 01:01:29,735
dollars worth withdrawals from with from cash app over the lightning network so incredible volume

719
01:01:29,735 --> 01:01:33,795
and it's all going through blocks, node,

720
01:01:34,235 --> 01:01:36,155
which gives them an opportunity

721
01:01:36,155 --> 01:01:39,815
to capture a lot of routing fees that happen,

722
01:01:40,055 --> 01:01:42,075
not just on the withdrawals

723
01:01:42,075 --> 01:01:43,835
or maybe not on the withdrawals, whatever,

724
01:01:44,575 --> 01:01:46,655
but actually on the reversal.

725
01:01:47,535 --> 01:01:50,395
So because Lightning payments can flow both ways

726
01:01:50,395 --> 01:01:52,155
and they're capturing that flow.

727
01:01:52,155 --> 01:01:54,435
So it really has very little to do

728
01:01:54,435 --> 01:01:57,215
with the amount of capital

729
01:01:57,215 --> 01:01:58,535
that they've added to their node.

730
01:01:59,115 --> 01:02:01,795
So I have to separate those two things in my mind.

731
01:02:01,875 --> 01:02:04,255
It's not about how much capital you're bringing to the table.

732
01:02:04,495 --> 01:02:08,455
It is about how big of pipes you're creating on the lightning network,

733
01:02:08,455 --> 01:02:10,955
because once you created a large pipe,

734
01:02:11,095 --> 01:02:11,255
well,

735
01:02:11,335 --> 01:02:13,155
now you can send large payments through there.

736
01:02:13,375 --> 01:02:18,655
So if we want to talk about enterprise settlement disruption,

737
01:02:18,655 --> 01:02:23,455
we're going to have to bring more capital to the lightning network to build

738
01:02:23,455 --> 01:02:26,095
those bigger pipes for those payments to flow.

739
01:02:26,095 --> 01:02:33,655
but at the end of the day it's about payment volume that is where the yield comes from

740
01:02:33,655 --> 01:02:40,415
and so we're very focused on bringing more businesses to the lightning network to access

741
01:02:40,415 --> 01:02:49,215
cheaper payments faster payments avoiding all of the foreign exchange that they may currently have

742
01:02:49,215 --> 01:02:59,015
to deal with and that can go away through a payments api integration and so okay if if you

743
01:02:59,015 --> 01:03:05,315
have bitcoin to allocate which you're looking to earn a yield on in a non-custodial fashion this is

744
01:03:05,315 --> 01:03:13,255
really cool but you don't bring cash out volume i for example i don't have a payments business to

745
01:03:13,255 --> 01:03:18,495
bring to the table um but there's a symbiosis there because one assumes that the payment processor

746
01:03:18,495 --> 01:03:22,155
actually doesn't necessarily want to deploy the capital that's necessary to run all the payments.

747
01:03:23,035 --> 01:03:29,535
And perhaps it is, as you've already clearly shown, it's about providing marketplaces to batch the two together.

748
01:03:30,595 --> 01:03:33,655
Yeah, wow. Okay. What a journey, Jesse.

749
01:03:33,915 --> 01:03:38,135
Did you ever expect, this will be my final question, I think, roughly.

750
01:03:38,135 --> 01:03:44,795
It's like, when you set a vision and you have a direction that you're going in,

751
01:03:44,795 --> 01:03:51,675
sometimes it's hard to distinguish the difference between the destination and the journey and so like

752
01:03:51,675 --> 01:03:56,675
did you ever expect to be in the position you're in today and like how how's that kind of played out

753
01:03:56,675 --> 01:04:04,455
i i never expected this i studied wastewater treatment um in college you're kidding me and

754
01:04:04,455 --> 01:04:10,815
which actually taught me concepts of liquidity and kind of the plumbing of the wastewater

755
01:04:10,815 --> 01:04:18,175
treatment system you're kidding me wow uh i'm not kidding um and then i've also i've also done

756
01:04:18,175 --> 01:04:24,315
like asset management for highways but it's like it's yeah sorry to interrupt jesse you don't know

757
01:04:24,315 --> 01:04:31,035
when a piece of information you receive is going to be useful so it's this concept of non-linear

758
01:04:31,035 --> 01:04:37,075
productivity and intuition like something took you there you don't know what and suddenly you're

759
01:04:37,075 --> 01:04:41,595
starting wastewater management and it turns out that the liquidity you learned there is useful

760
01:04:41,595 --> 01:04:50,135
building your business however many that's wild wow it's it's uh a very unpredictable journey

761
01:04:50,135 --> 01:04:57,395
you know we're doing our best to see as far in the future as we can um and we've got the you know

762
01:04:57,395 --> 01:05:04,235
praxeology kind of looks at the incentives of the system to devise what the future will look like

763
01:05:04,235 --> 01:05:12,795
but we can't predict everything um and so at every stage we're playing our hands the best

764
01:05:12,795 --> 01:05:18,755
you know we can't really control which cards were dealt uh but we can be strategic about when to

765
01:05:18,755 --> 01:05:24,675
play those yeah cool well i'm wishing you the very best of luck for the next phase jesse

766
01:05:24,675 --> 01:05:30,275
i want to make one final shout out which is to phil from 21and communications putting us in touch

767
01:05:30,935 --> 01:05:34,395
Very briefly, Jesse, what's it been like working with Phil?

768
01:05:34,835 --> 01:05:36,395
And why would you recommend him?

769
01:05:37,475 --> 01:05:38,495
Shout out, Phil.

770
01:05:38,715 --> 01:05:41,915
Thank you so much for having me, Jake.

771
01:05:41,915 --> 01:05:46,575
And also for Phil, I get to chat with him once a week.

772
01:05:47,035 --> 01:05:48,355
It's an incredible experience.

773
01:05:48,675 --> 01:05:53,415
I get signal about what's happening in the Bitcoin and crypto worlds.

774
01:05:53,875 --> 01:05:56,815
What are news agencies focused on?

775
01:05:56,815 --> 01:06:02,995
and also Phil gets me connected with all the people that can help carry my message

776
01:06:02,995 --> 01:06:10,015
and deliver my message through their networks and reach as many people as possible.

777
01:06:11,095 --> 01:06:17,555
Awesome. Well, Jesse, you painted a picture today that I have to learn more, as I said to you just

778
01:06:17,555 --> 01:06:23,255
now. It's like, what is going on here and how might I be part of it? So I will let you know

779
01:06:23,255 --> 01:06:28,635
how the process goes. I signed up for the wait list with Rails, I think it is. So if there's any

780
01:06:28,635 --> 01:06:33,815
way of like bumping an email address further up the list, then I'd appreciate that. Otherwise,

781
01:06:34,015 --> 01:06:36,915
thank you so much for your time today and very best of luck with everything in the future.

782
01:06:37,755 --> 01:06:39,115
Love it. Thank you so much, Jake.

783
01:06:39,595 --> 01:06:40,135
Cheers, Jesse.