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Blogs & Articles: Scaling Bitcoin with Lightning as a Service (LaaS) đź”— 1 year ago

Breez Technology - Medium

Ready for a hot take? Check this: money has no inherent value. Besides being a special kind of money that allows for disintermediated transfers, the same applies to bitcoin.

As banal as it may sound, money is just a means to an end. As a matter of fact, it’s a means to any number of ends. And those ends are what matter. Money — whether dollars, satoshis, or the rai stones of Yap — is not valuable for what it is, but for what it lets us do. We transform money into experiences, and experiences are what make a life, not ledger entries. Everything else is bank propaganda devised to generate interest.

As long as it’s “just” a store of value, bitcoin is even further removed from the ends that matter (unless watching charts is your thing). At least by turning bitcoin into a medium of exchange that can be traded for those valuable experiences, Lightning moves bitcoin closer to what matters.

In fact, here’s a general postulate: bitcoin’s value is inversely proportional to the friction between the blockchain and the experiences it enables. Lightning was one big step in reducing that friction, and Lightning itself has taken several steps in the last four or so years to diminish it further, including:

We at Breez are honored to have been involved in many key developments and proud of having invented some of them.

Still, though it’s painful to admit, there remains more friction in non-custodial Lightning than in the best custodial and fiat solutions, and users will choose whatever gets them to those experiences faster and easier. Less friction = closer to experiences = more value in bitcoin and in life.

Through the course of our journey with Breez, we have not only learned that the key to mainstreaming Lightning is getting people closer to the experiences they really value, we have also learned how.

For more joy, reduce friction. (Image: Berry College)

The First Key to Reducing Friction: P2P Interaction

The reactions to the Breez podcast player and point-of-sale modes blew us away. They were great for our business and even better for our understanding. Of course we expect every feature to boost usage, but we couldn’t have anticipated the growth yielded by those two features. And the correlation was easy to analyze: both features directly implement a vision of the P2P economy.

The P2P economy refers to disintermediated exchange, like creative people trading the fruits of their creativity — podcasts, videos, fanfic novels, 3D-printed cosplay accessories — with users for cash, without the intervention of banks, payment processors, or aggregators.

Each intermediary in an interaction induces friction and increases the distance from the desired experience, and they can’t help it. Banks have to placate shareholders and regulators and make a profit. Aggregation platforms have to placate shareholders and regulators and make a profit. Payment processors have to placate shareholders and regulators and make a profit.

Notice the pattern? While each intermediary claims to be giving users what they want, they’re actually serving different groups who want different things at the same time. That intermediaries always take a cut, induce friction, and increase the distance between people and experiences isn’t the result of bad management or evil intentions, it’s just the nature of the beast.

So why not create something far better for users? Let people interact directly, pay each other directly, exchange goods and services directly. There are even services out there — social networks, messaging services, content aggregators, gaming platforms — that would like to facilitate exchanges among their users, but they can’t because legacy intermediaries induce too much (financial, regulatory, UX) friction. Worse still, the centralization induced by these large data networks increases their power over each user and, therefore, increases the risk of abuse to all users.

The P2P economy isn’t some billionaire’s pipe dream; it describes a world where we’re closer to the experiences we value and to each other. That’s what Lightning was made for. We just need to make it happen.

Web 2.0 interaction is you paying a conglomerate with money controlled by someone else; the P2P economy is just two people trading ideas, goods, or a laugh for some P2P cash. (Image: Brooke Cagle)

The Second Key to Reducing Friction: Fitting the Right Application to the Experience

The second lesson we’ve drawn from the Breez podcast player and POS mode is that different kinds of experience (ends) need different payment interfaces (means). While both of those functions are in the Breez app, they feel like their own little self-contained interfaces, tailor-made for their respective purposes (or as close as we could get with the technological limitations of running a node on a phone).

But you can only cram so many activities and experiences into a non-custodial Lightning payment app. And however clever, charming, and good looking a team behind the payment app may be, they’re not necessarily best placed to devise new ways of applying P2P payments to new types of experience. We know how to make Lightning mobile and how to improve its UX, but when it comes to commerce, music, video streaming, or any other vertical solution, experts in those fields know better how to craft the best experience.

Indeed, the POS mode and the podcast player are just scratching the surface of what’s possible. We implemented them according to the KISS principle. Though they have scaled remarkably and attracted thousands of new users, they’re basically demo versions implemented to showcase how people interface with the P2P economy.

Could others with fine-grained expertise of those and other kinds of experience come up with better ways to apply P2P money to P2P interaction? Of course they could. And would those better applications achieve scale that our neophyte, outsider attempts never could? Absolutely.

And that’s the point. The better we apply the tech, the closer people get to the experiences they want, the more they will use the tech, the faster Lightning will scale. The scale we’re aiming for is not X orders of magnitude; we’re shooting for a world where kids roll their eyes whenever an adult says “Back in the fiat days…”

Achieving scale is a matter of reducing friction, and multiple, tailor-made apps that apply Lightning technology optimally to life’s many worthwhile pursuits is the best way of minimizing friction and expanding the P2P economy. It’s not about making the best wallet that can do everything; it’s about adapting Lightning — the means — to whatever ends users want and whatever kind of experience they want in exchange.

(Image: Alison E. Berman)

LaaS Liberates Lightning

Those who understand the technical requirements of running a non-custodial Lightning app will have realized already that adapting Lightning payments to any number of existing and yet-unimagined applications is incompatible with running a node in a single app. Lightning is far too technically demanding to scale the P2P economy as we have described it. Running the kind of always-on node required is an experience that few users, developers, creators, or vendors out there will relish.

We’re envisioning, inventing, and realizing Lightning as a Service (LaaS). LaaS is about using Lightning to remove friction from life, from the experiences we crave. The point isn’t to improve the user experience in the app, but to improve the users’ experience of Lightning as a whole that gives them more value in their lives.

And LaaS is doable. As Breez envisions it, LaaS has three major components, the first of which is in development, the second has an alpha set to launch in a couple of months, and the third exists already and just needs to scale:

A Lightning SDK

As it stands, anyone seeking to integrate Lightning payments to their existing business faces a steep learning curve. Accepting payments over Lightning requires them to run a node, secure liquidity with an LSP, manage fiat exchanges, perform swaps on and off the Bitcoin blockchain, manage a wallet, and so on. A non-custodial SDK would give P2P entrepreneurs and existing web utilities access to those functions without having to start from scratch.

With a well-designed SDK, developers will be able to select the Lightning functions they need from a menu and integrate them quickly and easily into their own applications. Instead of having to learn the Lightning tech stack, a Lightning SDK will let developers simply plug it into their own tech stacks.

Hybrid architecture

Lightning needs to be immediately available wherever and whenever people want to make payments. Locking a user’s functionality into a single app or on a single device would require the user to adapt to the technology, which is backwards. That’s friction.

At the same time, though, KYC friction and global, cross-market expansion requires a peer-to-peer, non-custodial solution. As soon as LSPs start acting like banks, regulators will start treating them like banks. That’s friction too.

The solution is a hybrid architecture based on sovereign remote nodes, but that locates those nodes in the cloud rather than on users’ local devices. To deliver both optimal user sovereignty with a next-gen UX, we’ve partnered with Blockstream and their Greenlight product. Any service can access these nodes from any device, but as long as the users’ keys are locally stored, users maintain custody of their own funds, minimizing the operators’ regulatory profile.

P2P + minimal friction = scale.

Decentralizing liquidity

There is no credit on Lightning. The liquidity to settle any transaction needs to be preloaded onto the network. While this imposes a significant liquidity burden on those seeking to process users’ payments, it also presents the rich opportunity of a snowball effect: the more liquidity the network contains, the more transactions it can process, the more transaction fees the operators can collect, the more liquidity they have to invest in the network, and so on.

As Lyn Alden recently put it,

Once there are tens of thousands, hundreds of thousands, or millions of participants, and with larger average channel balances, then routing a payment from any arbitrary point to any other arbitrary point on the network becomes exponentially easier and more reliable.

Ironically, snowballs are only possible when water is frozen, i.e. not liquid. (Image: Pauline Bernfeld)

In order to get the snowball rolling, we must distribute the burden of preloading the network with liquidity by onboarding new Lightning Service Providers (LSPs). By attracting LSP collaborators, we will raise the liquidity level of the network overall, turning the snowball into an unstoppable avalanche of liquidity.

Lightning Is Scaling and so Is Breez

With LaaS, Breez can unlock the creativity of millions of entrepreneurs, who are currently trapped in legacy oligopolies, to exchange value and liberate their potential. LaaS reconceives the limits of possibility, giving everyone new means to create and derive value directly. We’re inventing LaaS to accelerate the emerging and unstoppable P2P economy.

We’re in good company. In fact, Breez has just wrapped up our seed round! Our partners at ego death capital (best VC name evar!), Entrée Capital, Hivemind Ventures, Fulgur Ventures, Hawk Digital Innovation, Bitcoiner Ventures, HashKey Capital, Lightning Ventures, among others, are betting on Breez and our vision for LaaS.
🥳🎉🎆

They’re confident that Breez is going to scale Lightning, which is why they’re helping us to scale. Given that such brilliant people are willing to invest in our vision, we must be on to something. We’re as grateful for their help as we are excited to get started.

LaaS is the world’s Lightning party, and everyone is invited. (Image: Robert Adams)

Help Us Realize the Potential of Lightning

As was the case with Lightning a few years ago, nobody has ever seen LaaS in action. We know how to build the frame, but only developers and users know how to tweak the details. Which elements are essential to an SDK and which are optional? How do we best communicate different functions, benefits, and tradeoffs? How can we craft a flawless UX?

To ensure it meets the needs of all users, we’ll be working with selected design partners this year to ensure our SDK meets their requirements.. The more we learn about their actual needs and usage, the faster we can make Lightning a global reality. If you’re interested in adding non-custodial Lightning support to your project, please let us know.

We’ll also be launching an alpha version of our next next-gen app in a couple of months. Input from users like you will determine its success. Help us help the world and hammer your own nail into fiat’s coffin.

Scaling Bitcoin with Lightning as a Service (LaaS) was originally published in Breez Technology on Medium, where people are continuing the conversation by highlighting and responding to this story.

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