 Sphinx is an example of what I would call almost a layer three application. Hey folks I'm Adam B. Levine and this is speaking of Bitcoin as always I'm joined by the other host the show Stephanie Murphy hi Jonathan Mohan. Hey and Andreas M. Antinopoulos hello. On today's show we're checking in on the lightning network a much anticipated still in development but working second layer built on top of Bitcoin to address some of the scaling challenges and to bring back that microtransactions use case. But specifically today I want to talk about a really neat set of applications that some of the listeners and I have been playing around with streaming Satoshi's two podcasts. There's actually a couple of applications out there that allow you to do this but the one that we've been playing around on for the most part is Sphinx dot chat so that Sphinx like the monument in Egypt dot chat. And basically it kind of combines a lightning network node approach so you have your own lightning network node and then it connects you into a chat application that lets you among other things create tribes like we have for speaking of Bitcoin. Which are chat rooms allow you to you know send voice messages to have live calls and then also to send payments over the lightning network so you can do things like tip somebody 10 Satoshi's. And it happens instantly and it happens you know not on chain but it happens you know using Bitcoin is the underlying layer. And then one of the most interesting things about it is the idea of connecting podcast or content streaming. Directly to lightning network payments which actually brings me kind of back to the original use case that sort of led to the lightning network which were payment channels right and trace. Yeah I think the payment channel use case which was demonstrated with things like streaming video was one of the things that eventually grew into the lightning network. And so this idea of streaming money in one direction while you stream content in the other direction has been one of the driving use cases or was one of the use cases that got people really excited and combines nicely with my payments. So I've been playing around with this for a little while Jonathan and Stephanie just got on Andreas I think you've been messing with it too. Yep the big thing that really stopped me for a long time around using the lightning network when we accepted tips like you know I paid a buddy of mine to set up a node for us and to run it for us and then I think we used a tipping application that was created by block stream and it was kind of very technical to set up. That may not be true in terms of like for people who like doing this sort of technical stuff but I have like a terminal fear of command line interactions. And so for someone like me it really triggered all of my phobias and just you know it's not a thing that I'm really ever gonna gonna be the guy to do. And so space chat used to be like that so in order to use the lightning network you need to have your own note and that note needs to be running all the time. That's not entirely true you can use the lightning network without running your own note you can use the lightning network with a third party running the node for you. And yet without it being a custodial service because you still have control of keys however it's a more complicated scenario so there are a number of lightning wallets that you can use on mobile for example. Phoenix or blue wallet that allow you to set up a lightning wallet without actually running a lightning note however for more advanced applications including Sphinx yes you do need your own note. So that was a big stopping point for me and I suspect a lot of other people like me you know for a very long time. And what Sphinx did that made it easier was they made it so that you could just pay them a little bit of money you know I think it's 2000 satoshis. And then they will operate a node for you and then you get to use all of this stuff. And I kind of want to talk about that for a while because I have for a long time believed that there is the purest approach to all of these things that were interested in where you are running the clients and you know you understand the technology. And that was something that was very important kind of the early days because that was all that was available and so if you were here. Well you weren't here because of the money you were here because of the technology and as time has gone on that has kind of changed and so we've seen uses that are increasingly not about the technology that are about kind of taking the technology and putting it into the most accessible package I was talking with Roger Bear the other day and I was talking to him about this and I was like well what do you think about kind of the lightning network as far as the way that it's developed. And he's like well how do you buy lightning like network Bitcoin and I was like well you either have Bitcoin you send it in or you use your credit card and he's like aha you need to use a credit card in order to get Bitcoin. And they actually kind of got turned into a meme in the Bitcoin cash community that I was admitting that you needed to use something like a credit card in order to do this. And I mean like on the one hand I guess that's a thing but on the other hand what's the alternative right like. Somebody has to put money into this stuff in order for you to get any type of token irrespective of what the type of token is. I think the comment at that point was about like transaction fees on chain you know being really expensive because there was a disruption around China mining going on at the time. But it just kind of like I want to talk about the lightning network on one side and then on the other side of this thing I want to talk about like. What is the proper way to use this technology and how much should we be compromising in order for it to be easier to use in order for it to be kind of more approachable for people who don't have that command line interface or is that actually a bad thing that gets us in trouble later on. I think the user friendliness comes naturally it's like anything whenever a new technology first comes out. It might be really cool but it's also inaccessible to most people because you need to have special knowledge to use it or you need to pay for it or it's expensive something like that. But naturally over time the technology gets cheaper more user friendly and just more accessible to more people so I think it's fine at first to have some friction that's gonna work itself out. I think that when it comes to improving user privacy and human freedoms in general they're like two types of problems you're solving for one is getting the spire another 10 feet higher. Right so that people can climb higher if they want to reach for the heavens and the other is just raising the ground up right and so text message to factor authentication didn't raise the spire for privacy online a single foot higher. But what it did was it raised the bottom of the tower like 1020 feet right so you know we went from an environment where there was functionally no security to hey at least you have SMS backup. And now we have people who are accustomed to SMS backup that use Google authenticator or off the and then some that even use you be keys or other forms of privacy and so I think that any time there's a solution that isn't a dead end. It's not here's an easy way to do it and there isn't another rung or another step up the tower that you can get. But is actually like we're just raising the bottom I think is really useful and if there's anything Bitcoin needs right now it needs a lot more you know raising up the bottom that it does getting the spire to go 10 feet taller. Especially with things like lightning I mean I spend a chunk of time these days on clubhouse and there's an entire room dedicated to lightning and umbral. And the number of people who are very sophisticated that need their hand held in order to get on spin chat can't be overlooked and so we have a lot more I think in terms of building up the foundations than we do and try to get this thing to go any taller. Yeah there is different uses of lightning to as I just mentioned if you just want to get the lightning wallet to make lightning payments that started off being difficult and complicated and requiring quite a bit of technical expertise but over the last six months in fact over the last year we've seen. The development some very easy to use very sophisticated lightning wallets that are non custodial and hide all of the complexity of the lightning network so you can get the payment side now Sphinx of course is an example of what I would call almost a layer three application. It uses the lightning as it's underlying layer and on top of that some people call these laps or lightning applications but because Sphinx is actually a network I'd actually call it a layer three. It's using the lightning network to not only do payments and establish no identities with public keys that are on the lightning network but it's also using the onion routed protocol underneath. To embed messages in signs of the island routed lightning packets from what I understand to do essentially encrypted onion routed chat which is great fantastic application it's an unanticipated application of the lightning protocol. But it's an overlay network so with Sphinx you're not just using lightning you've gone quite a bit further than that. Then there's the other question which is running a node again this is something that used to be something you did on the desktop until it got too heavy to run on your day to day desktop. Then we got lightweight clients and wallets that don't require you to run a node and then we got people starting to run nodes on various raspberry pies and manually configure them with command line. Now we have very easy to use web based interface solutions that allow you to run a node on your own hardware at home that even novice users who are deeply allergic of the command line have been able to build and run with you know about two hundred dollars worth of hardware like a raspberry pie or mini PC and about you know an hour or two of tinkering around and that would be things like my notes and raspy blitz and umbrella and others that are doing this and with that you can then run all kinds of other applications most of these node packages come with. The ability to run e-commerce solutions like btc pay server lightning nodes block explorers locally and all kinds of other nice gadgets that you can lay on top. Bitcoin node and they give you a lot of power user features without having to be very technically sophisticated so this is moving it's just perhaps not moving as fast as we'd like and that's partly because these things have not yet reached a level of commercialization where you have companies competing to build the nicest user interface. After the break we'll be back to talk about this a little bit more stay tuned. So Andreas I really like the idea that you're talking about there where something like Sphinx isn't actually a lightning application it's like a layer on top of lightning making it kind of like a layer three. One of the things that I've been using the application for is actually to listen to music to listen to music there are a couple of music channels on there of original music. That costs you know like three satoshis per minute or something like that that's really reasonable and it just feels so cool. To be able to connect these dots and not have it be this like painful head scratching process because I gotta be honest with you like. As far as users go I'm a really strategically lazy user I really only do things that have like a really good you know like amount of irritation and like I hate fiddling with something for two hours. I'll sit there and I'll write papers all day long but if you ask me to like try to troubleshoot something with technology that I'm just going to get bored and wander off and go eat a sandwich or something. So like that kind of kept me off the lightning network proper but I think the idea that maybe the lightning network proper isn't even where most users who at least fall into my bucket are going to wind up maybe it is these layer three applications as the first exposure to it and maybe even the first exposure to Bitcoin in many cases. I think that idea is really fascinating and the key here is that if you're not using Bitcoin purely for payments and really mostly. As a wire transfer network big payments because of course the fees have made it difficult to use it for very small payments and it doesn't scale in that way. A lot of the applications that we'd like to see are not really feasible between the uncertainty of fees the latency of block confirmations. And the minimum payments you need to make in order to have it accepted by the network all of these things make it very difficult to embed Bitcoin seamlessly into applications because what happens is. You're operating seamlessly an application like music or video streaming or whatever and then it comes to the payment unless what you're doing is an online commerce where. You know an item gets shipped three days later you will run into some discontinuities in the experience that will make you not really appreciate what Bitcoin can do. What lightning does is it removes exactly those discontinuity so you don't have the latency for block confirmations because payments are effectively settled immediately within a matter of about one to two seconds. You don't have a minimum payment amount once it she is possible in fact Middle East or she's a possible and fees are so small as to be negligible. Combining these three properties means that you can build applications that have nothing to do with money where money is simply the enabling technology where money is. A metering technology it's an anti spam technology it's a micropayment streaming technology and the real application is the music the video the content the game. And I think that's going to open the door for some very interesting lightning applications laps as they're called or layer three networks on top. I've been thinking a lot about how to get like the most amount of normal people or the least technically capable into something like Bitcoin and the community that I'm most fascinated by in terms of its dissemination is minecraft. And it's because it's targeted towards the least sophisticated people in terms of knowledge and in terms of technical sophistication it's literally to you know five to fifteen year olds in yet it's proliferated and it's everywhere and if you actually look at how they made that work. They said OK well let's just get the one geekiest guy or girl out of thirty friends and he'll or she will be the one to set up a minecraft server. And then all the friends will just join the minecraft server and then they can all create and engage and enjoy on his server and so sort of like rediscovering the value of federated deployed servers and that idea of well maybe the way that we deploy this is we think. We just need that one geekiest guy out of thirty and then just get him to evangelize his friends onto it and so look at what you did with Stephanie myself Adam you got this thing set up and then you sent us a link with the geeky guy and the geeky guy you would be our geeky guy right now. You've been upgraded and so you know everything's relative right so you got your geeky guy to do it and so like this to me is how like lightning applications will really catch on it's when you have that evangelist who's able to set up the lightning application instance on his end and then we'll even instance you the keys to join it and then guess what maybe the next conversation you have is you self cussing those keys rather than him maintaining them for you. And so like I'm starting to see the rungs on this conversation of how do we get people to go from having an online password and a login and then how do we get them to do text to factor authentication and then how do we get them to do Google off the I'm starting to see that transition with things like Sphinx chat and I'm really excited because I do think that something like. A minecraft style user acquisition strategy is the way that bitcoin and lightning will actually succeed. Yeah there's a very similar application that I'm very excited about so back to the conversation about lightning apps. There's an application called Ellen bits which is still in beta but it works and it's really fascinating what it does you run it on top of your lightning node. And what it does is it creates effectively a platform for sub accounts and wallets that you can then give to other people so you can do a number of things you can either take your lightning node and have it essentially host a series of sub accounts which you could use for personal organization. Lightning node that has business personal operations you know department one department two in the company. You could have it run multiple accounts and wallets for your family members so you run one node. And again you can do this on one of these node platforms where you can install and bits on top of a lightning node and a bitcoin node and then from there you could host your family and your family can have. Fully running lightning wallets through a web based interface that are very easy to use you could use it to create temporary wallets that can be easily redeemed for example to do the same thing we used to do at bitcoin meetups where you say hey you want to try this. Are you talking about paper wallets yeah paper wallets or just with bitcoin wallets before fees were a significant issue. They can set up a wallet and you can just give them a tiny bit of bitcoin right at dollar or two dollars worth of bitcoin at the time. So you can now do that only you can do it with a lightning payment to a temporary web based lightning wallet that they can create right off Ellen bits and keep the keys and credentials. And you can then send them a hundred satoshis or a thousand satoshis can you make a revocable wallet like something where you also have keys so they'd never redeem it or something you can take the funds back. Um I'm not sure that would be interesting to know because you know that's a useful feature to write like if you give someone a gift but then they never open it or whatever. This might be a little bit early for that I'm looking at it right now and actually I mean I think Andre is you're underselling this a little bit not only does it have that feature you're talking about there but it has this whole extensions area and just like looking through the extensions the ones that immediately jumped out to me is super interesting and things I want to explore are DJ live stream events tickets paywall subdomains like there's a ton here I've never heard of this before. So you can check this out at Ellen bits dot com and again looks like you can just set up a wallet very easily this doesn't look like it's something I'm hosting looks like something they're hosting but definitely very cool. Well yeah because it's open source and because it's a platform I can host my own Ellen bits on my own node as an application on top of my own lightning node where I can use them there's of course I can use theirs for all of the same features but I can also host it as an application on my own node and this means that you can deploy. Bitcoin capable lightning wallets in very low tech areas with a basic web interface. Things are heating up here I don't think people realize and I've been saying it for a couple of years and if you're not paying careful attention you might miss the fact that a lot of innovation is being built around lightning not just. The maturation of the core protocol the stability route ability of payments in the strength of the network but also the ability to build applications on top of it from the serious to the extremely silly like the one where you can. Tip satoshis and watch on a webcam as a machine dispenses food pallets the chickens all the way up to something like Ellen bits that we just described and btc pay server and other things that allow you to do seriously commerce. The majority of user facing innovation that's happening in bitcoin is actually enlightening now it's not in bitcoin anymore it's enlightening plus bitcoin. I think that it's so long or innovation to occur on chain that people forget that innovation was still occurring there just wasn't the ability to link it back to the primary chain. And so what lightning is doing is letting us take you know stuff on bitcoin put it into an environment that's not bitcoin and bring it back and so that ability to just distance yourself from bitcoin but still be in bitcoin. Is going to unlock like ten years worth of amazing products and innovation and things that never could have been done on the main chain of bitcoin. Innovation on bitcoin and building with bitcoin reminds me of my favorite mark twain quote which is my dear from twice the distance you're twice as lovely. And so being able to use the bitcoin protocol but detach yourself from the feature extensibility of bitcoin and yet still have all of that in bitcoin. It's like that it's like my god you know from twice the distance bitcoin is twice as lovely if that could just be the moniker for lightning i would die happy. Yeah i mean we could make it that so it's like if like when is silver to bitcoin's gold then lightning is from twice the distance bitcoin is twice as lovely yeah i think we could work with that. You're very right you know there was a period of time where regrettably for bitcoin a lot of people who are frustrated with a slow and conservative base of development in bitcoin. Move to two ethereum and they moved to other chains where innovation was happening at a faster pace with all of the downsides that has but faster. What's exciting for me about lightning is that it gives an outlet so a lot of the very very innovative front end developers ui developers etc who are interested in bitcoin and who still appreciate. The sound money the very robust security the censorship resistance the centralized nature of bitcoin and don't want to go somewhere where some of those things are sacrificed. Can have their cake and eat it to by developing and lightning where you don't need to be locked step in consensus where you have standardized protocols implemented by multiple different clients moving at different speeds and implementing different features. And then build on top of that very very fast. I've always been fascinated by bitcoin as a financial system but to me the most transformative thing is messaging and if you could just look at bitcoin as a multi trillion dollar root Goldberg machine to solve messaging online that is just going to change the world one of my favorite research reports came from brand the defense contractor. It's called the national security implications of virtual currencies deployed by non nation state actors came out like twenty fourteen. It's like eighty pages most of its nonsense talked about that on the show if the real fans can dig that up. Yep. And in it it said yeah bitcoins money but that's what dollars or work criminals use the most transformative thing that bitcoin could achieve. Is if it got the average person a level one person to act with the signaling and communication sophistication of a level three person which would be a criminal enterprise or a company. And so this thought of wow you can have completely free money you can violate every single fact law but the pentagon thinks that the most dangerous thing that bitcoin could ever achieve is as a framework to enable unsophisticated people to engage in not good semi sophisticated secure messaging that would be the most disruptive. In the eyes of the pentagon and so we look at what lightning is doing and what Sphinx chat represents and all of this innovation that's just using bitcoin as a trillion dollar PGP system that works it gets me really excited it gets those energy juices flowing. The enlightenment network instead of the lightning network because it's enlightening regular people to act more sophisticated. Okay so I think that that about wraps up our time for today so I think we're going to try one of our notorious giveaways notorious because we don't do them very often and sometimes I forget to send people prizes for a really long time but we're not going to do that this time if you are not currently on Sphinx chat but would like to check it out go ahead and send me an email at him it's speaking of bitcoin dot show and give me your best crypto or inflation or any of this stuff we're talking about joke just want something. The funniest joke we're going to send you a free invite and you want to pay for your note if you have your own note then you can just set this up for free go ahead and go to Sphinx chat and if you don't win the contest I think it just cost a couple of bucks to set up a note that's a host on their side and it's really ridiculously easy which is the only reason why I got in the door which then got Jonathan and Stephanie in the door as we've been talking about. So like I said send me an email at him it's speaking of bitcoin dot show today's episode featured Andreas and Antonopoulos Stephanie Murphy and Jonathan Mohan as well as myself out of the Levine this episode featured music from Jared Rubins with editing by Jonas. You enjoyed the episode send me an email at Adam it's speaking of bitcoin dot show or just leave a review on your favorite podcast player and until next time. Thanks for listening.