 Good afternoon. We will be talking about building the new financial system from the ground up. My name is Sunna Amaz. For those of you who don't know, I'm co-founder of Token Daily, a community platform and newsletter that keeps you up-to-date on the latest in cryptocurrency and blockchain projects. Today, I'm joined by Elizabeth Stark and Elizabeth. How about you introduce yourself to everybody? Thanks, Sunna. Hey everybody. I'm Elizabeth Stark, CEO and co-founder of Lighting Labs. This is my third year here back at Slush, which is awesome. I'm really excited to be back. I will say it's the warmest year so far, so I'm really happy about that. But no, Slush has been amazing and in fact, I was just thinking about 2016, I was here. I actually gave a talk about the technology my company is building at Lighting. Back then, a lot of it was just really kind of the theory and what we'd been envisioning and what we were working on. Last year, 2017, was the height of a lot of the madness in the world of Bitcoin and cryptocurrency. There was a lot of hype. Then this year has really been focused on building, which is exactly what I love and what I'm really passionate about. I'm super excited to be back. As Sunna mentioned, my company, Lighting Labs, are building technology to make Bitcoin faster and more scalable. I've always been really passionate about open-source decentralized technologies. I've previously taught at Stanford and Yale University and have just always been an internet geek. Really excited to be here. You're in good company. Roomful of internet geeks. I was wondering, before we start jumping into Lighting Labs and talking about the tech you and your team are building, how did you start on your journey into crypto and what took you down the crypto rabbit hole? As mentioned, open-source technology was something that I've always really been excited about and passionate about. I think the reason why was because I saw that the internet opened up so many opportunities to people around the world. It didn't matter where you were, who you were. When I first learned about Bitcoin, I was teaching at Stanford actually, a TA for the course that I was teaching. It said this article. It was 2010. The article is about open-source money. I remember thinking, open-source money, that sounds really cool, but will it ever work? Of course, I should have spent my life saving some Bitcoin with an academic at the time. Instead, I just said, okay, this is something interesting. Let's see what happens. Several months later, it started getting more in the media. It started reading the white paper, learning about it. The thing about Bitcoin and cryptocurrency more broadly is once you get interested, you go down this rabbit hole and you can't come back. It's like a vortex. Here I am, eight years later, and this is what I'm doing with my life, and I love it. Wow. In those eight years, what are major shifts and trends that you've observed over time? One really significant thing that happened this past year, 2018, was it was the 10th anniversary of the Satoshi Nakamoto white paper. On Halloween of 2008, the pseudonymous individual named Satoshi Nakamoto released his white paper to the world. Back then, nobody really cared. It wasn't this big ordeal. It didn't kind of go viral. A few people on a mailing list saw it. Some people thought it was cool. In fact, somebody named Hal Finney, who sadly passed away, who was key in this community, immediately saw the potential, spoke to Satoshi and got involved. That was really kind of the earliest days. The internet has been around for decades now. We think of the World Wide Web, but the internet predated the World Wide Web substantially. I think we've really seen the first decade of Bitcoin and cryptocurrency, but it's early. I like to analogize this to say the command line days of the internet. This was pre-graphical browser. It's kind of like when you had to type in text into the command line, and you didn't yet have the World Wide Web or all of the good usable apps that we have today. There were a lot of ups and downs throughout this first 10 years. The peak of the craziness was the end of 2017. But now we're really at the point where I think the focus is on building real technology with real use cases, and that's what I'm really passionate about right now. Before we jump into lightning and talking about those specific use cases, I like that you bring up the internet analogy. When we look back at USA Today shows from the early 90s, early 80s, we see people discussing the at sign, and they don't know what to make of it. They don't know how to think of it. They call it the A with the ring around it because they've never been exposed to email or it wasn't normalized. We see this happening today as well. People have a difficulty thinking about how to think about cryptocurrencies. Do we evaluate it in a tech framework? Do we evaluate it in a financial framework? Is it going to replace fiat entirely or will it be a parallel currency? Where do you see Bitcoin headed to 10 to 20 year time span? I think one of the most fascinating things about this technology is it encompasses so many different areas. It's not just technology. It involves apply cryptography and breakthroughs in computer science, but Bitcoin also involves game theory, incentive structures. Obviously, there are economic elements. There are sociological elements, cultural elements, legal elements. So I think it's really a fascinating area to study and one that I'm really passionate about. In fact, I don't teach anymore at universities, but it would be a perfect subject to teach a course on in a multidisciplinary manner. From my perspective, what's so significant about this technology is it touches so many areas of our society. In the global landscape, financial inclusion, there are so many different implications. I think it's very easy to dismiss. One thing that we've seen is, say, there are a lot of people from the broader financial community that have said something like, Bitcoin is a scam. We're like, this will never take off. Again, let's remember the early days of the internet. When people thought that that would never take off, that there was no potential there, that it was crazy. In fact, I've heard stories that people got angry when people were sending emails. They said, no, no, no, you can't do this in the 70s or something. Similarly, I think a lot of people still think, oh, this could never take off. It's a scam. This is easy to dismiss. But in fact, there's something really significant here. Let's separate that from, there was a lot of hype, especially in the last year. I've been a very open skeptic of ICOs of people raising far too much money at far too high of a valuation. It's like Silicon Valley, the TV show, if anyone's seen that one. But Bitcoin itself, Satoshi, we still have no idea who Satoshi is. I think Satoshi should remain anonymous for however long he or she desires, which is fascinating. It's like one of the modern mysteries. We still do not know who created this. Satoshi did not pre-mine any Bitcoin. Anybody could mine it. It's really a powerful community of people around the world that are passionate about this technology. It's an open-source community, so lots of developers volunteer their time to contribute. It's something really special and something that I think we haven't really seen since the early days of the Internet. That's what I think is what's so powerful about it. Completely agree. I want to continue tugging on that thread of hype cycles and run-ups. It's no secret that Bitcoin and cryptocurrencies in general are pretty volatile. We saw a spike, and now it's no secret that Bitcoin's dropped a little bit in its price. How do you as an operator continue sticking to your guns in bear markets and keeping T-Moral up? What did Lightning Labs office look like during a bear market? For our company, we started working on it in 2015, and then we actually officially created it in 2016. That was the real Bitcoin winter back then. The price of Bitcoin was about $200. If you ask me, $4,000 Bitcoin price is still pretty okay, all things considered, but we're builders. Our perspective on this industry is we believe in the long-term. We believe in the five- and ten-year horizon and longer. The short-term price cycles don't really affect us in our mentality. Of course, at the end of last year, we got a lot of press, there was a lot of hype coming in, and there was a lot of frenzy, but to be frank, that was distracting. As our goal to build this Layer 2 technology to scale Bitcoin, it's better if things are calmer and if we can focus and really build out the technology to get things done. Our office, in fact, is not any different whatsoever. In fact, we've hired quite a bunch more people this past year to really build out and grow out the industry. One of the things about these quote-unquote bear markets that I think is valuable is to actually saw this at the end of 1999, we had the hold.com bubble and then crash. After those crashes happen, I think that's a real time to focus and to build out and to ignore that. My co-founder has a saying, ignore the hype and keep on building. Ignore the noise as well. That's kind of in our mentality internally, and I think it's paid off thus far. Absolutely. I actually want to take a quick step back. You mentioned Layer 2, and I'd like to give you the opportunity to actually describe what Lightning is about in layman's terms. What are you guys actually building? Yeah, so Lightning is a transaction network and technology for Bitcoin. It turns out because Bitcoin and other related blockchains are decentralized, they're not terribly efficient, they're not terribly fast. So for example, with Bitcoin, you have to wait 10 minutes per transaction. You can only have about 5 to 10 transactions per second, and then you have fees that can spike and go up and down, and the fees are actually a fee market. People pay for priority for fees, and then you actually would have to say, if the fees go up, you have to pay higher fee to then get into the fee market and get your transaction through sooner. So that can be somewhat unpredictable. If there's more traffic, people will pay more fees. So with Lightning, we created this technology and protocol on top of Bitcoin that uses the underlying blockchain for security, where you can have instant high volume transactions at low fees without trust. So it's a peer-to-peer decentralized protocol and technology. So the analogy that I like to use is if Bitcoin is like a decentralized savings account, Lightning is like a decentralized checking account, where you can have instant transactions. So the way that Lightning works is you can put your funds onto Bitcoin, effectively transfer them onto Lightning. Once you've waited, say, your one 10-minute confirmation or a few to get onto Lightning, then you can transact instantly at high volume. So for example, you can send potentially, you know, right now we can already do many thousands, but we're looking at, say, potentially 100,000 transactions per second, or more. Visa, for example, can do about 40 to 60,000 transactions per second at its peak. In almost all cases, it's going to be instant, and then the fees can be very, very low of fractions of ascent. So this past year was really an important year for this protocol and this technology. So not only is Lightning a scalability and speed solution for Bitcoin, it's also an application development platform. And I think a lot of people didn't really realize this. They thought, okay, this can solve scalability. But you don't want to build on the Bitcoin blockchain at its base layer because you don't, who wants to wait 10 minutes to send a payment that's not very efficient if you're using an app that doesn't necessarily make sense. So this past year, on March 15th, we Lightning Labs released the first beta of a Lightning network implementation. Ours is called LND. And what that meant was, previously people were using our software with fake Bitcoin, we call it TestNet Bitcoin. With the beta, people were using it finally with real Bitcoin. So they were actually sending Bitcoin instantly at a high volume with very low fees. And a lot of it was early testers and developers and people that were passionate about it. But what we've seen happen in the past, say, seven or eight months is this explosion of developers and people just building interesting cool applications on top of it. And it's been super exciting. I actually want to continue on that thread. You guys launched beta. That was exciting. But what other milestones and what other developments have you guys seen in the past year? So especially on the heels of the run up. So I think the passion and excitement is palpable. And I was talking to somebody about Lightning two weeks ago. And the person, I was explaining the developer community, we have a Slack community, by the way, any testers, developers or enthusiasts in the room join our developer Slack at dev.lightning.community. So we have this community of people and they love it. They love Bitcoin. They love Lightning. And somebody said to me, this is a movement. And I said, you're right. This is a movement. There are people in our community that love this technology so much and want to build with it that every day test our software and find bugs which has been really incredible and amazing to see grow. And then right now, every day, I wake up and I get a message about a new application that somebody has built with Lightning which has been really incredible to see. And my take is, you know, we don't even, people say, okay, what is the killer app? I don't think we even yet know what the use cases are going to be. It's like, imagine if somebody had told you like there would be an encyclopedia that anybody in the world can edit, you know, in 1950. Nobody would have believed that that was even possible. And now we have Wikipedia and many of us use it every day of our lives. I think we'll see something similar with Lightning. So, for example, some of the applications that we've seen are micro payments for articles, podcasts, videos, kind of a micro worksite like Mechanical Turk, in-game payments, a Unity plugin for that. People love vending machines. Arcade games just last week in New York City. This dad and his son, this was awesome, built a maker pac-man game with a whole arcade and they cut out the wood and bought the joystick and installed it all that accepted Lightning and they brought it to the meetup and you could actually just pay with Lightning and pay this arcade game using a Raspberry Pi and a micro controller and all of that. So, there's just been a myriad of, oh, SMS. You can actually pay with Lightning and send an SMS in the variety of API type technologies people have built. In Iran, developers built a vending machine where there was a cool video, there was speaking Farsi, you could pay with Lightning with real Bitcoin by a juice in the vending machine. So, just all sorts of weird crazy things that we've seen emerge. It's been really exciting to see. You briefly alluded to it and like we clearly see it here, but Lightning has one of the strongest developer communities in the crypto space and I'm curious, what factors do you think contribute to that enthusiasm and that love to just build? So, one really interesting thing is the Lightning developer community is really not that old. In fact, the protocol developers have been around, you know, for a few years now and the protocol world is smaller and they're building kind of like, you know, the applied cryptography base layer aspect of the blockchain, but the application community is only a little bit over a year old and we've seen that emerge and I've actually had people, you know, come to us and say, oh, Lightning is what got me interested in Bitcoin and cryptocurrency because I finally saw that they're, you know, this could be usable. For example, it's a much better user experience. UX is something I'm really passionate about to send, you know, instantly and not have to wait for 10 minutes or to, you know, have fees that are more predictable and also not have this like transaction limit that can, you know, be a downside if you're trying to send a lot of payments. So, I think seeing that these people have found Lightning and that's bringing them to Bitcoin and cryptocurrency has been really exciting, bringing designers into the community. There have been some really great user experience designers that have gotten involved and are really excited about this technology. There have been these incredible hack days. In fact, I would love to see one here and Helsinki was just chatting with my buddy Jasmine about the cryptocurrency association here potentially doing something like that. In Berlin, there have been like many hack days with hundreds of developers. There was just one in New York City recently. So, to me, the creativity is what I'm really, I love. And that's what this year has been about. People are building, people are, one interesting thing the other way about Lightning apps that are different from say like typical quote unquote dApps or Ethereum dApps is, with Ethereum dApps, you have a variety of the application decentralized and I think that can make for a much harder user experience. With Lightning, you would have a typical website or an app and then Lightning is the payment element of it. So, you'd use your wallet or your app and a QR code to pay or then say a browser plug and it can happen automatically with some of the things that we're building out, but you don't have to then go to the block, I mean the whole point of Lightning is you're off chain, right? You have the scalability where you don't have to go to the blockchain. So, I think these applications can be a lot easier to use than some of the other technologies that are out there. Absolutely. Are we still calling them laps by the way? Lightning apps or did we do a little bit? Lightning apps or laps, yeah, depends. What, from your viewpoint, what are the biggest misconceptions people have about Lightning or the Bitcoin space at large that you continuously get asked or continuously see and you just wish you could correct in real time? So, a lot of people, in this community, of the cryptocurrency community more broadly, I do feel like people love spreading thought as we call it, fear, uncertainty and doubt. So, some folks that say Lightning is centralized and it's going to ruin everything and in fact one thing that I've loved over the past year is to see the map of Lightning. So, the way that Lightning works is you have payment channels and then you have various nodes that are connected to each other and it's much like the map of the internet. In fact, there's this really cool map of the internet circa 1969 right when it launched and there were like three or four different nodes on the internet and someone tweeted that earlier this year and they said, it's 1969 for the Lightning network. Do not underestimate what happens next and I love that tweet. But people say, oh, it's going to be centralized and it'll just be three mega nodes or five or ten and in fact, we've already seen this map of thousands of nodes on the network which is, I think it's been really significant. There's a website called 1ml.com and it's a Lightning network search engine. So, in fact, in the past two weeks, somebody added a whole lot of Bitcoin to Lightning. So, as mentioned, you have decentralized savings account, you transfer funds to the decentralized checking account that is Lightning. So, previously there were about 130 Bitcoin on Lightning. In fact, we intentionally didn't want people to put too much money on Lightning while it was in beta because we believe in security, we are passionate about that this is beta software. We said, don't put more money in there than you're willing to lose because it's early software. So, somebody came along and put an additional 320 Bitcoin on there. So, now we have 450 Bitcoin current value around 2 million US dollars onto Lightning, which is a big deal. So, it's grown dramatically over the past few weeks even. And apparently, the person who did this just wants to make money off of his money because the way the Lightning works is once you put funds in there, if you are routing, you can actually charge fees to route and those are the fees that you pay on the Lightning network. You pay the on-chain fees to get on and off of Lightning. Once you're on Lightning, you pay fees to route. So, we've also seen the growth of nodes. There's this really great company called CASA and they're selling a CASA Lightning node. They're running our LND Lightning software and I believe they've, I think they've sold over a thousand and various people in the Bitcoin community have bought those and then they can run their own routing nodes so they can get fees for that. But you don't need to run an always-on node to use Lightning. In fact, one of our biggest goals for the next few months is the mobile experience on Lightning. There are some early mobile applications, but we really want to make it seamless so we have this technology called Neutrino and it's a more privacy-preserving what we call Light Client. It means you don't have to download the full Bitcoin blockchain on your phone or on your laptop because it's actually really large and that doesn't make any sense. So, we are about to release a mobile application and a desktop app where you just, you sync to the blockchain quickly and then you can send and receive on iOS and then after that Android. And I think really, as mentioned, improving the usability of this technology is going to be one of our big focuses over the next year. And really, we want to make it so it just works, but building infrastructure takes time. You know, we had 10 years of Bitcoin, but again, the internet was not built in 10 years. So, we're really still in the early days. The mid-90s, I think we're still there. You know, we're not even yet in the OOs for that matter. And as mentioned, they're going to be ups and downs and I guess when it comes to the price standpoint, maybe we've already hit like 1998-99, but I'm happy for the relative com. Well, in like 20 or 30 years, how do you foresee lightning having changed the financial system as it exists today? Yeah, so I think that gets back to the name of the session and I remember talking to Katya and the Slush folks about it. And I really see this as building a new financial infrastructure from the ground up. You know, why in the U.S., our system is particularly bad. It takes me three days or more to send people money. That's crazy. Like, I actually just had to mail a paper check. Like, what are we doing? It's almost 2019 and in the U.S., I'm mailing paper checks to send value and money across the world. So, I see lightning as a means to send value instantly, you know, at a high volume across the internet and to have this value layer of the internet. And to me, that's kind of only the beginning. Once we have this decentralized financial infrastructure that's global that, you know, anybody can tap into, and in fact, one of the key elements of this is it's programmable. It's global and it's programmable, so anybody can build on top of it. You know, right now, if you want to build on top of a bank's API, good luck, because I don't think they're really giving you access to be able to do that. And this is why I really believe Bitcoin is the Internet of Money. Andreas Antonopoulos has written a book called That Really Great Guy. You Should Check Out His Work. He was here last year. And that's super significant because once we can program that, there are all sorts of interesting applications and I think financial inclusion is going to be huge. And there are going to be a lot of things that we really haven't thought of today. So, to me, I don't know what's going to happen in 10 to 20 years because I really believe it will be this world where we have all sorts of new applications and have improved people's lives all over the world and we haven't even imagined how that was possible yet. Absolutely. All right, we're all out of time and that's a wrap. Thank you so much, Elizabeth.