[00:03:22] Preston Pysh: Help people understand where this is at in Bitcoin. So is this layer one, layer two on Lightning? Where, where’s the code kind of manifesting itself?

[00:03:33] Ryan Gentry: Yeah, it’s interesting because it doesn’t really fit into the usual, you know, layered paradigm. What I will say is that from a high level perspective, what we’re doing here is, you know, Bitcoin individual, the smallest unit of a Bitcoin in the database is UTXO, right? An unspent transaction output. So I like to think of these as like the equivalent of a gold bar.

[00:03:55] Ryan Gentry: You know, UTXOs can be of different sizes, different denominations. You can have a UTXO that’s a hundred Bitcoin, a thousand Bitcoin. You can have one that’s as small as, you know, a couple of hundred Satoshis, but they are all objects as these UTXOs, which I can think of as a gold bar. So what we do with tapered assets is when you mint some new assets on the Bitcoin blockchain, what you do is you take one of those UTXOs.

[00:04:19] Ryan Gentry: And you fill it up with a bunch of new assets. So you have a Bitcoin, a UTXO that was, say, worth one Bitcoin. You make a transaction and all of a sudden you have a UTXO that’s one Bitcoin and also has a hundred dollars of a stablecoin in it, right? So like from a code perspective, what we’re doing is we are committing to a bunch of off chain metadata that says, you know, this is issued by Preston.

[00:04:44] Ryan Gentry: It is, there are a hundred units and it has, you know, this ticker, et cetera, right? And we are committing that information to UTXO. So on chain, this is as scalable as a protocol as you can possibly get, right? It’s very much like lightning. where all the actual activity happens off chain. And there’s just a really, really small footprint of data on chain.

[00:05:06] Ryan Gentry: So, you know, effectively what this could do is, you know, you could mint a million units of a stable coin and pay a couple of cents. You could transact millions of units at a time and only pay, you know, a single on chain fee. So it’s, it’s an off chain protocol that, you know, we, we think is as incentive compatible with Bitcoin is you can get very similar to but it is not, I wouldn’t say a layer two because we are actually transacting assets that aren’t Bitcoin, right?

[00:05:34] Ryan Gentry: They are net new assets that are, you know, predominantly in the early days, we expect tied to off chain assets like, you know, how stable coins are referencing, you know reserves held by some corporate entity. These are similar in that they’re, they’re, they’re off chain assets that have been realized on chain for the global liquidity and some settlement of lightning, et cetera.

[00:05:54] Preston Pysh: So let’s just take the example of a dollar stable coin. So you’re, you’re coming up with this Taproot Asset Protocol. You’re saying that there’s a hundred tokens of U S dollars. And they are not on Bitcoin, but what you do is you inscribe almost like you’re throwing an anchor into layer one inscribing that this ledger of these hundred US dollar tokens exist in this new Taproot Asset Protocol.

[00:06:23] Preston Pysh: And you’re throwing that anchor into layer one Bitcoin to say that, that this is the proof. This is the inscription proof that this was created at this date and time or in this block.

[00:06:33] Ryan Gentry: I would say that like the word inscribed now because of the ordinal stuff, like that has a little bit of different connotation where with inscriptions, they’re actually writing into the block space itself, right?

[00:06:44] Ryan Gentry: We are doing something much lighter weight. We’re more, it’s basically just a timestamp, right? Is, is a, you know, timestamp that’s verifiable and provable that says These were issued at this time by this key and with this information, and everybody who follows the protocol who’s running the software can notice that, recognize it, and agree upon it.

[00:07:04] Preston Pysh: Got it. So it’s a lightweight anchor that through encryption, that’s what makes it lightweight. Because when we talk about inscriptions, I think it’s important that like, you could take all the data from a JPEG and inscribe that into layer one Bitcoin through inscriptions and point some type of reader or browser to that data on the blockchain and you can repopulate that image with a web browser by looking at, this is more of, we would take that JPEG, we would compress it Through encryption down to just a hash effectively, and then we’re populating that hash.

[00:07:43] Preston Pysh: And if you have the key to know what that, what compressed it, then you can open up the file and know what it says inside. Is it, am I describing that correctly? Ryan, I’m trying to understand.

[00:07:55] Ryan Gentry: Yeah, no, I know it’s, it’s a lot to wrap your mind around, but effectively like, and it’s important to know for the audience that all of this is going to be abstracted away from users, right? What you’re going to see is you’re going to have a wallet that says, Oh, do you want to generate an address to receive some USD, whatever on Bitcoin? And you’ll generate an address. It’ll look a little bit different from lightning address and a little bit different from a lightning invoice if you’re receiving on chain, but then the person who’s sending to you will get the address.

[00:08:23] Ryan Gentry: They’ll press send just like a normal Bitcoin transaction. And it’ll just work and it’ll behave kind of exactly the same, but your wallet, what it’s doing is a bunch of this complicated cryptography in the background to verify like, okay, this asset that’s being sent to me is one issued by the issuer that I’m expecting, right?

[00:08:40] Ryan Gentry: It’s not a counterfeit. I can prove cryptographically that it is issued by the person I’m expecting to. I can prove that I’m only receiving, you know, the amount of units that I want, or I can verify that I’m only receiving the amount of units. 2020. And you know, three, I’m, I’m verifying each step in this assets history back to the actual issuements, right?

[00:09:00] Ryan Gentry: Making sure that every step along the way was not double spent just like we do with Bitcoin, but it’s, that’s one of the really cool things about the protocol as we inherit, although the, you know, a lot of this nature of the assets themselves are off chain for scalability reasons. We inherit all the same double spending protection, the Bitcoin, we inherit a lot of the integrity and the security of the protocol by, you know, like you’re saying, anchoring into the Bitcoin chain and then committing this data into the chain itself.

[00:09:27] Preston Pysh: So, for years, having been in this space, and for years I’ve heard from Ethereum folks, Tron, the people at Stacks, every one of them are saying, or at least they have, to date, said that something like this is impossible to do on Bitcoin, and you have to have a proof of stake system and not a proof of work system to do this, and it appears that, like, that is not true, and that you guys have kind of cracked the software.

[00:09:54] Preston Pysh: Yeah. to enable this. Is, is that a fair statement or do you think that there’s still some nuance to what I just said?

[00:10:02] Ryan Gentry: I would actually say that the nuance is not necessarily that we cracks anything because this is, you know, there’s a long lineage of people trying to build these protocols on the Bitcoin network.

[00:10:14] Ryan Gentry: You know, and we, we reference and credit a lot of prior art in the Bitcoin approval proposals, right? Like I know Peter Todd has done a bunch of work here in particular. There’s a lot of old ideas of trying to build asset layers on top of the Bitcoin blockchain. I think Taproot in particular, and then just the timing of the demand of stable coins made it to where we could build.

[00:10:36] Ryan Gentry: A really nice, slim, scalable protocol that natively integrated with, with the lightning network to serve a use case that we just know that there’s tons of demand for, right? So like on the kind of other chains perspective, you know, that’s a little bit of their talking in their own book, which is fine.

[00:10:55] Ryan Gentry: That’s part Bitcoin. They began on the Omni protocol, you know, years ago, a decade ago, and it was just that they weren’t, the protocol was on chain only and didn’t scale and, you know, wasn’t able to leverage the lightning network at all.

[00:11:13] Ryan Gentry: And then, you know, just general developer friendliness was not really a huge priority in those super early days.

[00:11:20] Ryan Gentry: So we’ve kind of. you know, more kind of taken a more updated view with updated technology of old ideas and what made them new again. And so, you know, I think that’s, we’re really excited having seen, I think the greatest hope for this protocol is that we’ve seen a lot of developers and a lot of users expand beyond Bitcoin to other chains to try and, you know, experiment with these new use cases.

[00:11:42] Ryan Gentry: And we’re kind of bringing these use cases that we have admittedly seen succeed elsewhere back to Bitcoin, right back to the mothership, back to the secure decentralized infrastructure. And, you know, we hope that in this next full cycle, we will bring a lot of those users and developers back and will retain a lot of the new users that show up.

[00:11:59] Ryan Gentry: Because we have kind of improved the value prop, so to speak, of the Bitcoin ecosystem.

[00:12:05] Preston Pysh: You had mentioned Haven’t levered the Lightning Network. Is the Taproot Asset Protocol leveraging the Lightning Network as well as Layer 1?

[00:12:16] Ryan Gentry: So that is the ultimate goal. Like there was There’s like a lot of prerequisites that had to be built first before that.

[00:12:24] Ryan Gentry: And so the two major ones are one, we needed to upgrade the lighting network generally to support taproot channels. And so for context, for those that aren’t familiar, you know, the taproot soft fork, I believe was activated in 2020, 2019 or 2020, one of those two, 2020, I think. And, you know, that gave us no, sorry. 2020 or 2021. And so that gives us, you know, a whole bunch of new capabilities

[00:12:49] Ryan Gentry: for, you know, more private channels, you know, more cost effective channels, et cetera, on the Lightning Network. So we had to build all the TAProot channels first. And then we also had to build all of the on chain components of the TAProot assets protocol first so that you could mint, send and receive on chain.

[00:13:05] Ryan Gentry: But now with these two prerequisites finished, live taproot channels are, you know, live in LND, the Lightning Network daemon, Lightning Labs’s open source software implementation of the Lightning Network as an LND 17, which we shipped a month ago. And now we have the taproot asset daemon live on mainnet for on chain usage.

[00:13:23] Ryan Gentry: The next step is combining these two together so that you can transfer tapered assets over Lightning Network, which is where we think, you know, particularly for stable coins, but, you know, for other uses, that’s like the real value prop. That’s the real killer use case that we’re excited to enable. And it was important that as you noted, none of the kind of previous asset issuance, asset management protocol attempts on Bitcoin were specifically designed to interoperate with the Lightning Network.

[00:13:47] Ryan Gentry: Right. And so that’s one of those things where, you know, again, the, the demand here was in 2021, after the El Salvador Bitcoin legal tender announcement, lightning, the lightning community saw just tons and tons of explosion of usage in emerging markets in particular. Right. I think there are a lot of the, the El Salvador use case and, you know, give credit to Jack Moller for kind of spreading the word.

[00:14:08] Ryan Gentry: People really got the cross border remittance use case of lightning. That was one that really clicked for people. And so we started seeing EBEX Mercado in Central America, the Bitcoin beach wallet in Galoi in El Salvador, of course, you know, Neutron Pay in Southeast Asia, Bitnob in West Africa, you know, BIPA down in Brazil.

[00:14:29] Ryan Gentry: Like we have these lightning startups all over the world, but all of a sudden, so there’s a big surge of usage. Because people really got, Oh, I can do this for a minute. Since it’s like sending a text message instead of going to stand in a kiosk for Western Union. People really got it. But then as the year progressed and as this kind of growth wave started to not really subside, but as, as it started to peak, We kept hearing from all of these emerging markets developers and lightning entrepreneurs like, okay, I’ve, I’ve acquired all the Bitcoiners like I’ve gotten, they’re using my app.

[00:14:59] Ryan Gentry: This is great. The next tier of user, the next group that I’m going after to try and onboard onto my business, like they want the dollar. They love the experience of lightning. They love the global reach. They love the instant settlement. They love the low fees for a variety of reasons.

[00:15:14] Ryan Gentry: Bitcoin is just as an asset is just a bridge too far for them.

[00:15:17] Ryan Gentry: And what they really want is the dollar. And so that kind of just a bunch of timing happened to line up there with the tech being ready, with the team being ready, with hearing all of this kind of user and customer demand. We were like, okay, well, we got to, we got to build a protocol to support that. And so that is the ultimate goal.

[00:15:33] Ryan Gentry: We don’t have Pepperdisk assets integrated with Lightning yet, but that is priority number one, and we expect to have that soon.

[00:15:41] Preston Pysh: So once that combines, or basically that rolls out, that you can then leverage Lightning for the settlement of these assets, I think you get into a really interesting scenario where Peter McCormick was down, I think it was in Argentina, and he was trying to get dollar stable coins, and the conversation.

[00:16:02] Preston Pysh: Started off with, Hey, do you want me to do this over Ethereum? And the guy laughed at him and says, no, that’s like 5 just to conduct that transaction. We, we use Tron, which is 1 and for the transaction settlement. So on this, what would be the transaction settlement for a dollar? Would it be like what it is for Bitcoin, which is like a Satoshi or two to, to conduct that fee that basically the fee for the settlement, once you guys roll that out.

[00:16:32] Ryan Gentry: Yeah, I mean, the really cool thing about the Lightning Network, I think the coolest thing about the Lightning Network actually is that because of the integrity of the market mechanics that surround the fee setting, the permissionless ability to open channels and add liquidity and, you know, undercut people whose rates are publicly advertised to route payments.

[00:16:54] Ryan Gentry: There is constant downward pressure on fees in the network. Right. And we see this, you can, and again, this is a fun thing to watch if you’re a lightning network nerd like myself, but you can watch kind of the games that routing nodes play where like, so let’s see, you want it to receive to your specific node and you have five channels, five entities who are providing liquidity to you, right?

[00:17:17] Ryan Gentry: All of their fees to route that final hop to you are publicly gossiped, right? They’re public information. So if you watch, you can see people kind of play games and undercut each other, right? And make sure that if one entity all of a sudden raises their fees out of equilibrium, guess what? They’re just not going to route any payments.

[00:17:35] Ryan Gentry: The network integrity is such that payments will go to the lowest fee route and make sure that there is that downward market pressure. So, you know, I can’t give a specific number because it depends on where in the network you’re sending to, but I can tell you that it’s very rare to see total payment costs in double digit bits of the amount being sent.

[00:17:55] Ryan Gentry: So, you know, for retail size payments, you know, anything under a thousand dollars or a hundred dollars or something like that, I mean, you’re looking at a minuscule payment, right? And especially if you’re sending something like 5, Right. I mean, think about 10 bits of that, you know, that’s, that’s, you know, sub cent almost, it is sub cent.

[00:18:13] Ryan Gentry: And so that’s, that’s kind of what we’re looking at and what we’re expecting. It depends on the amount, but the fact that there is downward market pressure and, you know,

[00:18:21] Ryan Gentry: Ethereum, you’re competing with large DeFi transactions for block space. Now, I don’t really know exactly how fees on Tron work, but I think it’s just kind of up to Justin Sun to set whatever he wants, right?

[00:18:35] Ryan Gentry: I think that’s accurate. Yeah, and so there is not this free market of liquidity provisioning that keeps fees low. So I think over time. They will, other platforms will not be able to compete. I think just the economics of the Lightning Network will win out to where the cheapest, the lowest cost and fastest way to transfer stable coins will be on Lightning.

[00:18:57] Preston Pysh: As a person that’s opened channels with other nodes and you got large channels, you got small channels, you can zap sats through a node to somebody else. I’m curious about the fungibility of these sats and how the data of these assets are somehow incorporated into these channels.

[00:19:20] Ryan Gentry: Yeah, it’s, it’s, this is a really cool part of the protocol, I think, actually.

[00:19:24] Ryan Gentry: It’s, it’s pretty beautiful because in the initial stage, and this is more of just a kind of Cork of the protocol. Initially

when we roll out tabular asset channels, they will be private only. So you won’t announce to the world my channel exists. Right. So that means you won’t be able to actually route through tabular asset channels.

Instead, they will only be the initial hop. So the sending channel and and or the final hop, the receiving channel will be the stable coin liquidity. In between will be the existing Bitcoin in the network. So you will have, you know, the first hop node will effectively be if you’re making a U. S. dollar to then route through Bitcoin to the U. S. dollar payment. The initial node will be effectively receiving dollars and paying out Bitcoin. And the way that they’re doing that is using the existing hash time lock contract HTLC construction that all Lightning Network payments. leverage. So you’re doing a usual HTLC, that initial hop, you know, is receiving dollars, paying out Bitcoin, Bitcoin routes through the network.

Everybody gets paid and Satoshi’s along the way. And then that final hop receives Bitcoin and pays out US dollars. Right, so it is a atomic payment where people on either ends are negotiating rates, they are doing the swap, an FX swap, effectively, and the actual transaction in the middle of the routing nodes in the core of the network don’t even need to upgrade, they just know that they’re routing Bitcoin payments, they may not even know that it’s a tapered asset payment at all, but at the edges, They may not know that they’re using Bitcoin, right?

They’re just using dollars.

[00:21:06] Preston Pysh: Is this only available to people that are running the L& D implementation on their node? Or could this be any lightning?

[00:21:15] Ryan Gentry: The goal, the reason why this is an open protocol, this is an open spec. We did a lot of work actually in making sure that anybody can write their own implementation in Rust and C or whatever language would be best for their implementation.

[00:21:30] Ryan Gentry: We want this to be for everybody. Now, we are only building the implementation that works with L& D, but it is an open source protocol, and we fully expect, as it gains popularity, that we will see additional implementations that work for the other implementations. Got it. is, this is not a Lightning Labs thing, right?

[00:21:47] Ryan Gentry: This is a Bitcoin thing. This is, this is for everybody because we want, we think this is really good for the network, for both networks, both the Bitcoin and the Lightning.

[00:21:55] Preston Pysh: Let’s say that you guys finalize this coordination over Lightning and you roll out the next update. For a person running a node for all these channels that I already have open with other nodes, is this something that I’m going to have to toggle to enable, or is it just ready to go?

[00:22:14] Preston Pysh: Do I have to update my node with the new L and D software? Walk us through like what that’s like from the perspective of the node operator that is not technically dialed into everything that’s taking place here.

[00:22:28] Ryan Gentry: We are going to endeavor to make this as easy as possible and, you know, Not just us, but you know, if you’re running on umbral or start nine or you have a voltage node or kind of any one of the distributors that, that make it easy to run a node, a lot of them actually with this next software update will be able, you’ll be able to access the Tabard assets daemon like out of the box.

[00:22:53] Ryan Gentry: Right. So that’s our, our bundle of tools that we call LIDD. So LIDD version 0. 12 has LND, it also has TAPD, and then it has our liquidity management tools, loop and pool, and it also has a couple other things. So we have this one nice bundle that a lot of the, again, Umbral, Start9, Voltage, bTCPayServer, a lot of the, like, node in a box type operations provide that use that bundle instead of just pure lND.

[00:23:22] Ryan Gentry: So you’ll be able to update, you won’t have to do anything, and all of a sudden you’ll have these new APIs to let you mint, send, and receive assets. Now, in order to then open an actual channel with Tapered Assets with stable coins in it, you would need to either acquire the stable coins yourself first, just like how you have to acquire Bitcoin first and then open a channel with that Bitcoin in order to use it, or you would have to get somebody who has the Tapered Asset in question to open a new channel to you.

[00:23:51] Ryan Gentry: Right? So it’s not like you can necessarily update existing channels that you have to all of a sudden also have tabard assets in them.

[00:23:59] Preston Pysh: It would have to be a new channel, but that’s just how about for, how about if I wasn’t really even wanting the stable coin, but I wanted to enable the routing through my node?

[00:24:10] Ryan Gentry: Great question. So that very importantly, you don’t have to do with that, right? You just have to keep running. You don’t have to ever touch tabard assets if you don’t want to. Right. All, you know, all, you know, like I said previously, is that your volume has increased because people are sending or routing more Bitcoin around it.

[00:24:26] Ryan Gentry: So this is why, you know, in the in the blog posts, and we’ve been like working on kind of the framing of this, we’re talking about how. Enabling this tapered assets, these new stable coins at the edges of the network and keeping the Bitcoin core, bitcoin only, that really turns Bitcoin into like a global routing currency, right?

[00:24:47] Ryan Gentry: It’s where we’re literally for these fX transactions, people going from, you know, you could go dollars to yen or Euro to GPB if you wanted to, Bitcoin is the other side of all of those trades.

[00:24:59] Ryan Gentry: Which I think is really, really important. And like that’s a, it’s a little bit of a different frame on making Bitcoin a medium of exchange than what people think.

[00:25:09] Ryan Gentry: Right? It’s not necessarily medium of exchange in terms of using Bitcoin to buy coffee. It’s no, you are exchanging currency to currency and the medium through which that exchange happens is Bitcoin and the Lightning Network, right? You are physically routing dollars through Satoshi’s, through Bitcoin, and those node operators in the core, to your point, don’t have any idea that they’re routing a tempered assets payment, right?

[00:25:34] Ryan Gentry: To them, they’re just doing their normal job of forwarding Bitcoin around. And you are actually using Bitcoin as like a medium, like in the traditional sense, like air or water or something to route value. And we think that’s like really, really important in terms of realizing the internet of value where, you know, the internet, what that means is it’s a network of networks.

[00:25:56] Ryan Gentry: It’s a way to connect a bunch of disparate networks and we see lightning similarly, you know, evolving into something that is a payment network of networks where it is connecting, you know, a bunch of these other existing payment networks, existing FinTech operations, you know, sovereign users, et cetera, but it is Bitcoin at the core, just like how at the core of the internet, it’s just TCP over iP.

[00:26:20] Preston Pysh: In preparation for this discussion, Ryan was kind enough to send me a couple articles that really kind of did an incredible job kind of walking a person through the technology and just some of the more interesting points about this. And one of the things that I really, really found a lot of value in there’s, there’s a person that the website is called coinshares.

[00:26:43] Preston Pysh: com. We’re going to have a link to this particular article. It’s very in depth. We’re going to have a link to this in the show notes, but. About halfway down through the article, there’s this figure 11 and it says the evolution of tether transfers on crypto platforms. And what it does is it, it shows the percentage of tether and it’s like what it’s been minted on, which protocols it’s been minted on.

[00:27:07] Preston Pysh: And it shows how, as Ethereum came online, how it took away from this Bitcoin USDT use. And then as Tron came on, how it took all of the, basically the dollar stable coins away from Ethereum. And because we’re talking about the fee incentive, it’s the incentive of not having to pay a lot to transact. And when I’m looking at what you’re describing…

[00:27:33] Preston Pysh: It’s also, it’s also, just to be quick, a quick interjection, it’s also the speed of settlement, right? That’s a very, very important aspect, right? Bitcoin block times are 10 minutes. I forget the exact number for Ethereum block. it’s much faster. And then, you know, Tron is down the order of like, you know, five or six seconds speed of settlement and low fees. That’s what people want. Yes.

[00:28:00] Preston Pysh: Okay. So when we think about that, and we think about what you just described with this now taking place over lightning, which is less than five seconds, it’s a median, practically milliseconds.

[00:28:12] Preston Pysh: And the fee is so small that you don’t even, you don’t even think there’s a fee. I’m looking at the incentive of people continuing to use the Tron network, which, which, by the way, like back to your comment, I don’t know if people are intimately familiar with Tron, probably not if they’re listening to this show, but your comment about Justin Sun basically being able to determine what the fee is because it’s a very centralized protocol like all the others.

[00:28:40] Preston Pysh: And why we continue to talk about Bitcoin is because it’s actually decentralized. I don’t know. I would like to think that a lot of this is going to come to this protocol because of those two key characteristics and incentives, which is basically no fees and immediate settlement. What am I missing?

[00:28:57] Preston Pysh: Prior to this year, I would have said that the thing that you’re missing is that maybe lightning isn’t integrated all the places where the users already are. But this year we got Binance, we got Coinbase coming soon. Like all the places that the users are where they’re sending USDT over Tron, they now have Lightning too.

[00:29:16] Preston Pysh: And you know, the people who were using cryptocurrencies for like the utility of it, I guess, even, even the people using it for the speculative value, but you know, the people who are using it as a tool, they’re very smart and they’re very pragmatic and they’re very capable of figuring out how do I get the best deal?

[00:29:34] Preston Pysh: And how do I use this new technology most efficiently? And I think that now that we have Lightning distributed in all the places and connected in all the places where these users are, I think it’s just a matter of time. It’s just a matter of getting the assets issued. And it’s a matter of people realizing and spreading through word of mouth.

[00:29:52] Preston Pysh: Like, Oh man, like you’re still paying a dollar per transaction on Tron. I’m only paying five cents on lightning. You’re missing out, man. You’re on the old tech. I’m on the

[00:30:02] Preston Pysh: new stuff because I think you’re right. It’s, it’s purely just the incentives are better. The platform is better. And I think also another thing that you’ll, you know, that is underappreciated is Bitcoin infrastructure, Bitcoin software.

[00:30:15] Preston Pysh: And I’m not, I’m absolutely talking about lightning labs and software, but not just specifically lightning labs and software. Bitcoin software is just, it’s such a level above. The rest of the industry in terms of security, in terms of integrity, in terms of how battle tested it is also in terms of just how much attention is paid to developer friendliness.

[00:30:35] Preston Pysh: Generally, we hear from entrepreneurs all over the world all the time who are Bitcoiners, Bitcoin, operating Bitcoin companies, but have had to support tether on these other platforms because

[00:30:45] Preston Pysh: it’s just, you know, there’s user demand for it and they’re just continually those like, please. Please let me spin down my various crypto nodes.

[00:30:55] Ryan Gentry: Please let me just run Bitcoin infrastructure because I trust this stuff. I know how this stuff works. This isn’t going to screw up my business or screw me over, but I got to have the stable points, right? So I think there will also be a, you know, a push from companies who are saying, Oh, please use the stable coins over on this platform on this network instead of these others. Cause these ones give us tons of problems.

[00:31:17] Preston Pysh: And by the way, if you’re paying five cents on the network, at least today, like you probably overpaid on the fee by like a hundred X of what it actually costs just to kind of give people an idea of like how small, like we’re talking like five sats, which, you know, I mean, you’re talking tenths of pennies with the routing fees today.

[00:31:37] Ryan Gentry: It’s, it’s not fair. It’s not a fair comparison. No, it’s. We are definitely 10X better.

[00:31:42] Preston Pysh: Yeah, yeah, if not more. Okay, I think there’s this stigmatism inside of the Bitcoin space for good reason that anything that is tokenized other than Bitcoin is just looked at as a scam or a fraud and I think that if I was going to quantify why it’s just because when we look at anything beyond stable coin dollars or stable euros, like it’s just been a total rug pull.

[00:32:14] Preston Pysh: NFTs, all of it, right?

[00:32:16] Preston Pysh: So I think for a lot of people in the Bitcoin community, they would see the announcement and they’re just saying, Oh boy, now we’re going to get rug pulled here. And then because of the scar tissue that so many people have with. Everything that’s happened in this space, in particularly the last cycle, they’re just, they just want to shoot everything that’s not Bitcoin.

[00:32:41] Ryan Gentry: I get it. Yeah.

[00:32:42] Preston Pysh: Yeah. What are, what are some of your comments for that person as they’re, as they’re hearing us have this conversation, what would you say to them? Yeah. I mean, I think I would say by no means do you have to use these assets, right? This is all purely opt in.

[00:32:57] Ryan Gentry: Bitcoin remains the only trustless asset. It remains the most secure, the most decentralized, obviously the most supply capped. It’s the only one that you can 100 percent verify your ownership of yourself.

[00:33:09] Ryan Gentry: This is by no means a substitute for Bitcoin. And we have taken great pains in our communication and in the design of the protocol to make sure that these assets only augment bitcoin’s existing capabilities.

[00:33:23] Ryan Gentry: Right. We took great pains to make sure that, you know, the way to transact on the lightning network is actually routing through the existing Bitcoin liquidity. Right. I think that’s really important to note that these are applications. These, these channels will plug in at the edges of the network and serve to like, you know, the image that I have in my head of this is if you have like, you know, this spider web network of channels.

[00:33:47] Preston Pysh: Right.

[00:33:48] Ryan Gentry: All of a sudden you start pumping in, you know, additional energy, additional juice at the edge. And you just kind of see this spiderweb, like, you know, start vibrating and flexing and getting bigger and bigger and bigger, like something from a, you know, a horror movie or something like that. I don’t know if people follow me with that, but it’s really clear in my head.

[00:34:06] Ryan Gentry: I’ll do some, you know, mid journey or ChatGPT image generation to try and get, you know, get it out there. But this should only be something that exists to augment the existing lightning network to augment the, you know, node operators who just want to earn more Bitcoin by routing these payments without having to upgrade.

[00:34:25] Ryan Gentry: And I think also we’ve taken great pains in communicating that, you know, these, with these assets, you are trusting the issuer, right? You are trusting explicitly the issuer.

[00:34:36] Ryan Gentry: This is not a trustless protocol. The routing and using HTLCs and using the same contracts the lighting network uses, that is trustless.

[00:34:46] Ryan Gentry: That still uses, you know, the same cryptography as, as bitcoin payments. But if you’re using a U. S. dollar tapered asset, you know, you are trusting the issuer. And so for people who don’t want to make those trust assumptions, then you don’t have to use it. What we have seen on the counter, and I think this is, you know, important is Bitcoin Twitter is very loud, but it’s not necessarily representative of all Bitcoin users.

[00:35:08] Ryan Gentry: There’s 120 billion of stable coins issued out there. There are, I think the chart has been going around and we had this in the blog post, stablecoin issuers own more U. S. treasuries than the country of Germany, right, than the country of South Korea. These are geopolitically and globally relevant on a scale that, you know, this is not just your little NFT pump and dump.

[00:35:33] Ryan Gentry: There is real, persistent, actual demand for these assets, and I think when we think about, you know, the ultimate goal of the Lightning Network, what we’re shooting for is we’re shooting to disrupt all of the analog payment networks. Right. All of the payment networks that were set up and constructed before the internet.

[00:35:50] Ryan Gentry: And this is, you know, SWIFT facilitates 150 trillion of transactions a year. Visa and MasterCard, all the payment networks combined, you know, facilitate 40 trillion of transactions in a year. Right. Mobile money networks, which are all walled gardens. That’s another, you know, one and a half trillion dollars per year.

[00:36:10] Ryan Gentry: One thing that all of those networks have in common is that they support many currencies and not just Bitcoin. One thing that the Lightning Network does not have yet, but will have soon is support for many currencies, right? And so I think when we think about, you know, making the Lightning Network feature complete and at feature parity as a system with these analog systems, we’re looking to disrupt.

[00:36:32] Ryan Gentry: One of the most glaring missing things is support for, you know, primarily the dollar right with Swift, 46 percent of, with Swift transactions are the dollar. 23 is the Euro. And then it’s like, you know, EUR, JPY, RMB downstream of that. Right. So I think it’s just one of those things where when we look at, when we look forwards, What do the next, again, like, just like we’ve heard from these sliding entrepreneurs, what does the next tier of user want?

[00:36:57] Ryan Gentry: How do we keep growing this network? How do we get it to the point where it’s reaches its destiny of disrupting all this legacy infrastructure?

[00:37:05] Ryan Gentry: We need stable points. This is kind of the next thing to add to it. And I think, you know, again, like, I just want to underscore this. When I think about the lightning network from an infrastructure perspective, like I think about it in the same breath as, you know, electrical power grids, as oil pipelines, right.

[00:37:22] Ryan Gentry: As fiber networks, this is mission critical infrastructure, or it will be mission critical infrastructure, right. For the world.

[00:37:29] Ryan Gentry: This is not just for, although the micropayment use case is fantastic. This is not just for like tipping your friends and stuff like that. This is for global commerce. And, you know, those numbers that I threw out earlier, right, you know, in the hundreds and tens of trillions of dollars a year, that’s, that’s big boy stuff.

[00:37:45] Ryan Gentry: And that’s where we’re headed.

[00:37:47] Preston Pysh: When we look at this past cycle, I just can’t even imagine the amount of monetary energy that was directed towards all these other science experiments happening on all these other quote unquote blockchains. And I say that because they’re not actually decentralized. And it almost seems like a lot of that on this next cycle is going to be pointed directly at Bitcoin for innovations like the one that we’re talking about right now.

[00:38:13] Preston Pysh: Yeah, I think that’s really important.

[00:38:15] Ryan Gentry: It’s super important. And I think, I think that’s, I mean, like for the folks that don’t know my history you know, I started my career in crypto. I was a lead analyst at a crypto hedge fund. Right. I started, I cut my teeth in the industry reading white papers about ICOs and stuff like that.

[00:38:33] Ryan Gentry: And I, the whole two years, the longer I read these white papers, the more I talked to these founders and the more I educated myself about first Bitcoin and then second about Lightning. The more mad I got that, like, why aren’t these people building this stuff on bitcoin? Like, none of this is going to matter.

[00:38:51] Ryan Gentry: All of this is misdirected energy that’s just, you know, going into some black hole that’s going to, you know, bump these tokens briefly and then send them down to zero. Like, none of this stuff is going to matter if it’s not anchored to the most secure blockchain, which is Bitcoin, right? If it’s not taking advantage and leveraging the network effects of the 21 million cap.

[00:39:11] Ryan Gentry: Right. So this is like kind of personal for me in a way with when I got to lightning labs, you know, a big, big priority of mine was how do we get some of this capital from the, you know, crypto VC industry and just it’s all of the capital that’s flooding into these crypto projects. How do we redirect that to bitcoin?

[00:39:29] Ryan Gentry: How do we get the energy and the attention back where it matters, where it should be, which is, you know, contributing to Bitcoin’s network effects, contributing to Bitcoin’s destiny as a global reserve currency.

[00:39:40] Ryan Gentry: Right. How do we, how do we get that back? And we’ve made amazing strides in that direction over the last four years, you know, and that’s collectively as a community, you know, not taking any credit for that.

[00:39:49] Ryan Gentry: And we’ve made amazing strides in the right direction. And I think you’re exactly right. You know, there’s never been a better time to build on Bitcoin. There’s never been a better opportunity set for building on Bitcoin. Right. There’s never been more stuff to do. The tooling has never been better for developers.

[00:40:03] Ryan Gentry: You know, not only are we talking about just Bitcoin or lightning or tempered assets, talking about Nostra, right. We’re talking about, you know, lightning in the, in the AI industry you know, micropayments there. We’re talking about there’s just a host of new protocols and new opportunities.

[00:40:19] Ryan Gentry: And, you know, one of my favorite startups in the intemperate asset space already is combining the two interesting areas of Nostra and tempered assets, right.

[00:40:28] Ryan Gentry: And trying to kind of make something that’s greater the whole is greater than the sum of the parts, right. Which I think is really cool. So I think there’s tons of tons and tons of space to experiment. And then yes, our greatest hope is that in this next bull market, we won’t lose so many people to the black hole of, you know, shit coins and all the associated nonsense.

[00:40:48] Preston Pysh: One of the things that I think is going to be important for the success of this is just on the wallet side. So when we look at a lot of Bitcoin wallets, they, and a lot of their branding, it’s that we don’t do anything other than Bitcoin for our wallet. What are they going to have to do in order to enable this so that if I want to receive a dollar, a stablecoin dollar, onto onto my wallet.

[00:41:10] Preston Pysh: Is it a heavy lift for them to enable a lot of this, the timeline for their ability to implement something like, like that? What does that look like?

[00:41:20] Ryan Gentry: Yeah, so we have. It’s never going to be, I mean, we’ve made it about as easy, I think, as we can, if you’re already leveraging our existing, again, that litby bundle, and you’re running either a mobile wallet or, you know, a custodial wallet or something like that, all you’ll have to do is just upgrade to the latest version of the software and you will at least have on chain support for these tapered assets.

[00:41:42] Ryan Gentry: And, you know, that I think is going to be really important and really big to your point about wallet support because, you know, users aren’t going to be touching the protocol directly. They’re going to need some interface in between them and the protocol to make it easy. On the timing front, like I said, like there is a very clear light at the end of the tunnel now, predicting dates for software, something that now I’ve been doing this for long enough.

[00:42:03] Ryan Gentry: I know to avoid that trap you know, it’ll get done when it gets done, but it is like absolutely our top priority. And, you know, we’ve gotten a pretty good track record of, of shipping code on time.

[00:42:13] Ryan Gentry: And so I think that’ll be something that happens sooner rather than later. And what you’ll need to do as well as developers, basically you’ll just all of a sudden inherit.

[00:42:21] Ryan Gentry: A bunch of new APIs that allows you to say Oh, I would like to open a channel, but not just the Bitcoin channel. I would like to open a channel that has, you know, some Bitcoin and also some capital asset USD, right? Oh, I’m going to generate an invoice, but when I receive this payment, I don’t just want to receive it in Bitcoin.

[00:42:40] Ryan Gentry: I actually want to receive it in this other currency like, Oh, I’m going to go send a payment. And when I send it, I don’t want to spend any of my Bitcoin. I want to spend my capital at USD. Right. So there’s going to be, you know, of course, a little bit of, there’s an opportunity here, frankly, for the wallet, who was the best, who abstracts at the best for the users.

[00:43:00] Ryan Gentry: And I think, you know, it’s going to be really interesting to see, but we have made it as easy as possible in our minds. And now that we’re ready for main net, like it’s time to start getting feedback from the developer community and hearing, you know, what we did wrong and what we can improve. So, you know, if, if folks are listening and interested in doing that, like the big ask here is run the software, let us know, is it as easy as we think it is?

[00:43:21] Ryan Gentry: Because that’s just, you know, a classic thing with software engineering is you build according to what you think works and then you go and toss things over to the users and they say, Oh, this doesn’t make any sense. That doesn’t make any sense. You know, you messed this up, et cetera, et cetera. And so we’ve done a really good job of engaging with the development community building up to this point, but you know, always welcome more feedback.

[00:43:42] Preston Pysh: One of the things that has been frustrating. So, you know, I came out of traditional finance looking at stocks and equity and all this, right, is being the main thing that I would study and try to value and own. When I look at all the crypto tokens and things that have happened in this space over the last, call it four to five years, my, the reason I was always just so disgusted by it all is because I would always say, so like, what equity, or what is this token like actually representing other than just marketing? Really? I mean, it’s just like, buy this-

[00:44:18] Ryan Gentry: But like, what if you could own a share of TCP iP?

[00:44:22] Preston Pysh: That was the narrative, right? That was the narrative. And so bad. And it got to the point where a lot of the tokens weren’t even trying to convince people of a story of technology that was over, you know, 99 percent of people’s heads. They weren’t even trying to do that anymore. It was just buy this picture of this monkey that has 20 different types of sunglasses on that I used AI to enhance. And there’s literally no value or no equity behind any of this digital.

[00:44:55] Ryan Gentry: Vaporware, right?

[00:44:56] Preston Pysh: Now, just in July 15, JP Morgan comes out and they are marketing this, the launch of the tokenized collateral network.

[00:45:07] Preston Pysh: The TCN is what they’re calling it. And they’re saying blockchain brings collateral mobility to traditional assets. They’re going to tokenize equity.

[00:45:17] Preston Pysh: When I look at this, what they’re effectively doing is they’re making stock certificates immediately settling and They already have the capacity to do this with the ledgers.

[00:45:29] Preston Pysh: They’re centralized ledgers that they already have There’s nothing new other than them basically using blockchain as a marketing scheme to do what they’ve they’ve already done when I look at What you guys are doing with the Taproot Asset Protocol. You can’t get around the, the SEC and every one of these developed nation states that are working with these banks that handle these equities that actually have things behind them because of KYC requirements. Like if I have, if I own a certificate of Apple stock and I want to send it to you, that certificate has to be KYC’d into your name. And so I see a major disconnect with anything that gets tokenized beyond currencies, like the dollar, like what we’ve talked about, which I see as the primary use case for this is, is the tokenization of currency, right?

[00:46:26] Preston Pysh: The tokenizing equities, I think is going to be a whole lot more difficult, but I say all that in that in this conversation, I came to the realization that because JP Morgan’s running the server, right? They’re running this blockchain server. There’s an expense to this that, I mean, it’s not like you can go out and run this TCN node, right?

[00:46:50] Preston Pysh: Like people aren’t going to run out and go out there and run these nodes. They’re, it’s completely centralized by JP Morgan. They have an incentive to leverage these rails because the cost to basically run the quote unquote server or the settlement is nothing.

[00:47:08] Preston Pysh: It’s completely been diminished down to like.

[00:47:12] Preston Pysh: Tenths of a penny to settle these certificates, as opposed to using their centralized network. I’m just, where do you, and a lot of this, I’m sorry, there’s, I guess a question in here. It’s me trying to kind of wrap my head around it.

[00:47:27] Ryan Gentry: I would say, I mean, a lot of this stuff, when I try and think about how things are going to play out in the future.

[00:47:34] Ryan Gentry: Although the analogy is never perfect. Like truly, I think you can look back at the lessons of the internet and how the internet spread, and I think you can learn a lot about how the internet of London is going to grow, right? And so I wouldn’t say what JP Morgan is doing is they have built a corporate intranet, right?

[00:47:51] Ryan Gentry: Of money, right? And that’s fine, right? It may be good. There’s some VP there that got a promotion because they’re doing innovative things, right? But what happened to all the intranets?

[00:48:02] Ryan Gentry: All of them just got decimated because it was way, way more effective to leverage the network effects of the internet itself, right?

[00:48:09] Ryan Gentry: All the open source software, being able to connect out to all of, you know, you get it by connecting to the broader internet. You get the benefit of everybody else who’s contributing to the internet, right? And I think that’s the same thing with Bitcoin, with lightning, with chatbot assets.

[00:48:24] Ryan Gentry: You know, another thing that I think in looking back at the internet and one more point before I move on to like specifically how would J. P. Morgan do this. is that what the internet did more than anything else, like the trade of the 2000s was long Google short print media.

[00:48:41] Ryan Gentry: If you did that, you were ran out with a bandit, right? Because what it did was it was just more efficient to initially distribute, instead of taking analog writing and publishing it as in a digital format.

[00:48:56] Ryan Gentry: It was much, much more efficient to take natively published, natively published, digitally published content and distribute that over the internet to everybody, right? That was just way better. And so, you know, sadly, so all of these local newspapers and, you know, all of these different print media companies just get decimated by the internet, right?

[00:49:15] Ryan Gentry: I think we’ll do the same thing with lightning, where, you know, the

trade of the 2020s is long Bitcoin, long lightning, short analog payment networks in the same way. Cause if you have physically analog issued currency and you’re trying to move it or other assets like you mentioned, and you’re trying to then move it over digital rails, that’s just so much less efficient than natively digitally issued currency that is distributed over these digital rails.

Right. So I think the key here is that with currency, like what these, what Tether and these other companies are doing is they have physical reserves, right? Or, you know, they’re probably digital reserves, but off chain analog reserves that they have been issued as these digital units.

[00:50:02] Ryan Gentry: And they’re just, people love them, right? Cause everybody around the world wants dollars and they just, they can’t get enough of it. And there are structural physical impediments to them giving dollars outside of, you know, Bitcoin and Lightning soon or trying at the moment.

[00:50:16] Ryan Gentry: I think, although I’m not a lawyer, what I would say with, you know, these other assets is I could see a similar model taking place where maybe there is some initial kind of private world garden.

[00:50:30] Ryan Gentry: One might say like a custodial side chain type thing that the issuer is running. And for

whatever reason, they allow, you know, their holders to take ownership of these instruments, which then they can transact over, you know, the internet of money, the lighting network, frictionlessly, and, you know, at the, with the great speed benefits of lighting.

And so I think, you know, ownership of this stuff is always really tricky. That’s the devil is in that details. The transaction of it, I think we have that solved. And I think like the gravity of the improved transaction experience, the lower fees, the instant settlement, the global reach, I think that will just continue to pull more and more assets into the digitally native world.

To your point, like currencies are very straightforward. That makes perfect sense.

I think equities, debt, et cetera, a little bit fuzzier for sure. But I think what we hope to do is to make, let it be known to smart people who see a better way of doing this, that we have a playground for you to come experiment, right?

We have the tools. We may not have it all figured out yet, but we would love to support what you’re looking to build and help you build it out, you know, on a foundation and on a platform that’s going to last.

And it is going to scale.

[00:51:42] Preston Pysh: It seems to me like if I had to guess how I see this kind of evolving is they’re going to, they’re going to continue to come up with these TCN networks between JP Morgan and BlackRock and whatever.

[00:51:52] Preston Pysh: And then what’s going to eventually where I think the equity eventually gets tokenized is they will use these rails, but they’re going to use them for transactions between themselves, between BlackRock, JP Morgan, and anybody who’s basically custodying equity on behalf of their KYC customers. They’re going to use these types of rails, like this Taproot network asset protocol.

[00:52:18] Preston Pysh: Because the cost for them to run it is nothing. It’s literally nothing. But then they can immediately settle with each other on these, on these certificates. Because one of the issues that I’ve had is like the business model is the rehypothecation of these dang certificates, these equity certificates.

[00:52:33] Preston Pysh: And as long as they have a stranglehold on that, because the SEC is always going to be behind their back and the equity has physical property in these, in these, in the United States or Europe or whatever. And that’s kind of the vulnerability of like why I think it’s so hard to tokenize equity is because you have that physical contact point.

[00:52:54] Preston Pysh: Right. But I think that these, these entities call it JP Morgan or BlackRock. because they rehypothecate the stock certificates so that they can collect a yield on, on lending them out. I just don’t see them with regulators giving up that stranglehold, but I think that they would potentially lever this network because it reduces their costs to clear with each other as there.

[00:53:17] Ryan Gentry: Well, so what I would, I don’t disagree with any of that, but one kind of thing I would want to shift your perspective on a little bit is, you know, like one thing we talk a lot about with, with lightning is like, The US and Europe to a lesser extent is probably like the last place that lightning payments are going to take off on like a daily basis, right?

Cause we have pretty good payments networks, right? Like they generally work. I mean, I think they generally work pretty well. And there’s not like a lot of pain that’s forcing users to seek alternatives, right? We have seen great uptake of lightning in emerging markets where they don’t necessarily have good payments experience, where maybe they are predominantly cash only, or they can’t, you know, really, they can’t trust the banks, not because, you know, they may be underwater on their bond portfolios, but like, cause the banks like to steal money from their accounts and stuff like that or center arbitrarily.

Right. So it’s more like who has the pain point that is willing to take a risk on an early technology to build out first. And so one thing that I think would be really interesting. is like, well, what if you look at places that don’t have functioning securities markets.

[00:54:22] Preston Pysh: Right.

[00:54:23] Ryan Gentry: What if you look at places like Latin America generally, where there isn’t, you don’t have the same ability to, you don’t have the same capital markets as the U. S and maybe you have net new incumbents or net new capitalists who want to create those markets.

right? If you’re going to create a brand new capital market from scratch today, right? Are you going to go and talk to the New York stock exchange and like ask for their software and like a license? Probably not. I think it would be a lot easier to get started in your basement, you know, building with tempered assets.

And you know, that’s again, not a lawyer, not a regulator. I know it’s a lot more complicated than that. But I do think that that might be an area where we see a lot more early development.

And as it gets proven out in kind of these more nascent markets, you know, and the technology advances, that’s when we start seeing some of the bigger, you know, Western incumbents who they don’t have a problem with capital markets are looking to solve.

Right. It works great for them. And I think, and the reason why I’m speaking confidently about this is this is exactly what we’ve seen with Lightning. This year, we got Binance and Coinbase. Last year, you know, we got. I forget exactly who, but like HashApp and you know, a few others, right? Kraken was another big one we got last year, right?

The year before that we got Paxful and like, you know, big, important institutions that joined, but they were of the smaller variety, right? The way that these protocols grow. is, you know, start from the ragtag crazy people who believe, which is tempered assets today.

[00:55:54] Ryan Gentry: And we love them. And we are similarly crazy and believe.

[00:55:57] Ryan Gentry: And then you get like a little bit bigger, you get, you know, people who are willing to take not as much risk as the early people. They want to see the protocol mature a little bit, but they still want to be early, you know, the, the early adopters from the innovators, early adopters. And then you get kind of your early majority who just want a thing that works, but they are willing to take a risk.

And then you try and cross the chasm. And so I think with lightning, like this year, I think we have definitely successfully crossed the chasm. I’ve been writing a bunch about it in our newsletter and like a bunch last year about is this the tipping point? Have we crossed the chasm? Is it really working?

Like, I, I think we definitely have, and we’re like well into expanding beyond into the early majority and beyond. And with tabard assets, I think we’ll follow the same pathway, right?

[00:56:38] Ryan Gentry: We’re like, right now it’s the crazies, but you know, who knows who will be the first person to figure out in their jurisdiction, like, Oh man, like Actually, we can raise capital for this business, we can tokenize the equity on chain, and you know, I can have a meatspace legal contract with my local government that says these are valid securities, and you know, if you lose your private key, your shares are gone, or something like that, or they’re burned from the supply, right?

I think it’s tough in the Western world and from a U. S. perspective to especially if you have a knowledge about how the current system works to think about how it can be disrupted because you’re like, well, the regulators are all captured or whatever. There are no avenues for disruption. They have all their bases covered.

And I think that that’s probably true, but there’s a big wide world out there that may want problems, may have problems they want to solve for themselves.

[00:57:33] Preston Pysh: I love that point. And I think you’re exactly right. And I think what I was describing was a very Western, U. S. centric mindset as I was looking at it.

[00:57:43] Preston Pysh: But I think as you look at, I mean, This is a massive opportunity for capital formation in areas that just haven’t had the means to organize equity and, and build that, that investor base out because of all the infrastructure, the technology infrastructure that’s required to do such a thing. And boy, this really offers a unique change to that.

[00:58:09] Ryan Gentry: Oh, you mentioned one thing that I would love to see my, my, like my favorite stories about like net new Bitcoin adoption are always about miners going out to rural areas and figuring out stranded energy sources, right? Like, I don’t know if you saw this, I’m sure you did, but like the, the story of the guy who is running the national park in the Congo, I think.

It came out, it was like a year or so ago. I’ll, I’ll try and find it and send it to you to keep in the show notes to keep me honest, but basically there’s this guy who, you know, runs this national park, I think in the Congo, and they have all of these rivers and all this hydropower and they were like really struggling in COVID because nobody was coming to visit the park.

And so he was like, you know what? Like we can monetize this energy. We can make some money. We just need some Bitcoin miners. So he did the work and figured out how to get some Bitcoin miners. And they all of a sudden started mining in 2020 when Bitcoin was, you know, five or six K or something. And, you know, made enough money to keep the park open and keep the employees and blah, blah, blah, blah, blah, all that sort of stuff. Right?

Like, how cool would it be, although that’s an amazing story and great, and I hope people replicate it all around the world, how cool would it be if there was a mechanism where instead of him having to front all the capital himself, right? He could, in his jurisdiction, say, look, I’m going to create some stock certificates. on the blockchain on Tapered Assets. I’m going to sell them to the folks who want to, you know, front the capital and down the road take in earnings, take a cut of the earnings of the miners once they’re live. And, you know, maybe even provide some shares to the local populace who is, you know, maintaining the mines or something like that.

So he doesn’t have to do it directly. And, you know, I don’t know if there’s legal restraints or anything around that that would make that difficult, but how cool would it be if you could get capital formation out there to like actually solve a real problem of, you know, helping monetize some of this energy.

And helping to build out most importantly, helping to build out real energy infrastructure in places that need it. Right. I just think that would be awesome.

[01:00:12] Preston Pysh: I love that. I love that. If you’re listening to this and you’re, you know, you could make something like that happen, boy, wouldn’t that be awesome?

[01:00:21] Ryan Gentry: Wouldn’t that be just cool, right? I would just love to see that happen.

[01:00:25] Preston Pysh: Yeah. You had mentioned real briefly, and I just want to highlight another source for people about lightning kind of passing over its event horizon, if you will.

[01:00:34] Preston Pysh: River just recently published this incredible report that laid out in tons of detail why that, that might be the case.

[01:00:43] Preston Pysh: We’ll also have that in the show notes for people to look at. It’s an awesome report. Ryan, this is, this has been a blast. I learned a ton. This is really exciting stuff that this is all happening on top of Bitcoin. No hard fork required for this to roll out. Yeah.

[01:01:00] Ryan Gentry: Yeah. I mean, it, it, it really is just beyond taproot.

[01:01:04] Ryan Gentry: I got to say taproot was required for this to curb it. Yeah, just really exciting time. We’ll have links in the show notes for a lot of these sources. Is there any other, anything else you want to highlight or bring to the audience’s attention? One thing that, you know, it’s a bummer to end on this, but maybe for the folks that are still listening, I think you’ll get a little glimpse into something special, which is we really strongly believe, and I think the River Report highlights this really well, The lightning as a network has a really natural flywheel effect, right?

And when I say flywheel effect, I mean like growth compounds into growth and compounds into growth growth. And like, again, I think I don’t want to get overconfident or cocky and say like it’s now self sustaining and it’s just going to keep growing till it’s growing. But like the flywheel is starting to spin pretty fast.

And when I say flywheel, what I mean is, you know, we start with developers. Developers come to this protocol, they build applications that abstract the details of the protocol for end users. Developers go and acquire users. Users transact on the network and create volume. Volume creates routing fees for node operators.

When node operators start making money, that induces them to add more capital, right, to allocate more capital to the network, which improves the capacity for everybody. It also induces no node operators to join the network and start competing in the marketplace. The more node operators that there are joining the network, the more developers there are tinkering or tinkering with the software, and then the flywheel starts to spin and those developers build new application, right?

Those new applications bring new users. Those new users create new volume. That new volume creates more fees. That fees creates more liquidity and more nodes.

And then we get more developers and we get more users. And so I think if you think about it in that framework, and we’ve been seeing this really start to spin over the last couple of years and like, you know, again, when Binance joined the network this year, they probably, if Binance has 120, 150 million monthly active users, something like that.

That’s probably more than every application on the Lightning Network prior to them joining combined, right? I mean, Cash App was definitely the biggest previously with like 60 million.

Finance and Coinbase joining, think about the energy that that gives to this flywheel as it spins, right? If collectively we got another 200 million potential users, think about how much more volume that’s going to create.

How much more, you know, transaction fees that’s going to earn for these node operators, how many more businesses are going to join. Think about the network effects that are growing here. And then think about, okay, now what happens when we add dollars into the mix? And it’s not just Bitcoin. Think about how many more users that’s going to bring, how much more volume that’s going to bring.

This is this flywheel that’s spinning, I think is, is really, really important for business people, for investors, for founders, for developers to understand, because, you know, if you had a chance to be early to the internet and start building an application and take advantage of just this massive exponential curve of growth that happened over the last 20 years, you would want to take advantage of it.

And I think we have a second chance here. Right. I think, I think we have the internet of money, you know, in our grasp. And I think the fundamentals are so strong and the ecosystem is so good. And there’s just never been a better time to get building on this network that like, if you’re sitting on the sidelines and you’re looking for something to do, and you’ve been interested in crypto generally, like I’m telling you, this is the opportunity.

Like it’s happening, it’s growing. And we’re about to really hit an inflection point where we start to grow. I mean, it’s been growing fast so far. I think we’re about to start growing at a crazy speed.

[01:04:44] Preston Pysh: Yeah. Especially with the macro backdrop.

[01:04:47] Ryan Gentry: I mean, it literally could not be more perfect. Right? Just like across the board, the timing could not be better for building on Bitcoin right now.

[01:04:55] Ryan Gentry: Yeah. It really is just, I think, a special time and a special period, and so I encourage people to get involved because there’s always work to be done and there’s, you know, always new opportunities to be seized.

[01:05:07] Preston Pysh: I love it. What a pleasure. I learned a ton and we’ll have some of these articles in the show notes for people to pick through and really kind of dive into.

[01:05:17] Preston Pysh: So we’ll have links to your Twitter as well and Lightning Labs. And if people want to read whatever it will have it there for them. So Ryan, thanks for making time and coming on the show today.

[01:05:27] Ryan Gentry: Have a blast. Thanks for having me. This was great.

[01:05:30] Preston Pysh: If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for, We Study Billionaires. The Bitcoin specific shows come out every Wednesday, and I’d love to have you as a regular listener. If you enjoyed the show or you learned something new or you found it valuable, if you can leave a review, we would really appreciate that. And it’s something that helps others find the interview in the search algorithm.

[01:05:54] Preston Pysh: So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening and I’ll catch you again next week.

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