[00:02:03] Luke Gromen: No, no, no. You’re going to seem like Einstein compared to me. These questions, they’re going to be like five year olds, but there’s a lot of, I think, people out there that feel that way about sort of the apps within the use case, right?

[00:02:15] One of the Bitcoin is, Oh, what’s it used for? There’s no use case, no use. And quietly, as you know. And as I know, there’s a lot of use cases. And so last night there was this announcement. And so why don’t we start by just having you in your words, what was that announcement and what was the significance of that announcement?

[00:02:34] Preston Pysh: So first and foremost, Bitcoin is store value technology. I think everybody understands that it’s the first and most primary use cases to preserve buying power and protect against government printing a fiat. But through the years, there’s been a lot of innovation that’s been done on the code base to allow it to become payment rails as well.

[00:02:55] And so, what was it, 2017, you had a SegWit update to the Bitcoin 4 code that then enabled scaling on the Lightning Network. So the Lightning, think of just like how the internet works, you got internet protocol and then on top of that, you have the transmission control protocol, which then basically allows you to send the digital packets over the internet very quickly.

[00:03:17] I could get into more details on that. What I would rather do is just say similar to internet protocol and then transmission control protocol being built on top of it. You now have Bitcoin. As like store value money layer, layer 1 and then layer 2 on top of it, similar to transmission control protocol, TCM, I’m sorry, TCP on top of IP, you have the Lightning Network and what it’s doing is it’s basically breaking Bitcoin into these like smaller pieces that allow them to be sent very quickly all over the internet, just like PCP does for just basic data.

[00:03:51] So that update happened in 2017. So Lightning Network has grown significantly since then. Right now you have 21. I looked this stat up before we started the chat. Bitnodes reports that there’s 21, 592 full nodes running on the network and then what happens is, is these full nodes that are all over the world, anybody can run them, you can run a node for, I mean, it’s basically free on the electrical cost because it doesn’t require a lot of power at all to run a node.

[00:04:21] Like I run a node, it’s very simple and easy to do for the most part. The hardware will cost you anywhere from 300 bucks to run like a raspberry pi, and you can run the whole code base for three to 400 one time cost. And then there’s no additional like electrical costs to run a full node. So these full nodes, which there’s 21, 000, at least there’s a lot that aren’t being accounted for.

[00:04:43] So I suggest that the number is higher than that all distributed all over the world. And what they’re doing is. They’re setting up channels between each other. So, I have a channel open to somebody else, and then that person has a channel open to another node, and what it’s done is it’s created this payments network on layer 2 that allow for me to send, you could pull out your smartphone, you have a Nostr account, right?

[00:05:05] I think you do. Yeah. I could zap you, dollars worth of Bitcoin over this network. And it would be that Lightning Network, that layer two network that’s conducting the settlement of that Bitcoin to come to you instantly at a snap of a finger.

[00:05:18] Luke Gromen: I think it’s important to stop and then just highlight and then pull on that thread for a second for the uninitiated, because if I understand it correctly, what you just said, there is actual physical Bitcoin is moving.

[00:05:29] To move that packet of value from one node to another around the world. And I think I want to just pause there for a second because this highlights something very fundamentally important that I’ve noticed amongst the, we’ll call them Bitcoin skeptics around the use cases and how it is different than gold, which is to say in gold, gold’s price historically has been controlled in part because it’s all centralized in a vault.

[00:05:56] And so when a payment occurs on a ledger, relative to gold, basically it gets put on a cart and it gets wheeled across to the other side of the vault and a ledger is made, but it allows, it’s all paper. It allows for a great deal of the expansion of unallocated paper derivatives.

[00:06:13] In contrast, what you just described as I understand it is basically you are, this payment rails requires the movement of some small amount of physical Bitcoin from one node to the other. So that makes it difficult to centralize Bitcoin and run sort of the capping of Bitcoin price that a lot of people have discussed with gold, rightfully so.

[00:06:37] Preston Pysh: So Luke, there are similarities, but very large differences when you start talking about the record of the Bitcoin happening on layer two to two, which you were describing with gold. So like you’re saying the gold moves from one side of the vault to the other, and it’s a paper entry that now Switzerland doesn’t own it. The United States now owns it. It sits over on this side of the ball.

[00:06:57] Lightning works kind of similar to that where let’s say you and I have a Lightning channel open to each other. I send you a hundred sats, which is 10 cents. Okay. So I send you that 10 cents on this network. And all it is is there’s this gossip network on the whole network that is constantly saying, “Hey, the update is the channel that Preston opened the original channel on layer one Bitcoin,” that’s important.

[00:07:23] On layer one Bitcoin that Preston opened to Luke was for a hundred dollars. We’re going to make a paper entry that instead of it being 100 on Preston side and zero on Luke side, now it’s 99. 90 on Preston side and 0. 10 on Luke side. Okay. That hasn’t been officially updated into layer one.

[00:07:45] It’s basically, it’s almost like a paper entry between you and I on layer two that we could just keep zapping these paper entries back and forth to each other and keeping an update on the ledger. But here’s the difference. When you want to make that final, you can unilaterally go back to layer one and say, I want to settle this channel right now and I want my 10 cents and I want Preston to have his 99 at 90 cents. You can make that decision. And also I can make that decision at any point.

[00:08:14] Luke Gromen: Then the gossip goes off of their end of the banking system. There it goes into stablecoins or?

[00:08:19] Preston Pysh: No. We’re not even talking stablecoins or any of that yet. We’re all still just Bitcoin. Basically what happens is when either one of us make that unilateral decision to make it final, we go to layer one Bitcoin, where the mining is happening and the core layer, just like I was describing the internet protocol and TCP Lightning, we’ll go to layer one Bitcoin, raw Bitcoin, and make that all final. And nobody can undo that transaction. And we write that into layer one, but we can keep that channel between you and I open for 10 years, and we could be transacting that 100 back and forth to each other as much as we want.

[00:08:56] And here’s the other thing is, let’s say I’m connected to Sam and you’re connected to Sally. And Sam wants to send that transaction to Sally, but they’re not connected. But they’re both connected to us and you and I are connected. So now you get the routing of that 10 cents from Sam to Sally that actually came through us. Right? So I have 10 cents less if they routed through you, but then you don’t have that 10 cents because it went to Sally, right?

[00:09:21] So you can see how the SATs just kind of pinged off of us. I have the same balance. I still have the 100. You still have zero in that scenario. But we just routed payments to two people that aren’t even connected. It’s so identical to transmission control protocol where it’s breaking down data packets and making them more digestible so you can send them.

[00:09:38] There’s so many similarities there with Lightning’s doing. So people, if they want to like research or study that more, I would tell them to kind of look at that and then look at how Lightning channels work. And again, we’re not even to the big news event, which is what we still need to talk about, right?

[00:09:53] Luke Gromen: Let me build 1 more on top of that. But if I understand it properly, it sets us up for that big news event and its implications for our discussion. But that is implied here since we’re talking about since 2017 and the rapid growth in the Lightning Network, what you’re creating is. A what, how fast does Lightning Network grown?

[00:10:09] It doesn’t have to be exactly what you, you and I both know it’s a huge number. I don’t know if the top of my head, you know, better than me. I’m sure a what’s that growth. And then B does that imply essentially that you are creating given finite number of Bitcoin at the base layer. You’re as you’re using this more and more as payment rails. You are essentially creating what is a short squeeze that cannot be papered over unlike gold, where there’s more and more ultimately, whenever those packets are settled. Is that the right way to think about it? And then what is the growth in the network and Lightning Network band? And what’s the perspective growth? And then we can sort of talk about this news.

[00:10:50] Preston Pysh: I’m smirking because I think I know what you’re getting at, which is if I take 100 worth of Bitcoin and I load it into a channel that I’m sharing with you, and that channel is being used to zap Satoshi’s back and forth between us, and let’s say we keep the channel open for 5 years, right, on this layer 2.

[00:11:08] Those coins are never going back on an exchange to be sold into the market or exchange for dollars. Right? So as the Lightning Network is being used, it has more and more utility. It’s creating a short squeeze in dollar terms on layer 1 or Bitcoin that’s being sold into an exchange because that Bitcoin is not there anymore.

[00:11:28] Luke Gromen: It has to be there. It is the fundamental building block to allow these rails to exist.

[00:11:34] Preston Pysh: Yes.

[00:11:35] Luke Gromen: Okay. And is there a ratio of number one, two questions, follow up questions. Is there any ratio established between amount of Bitcoin needed relative to amount of transactions that has been established? And then what has been the growth in transactions on Lightning Network over the last seven, eight years, since 2017.

[00:11:53] Preston Pysh: So what you’ll find is let’s say you were Apple and I am nobody Preston Pysh running my own node and I’ve connected to all these other people. Right? And Apple starts doing a bunch of sales in Bitcoin, and I’m using Apple as an example because they’re a retailer that sells a whole lot of stuff. Right?

[00:12:13] So let’s say I open up a one Bitcoin channel, a whole Bitcoin, 100, 000 worth of capacity to you. And capacity is kind of an interesting way to look at this because it’s almost like an electrical network, right? As far as the capacitance, the size of the cable that’s running between you and me.

[00:12:31] So I open a 100, 000 channel to you. That 100, 000 is sitting on my side of the channel. Yours is at zero, right? But I’m connected to all these other people on the network, and all these other people are buying things from Apple.

[00:12:44] Okay, so what’s happening is, is all of these transactions are flowing through me to you, and that channel, all of those coins that are sitting on my side of the channel, immediately go to your side of the channel, and it’s completely used up. And there’s not much more flowing from you through me back out to the rest of the world because you’re kind of a bit of a black hole with respect to everybody wants to pay you for your physical things that you’re selling.

[00:13:11] Okay, so I don’t have much of an incentive to open a channel to you. Sure. I’ll get all those routing fees 1 time as they go through you. But what I would really like to have when I open a Lightning channel is kind of a 2 way mechanism where sats are flowing through me and then they’re coming from me to you and then they’re coming from you back through me out to the network because that back and forth almost like alternating currency or alternating current is actually very lucrative for me because I’m getting routing fees as it’s going back and forth between the two of us.

[00:13:42] But if it’s a one way street, because you’re Apple and you’re like, just selling a ton of stuff, like my channel gets depleted really fast. It goes to zero on my side. It goes to a whole Bitcoin on your side. And I’m sitting there and I’m saying, I should probably just close this channel and basically unilaterally settle this, go back to layer one and open another channel to somebody else that’s not going to deplete my side of the channel as quickly because I can make more routing fees that way.

[00:14:08] So there’s a lot going on in like that conversation, but what it gets down to is. The most optimal partner that you can have on the network is somebody that’s somewhat balanced with the amount of Bitcoin that’s going to flow between you and them. And because that becomes, I’m going to get the most routing fees for something like that.

[00:14:25] Luke Gromen: So then can you give some real world examples of what more of that bilateral type of interaction transactions would be relative to what you just laid out? Some real world examples, right? So it’s not you buying a bunch of stuff from Apple all the time through me. It’s you wanting to have a back and forth netting on those rails.

[00:14:47] Is that as simple as, you know, a retailer who is both taking in Visa cards right now, Visa transactions from customers now and paying suppliers on the other side, or does it have to be back and forth with the same people?

[00:14:58] Preston Pysh: I would just to say that today the network is pretty robust from just how many nodes you I mean, you like I said before, you have 21, 000 nodes on the network that are doing this. So finding a path between you and another node on the network, there’s some type of connection that can be found to route that payment because of how many nodes are on the network.

[00:15:21] I was talking more if you were going to run a node and try to do it in a way that you’re collecting a lot of fees, you want to try to have balanced partners or else, if you have a black hole payment, 1 of the nodes on the network is just sucking.

[00:15:34] I mean, I’ll give you an example. There is a wallet of Satoshi. Super liquid node that you can connect to. But if you do it’s just going to deplete your channel really fast. And you’re going to want to go back to layer one to close out the channel.

[00:15:46] Luke Gromen: So when you say your channel means the Bitcoin you’re putting up as essentially collateral is going to zero because you’re running deficits against that channel.

[00:15:55] Preston Pysh: Yeah, against that node. But then all the people that are paying through you, you would still have one Bitcoin on your node, right? let’s say I only had one Bitcoin on my node. I open a channel with you, you deplete the Bitcoin out of that channel, but I’m receiving a full Bitcoin from all these other people that are routing through me so I still have my one Bitcoin.

[00:16:15] I actually have a little bit more than one Bitcoin because I have the fees for routing all of it. And so I go back to layer one, I close out the channel and I got 1. 0. 001 Bitcoin, right? Instead of just one Bitcoin, because I routed all of that Bitcoin to you.

[00:16:30] Luke Gromen: So that was your fee, you were getting paid. That was a fee in Bitcoin.

[00:16:33] Preston Pysh: That’s right. Now, some people aren’t even running fees. Yeah. Some people are just doing it because they want to make the network stronger. So they’re not even charging a fee. And so then the routing is going through these paths where nobody’s even charging a fee today. 10 years from now, it might be very different, but today it’s getting routed through nodes that aren’t even charging a fee.

[00:16:50] And so they, the Bitcoin, as I close that out on layer one, I’m paying a fee to close it out on layer one. And you know, very de minimis, I would tell you right now, practically nothing, it might be 20 cents to close it out on layer one. And so that full Bitcoin is still there, but that channel between you and me, I closed it out because it’s just been inundated because you’re such a popular vendor on the network.

[00:17:12] Luke Gromen: So, but there’s, we don’t know the ratio per se, but there is a positive, it’s fair to say there’s a positive correlation between the growth in volume on the Lightning Network and the amount of Bitcoin we’ll call collateral that you’ve got to put up in order to facilitate the volume on that network.

[00:17:29] Preston Pysh: Yes. Correct. And I don’t know how many Bitcoin, let me see something real fast. I’ll just search this.

[00:17:34] Luke Gromen: Yeah. Okay.

[00:17:35] Preston Pysh: We’ll see what AI tells us here on like how many Bitcoin have been loaded into the Lightning Network. I don’t know how accurate this is. This answer is going to be, but it’ll kind of give you a sense for what it is.

[00:17:45] Now, here’s where this is where this new news is. There’s a lot going on here. So yesterday down in El Salvador, you had Tether. Paulo from Tether made the announcement and just for context, Tether was more profitable than BlackRock in the last year with the amount of money they’re making off the coupons of all the treasuries that they’re sitting on for all of the dollar tokens that they have issued against those treasuries, just to put things like we’re talking, it’s billions, billions and billions of dollars.

[00:18:17] So this guy who’s running this company, that’s basically tokenizing U.S. Treasuries. Short duration treasuries. He only buys the short duration stuff because the yields are better than the long duration stuff, and he doesn’t have the inflation risk, right?

[00:18:30] Okay, so here’s what it’s saying. Today, there’s approximately 5, 100 Bitcoin loaded into these channels over the Lightning Network. Now, because it settles so quickly, it’s not like you have to have 100, 200, 400, 000 Bitcoin loaded in this because it’s both ways. Right? these channels are operating both ways. And like, when you get into the capacitance of what’s needed as far as Bitcoin in these channels, and just for, you know, if a person wanted to research this more, they could go to river.com and they have a full are really quality article about how much capacitance do we think is even needed in the Lightning Network because of the way payments are routed and blah, blah, blah.

[00:19:11] But going back to sorry, I interrupted my previous point, so Tether makes this announcement that they’re going to start routing their U. S. Dollar Stablecoin, USDT, over the Lightning Network. And they’re going to use a thing called  Taproot Asset Protocol. You know, this protocol is a decentralized protocol. Anybody can run it. It takes consensus to agree with the protocol. But they developed this open source protocol that allows an individual to issue tokens, USDT, in this case on the Lightning Network and route the tokens just like we’re routing Bitcoin.

[00:19:48] Here’s why this is exciting is because the speed at which you can do this is near instantaneous. The fees to do this are practically nothing and the reliability and the decentralized nature of this network, in my opinion, is the most decentralized network that exists.

[00:20:10] truly decentralized. And the reason I would say that it’s decentralized is because, going back to the first point that I said, it costs 300 to buy a Raspberry Pi and participate in this network, and the electrical cost is basically like a goose egg. It’s like nothing. It’s de minimis.

[00:20:25] So, for example, competitors that this is currently being routed on, call it Solana or Ethereum, for you to conduct an Ethereum transaction of USDT today, you’re gonna pay 50 cents to a dollar and maybe even more to transact. So that means if I wanted to send you a dollar or better yet, 10 cents in US Dollar Stablecoins, USDT. That 10 cents would cost me 50 cents to send it to you on Ethereum, or more, maybe a dollar, maybe $2 to send the 10 cents. So you can quickly see how that’s not, the incentives are very bad relative to this new way of doing it over the Bitcoin like network.

[00:21:05] Okay, so Solana, which would also be another competitor, the fees are very low, but I would argue that running as a law on a full node cost, you ready for this number? Anywhere from 3, 000 to 5, 000 per month to run the node. So, do you think that that’s actually decentralized or do you think that Solana itself is running all the nodes?

[00:21:31] everybody’s got their own opinion, but I’m sorry, I don’t know too many people that are going to go spend 3, 000 to 5, 000 to run a node just to route payments. Not to mention, I think they have to have 10 Salon is in order to have voting rights and all these other, like that network, in my humble opinion, is completely centralized.

[00:21:47] Luke Gromen: Yeah, we just saw that right with deep seek versus open AI, right? You’re seeing the open source is killing.

[00:21:53] Preston Pysh: Yeah, killing. So if it’s not actually open source, if it’s actually not decentralized, because willing participants want to run a note on the network, is it actually decentralized and outside of government control? And I would say absolutely not.

[00:22:08] So why would Tether want to do this? Well, I think Tether would want to do this because they don’t want and I’ll argue with myself here in a second. I think they want to make sure that they don’t ever have to worry about the Solana nonprofit, tapping them on the shoulder and telling them what in the world to do same with Ethereum and whatnot. Right?

[00:22:27] Well, Ethereum, I think, is just killing itself just through the fees alone. it’s in my opinion, that thing’s dead, super dead. Solana is the competitor to like, what we’re talking about, but if I’m Paulo at Tether, I don’t I want to move to a network that I know some Solana Foundation can’t tell me what to do or control me.

[00:22:45] So welcome to the Bitcoin Lightning Network where nobody can tell you what, what’s what. Right? Now, here’s where I’m gonna argue with myself. Tether’s still centralized, right? The amount of treasuries that Tether is holding, don’t think for a second that the US government can’t tap him on the shoulder and say, Hey, we don’t like the fact that so and so is squatting on a hundred million dollars or a billion dollars worth of Tether tokens.

[00:23:09] We want you to remove those tokens from their control. And guess what? If he’s the issuer of the USDT token that’s backed by U. S. Treasuries, he can kind of control those tokens, even if they’re running on the Lightning Network. Right? Because he’s the issuer. And that’s an important point.

[00:23:27] And think about this. So why is Bitcoin different than Tether? Why is Bitcoin different than Solana? Why is it different than Ethereum? It’s different because nobody can take those Bitcoin from you. It’s impossible because there’s no issuer. The issuer is the protocol itself.

[00:23:41] Luke Gromen: So that’s a long run range. What is this? Cause Tether is, we’ll say controversial in certain circles for a number of different reasons as to verity of reserves, et cetera. Trust me, I get asked all the time and I don’t have nearly the depth of answer I should, but knowing that what you just described is the case that he can get tapped on the shoulder, that he does have the vast majority of Tether reserves in T bills, which are liquid backed by the government, et cetera.

[00:24:06] Is there a longer run move here? And what is it? Cause it seems to me that it’s a short uninitiated person on this. It seems to be a relatively short jump from this world to rolling this out, to competing with more existing payment systems, securities clearing. Big fee business is done by payment processors, credit card companies, banks, and is that where this is going? And if so, how quickly does that start to be a factor for some of these kinds of industries do you think?

[00:24:38] Preston Pysh: Well, I would say 100 percent without a doubt, like all payments technologies are being disrupted. Like now, the next thing I would say is the fact that you have a company that probably one in a hundred people would even know exists, call it Tether is making more profit than BlackRock alone tells you how fast this is happening.

[00:24:58] And should be the wake up call of wake up calls to anybody on Wall Street that’s not paying attention to this. The fact that you have this company, literally shellacking any other major bank in profits. I mean, that’s the signal that is the signal that this is where and you know what, with the SAP 121 repeal, and now that the banks can basically get into the same game of over collateralized tokenization of U.S. Securities is a super lucrative and profitable business and now that banks can custody Bitcoin and play in this space, like you basically have the president and his administration saying it’s green light here. We want to be the leader in this space. If you’re a bank and you’re not trying to do what these guys are doing, you’re off your rocker. You’re spending too much time on the golf course and you need to wake the hell up.

[00:25:46] Luke Gromen: So to clarify exactly just for the listeners, what we’re talking about here, what you’re talking about, that the rollback of, Sab one 20 or whatever one 21 is with staff accounting bulletin from the sec under Gensler was repealed.

[00:25:58] So these banks now can start issuing their own stablecoins backed issue from the bank collateralized with T bills and ultimately collateralized, you know, to go in and out of, or help their customers go in and out of Bitcoin. In other words, to be involved in Bitcoin and not only that, but in the in the same way that some of these AI companies are having to invest lots of money, because if they don’t, it’s a threat to their business.

[00:26:26] It would seem to me that these banks are going, not only it’s not a choice, they’re going to have to invest to compete with what Tether is doing.

[00:26:33] Preston Pysh: Where I think this race goes is so Tether is sweeping all their coupons from all these treasuries into their corporate balance sheet and buying Bitcoin with it. That’s what they’re doing with all their coupons that they’re getting. Where I think the competition is going next, you know, if I’m JP Morgan, or I’m one of these big banks, and I actually understand all of them, what I’m going to do is I’m going to do the exact same thing that Tether’s doing, but I’m going to issue with the coupons that I receive. I take, let’s say I receive 5 percent of the underlying, let’s say I got 100 billion dollars of treasuries backing all the coins I got on the network. That means I’m going to get 5 billion in coupons annualized for all of that. And why don’t I take 3 billion of that and I create a mint new coins and I distribute those coins to all the people that are holding the existing stock of USDT.

[00:27:24] I basically get interest payments for holding USDT, right? Then I take the other 2 billion that I made, because I made 5, and I take the other 2 billion and I retain that on the corporate balance sheet, and I buy Bitcoin with it, which then makes me even over collateralized on the coins that I’m issuing, because Bitcoin has a CAGR of 25 50 percent annualized, right?

[00:27:45] Which makes my coin more trusted because I’m over collateralized and I have this treasury. And that’s where, you know, but they don’t have any competition, so they don’t need to pay this dividend or coupon payment or whatever we want to call this yield that’s there. But if you’re going to compete with them, you have to start competing in a way that you’re paying some type of yield for holding Tether, which they can completely do.

[00:28:07] Luke Gromen: And this creates balance sheet capacity from the government. Why would the government want JPMorgan to do this is ultimately they need by government needs balance sheet. They need balance sheet to buy treasuries. And they need preferably balance sheet that they can issue. They can financially repress.

[00:28:21] Preston Pysh: They need somebody buying their debt and this is Tether is the number one growing buyer of U.S. debt. If you’re looking at, the second derivative of who is really stepping up to the buying this garbage? Well, it’s Tether. They’re like, probably top 10 at this point in the world buying us debt.

[00:28:37] So, the government has to love that. They might not agree or like how it’s like basically expanding the monetary units in the crypto Bitcoin ecosystem, because that’s what it’s really doing is it’s the access and how quickly these rails are being tied to the Bitcoin are self reinforcing and just making it that much more powerful. And they probably don’t like that, but well, I guess the new administration loves it.

[00:29:01] Luke Gromen: New administration seems to love it. You’ve got the balance sheet there. You’ve got. Presumably competition, the not too distant future on, right? Because now if you start getting these establishment banks in things like Visa and MasterCard, are these types of payment monopolies or oligopolies then at risk of margin compression if JPMorgan can process payments far cheaper over the Lightning Network in some period of time, is that the right way to think about this kind of thing?

[00:29:26] Preston Pysh: Far cheaper is such an understatement. Like you were by doing this on Lightning, right? You are literally taking the cost of a USD transaction. So it’s de minimis. It’s effectively zero because it’s less than a penny. It’s way less than a penny. And the transaction size could be 5, 000, right? And it’s still less than a penny for the transaction to clear.

[00:29:51] Luke Gromen: So game theory, JP Morgan would want to put some Bitcoin on their balance sheet in the context of what you discussed earlier, because then they can, that will subsidize their ability to undercut the competition and move the volume on payment rails at some point down the road in theory.

[00:30:06] Preston Pysh: And the wild thing is, is we’re just talking about Bitcoin. Tokenizing dollars on the  Taproot Asset Protocol. Like you can literally tokenize Microsoft stock or Apple stock and, have the same clearing mechanism. And so again, you’re dematerializing and traditional finance is clearinghouses.

[00:30:23] Clearinghouses and custodians. Custody services, like all of it. Now, think about like, how does Robinhood make their money? Well, they take your shares that you own and they lend them out like behind the scenes. In a rehypothecation scheme that they collect fees on, and then whenever you like sell that, then they have to get them back. And they’re just looking at from a statistics standpoint, like how much can we rehypothecate without running into issues, right?

[00:30:49] That all, as in all these share, all these naive, like retail and investors, they don’t understand that that’s happening in the background and that their shares are actually being rehypothecated and money’s being made on that.

[00:31:02] But think about if you are creating tokens of Apple and I’m receiving those on my digital wallet, I actually hold those certificates. And if I want to send you a share of Apple, I can do that instantly without asking somebody for permission for the actual stock certificate. That’s kind of a big deal.

[00:31:21] Luke Gromen: Potentially huge deal. How much has Lightning Network transactions grown over the last seven years since its existence? Well, that’s the infinite basically, but what’s it going at now? Yeah, it’s sort of a dumb phrasing.

[00:31:32] Preston Pysh: During the bear market, it was pretty flat, but now that it’s starting to get into a bull market again, it’s picking up.

[00:31:39] Let me just look real fast.

[00:31:40] Luke Gromen: Sure.

[00:31:41] Preston Pysh: So how many Lightning transactions happened in 2024 is the question, and this is what, and I’m using Perplexity if people want to know which AI I’m using to kind of search this.

[00:31:51] Okay, based on the search result, Lightning showed significant growth in 2024, in August 2024. It was reported that a record breaking 92, 000 transactions through their infrastructure, averaging 3000 transactions a day on Lightning. And you got to remember no, I mean, for the most part, globally, no vendors are even, I would think that honestly, I would think the number is like way higher. I would imagine you have, cause I I’m on Nostr, right.

[00:32:16] And just to give people an idea is like how simple and some of this stuff is. I can go to a person’s post right here on my phone. And for people that are seeing the video, they can see that I got this social media. I can go to this little icon, like this little Lightning bolt icon. And when I click that, it’s already made the payment.

[00:32:36] I just paid that person 42 Satoshis, which is like 4 cents. And it’s already cleared. It’s already sent. That’s one transaction right there for the day on the Lightning Network. Right. Micro transactions are happening all day long. So that’s, that’s what it’s saying here.

[00:32:50] Luke Gromen: Let me interrupt you because in the press release yesterday of this announcement, they noted that total USDT Tether volume tops 10 trillion on chain. Rapidly closing in on Visas, annual volume of 16 trillion. Once fully integrated users will be able to make cross border payments with USDT on Lightning that settle instantly. And in a fraction of the cost of other networks. So when you frame it out that way, the volume that’s on USDT is staggering already.

[00:33:20] Preston Pysh: Your point is perfect because what you’re going to get is better reliability on this network of 21, 000 decentralized nodes. You’re going to get more connectivity. You’re going to get, just a more robust reliability of being able to route payments because USDT is coming onto the Lightning Network, which then reinforces the reliability of the Bitcoin network because they now want to play on that.

[00:33:45] And if you get other stablecoins, let’s say a company in Europe wants to do a European stablecoin on the Lightning Network and have zero fees for the routing and have instant clearing through the  Taproot Asset Protocol running on top of Lightning. I don’t know. Like when you have an open network, everybody is strengthening it and making it stronger by participating on and making the reliability better. And the transactions that you just said are mind blowing in size.

[00:34:13] Luke Gromen: Yeah, and then you start getting into things like FETI, which you can use to set up any size federation and whether you’re a major corporation or family and pay use the same network to pay in different currencies with those same types of low cost instantaneous or near instantaneous settlement, you start to see the network effect really build on itself.

[00:34:32] Well, I promised. 11 o’clock card stop. I’m close. I know you got things to do. I would love to continue this at some point in the future. Yeah, because I think it’s super, I mean, it is super important, but I think it’s been super important in a niche space. And I think what we’re starting to see with these announcements is it’s stopping being niche and starting to really compete with or see clear to competing with the existing big chunks of the existing financial system, some of which have been around a long time, have very entrenched positions and have very rich margins to boot. And so I think it’s a really interesting moment of of an acceleration and what’s already a very disruptive technology.

[00:35:14] Preston Pysh: For sure. Hang on, man. This is totally getting crazier my day, man.

[00:35:20] Luke Gromen: Absolutely. Well, thank you very much for your time.

[00:35:22] Preston Pysh: Always a pleasure, brother. Great chatting with you.

[00:35:25] Luke Gromen: You too.

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