“TikTok’s competitors will be using the Lightning Network in one year’s time”. Interview with Roy Sheinfeld, co-founder and CEO of Breez, who explains how to bring Bitcoin to the masses: easily integrate LN into every app
Exploiting the potential of the Lightning Network by integrating bitcoin payments into popular applications.
This is how Roy Sheinfeld, co-founder and CEO of Breez, one of the most popular Lightning wallets on the market, thinks about bitcoin adoption now and in the future.
In this interview, Roy discusses how access to a critical mass of users is inextricably linked to solving one of the biggest problems plaguing the Lightning Network: the difficulty of self-custody. The complexities of managing a Lightning node, its channels and routing, lead many users to rely on custodial solutions, trusting third-party companies and thus distorting the very purpose of Bitcoin. If on-chain the saying Not your keys, not your coins applies, for the Lightning Network the expression Not your node, not your coins applies.
How to ensure that even the inexperienced user can interact with the Lightning Network via their node, but without taking on the complexity of managing it? The solution proposed by Roy is a recipe whose main ingredients are called The Breez Open-LSP Model and Breez SDK.
At what stage of the adoption is the Lightning Network?
The adoption of a technology always occurs in two phases. The first phase is when we use the new technology to slightly improve the old way of interacting, but imitating the same methods of the past. The second phase is the revolutionary one, where new ways of interacting with the world are invented and things really change.
For example?
It took time for the digital camera to really penetrate the market. When it initially replaced the old film camera, it did not change the way people behaved. Perhaps it produced better quality photographs, although some photographers argue that it did not. People took pictures, with the old or the new camera, in the same way.
The real transformative moment came with the convergence of the digital camera and the mobile phone and, more specifically, the iPhone. The iPhone, with the possibility of developing applications integrated with the camera, changed everything. People now live their lives through the prism of social interactions: Instagram, TikTok and other platforms. Social apps are in effect new ways of using the digital camera. Technology transforms the way we operate and think.
The Lightning Network has the same transformative potential. To become one, however, it is not enough to improve the user experience: it is not enough to develop the new Lightning wallet that slightly improves the experience compared to the banking app in forwarding and receiving payments. The open and borderless nature of the Lightning network will be integrated into new ways of interacting with the world, in a way we cannot yet imagine. The same goes for Nostr.
How do you get to the second stage?
Building the necessary tools. That is what we are focusing on at the moment in Breez with the SDK. We need to make it easier for everyone to integrate Lightning into their apps. If you have to be a Bitcoin expert to add Lightning payments into your app, you will never get to phase two.
You can’t build Spotify if you focus on how payments work. You have to focus on your core proposition. Lightning simply becomes an implementation, an API to be used in the background. You don’t even need to think about what it means, how it works. You integrate it exactly like you integrate a digital camera into your app. That’s why we focused on the SDK. By the way, we are not the only ones. Developers only need to write a few lines of code and magically they will have access to digital payments with the Lightning Network, without having to interact with intermediaries and without having to think about KYC, AML, etc.
The critical mass of users, however, will never want to commit to managing their own Lightning node and will risk taking refuge in custodial solutions. At Breez, you have coined a term, Lightning Service Provider (LSP), which expresses the solution to this problem. What does an LSP do?
Before the invention of the LSP, there were two options for using the Lightning Network. You could use a custodian service – i.e. use someone else’s node to make payments – or you could manage your own node and create your own channels.
An LSP is to Lightning what an ISP (Internet Service Provider) is to the Internet: you have a router at home, plug it into a socket and you are magically connected to the Internet. An LSP aims to provide the exact same functionality, enabling the end user to connect and actively participate in the Lightning network. What we are doing is abstracting all the complexities of managing a node and providing the functionality to simply connect to an LSP. When you take advantage of a telecommunication company’s service, you don’t think: “How do I connect to the Internet?” You just do it: you use the infrastructure behind the scenes and connect. The same applies to an LSP.
How does it work?
Technically, what an LSP does is open a channel between a node that already exists (its own) and the new node of the user starting to use the network. The channel is the bridge between the user and the entire network. It is the LSP himself who actively opens the channel to the end user. It is not necessary for the user to think about which node he has to connect to for payments to go through.
Furthermore, the LSP solves the inbound liquidity problem. It is not necessary to have a channel and previous liquidity to receive payments. The LSP instantly opens a channel to the user when the latter needs to receive a payment. The LSP is then a well-connected node, so it also handles the routing of payments.
If, however, there were only a few LSPs on the market that opened channels from all their users’ nodes to their own nodes, this would create a scenario in which a narrow circle of nodes – those of the LSPs – would hold most of the network connectivity. In short, the Lightning Network would be centralised. You thought about this and devised the Breez Open-LSP Model. What is it specifically about?
If the market were oligopolised by a few companies, it would not be a free market: it would mean that the government would have a lot of influence on the industry and we do not want this scenario for the Lightning Network. We want a truly free market and we therefore want to lower the barriers to entry. We want tens, hundreds, thousands of LSPs to allow users a free choice and to get maximum service at low rates. The Breez Open-LSP Model is an open model where the barrier to market entry to become an LSP is very low.
So if you have cash to invest in the network and want to become an LSP we help you do so, whether you are an individual or a company. We do this by providing the software you need to serve our customers.
Liquidity is the blood of the Lightning Network. It is its fuel. What LSPs do is provide liquidity to the network. In a nutshell, they create the supply. With supply, of course, comes demand. Someone has to use that liquidity. And that is where the SDK comes in. By bringing the Lightning Network into mainstream applications we provide the new users, we bring the demand for liquidity, we bring the demand.
Through this matchmaking our goal is to increase the adoption of the Lightning Network.
Are you building tools to incentivise competition in your industry? To facilitate your competitors?
Yes. We are also creating a standard together with companies like Square, Jack Dorsey’s new venture, and Synonym, owned by John Carvalho. In this way, users will be able to choose their own LSPs without changing the code. The standardisation is not yet final, but once everyone conforms to the new standard, then users will be able to quickly switch LSPs or connect to multiple LSPs at once.
Coopetition, as I like to call it instead of competition, the promotion of competition, is positive. This is because our real rival is the fiat world, not the other companies in the Bitcoin world.
Our goal is to bring Bitcoin to the world while maintaining its core values and there is no other way to do that than to propose a transparent, open and collaborative model.
You launched the SDK a little over three months ago. Are you already seeing interest from companies and developers?
Yes. We are in a design phase where we are only working with a select group of partners. It’s a kind of beta phase for the SDK. But the requests are continuous. Every day we get calls from users who want to join the waiting list. To date we are already working with several companies in the Bitcoin ecosystem. One example is Green, Blockstream’s wallet that wants to integrate Lightning with our SDK. Another example is Satimoto: an app that allows electric vehicles in Europe to be recharged by paying in bitcoin via the Lightning Network. There are various apps being built on top of the Breez SDK, including social and fintech apps. I am very excited about the future. I think it’s going in the right direction.
Bitcoin is still considered by many to be an adversarial technology. It is an alternative to governments and central banks. Are you worried that in some way this feature might scare companies away from adopting the Lightning Network?
I see Cash App that brought Lightning to 50 million users in the US. I see PayPal that has integrated Bitcoin and allows users to buy it. So, conversely, I see openness towards Bitcoin. But in the end it doesn’t matter what you think, because Bitcoin is simply a better technology, it’s the best form of money and so it’s only a matter of time before people start using it. The fear you speak of exists with any new technology. Just think of the Internet in the past or artificial intelligence in the present.
You wrote that there are no Lightning wallets but Lightning payment applications. What do you mean?
We used to keep paper banknotes in the leather wallet. Money was contained in a physical sense within the wallet. This definition does not work when thinking about the on-chain world or even the Lightning Network. Sending a Lightning payment there is the signature component with the cryptographic key, of course, but it is not the only factor. The most important job is the routing of payments. In fact, the application takes care of node management. It takes care of cash management to receive payments, it takes care of routing when you send a payment. That is why I suggest calling these software Lightning Payment Apps: because their main function is to handle Lightning payments.
In this sense, the wall between fiat and cryptocurrency should be broken down. Let me explain: where is the term wallet used in the traditional economy? Cash App is not called wallet.
You said at the beginning that the adoption of the technology goes through two phases and that the Lightning Network is still in its first phase. When will it reach the second phase?
We are going in the right direction but we are not there yet. We are still building applications that address the Bitcoin and Lightning ecosystem. But I would say we are pretty close. Already in a year’s time we will be in a different position. I don’t think TikTok will adopt Lightning within a year, but I think we will see TikTok’s competitors, or apps that are more or less in the same field, integrate Lightning.
