Interoperability between LSPs, regulation, and Breez SDK: Atlas21 interviews Roy Sheinfeld, CEO of Breez.
During the Tuscany Lightning Summit, discussions revolved around the status of specifications for Lightning Service Providers (LSPs), interoperability among various LSPs, and how to easily integrate the Lightning Network into any app.
To delve into these topics and more, Atlas21 interviewed Roy Sheinfeld, co-founder and CEO of Breez, one of the most renowned Lightning Network wallets.
At the Tuscany Lightning Summit, we witnessed panels and speeches dedicated to the integration of Lightning Network specifications. In recent months, there has also been much discussion about LSP specifications. What is the current state of interoperability among various LSPs?
I believe it’s improving. In general, the concept of LSP is fairly recent. It hasn’t been in the market for a long time. I think it’s a process that’s progressing well, albeit slowly. Every standardization has its own path. I’m pleased with the progress; we have at least two specifications that will be finalized during the Tuscany Lightning Summit.
The only change is that Acinq was developing on its own, following its own path, and wasn’t part of the discussion around LSPs. The Tuscany Lightning Summit helped us involve Bastian Teinturier, CTO of Acinq, and we decided to create a standardization on top of the Liquidity Ads Protocol, which is a different direction from the original LSP standard direction.
Let’s take a step back: what does an LSP do?
I believe I made a mistake when I coined the term Lightning Service Provider (LSP). In reality, it’s not about a Lightning Service Provider because Lightning encapsulates too many services and can mean many different things to different people. For example, Wallet of Satoshi can be considered an LSP. I was referring more to liquidity services, so it’s actually a Liquidity Service Provider. The reason why an LSP is needed is because LN has an intrinsic problem when it comes to receiving a payment. You can’t receive a payment until you have established a channel and until you have some form of connection to the LN. An LSP, just like an ISP, enables connection to the LN.
Why is there a need for interoperability among the various LSPs?
LN is an open protocol. We want to have an open monetary platform to build on top of. We don’t want to tie users to a specific LSP, but we want to have free market dynamics even regarding the LN. So, to have open standards and to enable different wallets to interact with different LSPs, some form of standardization is necessary.
For several months, there has been a lengthy debate about potential soft forks: CTV, APO, and other ideas, many of which are focused on improving the performance of the LN, which we know is not the definitive scaling solution for Bitcoin at present. What is your position on this matter?
I absolutely believe that we should not ossify Bitcoin. I think Bitcoin must continue to evolve. I have a somewhat ambivalent opinion regarding the discussion on new OP Codes because what I am personally trying to do is solve today’s and tomorrow’s problems, and I believe that scaling Bitcoin from the LN perspective is irrelevant for the near future. I don’t think we would have problems onboarding 20 million people onto LN today. Certainly, we currently cannot scale to hundreds of millions or billions of users, but we will need some improvements. And I would like these improvements to be specifically on Bitcoin. I don’t want to see diversified solutions in other assets like Fedimint or Cashu; I want people to use Bitcoin as a bearer asset. I haven’t seen anything yet that I really like, but I believe the next soft fork will be a kind of mix of the proposals currently on the table.
Speaking about regulation, do you believe that companies offering access to the LN in a custodial manner will be an easy target for regulators?
Yes. The reason I am working on LN is because I want people to use Bitcoin. And Bitcoin, to me, is when people hold their own private keys. If they were to use custodial solutions, it means we are just replicating the functioning of banks on top of Bitcoin. There is also the possibility that non-custodial solutions will be attacked, but I believe it is a good thing because I think the only thing that will prevail is the ability for users to hold their own funds, even if it were to become illegal in 10 or 20 years.
What is Breez SDK?
Breez SDK aims to provide developers with the necessary tools to integrate LN payments into their service or application with a gentle learning curve and a small entry barrier. It’s a set of APIs: the core APIs are sendpayment and receivepayment, which allow you to send and receive bitcoin from a service or application. We obfuscate all the technical complexities of the LN infrastructure: end-user node, liquidity, LSP, on-chain interoperability, and fiat on-off ramp.
About a year ago, you stated that within a year we would see TikTok’s competitors integrate LN. Do you still believe it could happen soon, or will it take more time?
A year ago, we had the first partners starting to experiment with Breez SDK; now it’s used in production. We have learned a lot working with our partners, and we have definitely seen that Bitcoin companies were the first to adopt Breez SDK. Relai, BitBox, Satimoto, and CrowdHealth are just a few examples. The initial group of partners came from Bitcoin & LN ecosystem companies. We are starting to see different partners such as crypto companies, and we have the first signs of “mainstream” applications wanting to integrate LN payments into their app. Of course, they are much smaller entities than TikTok: I still believe we will see small TikTok competitors in the future.
