Jesse Shrader from Amboss Tech talks about their new product Rails

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In this in-depth interview, Jesse, co-founder of Amboss and creator of Lightning Network-related products, discusses his journey into Bitcoin, the evolving role of Bitcoin as both an investment and a medium of exchange, and the innovative solutions Amboss offers to scale Bitcoin payments through the Lightning Network.

Jesse’s interest in Bitcoin was sparked by his experiences witnessing bank overdraft fee abuses, driving him to explore Bitcoin’s consensus-based system as an alternative financial infrastructure.

With a background in environmental engineering, Jesse found useful analogies in water flow management that helped him understand liquidity challenges on the Lightning Network.

Amboss started by creating tools like Thunderhub, a user-friendly Lightning node manager, and a Lightning Network explorer, amboss.space, to visualize and navigate Lightning nodes.

They then launched Magma, a liquidity marketplace allowing users to buy and sell Lightning channels, effectively leasing liquidity and earning returns on Bitcoin without lending or rehypothecation risks.

Building on this, Amboss introduced Rails, an automated service to manage Lightning node infrastructure, enabling Bitcoin holders—whether individuals or businesses—to deploy self-custodied Lightning nodes easily and earn yield by supporting the Bitcoin’s payment layer.

Jesse explains the concept of the “time value of Bitcoin,” emphasizing its absolute scarcity and how yield can be generated through utility—specifically, by enabling Bitcoin payments on the Lightning Network.

He highlights the significance of balancing supply and demand in liquidity leasing, empowering businesses to receive Bitcoin payments with much lower fees than traditional payment processors.

Amboss’s suite also includes Reflex, a risk management tool for regulated businesses, and liquidity subscriptions, which automate liquidity leasing.

The conversation also touches on the growing interest of Bitcoin treasury companies in using Amboss’s Rails to earn yield and support the network while maintaining compliance.

Jesse argues for the necessity of large Lightning channels to facilitate bigger payments, beyond microtransactions like coffee purchases or tipping, enabling use cases such as hotel bookings, airline tickets, interbank settlement, and e-commerce.

Despite current on-chain fees sometimes being cheaper than Lightning, Jesse stresses Lightning’s scalability and faster settlement as critical for Bitcoin’s future global adoption as a payments network.

Overall, the interview provides a comprehensive overview of Bitcoin’s evolution from a store of value to a scalable medium of exchange, the technical and economic challenges of the Lightning Network, and Amboss’s role in making Bitcoin payments practical, profitable, and secure for users worldwide.

Highlights

• ⚡ Jesse’s journey to Bitcoin was motivated by witnessing unfair banking practices and discovering Bitcoin’s consensus-based, transparent system.
• 🌊 Environmental engineering analogies helped Jesse understand Lightning Network liquidity flows and capacity management.
• 🔍 Amboss began with tools like a Lightning node manager and a network explorer to improve usability and transparency.
• 💰 Magma, Amboss’s liquidity marketplace, allows Bitcoin holders to lease liquidity by buying and selling Lightning channels and earn yield without lending risks.
• 🤖 Rails automates Lightning node management, enabling businesses and individuals to deploy self-custodied nodes and earn yield effortlessly.
• 📈 The “time value of Bitcoin” concept arises from Bitcoin’s scarcity and utility, with yield generated by supporting payment activity on Lightning.
• 🌍 Large Lightning channels are necessary to scale Bitcoin payments beyond microtransactions, unlocking use cases like e-commerce and interbank settlements.

Key Insights

• ⚡ Consensus as a Foundation of Trust: Jesse’s initial attraction to Bitcoin was its consensus-driven system, which ensures rules are enforced transparently by network agreement, making adversarial bank practices impossible. This foundational trust layer distinguishes Bitcoin from traditional banking and is critical for long-term financial system reform. The insight is that trustless consensus is not just a technical feature but a socio-economic innovation that can restore fairness and openness in money.
• 🌊 Interdisciplinary Knowledge Aids Blockchain Innovation: Jesse’s environmental engineering background, especially his understanding of fluid dynamics and capacity constraints in water treatment, provided a unique lens to conceptualize liquidity and flow management on the Lightning Network. This highlights how cross-disciplinary expertise can be invaluable in solving blockchain network challenges, such as optimizing payment channel capacity and liquidity routing.
• 🔍 User Experience is Key to Lightning Network Adoption: The Lightning Network started as a complex, code-heavy environment accessible only to a few experts. Amboss’s development of user interfaces like Thunderhub and the network explorer lowers the barrier to entry, making node operation more approachable. This underscores a broader insight that technological innovation in blockchain must be paired with intuitive UX design to drive mass adoption.
• 💰 Liquidity Leasing Unlocks Yield Without Custodial Risk: Magma’s marketplace for buying and selling Lightning channels creates a new kind of yield on Bitcoin that doesn’t rely on lending or rehypothecation, thus avoiding systemic risks associated with centralized lending platforms like BlockFi or Celsius. This new yield model leverages Bitcoin’s network utility, providing income by facilitating actual payment flows rather than speculative financial engineering.
• 🤖 Automation Enables Scale and Accessibility of Bitcoin Payments: Rails automates complex Lightning node management tasks such as opening/closing channels and fee setting, allowing users to deploy self-custodied nodes without deep technical expertise. This automation is crucial for scaling Bitcoin as a medium of exchange, as it relieves users from operational burdens and risks while preserving control of funds, aligning with Bitcoiners’ desire for self-sovereignty.
• 📈 Time Value of Bitcoin Is Rooted in Scarcity and Utility: Unlike fiat interest rates, which are often nominal and inflated by money printing, Bitcoin’s yield comes from its absolute scarcity and utility derived from payment activity. As more businesses and users transact on Lightning, the network’s utility grows, generating a natural risk-free rate of return on Bitcoin holdings through routing fees and liquidity leasing. This reframes Bitcoin interest as a function of network adoption rather than monetary policy.
• 🌍 Large Channels Enable Enterprise-Grade Bitcoin Payments: While Lightning initially focused on microtransactions (e.g., tipping), Jesse emphasizes the need for large-capacity channels to support bigger payments like travel bookings and interbank settlements. Large channels improve payment reliability and scalability, crucial for integrating Bitcoin into mainstream commerce and financial markets. This insight reveals that Bitcoin’s future as a global payments network depends not only on technical scalability but on financial product innovation that attracts institutional capital.
• 🔄 Balancing Liquidity Supply and Demand Drives Market Efficiency: Amboss’s dual focus on providing liquidity supply (Rails) and onboarding demand (businesses needing liquidity) creates a balanced ecosystem that incentivizes participants to shift more economic activity onto Bitcoin payments. This market-driven approach ensures yields remain attractive while growing the network’s utility, illustrating how decentralized finance models can align incentives for sustainable growth.
• 💳 Bitcoin Payments Can Outcompete Traditional Payment Systems: Jesse points out that Lightning Network payments can drastically reduce costs for businesses compared to credit card fees (from ~3-4% down to ~0.5%), while also offering faster settlement and self-custody. This suggests Bitcoin payments have a competitive advantage that could drive adoption in e-commerce, content creation, and other sectors, especially as payment processing fees remain a significant business expense.
• ⚠️ Regulatory and Custodial Challenges Remain for Institutional Adoption: Bitcoin treasury companies face hurdles in using products like Rails due to compliance and custodial requirements imposed by boards and regulators. Amboss is addressing this by working with licensed custodians to enable omnibus accounts, allowing smaller holders to pool funds and access the Lightning network more effectively. This highlights the ongoing interplay between innovation, regulation, and institutional adoption in the Bitcoin ecosystem.
• 🚀 Lightning Network’s Scalability Is Vital for Bitcoin’s Future: Despite sometimes higher on-chain fees, the Lightning Network offers near-instant payments and theoretically unlimited transaction capacity, essential for Bitcoin’s mass adoption as a payment system. Jesse’s comparison to sidechains and scaling solutions highlights Lightning’s unique advantage in enabling unbounded scalability, a prerequisite for Bitcoin to handle global economic activity efficiently.
• 🎯 Bitcoin Is Evolving From Store of Value to Medium of Exchange: The conversation charts Bitcoin’s evolution beyond a “digital gold” investment into a practical currency that can be used daily. By developing infrastructure, marketplaces, and automation tools, Amboss is helping Bitcoiners realize this vision, encouraging businesses and individuals to earn Bitcoin income directly, thus reducing reliance on fiat and building a more decentralized financial future.

These insights collectively paint a picture of a maturing Bitcoin ecosystem where technical innovation, user experience, economic incentives, and regulatory navigation converge to unlock Bitcoin’s full potential as a global, scalable, and efficient payment network.

Welcome you to Streaming Sats, Jesse. Thank you so much for being on the show.

Thanks for having me. Appreciate it.

I so want to ask you like how did you get involved in Bitcoin? What’s your origin story in the space?

I think it really started just hearing about it from from my brother and then uh I think shortly thereafter uh I graduated from college and took a temp job uh working in a call center and that’s when I learned about all of these class action lawsuits that were against banks um where you know banks primarily in the US uh were doing some somewhat shady things like uh reorganizing debit card transactions to maximize overdraft fees.

And so that’s that’s a big thing in the US. Um overdraft fees are basically when your account runs out of money, um you would pay $30 each time. And so I was looking for alternatives and and eventually I stumbled onto Bitcoin, which was really a system that operates based on consensus.

So that really appealed to me because it would be impossible to introduce any of those adversarial policies like the banks had done and instead it would be a system that operates completely based on rules that everybody agrees on.

That’s what consensus means. So it was really something that was completely different and gave me a lot of hope that we could build a better system that’s open to anyone.

So how did you rock that immediately that you know it’s based on consensus and wouldn’t be able to like uh cheat you the way banks do? What was your background to make you grok that as the the main thing that’s different in the Bitcoin network?

Oh, you just gave me a a lot more credit than uh maybe I deserve because it did not I did not grok it immediately. Um it did take me a long time to understand, you know, how this is fundamentally different. And it really came from a perspective of saying there’s no way that this thing could work.

there has to be a flaw in it somehow. There’s no way you could have internet based money like it’ll get hacked.

The government will stop it. Um and so it’s coming from the perspective of trying to prove it wrong. Um and also the price going down at that point uh after I had initially invested in it.

it really motivated me to figure out do I sell this thing or not? Um and going through that research process of finding out okay is now the right time to sell it um was actually what pushed me to do the research and to understand but my background is in environmental engineering and in that in that engineering study it’s a lot of math and physics courses and most of it was around water treatment which actually has to do a lot with flows and that actually became very helpful when I dove deeper into the lightning network to understand some of the issues around liquidity and ensuring that you have enough capacity to store uh certain flows. So this is something that you know you would deal with in wastewater treatment where you

00:03:48 – 00:05:00
might have some inflow. Well, you need someplace to put it and that is almost exactly the same uh issue that is faced with the lighting network today. um you know what initially got me into the lighting network was trying to make a payment with Bitcoin and that’s what really exposed the an opportunity if if I can say it nicely to make improvements on Bitcoin payments uh on the payment side of things because I think a lot of people talk about you know Bitcoin as a store of value and as an investment um

00:04:24 – 00:05:42
so it really goes from investment to being savings things. And then the next frontier is, you know, can can Bitcoin become a currency or can it become a medium of exchange and not just a a commodity or investment vehicle. >> So that brings us very nicely to the latest product that you’re offering on your MBOS technology um platform. So um that’s uh it’s called Rails, right? Um but first before we get there, let’s talk a bit about uh Amboss and what you do there. >> Sure. Um so Ambos started really because

00:05:03 – 00:06:12
I met my co-founder who was already building Lightning Technologies. Uh so he he built Thunderhub which is an open-source node manager and that has that’s basically where you know someone can run a lightning node and actually have a user interface where you could click buttons. It’s not just code now. It’s something that you can visualize and be able to understand a bit more. And we noticed that there were some problems with the lightning network because you do need to connect to other

00:05:38 – 00:06:47
people. It’s not something that you can just do yourself. It’s not you and math. Now it’s you, math, and other people. And so making those connections and kind of forming a social network was how we initially launched amboss.space, which is our lighting network explorer. and you can look up any other lighting node on the network. And then the next problem is how do you get other people to take action? And the way you get them to take action is through market forces. And so shortly after we launched the

00:06:12 – 00:07:25
explorer, then we launched a liquidity marketplace, which is where you can buy and sell lightning channels and get rewarded for it. So, that is really the first way that you can earn yields on your Bitcoin by forming new connections and getting paid for them. Um, if I can make an analogy, it’s almost like you’re running a power company and you can you can earn money with every electron that you deliver to someone’s house um just by, you know, reading the meter. But you can also make money by building

00:06:48 – 00:07:53
new connections to new homes. And that is analogous to the liquidity leasing. So selling a channel is really like building a new connection to a new home. And then from there, once you’ve built that initial connection, then you can continue to earn on the electrons that get delivered or the satoshi’s that get delivered to that destination. And really that’s how the yield uh manifests. So is that initial like connection that you make like the power company making a connection is that like

00:07:20 – 00:08:38
a once off payment that happens and then you earn like the yield with each electron that gets transferred or each satoshi that gets transferred in the channel. That may be where the analogy starts to fall apart. um because the connection is only as you know can only tolerate as much usage as the amount of Bitcoin that you allocate to it. So if I allocate a one bitcoin connection to you, the net settlement that can be delivered to you is one bitcoin. But if you start to use that and maybe okay to

00:08:00 – 00:09:11
extend the analogy a little bit more send power back to the grid. So um that would be like you making payments over the lightning network from from your home or from your node that would actually help balance it out so that you can actually have birectional flows and that is probably the most efficient use of it. Um so overall it this initial connection it doesn’t last forever but it can last for years um as long as it’s you know still profitable for for both sides. I think uh people tend to leave

00:08:35 – 00:09:52
these channels open for a very long time but the initial lease is only for a month or two. >> Okay I understand. So um does your product uh your new product rails does it automate the management of uh the entire lightning management infrastructure? >> Yeah. So one thing we noticed is that you know everything that we’ve discussed is very technical um and only works for a couple of people that deeply understand this lightning technology. And so what we built Rails for is for people that have Bitcoin and want to put

00:09:13 – 00:10:24
it to work and they don’t want to do any yield service that has lending or rehypothecation because you know that’s introduced too much risks to the financial system. You know, I think Bitcoiners have been burned by BlockFi and Celsius and also FTX where you’ve got these weird token issuances and all of this trading and leverage. But really, I think the Bitcoiners, they want their Bitcoin to support Bitcoin, Bitcoin’s growth, not just as a store of value, but also as a medium of exchange, and they don’t want

00:09:49 – 00:11:08
to give up custody. And so we set up rails to be very simple so that people can deposit their bitcoin on their own infrastructure, you know, their own node and not have to do the management of it. So Ambos offers as a service rails so that you can so we as Ambos can open channels, close channels, set routing fees and understand a bit of the market and you know you as the customer of Rails really just need to be able to deposit onchain Bitcoin and be comfortable with self-custody and you know we’ll help as much as we can to

00:10:28 – 00:11:42
give you as the customer the 24 words and then give us as amboss the limited permissions that we need. So we only want these few permissions to not be custodians really just opening and closing channels setting fees but we don’t have the ability to send Bitcoin or withdraw Bitcoin from this account. Uh we can only receive it into that account. So that’s that’s really how the the system operates. So Jesse, I want to take this conversation a bit philosophical. Uh in listening to a few

00:11:06 – 00:12:34
of your earlier interviews, you spoke a bit about the time value of Bitcoin. Can you explain a bit what that is? >> Yeah. So like in uh in other systems uh there is kind of the risk-free rate of of money and that was something that we stumbled across uh with Nick Batia. uh he originally wrote this essentially a blog post on the time value of of money and the time value of bitcoin. So it is something that exists uh for for fiat currency. But the way that the interest rate is generated for for fiat

00:11:50 – 00:13:11
currencies is usually through lending or through rehypothecation. And that introduces risk and additionally the the underlying is uh the underlying unit of fiat currency is just freely available to print. So that becomes an issue. So then you’re actually having to manage like the idea of an interest rate versus the new creation of money and understand which one is outpacing the other. So that that’s where you get nominal interest rates versus real interest rates. Now for Bitcoin, we’ve

00:12:30 – 00:14:01
got absolute scarcity here. So with that absolute scarcity, you you don’t have to worry about the underlying unit being devalued through additional money printing. And so that becomes a much better platform for actually uh basing uh kind of a risk-free rate of Bitcoin. And this this rate comes from the utility that is delivered. So the value of the network is actually building because this utility value or this utility layer is added to bitcoin so that the bitcoin can be used for payments not just for savings and so

00:13:16 – 00:14:39
that’s where this additional you know yield is derived uh from additional utility added. So essentially if you um join this rails then you are earning a yield on your bitcoin through offering liquidity on payment channels. Yeah. So uh our job is to grant people access to this this new market. So we’ll make it completely automated to lease out the liquidity and also be maintenancefree on the actual routing of payments. So, we’re going to be using machine learning models in the background to actually determine how to

00:13:57 – 00:15:13
allocate this Bitcoin to be useful for the network and provide reliable payments. So that infrastructure you know then then you as a customer of rails gets access to almost a derivative on payment activity. So that you know as more payments happen over the lightning network then you know your node has a better shot at actually routing those payments getting to earn you know payment routing fees or liquidity leasing fees. >> Okay. Okay. And then you said that the liquidity leasing is almost like in your

00:14:34 – 00:15:48
analogy like creating the um connection to it’s the the speaking part of finding other nodes that are on the network and then speaking to them. So creating a connection to to them. That’s the first part and then the other part is the actual um transactions that happen between them. So can you speak a bit about like how much you earn in both of these uh different ways of uh using Rails? >> I can only you know speak about historical rates. Um, and you know, anecdotally, you know, my node has

00:15:11 – 00:16:21
earned a bit less than 1% just from payment routing, but we’ve seen the Magma marketplace, which is where this, you know, the channels are bought and sold through the liquidity leasing. And historically, that’s been 1 to 4% APY on any of those leases. So, of course, you know, we’re looking for more opportunities to to do more channel leases, and that’s really where uh we we created some additional automation tools to help businesses adopt Bitcoin as a payment system and get bootstrapped on

00:15:46 – 00:17:00
the lighting network. So you know when a traditional business would pay payment processing fees to Visa or Mastercard and they’ll generally pay three 3 to 4% of whatever they’re earning for payment processing. Now Lightning is a much better payment technology. So we can continue to deliver fresh liquidity to that business and that means that they’re that at the end of the day their payment processing is not only faster but it only costs them half a percent of the actual payments that

00:16:23 – 00:17:37
they receive assuming that they are making no payments because that would actually add efficiency to to their system. So really we offer that uh in the form of liquidity subscriptions. So, any business that runs its own node would actually be able to sign up for a service that says, you know, I plan to receive $100,000 uh in revenue this month. Let me get the liquidity for that. And uh that’s basically the end of the process. Say, you know, my node is going to receive a lot of payments. Um and so on a

00:17:00 – 00:18:13
recurring basis, we’ll we’ll supply the liquidity from the marketplace. Is there a separate product to what Rails is? What I’m understanding rails, it’s uh it’s almost like a plugandplay um uh instantaneous lightning network node that gets deployed and earns you yield without you knowing what to do. But now what you’re describing is something where you are a business and you want to um do most of your payments over over Bitcoin and lightning. And so therefore, you’re creating a lightning

00:17:37 – 00:18:48
node to facilitate that. And you’re saying that you have a product or something that can make it easier for a business to do that, right? >> Yeah. I think the biggest pain point that businesses experience is that they don’t want to have to manage lightning channels. Um, so we built we built a product that is on the other side of the market as Rails. So rails gives us the supply but who is demanding the liquidity who’s demanding the new connections and so we have to onboard businesses as well and so that allows us

00:18:11 – 00:19:26
to balance the market. So if we can provide automation services not just to the supply but first the demand that’s much more important because then we have a product that is much higher yielding um because all of that demand you know brings up the cost that um or brings up the returns that someone could earn because really the magic of Rails is that everyone that participates is now incentivized to see more Bitcoin payments in real life. We don’t just want this thing to magically earn us

00:18:49 – 00:20:02
yields. uh really we’re we’re giving them access and then we’re giving them the incentives to start shifting the economy and moving it over to to more Bitcoin payments so that if you as you know running a stream you know your your viewers wanted to tip you and wanted to stream sats to you well then we could make sure that you actually have the liquidity in order to receive that and you have that capacity within your lightning node to start receiving, you know, these instantaneous payments. And then, you

00:19:26 – 00:20:26
know, for for our Rails customers, they don’t have to think about it. They just put their Bitcoin to work. And, you know, Ambos can manage it in the back end to meet both of those needs of the economy, both for businesses that want to receive payments and also for, you know, our liquidity providers that want to earn some return on their Bitcoin. In this example that you’ve just uh said, would that mean that the content creator in this way would be like one of the businesses that are having a lightning

00:19:56 – 00:21:10
node and then payment like goes directly to them like you know at the moment we all talking about NASA and posting on Nostra and getting zapped that way which is essentially the same thing right but that’s probably getting lightning tips on over custodial like uh um wallets this way the content creator would be their own lightning node. Uh hopefully use uh Ambos as a service provider uh but then gets um SATs or um you know gifts or whatever direct hard money in the form of Bitcoin directly from their

00:20:33 – 00:21:54
audience to their own uh lightning network node that’s managed by Ambos. Yeah, this this gives us a different path other than you know complete uh custody. So I think right now it’s very common for any business to actually be using uh a custodial wallet because the user experience is you know very high. But for self- custody, there’s more challenges on the user experience side. And we’re doing everything that we can to make it as simple as possible to start receiving Bitcoin because, you

00:21:13 – 00:22:22
know, one of my fundamental beliefs is that it’s actually easier to earn Bitcoin than to buy Bitcoin. It’s it’s cheaper because you don’t have to pay these exchange fees. And if you can start converting your existing revenue from, you know, fiat money income to Bitcoin income, then you don’t have that friction and you can still start saving this hard money, but just through existing payment processing and more efficient payment processing. So my hope is to inspire more businesses to take

00:21:47 – 00:22:56
self-custody and use Ambos’s services to support that self-custody. um you don’t have to give up any permissions to use uh the liquidity subscriptions at all. So overall they can just start start receiving Bitcoin income and uh convert their business. >> Okay, fantastic. How big are you? How long has Emboss been going? >> We’ve been uh active for about five years now and Magma has been live for four of those years and now finally we’re able to automate the process. So,

00:22:23 – 00:23:32
let me see if I get this straight right. Magma is like a peer-to-peer um lightning channel marketplace where you can buy and sell Lightning channels that you’ve already created. So, if you’re like a new lightning node that you’ve just got into Bitcoin, you’ve orange build yourself, you’ve >> got some u bitcoin on on chain somewhere, you’ve got a hardware wallet, you’ve self-custoded, and now you’re wanting to get into um the payment side. So you learn about lightning, you set up

00:22:57 – 00:24:07
a umbrell and you’ve uh like uh open up a channel, but now you wanting to connect with other people. So that would be the first step. You’d uh you check out like a magma where it’s like a marketplace where you can buy and sell liquidity. Obviously, you just knew, so you’d probably want to buy liquidity, right? You’d want to connect to other um open channels. Yeah. Um but we’ve noticed like some some confusion on that front because you know people think okay I have a lightning node now I’ll just earn money

00:23:32 – 00:24:39
on it. Well it doesn’t quite work like that. If you want to be a business and you want to start receiving payments then you need to buy liquidity so that you actually have enough capacity to store uh all that revenue that’s coming in over the lightning network. So the next step is to go to Magma and you could buy Lightning Channels which is really a a lease of liquidity. So it’s it’s getting that first new connection to your your business so that you can begin to receive these lightning

00:24:06 – 00:25:21
payments. >> Okay. And so that provides the buy side uh for for liquidity and that ends up translating into yield for another another person that is using the putting their Bitcoin to work >> from the rail side. So you started out with magma and then so firstly you started out with just like a a lightning viewer like you you’d view other channels and that and then you formalized your business became Ambos and then create did Magma and then how did you progress from that to now Rails?

00:24:43 – 00:25:56
You’ve got like other products too don’t you? >> We do. Um we’ve been kind of a product machine over at Ambos. Uh but overall I think we started with we started with the explorer then we built the liquidity marketplace magma to buy and sell lightning channels. Um from there we actually built risk management um because now you’ve got a completely decentralized uh you know network. um and businesses have some compliance obligations that they need that they need to follow. So we we built a

00:25:19 – 00:26:24
separate product for them uh and that’s for the most conservative of the businesses that do have those compliance obligations that are regulated businesses and have licenses to maintain. So that product’s called reflex. And then from there we built Rails which is completely automated operations and that’s for you know high- netw worth Bitcoiners or for uh really the companies with Bitcoin in the balance sheet which there have just been a ton of those recently uh with all the Bitcoin treasury companies. So that that

00:25:52 – 00:27:03
covers most of our product suite. Um, and it’s and uh I guess the the last piece is probably just the liquidity subscriptions which is just an automated version of Magma. So you don’t have to manually buy. You can just set it and forget it. >> Okay. So um I I heard you mention like uh Bitcoin treasury companies in other other spaces. Uh do you see much uptake of these companies like actually using the Bitcoin that they bought up into into this or do they just leave an exchange and report it on their balance

00:26:27 – 00:27:34
sheet and then use that to raise more capital to continue that Ponzi or are they actually like using the Bitcoin in services like yours for the actual network itself? um for let’s see for the Bitcoin Treasury companies soon after we’ve launched Rails. Um and it’s really only been live for about a month and a half now. Um but we’ve got a lot of inbound interest from the Bitcoin Treasury companies because they’re looking for ways to differentiate. Um, if you’re just a company that

00:27:03 – 00:28:24
accumulates Bitcoin, you know, and there’s 50 of those Bitcoin treasury companies out there, then well, how do you stand out from the rest of the crowd? You have to find some novel way to increase your Bitcoin accumulation more so than the other companies. So, when Bitcoin treasury companies see Rails, they see as a lowrisk way to access yields on their Bitcoin. and also do it in a way that actually supports the Bitcoin network. And this isn’t some uh additional Ponzi or using some other blockchain to or staking

00:27:43 – 00:29:01
their Bitcoin on, you know, some other chain. Uh this is actually uh supporting Bitcoin’s use as a medium of exchange and getting getting them access to a market that they wouldn’t normally have access to. What we learned as we’re talking with these Bitcoin treasury companies is most of them have to use custodians. So, their board has to approve any of their uh Bitcoin Treasury operations and that requires them to use registered custodians. So, that’s been a barrier that has slowed down Bitcoin Treasury companies

00:28:21 – 00:29:37
from taking advantage of Rails. And so it’s pushed us to start having conversations with custodians directly, which uh because they are licensed custodians gives them some advantages uh over others because they’re actually able to co-mingle funds and create omnibus accounts. Um, so it’s basically we could have smaller smaller holders of Bitcoin actually together create a rails node that would be very useful to the network where normally we have to have a one bitcoin minimum because below that

00:28:59 – 00:30:06
level the the bitcoin isn’t especially useful to the network. It would only support micro payments. But we’ve got a strong interest in being able to provide large payments over the lightning network because any of those large channels essentially means large pipes for big settlement to happen. And I think you know lightning is a very important payments technology. Um if we want to move more of the global economy onto Bitcoin, not only does it help it scale, but we also want to provide for larger

00:29:33 – 00:30:41
payments. So instead of wiring money around the world and you know having to deal with that process, it’s as simple as a lightning payment. So an exchange of invoices and the settlement happens, you know, nearly instantaneously wherever you are in the world, just speaking the common language of Bitcoin, you know, as naturally as the internet. >> That’s very interesting. Firstly, I was uh um uh wanting to ask you about the one bitcoin minimum and now you’ve kind of like quasi um answered that.

00:30:07 – 00:31:19
You’ve also answered like the other one is like with a one bitcoin minimum you actually like have much larger channels and you saying that this is more for maybe crossber payments which are like larger volume instead of just paying for the coffee at uh your coffee shop and this is where you seeing like wanting to grow the orc skating uh bitcoin payments into. So not just micro payments like buying your um but actual payments for much larger goods and services. >> Yeah. Uh in this early stage of

00:30:43 – 00:31:49
lightning network I think lightning has supported micro payments. So the zaps um little tips that we can send each other uh over noster or through other platforms. But I don’t think that that’s the end of the lightning network because it’s incredibly efficient technology. It basically means that you can just use simple digital signatures to send value. But if we want to scale that up, you do need the liquidity in the lightning network. And so you have to kind of create these big big pipes uh on on the

00:31:16 – 00:32:25
lightning network with large capital allocations. And so we have to attract that capital and then we deploy it strategically to make larger payments happen because we noticed that wallet providers were having difficulty when their customers wanted to make hotel reservations or buy airline tickets because those are larger ticket items and it requires you have larger channels. Yes, of course you can sometimes do multipath payments where the payment can split and then rejoin, but the reliability suffers in those

00:31:50 – 00:32:56
instances. So, we do want to create larger channels that could reach a broad portion of the lightning network as a whole um and not be not be limited by these small almost test channels that people have created. the hobbyists that are running Raspberry Pies, they don’t want to put too much capital on there because it’s not enterprisegrade infrastructure. But with with Rails, you know, we’re using Voltage, which does provide that enterprisegrade infrastructure, allowing us to make these larger allocations. So when you

00:32:23 – 00:33:31
when we see these large channels like 14 Bitcoin, that’s the largest channel that we’ve ever seen on the Lightning Network, you know, today at at these prices that would be able to process a 1.4 4 million payment instantaneously. Um so that that is a huge unlock for any of the firms that want to do high frequency trading or arbitrage. Um essentially it equips them with all of the infrastructure that they’ll need to execute very large payments very quickly. So we could support interbank

00:32:57 – 00:34:11
settlement or e-commerce um any of these things with large payment flows which is makes up a huge portion of the economy. Okay. Uh Jesse I’ve got like one final question for you for today. Um I saw a tweet recently where this uh um author was like comparing uh sending the same transfer over the lightning network versus doing it onchain. And >> it worked out that at the moment onchain is much cheaper than the lightning network. Uh you know pro maybe because the mele’s down not many scammers are

00:33:34 – 00:34:57
like uh um minting JPEGs or whatever. Uh but do you see any problem with that? Like you know onchain fees are are cheaper at the moment so why use lightning? >> Yeah and I I think a lot of it comes down to really the user experience. Um I think if you like you could use gold to transfer and settle payments. uh you could use onchain bitcoin and lightning is not at all um in opposition to using onchain bitcoin. Um really it’s just a scalability method to to make the tradeoffs to say I want this payment to

00:34:15 – 00:35:33
settle faster or um I I think that that really strikes at the the heart of it. you know, we want we want faster payments. And in the future, we know that there’s not enough blockchain space. There’s not enough block space for everybody to actually have their own, you know, UTXO. And we do have to think about ways to scale that. So, Lightning is another way to actually make the payment processing ability of Bitcoin to be essentially unbounded where, you know, Bitcoin could really only process about seven

00:34:55 – 00:36:07
transactions per second, you know, lightning is unbounded on that front. So, if we get largecale usage of Bitcoin, onchain simply won’t be an option. Um, and we’ll have to think about other ways to do that. Granted, there’s other ways to scale Bitcoin. Lightning is not the only way, but it’s the only one that makes the scalability unbounded. Or you could use a side chain like liquid, and that would give you a scalar multiple on how many transactions could be processed, but it’s a simple

00:35:31 – 00:36:35
multiple instead of uh an unbounded function. So really you could put the put the transactions of the world on a bitcoin by using the lightning network and some of the other scaling uh technologies don’t work to that degree. >> Jes thank you so much for being on streaming sets. It was lovely talking to you. Thank you for educating us. >> Thank you so much for having me. It was a pleasure speaking with you. >> I hope to speak to you again. I’ve got so many more questions, but I want you

00:36:03 – 00:36:28
to enjoy your time in Barcelona and being a digital nomad a bit more. I appreciate it. I’ll be having a good time here. >> Bye-bye.